UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07938
Exact name of registrant as specified in charter:
Delaware Investments Minnesota Municipal Income Fund III, Inc.
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: March 31
Date of reporting period: September 30, 2003
Item 1. Reports to Stockholders
Delaware
Investments(SM)
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A member of Lincoln Financial Group(R)
CLOSED END
Semiannual Report 2004
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DELAWARE INVESTMENTS CLOSED-END
MUNICIPAL BOND FUNDS
[Logo]
POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
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FINANCIAL STATEMENTS:
Statements of Net Assets 1
Statements of Operations 14
Statements of Changes in Net Assets 16
Financial Highlights 18
Notes to Financial Statements 24
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Dividend Reinvestment Plans
Each Fund offers an automatic dividend reinvestment program. If Fund shares are
registered in your name and you are not already reinvesting dividends but would
like to do so, contact the dividend plan agent, Mellon Investor Services,
L.L.C., at 800 851-9677. You will be asked to put your request in writing. If
you have shares registered in "street" name, contact your financial advisor or
the broker/dealer holding the shares.
Under the current policies of Arizona Municipal Income Fund, Florida Insured
Municipal Income Fund, Minnesota Municipal Income Fund I, and Minnesota
Municipal Income Fund II, all distributions of net investment income and capital
gains to common stock shareholders are automatically reinvested in additional
shares unless shareholders elect to receive all dividends and other
distributions in cash paid by check mailed directly to shareholders by the
dividend plan agent. Under the current policies of Colorado Insured Municipal
Income Fund and Minnesota Municipal Income Fund III, distributions of net
investment income and capital gains to common shareholders will be paid in cash
unless shareholders notify Mellon Investor Services, L.L.C. of their desire to
participate in the dividend reinvestment program.
After each Fund declares a dividend or determines to make a capital gains
distribution, the plan agent will, as agent for the participants, receive the
cash payment and use it to buy shares in the open market on the American Stock
Exchange. The Funds will not issue any new shares in connection with the plan.
You can contact Mellon at:
Mellon Investor Services, L.L.C.
Dividend Reinvestment Department
Overpeck Centre
85 Challenger Road
Ridgefield, NJ 07660
800 851-9677
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a
series of Delaware Management Business Trust, which is a registered
investment advisor.
(C)2003 Delaware Distributors, L.P.
Statements Delaware Investments Minnesota Municipal Income Fund, Inc.
OF NET ASSETS September 30, 2003 (Unaudited)
Principal Market
Amount Value
Municipal Bonds - 148.37%
Airport Revenue Bonds - 7.82%
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/30 (AMBAC) $ 500,000 $ 505,985
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series C
5.25% 1/1/32 (FGIC) 2,500,000 2,573,900
----------
3,079,885
----------
City General Obligation Bonds - 2.60%
Willmar County (Rice Memorial Hospital
Project) 5.00% 2/1/32 (FSA) 1,000,000 1,022,700
----------
1,022,700
----------
Continuing Care/Retirement Revenue Bonds - 6.13%
Minnetonka Housing Facilities Revenue
(Beacon Hill Housing Project,
Presbyterian Homes & Services)
7.70% 6/1/25 1,500,000 1,509,405
St. Paul Housing & Redevelopment
Authority Revenue
(Franciscan Health Project)
5.40% 11/20/42 (GNMA/FHA) 880,000 904,992
----------
2,414,397
----------
Corporate Backed Revenue Bonds - 4.49%
Anoka County Solid Waste Disposal
National Rural Co-Op Utility
(United Power Association) Series A
6.95% 12/1/08 (AMT) 785,000 795,605
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 1,000,000 972,860
----------
1,768,465
----------
Escrowed to Maturity Bonds - 13.16%
Dakota/Washington Housing &
Redevelopment Authority Single Family
Mortgage Revenue 8.375% 9/1/21
(GNMA/FHA/AMT) 2,555,000 3,757,358
Southern Minnesota Municipal Power
Agency Series B
5.50% 1/1/15 (AMBAC) 390,000 399,348
5.75% 1/1/11 (FGIC) 1,000,000 1,024,350
----------
5,181,056
----------
Hospital Revenue Bonds - 20.60%
Bemidji County Health Care Facilities
(North Country Health Services)
5.00% 9/1/24 (RADIAN) 1,000,000 1,017,600
Duluth Economic Development Authority
Health Care Facilities Revenue
Benedictine Health System
(St. Mary's Hospital) Series C
6.00% 2/15/20 (Connie Lee) 1,000,000 1,023,460
Minneapolis Health Care Facilities Revenue
(Fairview Hospital & Healthcare Service)
Series A 5.25% 11/15/19 (MBIA) 1,500,000 1,536,705
Minneapolis Health Care System Revenue
(Allina Health System) Series A
5.75% 11/15/32 1,100,000 1,143,846
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series A
6.375% 11/15/29 $2,500,000 $ 2,697,175
St. Paul Housing & Redevelopment
Authority Health Care Facilities Revenue
(Regions Hospital Project)
5.30% 5/15/28 700,000 691,887
-----------
8,110,673
-----------
Investor Owned Utilities Revenue Bonds - 5.40%
Bass Brook Pollution Control Revenue
(Minnesota Power & Light
Company Project) 6.00% 7/1/22 2,100,000 2,128,203
-----------
2,128,203
-----------
Miscellaneous Revenue Bonds - 6.87%
Minneapolis Art Center Facilities Revenue
(Walker Art Center Project)
5.125% 7/1/21 1,600,000 1,671,968
Minneapolis Community Development
Agency Supported Development Revenue
Series G-3 5.45% 12/1/31 1,000,000 1,032,310
-----------
2,704,278
-----------
Multifamily Housing Revenue Bonds - 10.07%
Brooklyn Center Multifamily Housing
Revenue (Four Courts Apartments Project)
Series A 7.50% 6/1/25 (AMT) 1,800,000 1,669,554
Minneapolis Multifamily Housing Revenue
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 1,000,000 1,008,460
Southeastern Minnesota Multi County
Housing & Redevelopment Authority
Revenue (Winona County) 5.35% 1/1/28 300,000 303,153
Washington County Housing &
Redevelopment Authority Revenue
(Woodland Park Apartments Project)
4.70% 10/1/32 1,000,000 982,890
-----------
3,964,057
-----------
Municipal Lease Revenue Bonds - 3.05%
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.25% 12/1/27 1,150,000 1,201,049
-----------
1,201,049
-----------
Parking Revenue Bonds - 1.73%
St. Paul Housing & Redevelopment Authority
Parking Revenue (Block 19 Ramp Project)
Series A 5.35% 8/1/29 (FSA) 650,000 682,110
-----------
682,110
-----------
Political Subdivision General Obligation Bonds - 8.49%
Hennepin County
Series B 5.00% 12/1/18 1,300,000 1,397,708
Washington County Housing &
Redevelopment Authority Series B
5.50% 2/1/22 (MBIA) 855,000 902,572
5.50% 2/1/32 (MBIA) 1,000,000 1,042,810
-----------
3,343,090
-----------
1
Statements Delaware Investments Minnesota Municipal Income Fund, Inc.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
*Pre-Refunded Bonds - 8.44%
Duluth Economic Development Authority
Health Care Facilities Revenue
(Duluth Clinic)
6.30% 11/1/22-04 (AMBAC) $ 730,000 $ 771,617
Puerto Rico Commonwealth
6.00% 7/1/26-07 1,000,000 1,165,540
St. Francis Independent School District #15
6.30% 2/1/11-06 (FSA) 1,250,000 1,387,750
-----------
3,324,907
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Public Power Revenue Bonds - 25.47%
Chaska Electric Revenue Series A
6.00% 10/1/25 1,000,000 1,055,150
Rochester Electric 5.25% 12/1/30 (AMBAC) 150,000 155,489
Southern Minnesota Municipal Power
Agency Supply System Revenue Series A
5.00% 1/1/12 (AMBAC) 1,000,000 1,114,630
5.25% 1/1/16 (AMBAC) 1,000,000 1,135,150
**Southern Minnesota Municipal Power
Supply System Revenue, Inverse Floater
8.96% 1/1/14 (AMBAC) 2,500,000 3,171,974
Western Minnesota Municipal Power Agency
Series A 5.00% 1/1/30 (MBIA) 2,500,000 2,541,500
Series B 5.00% 1/1/15 (MBIA) 765,000 853,205
-----------
10,027,098
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School District General Obligation Bonds - 13.15%
Centennial Independent School District #012
Series A 5.00% 2/1/20 (FSA) 400,000 420,708
Farmington Independent School
District #192 5.00% 2/1/23 (FSA) 1,200,000 1,235,784
Morris Minnesota Independent School
District #769 5.00% 2/1/28 (MBIA) 1,000,000 1,020,810
Mounds View Minnesota Independent
School District #621 5.00% 2/1/23 (FSA) 1,020,000 1,053,364
Robbinsdale Independent School
District #281 5.00% 2/1/21 (FSA) 500,000 521,605
St. Michael Independent School District #885
5.00% 2/1/22 (FSA) 500,000 518,420
5.00% 2/1/24 (FSA) 400,000 409,144
-----------
5,179,835
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Single Family Housing Revenue Bonds - 3.85%
Dakota County Housing & Redevelopment
Authority Single Family Mortgage Revenue
5.85% 10/1/30 (GNMA/FNMA/AMT) 193,000 198,118
Minnesota Housing Finance Agency
Single Family Mortgage Series J
5.90% 7/1/28 (AMT) 1,275,000 1,319,115
-----------
1,517,233
-----------
State General Obligation Bonds - 2.66%
Minnesota State Refunding 5.00% 8/1/21 1,000,000 1,049,080
-----------
1,049,080
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Territorial Revenue Bonds - 4.39%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series A 5.00% 7/1/38 $ 300,000 $ 300,063
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series G 5.00% 7/1/42 250,000 248,413
Puerto Rico Public Buildings Authority
Revenue Series D 5.25% 7/1/27 1,150,000 1,180,176
-----------
1,728,652
-----------
Total Municipal Bonds (cost $56,259,452) 58,426,768
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Total Market Value of Securities - 148.37%
(cost $56,259,452) 58,426,768
Receivables and Other Assets
Net of Liabilities- 2.42% 951,036
Liquidation Value of Preferred
Stock-- (50.79%) (20,000,000)
-----------
Net Assets Applicable to 2,594,700 Shares
Outstanding - 100.00% $39,377,804
-----------
Net Asset Value Per Common Share
($39,377,804 / 2,594,700 Shares) $15.18
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Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, 200 million
shares authorized to the Fund $35,426,619
Undistributed net investment income 875,131
Accumulated net realized gain on investments 908,738
Net unrealized appreciation of investments 2,167,316
-----------
Total net assets $39,377,804
-----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of September 30, 2003.
Summary of Abbreviations:
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
Connie Lee -- Insured by the College Construction Insurance Association
FGIC -- Insured by the Financial Guaranty Insurance Company
FHA -- Insured by the Federal Housing Administration
FNMA -- Insured by Federal National Mortgage Association
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Association
MBIA -- Insured by the Municipal Bond Insurance Association
RADIAN -- Insured by Radian Asset Assurance
See accompanying notes
2
Delaware Investments Minnesota Municipal Income Fund II, Inc.
September 30, 2003 (Unaudited)
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds - 152.07%
Airport Revenue Bonds - 6.52%
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/28 (MBIA) $1,250,000 $ 1,273,088
5.00% 1/1/30 (AMBAC) 1,200,000 1,214,364
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series B
5.25% 1/1/24 (FGIC) 1,000,000 1,020,150
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series C
5.25% 1/1/32 (FGIC) 3,500,000 3,603,460
-----------
7,111,062
-----------
City General Obligation Bonds - 2.57%
Moorhead Series B 5.00% 2/1/33 (MBIA) 1,250,000 1,273,675
Willmar County
(Rice Memorial Hospital Project)
5.00% 2/1/32 (FSA) 1,500,000 1,534,050
-----------
2,807,725
-----------
Continuing Care/Retirement Revenue Bonds - 4.43%
Minneapolis Health Care Facility Revenue
(Jones-Harrison Residence Project)
6.00% 10/1/27 1,565,000 1,445,418
Minnetonka Housing Facilities Revenue
(Beacon Hill Senior Housing Project,
Presbyterian Homes & Services)
7.55% 6/1/19 2,365,000 2,388,414
Moorhead Economic Development Authority
Multifamily Revenue (Eventide Lutheran
Home Project) Series B 6.00% 6/1/18 1,000,000 1,003,970
-----------
4,837,802
-----------
Corporate Backed Revenue Bonds - 5.08%
Burnsville Commonwealth Development
(Holiday Inn Project) 5.90% 4/1/08 1,430,000 1,492,748
Cloquet Pollution Control Revenue
(Potlatch Corporation Projects)
5.90% 10/1/26 4,500,000 4,051,575
-----------
5,544,323
-----------
Escrowed to Maturity Bonds - 21.02%
Dakota/Washington Housing &
Redevelopment Authority Single Family
Mortgage Revenue 8.375% 9/1/21
(GNMA/FHA/AMT) 5,500,000 8,088,244
Metropolitan Council Minneapolis/St. Paul
Area Sports Facilities Commission
(Hubert H. Humphrey Metrodome)
6.00% 10/1/09 2,360,000 2,480,218
Southern Minnesota Municipal Power
Agency Supply Revenue Series A
5.75% 1/1/18 3,715,000 3,804,346
St. Paul Housing & Redevelopment
Authority Sales Tax (Civic Center)
5.55% 11/1/23 (MBIA) 4,200,000 4,300,716
5.55% 11/1/23 2,300,000 2,355,154
Western Minnesota Municipal Power Agency
6.625% 1/1/16 1,535,000 1,896,723
-----------
22,925,401
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Higher Education Revenue Bonds - 7.56%
Minnesota Higher Education Facilities Authority
(St. Catherine College) Series 5-N1
5.375% 10/1/32 $1,500,000 $ 1,520,295
Minnesota Higher Education Facilities
Authority (St. Thomas University)
Series 3-R1 5.60% 10/1/15 1,050,000 1,061,792
Minnesota Higher Education Facilities
Authority (St. Thomas University)
Series 3-R2 5.60% 9/1/14 175,000 176,965
Minnesota Higher Education Facilities
Authority (St. Thomas University)
Series 4-A1 5.625% 10/1/21 1,000,000 1,031,690
St. Cloud Housing & Redevelopment
Authority Revenue (State University
Foundation Project) 5.00% 5/1/23 1,000,000 1,024,150
University of Minnesota Series A
5.50% 7/1/21 3,000,000 3,433,500
-----------
8,248,392
-----------
Hospital Revenue Bonds - 24.42%
Brainerd Health Care (Evangelical Lutheran
Health Care Facilities) Series A
6.65% 3/1/17 (FSA) 1,195,000 1,212,208
Duluth Economic Development Authority
Health Care Facilities Revenue
Benedictine Health System
(St. Mary's Hospital) Series C
6.00% 2/15/20 (Connie Lee) 6,000,000 6,140,759
Minneapolis Health Care System Revenue
(Fairview Health Services) Series A
5.625% 5/15/32 2,750,000 2,840,915
Minneapolis/St. Paul Housing &
Redevelopment Authority Health Care
Systems (Children's Health Care Series)
Series A 5.50% 8/15/25 (FSA) 1,400,000 1,471,848
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series 97A
5.75% 11/15/26 (MBIA) 5,550,000 5,993,167
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series A
6.375% 11/15/29 3,300,000 3,560,271
Rochester Health Care Facilities Revenue
(Mayo Foundation) Series B
5.50% 11/15/27 3,365,000 3,534,024
St. Paul Housing & Redevelopment
Authority Health Care Facilities Revenue
(Regions Hospital Project)
5.30% 5/15/28 300,000 296,523
Waconia Health Care Facilities Revenue
(Ridgeview Medical Center Project)
Series A 6.10% 1/1/19 (RADIAN) 1,405,000 1,581,342
-----------
26,631,057
-----------
Investor Owned Utilities Revenue Bonds - 7.02%
Bass Brook Pollution Control Revenue
(Minnesota Power & Light Company
Project) 6.00% 7/1/22 7,560,000 7,661,531
-----------
7,661,531
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3
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Miscellaneous Revenue Bonds - 3.73%
Minneapolis Art Center Facilities Revenue
(Walker Art Center Project)
5.125% 7/1/21 $2,400,000 $ 2,507,952
Minneapolis Community Development
Agency (Supported Development
Revenue Limited Tax Common Bond Fund)
Series 5 5.70% 12/1/27 375,000 381,608
Minneapolis Community Development
Agency (Supported Development
Revenue Limited Tax Common Bond Fund)
Series G1 5.70% 12/1/19 1,100,000 1,177,308
-----------
4,066,868
-----------
Multifamily Housing Revenue Bonds - 12.64%
Chanhassen Multifamily Housing Revenue
(Heritage Park Project Section 8)
6.20% 7/1/30 (FHA/AMT) 1,105,000 1,128,150
Coon Rapids Multifamily Housing Revenue
(Browns Meadow Manor Project)
Series A 4.70% 1/1/38 (FHA/AMT) 1,000,000 935,470
Dakota County Housing & Redevelopment
Authority Multifamily Mortgage
(Imperial Ridge Project) Series 1993-A
6.10% 12/15/28 (GNMA/FHA) 1,780,000 1,794,702
Harmony Multifamily Housing Revenue
Refunding Section 8 (Zedakah Foundation
Project) Series A 5.95% 9/1/20 1,000,000 867,350
Minneapolis Multifamily Housing Revenue
(Sumner Housing Project) Series A
5.15% 2/20/45 (GNMA/AMT) 3,575,000 3,578,360
Minnesota Housing Finance Agency
Series D 5.95% 2/1/18 (MBIA) 1,065,000 1,100,283
Minnetonka Housing Facilities
(Beacon Hill Project, Presbyterian
Homes & Services)
7.25% 6/1/09 1,225,000 1,227,046
7.50% 6/1/14 760,000 767,167
Southeastern Minnesota Multi County
Housing & Redevelopment Authority
Revenue (Winona County) 5.35% 1/1/28 870,000 879,144
Stillwater Multifamily (Stillwater Cottages)
(Orleans Homes Number One)
7.25% 11/1/27 (AMT) 1,540,000 1,515,760
-----------
13,793,432
-----------
Municipal Lease Revenue Bonds - 6.72%
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,385,000 2,476,369
5.25% 12/1/27 2,650,000 2,767,634
St. Paul Port Authority Lease Revenue
(Robert Street Site) 5.25% 12/1/27 2,000,000 2,088,780
-----------
7,332,783
-----------
Parking Revenue Bonds - 1.20%
St. Paul Housing & Redevelopment Authority
Parking Revenue (Block 19 Ramp Project)
Series A 5.35% 8/1/29 (FSA) 1,250,000 1,311,750
-----------
1,311,750
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Political Subdivision General Obligation Bonds - 5.35%
Hennepin County Series B
5.00% 12/1/18 $1,000,000 $ 1,075,160
Hennepin Regional Railroad Authority
5.00% 12/1/26 3,500,000 3,574,795
Washington County Housing &
Redevelopment Authority Series B
5.50% 2/1/32 (MBIA) 1,140,000 1,188,803
-----------
5,838,758
-----------
*Pre-Refunded Bonds - 8.47%
Duluth Economic Development Authority
Health Care Facilities Revenue
(Duluth Clinic)
6.20% 11/1/12-04 (AMBAC) 280,000 295,660
6.30% 11/1/22-04 (AMBAC) 960,000 1,014,730
Esko Independent School District #99
5.65% 4/1/12-05 (FSA) 550,000 585,789
Hawley Independent School District #150
Series A 5.75% 2/1/17-06 (FSA) 1,000,000 1,097,620
Minnesota Public Facilities Authority Water
Pollution Control Revenue Series A
6.25% 3/1/16-05 1,000,000 1,072,990
Puerto Rico Highway & Transportation
Authority Revenue
(Highway Improvements)
Series Y 5.50% 7/1/26-06 3,000,000 3,379,920
Stewartville Independent School
District #534 5.75% 2/1/17-05 1,705,000 1,797,428
-----------
9,244,137
-----------
Public Power Revenue Bonds - 6.13%
Rochester Electric 5.25% 12/1/30 (AMBAC) 450,000 466,466
**Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater
8.96% 1/1/14 (AMBAC) 3,000,000 3,806,370
8.96% 1/1/15 (AMBAC) 1,500,000 1,905,405
Western Minnesota Municipal Power Agency
Series A 5.00% 1/1/30 (MBIA) 500,000 508,300
-----------
6,686,541
-----------
School District General Obligation Bonds - 8.31%
Centennial Independent School District #012
Series A 5.00% 2/1/20 (FSA) 400,000 420,708
Farmington Independent School District #192
5.00% 2/1/23 (FSA) 1,080,000 1,112,206
Morris Minnesota Independent School
District #769 5.00% 2/1/28 (MBIA) 2,750,000 2,807,227
Mounds View Minnesota Independent
School District #621 5.00% 2/1/23 (FSA) 1,000,000 1,032,710
Rosemount Independent School
District #196 Series A 5.70% 4/1/12 1,270,000 1,396,911
St. Michael Independent School District #885
5.00% 2/1/22 (FSA) 1,500,000 1,555,260
5.00% 2/1/24 (FSA) 725,000 741,574
-----------
9,066,596
-----------
4
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Single Family Housing Revenue Bonds - 7.57%
Minnesota Housing Finance Agency Single
Family Housing Series 1992-B
6.15% 1/1/26 (AMT) $2,430,000 $ 2,465,357
Minnesota Housing Finance Agency Single
Family Housing Series 1992-C2
6.15% 7/1/23 (AMT) 2,465,000 2,505,081
Minnesota Housing Finance Agency Single
Family Housing Series 1994-J
6.95% 7/1/26 (AMT) 1,160,000 1,186,054
Minnesota Housing Finance Agency Single
Family Housing Series F 6.30% 7/1/25 810,000 828,411
Minnesota State Housing Finance Agency
Single Family Mortgage Series B
5.35% 1/1/33 (AMT) 165,000 167,199
Minnesota State Housing Finance Agency
Single Family Mortgage Series J
5.90% 7/1/28 1,075,000 1,112,195
-----------
8,264,297
-----------
State General Obligation Bonds - 4.00%
Minnesota State Refunding 5.00% 8/1/21 3,525,000 3,698,007
**Minnesota State, Inverse Floater
8.86% 11/1/17 570,000 663,252
-----------
4,361,259
-----------
Tax Increment/Special Assessment Bonds - 3.52%
Becker Tax Increment Series D
6.25% 8/1/15 (MBIA/AMT) 3,700,000 3,840,970
-----------
3,840,970
-----------
Territorial General Obligation Bonds - 2.22%
Puerto Rico Public Improvement Series A
5.00% 7/1/27 1,250,000 1,258,988
5.50% 7/1/19 (MBIA) 1,000,000 1,164,400
-----------
2,423,388
-----------
Territorial Revenue Bonds - 3.59%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series G 5.00% 7/1/42 1,500,000 1,490,475
Puerto Rico Electric Power Authority Power
Revenue Series Z 5.25% 7/1/21 1,500,000 1,558,545
Puerto Rico Public Buildings Authority
Revenue Series D 5.25% 7/1/27 850,000 872,304
-----------
3,921,324
-----------
Total Municipal Bonds (cost $159,208,998) 165,919,396
-----------
Total Market Value of Securities - 152.07%
(cost $159,208,998) 165,919,396
Receivables and Other Assets
Net of Liabilities- 2.92% 3,184,830
Liquidation Value of Preferred
Stock - (54.99%) (60,000,000)
------------
Net Assets Applicable to 7,252,200 Shares
Outstanding - 100.00% $109,104,226
============
Net Asset Value Per Common Share
($109,104,226 / 7,252,200 Shares) $15.04
------
Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, 200 million shares
authorized to the Fund $99,710,000
Undistributed net investment income 3,507,338
Accumulated net realized loss on investments (823,510)
Net unrealized appreciation of investments 6,710,398
------------
Total net assets $109,104,226
============
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of September 30, 2003.
Summary of Abbreviations:
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
Connie Lee -- Insured by the College Construction Insurance Association
FGIC -- Insured by the Financial Guaranty Insurance Company
FHA -- Insured by the Federal Housing Administration
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Association
MBIA -- Insured by the Municipal Bond Insurance Association
RADIAN -- Insured by Radian Asset Assurance
See accompanying notes
5
Delaware Investments Minnesota Municipal Income Fund III, Inc.
September 30, 2003 (Unaudited)
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds - 153.66%
Airport Revenue Bonds - 9.30%
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/28 (MBIA) $ 750,000 $ 763,853
5.00% 1/1/30 (AMBAC) 750,000 758,978
5.125% 1/1/25 (FGIC) 900,000 922,598
----------
2,445,429
----------
City General Obligation Bonds - 2.91%
Moorhead Series B 5.00% 2/1/33 (MBIA) 750,000 764,205
----------
764,205
----------
Continuing Care/Retirement Revenue Bonds - 11.77%
Minnesota Agriculture & Economic
Development Board Revenue
(Benedictine Health Systems)
5.75% 2/1/29 1,300,000 1,223,404
St. Paul Housing & Redevelopment
Authority Revenue
(Franciscan Health Project)
5.40% 11/20/42 (GNMA/FHA) 1,820,000 1,871,688
----------
3,095,092
----------
Corporate Backed Revenue Bonds - 6.93%
Cloquet Pollution Control Revenue
(Potlatch Corporation Projects)
5.90% 10/1/26 1,000,000 900,350
Minneapolis Community Development
Agency Supported Development Revenue
(Pajor Graphics) Series 1
(LOC US Bank NA) 6.75% 12/1/25 (AMT) 865,000 922,367
----------
1,822,717
----------
Escrowed to Maturity Bonds - 12.45%
University of Minnesota Hospital
6.75% 12/1/16 2,580,000 3,272,962
----------
3,272,962
----------
Higher Education Revenue Bonds - 9.13%
Minnesota Higher Education Facilities
Authority (College of St. Benedict)
Series 3-W 6.375% 3/1/20 345,000 347,170
Minnesota Higher Education Facilities
Authority (St. Mary's College)
Series 3-Q 6.15% 10/1/23 1,000,000 1,010,610
Minnesota Higher Education Facilities
Authority (St. Thomas University)
Series 4-A1 5.625% 10/1/21 1,010,000 1,042,007
----------
2,399,787
----------
Hospital Revenue Bonds - 14.50%
Minneapolis Health Care System Revenue
(Allina Health System) Series A
5.75% 11/15/32 1,100,000 1,143,846
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series A
6.375% 11/15/29 1,500,000 1,618,305
Rochester Health Care Facilities Revenue
(Mayo Foundation) Series B
5.50% 11/15/27 1,000,000 1,050,230
----------
3,812,381
----------
Principal Market
Amount Value
Municipal Bonds (continued)
Investor Owned Utilities Revenue Bonds - 5.80%
Bass Brook Pollution Control Revenue
(Minnesota Power & Light
Company Project) 6.00% 7/1/22 $1,505,000 $ 1,525,212
-----------
1,525,212
-----------
Miscellaneous Revenue Bonds - 0.99%
Minneapolis Art Center Facilities Revenue
(Walker Art Center Project) 5.125% 7/1/21 250,000 261,245
-----------
261,245
-----------
Multifamily Housing Revenue Bonds - 19.12%
Brooklyn Center Multifamily Housing
Revenue (Four Courts Apartments Project)
Series A 7.50% 6/1/25 (AMT) 1,000,000 927,530
Burnsville Multifamily Housing Mortgage
Revenue SCA Tax Exempt Trust
Series A 7.10% 1/1/30 (FSA) 1,970,000 2,051,380
Minneapolis Multifamily Housing Revenue
(Gaar Scott Loft Project) 5.95% 5/1/30 990,000 1,057,963
Minneapolis Multifamily Housing Revenue
(Olson Townhomes Project)
6.00% 12/1/19 (AMT) 1,000,000 990,720
-----------
5,027,593
-----------
Municipal Lease Revenue Bonds - 3.97%
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.25% 12/1/27 1,000,000 1,044,390
-----------
1,044,390
-----------
Parking Revenue Bonds - 5.79%
St. Paul Housing & Redevelopment Authority
Parking Revenue (Block 19 Ramp Project)
Series A 5.35% 8/1/29 (FSA) 1,450,000 1,521,630
-----------
1,521,630
-----------
Political Subdivision General Obligation Bonds - 6.44%
Minneapolis Sports Arena Project
5.125% 10/1/20 750,000 796,733
Washington County Housing &
Redevelopment Authority Series B
5.50% 2/1/22 (MBIA) 850,000 897,294
-----------
1,694,027
-----------
*Pre-Refunded Bonds - 18.29%
Duluth Economic Development Authority
Health Care Facilities Revenue
(Duluth Clinic)
6.20% 11/1/12-04 (AMBAC) 420,000 443,491
Esko Independent School District #99
5.75% 4/1/17-05 (FSA) 2,145,000 2,287,749
Minnesota Higher Education Facilities
Authority (College of St. Benedict)
Series 3-W 6.375% 3/1/20-04 930,000 950,804
Puerto Rico Highway & Transportation
Authority Revenue
(Highway Improvements)
Series Y 5.50% 7/1/26-06 1,000,000 1,126,640
-----------
4,808,684
-----------
6
Delaware Investments Minnesota Municipal Income Fund III, Inc.
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Public Power Revenue Bonds - 11.94%
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series A 5.25% 1/1/16 (AMBAC) $ 500,000 $ 567,575
**Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater 8.96% 1/1/14 (AMBAC) 1,500,000 1,903,185
Western Minnesota Municipal Power Agency
Series B 5.00% 1/1/15 (MBIA) 600,000 669,180
----------
3,139,940
----------
Single Family Housing Revenue Bonds - 2.51%
Minnesota State Housing Finance Agency
Single Family Mortgage Series B
5.35% 1/1/33 (AMT) 650,000 658,665
----------
658,665
----------
Territorial Revenue Bonds - 2.83%
Puerto Rico Highway & Transportation
Authority Revenue Series G
5.00% 7/1/42 750,000 745,238
----------
745,238
----------
Water & Sewer Revenue Bonds - 8.99%
Minnesota Public Facilities Authority Water
Pollution Control Revenue Series B
5.40% 3/1/15 2,200,000 2,362,910
----------
2,362,910
----------
Total Municipal Bonds (cost $38,146,697) 40,402,107
----------
Total Market Value of Securities - 153.66%
(cost $38,146,697) 40,402,107
Receivables and Other Assets
Net of Liabilities - 3.39% 891,094
Liquidation Value of Preferred
Stock - (57.05%) (15,000,000)
-----------
Net Assets Applicable to 1,837,200 Shares
Outstanding - 100.00% $26,293,201
===========
Net Asset Value Per Common Share
($26,293,201 / 1,837,200 Shares) $14.31
------
Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, 200 million
shares authorized to the Fund $24,853,904
Undistributed net investment income 762,838
Accumulated net realized loss on investments (1,578,951)
Net unrealized appreciation of investments 2,255,410
-----------
Total net assets $26,293,201
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of September 30, 2003.
Summary of Abbreviations:
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
FGIC -- Insured by the Financial Guaranty Insurance Company
FHA -- Insured by the Federal Housing Administration
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Association
LOC -- Letter of Credit
MBIA -- Insured by the Municipal Bond Insurance Association
See accompanying notes
7
Delaware Investments Arizona Municipal Income Fund, Inc.
September 30, 2003 (Unaudited)
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds - 155.51%
Airport Revenue Bonds - 2.23%
Phoenix Civic Improvement Airport Revenue
Senior Lien Series A
5.00% 7/1/25 (FSA) $1,000,000 $ 1,016,250
-----------
1,016,250
-----------
Charter School Revenue Bonds - 8.21%
Maricopa County Industrial Development
Authority School District Revenue
6.75% 7/1/29 1,000,000 995,630
Pima County Industrial Development
Authority (Arizona Charter Schools
Project II) Series A 6.75% 7/1/31 2,750,000 2,737,653
-----------
3,733,283
-----------
Continuing Care/Retirement Revenue Bonds - 3.48%
Yavapai County Industrial Development
Authority Residential Care Facilities
(Margaret T. Morris Center) Series A
5.40% 2/20/38 (GNMA) 1,575,000 1,581,316
-----------
1,581,316
-----------
Dedicated Tax & Fees Revenue Bonds - 9.99%
Glendale Municipal Property Corporation
Excise Tax Revenue Series A
5.00% 7/1/33 (AMBAC) 3,455,000 3,501,332
Phoenix Civic Improvement Corporation
Excise Tax Revenue 5.25% 7/1/24 1,000,000 1,043,720
-----------
4,545,052
-----------
Escrowed to Maturity Bonds - 10.72%
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Series A
5.50% 10/1/40 4,500,000 4,875,390
-----------
4,875,390
-----------
Higher Education Revenue Bonds - 10.59%
South Campus Group Student Housing
Revenue (Arizona State University South
Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,077,720
Southern Arizona Capital Facilities Finance
Corporation Student Housing Revenue
(University of Arizona Project)
5.00% 9/1/23 (MBIA) 1,150,000 1,184,569
University of Arizona Certificates of
Participation (University of Arizona
Projects) Series B 5.125% 6/1/22 (AMBAC) 500,000 522,490
West Campus Housing Revenue
(Arizona State University Project)
5.50% 7/1/34 (ACA) 2,000,000 2,033,020
-----------
4,817,799
-----------
Hospital Revenue Bonds - 18.27%
Maricopa County Industrial Development
Authority (Mayo Clinic Hospital)
5.25% 11/15/37 2,000,000 2,023,960
Mohave County Industrial Development
Authority (Chris/Silver Ridge)
6.375% 11/1/31 (GNMA) 750,000 794,205
Scottsdale Industrial Development
Authority Hospital Revenue
(Scottsdale Healthcare) 5.80% 12/1/31 1,000,000 1,024,110
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Show Low Industrial Development
Authority Hospital Revenue
(Navapache Regional Medical Center)
Series A 5.50% 12/1/17 (ACA) $1,600,000 $ 1,676,032
University of Arizona Medical Center
6.25% 7/1/16 (MBIA) 700,000 709,793
Yavapai County Industrial Development
Authority Hospital Revenue
(Yavapai Regional Medical Center)
Series A 5.25% 8/1/21 (RADIAN) 2,000,000 2,083,300
-----------
8,311,400
-----------
Miscellaneous Revenue Bonds - 8.15%
Arizona School Facilities Board Revenue
5.00% 7/1/19 2,000,000 2,121,520
Arizona Student Loan Acquisition Authority
Revenue 5.90% 5/1/24 (AMT) 1,500,000 1,586,565
-----------
3,708,085
-----------
Multifamily Housing Revenue Bonds - 6.68%
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Pines at Camelback Apartments Project)
Series A 5.45% 5/1/28 (RADIAN) 1,250,000 1,251,988
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Sly-Mar Apartments) 6.10% 4/20/36
(GNMA/AMT) 465,000 494,123
Peoria Industrial Development Authority
Multifamily Housing Revenue
(Casa Del Rio) 7.30% 2/20/28 (GNMA) 1,230,000 1,293,603
-----------
3,039,714
-----------
Municipal Lease Revenue Bonds - 8.23%
Oro Valley Municipal Property Corporation
Excise Tax Revenue 5.00% 7/1/20 (FGIC) 1,000,000 1,053,160
Prescott Valley Municipal Property
Corporate Facilities Revenue
5.00% 1/1/27 (FGIC) 500,000 509,425
Tucson Certificates of Participation
5.60% 7/1/11 1,100,000 1,167,782
Yuma Municipal Property Corporation
5.00% 7/1/25 (AMBAC) 1,000,000 1,016,250
-----------
3,746,617
-----------
Political Subdivision General Obligation Bonds - 3.70%
Eagle Mountain Community Facilities District
Series A 6.40% 7/1/17 1,500,000 1,683,165
-----------
1,683,165
-----------
*Pre-Refunded Bonds - 6.06%
Arizona State Transportation Board Highway
5.75% 7/1/18-09 2,350,000 2,758,148
-----------
2,758,148
-----------
Public Power Revenue Bonds - 2.23%
Salt River Project Arizona Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 1,000,000 1,014,350
-----------
1,014,350
-----------
8
Delaware Investments Arizona Municipal Income Fund, Inc.
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
School District General Obligation Bonds - 17.14%
Maricopa County School District #6
(Washington Elementary)
5.375% 7/1/13 (FSA) $3,000,000 $ 3,454,529
Maricopa County School District #38
(Madison Elementary)
5.00% 7/1/13 (FSA) 1,250,000 1,399,888
Maricopa County School District #69
(Paradise Valley) 3.375% 7/1/13 (FGIC) 1,880,000 1,824,277
Tempe Union High School #213
5.00% 7/1/14 (FSA) 1,000,000 1,119,590
-----------
7,798,284
-----------
Single Family Housing Revenue Bonds - 8.94%
Phoenix Industrial Development Authority
Single Family Mortgage
5.30% 4/1/20 (GNMA/FNMA/FHLMC) 1,325,000 1,366,168
5.35% 6/1/20 (GNMA/FNMA/FHLMC) 2,155,000 2,210,922
Pima County Industrial Development
Authority Single Family Mortgage
Revenue Series A 6.125% 11/1/33
(GNMA/FNMA/FHLMC/AMT) 465,000 492,551
-----------
4,069,641
-----------
Territorial General Obligation Bonds - 0.56%
Puerto Rico Commonwealth Refunding
Public Improvement Series A
5.125% 7/1/31 250,000 253,170
-----------
253,170
-----------
Territorial Revenue Bonds - 22.16%
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series D 5.00% 7/1/32 (FSA) 8,500,000 8,705,190
Virgin Islands Public Finance Authority
Revenue Series A 6.125% 10/1/29 (ACA) 1,250,000 1,381,125
-----------
10,086,315
-----------
Water & Sewer Revenue Bonds - 8.17%
Arizona Water Infrastructure Finance
Authority Revenue Water Quality
Series A 5.05% 10/1/20 1,500,000 1,586,520
Phoenix Civic Improvement Corporation
Wastewater Systems Revenue
5.00% 7/1/24 (FGIC) 1,590,000 1,621,100
Phoenix Civic Improvement Corporation
Water Systems Revenue
5.00% 7/1/26 (FGIC) 500,000 509,010
-----------
3,716,630
-----------
Total Municipal Bonds (cost $67,505,652) 70,754,609
-----------
Total Market Value of Securities - 155.51%
(cost $67,505,652) 70,754,609
Liabilities Net of Receivables and Other
Assets - (0.56%) (255,581)
Liquidation Value of Preferred
Stock - (54.95%) (25,000,000)
------------
Net Assets Applicable to 2,982,200 Shares
Outstanding - 100.00% $45,499,028
===========
Net Asset Value Per Common Share
($45,499,028 / 2,982,200 Shares) $15.26
------
Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, 200 million shares
authorized to the Fund $40,838,893
Undistributed net investment income 1,117,400
Accumulated net realized gain on investments 293,778
Net unrealized appreciation of investments 3,248,957
-----------
Total net assets $45,499,028
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Summary of Abbreviations:
ACA -- Insured by American Capital Access
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
FGIC -- Insured by the Financial Guaranty Insurance Company
FHLMC -- Insured by the Federal Home Loan Mortgage Corporation
FNMA -- Insured by Federal National Mortgage Association
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Association
MBIA -- Insured by the Municipal Bond Insurance Association
RADIAN -- Insured by Radian Asset Assurance
See accompanying notes
9
Delaware Investments Florida Insured Municipal Income Fund
September 30, 2003 (Unaudited)
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds - 152.62%
Airport Revenue Bonds - 6.87%
Dade County Aviation Series 96B
5.60% 10/1/26 (MBIA) $1,000,000 $ 1,066,430
Hillsborough County Aviation Authority
(Tampa International Airport)
Series B 5.60% 10/1/19 (FGIC) 1,600,000 1,632,208
-----------
2,698,638
-----------
Dedicated Tax & Fees Revenue Bonds - 10.71%
Jacksonville Sales Tax Revenue
5.00% 10/1/30 (MBIA) 1,000,000 1,016,930
Jacksonville Transportation Revenue
5.25% 10/1/29 (MBIA) 2,000,000 2,076,040
Miami Beach Resort Tax
5.50% 10/1/16 (AMBAC) 1,000,000 1,111,940
-----------
4,204,910
-----------
Higher Education Revenue Bonds - 7.69%
Florida Agriculture & Mechanical University
(Student Apartment Facility)
5.625% 7/1/21 (MBIA) 1,250,000 1,365,263
Volusia County Educational Facilities
Authority (Stetson University Project)
Series A 5.50% 6/1/17 (MBIA) 1,500,000 1,653,000
-----------
3,018,263
-----------
Hospital Revenue Bonds - 28.25%
Escambia County Health Facilities Authority
(Florida Health Care Facilities --
VHA Program) 5.95% 7/1/20 (AMBAC) 3,075,000 3,311,190
Lee County Memorial Health System
Hospital Revenue 5.00% 4/1/20 (FSA) 1,000,000 1,047,600
Orange County Health Facilities Authority
(Adventist Health Center)
5.75% 11/15/25 (AMBAC) 1,500,000 1,628,985
Orange County Health Facilities Authority
(Orlando Regional Health) Series A
6.25% 10/1/18 (MBIA) 2,000,000 2,439,120
Venice Health Care
(Bon Secours Health System)
5.60% 8/15/16 (MBIA) 2,405,000 2,663,129
-----------
11,090,024
-----------
Multifamily Housing Revenue Bonds - 20.11%
Broward County Multifamily Housing
Finance Authority
(St. Croix Apartments Project)
Series A 5.45% 11/1/36 (FSA) 1,000,000 1,014,180
Florida Housing Finance Agency
(Leigh Meadows Apartments) Series N
6.30% 9/1/36 (AMBAC/AMT) 2,510,000 2,612,458
Florida Housing Finance Agency
(Woodbridge Apartments) Series L
6.05% 12/1/16 (AMBAC) 1,120,000 1,178,475
6.25% 6/1/36 (AMBAC/AMT) 1,500,000 1,561,980
Volusia County Multifamily Housing Finance
Authority (San Marco Apartments)
Series A 5.60% 1/1/44 (FSA/AMT) 1,500,000 1,530,210
-----------
7,897,303
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Municipal Lease Revenue Bonds - 23.58%
Broward School Board Certificates of
Participation Series A
5.25% 7/1/24 (FSA) $1,000,000 $ 1,048,160
Escambia County School Board
Certificates of Participation Series 2
5.50% 2/1/22 (MBIA) 5,000,000 5,419,250
Orange County School Board Certificates of
Participation 5.00% 8/1/27 (MBIA) 1,250,000 1,268,925
Palm Beach County School Board
Certificates of Participation Series D
5.00% 8/1/28 (FSA) 1,500,000 1,522,710
-----------
9,259,045
-----------
Ports & Harbors Revenue Bonds - 2.61%
Florida Ports Financing Commission State
Transportation Trust Fund
5.375% 6/1/27 (MBIA/AMT) 1,000,000 1,022,750
-----------
1,022,750
-----------
*Pre-Refunded Bonds - 30.83%
Dade County School Board Certificates
of Participation Series B
5.60% 8/1/17-06 (AMBAC) 1,000,000 1,126,210
Orange County Public Service Tax
6.00% 10/1/24-05 (FGIC) 3,000,000 3,294,600
Reedy Creek Improvement District
(Sports Complex) Series A
5.75% 6/1/13-05 (MBIA) 2,300,000 2,477,399
Sunrise Utility System Series A
5.75% 10/1/26-06 (AMBAC) 2,500,000 2,843,850
Tampa Utility Tax Series A
6.125% 10/1/19-09 (AMBAC) 1,000,000 1,208,770
Village Center Community Development
District Recreational Revenue Series A
5.85% 11/1/16-06 (MBIA) 1,000,000 1,152,030
-----------
12,102,859
-----------
Single Family Housing Revenue Bonds - 2.95%
Florida Housing Finance Agency
(Homeowner Mortgage) Series 2
5.90% 7/1/29 (MBIA/AMT) 1,115,000 1,157,649
-----------
1,157,649
-----------
State General Obligation Bonds - 9.34%
Florida Department of Transportation
5.00% 7/1/31 (FGIC) 1,400,000 1,419,866
Florida State Board of Education
(Capital Outlay Public Education) Series C
6.00% 6/1/21 (FGIC) 2,000,000 2,247,980
-----------
3,667,846
-----------
10
Delaware Investments Florida Insured Municipal Income Fund
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Water & Sewer Revenue Bonds - 9.68%
Dade County Water & Sewer System
5.50% 10/1/25 (FGIC) $1,100,000 $ 1,176,384
Indian River County Water & Sewer System
5.50% 9/1/16 (FGIC) 1,000,000 1,109,450
Village Center Community Development
District Florida Utility Revenue
5.00% 10/1/36 (MBIA) 1,500,000 1,513,530
-----------
3,799,364
-----------
Total Municipal Bonds (cost $55,053,431) 59,918,651
-----------
Total Market Value of Securities - 152.62%
(cost $55,053,431) 59,918,651
Liabilities Net of Receivables and
Other Assets - (1.68%) (657,850)
Liquidation Value of Preferred
Stock - (50.94%) (20,000,000)
-----------
Net Assets Applicable to 2,422,200 Shares
Outstanding - 100.00% $39,260,801
-----------
Net Asset Value Per Common Share
($39,260,801 / 2,422,200 Shares) $16.21
------
Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, unlimited shares
authorized to the Fund $33,361,389
Undistributed net investment income 1,027,015
Accumulated net realized gain on investments 7,177
Net unrealized appreciation of investments 4,865,220
-----------
Total net assets $39,260,801
-----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Summary of Abbreviations:
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
FGIC -- Insured by the Financial Guaranty Insurance Company
FSA -- Insured by Financial Security Assurance
MBIA -- Insured by the Municipal Bond Insurance Association
See accompanying notes
11
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
September 30, 2003 (Unaudited)
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds - 149.80%
Airport Revenue Bonds - 10.29%
Denver City & County Airport
5.25% 11/15/23 (MBIA) $7,500,000 $ 7,888,200
-----------
7,888,200
-----------
Continuing Care/Retirement Revenue Bonds - 3.46%
Colorado Health Facilities Authority
(Porter Place) 6.00% 1/20/36 (GNMA) 2,515,000 2,654,381
-----------
2,654,381
-----------
Dedicated Tax & Fees Revenue Bonds - 11.26%
Broomfield Sales & Use Tax Revenue
Refunding & Improvement Series A
5.00% 12/1/31 (AMBAC) 750,000 760,140
Denver City & County Excise Tax Revenue
(Colorado Convention Center Project)
Series A 5.00% 9/1/20 (FSA) 6,500,000 6,811,415
Golden Sales & Use Tax Revenue
Improvement Series B
5.10% 12/1/20 (AMBAC) 1,000,000 1,060,290
-----------
8,631,845
-----------
Higher Education Revenue Bonds - 34.74%
Adams State College (Board of Trustees)
5.75% 5/15/19 (MBIA) 1,000,000 1,034,300
Boulder County Development Revenue
University Corporation for Atmospheric
Research 5.00% 9/1/26 (MBIA) 4,500,000 4,574,835
Colorado Educational & Cultural Facilities
Authority (Johnson & Wales
University Project)
Series A 5.00% 4/1/28 (XLCA) 3,000,000 3,036,900
Colorado Educational & Cultural Facilities
Authority (University of Colorado
Foundation Project)
5.00% 7/1/27 (AMBAC) 4,000,000 4,070,640
Colorado Educational & Cultural Facilities
Authority (University of Denver Project)
5.50% 3/1/21 (AMBAC) 3,200,000 3,502,400
Colorado Educational & Cultural Facilities
Authority (University of Northern Colorado)
5.00% 7/1/31 (MBIA) 3,000,000 3,041,160
Colorado Springs Revenue
(Colorado College Project)
5.375% 6/1/32 (MBIA) 5,000,000 5,265,050
Colorado State University Systems
Series B 5.00% 3/1/35 (AMBAC) 2,095,000 2,120,978
-----------
26,646,263
-----------
Hospital Revenue Bonds - 6.67%
Colorado Health Facilities Authority
(Boulder Community Hospital Project)
Series B 5.875% 10/1/23 (MBIA) 1,925,000 2,043,619
Colorado Health Facilities Authority
(North Colorado Medical Center)
5.95% 5/15/12 (MBIA) 2,000,000 2,047,820
6.00% 5/15/20 (MBIA) 1,000,000 1,023,920
-----------
5,115,359
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Miscellaneous Revenue Bonds - 3.95%
Denver Convention Center Series A
5.00% 12/1/33 (XLCA) $3,000,000 $ 3,031,980
---------- -----------
3,031,980
-----------
Multifamily Housing Revenue Bonds - 5.81%
Burlingame Multifamily Housing Revenue
Series A 6.00% 11/1/29 (MBIA) 2,290,000 2,418,835
Snowmass Village Multifamily Housing
Revenue (Essential-Function Housing)
6.25% 12/15/16 (FSA) 2,000,000 2,038,780
-----------
4,457,615
-----------
Municipal Lease Revenue Bonds - 22.11%
Arapahoe County Library District
Certificates of Participation
5.70% 12/15/10 (MBIA) 2,000,000 2,255,520
Aurora Certificates of Participation
5.50% 12/1/30 (AMBAC) 2,000,000 2,122,280
Aurora Educational Development
6.00% 10/15/15 (Connie Lee) 1,500,000 1,587,495
Broomfield Certificates of Participation
5.75% 12/1/24 (AMBAC) 1,500,000 1,651,635
Denver City & County Certificates
of Participation Series B
5.50% 12/1/25 (AMBAC) 2,000,000 2,354,460
Eagle County Certificates of Participation
5.40% 12/1/18 (MBIA) 1,000,000 1,109,770
Garfield County Certificates of Participation
5.00% 12/1/24 (AMBAC) 1,000,000 1,025,890
Lakewood Certificates of Participation
5.375% 12/1/22 (AMBAC) 2,000,000 2,140,220
Westminster Building Authority
Certificates of Participation
5.25% 12/1/22 (MBIA) 1,555,000 1,646,092
Westminster Certificates of Participation
5.40% 1/15/23 (AMBAC) 1,000,000 1,063,180
-----------
16,956,542
-----------
Parking Revenue Bonds - 3.45%
Auraria Higher Education Center Parking
Facilities System Revenue
5.50% 4/1/26 (AMBAC) 2,485,000 2,647,668
-----------
2,647,668
-----------
Political Subdivision General Obligation Bonds - 10.99%
Arapahoe County Water & Wastewater
Public Improvement District Series A
5.125% 12/1/32 (MBIA) 1,000,000 1,022,320
Bowles Metropolitan District
5.00% 12/1/33 (FSA) 2,000,000 2,027,740
GVR Metropolitan District
5.75% 12/1/19 (AMBAC) 1,000,000 1,137,490
Pueblo County 5.80% 6/1/11 (MBIA) 1,405,000 1,560,365
Pueblo County (Pueblo Library
District Project) 5.80% 11/1/19 (AMBAC) 1,395,000 1,588,305
Stonegate Village Metropolitan District
Refunding & Improvement Series A
5.50% 12/1/21 (FSA) 1,000,000 1,093,750
-----------
8,429,970
-----------
12
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
School District General Obligation Bonds - 17.42%
Adams & Arapahoe Counties School
District #28J 5.00% 12/1/22 (FSA) $2,000,000$ 2,084,920
Adams County School District #1
5.00% 12/1/16 (FSA) 1,490,000 1,633,651
Archuleta & Hinsdale Counties School
District #50JT 5.55% 12/1/20 (MBIA) 4,000,000 4,400,440
Douglas County School District #Re-1
(Douglas & Elbert Counties)
5.00% 12/15/21 (MBIA) 1,000,000 1,042,650
El Paso County School District #20
5.625% 12/15/16 (MBIA) 1,000,000 1,104,850
5.625% 12/15/16 (AMBAC) 2,800,000 3,093,580
-----------
13,360,091
-----------
Turnpike/Toll Road Revenue Bonds - 13.50%
E-470 Public Highway Authority
5.75% 9/1/29 (MBIA) 3,000,000 3,300,660
5.75% 9/1/35 (MBIA) 1,700,000 1,881,050
Northwest Parkway Public Highway
Authority Series A 5.25% 6/15/41 (FSA) 5,000,000 5,170,650
-----------
10,352,360
-----------
Water & Sewer Revenue Bonds - 6.15%
Colorado Water Resources & Power
Development Authority Small
Water Resources Revenue
5.80% 11/1/20 (FGIC) 2,000,000 2,278,340
Ute Utility Water Conservancy District
Water Revenue 5.75% 6/15/20 (MBIA) 2,155,000 2,438,900
-----------
4,717,240
-----------
Total Municipal Bonds (cost $107,553,418) 114,889,514
===========
Total Market Value of Securities - 149.80%
(cost $107,553,418) 114,889,514
Receivables and Other Assets
Net of Liabilities - 2.35% 1,807,723
Liquidation Value of Preferred
Stock - (52.15%) (40,000,000)
-----------
Net Assets Applicable to 4,837,100 Shares
Outstanding - 100.00% $76,697,237
-----------
Net Asset Value Per Common Share
($76,697,237 / 4,837,100 Shares) $15.86
------
Components of Net Assets at September 30, 2003:
Common stock, $0.01 par value, 200 million shares
authorized to the Fund $67,238,110
Undistributed net investment income 1,961,922
Accumulated net realized gain on investments 161,109
Net unrealized appreciation of investments 7,336,096
-----------
Total net assets $76,697,237
===========
Summary of Abbreviations:
AMBAC -- Insured by the AMBAC Indemnity Corporation Connie Lee -- Insured by the
College Construction Insurance Association FGIC -- Insured by the Financial
Guaranty Insurance Company FSA -- Insured by Financial Security Assurance GNMA
-- Insured by Government National Mortgage Association MBIA -- Insured by the
Municipal Bond Insurance Association XLCA -- Insured by XL Capital Assurance
See accompanying notes
13
Statements Delaware Investments Closed-End Municipal Bond Funds
OF OPERATIONS Six Months Ended September 30, 2003 (Unaudited)
Delaware Delaware Delaware
Investments Investments Investments
Minnesota Minnesota Minnesota
Municipal Municipal Municipal
Income Income Income
Fund, Inc. Fund II, Inc. Fund III, Inc.
Investment Income:
Interest $1,585,563 $4,535,388 $1,134,561
---------- ---------- ----------
Expenses:
Management fees 118,818 336,746 81,531
Accounting and administration expenses 42,500 42,675 30,250
Remarketing Agent fees 25,069 75,206 18,801
Professional fees 1,413 2,784 5,060
Transfer agent fees and expenses 12,439 7,778 10,400
Reports and statements to shareholders 1,242 30 518
Custodian fees 1,228 2,480 1,036
Directors'/Trustees' Fees 100 -- 2,000
Rating Agency fees 4,200 2,100 2,000
Other 3,777 9,980 2,492
---------- ---------- ----------
210,786 479,779 154,088
Less expenses paid indirectly (1,949) (4,515) (1,458)
---------- ---------- ----------
Total expenses 208,837 475,264 152,630
---------- ---------- ----------
Net Investment Income 1,376,726 4,060,124 981,931
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 812,985 1,131,227 402,515
Net change in unrealized appreciation/depreciation of
investments (1,077,142) (1,487,531) (501,665)
---------- ---------- ----------
Net Realized and Unrealized Loss on Investments (264,157) (356,304) (99,150)
---------- ---------- ----------
Dividends on Preferred Stock (110,928) (293,892) (68,364)
---------- ---------- ----------
Net Increase in Net Assets Resulting
from Operations $1,001,641 $3,409,928 $814,417
========== ========== ==========
See accompanying notes
14
Delaware Investments Closed-End Municipal Bond Funds
Statements
OF OPERATIONS (CONTINUED)
Delaware Delaware Delaware
Investments Investments Investments
Arizona Florida Insured Colorado Insured
Municipal Municipal Municipal
Income Income Income
Fund, Inc. Fund Fund, Inc.
Investment Income:
Interest $1,773,237 $1,541,254 $2,928,187
---------- ---------- ----------
Expenses:
Management fees 141,721 117,917 231,668
Accounting and administration expenses 42,500 42,500 42,500
Remarketing Agent fees 31,508 25,087 50,137
Professional fees 14,370 2,246 28,068
Transfer agent fees and expenses 11,700 3,712 14,700
Reports and statements to shareholders 7,500 -- 21,000
Custodian fees 1,419 1,153 2,164
Directors'/Trustees' Fees 2,700 146 4,350
Rating Agency fees 6,000 5,500 6,000
Other 12,364 4,979 25,757
---------- ---------- ----------
271,782 203,240 426,344
Less expenses paid indirectly (2,273) (1,436) (3,111)
---------- ---------- ----------
Total expenses 269,509 201,804 423,233
---------- ---------- ----------
Net Investment Income 1,503,728 1,339,450 2,504,954
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 238,027 -- 115,224
Net change in unrealized appreciation/depreciation
of investments (575,003) (393,672) 87,375
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments (336,976) (393,672) 202,599
---------- ---------- ----------
Dividends on Preferred Stock (122,693) (98,258) (193,152)
---------- ---------- ----------
Net Increase in Net Assets Resulting from Operations $1,044,059 $ 847,520 $2,514,401
========== ========== ==========
See accompanying notes
15
Delaware Investments Closed-End Municipal Bond Funds
Statements
OF CHANGES IN NET ASSETS
Delaware Delaware
Investments Minnesota Investments Minnesota
Municipal Income Municipal Income
Fund, Inc. Fund II, Inc.
Six Months Ended Year Ended Six Months Ended Year Ended
9/30/03 3/31/03 9/30/03 3/31/03
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $1,376,726 $ 2,902,399 $ 4,060,124 $ 8,290,725
Net realized gain on investments 812,985 995,361 1,131,227 994,489
Net change in unrealized appreciation/depreciation
of investments (1,077,142) 973,094 (1,487,531) 3,980,122
Dividends on preferred stock (110,928) (266,220) (293,892) (809,316)
----------- ----------- ------------ ------------
Net increase in net assets resulting from operations 1,001,641 4,604,634 3,409,928 12,456,020
----------- ----------- ------------ ------------
Dividends and Distributions to Common
Shareholders from:
Net investment income (1,180,588) (2,309,357) (3,517,317) (6,817,138)
Net realized gain on investments (565,645) (168,655) -- --
----------- ----------- ------------ ------------
(1,746,233) (2,478,012) (3,517,317) (6,817,138)
----------- ----------- ------------ ------------
Net Increase (Decrease) in Net Assets (744,592) 2,126,622 (107,389) 5,638,882
Net Assets:
Beginning of period 40,122,396 37,995,774 109,211,615 103,572,733
----------- ----------- ------------ ------------
End of period $39,377,804 $40,122,396 $109,104,226 $109,211,615
=========== =========== ============ ============
Delaware Delaware
Investments Minnesota Investments Arizona
Municipal Income Municipal Income
Fund III, Inc. Fund, Inc.
Six Months Ended Year Ended Six Months Ended Year Ended
9/30/03 3/31/03 9/30/03 3/31/03
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $981,931 $1,991,078 $1,503,728 $3,182,495
Net realized gain on investments 402,515 326,287 238,027 541,098
Net change in unrealized appreciation/depreciation
of investments (501,665) 1,367,753 (575,003) 2,392,047
Dividends on preferred stock (68,364) (206,640) (122,693) (359,145)
----------- ----------- ------------ -----------
Net increase in net assets resulting from operations 814,417 3,478,478 1,044,059 5,756,495
----------- ----------- ------------ -----------
Dividends and Distributions to Common Shareholders from:
Net investment income (780,810) (1,524,928) (1,431,456) (2,803,315)
Net realized gain on investments -- -- (280,327) (489,081)
----------- ----------- ------------ -----------
(780,810) (1,524,928) (1,711,783) (3,292,396)
----------- ----------- ------------ -----------
Net Increase (Decrease) in Net Assets 33,607 1,953,550 (667,724) 2,464,099
Net Assets:
Beginning of period 26,259,594 24,306,044 46,166,752 43,702,653
----------- ----------- ------------ -----------
End of period $26,293,201 $26,259,594 $45,499,028 $46,166,752
=========== =========== ============ ===========
See accompanying notes
16
Delaware Investments Closed-End Municipal Bond Funds
Statements
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Delaware
Investments Florida Investments Colorado
Insured Municipal Insured Municipal
Income Fund Income Fund, Inc.
Six Months Ended Year Ended Six Months Ended Year Ended
9/30/03 3/31/03 9/30/03 3/31/03
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $1,339,450 $2,625,096 $2,504,954 $5,167,308
Net realized gain on investments -- 384,200 115,224 770,424
Net change in unrealized appreciation/depreciation
of investments (393,672) 2,487,451 87,375 5,600,747
Dividends on preferred stock (98,258) (264,652) (193,152) (587,820)
----------- ----------- ---------- ----------
Net increase in net assets resulting from operations 847,520 5,232,095 2,514,401 10,950,659
----------- ----------- ---------- ----------
Dividends and Distributions to Common Shareholders from:
Net investment income (1,174,767) (2,276,965) (2,321,808) (4,546,921)
Net realized gain on investments (62,977) -- (483,710) (920,984)
----------- ----------- ---------- ----------
(1,237,744) (2,276,965) (2,805,518) (5,467,905)
----------- ----------- ---------- ----------
Net Increase (Decrease) in Net Assets (390,224) 2,955,130 (291,117) 5,482,754
Net Assets:
Beginning of period 39,651,025 36,695,895 76,988,354 71,505,600
----------- ----------- ---------- ----------
End of period $39,260,801 $39,651,025 $76,697,237 $76,988,354
=========== =========== =========== ===========
See accompanying notes
17
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund, Inc.
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $15.460 $14.640 $14.790 $14.060 $15.380 $15.380
Income (loss) from investment operations:
Net investment income 0.513 1.119 1.191 1.155 1.180 1.188
Net realized and unrealized gain (loss) on
investments (0.077) 0.758 (0.323) 0.732 (1.256) 0.004
Dividends on preferred stock from:
Net investment income (0.043) (0.094) (0.178) (0.317) (0.272) (0.262)
Net realized gain on investments -- (0.008) -- -- (0.014) --
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.043) (0.102) (0.178) (0.317) (0.286) (0.262)
------- ------- ------ ------ ------- -------
Total from investment operations 0.393 1.775 0.690 1.570 (0.362) 0.930
------- ------- ------ ------ ------- -------
Less dividends and distributions to common
shareholders from:
Net investment income (0.455) (0.890) (0.840) (0.840) (0.907) (0.930)
Net realized gain on investments (0.218) (0.065) -- -- (0.051) --
------- ------- ------ ------ ------- -------
Total dividends and distributions (0.673) (0.955) (0.840) (0.840) (0.958) (0.930)
------- ------- ------ ------ ------- -------
Net asset value, end of period $15.180 $15.460 $14.640 $14.790 $14.060 $15.380
======= ======= ======= ======= ======= =======
Market value, end of period $15.150 $16.000 $14.450 $14.300 $13.563 $16.500
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value (1.11%) 17.74% 7.00% 12.09% (12.39%) 11.29%
Net asset value 2.54% 12.29% 4.81% 11.83% (2.56%) 5.88%
Ratios and supplemental data:
Net assets applicable to common shares,
end of period (000 omitted) $39,378 $40,122 $37,996 $33,386 $36,488 $39,919
Ratio of expenses to average net assets
applicable to common shares(3) 1.04% 1.21% 1.13% 1.23% 1.36% 1.21%
Ratio of net investment income to average
net assets applicable to common shares(3) 6.88% 7.35% 8.00% 8.22% 8.05% 7.68%
Ratio of net investment income to average net
assets applicable to common shares net of dividends
to preferred shares(4) 6.33% 6.68% 6.84% 6.00% 6.17% 5.99%
Portfolio turnover 87% 38% 15% 6% 12% 15%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Net asset coverage per share of preferred shares,
end of period $148,445 $150,306 $144,989 $145,964 $141,221 $149,797
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended March 31, 2002 was an increase in net
investment income per share of $0.006, a decrease in net realized and
unrealized gain (loss) per share of $0.006, and an increase in the ratio of
net investment income to average net assets of 0.04%. Per share data and
ratios for periods prior to April 1, 2001 have not been restated to reflect
this change in accounting.
(2)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
18
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $15.060 $14.280 $14.450 $13.590 $14.950 $14.800
Income (loss) from investment operations:
Net investment income 0.560 1.143 1.163 1.168 1.176 1.154
Net realized and unrealized gain (loss) on
investments (0.054) 0.689 (0.313) 0.850 (1.411) 0.099
Dividends on preferred stock from:
Net investment income (0.041) (0.112) (0.182) (0.340) (0.307) (0.285)
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.041) (0.112) (0.182) (0.340) (0.307) (0.285)
------- ------- ------ ------ ------- -------
Total from investment operations 0.465 1.720 0.668 1.678 (0.542) 0.968
------- ------- ------ ------ ------- -------
Less dividends to common shareholders from:
Net investment income (0.485) (0.940) (0.838) (0.818) (0.818) (0.818)
------- ------- ------ ------ ------- -------
Total dividends (0.485) (0.940) (0.838) (0.818) (0.818) (0.818)
------- ------- ------ ------ ------- -------
Net asset value, end of period $15.040 $15.060 $14.280 $14.450 $13.590 $14.950
======= ======= ======= ======= ======= =======
Market value, end of period $15.590 $15.300 $14.050 $14.080 $12.438 $15.060
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value 5.10% 15.84% 5.75% 20.37% (12.28%) 14.73%
Net asset value 3.01% 12.19% 4.73% 13.06% (3.43%) 6.76%
Ratios and supplemental data:
Net assets applicable to common shares, end
of period (000 omitted) $109,104 $109,212 $103,573 $104,775 $98,574 $108,456
Ratio of expenses to average net assets applicable
to common shares(3) 0.87% 1.03% 1.06% 1.01% 0.99% 1.00%
Ratio of net investment income to average net
assets applicable to common shares(3) 7.42% 7.74% 8.03% 8.42% 8.44% 7.70%
Ratio of net investment income to average net
assets applicable to common shares net
of dividends to preferred shares(4) 6.88% 6.99% 6.79% 5.96% 6.24% 5.80%
Portfolio turnover 49% 22% 7% 3% 4% 15%
Leverage analysis:
Value of preferred shares outstanding
(000 omitted) $60,000 $60,000 $60,000 $60,000 $60,000 $60,000
Net asset coverage per share of preferred
shares, end of period $140,920 $141,010 $136,311 $137,312 $132,145 $140,380
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended March 31, 2002 was an increase in net
investment income per share of $0.003, a decrease in net realized and
unrealized gain (loss) per share of $0.003, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to April 1, 2001 have not been restated to reflect
this change in accounting.
(2)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
19
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund III, Inc.
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $14.290 $13.230 $13.420 $12.560 $13.970 $13.760
Income (loss) from investment operations:
Net investment income 0.532 1.084 1.064 1.065 1.075 1.025
Net realized and unrealized gain (loss) on investments (0.053) 0.918 (0.306) 0.889 (1.425) 0.222
Dividends on preferred stock from:
Net investment income (0.034) (0.112) (0.183) (0.336) (0.302) (0.279)
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.034) (0.112) (0.183) (0.336) (0.302) (0.279)
------- ------- ------ ------ ------- -------
Total from investment operations 0.445 1.890 0.575 1.618 (0.652) 0.968
------- ------- ------ ------ ------- -------
Less dividends to common shareholders from:
Net investment income (0.425) (0.830) (0.765) (0.758) (0.758) (0.758)
------- ------- ------ ------ ------- -------
Total dividends (0.425) (0.830) (0.765) (0.758) (0.758) (0.758)
------- ------- ------ ------ ------- -------
Net asset value, end of period $14.310 $14.290 $13.230 $13.420 $12.560 $13.970
======= ======= ======= ======= ======= =======
Market value, end of period $13.960 $14.800 $13.000 $13.000 $11.750 $14.125
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value (2.87%) 20.72% 5.93% 17.57% (11.70%) 11.59%
Net asset value 3.12% 14.53% 4.43% 13.54% (4.57%) 7.28%
Ratios and supplemental data:
Net assets applicable to common shares, end
of period (000 omitted) $26,293 $26,260 $24,306 $24,659 $23,075 $25,665
Ratio of expenses to average net assets applicable
to common shares(3) 1.16% 1.32% 1.49% 1.42% 1.33% 1.22%
Ratio of net investment income to average net assets
applicable to common shares(3) 7.45% 7.80% 7.88% 8.30% 8.33% 7.35%
Ratio of net investment income to average net assets
applicable to common shares net of dividends to
preferred shares(4) 6.93% 6.99% 6.56% 5.68% 5.99% 5.35%
Portfolio turnover 59% 23% 5% 5% 16% 15%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
Net asset coverage per share of preferred shares,
end of period $137,643 $137,532 $131,007 $132,197 $126,916 $135,549
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended March 31, 2002 was an increase in net
investment income per share of $0.007, a decrease in net realized and
unrealized gain (loss) per share of $0.007, and an increase in the ratio of
net investment income to average net assets of 0.04%. Per share data and
ratios for periods prior to April 1, 2001 have not been restated to reflect
this change in accounting.
(2)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
20
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Arizona Municipal Income Fund, Inc.
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $15.480 $14.650 $14.970 $14.000 $15.290 $15.030
Income (loss) from investment operations:
Net investment income 0.504 1.067 1.113 1.124 1.115 1.108
Net realized and unrealized gain (loss) on investments (0.109) 0.988 (0.257) 0.965 (1.333) 0.202
Dividends on preferred stock from:
Net investment income (0.041) (0.103) (0.164) (0.346) (0.299) (0.277)
Net realized gain on investments -- (0.018) (0.051) -- -- --
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.041) (0.121) (0.215) (0.346) (0.299) (0.277)
------- ------- ------ ------ ------- -------
Total from investment operations 0.354 1.934 0.641 1.743 (0.517) 1.033
------- ------- ------ ------ ------- -------
Less dividends and distributions to common
shareholders from:
Net investment income (0.480) (0.940) (0.817) (0.773) (0.773) (0.773)
Net realized gain on investments (0.094) (0.164) (0.144) -- -- --
------- ------- ------ ------ ------- -------
Total dividends and distributions (0.574) (1.104) (0.961) (0.773) (0.773) (0.773)
------- ------- ------ ------ ------- -------
Net asset value, end of period $15.260 $15.480 $14.650 $14.970 $14.000 $15.290
======= ======= ======= ======= ======= =======
Market value, end of period $15.450 $15.490 $14.750 $14.250 $12.625 $15.125
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value 3.43% 12.74% 10.22% 19.28% (11.65%) 8.84%
Net asset value 2.22% 13.44% 4.21% 13.00% (3.10%) 7.07%
Ratios and supplemental data:
Net assets applicable to common shares, end
of period (000 omitted) $45,499 $46,167 $43,703 $44,637 $41,758 $45,586
Ratio of expenses to average net assets applicable
to common shares(3) 1.17% 1.16% 1.19% 1.18% 1.21% 1.15%
Ratio of net investment income to average net
assets applicable to common shares(3) 6.53% 6.96% 7.41% 7.86% 7.84% 7.28%
Ratio of net investment income to average net
assets applicable to common shares net of dividends
to preferred shares(4) 6.00% 6.18% 5.99% 5.44% 5.74% 5.46%
Portfolio turnover 36% 24% 43% 24% 41% 46%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
Net asset coverage per share of preferred shares,
end of period $140,998 $142,334 $137,405 $139,274 $133,516 $141,172
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended March 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to April 1, 2001 have not been restated to reflect
this change in accounting.
(2)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
21
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Florida Insured Municipal Income Fund
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $16.370 $15.150 $15.400 $14.340 $15.670 $15.300
Income (loss) from investment operations:
Net investment income 0.553 1.084 1.071 1.087 1.092 1.113
Net realized and unrealized gain (loss) on investments (0.161) 1.186 (0.337) 1.068 (1.368) 0.292
Dividends on preferred stock from:
Net investment income (0.041) (0.109) (0.179) (0.337) (0.296) (0.277)
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.041) (0.109) (0.179) (0.337) (0.296) (0.277)
------- ------- ------ ------ ------- -------
Total from investment operations 0.351 2.161 0.555 1.818 (0.572) 1.128
------- ------- ------ ------ ------- -------
Less dividends to common shareholders from:
Net investment income (0.485) (0.941) (0.805) (0.758) (0.758) (0.758)
Net realized gain on investments (0.026) -- -- -- -- --
------- ------- ------ ------ ------- -------
Total dividends (0.511) (0.941) (0.805) (0.758) (0.758) (0.758)
------- ------- ------ ------ ------- -------
Net asset value, end of period $16.210 $16.370 $15.150 $15.400 $14.340 $15.670
======= ======= ======= ======= ======= =======
Market value, end of period $15.400 $15.050 $14.020 $13.180 $11.750 $14.750
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value 5.71% 14.17% 12.63% 19.06% (15.57%) 8.47%
Net asset value 2.30% 14.92% 4.16% 13.99% (3.01%) 7.80%
Ratios and supplemental data:
Net assets applicable to common shares, end
of period (000 omitted) $39,261 $39,651 $36,696 $37,300 $34,730 $37,956
Ratio of expenses to average net assets
applicable to common shares(3) 1.02% 1.18% 1.34% 1.32% 1.31% 1.14%
Ratio of net investment income to average
net assets applicable to common shares(3) 6.77% 6.81% 6.95% 7.38% 7.50% 7.15%
Ratio of net investment income to average net
assets applicable to common shares net of
dividends to preferred shares(4) 6.27% 6.13% 5.79% 5.10% 5.47% 5.37%
Portfolio turnover 0% 13% 13% 8% 6% 0%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Net asset coverage per share of preferred shares,
end of period $148,153 $149,128 $141,740 $143,249 $136,825 $144,889
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. This change in
accounting had no effect on the Fund's results of operations for the year
ended March 31, 2002. Per share data and ratios for the periods prior to
April 1, 2001 have not been restated to reflect this change in accounting.
(2)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
22
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Six Months
Ended Year Ended
9/30/03(6) 3/31/03 3/31/02(1) 3/31/01 3/31/00 3/31/99
(Unaudited)
Net asset value, beginning of period $15.920 $14.780 $15.260 $13.870 $15.220 $14.920
Income (loss) from investment operations:
Net investment income 0.518 1.068 1.094 1.105 1.099 1.080
Net realized and unrealized gain (loss)
on investments 0.042 1.324 (0.401) 1.373 (1.417) 0.264
Dividends on preferred stock from:
Net investment income (0.040) (0.098) (0.172) (0.342) (0.297) (0.309)
Net realized gain on investments -- (0.023) (0.051) -- -- --
------- ------- ------ ------ ------- -------
Total dividends on preferred stock (0.040) (0.121) (0.223) (0.342) (0.297) (0.309)
------- ------- ------ ------ ------- -------
Total from investment operations 0.520 2.271 0.470 2.136 (0.615) 1.035
------- ------- ------ ------ ------- -------
Less dividends and distributions to common
shareholders from:
Net investment income (0.480) (0.940) (0.818) (0.746) (0.735) (0.735)
Net realized gain on investments (0.100) (0.191) (0.132) -- -- --
------- ------- ------ ------ ------- -------
Total dividends and distributions (0.580) (1.131) (0.950) (0.746) (0.735) (0.735)
------- ------- ------ ------ ------- -------
Net asset value, end of period $15.860 $15.920 $14.780 $15.260 $13.870 $15.220
======= ======= ======= ======= ======= =======
Market value, end of period $16.050 $16.650 $14.700 $14.560 $12.563 $14.938
======= ======= ======= ======= ======= =======
Total investment return based on:(2)
Market value (0.16%) 21.31% 7.52% 22.42% (11.05%) 12.13%
Net asset value 3.18% 15.37% 3.15% 16.21% (3.62%) 7.21%
Ratios and supplemental data:
Net assets applicable to common shares, end
of period (000 omitted) $76,697 $76,988 $71,506 $73,817 $67,093 $73,598
Ratio of expenses to average net assets applicable
to common shares(3) 1.10% 1.05% 1.01% 1.06% 1.08% 1.06%
Ratio of net investment income to average net
assets applicable to common shares(3) 6.49% 6.83% 7.18% 7.68% 7.84% 7.12%
Ratio of net investment income to average net
assets applicable to common shares net of dividends
to preferred shares(4) 5.99% 6.08% 5.71% 5.31% 5.72% 5.08%
Portfolio turnover 16% 14% 37% 56% 37% 18%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
Net asset coverage per share of preferred shares,
end of period $145,871 $146,235 $139,382 $142,272 $133,867 $141,998
Liquidation value per share of preferred shares(5) $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
(1)As required, effective April 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. This change in
accounting had no effect on the Fund's results of operations for the year
ended March 31, 2002. Per share data and ratios for the periods prior to
April 1, 2001 have not been restated to reflect this change in accounting.
(2)Total investmentreturn is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
the purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods.
(3)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(4)Ratio reflects total net investment income less dividends paid to preferred
shareholders from net investment income divided by average net assets
applicable to common shareholders.
(5)Excluding any accumulated but unpaid dividends.
(6)Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
23
Delaware Investments Closed-End Municipal Bond Funds
September 30, 2003 (Unaudited)
Notes
TO FINANCIAL STATEMENTS
Delaware Investments Minnesota Municipal Income Fund, Inc. ("Minnesota Municipal
Fund"); Delaware Investments Minnesota Municipal Income Fund II, Inc.
("Minnesota Municipal Fund II"); Delaware Investments Minnesota Municipal Income
Fund III, Inc. ("Minnesota Municipal Fund III"); Delaware Investments Arizona
Municipal Income Fund, Inc. ("Arizona Municipal Fund"), and Delaware Investments
Colorado Insured Municipal Income Fund, Inc. ("Colorado Insured Municipal Fund")
are organized as Minnesota corporations and Delaware Investments Florida Insured
Municipal Income Fund ("Florida Insured Municipal Fund") is organized as a
Massachusetts Business Trust (each referred to as a "Fund" and collectively as
the "Funds"). The Minnesota Municipal Fund II, Florida Insured Municipal Fund
and Arizona Municipal Fund are diversified closed-end management investment
companies and Minnesota Municipal Fund, Minnesota Municipal Fund III and
Colorado Insured Municipal Fund are non-diversified closed-end management
investment companies under the Investment Company Act of 1940, as amended. The
Funds' shares trade on the American Stock Exchange.
The investment objective of each Fund is to provide high current income exempt
from federal income tax and from the personal income tax of its state, if any,
consistent with the preservation of capital. Florida Insured Municipal Fund will
generally seek investments that will enable its shares to be exempt from
Florida's intangible personal property tax. Each Fund will seek to achieve its
investment objective by investing substantially all of its net assets in
investment grade, tax-exempt municipal obligations of its respective state.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Funds' Board of
Trustees/Directors.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the Funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Discounts and premiums are
amortized to interest income over the lives of the respective securities. Each
Fund declares and pays dividends from net investment income monthly and
distributions from net realized gain on investments, if any, annually.
Expenses Paid Indirectly -- Certain expenses of the Funds are paid
through commission arrangements with brokers. These transactions are done
subject to best execution. In addition, the Funds may receive earnings credits
from their custodian when positive cash balances are maintained, which are used
to offset custody fees. The expenses paid under the above arrangements are
included in their respective expense captions on the Statement of Operations
with the corresponding expense offset shown as "expenses paid indirectly." The
amount of these expenses for the period ended September 30, 2003 were as
follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured
Municipal Municipal Municipal Municipal Municipal Municipal
Fund Fund II Fund III Fund Fund Fund
--------- --------- --------- --------- --------------- ----------------
Commission Reimbursements $ 721 $2,035 $497 $ 854 $715 $1,407
Earnings Credits 1,228 2,480 961 1,419 721 1,704
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee of 0.40%
which is calculated daily based on the average daily net assets of each Fund,
including assets attributable to any preferred stock that may be outstanding.
The Funds have engaged Delaware Service Company, Inc., (DSC), an affiliate of
DMC, to provide accounting and administration services which are based on
average net assets and paid on a monthly basis, subject to certain minimums.
At September 30, 2003, the Funds had liabilities payable to affiliates as
follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured
Municipal Municipal Municipal Municipal Municipal Municipal
Fund Fund II Fund III Fund Fund Fund
--------- --------- --------- --------- --------------- ----------------
Investment management fee
payable to DMC $(19,608) $(55,819) $(13,627) $(23,272) $(19,594) $(38,494)
Dividend disbursing,
accounting and other expenses
payable to DSC (7,083) (7,083) (5,042) (7,083) (7,083) (7,083)
Other expenses payable to DMC
and affiliates (2,285) (3,221) (2,104) (2,365) (2,281) (2,775)
Certain officers of DMC and DSC are officers, and/or directors/trustees of the
Funds. These officers and directors/trustees are paid no compensation by the
Funds.
24
Delaware Investments Closed-End Municipal Bond Funds
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
3. Investments
For the six months ended September 30, 2003 the Funds made purchases and sales
of investment securities other than U.S. government securities and short-term
investments as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured
Municipal Municipal Municipal Municipal Municipal Municipal
Fund Fund II Fund III Fund Fund Fund
--------- --------- --------- --------- --------------- ----------------
Purchases $25,839,745 $42,048,432 $12,193,876 $13,885,558 $1,485,630 $9,345,974
Sales 26,309,142 40,942,532 12,274,601 12,622,994 30,000 10,190,078
At September 30, 2003, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At September 30, 2003, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured
Municipal Municipal Municipal Municipal Municipal Municipal
Fund Fund II Fund III Fund Fund Fund
--------- --------- --------- --------- --------------- ----------------
Cost of Investments $56,224,166 $159,030,514 $38,139,008 $67,485,427 $55,053,431 $107,553,418
=========== ============ =========== =========== =========== ============
Aggregate Unrealized
Appreciation $2,496,538 $7,803,327 $2,517,146 $3,475,282 $4,865,220 $7,476,713
Aggregate Unrealized
Depreciation (293,936) (933,609) (254,047) (206,100) -- (141,712)
---------- ----------- ---------- ----------- ----------- ------------
Net Unrealized Appreciation $2,202,602 $6,869,718 $2,263,099 $3,269,182 $4,865,220 $7,335,001
=========== ============ =========== =========== =========== ============
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the periods ended September 30, 2003 and March 31,
2003 was as follows:
Minnesota Municipal Fund Minnesota Municipal Fund II
------------------------ ---------------------------
9/30/03* 3/31/03 9/30/03* 3/31/03
Tax-exempt income $1,291,516 $2,553,713 $3,811,209 $7,626,454
Ordinary income 46,705 -- -- --
Long-term capital gains 518,940 190,519 -- --
---------- ---------- ---------- ----------
Total $1,857,161 $2,744,232 $3,811,209 $7,626,454
========== ========== ========== ==========
Minnesota Municipal Fund III Arizona Municipal Fund
---------------------------- ----------------------
9/30/03* 3/31/03 9/30/03* 3/31/03
Tax-exempt income $849,174 $1,731,376 $1,554,149 $3,109,679
Ordinary income -- -- 149,110 81,412
Long-term capital gains -- -- 131,217 460,450
-------- ---------- ---------- ----------
Total $849,174 $1,731,376 $1,834,476 $3,651,541
======== ========== ========== ==========
Florida Insured Municipal Fund Colorado Insured Municipal Fund
------------------------------ -------------------------------
9/30/03* 3/31/03 9/30/03* 3/31/03
Tax-exempt income $1,273,025 $2,541,617 $2,514,960 $5,022,997
Ordinary income -- -- 48,371 192,861
Long-term capital gains 62,977 -- 435,339 839,867
---------- ---------- ---------- ----------
Total $1,336,002 $2,541,617 $2,998,670 $6,055,725
========== ========== ========== ==========
*Tax information for the period ended September 30, 2003 is an estimate and the
tax character of dividends and distributions may be redesignated at fiscal year
end.
25
Delaware Investments Closed-End Municipal Bond Funds
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
4. Dividend and Distribution Information (continued)
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of September 30, 2003, the
estimated components of net assets on a tax basis were as follows:
Minnesota Municipal Fund Minnesota Municipal Fund II Minnesota Municipal Fund III
------------------------ --------------------------- ----------------------------
Paid in Capital $35,426,619 $99,710,000 $24,853,904
Undistributed tax-exempt income 875,131 3,507,338 762,838
Undistributed ordinary income 41,457 -- --
Undistributed long-term gains 831,995 988,114 365,224
Capital loss carry forward -- (1,970,944) (1,951,864)
Unrealized appreciation (depreciation) 2,202,602 6,869,718 2,263,099
----------- ----------- -----------
Net assets $39,377,804 $109,104,226 $26,293,201
=========== ============ ===========
Arizona Municipal Fund Florida Insured Municipal Fund Colorado Insured Municipal Fund
---------------------- ------------------------------ -------------------------------
Paid in Capital $40,838,893 $33,361,389 $67,238,110
Undistributed tax-exempt income 1,117,400 1,027,015 1,961,922
Undistributed ordinary income -- -- 13,586
Undistributed long-term gains 273,553 7,177 148,618
Unrealized appreciation (depreciation) 3,269,182 4,865,220 7,335,001
----------- ----------- -----------
Net assets $45,499,028 $39,260,801 $76,697,237
=========== =========== ===========
For federal income tax purposes capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows:
2004 2005 2006 2008 2009 2010 Total
---- ---- ---- ---- ---- ---- -----
Minnesota Municipal Fund II $1,127,768 $89,665 $132,129 $437,162 $175,804 $8,416 $1,970,944
Minnesota Municipal Fund III 1,279,495 455,666 6,539 56,856 153,308 -- 1,951,864
5. Capital Stock
Pursuant to their articles of incorporation, Minnesota Municipal Fund, Minnesota
Municipal Fund II, Minnesota Municipal Fund III, Arizona Municipal Fund and
Colorado Insured Municipal Fund each have 200 million shares of $0.01 par value
common shares authorized. Florida Insured Municipal Fund has been authorized to
issue an unlimited amount of $0.01 par value common shares. The Funds did not
repurchase any shares under the Share Repurchase Program during the period
ending September 30, 2003. Shares issuable under the Fund's dividend
reinvestment plan are purchased by the Fund's transfer agent, Mellon Investor
Services, LLC, in the open market.
For the period ended September 30, 2003, the Funds did not have any transactions
in common shares.
The Funds each have one million shares of $0.01 par value preferred shares
authorized, except for Florida Insured Municipal Fund, which has an unlimited
amount of $0.01 par value preferred shares authorized. Under resolutions adopted
by the Board of Directors/Trustees, Minnesota Municipal Fund is allowed to issue
up to 400 preferred shares, of which the entire amount was issued on August 6,
1992. On May 14, 1993, Minnesota Municipal Fund II, Arizona Municipal Fund and
Florida Insured Municipal Fund issued 1,200, 500 and 400 preferred shares,
respectively. On December 10, 1993, Minnesota Municipal Fund III issued 300
preferred shares and on September 23, 1993, Colorado Insured Municipal Fund
issued 800 preferred shares. The preferred shares of each Fund have a
liquidation preference of $50,000 per share plus an amount equal to accumulated
but unpaid dividends.
Dividends for the outstanding preferred shares of each Fund are cumulative at a
rate established at the initial public offering and are typically reset every 28
days based on the results of an auction. Dividend rates (adjusted for any
capital gain distributions) ranged during the period ended September 30, 2003 as
follows:
Fund Low High
---- --- ----
Minnesota Municipal Fund 0.89% to 1.22%
Minnesota Municipal Fund II 0.75% to 1.25%
Minnesota Municipal Fund III 0.80% to 1.20%
Arizona Municipal Fund 0.82% to 1.12%
Florida Insured Municipal Fund 0.80% to 1.15%
Colorado Insured Municipal Fund 0.65% to 1.17%
26
Delaware Investments Closed-End Municipal Bond Funds
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Stock (continued)
Salomon Smith Barney, Inc. and Merrill Lynch Pierce, Fenner & Smith Inc.
(Colorado Insured Municipal Fund only), as the remarketing agents, receive an
annual fee from each of the Funds of 0.25% of the average amount of preferred
stock outstanding.
Under the 1940 Act, the Funds may not declare dividends or make other
distributions on common shares or purchase any such shares if, at the time of
the declaration, distribution or purchase, asset coverage with respect to the
outstanding preferred stock is less than 200%. The preferred shares are
redeemable at the option of the Funds, in whole or in part, on any dividend
payment date at $50,000 per share plus any accumulated but unpaid dividends
whether or not declared. The preferred shares are also subject to mandatory
redemption at $50,000 per share plus any accumulated but unpaid dividends
whether or not declared, if certain requirements relating to the composition of
the assets and liabilities of each Fund are not satisfied. The holders of
preferred shares have voting rights equal to the holders of common shares (one
vote per share) and will vote together with holders of common shares as a single
class. However, holders of preferred shares are also entitled to elect two of
each Fund's Directors. In addition, the 1940 Act requires that along with
approval by shareholders that might otherwise be required, the approval of the
holders of a majority of any outstanding preferred shares, voting separately as
a class, would be required to (a) adopt any plan of reorganization that would
adversely affect the preferred shares, and (b) take any action requiring a vote
of security holders pursuant of Section 13(a) of the 1940 Act, including, among
other things, changes in each of the Fund's subclassification as a closed-end
investment company or changes in their fundamental investment restrictions.
6. Credit and Market Risks
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the state, regional or local economic conditions, and differing levels of
supply and demand for municipal bonds. Many municipalities insure repayment for
their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market value
may fluctuate for other reasons and there is no assurance that the insurance
company will meet its obligations. These securities have been identified in the
Statements of Net Assets.
The Funds may invest in inverse floating rate securities ("inverse floaters"), a
type of derivative tax-exempt obligation with floating or variable interest
rates that move in the opposite direction of short-term interest rates, usually
at an accelerated speed. Consequently, the market values of inverse floaters
will generally be more volatile than other tax-exempt investments. Such
securities are denoted on the Statements of Net Assets.
27
Proxy Delaware Investments Closed-End Municipal Bond Funds
RESULTS (UNAUDITED)
Shareholders of the Delaware Investments Minnesota Municipal Income Fund, Inc.,
Delaware Investments Minnesota Municipal Income Fund II, Inc., Delaware
Investments Minnesota Municipal Income Fund III, Inc., Delaware Investments
Arizona Municipal Income Fund, Inc., Delaware Investments Florida Insured
Municipal Income Fund, and Delaware Investments Colorado Insured Municipal
Income Fund, Inc. voted on the following proposals at the annual meeting of
shareholders held on August 14, 2003. The description of each proposal and
number of shares voted are as follows:
Common Shareholders Preferred Shareholders
Shares Shares Shares Shares Shares Shares
Voted Voted Voted Voted Voted Voted
For Against Abstain For Against Abstain
----- ------- ------- ------ ------- -------
1. To elect the Fund's Board of Directors/Trustees:
Delaware Investments Minnesota Municipal Income
Fund, Inc:
Jude T. Driscoll 2,272,497 48,987 -- -- -- --
David K. Downes 2,277,127 44,357 -- -- -- --
Walter P. Babich 2,270,185 51,299 -- -- -- --
John H. Durham 2,275,725 45,759 -- -- -- --
John A. Fry 2,277,127 44,357 -- -- -- --
Anthony D. Knerr 2,273,153 48,331 -- -- -- --
Ann R. Leven 2,277,024 44,460 -- -- -- --
Thomas F. Madison N/A N/A N/A 314 -- --
Janet L. Yeomans N/A N/A N/A 314 -- --
Delaware Investments Minnesota Municipal Income
Fund II, Inc:
Jude T. Driscoll 6,450,488 164,302 -- -- -- --
David K. Downes 6,454,530 160,260 -- -- -- --
Walter P. Babich 6,439,054 175,736 -- -- -- --
John H. Durham 6,450,954 163,836 -- -- -- --
John A. Fry 6,454,142 160,648 -- -- -- --
Anthony D. Knerr 6,448,065 166,725 -- -- -- --
Ann R. Leven 6,464,409 150,381 -- -- -- --
Thomas F. Madison N/A N/A N/A 1,200 -- --
Janet L. Yeomans N/A N/A N/A 1,200 -- --
Delaware Investments Minnesota Municipal Income
Fund III, Inc:
Jude T. Driscoll 1,612,802 38,397 -- -- -- --
David K. Downes 1,616,202 34,997 -- -- -- --
Walter P. Babich 1,612,631 38,567 -- -- -- --
John H. Durham 1,616,202 34,997 -- -- -- --
John A. Fry 1,616,202 34,997 -- -- -- --
Anthony D. Knerr 1,616,202 34,997 -- -- -- --
Ann R. Leven 1,612,802 38,397 -- -- -- --
Thomas F. Madison N/A N/A N/A 299 1 --
Janet L. Yeomans N/A N/A N/A 299 1 --
Delaware Investments Arizona Municipal Income
Fund, Inc:
Jude T. Driscoll 2,537,582 31,201 -- -- -- --
David K. Downes 2,538,282 30,501 -- -- -- --
Walter P. Babich 2,533,972 34,811 -- -- -- --
John H. Durham 2,537,922 30,861 -- -- -- --
John A. Fry 2,538,622 30,161 -- -- -- --
Anthony D. Knerr 2,537,772 31,011 -- -- -- --
Ann R. Leven 2,538,622 30,161 -- -- -- --
Thomas F. Madison N/A N/A N/A 500 -- --
Janet L. Yeomans N/A N/A N/A 500 -- --
28
Delaware Investments Closed-End Municipal Bond Funds
Proxy
RESULTS (UNAUDITED) (CONTINUED)
Delaware Investments Florida Insured Municipal Income
Fund:
Jude T. Driscoll 2,236,509 24,347 -- -- -- --
David K. Downes 2,236,759 24,097 -- -- -- --
Walter P. Babich 2,236,759 24,097 -- -- -- --
John H. Durham 2,236,759 24,097 -- -- -- --
John A. Fry 2,235,478 25,379 -- -- -- --
Anthony D. Knerr 2,236,759 24,097 -- -- -- --
Ann R. Leven 2,236,759 24,097 -- -- -- --
Thomas F. Madison N/A N/A N/A 400 -- --
Janet L. Yeomans N/A N/A N/A 400 -- --
Delaware Investments Colorado Insured Municipal Income
Fund, Inc:
Jude T. Driscoll 4,175,482 72,695 -- -- -- --
David K. Downes 4,172,957 75,220 -- -- -- --
Walter P. Babich 4,176,619 71,558 -- -- -- --
John H. Durham 4,177,016 71,161 -- -- -- --
John A. Fry 4,174,094 74,083 -- -- -- --
Anthony D. Knerr 4,179,819 68,358 -- -- -- --
Ann R. Leven 4,177,017 71,160 -- -- -- --
Thomas F. Madison N/A N/A N/A 541 -- --
Janet L. Yeomans N/A N/A N/A 541 -- --
29
Delaware
Investments(SM)
---------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Investments Closed-End
Municipal Bond Funds shareholders. The return and principal value of an
investment in the Funds will fluctuate so that shares, when resold, may be worth
more or less than their original cost. Notice is hereby given in accordance with
Section 23(c) of the Investment Company Act of 1940 that the Funds may, from
time-to-time, purchase shares of their common stock on the open market at market
prices.
Board of Directors/Trustees Affiliated Officers Contact Information
Jude T. Driscoll Joseph H. Hastings Investment Manager
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA International Affiliate
Walter P. Babich Delaware International Advisers Ltd.
Board Chairman Richelle S. Maestro London, England
Citadel Construction Corporation Senior Vice President,
King of Prussia, PA Chief Legal Officer and Secretary Principal Office of the Funds
Delaware Investments Family of Funds 2005 Market Street
John H. Durham Philadelphia, PA Philadelphia, PA 19103-7057
Private Investor
Gwynedd Valley, PA Michael P. Bishof Independent Auditors
Senior Vice President and Treasurer Ernst & Young LLP
John A. Fry Delaware Investments Family of Funds 2001 Market Street
President Philadelphia, PA Philadelphia, PA 19103
Franklin & Marshall College
Lancaster, PA ----------------------------------- Registrar and Stock Transfer Agent
A description of the policies and Mellon Investor Services, L.L.C.
Anthony D. Knerr procedures that the Fund uses to Overpeck Centre
Managing Director determine how to vote proxies (if 85 Challenger Road
Anthony Knerr & Associates any) relating to portfolio Ridgefield Park, NJ 07660
New York, NY securities is available without 800 851-9677
charge (i) upon request, by calling
Ann R. Leven 800 523-1918; (ii) on the Fund's For Securities Dealers and Financial
Former Treasurer/Chief Fiscal Officer website at Institutions Representatives
National Gallery of Art http://www.delawareinvestments.com; 800 362-7500
Washington, DC and (iii) on the Commission's
website at http://www.sec.gov.; and Web site
Thomas F. Madison beginning no later than August 31, www.delawareinvestments.com
President and Chief Executive Officer 2004, information (if any)
MLM Partners, Inc. regarding how the Fund voted Number of Recordholders as of
Minneapolis, MN proxies relating to portfolio September 30, 2003:
securities during the most recent Minnesota Municipal Income Fund I 349
Janet L. Yeomans 12-month period ended June 30 is Minnesota Municipal Income Fund II 557
Vice President/Mergers & Acquisitions available without charge (i) Minnesota Municipal Income Fund III 131
3M Corporation through the Fund's website at Arizona Municipal Income Fund 110
St. Paul, MN http://www.delawareinvestments.com; Florida Insured Municipal Income Fund 177
and (ii) on the Commission's Colorado Insured Municipal
Thomas F. Madison and Janet L. Yeomans were website at http://www.sec.gov. Income Fund 189
elected by the preferred Shareholders -----------------------------------
of the Delaware Investments Closed-End
Municipal Bond Funds.
(8329) Printed in the USA
SA-CEMUNI [9/03] IVES 11/03 J9449 EXP: 11/04
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 10. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are
attached hereto as Exhibit 99.CERT.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are furnished herewith as Exhibit 99.906CERT.
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.
Name of Registrant: Delaware Investments Minnesota Municipal Income Fund III,
Inc.
JUDE T. DRISCOLL
------------------------------------
By: Jude T. Driscoll
-----------------------------
Title: Chairman
Date: 11/25/03
-----------------------------
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.
JUDE T. DRISCOLL
------------------------------------
By: Jude T. Driscoll
-----------------------------
Title: Chairman
Date: 11/25/03
-----------------------------
JOSEPH H. HASTINGS
------------------------------------
By: Joseph H. Hastings
-----------------------------
Title: Chief Financial Officer
Date: 11/25/03
-----------------------------