-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FNYKNCglwbnhnogANCkBk/+FCiJP8EPDHOpI7eD0A6csxwyOMQIc/93htaOP4xaL fiwQRrnWTO2IqneryjCFOg== 0000950116-98-001255.txt : 19980603 0000950116-98-001255.hdr.sgml : 19980603 ACCESSION NUMBER: 0000950116-98-001255 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980602 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR ARIZONA MUNICIPAL INCOME FUND INC CENTRAL INDEX KEY: 0000895577 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411737155 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07412 FILM NUMBER: 98641058 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET SUITE STREET 2: 1285 AVE OF THE AMERICAS 16TH FLR CITY: MINNIAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 2127132741 MAIL ADDRESS: STREET 1: MITCHELL HUTCHINSONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND INC CENTRAL INDEX KEY: 0000884174 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411718337 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06568 FILM NUMBER: 98641059 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: SUITE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132741 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND CENTRAL INDEX KEY: 0000895574 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411737161 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07410 FILM NUMBER: 98641060 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: SUITE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132741 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II INC CENTRAL INDEX KEY: 0000895658 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07420 FILM NUMBER: 98641061 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: SUITE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132741 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND INC CENTRAL INDEX KEY: 0000907573 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411751991 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07810 FILM NUMBER: 98641062 BUSINESS ADDRESS: STREET 1: 1818 MARKET STREET STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103-3682 BUSINESS PHONE: 8005234640 MAIL ADDRESS: STREET 1: 1818 MARKET STREET STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103-3682 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III INC CENTRAL INDEX KEY: 0000910347 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411761999 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07938 FILM NUMBER: 98641063 BUSINESS ADDRESS: STREET 1: C/O DELAWARE MANAGEMENT CO STREET 2: ONE COMMERCE SQU CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2122551000 MAIL ADDRESS: STREET 1: C/O DELAWARE MANAGEMENT CO STREET 2: ONE COMMERCE SQU CITY: PHILADELPHIA STATE: PA ZIP: 19103 N-30D 1 FOR TAX-EXEMPT INCOME VOYAGEUR Closed-End Municipal Bond Funds [various photos demonstrating service and guidance, professional management and goals] service and guidance professional management goals 1998 ANNUAL REPORT Minnesota Municipal Income Funds - I, II, III Arizona Municipal Income Fund Florida Insured Municipal Income Fund Colorado Insured Municipal Income Fund DELAWARE INVESTMENTS - ------------------- Philadelphia*London A TRADITION OF SOUND INVESTING commitment Investment Objectives and Strategies EACH OF THE SIX FUNDS IN THIS report are closed-end management investment companies whose shares trade on the American Stock Exchange (ASE) in New York. Each Fund seeks 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. In addition, Florida Insured Municipal Income Fund seeks investments that enable its shares to be exempt from Florida's intangible personal property tax. Each Fund seeks to achieve its objective by investing at least 80% of its net assets in investment grade, tax-exempt municipal obligations. INVESTMENT ADVISER Delaware Management Company has been the Fund's investment adviser since May 1, 1997. At a meeting on April 11, 1997, the shareholders of each Fund approved a new investment advisory agreement with Delaware Management that became effective May 1, 1997. On May 30, 1997, Voyageur Fund Managers, Inc., the Funds' prior investment adviser, merged into Delaware Management. Delaware Management is a part of Lincoln Financial Group, one of America's largest publicly held diversified financial services companies, with global insurance operations and more than $120 billion in assets under management. Delaware currently manages more than $45 billion for mutual fund shareholders and institutional investors such as pension plans and foundations. In addition, Delaware manages closed-end equity funds traded on the New York Stock Exchange. LEVERAGING Each of the six funds in this report uses leveraging, a tool that is not usually used by open-end mutual funds and one that can be an important contributor to each Fund's income and capital appreciation potential. Of course, there is no guarantee that leveraging will benefit any of the Funds. Leveraging could result in a higher degree of volatility because the Fund's net asset value could be more sensitive to fluctuations in short-term interest rates and equity prices. Delaware believes this volatility risk is reasonable given the benefits of higher income potential. tax-exempt income (photo of illustration from Tax-Exempt Income Brochure) (photo of keyboard) April 13, 1998 for tax-exempt income 1 DEAR SHAREHOLDER: WE ARE DELIGHTED TO REPORT THAT EACH of the six Voyageur closed-end municipal bond funds in this report outperformed its respective unmanaged index and peer group average for fiscal 1998, as shown below. The Funds' portfolio managers generally focused on higher quality and longer term tax-exempt securities during the 12 months ended March 31, 1998. Each Fund's manager also employed prudent leveraging to take advantage of what they believed were the best municipal bond market opportunities available in Minnesota, Arizona, Florida and Colorado. Our results were exceptional. Each Fund outpaced its Lehman Brothers benchmark by nearly 300 basis points (3%). We capitalized on a positive interest rate environment and favorable federal tax legislation in fiscal 1998 to provide unusual, equity-like returns. Still, five of the Funds traded at attractive discounts to net asset value as of March 31, 1998. The economic winds were at our back. The robust performance of the U.S. economy has generated higher state tax revenues since April 1997. Meanwhile inflation, as measured by the Consumer Price Index, fell to an annual rate of just 1.4% as of the end of March. We achieved success even as bond supply rose sharply in all four states and the difference between short and long-term interest rates narrowed, a trend that can sometimes reduce the advantages of using leverage. IN OUR OPINION, THE BOND MARKET'S FUNDAMENTALS REMAIN ENTICING. MUNICIPAL BOND CREDIT QUALITY IS THE STRONGEST IN MORE THAN A DECADE.
CUMULATIVE TOTAL RETURN - --------------------------------------------------------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 BASED ON PREMIUM/ ASE NET ASSET VALUE DISCOUNT* SYMBOL - --------------------------------------------------------------------------------------------------------- Minnesota Municipal Income Fund I +13.02% +2.02% VMN Minnesota Municipal Income Fund II +15.51% -6.22% VMM Minnesota Municipal Income Fund III +14.82% -2.76% VYM Lipper Minnesota Municipal Fund Average (6 Funds) +12.25% -4.00% - --------------------------------------------------------------------------------------------------------- Arizona Municipal Income Fund +15.17% -2.66% VAZ Lipper Arizona Municipal Fund Average (3 Funds) +14.09% -0.27% - --------------------------------------------------------------------------------------------------------- Florida Insured Municipal Income Fund +18.22% -6.47% VFL Lipper Florida Insured Municipal Fund Average (12 Funds) +12.85% -1.66% - --------------------------------------------------------------------------------------------------------- Colorado Insured Municipal Income Fund +15.84% -6.17% VCF Lipper Insured Municipal Debt Fund Average (21 Funds) +11.83% -4.17% - --------------------------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index +10.07% Lehman Brothers Insured Municipal Bond Index +11.25% - --------------------------------------------------------------------------------------------------------- * As of March 31, 1998. All performance shown above assumes reinvestment of distributions. Past performance does not guarantee future results.
for tax-exempt income 2 As low interest rates have prompted many municipalities to refinance debt, your Fund's managers have been highly selective in choosing bonds for each Fund's portfolio. Indeed, the first three months of calendar 1998 was a near record breaking period for the issuance of municipal bonds with $68 billion in offerings - a 70% increase over the same period last year, according to The Bond Buyer, a trade publication. This came on the heels of calendar year 1997 being the third highest year ever for the issuance of municipal bonds. We expect the surge in municipal bond supply to slow in the coming months, due to limitations on how many times issuers can refinance. In our opinion, the bond market's fundamentals remain enticing. Municipal bond credit quality is the strongest in more than a decade, according to Moody's Investors Service, which upgraded a record 2,718 issues in calendar 1997. As of March 31, triple A rated long-term municipal bonds offered yields equal to about 86% of the yield of 30-year U.S. Treasuries. This was the highest level in two years. Of course, interest and principal of municipal bonds are not guaranteed by the U.S. government. Contributing to the strength of the municipal bond market in fiscal 1998 were: * the Federal Reserve Board's ability to fight inflation; * Washington's commitment to keep the income provided by municipal bonds generally exempt from Federal taxes; and * the ability of many states to post substantial budget surpluses. Each of these trends, in our opinion, remains intact for the coming year. Municipal bonds remain one of the few ways investors can obtain monthly income without increasing their income tax bill. In addition, history has shown that tax-exempt securities can help temper the effect of potential equity market volatility when included in a balanced investment portfolio. WE EXPECT THE SURGE IN MUNICIPAL BOND SUPPLY TO SLOW IN THE COMING MONTHS, DUE TO LIMITATIONS ON HOW MANY TIMES ISSUERS CAN REFINANCE. On the pages that follow, the managers of each of the state specific funds review the Funds' performance during the past fiscal year and provide an outlook for the balance of calendar 1998. We thank you for being among the hundreds of thousands of investors who have chosen to invest with the Delaware Investments family of funds. discipline Sincerely, /s/ Wayne A. Stork - ------------------ Wayne A. Stork Chairman /s/ Jeffrey J. Nick - ------------------- Jeffrey J. Nick President and Chief Executive Officer for tax-exempt income 3 PORTFOLIO MANAGERS' REVIEW Minnesota Municipal Income Funds - I, II, III MINNESOTA MUNICIPAL INCOME FUNDS BOND QUALITY AND PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- MARCH 31, 1998 FUND I FUND II FUND III - -------------------------------------------------------------------------------- AAA 54.9% 54.8% 66.1% AA 13.7% 16.9% 10.0% A 20.8% 20.9% 12.5% BB 0.0% 1.2% 6.7% Unrated 10.6% 6.2% 4.7% Average Quality AA3 AA2 AA2 Average Effective Maturity 10.1 years 7.9 years 7.8 years Average Effective Duration 5.0 years 5.8 years 5.9 years Current Yield at Market Price 5.92% 5.89% 5.66% Amount of Leveraging (Millions) $20.0 $60.0 $15.0 - -------------------------------------------------------------------------------- Approximately 22.1%, 21.2% and 13.0% of the income generated by Minnesota Municipal Income Funds - I, II and III for the 12 months ended March 31, 1998, respectively, was subject to the federal alternative minimum tax. YOUR FUNDS' PORTFOLIO MANAGERS MITCHELL L. CONERY AND PATRICK P. COYNE manage Florida Insured Municipal Income Fund. Mr. Conery holds an MBA from the State University of New York at Albany. He managed a $5 billion municipal bond portfolio at Travelers Group before coming to Delaware in January 1997. Mr. Coyne has managed fixed-income securities at Delaware Management Company since 1990. He holds an MBA in finance from the University of Pennsylvania's Wharton School of Business. ELIZABETH H. HOWELL manages the three Minnesota Funds discussed in this report. She has more than 13 years experience that includes serving as a fixed-income portfolio manager at Windsor Financial Group and investment management positions at Loomis Sayles & Co. and Eaton Vance Management. Ms. Howell has an MBA from Babson College. ANDREW M. MCCULLAGH JR. manages Arizona Municipal Income Fund and Colorado Insured Municipal Income Fund. He has more than 23 years of experience in municipal bond trading, underwriting and portfolio management. He holds a graduate certificate in public finance from the University of Michigan. for tax-exempt income 4 MINNESOTA MUNICIPAL INCOME FUNDS ASSET ALLOCATION - -------------------------------------------------------------------------------- MARCH 31, 1998 FUND I FUND II FUND III - -------------------------------------------------------------------------------- Housing 23.3% 21.7% 20.8% Hospitals 15.1% 16.2% 19.3% Power Authority 13.9% 8.0% 8.7% General Obligation 8.4% 11.3% 5.3% Higher Education 9.0% 9.7% 9.0% Pre-Refunded 23.6% 20.5% 17.9% Territorial 1.2% 3.7% 3.3% Industrial Development 4.5% 4.8% 11.2% Pollution Control 0.0% 3.1% 3.4% Cash 1.0% 1.0% 1.1% DELAWARE INVESTMENTS' THREE CLOSED-END Minnesota municipal bond funds provided a total return between 290 and 550 basis points (2.9% to 5.5%) higher than the unmanaged Lehman Brothers Municipal Bond Index for the 12 months ending March 31, 1998, as shown on page 1. We attribute the Funds' strong performance to 1) a duration that was longer than the average of each Fund's peers, and 2) prudent leveraging. As the bond market rallied during the last half of the fiscal year, this relatively aggressive position enabled the Funds to fully participate in the bond market's total return potential. Duration measures a bond's sensitivity to interest rate fluctuations. Municipalities across Minnesota benefited from a credit quality upgrade in fiscal 1998. Standard & Poor's, an independent bond rating agency, upgraded the state's general obligation bond rating to AAA from AA+. Minnesota is one of only eight states to obtain S&P's highest rating. The net assets of each of the Minnesota Municipal Income Funds were mostly allocated to the highest quality tiers of the state's municipal bond market. However, Minnesota Municipal Income Funds II and III had slightly longer durations than Minnesota Municipal Income STRATEGY Fund I. We believe the longer durations enabled Funds II and III to achieve higher returns than Fund I during fiscal 1998. Bonds with a longer duration are more sensitive to interest rate changes and investor perceptions regarding inflation. Thus, as inflation fears waned during the last half of fiscal 1998, Minnesota Funds II and III benefited to a greater extent. We believe some investors' preference for relatively high current yield and moderate duration explains why Minnesota Fund I sold at a premium to net asset value while Funds II and III sold at modest discounts as of year's end. However, as you can see by MINNESOTA MUNICIPAL INCOME FUND I MARKET PRICE VS. NET ASSET VALUE - -------------------------------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - -------------------------------------------------------------------------------- 4/01/97 $14.64 $14.69 4/25/97 $14.37 $14.63 5/30/97 $14.71 $14.69 6/27/97 $14.86 $15.19 7/25/97 $15.18 $15.38 8/29/97 $15.00 $15.44 9/26/97 $15.15 $15.63 10/24/97 $15.06 $15.38 11/28/97 $15.20 $15.38 12/31/97 $15.35 $15.44 1/30/98 $15.50 $15.63 2/27/98 $15.43 $16.06 3/31/98 $15.38 $15.69 - -------------------------------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. for tax-exempt income 5 MINNESOTA MUNICIPAL INCOME FUND II MARKET PRICE VS. NET ASSET VALUE - -------------------------------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - -------------------------------------------------------------------------------- 4/01/97 $13.52 $12.50 4/25/97 $13.51 $12.50 5/30/97 $13.95 $13.25 6/27/97 $14.12 $13.56 7/25/97 $14.70 $13.88 8/29/97 $14.30 $13.88 9/26/97 $14.46 $14.00 10/24/97 $14.39 $13.75 11/28/97 $14.56 $13.63 12/26/97 $14.78 $13.75 1/30/98 $14.91 $14.44 2/27/98 $14.83 $14.63 3/31/98 $14.80 $13.88 - -------------------------------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. comparing the performance table on page 1 with the portfolio highlights table on page 3, having a higher yield doesn't always generate a higher total return. The amount of Minnesota bonds issued during the first quarter of calendar 1998 increased 132% compared to a year earlier, according to The Bond Buyer. We believe this increase demonstrated many municipalities' desire to reduce borrowing costs by refinancing. The low interest rate environment has made it advantageous for Minnesota municipalities to advance refund bonds that were issued at higher interest rates. Fortunately, Minnesota Municipal Income Funds I, II and III were well-positioned for such an environment. Throughout the 1998 fiscal year, we focused on bonds that in our opinion offered good call protection. OUTLOOK We expect the confluence of factors that helped produce a strong U.S. economy in fiscal 1998 to continue in the coming months. Inflation appears to be benign despite a strong statewide and national economy. MINNESOTA Minnesota has employed stringent fiscal measures to balance the state budget and this helped the state record a $2 billion budget surplus by the end of the 1997 calendar year. The state government recently voted to apply surplus revenues to property tax rebates and reductions along with infrastructure improvements. Minnesota's businesses added approximately 70,000 new jobs in the 1997 calendar year as the total payroll employment grew to nearly 2.6 million. Personal income in the state is estimated to have grown at a 6.6% annual rate during 1997 - well above the national average of 5.3%. With increasing incomes and a state income tax among the highest in the nation, we believe Minnesota residents will see the state's municipal bonds as an attractive way to decrease their income tax bill in the coming year. ELIZABETH H. HOWELL Vice President Senior Portfolio Manager MINNESOTA MUNICIPAL INCOME FUND III MARKET PRICE VS. NET ASSET VALUE - -------------------------------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - -------------------------------------------------------------------------------- 4/01/97 $12.66 $11.63 4/25/97 $12.66 $11.50 5/30/97 $13.04 $12.63 6/27/97 $13.20 $12.38 7/25/97 $13.50 $12.50 8/29/97 $13.34 $12.81 9/26/97 $13.49 $13.00 10/24/97 $13.41 $12.69 11/28/97 $13.59 $12.63 12/26/97 $13.79 $12.88 1/30/98 $13.90 $13.63 2/27/98 $13.82 $13.88 3/31/98 $13.76 $13.38 - -------------------------------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. for tax-exempt income 6 ARIZONA MUNICIPAL INCOME FUND ARIZONA MUNICIPAL INCOME FUND provided a strong total return of +15.17% (capital change plus reinvestment of distributions) for the 12 months ended March 31, 1998. We outperformed the unmanaged Lehman Brothers Municipal Bond Index by more than 500 basis points (5%) for the period, as shown on page 1. We believe the Fund's superior performance is largely due to our success in finding pockets of value within Arizona's municipal bond market. We did not target particular sectors but sought specific bonds we thought had greater total return potential than that offered by the aggregate pool of bonds issued by the state's municipalities. Arizona has many characteristics which we believe make municipal bonds attractive. High technology industries are attracted to the state's relatively skilled labor pool. Many retirees and others have been moving to Arizona, generating a need for additional municipal services. Arizona has one of the fastest growing populations in the nation according to the U.S. Census Bureau. By the year 2001, the state is projected to have a population of 5 million, 8% more than today. Economic expansion has been greatest in Maricopa and Pima counties, the state's largest issuers of general obligation bonds and home to Arizona's two largest cities - Phoenix and Tucson. Phoenix' population of 1.2 million represents 26% of Arizona residents, according to a state economic development report. For most of the year, we maintained a longer duration (a measurement of a arizona ARIZONA MUNICIPAL INCOME FUND PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION - ---------------------------------------------------------------- MARCH 31, 1998 Utility 4.0% General Obligation 30.1% Certificates of Participation 3.7% Water/Sewer Bonds 15.5% Power Authority 2.5% Transportation 11.0% Cash 1.4% Hospitals 12.3% Higher Education 3.1% Housing 8.9% Other Revenue 2.0% Industrial Development 5.5% Average Effective Maturity 7.1 years Average Effective Duration 5.7 years Average Quality AAA Current Yield at Market Price 5.28% Amount of Leveraging $25 million - ---------------------------------------------------------------- Approximately 4.0% of the income generated by Arizona Municipal Income Fund for the 12 months ended March 31, 1998, was subject to the federal alternative minimum tax. for tax-exempt income 7 bond's sensitivity to interest rates) than most of our competitors. This helped your Fund benefit from rising bond prices during this past year's rally. We allowed the Fund's duration to decline as interest rates declined during the last six months of fiscal 1998. At year's end, your Fund's duration stood at 5.7 years, three quarters of a year lower than at mid-year. OUTLOOK We believe interest rates will remain stable in the coming months. Government economic indicators appear to show that U.S. economic growth is slowing from its torrid pace of 1997. First calendar quarter earnings have been lower than expected for many companies listed in the Standard & Poor's 500 Index, and many analysts believe this trend could continue for the balance of 1998, increasing the attractiveness of bond investments relative to equities. In the months ahead, investor demand for Arizona municipal bonds is likely to remain strong. We believe the state's demographic profile suggests that many residents will continue to seek income-oriented investments. For investors in the highest federal income tax bracket (39.6%), the tax-equivalent yield on the state's long-term bonds was an attractive 8.36% as of March 31. Andrew M. McCullagh, Jr. Vice President Senior Portfolio Manager ARIZONA MUNICIPAL INCOME FUND MARKET PRICE VS. NET ASSET VALUE - ---------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - ---------------------------------------------------------- 4/01/97 $13.74 $12.88 4/25/97 $13.72 $13.00 5/30/97 $14.15 $13.44 6/27/97 $14.36 $13.81 7/25/97 $14.75 $14.25 8/29/97 $14.53 $14.13 9/26/97 $14.70 $14.44 10/24/97 $14.63 $14.00 11/28/97 $14.78 $13.81 12/26/97 $15.02 $14.38 1/30/98 $15.21 $14.38 2/27/98 $15.10 $14.50 3/31/98 $15.03 $14.63 - ------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. for tax-exempt income 8 FLORIDA INSURED MUNICIPAL INCOME FUND FLORIDA INSURED MUNICIPAL INCOME FUND performed exceptionally well throughout the year - providing a total return of +18.22% (capital change plus reinvested distributions at net asset value) for the 12 months ended March 31, 1998. Your Fund handily outperformed both its benchmark - the Lehman Brothers Insured Municipal Bond Index, and Lipper peer group average, which had total returns of +11.25% and +12.85% respectively, as shown on page 1. We achieved strong results while investing in the highest credit quality tiers of Florida's municipal bond market. As of March 31, 1998, your Fund was exclusively invested in bonds with a rating of AAA - the highest credit quality available as judged by Standard & Poor's and Moody's Investors Service - two independent bond rating agencies. The credit quality of many of Florida's bonds is generally strong - more than 70% of the state's municipal bonds are protected by private insurance. The narrowing of the spread between short and long-term interest rates during the year presented a challenge for the Fund. In order to increase the Fund's income potential we maintained strong weighting in hospital bonds. Hospital bonds provided higher yields than any other type of Florida municipal bonds in the past year. Because of intense competition in the health care industry, we invest only in hospitals that show a proven ability to increase revenues over time. Florida's municipal bond market has been bolstered by the underlying strength of the state's economy. Aside from the traditionally strong travel and tourism industry, Florida has become a gateway to florida FLORIDA INSURED MUNICIPAL INCOME FUND PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION - ---------------------------------------------------------------- MARCH 31, 1998 Hospitals 15.8% Other Revenue Bonds 24.1% Pre-Refunded 6.7% General Obligation 4.3% Cash 1.4% Housing 11.8% Certificates of Participation 12.6% Transportation 4.7% Water and Sewer 11.3% Higher Education 5.0% Utility 2.3% Average Effective Maturity 8.9 years Average Effective Duration 6.6 years Average Quality AAA Current Yield at Market Price 5.29% Amount of Leveraging $20 million - ---------------------------------------------------------------- Approximately 16.7% of the income generated by Florida Insured Municipal Income Fund for the 12 months ended March 31, 1998, was subject to the federal alternative minimum tax. for tax-exempt income 9 international trade with Latin America. A constant influx of retirees and other new residents generates a need for more roads, schools and water treatment facilities. OUTLOOK If inflation remains low, we believe the Federal Reserve Board will be reluctant to raise borrowing costs for the balance of calendar 1998. In this low interest rate environment, we will seek bonds with a higher-than average income potential. Bonds issued by Dade County may provide such income opportunities. We largely avoided bonds issued by the county after its aborted merger with the city of Miami in 1997. Miami credit quality had suffered because of lax municipal fiscal controls and we were concerned that Dade County would be negatively affected. Remarkably, the credit quality of the county's bonds has remained relatively high. The U.S. Census Bureau projects that Florida's population will grow to 20.7 million people by the year 2025. This would represent a 40% increase in the number of state residents. Given the infrastructure additions and improvements needed to accommodate a growing population, we believe Florida's municipal bond market can continue to offer attractive total return and income producing opportunities. outlook Patrick P. Coyne Vice President Senior Portfolio Manager Mitchell L. Conery Vice President Senior Portfolio Manager FLORIDA INSURED MUNICIPAL INCOME FUND MARKET PRICE VS. NET ASSET VALUE - ---------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - ---------------------------------------------------------- 4/01/97 $13.62 $12.38 4/25/97 $13.63 $12.63 5/30/97 $14.17 $13.13 6/27/97 $14.39 $13.63 7/25/97 $14.88 $13.19 8/29/97 $14.61 $13.75 9/26/97 $14.79 $13.75 10/24/97 $14.74 $13.75 11/28/97 $14.95 $13.94 12/26/97 $15.25 $14.38 1/30/98 $15.43 $14.69 2/27/98 $15.31 $14.38 3/31/98 $15.30 $14.31 - ---------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. [photo of family on beach] for tax-exempt income 10 COLORADO INSURED MUNICIPAL INCOME FUND COLORADO INSURED MUNICIPAL INCOME Fund provided a robust total return of +15.84% (at net asset value with distributions reinvested) for the twelve months ended March 31, 1998. The Fund outperformed the Lehman Brothers Insured Municipal Bond Index by a remarkable 459 basis points (4.59%). The Fund capitalized on the state's diverse economy by seeking relative value in the state's municipal bond market. We did not target broad sectors, but focused on specific bonds we thought had greater total return potential than the average bond issued in the state. We reduced the Fund's average effective maturity modestly to 9.0 years as of March 31, 1998. Due to the narrowing spread between short- and long-term interest rates, we believed we could provide almost as much yield as the state's long-term bonds but without the added price volatility. The Fund's yield at market price was 5.25% as of March 31, 1998. For an investor in the top federal tax bracket of 39.6%, and the highest state tax bracket of 3.02%, the taxable equivalent yield is 9.14%. Colorado serves as a key distribution and transportation center for the growing Rocky Mountain region. We recently purchased a transportation bond for a toll highway that begins just south of Denver and leads to Denver International Airport. The Airport's popularity has exceeded expectations and we believe the highway will benefit from the airport's success. Colorado's growth as a regional medical center, which serves neighboring states as well as its own population, is creating attractive income and total return opportunities. We slightly increased the Fund's allocation to hospital bonds. We focused on high quality bonds issued by hospitals that have demonstrated colorado COLORADO INSURED MUNICIPAL INCOME FUND PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION - ---------------------------------------------------------------- MARCH 31, 1998 General Obligation 24.4% Sales Tax Revenue 2.6% Higher Education 14.0% Certificates of Participation 1.9% Cash 1.6% Hospitals 13.1% Pollution Control 1.4% Transportation 15.4% Pre-Refunded 12.5% Housing 8.2% Utility 4.9% Average Effective Maturity 9.0 years Average Effective Duration 6.7 years Average Quality AAA Current Yield at Market Price 5.25% Amount of Leveraging $40 million - ---------------------------------------------------------------- None of the income generated by Colorado Insured Municipal Income Fund for the 12 months ended March 31, 1998, was subject to the federal alternative minimum tax. for tax-exempt income 11 the ability to expand revenues and maintain profitability. OUTLOOK Colorado's emergence as a communications and transportation hub in the Western U.S. bodes well for the state's municipal bonds, in our opinion. The state's strong economy has helped to improve the credit quality of its municipal bonds over the past decade. Adding to the attractiveness of Colorado's municipal bond market was the passage of the Taxpayer Bill of Rights (TABOR amendment) which placed a constitutional cap on spending and has led to what we believe is more disciplined fiscal management. The amendment requires voter consent in order for the state to issue many types of general obligation bonds. Thus, we believe a larger percentage of the state's municipal securities will be issued as revenue bonds. Such bonds are supported by the revenue stream of a particular project - a toll road, a hospital or a water treatment plant, rather than income tax dollars. outlook Andrew M. McCullagh, Jr. Vice President Senior Portfolio Manager COLORADO INSURED MUNICIPAL INCOME FUND MARKET PRICE VS. NET ASSET VALUE - ---------------------------------------------------------- APRIL 1, 1997 TO MARCH 31, 1998 DATE NET ASSET VALUE MARKET PRICE - ---------------------------------------------------------- 4/01/97 $13.50 $12.63 4/25/97 $13.51 $12.88 5/30/97 $13.94 $13.38 6/27/97 $14.16 $13.69 7/25/97 $14.61 $13.75 8/29/97 $14.35 $13.50 9/26/97 $14.56 $13.38 10/24/97 $14.48 $13.50 11/28/97 $14.66 $13.81 12/26/97 $14.97 $14.13 1/30/98 $15.11 $14.44 2/27/98 $14.99 $14.31 3/31/98 $14.92 $14.00 - ---------------------------------------------------------- Source: Bloomberg Business News. Past performance does not guarantee future results. 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, Norwest Bank, Minnesota, NA at 1.800.468.9716. You will be asked to put your request in writing. If you have shares registered in "street" name, contact your financial adviser or the broker/dealer holding the shares. Under the Funds' current policies, 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 the shareholders by the dividend plan agent. 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. 12 for tax-exempt income FINANCIAL STATEMENTS VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS MARCH 31, 1998 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS - 98.87% GENERAL OBLIGATION BONDS - 8.35% Edina Recreational Facilities Bonds Series 1992-A 6.00% 01/01/09 ............... $ 305,000 $ 321,330 Edina Recreational Facilities Bonds Series 1992-A 6.00% 01/01/10 ............... 320,000 336,570 Minneapolis 6.00% 03/01/16 .................. 1,600,000 1,687,120 Minneapolis-St. Paul Metro Airport Commission AMT 6.60% 01/01/11 ........................ 1,500,000 1,601,445 Rosemount Independent School District #196 5.70% 04/01/12 ............................ 1,000,000 1,057,130 ---------- 5,003,595 --------- HIGHER EDUCATION REVENUE BONDS - 9.01% Minnesota Higher Education Facility St. Thomas University Series 3-C 6.25% 09/01/16 ....................... 1,000,000 1,049,660 Minnesota Higher Education Facility Macalester College Series 3-J 6.40% 03/01/22 ....................... 1,000,000 1,064,070 Minnesota State University Board Revenue State University System Series A 6.05% 06/30/18 ....................... 250,000 261,548 Northfield St. Olaf College Revenue 6.30% 10/01/12 ....................... 1,075,000 1,155,958 Northfield St. Olaf College Revenue 6.40% 10/01/21 ....................... 1,750,000 1,868,247 --------- 5,399,483 --------- HOSPITAL REVENUE BONDS - 15.04% Bloomington Health Care Facilities Masonic Home Care Center 5.875% 07/01/22 (AMBAC) ................. 1,000,000 1,041,990 Duluth Economic Development Authority Health Care Revenue Duluth Clinic Series 1992 6.30% 11/01/22 (AMBAC) ...... 1,270,000 1,380,426 Duluth Economic Development Authority Health Care Revenue St. Luke's Hospital Series 1992-B 6.40% 05/01/18 (Connie Lee) 1,000,000 1,079,690 Duluth Economic Development Authority Health Care Revenue St. Mary's Hospital Series 1993-C 6.00% 02/15/20(Connie Lee) 1,000,000 1,065,990 Minneapolis Hospital System Revenue Fairview Hospital Series 1991-A 6.50% 01/01/11 (MBIA) ................... 2,210,000 2,402,756 Minneapolis Hospital System Revenue Fairview Hospital Series 1993-A 5.25% 11/15/19 (MBIA) ................... 1,500,000 1,507,380 Minneapolis/St. Paul HRA HealthOne 6.75% 08/15/14 (MBIA) ................... 500,000 535,470 --------- 9,013,702 --------- PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) HOUSING REVENUE BONDS - 23.28% Brooklyn Center Multifamily Housing Revenue Four Courts AMT 7.50% 06/01/25 ............... $1,800,000 $1,857,402 Minneapolis Community Housing Revenue Series-5 5.70% 12/01/27 ..................... 200,000 205,666 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 1991-A AMT 7.45% 07/01/22 (FHA) ....... 1,385,000 1,470,053 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 1992-G 6.50% 07/01/06365,000390,864 Minnetonka Senior Housing Project (Presbyterian Homes Guaranteed) 7.70% 06/01/25 .............................. 2,725,000 2,939,648 New Brighton Multifamily Mortgage Revenue Polynesian Village Apartments Series 1995-A 7.60% 04/01/251,400,0001,493,814 St. Anthony Multifamily Housing Development 6.875% 07/01/22 (Asset Guaranty) ............. 2,265,000 2,427,876 St. Paul HRA Multifamily Housing Revenue Pointe of St. Paul Project Series 1992 6.60% 10/01/12 (FNMA) ............ 2,950,000 3,162,931 --------- 13,948,254 --------- INDUSTRIAL DEVELOPMENT REVENUE BONDS - 4.48% Bass Brook PCR Minnesota Power and Light 6.00% 07/01/22................................ 2,575,000 2,681,991 --------- 2,681,991 --------- POWER AUTHORITY REVENUE BONDS - 13.88% Anoka County Solid Waste Disposal National Rural Co-Op Utility AMT 6.95% 12/01/08 .............................. 1,000,000 1,069,710 Northern Minnesota Municipal Power Agency Electric System Revenue Series A 5.00% 01/01/21 .............................. 1,500,000 1,442,715 Northern Minnesota Municipal Power Agency Electric System Revenue Series B 5.50% 01/01/18 (AMBAC) ...................... 1,250,000 1,278,125 Southern Minnesota Municipal Power Agency 5.00% 01/01/16 (FGIC) ....................... 580,000 569,247 Southern Minnesota Municipal Power Agency 5.50% 01/01/15 (AMBAC) ...................... 610,000 627,580 Southern Minnesota Municipal Power Agency 5.75% 01/01/11 (FGIC) ....................... 1,000,000 1,052,920 Western Minnesota Municipal Power Agency 5.50% 01/01/15 (MBIA) ....................... 2,275,000 2,278,686 --------- 8,318,983 --------- for tax-exempt income 13 VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) *PRE-REFUNDED BONDS/ESCROWED TO MATURITY - 23.64% Carver County Series 1992-A 5.875% 02/01/14-02 ............................ $1,000,000 $1,049,930 Dakota & Washington Counties HRA Single Family Mortgage Revenue Bloomington AMT 8.375% 09/01/21(GNMA) (Escrowed to Maturity) ........................ 2,555,000 3,592,790 Duluth Economic Development Authority Health Care Revenue Duluth Clinic Series 1992 6.30% 11/01/22-04 (AMBAC) ...................... 730,000 815,060 Metropolitan Council Sports Facilities Commission Hubert H. Humphrey Metrodome 6.00% 10/01/09 (Escrowed to Maturity) .......... 1,750,000 1,875,492 Minnesota Public Facilities Authority Water Pollution Control Revenue Series 1992 6.50% 03/01/14-02 .................. 1,500,000 1,651,530 Puerto Rico Commonwealth 6.00% 07/01/26-07 ............................. 2,000,000 2,277,180 St. Cloud Hospital Revenue 6.75% 07/01/15-01 (AMBAC) ...................... 1,000,000 1,097,180 St. Francis Independent School District #15 6.30% 02/01/11-06 (FSA) ....................... 1,250,000 1,394,350 Southern Minnesota Municipal Power Agency 5.50% 01/01/15 (AMBAC) (Escrowed to Maturity) ........................ 390,000 404,953 ---------- 14,158,465 ---------- TRANSPORTATION REVENUE BONDS - 1.19% Puerto Rico Commonwealth Highway & Transportation Authority 5.50% 07/01/26........................ 700,000 715,337 ---------- 715,337 ---------- TOTAL MUNICIPAL BONDS (COST $54,727,125) 59,239,810 ---------- TOTAL MARKET VALUE OF SECURITIES - 98.87% (COST $54,727,125)** .......................... $ 59,239,810 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.13% ..................... 675,227 ------------ TOTAL NET ASSETS - 100.00% ..................... $ 59,915,037 LIQUIDATION VALUE OF PREFERRED STOCK ............ (20,000,000) ------------ NET ASSETS APPLICABLE TO 2,594,700 COMMON SHARES ($.01 PAR VALUE) OUTSTANDING ................... $ 39,915,037 ============ NET ASSET VALUE PER COMMON SHARE ($39,915,037 / 2,594,700 SHARES) .............. $ 15.38 ===== _____________________ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Also cost for federal income tax purposes. AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax Asset Guaranty - Insured by the Asset Guaranty Insurance Company Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Corporation FHA - Insured by the Federal Housing Authority FNMA - Insured by the Federal National Mortgage Association FSA - Insured by the Financial Security Assurance GNMA - Insured by the Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value, 200 million shares authorized to the Fund ............................................... $ 35,455,037 Preferred stock, $.01 par value, 1 million shares authorized to the Fund ............................................... 20,000,000 Distributions in excess of net investment income ........... (51,780) Accumulated net realized loss on investments ............... (905) Net unrealized appreciation on investments ................. 4,512,685 ------------ Total net assets ........................................... $ 59,915,037 ============
See accompanying notes VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENT OF NET ASSETS MARCH 31, 1998 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS - 99.02% GENERAL OBLIGATION BONDS - 11.26% Becker AMT 6.25% 08/01/15 (MBIA) ............ $ 3,700,000 $ 3,987,379 Buffalo Independent School District 6.15% 02/01/22 (FSA) ...................... 4,030,000 4,233,313 Hawley Independent School District 5.75% 02/01/17 (FSA) ...................... 1,000,000 1,047,350 Melrose Independent School District #740 Series A 5.625% 02/01/13 (FSA) ............. 3,225,000 3,309,979 Minneapolis Convention Center Facilities 5.40% 04/01/12 ............................ 2,000,000 2,058,700 Minnesota State 5.375% 08/01/11 ............. 1,000,000 1,031,410 Rosemount Independent School District #196 5.70% 04/01/12 ............................ 1,270,000 1,342,555 Stewartville Independent School District #534 5.75% 02/01/17 ............................ 1,705,000 1,827,931 ---------- 18,838,617 ---------- 14 for tax-exempt income VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENT OF NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) HIGHER EDUCATION REVENUE BONDS - 9.66% Minnesota Higher Education Facility Macalster College 5.55% 03/01/16................... $1,250,000 $1,295,600 Minnesota Higher Education Facility St. Thomas University Series 4A-1 5.625% 10/01/21 .................................. 1,000,000 1,030,260 Minnesota State Higher Education Facility St. Thomas University Series R1 5.60% 10/01/15 ................................... 1,050,000 1,088,966 Minnesota State Higher Education Facility St. Thomas University Series R2 5.60% 09/01/14 ................................... 275,000 285,890 Minnesota State University Board Revenue Series 1993-A State University System 6.10% 06/30/23 ................................... 1,150,000 1,205,304 Minnesota State University Board Revenue Series 1993-C State University System 5.60% 06/30/16 (MBIA) ............................ 4,115,000 4,232,977 Minnesota State University Board Revenue Series 1993-C State University System 5.60% 06/30/19 (MBIA) ............................ 3,720,000 3,818,022 University of Minnesota Series A 5.50% 07/01/21 ................................... 3,000,000 3,200,250 ---------- 16,157,269 ---------- HOSPITAL REVENUE BONDS - 16.20% Bloomington Health Care Facilities Masonic Home Care Center 5.875% 07/01/22 (AMBAC) .......................... 4,000,000 4,167,960 Brainerd Evangelical Lutheran Health Care Facilities Series A 6.65% 03/01/17 (FSA) ..................... 1,195,000 1,301,259 Detroit Lakes Benedictine Health Systems St. Mary's Hospital 6.00% 02/15/19 (Connie Lee) ....................... 1,250,000 1,332,488 Duluth Economic Development Authority Health Care Facilities Revenue Duluth Clinic 6.20% 11/01/12 (AMBAC) ........................... 720,000 779,659 Duluth Economic Development Authority Health Care Facilities Revenue Duluth Clinic Series 1992 6.30% 11/01/22 (AMBAC) ................ 3,890,000 4,228,236 Duluth Economic Development Authority Health Care Facilities Revenue St. Mary's Hospital Series 1993-C 6.00% 02/15/20 (Connie Lee) ......... 6,000,000 6,395,940 Minnesota Agricultural and Economic Development Health Care System Fairview Hospital Series A 5.75% 11/15/26 (MBIA) ............................ 4,800,000 5,079,264 Minneapolis-St. Paul HRA Childrens Health Care 5.50% 08/15/25 (FSA) ............................. 1,500,000 1,537,395 Minneapolis-St. Paul HRA HealthOne 7.40% 08/15/11 (MBIA) ............................ 2,105,000 2,288,261 ---------- 27,110,462 ---------- HOUSING REVENUE BONDS - 21.66% Chanhassen Multifamily Housing Heritage Park Project AMT 6.20% 07/01/30 (FHA) 1,105,000 1,169,764
PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) HOUSING REVENUE BONDS (CONTINUED) Dakota County HRA Multifamily Mortgage Revenue Imperial Ridge Project Series 1993-A 6.10% 12/15/28 (GNMA) .......................... $1,875,000 $1,972,800 Harmony Minnesota Multifamily Revenue Zedakah Foundation Project Series A 5.95% 09/01/20 ................................. 1,000,000 1,036,840 Minnesota Housing Finance Agency Multifamily Rental Housing Series D 5.90% 02/01/14 ........................ 1,115,000 1,161,953 Minnesota Housing Finance Agency Multifamily Rental Housing Series D 6.00% 08/01/22 ........................ 2,295,000 2,389,875 Minnesota Housing Finance Agency Single Family Housing Revenue Series 1994-F 6.30% 07/01/25 .................... 1,545,000 1,643,957 Minnesota Housing Finance Agency Single Family Mortgage Revenue AMT 7.05% 07/01/22 ................................. 1,710,000 1,802,785 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 1992-B2 AMT 6.15% 01/01/26 ............... 3,885,000 4,050,307 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 1992-C2 AMT 6.15% 07/01/23 ............... 3,935,000 4,088,111 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 1994-J AMT 6.95% 07/01/26 ................ 3,655,000 3,952,956 Minnetonka Senior Housing Project (Presbyterian Homes of Minnesota Guaranteed) 7.25% 06/01/09 ................................. 1,225,000 1,309,966 Minnetonka Senior Housing Project (Presbyterian Homes of Minnesota Guaranteed) 7.50% 06/01/14 ................................. 760,000 820,298 Minnetonka Senior Housing Project (Presbyterian Homes of Minnesota Guaranteed) 7.55% 06/01/19 ................................. 2,365,000 2,545,993 New Brighton Multifamily Mortgage Revenue Polynesian Village Apartments Series 1995-A 7.60% 04/01/25 .................... 3,820,000 4,075,978 St. Cloud Housing Redevelopment Authority Northway Manor, Section 8 Housing 5.35% 12/01/18 ................................. 565,000 560,836 St. Paul HRA Single Family Mortgage Revenue 6.40% 03/01/21 (FNMA) .......................... 1,935,000 2,066,096 Stillwater, Minnesota Multifamily Mortgage Revenue (Stillwater Cottages) AMT 7.25% 11/01/27 ........ 1,540,000 1,594,131 ---------- 36,242,646 ---------- INDUSTRIAL DEVELOPMENT REVENUE BONDS - 4.77% Bass Brook PCR Minnesota Power and Light 6.00% 07/01/22................................... 7,660,000 7,978,273 ---------- 7,978,273 ----------
for tax-exempt income 15 VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENT OF NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) POLLUTION CONTROL REVENUE BONDS - 3.14% Cloquet, Minnesota Pollution Control Revenue Potlatch Corporation Project 5.90% 10/01/26.. $5,000,000 $5,259,650 ---------- 5,259,650 ---------- POWER AUTHORITY REVENUE BONDS - 8.03% Northern Minnesota Municipal Power Agency Electric System Revenue Series B 5.50% 01/01/18 (AMBAC) ........................ 5,955,000 6,088,988 Puerto Rico Electric Power Authority 5.25% 07/01/21 ................................ 2,000,000 2,005,800 Southern Minnesota Municipal Power Agency 5.75% 01/01/18 (FGIC) ......................... 3,565,000 3,728,598 Western Minnesota Municipal Power Agency 5.50% 01/01/15 (MBIA) ......................... 1,605,000 1,607,600 ---------- 13,430,986 ---------- *PRE-REFUNDED BONDS/ESCROWED TO MATURITY - 20.49% Dakota & Washington Counties HRA Single Family Mortgage Revenue Bloomington AMT 8.375% 09/01/21(GNMA) (Escrowed to Maturity) ........................ 5,500,000 7,733,990 Duluth Economic Development Authority Hospital Facilities Revenue Duluth Clinic 6.20% 11/01/12-04 (AMBAC) ...................... 280,000 311,032 Duluth Economic Development Authority Health Care Facilities Revenue 6.30% 11/01/22-04 (AMBAC) ...................... 960,000 1,071,859 Esko Independent School District 5.65% 04/01/12-05 (FSA) ....................... 550,000 586,910 Metropolitan Council Sports Facilities Commission Hubert H. Humphrey Metrodome 6.00% 10/01/09 (Escrowed to Maturity) .......... 2,360,000 2,529,236 Minnesota Public Facilities Authority Water Pollution Control Revenue 6.25% 03/01/16-05 ............................. 1,000,000 1,115,470 Minnesota Public Facilities Authority Water Pollution Control Revenue Series 1992 6.50% 03/01/14-05 .................. 3,300,000 3,633,366 Red Wing Independent School District #256 Series 1993-A 5.70% 02/01/12-03 ................ 2,925,000 3,100,295 Red Wing Independent School District #256 Series 1993-A 5.70% 02/01/13-03 ................ 1,625,000 1,722,386 St. Paul HRA Sales Tax Revenue Civic Center 5.55% 11/01/23 (MBIA) (Escrowed to Maturity) ........................ 4,200,000 4,352,040 St. Paul HRA Sales Tax Revenue Civic Center 5.55% 11/01/23 (Escrowed to Maturity) .......... 2,300,000 2,383,260 Southern Minnesota Municipal Power Agency 5.75% 01/01/18-16 ............................. 3,715,000 3,957,924 Western Minnesota Municipal Power Agency 6.625% 01/01/16 (Escrowed to Maturity) ......... 1,535,000 1,791,406 --------- 34,289,174 ----------
PRINCIPAL MARKET AMOUNT VALUE ------------------------------- MUNICIPAL BONDS (CONTINUED) TRANSPORTATION REVENUE BONDS - 3.66% Puerto Rico Commonwealth Highway & Transportation Authority 5.50% 07/01/26.......................... $6,000,000 $6,131,460 ------------ 6,131,460 ------------ OTHER REVENUE BONDS - 0.15% Minneapolis Community Development Authority 5.50% 06/01/12.................................... 250,000 254,725 ------------ 254,725 ------------ TOTAL MUNICIPAL BONDS (COST $156,047,703).......... 165,693,262 ------------ TOTAL MARKET VALUE OF SECURITIES - 99.02 % (COST $156,047,703)**............................. $165,693,262 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.98%......................... 1,639,870 ------------ TOTAL NET ASSETS - 100.00%......................... $167,333,132 LIQUIDATION VALUE OF PREFERRED STOCK............... (60,000,000) ------------ NET ASSETS APPLICABLE TO 7,252,200 COMMON SHARES ($.01 PAR VALUE) OUTSTANDING...................... $107,333,132 ============ NET ASSET VALUE PER COMMON SHARE ($107,333,132 / 7,252,200 SHARES)................. 14.80 =====
- --------------------- * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Cost for federal income tax purposes is $156,086,937. 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 Corporation FHA - Insured by the Federal Housing Authority FNMA - Insured by the Federal National Mortgage Association FSA - Insured by the Financial Security Assurance GNMA - Insured by the Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value, 200 million shares authorized to the Fund................................................. $99,710,002 Preferred stock, $.01 par value, 1 million shares authorized to the Fund................................................. 60,000,000 Undistributed net investment income.......................... 728,355 Accumulated net realized loss on investments................. (2,750,784) Net unrealized appreciation on investments................... 9,645,559 ------------ Total net assets............................................. $167,333,132 ============
See accompanying notes 16 for tax-exempt income VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC. STATEMENT OF NET ASSETS MARCH 31, 1998 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS - 98.99% CERTIFICATES OF PARTICIPATION - 0.26% Anoka County Community Action Program 5.50% 06/01/13........................... $ 100,000 $ 103,213 ---------- 103,213 ---------- GENERAL OBLIGATION BONDS - 5.31% Brooklyn Park Minnesota Series A 5.50% 02/01/19........................... 1,075,000 1,103,638 North Branch Independent School District 5.625% 02/01/17 (FGIC)................... 1,000,000 1,034,530 ---------- 2,138,168 ---------- HIGHER EDUCATION REVENUE BONDS - 9.00% Minnesota Higher Education Facilities Authorities Revenue St. Thomas University Series 4-A1 5.625% 10/01/21.......................... 1,010,000 1,040,562 Minnesota Higher Education Facilities Macalester College Series 4-C 5.50% 03/01/12................ 200,000 208,858 Minnesota Higher Education Facilities St. Benedict College Series 3-W 6.375% 03/01/20............... 1,275,000 1,337,768 Minnesota Higher Education Facilities St. Mary's College Series 3-Q 6.15% 10/01/23................ 1,000,000 1,038,360 ---------- 3,625,548 ---------- HOSPITAL REVENUE BONDS - 19.28% Duluth Economic Development Authority Hospital Facilities Revenue Duluth Clinic 6.20% 11/01/12 (AMBAC)................... 1,080,000 1,169,489 Minnesota Agricultural and Economic Development Health Care System Fairview Hospital Series A 5.75% 11/15/26 (MBIA).. 2,000,000 2,116,360 Princeton Fairview Hospital Revenue Series 1991-C 6.25% 01/01/21 (MBIA)...... 2,000,000 2,135,160 Robbinsdale North Memorial Medical Center Series 1993-B 5.50% 05/15/23 (AMBAC)..... 1,500,000 1,527,270 Wadena County Health Care Facilities Revenue 7.75% 09/01/24................... 750,000 818,145 ---------- 7,766,424 ---------- HOUSING REVENUE BONDS - 20.75% Brooklyn Center Multifamily Housing Revenue Four Courts AMT 7.50% 06/01/25........... 1,000,000 1,031,890 Burnsville Multifamily Mortgage Revenue Series A 7.10% 01/01/30 (FSA)............ 2,000,000 2,232,220 Edina HRA Edina Park Plaza 7.70% 12/01/28 (FHA)..................... 1,000,000 1,043,530 Minneapolis Community Development Agency 5.70% 12/01/27........................... 475,000 488,457 PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS (CONTINUED) HOUSING REVENUE BONDS (CONTINUED) Minneapolis Multifamily Housing Revenue Olsen Townhomes AMT 6.00% 12/01/19...... $1,875,000 $1,930,444 Minnesota HFA Single Family Mortgage Revenue Series 1991-A AMT 7.45% 07/01/22 (FHA).. 1,540,000 1,634,571 ---------- 8,361,112 ---------- INDUSTRIAL DEVELOPMENT REVENUE BONDS - 11.17% Bass Brook PCR Minnesota Power and Light 6.00% 07/01/22.......................... 1,505,000 1,567,533 Minnesota Public Facility Authority Water Pollution Control 5.40% 03/01/15........ 2,820,000 2,932,039 ---------- 4,499,572 ---------- POLLUTION CONTROL REVENUE BONDS - 3.37% Cloquet, Minnesota Pollution Control Revenue Potlatch Corporation Project 5.90% 10/01/26.......................... 1,000,000 1,051,930 International Falls Pollution Control Revenue Boise Cascade Corporation Project 5.65% 12/01/22.......................... 300,000 304,842 ---------- 1,356,772 ---------- POWER AUTHORITY REVENUE BONDS - 8.66% Moorhead Public Utilities Revenue 6.25% 11/01/12 (MBIA)................... 1,500,000 1,605,510 Southern Minnesota Municipal Power Agency 5.75% 01/01/18 (FGIC)................... 1,800,000 1,882,602 ---------- 3,488,112 ---------- *PRE-REFUNDED BONDS/ESCROWED TO MATURITY - 17.89% Duluth Economic Development Authority Hospital Facilities Revenue Duluth Clinic 6.20% 11/01/12-04 (AMBAC)............... 420,000 466,549 Esko Independent School District 5.75% 04/01/17-05 (FSA)................. 2,145,000 2,301,692 St. Paul HRA Sales Tax Revenue Civic Center 5.55% 11/01/23 (MBIA) (Escrowed to Maturity).................. 1,300,000 1,347,060 University of Minnesota Hospital 6.75% 12/01/16 (Escrowed to Maturity)... 2,580,000 3,092,517 ---------- 7,207,818 ---------- TRANSPORTATION REVENUE BONDS - 3.30% Puerto Rico Commonwealth Highway & Transportation Authority 5.50% 07/01/26................................ 1,300,000 1,328,483 ---------- 1,328,483 ---------- TOTAL MUNICIPAL BONDS (COST $37,174,892).. 39,875,222 ---------- for tax-exempt income 17 VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC. STATEMENT OF NET ASSETS (CONTINUED) - -------------------------------------------------------------------------------- MARKET VALUE ------ TOTAL MARKET VALUE OF SECURITIES - 98.99% (COST $37,174,892)**..................................... $39,875,222 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.01%...................................... 408,054 ----------- TOTAL NET ASSETS - 100.00%................................. $40,283,276 LIQUIDATION VALUE OF PREFERRED STOCK....................... (15,000,000) ----------- NET ASSETS APPLICABLE TO 1,837,200 COMMON SHARES ($.01 PAR VALUE) OUTSTANDING............................. $25,283,276 =========== NET ASSET VALUE PER COMMON SHARE ($25,283,276/1,837,200 SHARES)........................... $13.76 ====== _____________________ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Also cost for federal income tax purposes. AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Corporation FHA - Insured by the Federal Housing Authority FSA - Insured by the Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value, 200 million shares authorized to the Fund.............................................. $25,246,730 Preferred stock,$.01 par value, 1 million shares authorized to the Fund.............................................. 15,000,000 Undistributed net investment income........................ 174,306 Accumulated net realized loss on investments............... (2,838,090) Net unrealized appreciation on investments................. 2,700,330 ----------- Total net assets........................................... $40,283,276 =========== See accompanying notes VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS MARCH 31, 1998 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS - 98.45% GENERAL OBLIGATION BONDS - 30.08% Eagle Mountain Community Facility District A2 6.40% 07/01/17............... $1,500,000 $1,642,320 Maricopa County Alhambra Elementary School District #68 5.625% 07/01/13 (AMBAC).................. 3,400,000 3,600,940 Maricopa County Unified School District #4 5.55% 07/01/10 (FGIC)........ 1,900,000 2,021,277 Maricopa County Unified School District #11 5.50% 07/01/10.............. 3,000,000 3,133,020 Maricopa County Unified School District #41 5.00% 07/01/17 (FSA)........ 500,000 491,470 VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS (CONTINUED) GENERAL OBLIGATION BONDS (CONTINUED) Maricopa County Unified School District #41 6.25% 07/01/15 (FSA)........ $1,500,000 $1,665,270 Maricopa County Washington Elementary Unified School District #6 5.375% 07/01/14 (AMBAC).................. 1,000,000 1,027,400 Mesa General Obligation Project of 1987 5.70% 07/01/08 (MBIA).................... 1,800,000 1,947,474 Mohave County Unified School District #1 5.90% 07/01/15 (FGIC).................... 1,500,000 1,614,900 Pima County Unified School District #6 5.75% 07/01/12 (FGIC).................... 2,000,000 2,126,480 Pinal County Unified School District 5.80% 07/01/11 (FGIC).................... 1,000,000 1,093,400 Santa Cruz Valley Unified School District #35 5.80% 07/01/09 (AMBAC)................... 600,000 637,026 ---------- 21,000,977 ---------- HIGHER EDUCATION REVENUE BONDS - 3.10% University of Arizona 6.25% 06/01/11........................... 1,000,000 1,077,920 University of Arizona 6.35% 06/01/14........................... 1,000,000 1,083,830 ---------- 2,161,750 ---------- HOSPITAL REVENUE BONDS - 12.26% Arizona Hospital Health Facilities Authority 6.25% 09/01/11 (MBIA).................... 1,500,000 1,635,270 Maricopa County Health Facilities Catholic Health Care West Series A 5.75% 07/01/11 (MBIA).................... 1,750,000 1,858,290 Maricopa County Health Facilities Catholic Health Care West Series A 6.00% 07/01/21 (MBIA).................... 1,100,000 1,175,042 Maricopa County Industrial Development Authority Baptist Hospital 5.50% 09/01/13 (MBIA).................... 300,000 313,725 Mohave County Industrial Development Authority Baptist Hospital 5.50% 09/01/21 (MBIA).................... 500,000 514,750 Mohave County Industrial Development Authority Baptist Hospital 5.75% 09/01/26 (MBIA).................... 150,000 158,040 Phoenix Industrial Development Authority John C. Lincoln Hospital 5.50% 12/01/13 (FSA)..................... 1,100,000 1,156,254 Scottsdale Industrial Development Authority Scottsdale Memorial Hospital 5.25% 09/01/18 (AMBAC)................... 1,000,000 1,001,770 University of Arizona Medical Center 6.25% 07/01/16 (MBIA).................... 700,000 749,658 ---------- 8,562,799 ---------- HOUSING REVENUE BONDS - 8.90% Peoria Multifamily Housing Mortgage Revenue 7.30% 02/20/28 (GNMA)............ 1,230,000 1,361,708 18 for tax-exempt income VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS (CONTINUED) HOUSING REVENUE BONDS (CONTINUED) Phoenix Industrial Development Authority Multifamily Mortgage Revenue 6.80% 11/01/25 (FHA).................... $500,000 $527,580 Pima County Industrial Development Authority Multifamily Mortgage Revenue 5.40% 03/01/15 (Asset Guaranty)......... 380,000 381,535 Pima County Industrial Development Authority Single Family Mortgage Revenue Series A 6.25% 11/01/30 (GNMA)................... 1,405,000 1,492,672 Tempe Industrial Development Authority Multifamily Mortgage Revenue 6.125% 06/01/10 (FHA)................... 2,305,000 2,450,699 ---------- 6,214,194 ---------- INDUSTRIAL DEVELOPMENT REVENUE BONDS - 5.52% Coconino County Pollution Control Corporation 5.80% 11/01/32.......................... 1,000,000 1,019,080 Maricopa County Stadium District 5.50% 07/01/13 (MBIA)................... 1,750,000 1,814,312 Navajo County Pollution Control Corporation 5.50% 08/15/28 (AMBAC).................. 1,000,000 1,019,930 ---------- 3,853,322 ---------- LEASES/CERTIFICATES OF PARTICIPATION - 3.65% Scottsdale Municipal Property Corporation 6.25% 11/01/14 (FGIC)................... 1,300,000 1,402,024 Tucson 5.60% 07/01/11..................... 1,100,000 1,145,804 ---------- 2,547,828 ---------- POWER AUTHORITY REVENUE BONDS - 2.51% Salt River Project Electric System Revenue 6.25% 01/01/27.......................... 1,635,000 1,751,919 ---------- 1,751,919 ---------- *PRE-REFUNDED BONDS/ESCROWED TO MATURITY - 0.57% Salt River Project Electric System Revenue Series D, 6.25% 01/01/27-02............. 365,000 396,894 ---------- 396,894 ---------- TRANSPORTATION REVENUE BONDS - 11.00% Arizona State Transportation Board 5.25% 07/01/09.......................... 1,000,000 1,032,120 City of Phoenix Junior Lien Street & Highway 6.25% 07/01/11 (FGIC)................... 1,300,000 1,413,698 Tucson Airport Authority Revenue 5.70% 06/01/13 (MBIA)................... 2,000,000 2,105,360 Tucson Street & Highway Revenue 5.50% 07/01/12 (MBIA)................... 3,000,000 3,126,960 ---------- 7,678,138 ---------- UTILITY REVENUE BONDS - 3.97% Mesa Utility System Revenue 5.25% 07/01/16 (FGIC)................... 2,730,000 2,773,817 ---------- 2,773,817 ---------- WATER AND SEWER REVENUE BONDS - 15.47% Chandler Water & Sewer Revenue 5.00% 07/01/09 (FGIC)................... 1,000,000 1,022,480 PRINCIPAL MARKET AMOUNT VALUE --------- ------ MUNICIPAL BONDS (CONTINUED) WATER AND SEWER REVENUE BONDS (CONTINUED) Phoenix Civic Improvement Corporation 5.50% 07/01/21 (AMBAC)................... $2,000,000 $2,042,320 Phoenix Civic Improvement Corporation Water System Revenue Junior Lien 5.375% 07/01/22 (MBIA)................... 1,000,000 1,017,770 Phoenix Civic Improvement Corporation Water System Revenue Junior Lien 5.60% 07/01/18........................... 1,000,000 1,037,990 Phoenix Water System Revenue 5.50% 07/01/22........................... 2,000,000 2,045,340 Tucson Water Revenue Refunding Series A 5.75% 07/01/18 (AMBAC)................... 3,500,000 3,633,280 ----------- 10,799,180 ----------- OTHER REVENUE BONDS - 1.42% Guam Government Series A 5.00% 11/01/17........................... 1,000,000 992,550 ----------- 992,550 ----------- TOTAL MUNICIPAL BONDS (COST $64,486,598)... 68,733,368 ----------- TOTAL MARKET VALUE OF SECURITIES - 98.45% (COST $64,486,598)**..................... $68,733,368 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.55%................. 1,079,888 ----------- TOTAL NET ASSETS - 100.00%................. $69,813,256 LIQUIDATION VALUE OF PREFERRED STOCK....... (25,000,000) ----------- NET ASSETS APPLICABLE TO 2,982,200 COMMON SHARES ($.01 Par Value) Outstanding............. $44,813,256 =========== NET ASSET VALUE PER COMMON SHARE ($44,813,256 / 2,982,200 SHARES)......... $15.03 ====== _____________________ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. ** Also cost for federal income tax purposes. AMBAC - Insured by the AMBAC Indemnity Corporation Asset Guaranty - Insured by the Asset Guaranty Insurance Company FGIC - Insured by the Financial Guaranty Insurance Corporation FHA - Insured by the Federal Housing Authority FSA - Insured by the Financial Security Assurance GNMA - Insured by the Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value, 200 million shares authorized to the Fund.............................................. $40,838,893 Preferred stock, $.01 par value, 1 million shares authorized to the Fund................................... 25,000,000 Undistributed net investment income........................ 389,925 Accumulated net realized loss on investments............... (662,332) Net unrealized appreciation on investments................. 4,246,770 ----------- Total net assets........................................... $69,813,256 =========== See accompanying notes for tax-exempt income 19 VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND STATEMENT OF NET ASSETS MARCH 31, 1998 PRINCIPAL MARKET AMOUNT VALUE --------------------------------- MUNICIPAL BONDS - 98.57% CERTIFICATES OF PARTICIPATION - 12.63% Dade County School Board Lease 5.60% 08/01/17 (AMBAC) .................... $1,000,000 $1,040,430 Escambia County School Board Lease 5.50% 02/01/22 (MBIA)...................... 5,000,000 5,156,600 St. Lucie County School Board Lease 5.375% 07/01/19 (FSA)...................... 1,000,000 1,012,170 --------- 7,209,200 --------- GENERAL OBLIGATION BONDS - 4.28% Reedy Creek Improvement-Sports Complex 5.75% 06/01/13 (MBIA)...................... 2,300,000 2,445,245 --------- 2,445,245 --------- HIGHER EDUCATION REVENUE BONDS - 5.03% Florida Agricultural & Mechanical University/Student Apartment Facility 5.625% 07/01/21 (MBIA)..................... 1,250,000 1,304,337 Volusia Education Facilities Authority Revenue Stetson University 5.50% 06/01/17 (MBIA)...................... 1,500,000 1,563,930 --------- 2,868,267 --------- HOSPITAL REVENUE BONDS - 15.76% Lakeland Hospital System Revenue Lakeland Regional Medical Center 5.75% 11/15/15 (FGIC)...................... 2,500,000 2,612,950 Orange County Health Facilities Authority Revenue Adventist Health System 5.75% 11/15/25 (AMBAC)..................... 1,500,000 1,574,445 Orange County Health Facilities Authority Revenue Orlando Regional Health 6.25% 10/01/18 (MBIA)...................... 2,000,000 2,295,860 Venice Health Care Revenue Bon Secours Health System Project 5.60% 08/15/16 (MBIA)...................... 2,405,000 2,510,555 --------- 8,993,810 --------- HOUSING REVENUE BONDS - 11.79% Florida Housing Finance Agency Homeowner Mortgage Series 2 AMT 5.90% 07/01/29 (MBIA)...................... 1,250,000 1,296,700 Florida State Housing Revenue Leigh Meadows Project Series N AMT 6.30% 09/01/36 (AMBAC)..................... 2,510,000 2,663,311 Florida State Housing Revenue Woodbridge Project Series L AMT 6.05% 12/01/16 (AMBAC)..................... 1,120,000 1,181,107 Florida State Housing Revenue Woodbridge Project Series L AMT 6.25% 06/01/36 (AMBAC)..................... 1,500,000 1,587,210 --------- 6,728,328 --------- PRINCIPAL MARKET AMOUNT VALUE --------------------------------- MUNICIPAL BONDS (CONTINUED) *PRE-REFUNDED BONDS/ESCROWED TO MATURITY - 6.73% Dade County Seaport 6.25% 10/01/21-01 (AMBAC).................. $1,000,000 $1,078,010 Sunrise Utility System Revenue Series A 5.75% 10/01/26-06 (AMBAC).................. 2,500,000 2,763,675 --------- 3,841,685 --------- TRANSPORTATION REVENUE BONDS - 4.70% Dade County Aviation Revenue Series B 5.60% 10/01/26 (MBIA)...................... 1,000,000 1,034,480 Hillsborough County Aviation Authority Revenue Tampa International Airport Series B 5.60% 10/01/19 (FGIC)............. 1,600,000 1,650,304 --------- 2,684,784 --------- UTILITY REVENUE BONDS - 2.28% Florida State Municipal Power Agency Revenue St. Lucie Project 5.70% 10/01/16 (FGIC)...................... 1,250,000 1,298,000 --------- 1,298,000 --------- WATER AND SEWER REVENUE BONDS - 11.28% City of Panama Beach Water & Sewer 5.50% 06/01/18 (AMBAC)..................... 1,000,000 1,020,310 Dade County Water & Sewer 5.50% 10/01/25 (FGIC)...................... 1,100,000 1,136,960 Florida Keys Aqueduct Water Revenue 5.25% 09/01/21 (AMBAC)..................... 1,700,000 1,706,120 Indian River County Water & Sewer Revenue 5.50% 09/01/16 (FGIC)...................... 1,000,000 1,043,450 Sarasota County Utility System Revenue 5.50% 10/01/22 (FGIC)...................... 1,500,000 1,529,490 --------- 6,436,330 --------- OTHER REVENUE BONDS - 24.09% Boca Raton Community Redevelopment Tax Increment Revenue Mizner Park Project 5.875% 03/01/13 (FGIC)..................... 1,500,000 1,586,685 Dade County Professional Sports Franchise Facilities Revenue 6.00% 10/01/22 (FGIC) 1,000,000 1,070,590 Florida Ports Financing Commission Revenue AMT 5.375% 06/01/27 (MBIA)................. 2,250,000 2,265,773 Hillsborough County Industrial Development Authority Revenue Alleghany Health System Knox Village 5.75% 12/01/21 (MBIA) 1,000,000 1,059,210 Miami Beach Resort Tax Revenue 5.50% 10/01/16 (AMBAC)..................... 1,000,000 1,043,760 Orange County Public Service Tax Revenue 6.00% 10/01/24 (FGIC)...................... 3,000,000 3,252,540 Orange County Sales Tax Revenue 6.125% 01/01/19 (FGIC)..................... 1,000,000 1,042,810 Saint John's County Industrial Development Authority Revenue Pro Golf Hall of Fame 5.50% 03/01/17 (MBIA)...................... 250,000 255,775 VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND STATEMENT OF NET ASSETS (CONTINUED) PRINCIPAL MARKET AMOUNT VALUE --------------------------------- MUNICIPAL BONDS (CONTINUED) OTHER REVENUE BONDS (CONTINUED) Tampa Utilities Tax Revenue 6.00% 10/01/15 (AMBAC)..................... $1,000,000 $1,051,300 Village Center Community Development District Revenue Series A 5.85% 11/01/16 (MBIA)...................... 1,000,000 1,120,220 ---------- 13,748,663 ---------- TOTAL MUNICIPAL BONDS (COST $52,552,720) 56,254,312 ---------- TOTAL MARKET VALUE OF SECURITIES - 98.57% (COST $52,552,720)**....................... $56,254,312 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.43%................... 816,298 ---------- TOTAL NET ASSETS - 100.00%................... $57,070,610 LIQUIDATION VALUE OF PREFERRED STOCK (20,000,000) ---------- NET ASSETS APPLICABLE TO 2,422,200 COMMON SHARES ($.01 PAR VALUE) OUTSTANDING................. $37,070,610 ========== NET ASSET VALUE PER COMMON SHARE ($37,070,610 / 2,422,200 shares)............. $ 15.30 ========== _______________ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Also cost for federal income tax purposes. AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Corporation FSA - Insured by the Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value unlimited shares authorized to the Fund ........................... $33,361,389 Preferred stock $.01 par value unlimited shares authorized to the Fund ............................. 20,000,000 Undistributed net investment income 403,229 Accumulated net realized loss on investments (395,600) Net unrealized appreciation on investments 3,701,592 ---------- Total net assets ........................ $57,070,610 ========== See accompanying notes 20 for tax-exempt income VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS MARCH 31, 1998 PRINCIPAL MARKET AMOUNT VALUE ------------------------------------- MUNICIPAL BONDS - 98.50% CERTIFICATES OF PARTICIPATION - 1.90% Arapahoe County Colorado Library District 5.70% 12/15/10 (MBIA). . . $2,000,000 $2,136,880 --------- 2,136,880 --------- GENERAL OBLIGATION BONDS - 24.43% Adams County School District #12, Five Star 5.40% 12/15/15 (FGIC).......... 1,250,000 1,294,087 Adams County School District #12, Five Star 5.40% 12/15/16 (FGIC).......... 2,000,000 2,062,160 Archuleta & Hinsdale Counties School District #50JT 5.50% 12/01/14 (MBIA)....... 1,000,000 1,031,670 Archuleta & Hinsdale Counties School District #50JT 5.55% 12/01/20 (MBIA)..... 4,000,000 4,093,400 Eagle Garfield & Routt Counties School District #Re-50J 6.30% 12/01/12 (FGIC)... 1,000,000 1,114,330 El Paso County School District #20 5.625% 12/15/16 (MBIA)................... 1,000,000 1,048,600 El Paso County School District #20 5.625% 12/15/16 (AMBAC).................. 3,000,000 3,145,800 Jefferson County School District #R-001 Series A 5.00% 12/15/17 (FGIC) 1,850,000 1,817,995 Larimer & Weld Counties School District #Re-5J 5.75% 11/15/20 (MBIA)............. 1,700,000 1,792,310 Larimer, Weld & Boulder Counties School District #R-2J Thompson 5.45% 12/15/16 (FGIC) 1,250,000 1,288,175 Mesa County Colorado Valley School District #51 Grand Junction 5.50% 12/01/15 (MBIA).................. 1,000,000 1,042,530 Mesa County Colorado Valley School District #51 Grand Junction 5.50% 12/01/16 (MBIA) 1,100,000 1,147,652 Piney Creek Colorado Metropolitan District 5.65% 12/01/17 (FGIC).................. 2,100,000 2,198,490 Pueblo County 5.80% 06/01/11 (MBIA)...... 1,405,000 1,497,871 Stonegate Village Metropolitan District Refunding and Improvement Series A 5.50% 12/01/21 (FSA).......... 2,750,000 2,832,528 --------- 27,407,598 --------- HIGHER EDUCATION REVENUE BONDS - 13.97% Aurora Educational Development Revenue 6.00% 10/15/15 (Connie Lee)............ 2,500,000 2,648,825 Colorado Mountain College Residence Hall Authority Revenue 5.75% 06/01/23 (MBIA) 1,000,000 1,054,500 Colorado Postsecondary Education Facility Authority Revenue Refunding & Improvement - University of Denver Project 5.375% 3/01/18 (MBIA).................. 3,500,000 3,573,955 Colorado Postsecondary Education Facility Authority Revenue, University of Denver Project 6.00% 03/01/16 (Connie Lee).... 4,000,000 4,255,520 for tax-exempt income 21 VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS (CONTINUED) PRINCIPAL MARKET AMOUNT VALUE --------------------------------- MUNICIPAL BONDS (CONTINUED) HIGHER EDUCATION REVENUE BONDS (CONTINUED) Colorado State Board of Agriculture State University Revenue Refunding & Improvement - Auxiliary Facilities 5.125% 3/01/17 (AMBAC) $1,000,000 $1,001,100 Colorado State Colleges Board of Trustees, Adams State College Series A 5.75% 05/15/19 (MBIA)............. 2,000,000 2,089,640 University of Northern Colorado Revenue Auxiliary Facilities System 5.60% 06/01/24 (MBIA).............................. 1,000,000 1,045,830 ---------- 15,669,370 ---------- HOSPITAL REVENUE BONDS - 13.12% Colorado Health Facilities Authority Revenue, Boulder Community Hospital Project Series B 5.875% 10/01/23 (MBIA)............ 2,625,000 2,767,511 Colorado Health Facilities Authority Revenue, North Colorado Medical Center 5.95% 05/15/12 (MBIA)...................... 2,000,000 2,132,620 Colorado Health Facilities Authority Revenue, North Colorado Medical Center 6.00% 05/15/20 (MBIA)...................... 1,000,000 1,068,080 Colorado Springs Memorial Hospital Revenue 6.00% 12/15/24 (MBIA)...................... 2,250,000 2,447,055 Logan County Health Care Facilities Revenue, Western Health Network Inc. 5.90% 01/01/19 (MBIA)...................... 2,510,000 2,621,695 University of Colorado Hospital Authority Revenue Refunding Series A 5.20% 11/15/17 (AMBAC) 3,695,000 3,681,255 ---------- 14,718,216 ---------- HOUSING REVENUE BONDS - 8.19% Colorado Housing Finance Authority - Single-Family Housing, Series AA 5.625% 11/01/23 (MBIA) 5,000,000 5,081,450 Denver Colorado City and County Multi-Family Housing, Revenue Mortgage Loan Garden Court 5.40% 07/01/39 (FHA) 2,000,000 1,996,200 Snowmass Village Multi-Family Housing, Revenue Refunding Essential Function Housing 6.25% 12/15/16 (FSA). . . . 2,000,000 2,110,400 --------- 9,188,050 --------- MISCELLANEOUS AND SALES TAX REVENUE BONDS - 2.59% Castle Rock Sales & Use Tax Revenue 5.90% 06/01/16 (FSA). . . . 1,755,000 1,860,844 Douglas County Sales & Use Tax Revenue 5.50% 10/15/11 (MBIA). . . 1,000,000 1,049,950 --------- 2,910,794 --------- POLLUTION CONTROL REVENUE BONDS - 1.41% Adams County Pollution Control Revenue Refunding, Public Service Company Project, Series A 5.875% 04/01/14 (MBIA) 1,500,000 1,581,315 --------- 1,581,315 --------- PRINCIPAL MARKET AMOUNT VALUE --------------------------------- MUNICIPAL BONDS (CONTINUED) *PRE-REFUNDED BONDS - 12.52% City of Westminster County Sales & Use Tax Revenue Refunding, Series A 6.25% 12/01/12-02 (FGIC) $5,000,000 $ 5,440,500 Jefferson County School District #R-001 6.00% 12/15/12-02 (AMBAC) 1,575,000 1,711,127 Jefferson County School District #R-001 6.25% 12/15/12-02 (AMBAC) 2,435,000 2,671,195 Regional Transportation District Colorado Sales Tax Revenue 6.25% 11/01/12-02 (FGIC) 3,855,000 4,221,148 --------- 14,043,970 --------- Transportation Revenue Bonds - 15.44% Arapahoe County Capital Improvements Highway Revenue 6.05% 08/31/15 (MBIA)................ 4,700,000 5,164,830 Denver City & County Airport Revenue, Series A 5.70% 11/15/25 (MBIA)............... 1,000,000 1,046,640 Denver City & County Airport Revenue, Series E 5.25% 11/15/23 (MBIA)............... 8,000,000 7,999,440 E-470 Public Highway Authority Revenue SR Series A 5.00% 9/01/26 (MBIA)............. 2,500,000 2,415,275 Regional Transportation District Colorado Sales Tax Revenue 6.25% 11/01/12 (FGIC)...... 645,000 695,626 ------------ 17,321,811 ------------ UTILITY REVENUE BONDS - 4.93% Platte River Power Authority Colorado Power Revenue Series DD 5.375% 06/01/17 (MBIA)........... 2,250,000 2,313,562 Municipal Subdistrict of Northern Colorado Water Conservancy District Revenue Series F 6.50% 12/01/12 (AMBAC)............ 2,800,000 3,216,248 ------------ 5,529,810 ------------ TOTAL MUNICIPAL BONDS (COST $105,673,126) 110,507,814 ------------ TOTAL MARKET VALUE OF SECURITIES - 98.50% (COST $105,673,126)**...................... $110,507,814 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.50% 1,679,101 ------------ TOTAL NET ASSETS - 100.00% .................. 112,186,915 LIQUIDATION VALUE OF PREFERRED STOCK (40,000,000) ------------ NET ASSETS APPLICABLE TO 4,837,100 COMMON SHARES ($.01 PAR VALUE) OUTSTANDING ................ $ 72,186,915 ============ NET ASSET VALUE PER COMMON SHARE ($72,186,915 / 4,837,100 shares)............. $ 14.92 ============ 22 for tax-exempt income VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC. STATEMENT OF NET ASSETS (CONTINUED) _____________________ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Also cost for federal income tax purposes. AMBAC - Insured by the American Municipal Bond Assurance Corporation Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FSA - Insured by the Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association MARKET VALUE COMPONENTS OF NET ASSETS AT MARCH 31, 1998: Common stock, $.01 par value, 200 million shares authorized to the Fund....... 67,238,110 Preferred stock, $.01 par value, 1 million shares authorized to the Fund ................................. 40,000,000 Undistributed net investment income 749,281 Accumulated net realized loss on investments (635,164) Net unrealized appreciation on investments 4,834,688 ------------ _______________ Total net assets.......................... $112,186,915 ============ See accompanying notes THE VOYAGEUR FUNDS STATEMENTS OF OPERATIONS YEAR ENDED MARCH 31, 1998
FLORIDA COLORADO MINNESOTA MINNESOTA MINNESOTA ARIZONA INSURED INSURED MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME INCOME INCOME INCOME INCOME INCOME FUND, INC. FUND II, INC. FUND III, INC. FUND, INC. FUND FUND, INC. --------------------------------------------------------------------------------- INVESTMENT INCOME: Interest..................................... $3,517,857 $9,430,385 $2,265,260 $3,785,138 $3,082,463 $6,010,087 --------- --------- --------- ------- ------ ------ EXPENSES: Management fees ............................. 235,855 657,638 158,622 274,603 222,903 439,768 Administration fees ......................... 100,000 246,614 59,483 102,976 83,589 164,944 Remarketing agent fees ...................... 50,000 150,000 37,500 62,500 50,000 106,000 Transfer agent and custodian fees and expenses 24,846 44,920 12,962 20,198 17,942 31,692 Professional fees ........................... 8,199 32,318 19,800 23,338 20,798 28,584 Directors'/Trustees' fees 5,444 7,028 5,151 5,591 3,998 7,482 Other ........................................ 30,348 104,166 36,173 59,351 49,080 44,559 --------- --------- --------- ------- ------ ------ Total Expenses 454,692 1,242,684 329,691 548,557 448,310 823,029 NET INVESTMENT INCOME ........................ 3,063,165 8,187,701 1,935,569 3,236,581 2,634,153 5,187,058 --------- --------- --------- ------- ------ ------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain (loss) on investments (905) (99,452 51,297 233,414 71,462 974,269 Net change in unrealized appreciation/depreciation of investments 2,515,951 8,807,600 1,892,300 3,450,141 3,818,631 5,313,456 --------- --------- --------- ------- ------ ------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,515,046 8,708,148 1,943,597 3,683,555 3,890,093 6,287,725 --------- --------- --------- ------- ------ ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,578,211 $16,895,849 $3,879,166 $6,920,136 $6,524,246 $11,474,783 ========== =========== ========== ========== ========== ===========
See accompanying notes for tax-exempt income 23 THE VOYAGEUR FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------ MINNESOTA MUNICIPAL MINNESOTA MUNICIPAL MINNESOTA MUNICIPAL INCOME FUND, INC. INCOME FUND II, INC. INCOME FUND III, INC. ---------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97 INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income ............................ $ 3,063,165 $ 2,753,370 $ 8,187,701 $ 8,173,422 $ 1,935,569 $ 1,978,163 Net realized gain (loss) on investments .......... (905) 101,820 (99,452) (122,342) 51,297 (485,545) Net change in unrealized appreciation/depreciation of investments ........ 2,515,951 374,814 8,807,600 732,771 1,892,300 752,657 ----------- ----------- ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations ................................. 5,578,211 3,230,004 16,895,849 8,783,851 3,879,166 2,245,275 ----------- ----------- ----------- ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO: Common shareholders from net investment income ... (2,413,072) (2,413,073) (5,928,674) (5,860,687) (1,391,679) (1,374,458) Preferred shareholders from net investment income ............................... (720,894) (702,068) (2,206,092) (2,106,108) (552,111) (569,220) Common shareholders from net realized gain on investments .................................. (56,857) -- -- -- -- -- Preferred shareholders from net realized gain on investments .................................. (16,542) -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- (3,207,365) (3,115,141) (8,134,766) (7,966,795) (1,943,790) (1,943,678) ----------- ----------- ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ............ 2,370,846 114,863 8,761,083 817,056 1,935,376 301,597 NET ASSETS: Beginning of year ................................ 57,544,191 57,429,328 158,572,049 157,754,993 38,347,900 38,046,303 ----------- ----------- ----------- ----------- ----------- ----------- End of year ...................................... $59,915,037 $57,544,191 $167,333,132 $158,572,049 $40,283,276 $38,347,900 =========== =========== ============ ============ =========== =========== ARIZONA MUNICIPAL FLORIDA INSURED MUNICIPAL COLORADO INSURED MUNICIPAL INCOME FUND, INC. INCOME FUND INCOME FUND, INC. ---------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97 INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income ............................ $ 3,236,581 $ 3,219,712 $ 2,634,153 $ 2,625,869 $ 5,187,058 $ 5,058,004 Net realized gain (loss) on investments .......... 233,414 (169,429) 71,462 55,988 974,269 (1,395,905) Net change in unrealized appreciation/depreciation of investments ........ 3,450,141 192,773 3,818,631 (263,919) 5,313,456 1,100,880 ----------- ----------- ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations ................................. 6,920,136 3,243,056 6,524,246 2,417,938 11,474,783 4,762,979 ----------- ----------- ----------- ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO: Common shareholders from net investment income .......................................... (2,303,750) (2,275,793) (1,834,817) (1,812,111) (3,555,272) (3,509,923) Preferred shareholders from net investment income .......................................... (905,587) (854,450) (728,766) (702,830) (1,419,308) (1,409,304) ----------- ----------- ----------- ----------- ----------- ----------- (3,209,337) (3,130,243) (2,563,583) (2,514,941) (4,974,580) (4,919,227) ----------- ----------- ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ............ 3,710,799 112,813 3,960,663 (97,003) 6,500,203 (156,248) NET ASSETS: Beginning of year ................................ 66,102,457 65,989,644 53,109,947 53,206,950 105,686,712 105,842,960 ----------- ----------- ----------- ----------- ----------- ----------- End of year ...................................... $69,813,256 $66,102,457 $57,070,610 $53,109,947 $112,186,915 $105,686,712 =========== =========== =========== =========== ============ ============
See accompanying notes 24 for tax-exempt income THE VOYAGEUR FUNDS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------ Selected data for each common share of the Fund outstanding throughout each year was as follows: MINNESOTA MUNICIPAL INCOME FUND, INC. ------------------------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of year ........................................ $14.47 $14.43 $14.21 $13.89 $14.67 Income from investment operations: Net investment income ................................................... 1.18 1.06 1.18 1.21 1.20 Net realized and unrealized gain (loss) on investments .................. 0.97 0.18 0.26 0.34 (0.68) ------ ------ ------ ------ ------ Total from investment operations ........................................ 2.15 1.24 1.44 1.55 0.52 ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income .......................... (0.93) (0.93) (0.93) (0.93) (0.93) Preferred shareholders from net investment income ....................... (0.28) (0.27) (0.29) (0.27) (0.18) Common shareholders from net realized gain on investments ............... (0.02) -- -- (0.02) (0.16) Preferred shareholders from net realized gain on investments ............ (0.01) -- -- (0.01) (0.03) ------ ------ ------ ------ ------ Total dividends and distributions ....................................... (1.24) (1.20) (1.22) (1.23) (1.30) ------ ------ ------ ------ ------ Net asset value, end of year .............................................. $15.38 $14.47 $14.43 $14.21 $13.89 ====== ====== ====== ====== ====== Market value, end of year ................................................. $15.69 $14.38 $15.00 $14.50 $15.63 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value ............................................................ 16.04% 2.01% 10.31% (0.71%) 4.28% Net asset value ......................................................... 13.02% 6.90% 8.20% 9.72% 1.63% Ratios and supplemental data: Net assets applicable to capital shares, end of year (000 omitted) ...... $59,915 $57,544 $57,429 $56,881 $56,034 Ratio of expenses to average net assets(2/3) ............................ 0.77% 0.81% 0.82% 0.85% 0.78% Ratio of expenses to average net assets applicable to common shares(3) .. 1.17% 1.24% 1.24% 1.33% 1.17% Ratio of net investment income to average net assets(2) ................. 5.20% 4.78% 5.28% 5.66% 5.22% Ratio of net investment income to average net assets applicable to common shares(4) ....................................................... 6.01% 5.45% 6.04% 6.93% 6.68% Portfolio turnover ...................................................... 0% 5% 7% 13% 11% Leverage analysis: Value of preferred shares outstanding (000 omitted) ..................... $20,000 $20,000 $20,000 $20,000 $20,000 Net asset coverage per share of preferred shares, end of year ........... $149,788 $143,860 $143,573 $142,201 $140,086 Liquidation value per share of preferred shares(5) ...................... $50,000 $50,000 $50,000 $50,000 $50,000
- --------------- (1) 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 year 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 years 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 years. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in years 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 years. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior year expense ratios have not been adjusted. (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) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes Financial Highlights (Continued) - ------------------------------------------------------------------------------- Selected data for each common share of the Fund outstanding throughout each year was as follows:
Minnesota Municipal Income Fund II, Inc. -------------------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of year.......................... $13.59 $13.48 $13.12 $12.73 $13.84 Income from investment operations: Net investment income .................................... 1.13 1.13 1.10 1.11 0.98 Net realized and unrealized gain (loss) on investments.... 1.20 0.08 0.38 0.39 (0.96) ------ ------ ------ ------ ------ Total from investment operations ......................... 2.33 1.21 1.48 1.50 0.02 ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income ........... (0.82) (0.81) (0.80) (0.83) (0.76) Preferred shareholders from net investment income ........ (0.30) (0.29) (0.32) (0.28) (0.18) Common shareholders from net realized gain on investments. -- -- -- -- (0.02) ------ ------ ------ ------ ------ Total dividends and distributions ........................ (1.12) (1.10) (1.12) (1.11) (0.96) ------ ------ ------ ------ ------ Capital share transactions: Capital charge with respect to issuance of shares ........ -- -- -- -- (0.17) ------ ------ ------ ------ ------ Net asset value, end of year ............................... $14.80 $13.59 $13.48 $13.12 $12.73 ====== ====== ====== ====== ====== Market value, end of year .................................. $13.88 $12.63 $13.25 $12.38 $14.63 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value ............................................. 16.56% 1.47% 14.16% (9.59%) 1.71% Net asset value........................................... 15.51% 6.97% 8.88% 10.16% (2.93%) Ratios and supplemental data: Net assets applicable to capital shares, end of year (000 omitted) ........................................... $167,333 $158,572 $157,755 $155,139 $152,326 Ratio of expenses to average net assets(2/3).............. 0.76% 0.74% 0.77% 0.77% 0.76% Ratio of expenses to average net assets applicable to common shares(3)......................................... 1.19% 1.19% 1.23% 1.28% 1.15% Ratio of net investment income to average net assets(2)... 4.98% 5.15% 5.03% 5.39% 4.54% Ratio of net investment income to average net assets applicable to common shares.............................. 45.73% 6.15% 5.76% 6.69% 5.58% Portfolio turnover ....................................... 4% 20% 11% 32% 27% Leverage analysis: Value of preferred shares outstanding (000 omitted) ...... $60,000 $60,000 $60,000 $60,000 $60,000 Net asset coverage per share of preferred shares, end of year ............................................. $139,444 $132,143 $131,462 $129,283 $126,938 Liquidation value per share of preferred shares(5)........ $50,000 $50,000 $50,000 $50,000 $50,000
- --------------- (1) 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 year 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 years 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 years. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in years 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 years. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior year expense ratios have not been adjusted. (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) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes Financial Highlights (Continued) - ------------------------------------------------------------------------------- Selected data for each common share of the Fund outstanding throughout each period was as follows:
Minnesota Municipal Income Fund III, Inc. -------------------------------------------------------------- Year Year Year Year Ended Ended Ended Ended 10/29/93* to 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of period........................ $12.71 $12.54 $12.20 $11.86 $14.03 Income (loss) from investment operations: Net investment income .................................... 1.05 1.08 1.05 1.06 0.32 Net realized and unrealized gain (loss) on investments.... 1.06 0.15 0.33 0.28 (1.88) ------ ------ ------ ------ ------ Total from investment operations............................ 2.11 1.23 1.38 1.34 (1.56) ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income ........... (0.76) (0.75) (0.72) (0.73) (0.25) Preferred shareholders from net investment income ........ (0.30) (0.31) (0.32) (0.28) (0.06) ------ ------ ------ ------ ------ Total dividends and distributions ........................ (1.06) (1.06) (1.04) (1.01) (0.31) Capital share transactions: Capital charge with respect to issuance of shares ....... -- -- -- 0.01 (0.30) ------ ------ ------ ------ ------ Net asset value, end of period ............................. $13.76 $12.71 $12.54 $12.20 $11.86 ====== ====== ====== ====== ====== Market value, end of period ................................ $13.38 $12.25 $12.00 $11.25 $14.00 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value ............................................. 15.80% 8.62% 13.51% (14.27%) 1.53% Net asset value .......................................... 14.82% 7.50% 8.79% 9.55% (13.85%) Ratios and supplemental data: Net assets applicable to capital shares, end of period (000 omitted)............................................ $40,283 $38,348 $38,046 $37,418 $36,785 Ratio of expenses to average net assets(2/3).............. 0.83% 0.81% 0.81% 0.82% 0.90%** Ratio of expenses to average net assets applicable to common shares(3)........................................ 1.34% 1.33% 1.33% 1.40% 1.30%** Ratio of net investment income to average net assets(2)... 4.88% 5.17% 5.05% 5.37% 3.95%** Ratio of net investment income to average net assets applicable to common shares............................. 45.61% 6.05% 5.81% 6.79% 4.62%** Portfolio turnover ....................................... 9% 39% 35% 47% 21% Leverage analysis: Value of preferred shares outstanding (000 omitted)....... $15,000 $15,000 $15,000 $15,000 $15,000 Net asset coverage per share of preferred shared, end of period .......................................... $134,278 $127,826 $126,821 $124,728 $122,616 Liquidation value per share of preferred shares(5)........ $50,000 $50,000 $50,000 $50,000 $50,000
- ------------- * Commencement of operations. ** Annualized. (1) 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. The total investment returns calculated based on market value and net asset value for a period of less than one year have not been annualized. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior period expense ratios have not been adjusted. (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) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes for tax-exempt income 27 FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- Selected data for each common share of the Fund outstanding throughout each year was as follows: ARIZONA MUNICIPAL INCOME FUND, INC. ---------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of year ...................................... $13.78 $13.74 $13.22 $12.70 $13.77 Income from investment operations: Net investment income ................................................. 1.09 1.08 1.09 1.08 0.95 Net realized and unrealized gain (loss) on investments ................ 1.23 0.01 0.47 0.56 (0.79) ------ ------ ------ ------ ------ Total from investment operations ...................................... 2.32 1.09 1.56 1.64 0.16 ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income ........................ (0.77) (0.76) (0.73) (0.78) (0.75) Preferred shareholders from net investment income ..................... (0.30) (0.29) (0.31) (0.28) (0.18) Common shareholders from net realized gain on investments ............. -- -- -- (0.05) (0.09) Preferred shareholders from net realized gain on investments .......... -- -- -- (0.01) (0.02) ------ ------ ------ ------ ------ Total dividends and distributions ..................................... (1.07) (1.05) (1.04) (1.12) (1.04) ------ ------ ------ ------ ------ Capital share transactions: Capital charge with respect to issuance of shares ..................... -- -- -- -- (0.19) ------ ------ ------ ------ ------ Net asset value, end of year ............................................ $15.03 $13.78 $13.74 $13.22 $12.70 ====== ====== ====== ====== ====== Market value, end of year ............................................... $14.63 $13.00 $12.75 $12.13 $13.88 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value .......................................................... 18.79% 8.20% 11.52% (6.43%) (2.91%) Net asset value ....................................................... 15.17% 5.94% 9.55% 11.29% (2.20%) Ratios and supplemental data: Net assets applicable to capital shares, end of year (000 omitted) .... $69,813 $66,102 $65,990 $64,438 $62,881 Ratio of expenses to average net assets(2/3). 0.80% .78% 0.78% 0.79% 0.82% Ratio of expenses to average net assets applicable to common shares(3). 1.26% 1.25% 1.26% 1.32% 1.24% Ratio of net investment income to average net assets(2) ............... 4.71% 4.85% 4.88% 5.19% 4.41% Ratio of net investment income to average net assets applicable to common shares(4) ..................................................... 45.34% 5.71% 5.57% 6.42% 5.45% Portfolio turnover .................................................... 22% 31% 30% 18% 15% Leverage analysis: Value of preferred shares outstanding (000 omitted) ................... $25,000 $25,000 $25,000 $25,000 $25,000 Net asset coverage per share of preferred shares, end of year .........$139,627 $132,205 $131,979 $128,877 $125,762 Liquidation value per share of preferred shares(5) .................... $50,000 $50,000 $50,000 $50,000 $50,000 _____________________ (1) 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 dayof each year 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 years 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 years. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in years 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 years. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior year expense ratios have not been adjusted. (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) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes
28 for tax-exempt income FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- Selected data for each common share of the Fund outstanding throughout each year was as follows: FLORIDA INSURED MUNICIPAL INCOME FUND ------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of year ....................................... $13.67 $13.71 $13.17 $12.46 $13.73 Income (loss) from investment operations: Net investment income ................................................... 1.09 1.08 1.06 1.07 0.96 Net realized and unrealized gain (loss) on investments .................. 1.60 (0.08) 0.51 0.69 (1.10) ------ ------ ------ ------ ------ Total from investment operations ........................................ 2.69 1.00 1.57 1.76 (0.14) ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income .......................... (0.76) (0.75) (0.72) (0.77) (0.74) Preferred shareholders from net investment income ....................... (0.30) (0.29) (0.31) (0.28) (0.19) ------ ------ ------ ------ ------ Total dividends and distributions ....................................... (1.06) (1.04) (1.03) (1.05) (0.93) ------ ------ ------ ------ ------ Capital share transactions: Capital charge with respect to issuance of shares ....................... -- -- -- -- (0.20) ------ ------ ------ ------ ------ Net asset value, end of year ............................................. $15.30 $13.67 $13.71 $13.17 $12.46 ====== ====== ====== ====== ====== Market value, end of year ................................................ $14.31 $12.50 $12.75 $12.25 $12.50 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value ............................................................ 20.94% 3.94% 10.39% 4.69% (13.04%) Net asset value ......................................................... 18.22% 5.23% 9.66% 12.56% (4.40%) Ratios and supplemental data: Net assets applicable to capital shares, end of year (000 omitted) ...... $57,071 $53,110 $53,207 $51,891 $50,189 Ratio of expenses to average net assets(2/3) ............................ 0.80% .78% 0.80% 0.81% 0.85% Ratio of expenses to average net assets applicable to common shares(3) .. 1.25% 1.25% 1.27% 1.35% 1.28% Ratio of net investment income to average net assets(2) ................. 4.73% 4.91% 4.82% 5.21% 4.49% Ratio of net investment income to average net assets applicable to common shares(4) ....................................................... 5.33% 5.74% 5.45% 6.37% 5.46% Portfolio turnover ...................................................... 5% 68% 22% 10% 20% Leverage analysis: Value of preferred shares outstanding (000 omitted) ..................... $20,000 $20,000 $20,000 $20,000 $20,000 Net asset coverage per share of preferred shares, end of year ........... $142,677 $132,775 $133,017 $129,728 $125,473 Liquidation value per share of preferred shares5 ........................ $50,000 $50,000 $50,000 $50,000 $50,000 _____________________ (1) 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 year 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 years 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 years. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in years 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 years. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior year expense ratios have not been adjusted. (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) Commencing May 1, 1997 Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes
for tax-exempt income 29 FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- Selected data for each common share of the Fund outstanding throughout each period was as follows: COLORADO INSURED MUNICIPAL INCOME FUND, INC. ----------------------------------------------------- YEAR YEAR YEAR YEAR 7/29/93* ENDED ENDED ENDED ENDED TO 3/31/98(6) 3/31/97 3/31/96 3/31/95 3/31/94 Net asset value, beginning of period ...................................... $13.58 $13.61 $13.19 $12.80 $14.10 Income from investment operations: Net investment income .................................................... 1.07 1.05 1.03 1.02 0.59 Net realized and unrealized gain (loss) on investments ................... 1.30 (0.06) 0.41 0.44 (1.19) ------ ------ ------ ------ ------ Total from investment operations ......................................... 2.37 0.99 1.44 1.46 (0.60) ------ ------ ------ ------ ------ Less dividends and distributions to: Common shareholders from net investment income ........................... (0.74) (0.73) (0.70) (0.76) (0.39) Preferred shareholders from net investment income ........................ (0.29) (0.29) (0.32) (0.27) (0.11) Common shareholders from net realized gain on security transactions ...... -- -- -- -- (0.03) Preferred shareholders from net realized gain on security transactions .. -- -- -- -- (0.01) ------ ------ ------ ------ ------ Total dividends and distributions ......................................... (1.03) (1.02) (1.02) (1.07) (0.50) ------ ------ ------ ------ ------ Capital share transactions: Capital charge with respect to issuance of shares ........................ -- -- -- -- (0.20) ------ ------ ------ ------ ------ Net asset value, end of period ............................................ $14.92 $13.58 $13.61 $13.19 $12.80 ====== ====== ====== ====== ====== Market value, end of period ............................................... $14.00 $12.50 $12.63 $12.25 $14.50 ====== ====== ====== ====== ====== Total investment return based on:(1) Market value ............................................................. 18.09% 4.77% 8.99% (10.05%) 5.52% Net asset value .......................................................... 15.84% 5.19% 8.55% 9.67% (6.66%) Ratios and supplemental data: Net assets applicable to capital shares, end of period (000 omitted) ..... $112,187 $105,687 $105,843 $103,781 $101,923 Ratio of expenses to average net assets(2/3). ............................ 0.75% 0.77% 0.75% 0.76% 0.78%** Ratio of expenses to average net assets applicable to commonshares(3) .... 1.18% 1.23% 1.21% 1.27% 1.13%** Ratio of net investment income to average net assets(2) .................. 4.72% 4.76% 4.68% 4.88% 4.26%** Ratio of net investment income to average net assets applicable to common shares(4) ........................................................ 5.38% 5.51% 5.18% 5.88% 5.02%** Portfolio turnover ...................................................... 39% 88% 39% 7% 3% Leverage analysis: Value of preferred shares outstanding (000 omitted) ...................... $40,000 $40,000 $40,000 $40,000 $40,000 Net asset coverage per share of preferred shares, end of period .......... $140,234 $132,109 $132,304 $129,727 $127,404 Liquidation value per share of preferred shares(5) ....................... $50,000 $50,000 $50,000 $50,000 $50,000 _____________________ * Commencement of operations. ** Annualized. (1) 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. 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. The total investment returns calculated based on market value and net asset value for a period of less than one year have not been annualized. (2) Ratios were calculated on the basis of expenses and net investment income applicable to both the common and preferred shares relative to the average net assets of common and preferred shareholders. (3) In the years ended March 31, 1996 and 1997, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior period expense ratios have not been adjusted. (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 stock. (5) Excluding any accumulated but unpaid dividends. (6) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes
30 for tax-exempt income THE VOYAGEUR FUNDS NOTES TO FINANCIAL STATEMENTS MARCH 31, 1998 Voyageur Minnesota Municipal Income Fund, Inc. ("Minnesota Municipal Fund"); Voyageur Minnesota Municipal Income Fund II, Inc. ("Minnesota Municipal II Fund"); Voyageur Minnesota Municipal Income Fund III, Inc. ("Minnesota Municipal III Fund"); Voyageur Arizona Municipal Income Fund, Inc. ("Arizona Municipal Income Fund"); Voyageur Florida Insured Municipal Income ("Florida Insured Municipal Fund") and Voyageur Colorado Insured Municipal Income Fund, Inc. ("Colorado Insured Municipal Fund") (collectively referred to as the "Funds") are registered under the Investment Company Act of 1940 ("1940 Act")(as amended) as closed-end management investment companies. The Minnesota Municipal II , Florida Insured Municipal and Arizona Municipal Funds are registered as diversified funds. The Minnesota Municipal, Minnesota Municipal III and Colorado Insured Municipal Funds are registered as non-diversified funds. 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. FUND REORGANIZATION On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund Manager Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG"), pursuant to an agreement and plan of merger dated January 15, 1997, in which LNC acquired DFG, including the mutual fund investment advisory business of DFG conducted by Voyageur. Upon completion of the acquisition, Delaware Management Company ("DMC") became the Investment Manager to the Funds. 2. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with generally accepted accounting principles 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. Money market instruments 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 by or under the direction of the Funds' Board of Directors/Trustees. FEDERAL INCOME TAXES - Each Fund intends to continue to qualify 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. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. OTHER - Expenses common to all 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. Original issue discounts and market premiums are amortized to interest income over the lives of the respective securities. The Funds intend to pay monthly dividends from net investment income. Capital gains, if any, are distributed annually. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles 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. 3. INVESTMENT MANAGEMENT, ADMINISTRATION AND TRANSACTIONS WITH AFFILIATES Commencing May 1, 1997, and in accordance with the terms of their respective Investment Management Agreements, the Funds pay DMC, the Investment Manager of each Fund, an annual fee of .40% which is calculated daily based upon the average daily net assets of each Fund, including assets attributable to any preferred stock that may be outstanding. Prior to May 1, 1997, the Funds had an Investment Advisory and Management Agreement with Voyageur. Voyageur received a fee for its Investment Advisory and Management services based upon the average daily net assets of the Funds, including assets attributable to any preferred stock that was outstanding, at an annual rate of 0.40% for each Fund. At March 31, 1998 the Funds had Administrative Agreements with Mitchell Hutchins Asset Management Inc. and Princeton Administrators, L.P. (Colorado Insured Municipal Fund only) (the "Administrators"). The Administration Agreements provide the Administrators with a monthly fee computed at an annual rate of .15% of each Fund's average daily net assets, including assets attributable to any preferred stock that may be outstanding. Certain Funds have minimum annual fees payable to the Administrators. The Minnesota Municipal Fund paid the minimum fee for the year ended March 31, 1998. On March 31, 1998, the Funds had payables to affiliates as follows: MINNESOTA MINNESOTA MINNESOTA MUNICIPAL MUNICIPAL II MUNICIPAL III FUND FUND FUND ---------------------------------------------- Investment Management fee payable to DMC ..... $20,326 $56,787 $13,683 ARIZONA FLORIDA COLORADO MUNICIPAL INSURED INSURED INCOME MUNICIPAL MUNICIPAL FUND FUND FUND ---------------------------------------------- Investment Management fee payable to DMC ..... $23,719 $19,377 $75,027 Certain officers of DMC are officers, Directors/Trustees and/or employees of the Funds. These officers, Directors/Trustees and employees are not compensated by the Funds. 4. INVESTMENTS During the year ended March 31, 1998, the Funds made purchases and sales of investment securities other than U.S. government securities and temporary cash investments as follows: MINNESOTA MINNESOTA MINNESOTA MUNICIPAL MUNICIPAL II MUNICIPAL III FUND FUND FUND ---------------------------------------------- Purchases ............... $989,218 $6,958,264 $4,122,251 Sales ................... $240,000 $6,365,360 $3,397,319 ARIZONA FLORIDA COLORADO MUNICIPAL INSURED INSURED INCOME MUNICIPAL MUNICIPAL FUND FUND FUND ---------------------------------------------- Purchases ............... $15,082,091 $3,075,319 $42,843,224 Sales ................... $15,235,898 $2,658,608 $42,253,580 for tax-exempt income 31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. INVESTMENTS (CONTINUED) At March 31, 1998, the aggregate unrealized appreciation (depreciation) of securities for federal income tax purposes for each Fund were as follows: MINNESOTA MINNESOTA MINNESOTA MUNICIPAL MUNICIPAL II MUNICIPAL III FUND FUND FUND ---------------------------------------------- Aggregate unrealized appreciation ... $4,512,685 $9,606,325 $2,700,330 Aggregate unrealized depreciation ... -- -- -- ---------- ---------- ---------- Net unrealized appreciation ... $4,512,685 $9,606,325 $2,700,330 ========== ========== ========== ARIZONA FLORIDA COLORADO MUNICIPAL INSURED INSURED INCOME MUNICIPAL MUNICIPAL FUND FUND FUND ---------------------------------------------- Aggregate unrealized appreciation ... $4,252,222 $3,701,592 $4,841,704 Aggregate unrealized depreciation ... 5,452 -- 7,016 ---------- ---------- ---------- Net unrealized appreciation ... $4,246,770 $3,701,592 $4,834,688 ========== ========== ========== For federal income tax purposes, as of March 31, 1998, the Funds had capital loss carryforwards expiring in the following years:
FUND 2003 2004 2005 2006 TOTAL --------------------------------------------------------- Minnesota Municipal Fund .......... $ 102 $ 102 Minnesota Municipal Fund II ....... $1,345,916 $1,143,840 $ 89,665 131,614 2,711,035 Minnesota Municipal Fund III ...... 1,096,390 1,279,495 455,666 3,930 2,835,481 Arizona Municipal Fund ............ 492,903 169,429 662,332 Florida Insured Municipal Fund .... 212,501 183,099 395,600 Colorado Insured Municipal Fund ... 635,164 635,164
On the statement of net assets, as a result of permanent book-to-tax differences, reclassification adjustments have been made to decrease distributions in excess of net investment income and decrease additional paid-in capital by $23,028 for the Minnesota Municipal Fund. 5. CAPITAL STOCK Pursuant to their articles of incorporation, Minnesota Municipal Fund, Minnesota Municipal II Fund, Minnesota Municipal III Fund, Arizona Municipal Fund and Colorado Insured Municipal Fund each have 200 million shares of $0.01 par value common shares authorized. Florida Insured Municipal has been authorized to issue an unlimited amount of $0.01 par value common shares. For the years ended March 31, 1998 and March 31, 1997, 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 II Fund, Arizona Municipal Fund and Florida Insured Municipal Fund issued 1,200, 500 and 400 preferred shares, respectively. On December 10, 1993, Minnesota Municipal III Fund 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. Dividends rates (adjusted for any capital gain distributions) ranged from 3.40% to 4.25% on Minnesota Municipal Fund, from 3.45% to 4.30% on Minnesota Municipal II Fund, from 3.50% to 3.85% on Minnesota Municipal III Fund, from 3.35% to 4.10% on Arizona Municipal Fund, from 3.45% to 3.99% on Florida Insured Municipal Fund and from 3.43% to 4.25% on Colorado Insured Municipal Fund during the year ended March 31, 1998. Salomon Smith Barney Inc. and Merrill Lynch Pierce, Fenner & Smith Inc. (on Colorado Insured Municipal Fund only), as the remarketing agents, receive an annual fee from each of the Funds of .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 is 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/Trustees. 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. 32 for tax-exempt income NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. CREDIT AND MARKET RISKS The Funds concentrate their investments in limited geographical areas. 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 the market 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 Statement of Net Assets. The Funds may invest up to 15% of its total assets in illiquid securities which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of some of these securities may adversely affect the Funds' ability to dispose of such securities in a timely manner and at a fair price when it is necessary to liquidate such securities. These securities, if any, have been identified in the Statement of Net Assets. 7. YEAR 2000 (UNAUDITED) Like other investment companies, financial and business organizations and individuals around the world, the Funds could be adversely affected if computer systems used by the Investment Manager and other service providers do not properly process and calculate date-related information and data on and after January 1, 2000. The Funds are taking steps to obtain satisfactory assurances that the Investment Manager and other major service providers are taking steps reasonably designed to address the Year 2000 issu e with respect to the computer systems that such service providers use. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Funds. THE VOYAGEUR FUNDS REPORT OF INDEPENDENT AUDITORS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC. VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC. VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC. VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC. VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC. We have audited the accompanying statements of net assets of Voyageur Minnesota Municipal Income Fund, Inc., Voyageur Minnesota Municipal Income Fund II, Inc., Voyageur Minnesota Municipal Income Fund III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur Florida Insured Municipal Income Fund, and Voyageur Colorado Insured Municipal Income Fund, Inc. (the "Funds") as of March 31, 1998, and the related statements of operations, the statements of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes in net assets for the year ended March 31, 1997 and the financial highlights for the periods presented through March 31, 1997 were audited by other auditors whose report thereon dated May 9, 1997 expressed an unqualified opinion on those statements and financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 1998, by correspon dence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 1998 financial statements and financial highlights present fairly, in all material respects, the financial position of each of the respective Funds at March 31, 1998, and the results of their operations, the changes in their net assets and their financial highlights for the year then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania April 29, 1998 THIS ANNUAL REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF VOYAGEUR CLOSED-END MUNICIPAL BOND FUNDS. It sets forth details about charges, expenses, investment objectives and operating policies of each Fund. You should read it carefully before you invest. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. BOARD OF DIRECTORS WAYNE A. STORK Chairman Delaware Investments Family of Funds Philadelphia, PA JEFFREY J. NICK President and Chief Executive Officer Delaware Investments Family of Funds Philadelphia, PA WALTER P. BABICH Board Chairman, Citadel Constructors, Inc. King of Prussia, PA ANTHONY D. KNERR Consultant, Anthony Knerr & Associates New York, NY ANN R. LEVEN Treasurer, National Gallery of Art Washington, DC W. THACHER LONGSTRETH City Councilman Philadelphia, PA THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN CHARLES E. PECK Secretary/Treasurer, Enterprise Homes, Inc. Fredericksburg, VA EXECUTIVE OFFICERS DAVID K. DOWNES Executive Vice President, Chief Financial Officer and Chief Operating Officer Delaware Investments Family of Funds Philadelphia, PA GEORGE M. CHAMBERLAIN, JR. Senior Vice President, Secretary and General Counsel Delaware Investments Family of Funds Philadelphia, PA BRUCE D. BARTON President and Chief Executive Officer Delaware Distributors, L.P. Philadelphia, PA directors & officers INVESTMENT MANAGER Delaware Management Company Philadelphia, Pennsylvania INTERNATIONAL AFFILIATE Delaware International Advisers Ltd. London, England PRINCIPAL OFFICE OF THE FUND 1818 Market Street Philadelphia, PA 19103-3682 INDEPENDENT AUDITORS Ernst & Young LLP 2001 Market Street Philadelphia, PA REGISTRAR AND STOCK TRANSFER AGENT Norwest Bank Minnesota, NA P.O. Box 64851 St. Paul, Minnesota 55164-0854 1.800.468.9716 FOR SECURITIES DEALERS 1.800.362.7500 FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY 1.800.659.2265 www.delawarefunds.com The Delaware Investments family includes open-end and closed-end funds with a wide range of investment objectives. Stock funds, income funds, tax-exempt funds, money market funds and closed-end funds give investors the ability to create a portfolio that fits their personal financial goals. For a prospectus of any open-end fund from Delaware Investments, contact your financial adviser or call Delaware Investments at 1.800.523.4640. Read the prospectus carefully before investing. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Funds included herein may from time to time purchase shares of their common stock in the open market. NUMBER OF RECORDHOLDERS AS OF MARCH 31, 1998: Minnesota Municipal Income Fund I 514 Minnesota Municipal Income Fund II 872 Minnesota Municipal Income Fund III 217 Arizona Municipal Income Fund 182 Florida Insured Municipal Income Fund 325 Colorado Insured Municipal Income Fund 283 DELAWARE(SM) INVESTMENTS - --------------------- Philadelphia o London Printed in the USA on recycled paper (674) VOY-CEAR[3/98]TKO5/98 -----END PRIVACY-ENHANCED MESSAGE-----