-----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, IbH4VQ3QVFmZJgaK7nnh16XEPTkmZQLNfvaUPh4iKwnVJmfsqMzMJfQQM5YaaQIu xWDQ6aSDTJwz3bUchfK6dg== 0000950116-04-003616.txt : 20041201 0000950116-04-003616.hdr.sgml : 20041201 20041201132844 ACCESSION NUMBER: 0000950116-04-003616 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041201 DATE AS OF CHANGE: 20041201 EFFECTIVENESS DATE: 20041201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND III INC CENTRAL INDEX KEY: 0000910347 IRS NUMBER: 411761999 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07938 FILM NUMBER: 041176694 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III INC DATE OF NAME CHANGE: 19930806 N-CSR 1 n-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-07938 Exact name of registrant as specified in charter: Delaware Investments Minnesota Municipal Income Fund III, Inc. Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: March 31 Date of reporting period: September 30, 2004 Item 1. Reports to Stockholders The Registrant's shareholder report is combined with the shareholder reports of other investment company registrants. This Form N-CSR pertains to the information of the Delaware Investments Minnesota Municipal Income Fund, Inc. III, which is included in the following shareholder report. Delaware Investments(SM) -------------------------------------- CLOSED END A member of Lincoln Financial Group(R) Semiannual Report SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS SECTOR ALLOCATION Minnesota Municipal Income Fund 1 Minnesota Municipal Income Fund II 2 Minnesota Municipal Income Fund III 3 Arizona Municipal Income Fund 4 Florida Insured Municipal Income Fund 5 Colorado Insured Municipal Income Fund 6 - ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 7 Statements of Operations 20 Statements of Changes in Net Assets 22 Financial Highlights 23 Notes to Financial Statements 29 Proxy Results 33 - ----------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. DIVIDEND REINVESTMENT PLANS Each Fund offers an automatic dividend reinvestment program. If Fund shares are registered in your name and you are not already reinvesting dividends but would like to do so, contact the dividend plan agent, Mellon Investor Services, L.L.C., at 800 851-9677. You will be asked to put your request in writing. If you have shares registered in "street" name, contact your financial advisor or the broker/dealer holding the shares. Under the current policies of Arizona Municipal Income Fund, Florida Insured Municipal Income Fund, Minnesota Municipal Income Fund, and Minnesota Municipal Income Fund II, all distributions of net investment income and capital gains to common stock shareholders are automatically reinvested in additional shares unless shareholders elect to receive all dividends and other distributions in cash paid by check mailed directly to shareholders by the dividend plan agent. Under the current policies of Colorado Insured Municipal Income Fund and Minnesota Municipal Income Fund III, distributions of net investment income and capital gains to common shareholders will be paid in cash unless shareholders notify Mellon Investor Services, L.L.C. of their desire to participate in the dividend reinvestment program. After each Fund declares a dividend or determines to make a capital gains distribution, the plan agent will, as agent for the participants, receive the cash payment and use it to buy shares in the open market on the American Stock Exchange. The Funds will not issue any new shares in connection with the plan. You can contact Mellon at: Mellon Investor Services, L.L.C. Dividend Reinvestment Department Overpeck Centre 85 Challenger Road Ridgefield, NJ 07660 800 851-9677 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND The SEC adopted a requirement that all Funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following charts list each Fund's categories of portfolio holdings as a percent of total net assets, and is provided in compliance with such requirement. PERCENTAGE SECTOR OF NET ASSETS - -------------------------------------------------------------------------- MUNICIPAL BONDS 151.56% Airport Revenue Bonds 7.43% City General Obligation Bonds 4.02% Corporate Backed Revenue Bonds 4.37% Escrowed to Maturity Bonds 13.52% Higher Education Revenue Bonds 5.72% Hospital Revenue Bonds 19.35% Miscellaneous Revenue Bonds 7.10% Multifamily Housing Revenue Bonds 6.02% Municipal Lease Revenue Bonds 4.49% Parking Revenue Bonds 1.80% Political Subdivision General Obligation Bonds 8.82% Pre-Refunded Bonds 10.73% Public Power Revenue Bonds 30.79% School District General Obligation Bonds 15.54% Single Family Housing Revenue Bonds 2.60% State General Obligation Bonds 2.79% Tax Increment/Special Assessment Bonds 1.39% Territorial Revenue Bonds 2.26% Variable Rate Demand Notes 2.82% - -------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 151.56% - -------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.49% - -------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (52.05%) - -------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - -------------------------------------------------------------------------- 1 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND II The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets. PERCENTAGE SECTOR OF NET ASSETS - ------------------------------------------------------------------------- MUNICIPAL BONDS 152.79% - ------------------------------------------------------------------------- Airport Revenue Bonds 7.91% City General Obligation Bonds 3.75% Continuing Care/Retirement Revenue Bonds 2.28% Corporate Backed Revenue Bonds 5.45% Escrowed to Maturity Bonds 22.38% Higher Education Revenue Bonds 10.12% Hospital Revenue Bonds 25.51% Miscellaneous Revenue Bonds 3.74% Multifamily Housing Revenue Bonds 10.05% Municipal Lease Revenue Bonds 11.01% Parking Revenue Bonds 1.21% Political Subdivision General Obligation Bonds 6.59% Pre-Refunded Bonds 9.00% Public Power Revenue Bonds 11.92% School District General Obligation Bonds 9.29% Single Family Housing Revenue Bonds 2.65% State General Obligation Bonds 4.06% Tax Increment/Special Assessment Bonds 0.49% Territorial General Obligation Bonds 1.08% Territorial Revenue Bonds 1.61% Variable Rate Demand Notes 2.69% - ------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 152.79% - ------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.00% - ------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (54.79%) - ------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - ------------------------------------------------------------------------- 2 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND III The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets. PERCENTAGE SECTOR OF NET ASSETS - -------------------------------------------------------------------------- MUNICIPAL BONDS 156.00% - -------------------------------------------------------------------------- Airport Revenue Bonds 9.41% City General Obligation Bonds 4.91% Corporate Backed Revenue Bonds 7.41% Escrowed to Maturity Bonds 12.31% Higher Education Revenue Bonds 5.15% Hospital Revenue Bonds 30.05% Miscellaneous Revenue Bonds 1.01% Multifamily Housing Revenue Bonds 15.34% Municipal Lease Revenue Bonds 9.91% Parking Revenue Bonds 5.88% Political Subdivision General Obligation Bonds 9.63% Pre-Refunded Bonds 9.98% Public Power Revenue Bonds 20.15% Single Family Housing Revenue Bonds 2.51% Territorial General Obligation Bonds 1.96% Variable Rate Demand Notes 1.62% Water & Sewer Revenue Bonds 8.77% - -------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 156.00% - -------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.35% - -------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (57.35%) - -------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - -------------------------------------------------------------------------- 3 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS ARIZONA MUNICIPAL INCOME FUND The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets. PERCENTAGE SECTOR OF NET ASSETS - --------------------------------------------------------------------------- MUNICIPAL BONDS 152.06% - --------------------------------------------------------------------------- Airport Revenue Bonds 6.79% City General Obligation Bonds 1.14% Continuing Care/Retirement Revenue Bonds 3.48% Convention Center/Auditorium/Hotel Revenue Bonds 2.25% Dedicated Tax & Fees Revenue Bonds 6.76% Escrowed to Maturity Bonds 10.72% Higher Education Revenue Bonds 8.45% Hospital Revenue Bonds 18.81% Miscellaneous Revenue Bonds 8.27% Multifamily Housing Revenue Bonds 3.91% Municipal Lease Revenue Bonds 10.78% Political Subdivision General Obligation Bonds 3.57% Pre-Refunded Bonds 13.15% Public Power Revenue Bonds 2.26% School District General Obligation Bonds 17.58% Single Family Housing Revenue Bonds 5.52% Territorial Revenue Bonds 23.30% Water & Sewer Revenue Bonds 5.32% - --------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 152.06% - --------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 3.01% - --------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (55.07%) - --------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - --------------------------------------------------------------------------- 4 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets. PERCENTAGE SECTOR OF NET ASSETS - ----------------------------------------------------------------------------- Municipal Bonds 150.09% - ----------------------------------------------------------------------------- Airport Revenue Bonds 2.79% Dedicated Tax & Fees Revenue Bonds 24.67% Higher Education Revenue Bonds 7.68% Hospital Revenue Bonds 21.57% Multifamily Housing Revenue Bonds 22.87% Municipal Lease Revenue Bonds 23.93% Ports & Harbors Revenue Bonds 2.68% Pre-Refunded Bonds 22.01% Public Power Revenue Bonds 5.28% State General Obligation Bonds 6.00% Tax Increment/Special Assessment Bonds 0.79% Water & Sewer Revenue Bonds 9.82% - ----------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 150.09% - ----------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.15% - ----------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (52.24%) - ----------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - ----------------------------------------------------------------------------- 5 SECTOR ALLOCATION As of September 30, 2004 DELAWARE INVESTMENTS COLORADO INSURED MUNICIPAL INCOME FUND The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets. PERCENTAGE SECTOR OF NET ASSETS - --------------------------------------------------------------------------- MUNICIPAL BONDS 150.42% - --------------------------------------------------------------------------- Airport Revenue Bonds 10.41% City General Obligation Bonds 2.67% Continuing Care/Retirement Revenue Bonds 3.48% Convention Center/Auditorium/Hotel Revenue Bonds 3.98% Dedicated Tax & Fees Revenue Bonds 11.30% Higher Education Revenue Bonds 32.64% Hospital Revenue Bonds 4.50% Multifamily Housing Revenue Bonds 5.78% Municipal Lease Revenue Bonds 17.68% Parking Revenue Bonds 3.50% Political Subdivision General Obligation Bonds 8.22% Pre-Refunded Bonds 14.02% School District General Obligation Bonds 9.09% Turnpike/Toll Road Revenue Bonds 13.52% Water & Sewer Revenue Bonds 9.63% - --------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 150.42% - --------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.76% - --------------------------------------------------------------------------- LIQUIDATION VALUE OF PREFERRED STOCK (52.18%) - --------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - --------------------------------------------------------------------------- 6 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND, INC. STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS Principal Market Amount Value MUNICIPAL BONDS - 151.56% Airport Revenue Bonds - 7.43% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/30 (AMBAC) $ 250,000 $ 253,380 Series C 5.25% 1/1/32 (FGIC) 2,500,000 2,602,675 ---------- 2,856,055 ---------- City General Obligation Bonds - 4.02% Metropolitan Council Minnesota (Minneapolis/St. Paul Metropolitan Area) Series C 5.00% 2/1/22 500,000 521,600 Willmar (Rice Memorial Hospital Project) 5.00% 2/1/32 (FSA) 1,000,000 1,023,480 ---------- 1,545,080 ---------- Corporate Backed Revenue Bonds - 4.37% Anoka County Solid Waste Disposal National Rural Co-Op Utility (United Power Association) Series A 6.95% 12/1/08 (CFC)(AMT) 675,000 680,103 Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 1,000,000 997,280 ---------- 1,677,383 ---------- Escrowed to Maturity Bonds - 13.52% Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Single Family Residential Mortgage Revenue 8.375% 9/1/21 (GNMA)(FHA)(AMT) 2,555,000 3,779,101 Southern Minnesota Municipal Power Agency Series B 5.50% 1/1/15 (AMBAC) 390,000 399,430 5.75% 1/1/11 (FGIC) 1,000,000 1,017,520 ---------- 5,196,051 ---------- Higher Education Revenue Bonds - 5.72% Minnesota State Higher Education Facilities Authority (College of St. Benedict) Series 5-W 5.00% 3/1/20 1,000,000 1,034,330 University of Minnesota Series A 5.50% 7/1/21 1,000,000 1,163,740 ---------- 2,198,070 ---------- Hospital Revenue Bonds - 19.35% Bemidji Hospital Facilities Revenue (North Country Health Services) 5.00% 9/1/24 (RADIAN) 1,000,000 1,031,620 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 1,250,000 1,254,975 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 1,100,000 1,148,939 Minnesota Agricultural & Economic Development Health Care System (Fairview Hospital) Series A 6.375% 11/15/29 1,750,000 1,894,672 Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 5.25% 9/1/34 500,000 493,510 Principal Market Amount Value MUNICIPAL BONDS (continued) Hospital Revenue Bonds (continued) St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue (Franciscan Health Project) 5.40% 11/20/42 (GNMA)(FHA) $ 880,000 $ 911,337 (Regions Hospital Project) 5.30% 5/15/28 700,000 700,553 ---------- 7,435,606 ---------- Miscellaneous Revenue Bonds - 7.10% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 1,600,000 1,684,880 Minneapolis Community Development Agency Supported Series G-3 5.45% 12/1/31 1,000,000 1,041,670 ---------- 2,726,550 ---------- Multifamily Housing Revenue Bonds - 6.02% Minneapolis Multifamily Housing Revenue (Seward Towers Project) 5.00% 5/20/36 (GNMA) 1,000,000 1,017,950 Southeastern Minnesota Multi County Housing & Redevelopment Authority (Winona County) 5.35% 1/1/28 300,000 303,153 Washington County Housing & Redevelopment Authority Revenue (Woodland Park Apartments Project) 4.70% 10/1/32 1,000,000 993,220 ---------- 2,314,323 ---------- Municipal Lease Revenue Bonds - 4.49% St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.125% 12/1/27 500,000 520,070 5.25% 12/1/27 1,150,000 1,205,465 ---------- 1,725,535 ---------- Parking Revenue Bonds - 1.80% St. Paul Housing & Redevelopment Authority Parking Revenue (Block 19 Ramp Project) Series A 5.35% 8/1/29 (FSA) 650,000 689,657 ---------- 689,657 ---------- Political Subdivision General Obligation Bonds - 8.82% Hennepin County Series B 5.00% 12/1/18 1,300,000 1,412,034 Washington County Housing & Redevelopment Authority Series B 5.50% 2/1/22 (MBIA) 855,000 922,536 5.50% 2/1/32 (MBIA) 1,000,000 1,055,050 ---------- 3,389,620 ---------- *Pre-Refunded Bonds - 10.73% Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.30% 11/1/22-04 (AMBAC) 730,000 732,971 Puerto Rico Commonwealth 6.00% 7/1/26-07 1,000,000 1,121,210 Puerto Rico Public Buildings Authority Series D 5.25% 7/1/27-12 845,000 948,563 St. Francis Independent School District #15 Series A 6.30% 2/1/11-06 (FSA) 1,250,000 1,320,838 ---------- 4,123,582 ---------- 7 STATEMENTS DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND, INC. OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Public Power Revenue Bonds - 30.79% Chaska Electric Revenue Series A 6.00% 10/1/25 $1,000,000 $ 1,070,820 Minnesota State Municipal Power Agency 5.25% 10/1/19 1,110,000 1,200,620 Rochester Electric Utility Revenue 5.25% 12/1/30 (AMBAC) 150,000 156,947 **Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater Series A 8.688% 1/1/14 (AMBAC) 2,500,000 3,150,375 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/12 (AMBAC) 1,000,000 1,112,560 5.00% 1/1/13 (MBIA) 500,000 555,790 5.25% 1/1/15 (AMBAC) 570,000 648,170 5.25% 1/1/16 (AMBAC) 1,000,000 1,139,080 Western Minnesota Municipal Power Agency Series A 5.00% 1/1/30 (MBIA) 1,900,000 1,945,676 Series B 5.00% 1/1/15 (MBIA) 765,000 849,517 ----------- 11,829,555 ----------- School District General Obligation Bonds - 15.54% Centennial Independent School District #012 Series 2002A 5.00% 2/1/20 (FSA) 400,000 424,020 Farmington Independent School District #192 5.00% 2/1/23 (FSA) 1,200,000 1,254,227 Minneapolis Special School District #001 5.00% 2/1/19 (FSA) 675,000 724,640 Morris Independent School District #769 5.00% 2/1/28 (MBIA) 1,000,000 1,030,940 Mounds View Independent School District #621 5.00% 2/1/23 (FSA) 1,020,000 1,071,347 Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 500,000 527,100 St. Michael Independent School District #885 5.00% 2/1/22 (FSA) 500,000 524,520 5.00% 2/1/24 (FSA) 400,000 415,520 ----------- 5,972,314 ----------- Single Family Housing Revenue Bonds - 2.60% Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue 5.85% 10/1/30 (GNMA)(FNMA)(AMT) 54,000 55,497 Minnesota State Housing Finance Agency Single Family Mortgage Series J 5.90% 7/1/28 (AMT) 910,000 942,797 ----------- 998,294 ----------- State General Obligation Bonds - 2.79% Minnesota State 5.00% 8/1/21 1,000,000 1,072,140 ----------- 1,072,140 ----------- Tax Increment/Special Assessment Bonds - 1.39% Moorhead Economic Development Authority Tax Increment Series A 5.25% 2/1/25 (MBIA) 500,000 535,630 ----------- 535,630 ----------- Principal Market Amount Value MUNICIPAL BONDS (continued) Territorial Revenue Bonds - 2.26% Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series A 5.00% 7/1/38 $ 300,000 $ 301,467 Series G 5.00% 7/1/42 250,000 250,685 Puerto Rico Public Buildings Authority Revenue Series D (Unrefunded Balance) 5.25% 7/1/27 305,000 316,977 ----------- 869,129 ----------- Variable Rate Demand Notes - 2.82% Minneapolis Library 1.56% 12/1/32 700,000 700,000 Minnesota State Higher Education Facilities Authority (Carleton College) Series 5-G 1.56% 11/1/29 385,000 385,000 ----------- 1,085,000 ----------- TOTAL MUNICIPAL BONDS (cost $55,858,033) 58,239,574 ----------- TOTAL MARKET VALUE OF SECURITIES - 151.56% (cost $55,858,033) 58,239,574 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.49% 188,216 LIQUIDATION VALUE OF PREFERRED STOCK - (52.05%) (20,000,000) ------------ NET ASSETS APPLICABLE TO 2,594,700 SHARES OUTSTANDING - 100.00% $ 38,427,790 ------------ Net Asset Value Per Common Share ($38,427,790 / 2,594,700 Shares) $14.81 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, 200 million shares authorized to the Fund $ 35,426,619 Undistributed net investment income 601,048 Accumulated net realized gain on investments 33,096 Net unrealized appreciation of investments 2,367,027 ------------ Total net assets $ 38,427,790 ------------ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of September 30, 2004. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CFC - Insured by the National Rural Utilities Cooperative Finance Corporation FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance See accompanying notes 8 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS - 152.79% Airport Revenue Bonds - 7.91% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/28 (MBIA) $1,370,000 $ 1,406,237 5.00% 1/1/30 (AMBAC) 1,450,000 1,469,604 5.25% 1/1/16 (MBIA) 1,000,000 1,103,700 Series B 5.25% 1/1/24 (FGIC)(AMT) 1,000,000 1,032,980 Series C 5.25% 1/1/32 (FGIC) 3,500,000 3,643,745 ------------ 8,656,266 ------------ City General Obligation Bonds - 3.75% Metropolitan Council Minnesota (Minneapolis/St. Paul Metropolitan Area) Series C 5.00% 2/1/22 500,000 521,600 Moorhead Series B 5.00% 2/1/33 (MBIA) 2,000,000 2,053,160 Willmar (Rice Memorial Hospital Project) 5.00% 2/1/32 (FSA) 1,500,000 1,535,220 ------------ 4,109,980 ------------ Continuing Care/Retirement Revenue Bonds - 2.28% Minneapolis Health Care Facility Revenue (Jones-Harrison Residence Project) 6.00% 10/1/27 1,565,000 1,494,309 Moorhead Economic Development Authority Multifamily Revenue (Eventide Lutheran Home Project) Series B 6.00% 6/1/18 1,000,000 1,004,160 ------------ 2,498,469 ------------ Corporate Backed Revenue Bonds - 5.45% Burnsville Commonwealth Development (Holiday Inn Project) 5.90% 4/1/08 1,430,000 1,413,240 Cloquet Pollution Control Revenue (Potlatch Corporation) 5.90% 10/1/26 4,500,000 4,552,605 ------------ 5,965,845 ------------ Escrowed to Maturity Bonds - 22.38% Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Single Family Residential Mortgage Revenue 8.375% 9/1/21 (GNMA)(FHA)(AMT) 5,500,000 8,135,050 Elk River Independent School District #728 5.00% 2/1/16 (FGIC) 1,500,000 1,651,035 Metropolitan Council Minneapolis/St. Paul Area Sports Facilities Revenue (Hubert H. Humphrey Metrodome) 6.00% 10/1/09 2,360,000 2,395,896 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.75% 1/1/18 3,715,000 3,811,739 St. Paul Housing & Redevelopment Authority Sales Tax (Civic Center Project) 5.55% 11/1/23 (MBIA) 4,200,000 4,297,986 5.55% 11/1/23 2,300,000 2,353,659 Western Minnesota Municipal Power Agency 6.625% 1/1/16 1,535,000 1,866,268 ------------ 24,511,633 ------------ Principal Market Amount Value MUNICIPAL BONDS (continued) Higher Education Revenue Bonds - 10.12% Minnesota State Higher Education Facilities Authority (College of St. Benedict) Series 5-W 5.00% 3/1/20 $1,000,000 $ 1,034,330 (St. Catherine College) Series 5-N1 5.375% 10/1/32 1,500,000 1,547,205 (St. Mary's University) Series 5-U 4.80% 10/1/23 1,400,000 1,401,526 (St. Thomas University) Series 4-A1 5.625% 10/1/21 1,000,000 1,027,100 Series 5-Y 5.25% 10/1/34 1,500,000 1,545,075 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 1,000,000 1,037,980 University of Minnesota Series A 5.50% 7/1/21 3,000,000 3,491,220 ----------- 11,084,436 ----------- Hospital Revenue Bonds - 25.51% Brainerd Health Care (Evangelical Lutheran Health Care Facilities) Series A 6.65% 3/1/17 (FSA) 1,195,000 1,195,669 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 5,000,000 5,019,899 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 1,000,000 1,044,490 (Fairview Health Services) Series A 5.625% 5/15/32 2,750,000 2,864,290 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems (Children's Health Care) Series A 5.50% 8/15/25 (FSA) 1,400,000 1,474,844 Minnesota Agricultural & Economic Development Health Care System (Fairview Hospital) Series A 6.375% 11/15/29 3,300,000 3,572,811 Series 97A 5.75% 11/15/26 (MBIA) 5,550,000 6,078,970 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 3,365,000 3,567,539 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.25% 7/1/30 1,250,000 1,263,688 St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue (Regions Hospital Project) 5.30% 5/15/28 300,000 300,237 Waconia Health Care Facilities Revenue (Ridgeview Medical Center Project) Series A 6.10% 1/1/19 (RADIAN) 1,405,000 1,556,417 ----------- 27,938,854 ----------- Miscellaneous Revenue Bonds - 3.74% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 2,400,000 2,527,320 9 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENTS OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Miscellaneous Revenue Bonds (continued) Minneapolis Community Development Agency (Supported Development Revenue Limited Tax Common Bond Fund) Series 5 5.70% 12/1/27 $ 375,000 $ 382,391 Series G1 5.70% 12/1/19 1,100,000 1,184,964 ----------- 4,094,675 ----------- Multifamily Housing Revenue Bonds - 10.05% Chanhassen Multifamily Housing Revenue (Heritage Park Project Section 8) 6.20% 7/1/30 (FHA)(AMT) 1,105,000 1,149,255 Harmony Multifamily Housing Revenue Refunding Section 8 (Zedakah Foundation Project) Series A 5.95% 9/1/20 1,000,000 858,510 Minneapolis Multifamily Housing Revenue (Seward Towers Project) 5.00% 5/20/36 (GNMA) 1,000,000 1,017,950 (Sumner Housing Project) Series A 5.15% 2/20/45 (GNMA)(AMT) 3,575,000 3,620,581 Minnesota State Housing Finance Agency Series A 5.00% 2/1/35 1,000,000 1,000,990 Series D 5.95% 2/1/18 (MBIA) 950,000 973,332 Southeastern Minnesota Multi County Housing & Redevelopment Authority (Winona County) 5.35% 1/1/28 870,000 879,144 Stillwater Multifamily Housing Revenue (Stillwater Cottages) (Orleans Homes Number One) 7.25% 11/1/27 (AMT) 1,540,000 1,505,319 ----------- 11,005,081 ----------- Municipal Lease Revenue Bonds - 11.01% Andover Economic Development Authority Public Facilities Lease Revenue (Andover Community Center) 5.20% 2/1/29 1,000,000 1,010,470 Minneapolis Development Revenue (Limited Tax Supported Common Bond Fund) 5.50% 12/1/24 1,000,000 1,043,050 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.00% 12/1/22 2,385,000 2,494,662 5.25% 12/1/27 2,650,000 2,777,810 St. Paul Port Authority Lease Revenue (Robert Street Office Building Project) 5.00% 12/1/27 2,545,000 2,619,136 Series 9 5.25% 12/1/27 2,000,000 2,104,820 ----------- 12,049,948 ----------- Parking Revenue Bonds - 1.21% St. Paul Housing & Redevelopment Authority Parking Revenue (Block 19 Ramp Project) Series A 5.35% 8/1/29 (FSA) 1,250,000 1,326,263 ----------- 1,326,263 ----------- Political Subdivision General Obligation Bonds - 6.59% Hennepin County Series B 5.00% 12/1/18 1,000,000 1,086,180 Hennepin Regional Railroad Authority 5.00% 12/1/26 3,500,000 3,592,190 Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 1,250,000 1,340,025 Principal Market Amount Value MUNICIPAL BONDS (continued) Political Subdivision General Obligation Bonds (continued) Washington County Housing & Redevelopment Authority Series B 5.50% 2/1/32 (MBIA) $1,140,000 $ 1,202,757 ----------- 7,221,152 ----------- *Pre-Refunded Bonds - 9.00% Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.20% 11/1/12-04 (AMBAC) 280,000 281,117 6.30% 11/1/22-04 (AMBAC) 960,000 963,907 Esko Independent School District #99 5.65% 4/1/12-05 (FSA) 550,000 560,648 Hawley Independent School District #150 Series A 5.75% 2/1/17-06 (FSA) 1,000,000 1,049,450 Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 6.25% 3/1/16-05 1,000,000 1,019,520 Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/27-12 1,250,000 1,395,613 Puerto Rico Highway & Transportation Authority Revenue Series Y 5.50% 7/1/26-06 2,000,000 2,157,759 Puerto Rico Public Buildings Authority Series D 5.25% 7/1/27-12 625,000 701,600 Stewartville Independent School District #534 5.75% 2/1/17-05 1,705,000 1,727,677 ----------- 9,857,291 ----------- Public Power Revenue Bonds - 11.92% Minnesota State Municipal Power Agency Series A 5.00% 10/1/34 5,750,000 5,769,320 Rochester Electric Utility Revenue 5.25% 12/1/30 (AMBAC) 450,000 470,840 **Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater Series A 8.688% 1/1/14 (AMBAC) 3,000,000 3,780,450 8.688% 1/1/15 1,500,000 1,911,435 Western Minnesota Municipal Power Agency Series A 5.00% 1/1/30 (MBIA) 1,100,000 1,126,444 ----------- 13,058,489 ----------- School District General Obligation Bonds - 9.29% Centennial Independent School District #012 Series 2002A 5.00% 2/1/20 (FSA) 400,000 424,020 Farmington Independent School District #192 5.00% 2/1/23 (FSA) 1,080,000 1,128,805 Minneapolis Special School District #001 5.00% 2/1/19 (FSA) 1,000,000 1,073,540 Morris Independent School District #769 5.00% 2/1/28 (MBIA) 2,750,000 2,835,085 Mounds View Independent School District #621 5.00% 2/1/23 (FSA) 1,000,000 1,050,340 Rosemount Independent School District #196 Series A 5.70% 4/1/12 1,270,000 1,339,126 St. Michael Independent School District #885 5.00% 2/1/22 (FSA) 1,500,000 1,573,560 5.00% 2/1/24 (FSA) 725,000 753,130 ----------- 10,177,606 ----------- 10 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND II, INC. STATEMENTS OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Single Family Housing Revenue Bonds - 2.65% Minnesota State Housing Finance Agency Single Family Housing Series 1992-C2 6.15% 7/1/23 (AMT) $ 920,000 $ 928,262 Minnesota State Housing Finance Agency Single Family Mortgage Series B 5.35% 1/1/33 (AMT) 1,155,000 1,176,044 Series J 5.90% 7/1/28 (AMT) 770,000 797,751 ------------ 2,902,057 ------------ State General Obligation Bonds - 4.06% Minnesota State 5.00% 8/1/21 3,525,000 3,779,293 **Minnesota State, Inverse Floater 8.479% 11/1/17 570,000 666,091 ------------ 4,445,384 ------------ Tax Increment/Special Assessment Bonds - 0.49% Moorhead Economic Development Authority Tax Increment Series A 5.25% 2/1/25 (MBIA) 500,000 535,630 ------------ 535,630 ------------ Territorial General Obligation Bonds - 1.08% Puerto Rico Commonwealth Public Improvement Series A 5.50% 7/1/19 (MBIA) 1,000,000 1,176,290 ------------ 1,176,290 ------------ Territorial Revenue Bonds - 1.61% Puerto Rico Electric Power Authority Power Revenue Series Z 5.25% 7/1/21 1,500,000 1,527,465 Puerto Rico Public Buildings Authority Revenue Series D (Unrefunded Balance) 5.25% 7/1/27 225,000 233,836 ------------ 1,761,301 ------------ Variable Rate Demand Notes - 2.69% Minneapolis Block E Buildings Series A 1.56% 12/1/18 300,000 300,000 1.56% 3/1/27 1,250,000 1,250,000 Minneapolis Library 1.56% 12/1/32 200,000 200,000 Minneapolis Multifamily Housing Revenue (Seven Corners Apartments Project) 1.66% 11/1/31 300,000 300,000 Minnesota State Higher Education Facilities Authority (Carleton College) Series 5-G 1.56% 11/1/29 900,000 900,000 ------------ 2,950,000 ------------ TOTAL MUNICIPAL BONDS (cost $159,831,480) 167,326,650 ------------ TOTAL MARKET VALUE OF SECURITIES - 152.79% (cost $159,831,480) $167,326,650 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 2.00% 2,187,819 LIQUIDATION VALUE OF PREFERRED STOCK - (54.79%) (60,000,000) ------------ Net Assets Applicable to 7,252,200 Shares Outstanding - 100.00% $109,514,469 ------------ Net Asset Value Per Common Share ($109,514,469 / 7,252,200 Shares) $15.10 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, 200 million shares authorized to the Fund $ 99,710,000 Undistributed net investment income 2,951,972 Accumulated net realized loss on investments (461,794) Net unrealized appreciation of investments 7,314,291 ------------ Total net assets $109,514,469 ------------ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of September 30, 2004. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance See accompanying notes 11 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND III, INC. STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS - 156.00% Airport Revenue Bonds - 9.41% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/28 (MBIA) $ 750,000 $ 769,838 5.00% 1/1/30 (AMBAC) 750,000 760,140 5.125% 1/1/25 (FGIC) 900,000 930,636 ----------- 2,460,614 ----------- City General Obligation Bonds - 4.91% Moorhead Series B 5.00% 2/1/33 (MBIA) 1,250,000 1,283,225 ----------- 1,283,225 ----------- Corporate Backed Revenue Bonds - 7.41% Cloquet Pollution Control Revenue (Potlatch Corporation) 5.90% 10/1/26 1,000,000 1,011,690 Minneapolis Community Development Agency Supported Development Revenue (Pajor Graphics) Series 1 (LOC US Bank NA) 6.75% 12/1/25 (AMT) 865,000 926,303 ----------- 1,937,993 ----------- Escrowed to Maturity Bonds - 12.31% University of Minnesota Hospital & Clinics 6.75% 12/1/16 2,580,000 3,219,324 ----------- 3,219,324 ----------- Higher Education Revenue Bonds - 5.15% Minnesota State Higher Education Facilities Authority (College of St. Benedict) Series 5-W 5.25% 3/1/24 300,000 310,824 (St. Thomas University) Series 4-A1 5.625% 10/1/21 1,010,000 1,037,371 ----------- 1,348,195 ----------- Hospital Revenue Bonds - 30.05% Bemidji Hospital Facilities Revenue (North Country Health Services) 5.00% 9/1/24 (RADIAN) 500,000 515,810 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 1,000,000 1,003,980 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 1,100,000 1,148,939 Minnesota Agricultural & Economic Development Health Care System (Benedictine Health Systems) 5.75% 2/1/29 600,000 585,750 (Fairview Hospital) Series A 6.375% 11/15/29 1,250,000 1,353,338 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 1,000,000 1,060,190 Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 5.25% 9/1/34 310,000 305,976 St. Paul Housing & Redevelopment Authority Revenue (Franciscan Health Project) 5.40% 11/20/42 (GNMA)(FHA) 1,820,000 1,884,809 ----------- 7,858,792 ----------- Principal Market Amount Value MUNICIPAL BONDS (continued) Miscellaneous Revenue Bonds - 1.01% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 $ 250,000 $ 263,263 ---------- 263,263 ---------- Multifamily Housing Revenue Bonds - 15.34% Burnsville Multifamily Housing Mortgage Revenue SCA Tax Exempt Trust Series A 7.10% 1/1/30 (FSA) 1,930,000 1,980,932 Minneapolis Multifamily Housing Revenue (Gaar Scott Loft Project) 5.95% 5/1/30 (AMT) 980,000 1,047,345 (Olson Townhomes Project) 6.00% 12/1/19 (AMT) 1,000,000 983,790 ---------- 4,012,067 ---------- Municipal Lease Revenue Bonds - 9.91% Andover Economic Development Authority Public Facilities Lease Revenue (Andover Community Center) 5.125% 2/1/24 500,000 510,005 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.125% 12/1/27 500,000 520,070 5.25% 12/1/27 1,000,000 1,048,230 St. Paul Port Authority Lease Revenue (Robert Street Office Building Project) 5.00% 12/1/27 500,000 514,565 ---------- 2,592,870 ---------- Parking Revenue Bonds - 5.88% St. Paul Housing & Redevelopment Authority Parking Revenue (Block 19 Ramp Project) Series A 5.35% 8/1/29 (FSA) 1,450,000 1,538,465 ---------- 1,538,465 ---------- Political Subdivision General Obligation Bonds - 9.63% Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 750,000 804,015 Minneapolis Sports Arena Project 5.125% 10/1/20 750,000 796,590 Washington County Housing & Redevelopment Authority Series B 5.50% 2/1/22 (MBIA) 850,000 917,142 ---------- 2,517,747 ---------- *Pre-Refunded Bonds - 9.98% Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.20% 11/1/12-04 (AMBAC) 420,000 421,676 Esko Independent School District #99 5.75% 4/1/17-05 (FSA) 2,145,000 2,187,600 ---------- 2,609,276 ---------- Public Power Revenue Bonds - 20.15% Minnesota State Municipal Power Agency 5.25% 10/1/19 500,000 540,820 Series A 5.00% 10/1/34 250,000 250,840 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/13 (MBIA) 500,000 555,790 5.25% 1/1/15 (AMBAC) 700,000 795,998 5.25% 1/1/16 (AMBAC) 500,000 569,540 12 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND III, INC. STATEMENTS OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Public Power Revenue Bonds (continued) **Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater Series A 8.688% 1/1/14 (AMBAC) $1,500,000 $ 1,890,224 Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 600,000 666,288 ----------- 5,269,500 ----------- Single Family Housing Revenue Bonds - 2.51% Minnesota State Housing Finance Agency Single Family Mortgage Series B 5.35% 1/1/33 (AMT) 645,000 656,752 ----------- 656,752 ----------- Territorial General Obligation Bonds - 1.96% University Virgin Islands Series A 5.375% 6/1/34 500,000 513,525 ----------- 513,525 ----------- Variable Rate Demand Notes - 1.62% Minneapolis Block E Buildings Series A 1.56% 12/1/18 425,000 425,000 ----------- 425,000 ----------- Water & Sewer Revenue Bonds - 8.77% Minnesota Public Facilities Authority Water Pollution Control Revenue Series B 5.40% 3/1/15 2,200,000 2,293,302 ----------- 2,293,302 ----------- TOTAL MUNICIPAL BONDS (cost $38,711,216) 40,799,910 ----------- TOTAL MARKET VALUE OF SECURITIES - 156.00% (cost $38,711,216) $ 40,799,910 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.35% 354,192 LIQUIDATION VALUE OF PREFERRED STOCK - (57.35%) (15,000,000) ------------ NET ASSETS APPLICABLE TO 1,837,200 SHARES OUTSTANDING - 100.00% $ 26,154,102 ------------ Net Asset Value Per Common Share ($26,154,102 / 1,837,200 Shares) $14.24 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, 200 million shares authorized to the Fund $ 23,985,129 Undistributed net investment income 683,427 Accumulated net realized loss on investments (482,990) Net unrealized appreciation of investments 1,968,536 ------------ Total net assets $ 26,154,102 ------------ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of September 30, 2004. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance See accompanying notes 13 DELAWARE INVESTMENTS ARIZONA MUNICIPAL INCOME FUND, INC. STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS - 152.06% Airport Revenue Bonds - 6.79% Phoenix Civic Improvement Corporation Airport Revenue Senior Lien Series A 5.00% 7/1/25 (FSA) $1,000,000 $1,025,790 Series B 5.25% 7/1/27 (FGIC)(AMT) 2,000,000 2,059,620 ---------- 3,085,410 ---------- City General Obligation Bonds - 1.14% DC Ranch Community Facilities 5.00% 7/15/27 (AMBAC) 500,000 515,680 ---------- 515,680 ---------- Continuing Care/Retirement Revenue Bonds - 3.48% Yavapai County Industrial Development Authority Residential Care Facilities (Margaret T. Morris Center) Series A 5.40% 2/20/38 (GNMA) 1,575,000 1,580,560 ---------- 1,580,560 ---------- Convention Center/Auditorium/Hotel Revenue Bonds - 2.25% Arizona Tourism & Sports Authority Tax Revenue Multipurpose Stadium Facilities Series A 5.00% 7/1/31 (MBIA) 1,000,000 1,023,060 ---------- 1,023,060 ---------- Dedicated Tax & Fees Revenue Bonds - 6.76% Glendale Municipal Property Corporation 5.00% 7/1/33 (AMBAC) 3,000,000 3,069,180 ---------- 3,069,180 ---------- Escrowed to Maturity Bonds - 10.72% Puerto Rico Commonwealth Infrastructure Financing Series A 5.50% 10/1/40 4,500,000 4,868,730 ---------- 4,868,730 ---------- Higher Education Revenue Bonds - 8.45% Arizona State University Certificates of Participation 5.00% 9/1/30 (AMBAC) 1,000,000 1,023,930 South Campus Group Student Housing Revenue (Arizona State University South Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,090,990 Southern Arizona Capital Facilities Finance Corporation (University of Arizona Project) 5.00% 9/1/23 (MBIA) 1,150,000 1,193,735 University of Arizona Certificates of Participation (University of Arizona Project) Series B 5.125% 6/1/22 (AMBAC) 500,000 527,280 ---------- 3,835,935 ---------- Hospital Revenue Bonds - 18.81% Maricopa County Industrial Development Authority (Catholic Healthcare West) Series A 5.50% 7/1/26 430,000 434,489 (Mayo Clinic Hospital) 5.25% 11/15/37 2,000,000 2,043,200 Mohave County Industrial Development Authority (Chris/Silver Ridge) 6.375% 11/1/31 (GNMA) 260,000 273,546 Scottsdale Industrial Development Authority Hospital Revenue (Scottsdale Healthcare) 5.80% 12/1/31 1,000,000 1,035,340 Principal Market Amount Value MUNICIPAL BONDS (continued) Hospital Revenue Bonds (continued) Show Low Industrial Development Authority Hospital Revenue (Navapache Regional Medical Center) Series A 5.50% 12/1/17 (ACA) $1,600,000 $1,665,472 University Medical Center Corporation Arizona Hospital Revenue 5.00% 7/1/33 1,000,000 988,640 Yavapai County Industrial Development Authority (Yavapai Regional Medical Center) 5.25% 8/1/21 (RADIAN) 2,000,000 2,100,800 ---------- 8,541,487 ---------- Miscellaneous Revenue Bonds - 8.27% Arizona School Facilities Board Revenue (State School Improvement) Series 2001 5.00% 7/1/19 2,000,000 2,154,120 Arizona Student Loan Acquisition Authority Revenue Series A-1 5.90% 5/1/24 (AMT) 1,500,000 1,601,820 ---------- 3,755,940 ---------- Multifamily Housing Revenue Bonds - 3.91% Maricopa County Industrial Development Authority Multifamily Housing Revenue (Sly-Mar Apartments Project) 6.10% 4/20/36 (GNMA)(AMT) 465,000 500,187 Peoria Industrial Development Authority Multifamily Housing Revenue (Casa Del Rio) Series A 7.30% 2/20/28 (GNMA) 1,230,000 1,273,505 ---------- 1,773,692 ---------- Municipal Lease Revenue Bonds - 10.78% Arizona School Facilities Board Certificates of Participation Series B 5.25% 9/1/19 (FSA) 1,000,000 1,102,780 Phoenix Civic Improvement Corporation Excise Tax Senior Lien (Municipal Courthouse Project) Series A 5.25% 7/1/24 1,000,000 1,060,460 Prescott Valley Property Corporation 5.00% 1/1/27 (FGIC) 500,000 515,825 Tucson Certificates of Participation 5.60% 7/1/11 1,100,000 1,188,748 Yuma Municipal Property Corporation 5.00% 7/1/25 (AMBAC) 1,000,000 1,024,770 ---------- 4,892,583 ---------- Political Subdivision General Obligation Bonds - 3.57% Eagle Mountain Community Facilities District Series A 6.40% 7/1/17 1,500,000 1,619,940 ---------- 1,619,940 ---------- *Pre-Refunded Bonds - 13.15% Arizona State Transportation Board Highway Revenue Refunding 5.75% 7/1/18-09 2,350,000 2,674,887 Arizona Water Infrastructure Finance Authority Revenue Water Quality Series A 5.05% 10/1/20-11 1,500,000 1,675,350 Oro Valley Municipal Property Corporation Excise Tax 5.00% 7/1/20-11 (FGIC) 1,000,000 1,059,540 Puerto Rico Commonwealth Public Improvement Series A 5.125% 7/1/31-11 250,000 279,248 14 DELAWARE INVESTMENTS ARIZONA MUNICIPAL INCOME FUND, INC. STATEMENTS OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) *Pre-Refunded Bonds (continued) Yuma Industrial Development Authority Hospital Revenue (Yuma Regional Medical Center) 5.00% 8/1/31-11 (FSA) $ 250,000 $ 278,750 ----------- 5,967,775 ----------- Public Power Revenue Bonds - 2.26% Salt River Project Arizona Agricultural Improvement & Power District Electric System Revenue (Salt River Project) Series A 5.00% 1/1/31 1,000,000 1,024,040 ----------- 1,024,040 ----------- School District General Obligation Bonds - 17.58% Maricopa County School District #6 (Washington Elementary School Improvement Project of 2001) Series B 5.00% 7/1/17 (FSA) 1,000,000 1,115,510 (Washington Elementary) Series A 5.375% 7/1/13 (FSA) 3,000,000 3,431,700 Maricopa County School District #38 (Madison Elementary) 5.00% 7/1/13 (FSA) 1,250,000 1,394,738 5.00% 7/1/14 (FSA) 825,000 921,401 Tempe Union High School District #213 5.00% 7/1/14 (FSA) 1,000,000 1,116,850 ----------- 7,980,199 ----------- Single Family Housing Revenue Bonds - 5.52% Phoenix Industrial Development Authority Single Family Statewide Series A 5.35% 6/1/20 (GNMA)(FNMA)(FHLMC)(AMT) 1,160,000 1,196,354 Series C 5.30% 4/1/20 (GNMA)(FNMA)(FHLMC)(AMT) 915,000 948,498 Pima County Industrial Development Authority Single Family Mortgage Revenue Series A 6.125% 11/1/33 (GNMA)(FNMA)(FHLMC)(AMT) 340,000 358,979 ----------- 2,503,831 ----------- Territorial Revenue Bonds - 23.30% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Refunding Series D 5.00% 7/1/32 (FSA) 8,500,000 8,727,374 Puerto Rico Commonwealth Public Improvement Series A 5.125% 7/1/31 500,000 510,395 Virgin Islands Public Finance Authority Revenue Series A 6.125% 10/1/29 (ACA) 1,250,000 1,343,213 ----------- 10,580,982 ----------- Water & Sewer Revenue Bonds - 5.32% Phoenix Civic Improvement Corporation Wastewater Systems Revenue Junior Lien 5.00% 7/1/24 (FGIC) 1,590,000 1,641,818 5.00% 7/1/26 (FGIC) 750,000 772,530 ----------- 2,414,348 ----------- TOTAL MUNICIPAL BONDS (cost $65,484,033) 69,033,372 ----------- TOTAL MARKET VALUE OF SECURITIES - 152.06% (cost $65,484,033) $69,033,372 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 3.01% 1,365,531 LIQUIDATION VALUE OF PREFERRED STOCK - (55.07%) (25,000,000) ----------- NET ASSETS APPLICABLE TO 2,982,200 COMMON SHARES OUTSTANDING - 100.00% $45,398,903 ----------- Net Asset Value Per Common Share ($45,398,903 / 2,982,200 Shares) $15.22 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, 200 million shares authorized to the Fund $40,838,893 Undistributed net investment income 990,162 Accumulated net realized gain on investments 45,981 Net unrealized appreciation of investments 3,523,867 ----------- Total net assets $45,398,903 ----------- *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. SUMMARY OF ABBREVIATIONS: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHLMC - Insured by the Federal Home Loan Mortgage Corporation FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance See accompanying notes 15 DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS - 150.09% Airport Revenue Bonds - 2.79% Dade County Aviation Revenue Series 96B 5.60% 10/1/26 (MBIA) $1,000,000 $1,069,970 ---------- 1,069,970 ---------- Dedicated Tax & Fees Revenue Bonds - 24.67% Florida State Department of Transportation 5.00% 7/1/31 (FGIC) 1,525,000 1,552,481 Jacksonville Sales Tax Revenue 5.00% 10/1/30 (MBIA) 1,500,000 1,534,380 Jacksonville Transportation Revenue 5.25% 10/1/29 (MBIA) 2,000,000 2,084,980 Miami Beach Resort Tax Revenue 5.50% 10/1/16 (AMBAC) 1,000,000 1,084,240 Orange County Public Service Tax Revenue 6.00% 10/1/24 (FGIC) 3,000,000 3,190,919 ---------- 9,447,000 ---------- Higher Education Revenue Bonds - 7.68% Florida Agriculture & Mechanical University Revenue (Student Apartment Facility) 5.625% 7/1/21 (MBIA) 1,250,000 1,331,638 Volusia County Educational Facilities Authority (Stetson University Project) Series A 5.50% 6/1/17 (MBIA) 1,500,000 1,609,935 ---------- 2,941,573 ---------- Hospital Revenue Bonds - 21.57% Escambia County Health Facilities Authority (Florida Health Care Facilities - VHA Program) 5.95% 7/1/20 (AMBAC) 3,075,000 3,169,433 Lee County Memorial Health System Board of Directors 5.00% 4/1/20 (FSA) 1,000,000 1,050,040 Orange County Health Facilities Authority Revenue (Adventist Health Systems) 5.75% 11/15/25 (AMBAC) 1,500,000 1,579,995 (Orlando Regional Healthcare) Series A 6.25% 10/1/18 (MBIA) 2,000,000 2,458,280 ---------- 8,257,748 ---------- Multifamily Housing Revenue Bonds - 22.87% Broward County Housing Finance Authority (St. Croix Apartments Project) Series A 5.45% 11/1/36 (FSA)(AMT) 1,000,000 1,021,180 Florida Housing Finance Agency (Homeowner Mortgage) Series 2 5.90% 7/1/29 (MBIA)(AMT) 825,000 855,393 (Leigh Meadows Apartments Section 8) Series N 6.30% 9/1/36 (AMBAC)(AMT) 2,510,000 2,604,150 (Woodbridge Apartments Project) Series L 6.05% 12/1/16 (AMBAC)(AMT) 1,120,000 1,174,018 6.25% 6/1/36 (AMBAC)(AMT) 1,500,000 1,558,050 Volusia County Housing Finance Authority (San Marco Apartments) Series A 5.60% 1/1/44 (FSA)(AMT) 1,500,000 1,543,245 ---------- 8,756,036 ---------- Municipal Lease Revenue Bonds - 23.93% Broward School Board Certificates of Participation Series A 5.25% 7/1/24 (FSA) 1,000,000 1,061,660 Principal Market Amount Value MUNICIPAL BONDS (continued) Municipal Lease Revenue Bonds (continued) Escambia County School Board Certificates of Participation Series 2 5.50% 2/1/22 (MBIA) $5,000,000 $ 5,294,700 Orange County School Board Certificates of Participation Series A 5.00% 8/1/27 (MBIA) 1,250,000 1,277,725 Palm Beach County School Board Certificates of Participation Series D 5.00% 8/1/28 (FSA) 1,500,000 1,529,310 ----------- 9,163,395 ----------- Ports & Harbors Revenue Bonds - 2.68% Florida Ports Financing Commission State Transportation Trust Fund 5.375% 6/1/27 (MBIA)(AMT) 1,000,000 1,024,550 ----------- 1,024,550 ----------- *Pre-Refunded Bonds - 22.01% Dade County School Board Certificates of Participation Series B 5.60% 8/1/17-06 (AMBAC) 1,000,000 1,077,830 Reedy Creek Improvement District (Florida Sports Complex) Series A 5.75% 6/1/13-05 (MBIA) 2,300,000 2,364,308 Sunrise Utility System Revenue Series A 5.75% 10/1/26-06 (AMBAC) 2,500,000 2,715,700 Tampa Utility Tax Improvement Series A 6.125% 10/1/19-09 (AMBAC) 1,000,000 1,167,250 Village Center Community Development District Recreational Revenue Series A 5.85% 11/1/16-06 (MBIA) 1,000,000 1,100,820 ----------- 8,425,908 ----------- Public Power Revenue Bonds - 5.28% JEA Electric Systems Revenue Series 3-A 5.00% 10/1/34 (FSA) 2,000,000 2,019,820 ----------- 2,019,820 ----------- State General Obligation Bonds - 6.00% Florida State Board of Education (Capital Outlay Public Education) Series C 6.00% 6/1/21 (FGIC) 2,000,000 2,295,880 ----------- 2,295,880 ----------- Tax Increment/Special Assessment Bonds - 0.79% Julington Creek Plantation Community Development District Special Assessment 5.00% 5/1/29 (MBIA) 295,000 300,868 ----------- 300,868 ----------- Water & Sewer Revenue Bonds - 9.82% Dade County Water & Sewer System Revenue 5.50% 10/1/25 (FGIC) 1,100,000 1,150,643 Indian River County Water & Sewer Revenue 5.50% 9/1/16 (FGIC) 1,000,000 1,081,680 Village Center Community Development District Florida Utility Revenue 5.00% 10/1/36 (MBIA) 1,500,000 1,528,380 ----------- 3,760,703 ----------- TOTAL MUNICIPAL BONDS (cost $53,720,549) 57,463,451 ----------- 16 DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND STATEMENTS OF NET ASSETS (CONTINUED) TOTAL MARKET VALUE OF SECURITIES - 150.09% (cost $53,720,549) $ 57,463,451 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 2.15% 823,231 LIQUIDATION VALUE OF PREFERRED STOCK - (52.24%) (20,000,000) ------------ NET ASSETS APPLICABLE TO 2,422,200 SHARES OUTSTANDING - 100.00% $ 38,286,682 ------------ Net Asset Value Per Common Share ($38,286,682 / 2,422,200 Shares) $15.81 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, unlimited shares authorized to the Fund $ 33,361,389 Undistributed net investment income 922,679 Accumulated net realized gain on investments 259,712 Net unrealized appreciation of investments 3,742,902 ------------ Total net assets $ 38,286,682 ------------ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association VHA - Veterans Health Administration See accompanying notes 17 DELAWARE INVESTMENTS COLORADO INSURED MUNICIPAL INCOME FUND, INC. STATEMENTS September 30, 2004 (Unaudited) OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS - 150.42% Airport Revenue Bonds - 10.41% Denver City & County Airport Revenue Series E 5.25% 11/15/23 (MBIA) $7,500,000 $ 7,981,725 ----------- 7,981,725 ----------- City General Obligation Bonds - 2.67% Bowles Metropolitan District 5.00% 12/1/33 (FSA) 2,000,000 2,046,400 ----------- 2,046,400 ----------- Continuing Care/Retirement Revenue Bonds - 3.48% Colorado Health Facilities Authority Revenue (Porter Place) Series A 6.00% 1/20/36 (GNMA) 2,515,000 2,668,038 ----------- 2,668,038 ----------- Convention Center/Auditorium/Hotel Revenue Bonds - 3.98% Denver Convention Center Series A 5.00% 12/1/33 (XLCA) 3,000,000 3,049,440 ----------- 3,049,440 ----------- Dedicated Tax & Fees Revenue Bonds - 11.30% Broomfield County Sales & Use Tax Revenue Refunding & Improvement Series A 5.00% 12/1/31 (AMBAC) 650,000 662,838 Denver City & County Excise Tax Revenue (Colorado Convention Center Project) Series A 5.00% 9/1/20 (FSA) 6,500,000 6,919,835 Golden Sales & Use Tax Revenue Improvement Series B 5.10% 12/1/20 (AMBAC) 1,000,000 1,076,830 ----------- 8,659,503 ----------- Higher Education Revenue Bonds - 32.64% Boulder County Development Revenue (University Corporation for Atmospheric Research) 5.00% 9/1/26 (MBIA) 4,500,000 4,604,130 Colorado Educational & Cultural Facilities Authority (Johnson & Wales University Project) Series A 5.00% 4/1/28 (XLCA) 3,000,000 3,062,280 (University of Colorado Foundation Project) 5.00% 7/1/27 (AMBAC) 4,000,000 4,096,000 (University of Denver Project) 5.50% 3/1/21 (AMBAC) 3,200,000 3,568,512 (University of Northern Colorado) 5.00% 7/1/31 (MBIA) 2,500,000 2,539,175 Colorado Springs Revenue (Colorado College Project) 5.375% 6/1/32 (MBIA) 5,000,000 5,314,549 Colorado State University Systems Series B 5.00% 3/1/35 (AMBAC) 1,800,000 1,833,732 ----------- 25,018,378 ----------- Hospital Revenue Bonds - 4.50% Colorado Health Facilities Authority (Boulder Community Hospital Project) Series B 5.875% 10/1/23 (MBIA) 1,925,000 1,969,256 (North Colorado Medical Center) 5.95% 5/15/12 (MBIA) 1,420,000 1,480,350 ----------- 3,449,606 ----------- Multifamily Housing Revenue Bonds - 5.78% Burlingame Multifamily Housing Revenue Series A 6.00% 11/1/29 (MBIA) 2,290,000 2,419,980 Principal Market Amount Value MUNICIPAL BONDS (continued) Multifamily Housing Revenue Bonds (continued) Snowmass Village Multifamily Housing Revenue (Essential-Function Housing) 6.25% 12/15/16 (FSA) $2,000,000 $ 2,008,100 ----------- 4,428,080 ----------- Municipal Lease Revenue Bonds - 17.68% Arapahoe County Library District Certificates of Participation 5.70% 12/15/10 (MBIA) 2,000,000 2,153,340 Aurora Certificates of Participation 5.50% 12/1/30 (AMBAC) 2,000,000 2,156,340 Aurora Educational Development Revenue (Community College of Aurora Foundation) 6.00% 10/15/15 (Connie Lee) 1,500,000 1,517,760 Broomfield City & County Certificates of Participation 5.75% 12/1/24 (AMBAC) 1,500,000 1,676,520 Eagle County Certificates of Participation 5.40% 12/1/18 (MBIA) 1,000,000 1,104,260 Lakewood Certificates of Participation 5.375% 12/1/22 (AMBAC) 2,000,000 2,183,860 Westminster Building Authority Certificates of Participation 5.25% 12/1/22 (MBIA) 1,555,000 1,670,521 Westminster Certificates of Participation (Ice Centre Project) 5.40% 1/15/23 (AMBAC) 1,000,000 1,085,850 ----------- 13,548,451 ----------- Parking Revenue Bonds - 3.50% Auraria Higher Education Center Parking Facilities System Revenue 5.50% 4/1/26 (AMBAC) 2,485,000 2,684,421 ----------- 2,684,421 ----------- Political Subdivision General Obligation Bonds - 8.22% Arapahoe County Water & Wastewater Public Improvement District Refunding Series A 5.125% 12/1/32 (MBIA) 1,000,000 1,031,850 G V R Metropolitan District 5.75% 12/1/19 (AMBAC) 1,000,000 1,129,450 Pueblo County 5.80% 6/1/11 (MBIA) 1,405,000 1,491,660 Pueblo County (Library District Project) 5.80% 11/1/19 (AMBAC) 1,395,000 1,576,183 Stonegate Village Metropolitan District Refunding & Improvement Series A 5.50% 12/1/21 (FSA) 1,000,000 1,070,340 ----------- 6,299,483 ----------- *Pre-Refunded Bonds - 14.02% Archuleta & Hinsdale Counties School District #50JT 5.55% 12/1/20-10 (MBIA) 4,000,000 4,345,800 Denver City & County Certificates of Participation Series B 5.50% 12/1/25-06 (AMBAC) 2,000,000 2,293,940 El Paso County School District #20 5.625% 12/15/16-06 (AMBAC) 2,800,000 3,023,160 5.625% 12/15/16-06 (MBIA) 1,000,000 1,079,700 ----------- 10,742,600 ----------- School District General Obligation Bonds - 9.09% Adams & Arapahoe Counties School District #28J 5.00% 12/1/22 (FSA) 2,000,000 2,110,480 Adams County School District #1 5.00% 12/1/16 (FSA) 1,490,000 1,626,663 18 DELAWARE INVESTMENTS COLORADO INSURED MUNICIPAL INCOME FUND, INC. STATEMENTS OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) School District General Obligation Bonds (continued) Douglas County School District #Re-1 (Douglas & Elbert Counties) 5.00% 12/15/21 (MBIA) $1,000,000 $ 1,046,400 Larimer Weld & Boulder Counties School Districts #R-2J 5.00% 12/15/15 (FSA) 1,950,000 2,187,412 ------------ 6,970,955 ------------ Turnpike/Toll Road Revenue Bonds - 13.52% E-470 Public Highway Authority Series A 5.75% 9/1/29 (MBIA) 3,000,000 3,330,900 5.75% 9/1/35 (MBIA) 1,700,000 1,892,763 Northwest Parkway Public Highway Authority Series A 5.25% 6/15/41 (FSA) 5,000,000 5,142,100 ------------ 10,365,763 ------------ Water & Sewer Revenue Bonds - 9.63% Colorado Water Resources & Power Development Authority Small Water Resources Revenue Series A 5.80% 11/1/20 (FGIC) 2,000,000 2,266,520 Colorado Water Resources & Power Development Authority Water Resources Revenue (Parker Water & Sanitation District) 5.125% 9/1/34 (MBIA) 1,500,000 1,551,225 Lafayette Water Revenue Series A 5.00% 12/1/27 (MBIA) 1,100,000 1,131,218 Ute Utility Water Conservancy District Water Revenue 5.75% 6/15/20 (MBIA) 2,155,000 2,435,797 ------------ 7,384,760 ------------ TOTAL MUNICIPAL BONDS (cost $107,823,852) 115,297,603 ------------ TOTAL MARKET VALUE OF SECURITIES - 150.42% (COST $107,823,852) $115,297,603 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.76% 1,351,104 LIQUIDATION VALUE OF PREFERRED STOCK - (52.18%) (40,000,000) ------------ NET ASSETS APPLICABLE TO 4,837,100 SHARES OUTSTANDING - 100.00% $ 76,648,707 ------------ Net Asset Value Per Common Share ($76,648,707 / 4,837,100 Shares) $15.85 ------ COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 2004: Common stock, $0.01 par value, 200 million shares authorized to the Fund $ 67,238,110 Undistributed net investment income 1,919,088 Accumulated net realized gain on investments 17,756 Net unrealized appreciation of investments 7,473,753 ------------ Total net assets $ 76,648,707 ------------ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association XLCA - Insured by XL Capital Assurance See accompanying notes 19 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS STATEMENTS For the Six Months Ended September 30, 2004 (Unaudited) OF OPERATIONS
Delaware Delaware Delaware Investments Investments Investments Minnesota Minnesota Minnesota Municipal Municipal Municipal Income Income Income Fund, Inc. Fund II, Inc. Fund III, Inc. INVESTMENT INCOME: Interest $1,420,540 $ 4,316,826 $1,068,090 ---------- ----------- ---------- EXPENSES: Management fees 114,907 334,115 81,127 Accounting and administration expenses 42,500 42,500 30,154 Remarketing Agent fees 26,457 75,216 19,354 Transfer agent fees and expenses 21,370 29,455 12,455 Legal and Professional fees 14,746 19,713 16,868 Rating Agency fees 9,000 6,000 9,000 Reports and statements to shareholders 5,965 16,002 750 Directors'/Trustees' Fees 4,070 6,070 3,688 Stock Exchange Fees 1,278 3,476 845 Custodian fees 953 2,222 793 Other 3,826 8,984 2,287 ---------- ----------- ---------- 245,072 543,753 177,321 Less expenses absorbed or waived (5,780) -- -- Less expenses paid indirectly (871) (2,017) (677) ---------- ----------- ---------- Total expenses 238,421 541,736 176,644 ---------- ----------- ---------- NET INVESTMENT INCOME 1,182,119 3,775,090 891,446 ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 249,021 203,300 64,477 Net change in unrealized appreciation/depreciation of investments (560,875) (1,105,324) (437,907) ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (311,854) (902,024) (373,430) ---------- ----------- ---------- DIVIDENDS ON PREFERRED STOCK (136,552) (379,038) (83,238) ---------- ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 733,713 $ 2,494,028 $ 434,778 ---------- ----------- ----------
See accompanying notes 20 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS STATEMENTS For the Six Months Ended September 30, 2004 (Unaudited) OF OPERATIONS (CONTINUED)
Delaware Delaware Delaware Investments Investments Investments Arizona Florida Insured Colorado Insured Municipal Municipal Municipal Income Income Income Fund, Inc. Fund Fund, Inc. INVESTMENT INCOME: Interest $1,702,643 $ 1,521,150 $ 2,873,885 ---------- ----------- ----------- EXPENSES: Management fees 138,789 115,906 229,646 Accounting and administration expenses 42,500 42,500 42,500 Remarketing Agent fees 26,709 28,224 33,583 Legal and Professional fees 17,159 15,114 20,620 Transfer agent fees and expenses 15,226 12,788 27,844 Rating Agency fees 6,265 5,846 5,383 Directors'/Trustees' Fees 3,918 4,614 4,796 Reports and statements to shareholders 3,697 3,946 9,600 Custodian fees 1,824 1,286 1,861 Stock Exchange Fees 1,570 1,619 3,547 Other 4,471 2,177 2,528 ---------- ----------- ----------- 262,128 234,020 381,908 Less expenses paid indirectly (1,374) (1,109) (1,538) ---------- ----------- ----------- Total expenses 260,754 232,911 380,370 ---------- ----------- ----------- NET INVESTMENT INCOME 1,441,889 1,288,239 2,493,515 ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 18,080 259,712 13,768 Net change in unrealized appreciation/depreciation of investments (801,804) (1,153,374) (1,111,161) ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (783,724) (893,662) (1,097,393) ---------- ----------- ----------- DIVIDENDS ON PREFERRED STOCK (143,860) (116,236) (255,696) ---------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 514,305 $ 278,341 $ 1,140,426 ---------- ----------- -----------
See accompanying notes 21 STATEMENTS OF CHANGES IN NET ASSETS DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS
Delaware Delaware Investments Minnesota Investments Minnesota Municipal Income Municipal Income Fund, Inc. Fund II, Inc. Six Months Year Six Months Year Ended Ended Ended Ended 9/30/04 3/31/04 9/30/04 3/31/04 (Unaudited) (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 1,182,119 $ 2,592,109 $ 3,775,090 $ 7,924,672 Net realized gain on investments 249,021 650,891 203,300 1,299,317 Net change in unrealized appreciation/depreciation of investments (560,875) (316,556) (1,105,324) 221,686 Dividends on preferred stock (136,552) (262,664) (379,038) (595,374) ----------- ----------- ------------ ------------ Net increase in net assets resulting from operations 733,713 2,663,780 2,494,028 8,850,301 ----------- ----------- ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (1,284,377) (2,432,531) (3,807,405) (7,234,070) Net realized gain on investments -- (1,375,191) -- -- ----------- ----------- ------------ ------------ (1,284,377) (3,807,722) (3,807,405) (7,234,070) ----------- ----------- ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS (550,664) (1,143,942) (1,313,377) 1,616,231 NET ASSETS: Beginning of period 38,978,454 40,122,396 110,827,846 109,211,615 ----------- ----------- ------------ ------------ End of period $38,427,790 $38,978,454 $109,514,469 $110,827,846 ----------- ----------- ------------ ------------ Undistributed net investment income $ 601,048 $ 805,302 $ 2,951,972 $ 3,358,447 ----------- ----------- ------------ ------------
Delaware Investments Minnesota Municipal Income Fund III, Inc. Six Months Year Ended Ended 9/30/04 3/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 891,446 $ 1,898,759 Net realized gain on investments 64,477 562,903 Net change in unrealized appreciation/depreciation of investments (437,907) (350,631) Dividends on preferred stock (83,238) (152,709) ----------- ----------- Net increase in net assets resulting from operations 434,778 1,958,322 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (881,856) (1,616,736) Net realized gain on investments -- -- ----------- ----------- (881,856) (1,616,736) ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS (447,078) 341,586 NET ASSETS: Beginning of period 26,601,180 26,259,594 ----------- ----------- End of period $26,154,102 $26,601,180 ----------- ----------- Undistributed net investment income $ 683,427 $ 758,251 ----------- -----------
Delaware Delaware Investments Arizona Investments Florida Municipal Income Insured Municipal Fund, Inc. Income Fund, Inc. Six Months Year Six Months Year Ended Ended Ended Ended 9/30/04 3/31/04 9/30/04 3/31/04 (Unaudited) (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 1,441,889 $ 3,042,361 $ 1,288,239 $ 2,634,312 Net realized gain on investments 18,080 315,397 259,712 52,390 Net change in unrealized appreciation/depreciation of investments (801,804) 501,711 (1,153,374) (362,616) Dividends on preferred stock (143,860) (271,690) (116,236) (209,938) ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations 514,305 3,587,779 278,341 2,114,148 ----------- ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (1,431,456) (2,862,912) (1,235,322) (2,410,089) Net realized gain on investments (113,324) (462,241) -- (111,421) ----------- ----------- ----------- ----------- (1,544,780) (3,325,153) (1,235,322) (2,521,510) ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS (1,030,475) 262,626 (956,981) (407,362) NET ASSETS: Beginning of period 46,429,378 46,166,752 39,243,663 39,651,025 ----------- ----------- ----------- ----------- End of period $45,398,903 $46,429,378 $38,286,682 $39,243,663 ----------- ----------- ----------- ----------- Undistributed net investment income $ 990,162 $ 1,126,683 $ 922,679 $ 985,998 ----------- ----------- ----------- -----------
Delaware Investments Colorado Insured Municipal Income Fund, Inc. Six Months Year Ended Ended 9/30/04 3/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 2,493,515 $ 5,047,366 Net realized gain on investments 13,768 223,885 Net change in unrealized appreciation/depreciation of investments (1,111,161) 1,336,193 Dividends on preferred stock (255,696) (435,224) ----------- ----------- Net increase in net assets resulting from operations 1,140,426 6,172,220 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (2,321,808) (4,643,616) Net realized gain on investments (72,557) (614,312) ----------- ----------- (2,394,365) (5,257,928) ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS (1,253,939) 914,292 NET ASSETS: Beginning of period 77,902,646 76,988,354 ----------- ----------- End of period $76,648,707 $77,902,646 ----------- ----------- Undistributed net investment income $ 1,919,088 $ 2,003,077 ----------- -----------
See accompanying notes 22 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund, Inc. Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.020 $ 15.460 $ 14.640 $ 14.790 $ 14.060 $ 15.380 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.456 0.999 1.119 1.191 1.155 1.180 Net realized and unrealized gain (loss) on investments (0.118) 0.130 0.758 (0.323) 0.732 (1.256) Dividends on preferred stock from: Net investment income (0.053) (0.054) (0.094) (0.178) (0.317) (0.272) Net realized gain on investments -- (0.047) (0.008) -- -- (0.014) -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.053) (0.101) (0.102) (0.178) (0.317) (0.286) -------- -------- -------- -------- -------- -------- Total from investment operations 0.285 1.028 1.775 0.690 1.570 (0.362) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (0.495) (0.938) (0.890) (0.840) (0.840) (0.907) Net realized gain on investments -- (0.530) (0.065) -- -- (0.051) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.495) (1.468) (0.955) (0.840) (0.840) (0.958) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 14.810 $ 15.020 $ 15.460 $ 14.640 $ 14.790 $ 14.060 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 16.240 $ 16.600 $ 16.000 $ 14.450 $ 14.300 $ 13.563 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value 1.09% 13.86% 17.74% 7.00% 12.09% (12.39%) Net asset value 1.89% 6.62% 12.29% 4.81% 11.83% (2.56%) RATIOS AND SUPPLEMENTAL DATA: Net assets applicable to common shares, end of period (000 omitted) $ 38,428 $ 38,978 $ 40,122 $ 37,996 $ 33,386 $36,488 Ratio of expenses to average net assets applicable to common shares(3) 1.27% 1.20% 1.21% 1.13% 1.23% 1.36% Ratio of expenses to average net assets applicable to common shares prior to expense limitation and expenses paid indirectly 1.30% 1.20% 1.21% 1.31% 1.23% 1.36% Ratio of net investment income to average net assets applicable to common shares(3) 6.45% 6.57% 7.35% 8.00% 8.22% 8.05% Ratio of net investment income to average net assets applicable to common shares prior to expenses limitation and expenses paid indirectly 6.42% 6.57% 7.35% 8.00% 8.22% 8.05% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 5.72% 5.90% 6.68% 6.84% 6.00% 6.17% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares prior to expense limitation and expenses paid indirectly 5.69% 5.90% 6.68% 6.84% 6.00% 6.17% Portfolio turnover 18% 50% 38% 15% 6% 12% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 Net asset coverage per share of preferred shares, end of period $146,069 $147,445 $150,306 $144,989 $145,964 $141,221 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the period ended March 31, 2002 was an increase in net investment income per share of $0.006, a decrease in net realized and unrealized gain (loss) per share of $0.006, and an increase in the ratio of net investment income to average net assets of 0.04%. Per share data and ratios for periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. Total investment return reflects a waiver and payment of fees by the manager and distributors, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 23 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund II, Inc. Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.280 $ 15.060 $ 14.280 $ 14.450 $ 13.590 $ 14.950 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.521 1.093 1.143 1.163 1.168 1.176 Net realized and unrealized gain (loss) on investments (0.124) 0.207 0.689 (0.313) 0.850 (1.411) Dividends on preferred stock from: Net investment income (0.052) (0.082) (0.112) (0.182) (0.340) (0.307) -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.052) (0.082) (0.112) (0.182) (0.340) (0.307) -------- -------- -------- -------- -------- -------- Total from investment operations 0.345 1.218 1.720 0.668 1.678 (0.542) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS TO COMMON SHAREHOLDERS FROM: Net investment income (0.525) (0.998) (0.940) (0.838) (0.818) (0.818) -------- -------- -------- -------- -------- -------- Total dividends (0.525) (0.998) (0.940) (0.838) (0.818) (0.818) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 15.100 $15.280 $ 15.060 $ 14.280 $ 14.450 $ 13.590 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 16.150 $16.800 $ 15.300 $ 14.050 $ 14.080 $ 12.438 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value (0.58%) 16.87% 15.84% 5.75% 20.37% (12.28%) Net asset value 2.21% 7.99% 12.19% 4.73% 13.06% (3.43%) RATIOS AND SUPPLEMENTAL DATA: Net assets applicable to common shares, end of period (000 omitted) $109,514 $110,828 $109,212 $103,573 $104,775 $ 98,574 Ratio of expenses to average net assets applicable to common shares(3) 1.01% 0.93% 1.03% 1.06% 1.01% 0.99% Ratio of net investment income to average net assets applicable to common shares(3) 7.03% 7.23% 7.74% 8.03% 8.42% 8.44% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 6.33% 6.69% 6.99% 6.79% 5.96% 6.24% Portfolio turnover 23% 34% 22% 7% 3% 4% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 Net asset coverage per share of preferred shares, end of period $141,262 $142,357 $141,010 $136,311 $137,312 $132,145 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the period ended March 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 24 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Minnesota Municipal Income Fund III, Inc. Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 14.480 $ 14.290 $ 13.230 $ 13.420 $ 12.560 $ 13.970 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.485 1.034 1.084 1.064 1.065 1.075 Net realized and unrealized gain (loss) on investments (0.200) 0.119 0.918 (0.306) 0.889 (1.425) Dividends on preferred stock from: Net investment income (0.045) (0.083) (0.112) (0.183) (0.336) (0.302) -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.045) (0.083) (0.112) (0.183) (0.336) (0.302) -------- -------- -------- -------- -------- -------- Total from investment operations 0.240 1.070 1.890 0.575 1.618 (0.652) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS TO COMMON SHAREHOLDERS FROM: Net investment income (0.480) (0.880) (0.830) (0.765) (0.758) (0.758) -------- -------- -------- -------- -------- -------- Total dividends (0.480) (0.880) (0.830) (0.765) (0.758) (0.758) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 14.240 $ 14.480 $ 14.290 $ 13.230 $ 13.420 $ 12.560 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 15.500 $ 16.160 $ 14.800 $13.000 $ 13.000 $ 11.750 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value (0.85%) 15.76% 20.72% 5.93% 17.57% (11.70%) Net asset value 1.66% 7.43% 14.53% 4.43% 13.54% (4.57%) RATIOS AND SUPPLEMENTAL DATA: Net assets applicable to common shares, end of period (000 omitted) $ 26,154 $ 26,601 $ 26,260 $ 24,306 $ 24,659 $ 23,075 Ratio of expenses to average net assets applicable to common shares(3) 1.38% 1.23% 1.32% 1.49% 1.42% 1.33% Ratio of net investment income to average net assets applicable to common shares(3) 6.95% 7.20% 7.80% 7.88% 8.30% 8.33% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 6.31% 6.62% 6.99% 6.56% 5.68% 5.99% Portfolio turnover 13% 41% 23% 5% 5% 16% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000 Net asset coverage per share of preferred shares, end of period $137,180 $138,670 $137,532 $131,007 $132,197 $126,916 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the period ended March 31, 2002 was an increase in net investment income per share of $0.007, a decrease in net realized and unrealized gain (loss) per share of $0.007, and an increase in the ratio of net investment income to average net assets of 0.04%. Per share data and ratios for periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 25 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Arizona Municipal Income Fund, Inc. Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.570 $ 15.480 $ 14.650 $ 14.970 $ 14.000 $ 15.290 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.483 1.020 1.067 1.113 1.124 1.115 Net realized and unrealized gain (loss) on investments (0.267) 0.276 0.988 (0.257) 0.965 (1.333) Dividends on preferred stock from: Net investment income (0.048) (0.075) (0.103) (0.164) (0.346) (0.299) Net realized gain on investments -- (0.016) (0.018) (0.051) -- -- -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.048) (0.091) (0.121) (0.215) (0.346) (0.299) -------- -------- -------- -------- -------- -------- Total from investment operations 0.168 1.205 1.934 0.641 1.743 (0.517) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (0.480) (0.960) (0.940) (0.817) (0.773) (0.773) Net realized gain on investments (0.038) (0.155) (0.164) (0.144) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.518) (1.115) (1.104) (0.961) (0.773) (0.773) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 15.220 $ 15.570 $ 15.480 $ 14.650 $ 14.970 $ 14.000 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 15.240 $ 16.560 $ 15.490 $ 14.750 $ 14.250 $ 12.625 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value (4.71%) 14.64% 12.74% 10.22% 19.28% (11.65%) Net asset value 1.22% 7.86% 13.44% 4.21% 13.00% (3.10%) Ratios and supplemental data: Net assets applicable to common shares, end of period (000 omitted) $ 45,399 $ 46,429 $ 46,167 $ 43,703 $ 44,637 $ 41,758 Ratio of expenses to average net assets applicable to common shares(3) 1.17% 1.05% 1.16% 1.19% 1.18% 1.21% Ratio of net investment income to average net assets applicable to common shares(3) 6.46% 6.63% 6.96% 7.41% 7.86% 7.84% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 5.82% 6.04% 6.18% 5.99% 5.44% 5.74% Portfolio turnover 11% 30% 24% 43% 24% 41% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 Net asset coverage per share of preferred shares, end of period $140,798 $142,858 $142,334 $137,405 $139,274 $133,516 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the period ended March 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 26 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Florida Insured Municipal Income Fund Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 16.200 $ 16.370 $ 15.150 $ 15.400 $ 14.340 $ 15.670 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.532 1.088 1.084 1.071 1.087 1.092 Net realized and unrealized gain (loss) on investments (0.364) (0.130) 1.186 (0.337) 1.068 (1.368) Dividends on preferred stock from: Net investment income (0.048) (0.082) (0.109) (0.179) (0.337) (0.296) Net realized gain on investments -- (0.005) -- -- -- -- -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.048) (0.087) (0.109) (0.179) (0.337) (0.296) -------- -------- -------- -------- -------- -------- Total from investment operations 0.120 0.871 2.161 0.555 1.818 (0.572) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS TO COMMON SHAREHOLDERS FROM: Net investment income (0.510) (0.995) (0.941) (0.805) (0.758) (0.758) Net realized gain on investments -- (0.046) -- -- -- -- -------- -------- -------- -------- -------- -------- Total dividends (0.510) (1.041) (0.941) (0.805) (0.758) (0.758) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 15.810 $ 16.200 $ 16.370 $ 15.150 $ 15.400 $ 14.340 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 15.630 $ 16.650 $ 15.050 $ 14.020 $ 13.180 $ 11.750 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value (2.93%) 18.04% 14.17% 12.63% 19.06% (15.57%) Net asset value 0.92% 5.59% 14.92% 4.16% 13.99% (3.01%) RATIOS AND SUPPLEMENTAL DATA: Net assets applicable to common shares, end of period (000 omitted) $ 38,287 $ 39,244 $ 39,651 $ 36,696 $ 37,300 $ 34,730 Ratio of expenses to average net assets applicable to common shares(3) 1.22% 1.11% 1.18% 1.34% 1.32% 1.31% Ratio of net investment income to average net assets applicable to common shares(3) 5.55% 6.70% 6.81% 6.95% 7.38% 7.50% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 4.93% 6.16% 6.13% 5.79% 5.10% 5.47% Portfolio turnover 10% 3% 13% 13% 8% 6% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 Net asset coverage per share of preferred shares, end of period $145,717 $148,110 $149,128 $141,740 $143,249 $136,825 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no effect on the Fund's results of operations for the period ended March 31, 2002. Per share data and ratios for the periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 27 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Investments Colorado Insured Municipal Income Fund, Inc. Six Months Ended Year Ended 9/30/04(6) 3/31/04 3/31/03 3/31/02(1) 3/31/01 3/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $ 16.110 $ 15.920 $ 14.780 $ 15.260 $ 13.870 $ 15.220 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.515 1.043 1.068 1.094 1.105 1.099 Net realized and unrealized gain (loss) on investments (0.227) 0.324 1.324 (0.401) 1.373 (1.417) Dividends on preferred stock from: Net investment income (0.053) (0.077) (0.098) (0.172) (0.342) (0.297) Net realized gain on investments -- (0.013) (0.023) (0.051) -- -- -------- -------- -------- -------- -------- -------- Total dividends on preferred stock (0.053) (0.090) (0.121) (0.223) (0.342) (0.297) -------- -------- -------- -------- -------- -------- Total from investment operations 0.235 1.277 2.271 0.470 2.136 (0.615) -------- -------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income (0.480) (0.960) (0.940) (0.818) (0.746) (0.735) Net realized gain on investments (0.015) (0.127) (0.191) (0.132) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.495) (1.087) (1.131) (0.950) (0.746) (0.735) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 15.850 $ 16.110 $ 15.920 $ 14.780 $ 15.260 $ 13.870 -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF PERIOD $ 17.080 $ 16.960 $ 16.650 $ 14.700 $ 14.560 $ 12.563 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN BASED ON:(2) Market value 3.85% 8.76% 21.31% 7.52% 22.42% (11.05%) Net asset value 1.46% 8.05% 15.37% 3.15% 16.21% (3.62%) RATIOS AND SUPPLEMENTAL DATA: Net assets applicable to common shares, end of period (000 omitted) $ 76,649 $77,903 $ 76,988 $ 71,506 $ 73,817 $ 67,093 Ratio of expenses to average net assets applicable to common shares(3) 1.01% 1.01% 1.05% 1.01% 1.06% 1.08% Ratio of net investment income to average net assets applicable to common shares(3) 5.63% 6.54% 6.83% 7.18% 7.68% 7.84% Ratio of net investment income to average net assets applicable to common shares net of dividends to preferred shares(4) 4.95% 5.98% 6.08% 5.71% 5.31% 5.72% Portfolio turnover 2% 13% 14% 37% 56% 37% LEVERAGE ANALYSIS: Value of preferred shares outstanding (000 omitted) $4 0,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000 Net asset coverage per share of preferred shares, end of period $145,811 $147,379 $146,235 $139,382 $142,272 $133,867 Liquidation value per share of preferred shares(5) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
(1) As required, effective April 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no effect on the Fund's results of operations for the period ended March 31, 2002. Per share data and ratios for the periods prior to April 1, 2001 have not been restated to reflect this change in accounting. (2) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. (3) Ratios do not reflect the effect of dividend payments to preferred shareholders. (4) Ratio reflects total net investment income less dividends paid to preferred shareholders from net investment income divided by average net assets applicable to common shareholders. (5) Excluding any accumulated but unpaid dividends. (6) Ratios and portfolio turnover have been annualized and total return has not been annualized. The average shares outstanding method has been applied for per share information for the six months ended 9/30/04 and the year ended 3/31/04. See accompanying notes 28 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS NOTES September 30, 2004 (Unaudited) TO FINANCIAL STATEMENTS Delaware Investments Minnesota Municipal Income Fund, Inc. ("Minnesota Municipal Fund"); Delaware Investments Minnesota Municipal Income Fund II, Inc. ("Minnesota Municipal Fund II"); Delaware Investments Minnesota Municipal Income Fund III, Inc. ("Minnesota Municipal Fund III"); Delaware Investments Arizona Municipal Income Fund, Inc. ("Arizona Municipal Fund"), and Delaware Investments Colorado Insured Municipal Income Fund, Inc. ("Colorado Insured Municipal Fund") are organized as Minnesota corporations and Delaware Investments Florida Insured Municipal Income Fund ("Florida Insured Municipal Fund") is organized as a Massachusetts Business Trust (each referred to as a "Fund" and collectively as the "Funds"). The Minnesota Municipal Fund II, Florida Insured Municipal Fund and Arizona Municipal Fund are diversified closed-end management investment companies and Minnesota Municipal Fund, Minnesota Municipal Fund III and Colorado Insured Municipal Fund are non-diversified closed-end management investment companies under the Investment Company Act of 1940, as amended. The Funds' shares trade on the American Stock Exchange. The investment objective of each Fund is to provide high current income exempt from federal income tax and from the personal income tax of its state, if any, consistent with the preservation of capital. Florida Insured Municipal Fund will generally seek investments that will enable its shares to be exempt from Florida's intangible personal property tax. Each Fund will seek to achieve its investment objective by investing substantially all of its net assets in investment grade, tax-exempt municipal obligations of its respective state. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. 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. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Funds' Board of Trustees/Directors. Federal Income Taxes - Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Use of Estimates - The preparation of financial statements in conformity with U.S. 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. Other - Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the Funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares and pays dividends from net investment income monthly and distributions from net realized gain on investments, if any, annually. In addition, in order to satisfy certain distribution requirements of the Tax Reform Act of 1986, the Funds may declare special year-end dividend and capital gains distributions during November or December to shareholders of record on a date in such month. Such distributions, if received by shareholders by January 31, are deemed to have been paid by the Funds and received by shareholders on the earlier of the date paid for December 31 of the prior year. Expenses Paid Indirectly - The Funds may receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expenses paid under the above arrangement is included in the custodian fees on the Statement of Operations with the corresponding expense offset shown as "expenses paid indirectly." The amount of this expense for the six months ended September 30, 2004, were as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured Municipal Municipal Municipal Municipal Municipal Municipal Fund I Fund II Fund III Fund Fund Fund --------- --------- --------- --------- --------------- ---------------- Earnings Credits $871 $2,017 $677 $1,374 $1,109 $1,538
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee of 0.40% which is calculated daily based on the average daily net assets of each Fund, including assets attributable to any preferred stock that may be outstanding. As of September 1, 2004, DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Minnesota Municipal Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed 0.72% of average daily net assets of the Fund, including assets attributable to any preferred stock that may be outstanding, through March 31, 2005. The Funds have engaged Delaware Service Company, Inc., (DSC), an affiliate of DMC, to provide accounting and administration services which are based on average net assets and paid on a monthly basis, subject to certain minimums. 29 NOTES DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) At September 30, 2004, the Funds had liabilities payable to affiliates as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured Municipal Municipal Municipal Municipal Municipal Municipal Fund I Fund II Fund III Fund Fund Fund --------- --------- --------- --------- --------------- ---------------- Investment management fee payable to DMC $19,464 $56,454 $13,708 $23,453 $19,443 $38,857 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 7,965 9,598 5,641 8,122 7,976 47,720 Other expenses payable to DMC and affiliates* 5,118 10,509 3,026 3,865 2,637 5,561
*DMC, as part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees, and trustees' fees. As provided in the investment management agreement, the Funds bear the cost of certain legal service expenses, including in-house legal services provided to the Funds by DMC employees. For the six months ended September 30, 2004, the Delaware Investments Minnesota Municipal Income Fund, Delaware Investments Minnesota Municipal Income Fund II, Delaware Investments Minnesota Municipal Income Fund III, Delaware Investments Arizona Municipal Income Fund, Delaware Investments Florida Insured Municipal Income Fund, and Delaware Investments Colorado Insured Municipal Income Fund had costs of $150, $500, $168, $229, $179, and $428, respectively. During the six months ended September 30, 2004 Robert Collins was appointed as a co-portfolio manager for the Funds, and he worked with the existing portfolio managers in making day to day investment decisions for the Funds. Certain officers of DMC and DSC are officers, and/or directors/trustees of the Funds. These officers and directors/trustees are paid no compensation by the Funds. 3. INVESTMENTS For the six months ended September 30, 2004 the Funds made purchases and sales of investment securities as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured Municipal Municipal Municipal Municipal Municipal Municipal Fund I Fund II Fund III Fund Fund Fund ---------- ----------- ----------- ---------- --------------- ---------------- Purchases $5,065,817 $18,505,363 $2,663,654 $4,222,002 $2,870,721 $1,482,840 Sales 5,632,145 19,751,500 2,890,000 3,753,052 2,717,114 1,010,000
At September 30, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At September 30, 2004, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:
Minnesota Minnesota Minnesota Arizona Florida Insured Colorado Insured Municipal Municipal Municipal Municipal Municipal Municipal Fund I Fund II Fund III Fund Fund Fund ----------- ------------ ----------- ----------- --------------- ---------------- Cost of investments $55,858,033 $159,850,644 $38,711,216 $65,487,993 $53,720,549 $107,824,947 ----------- ------------ ----------- ----------- ----------- ------------ Aggregate unrealized appreciation $ 2,485,340 $ 7,844,793 $ 2,131,536 $ 3,657,483 $ 3,742,903 $ 7,553,004 Aggregate unrealized depreciation (103,799) (368,787) (42,842) (112,104) -- (80,348) ----------- ------------ ----------- ----------- ----------- ------------ Net unrealized appreciation $ 2,381,541 $ 7,476,006 $ 2,088,694 $ 3,545,379 $ 3,742,903 $ 7,472,656 ----------- ------------ ----------- ----------- ----------- ------------
4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. Tax information for the six months ended September 30, 2004 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The tax character of dividends and distributions paid during the six months ended September 30, 2004, and the year ended March 31, 2004, were as follows:
Minnesota Municipal Fund Minnesota Municipal Fund II ------------------------- --------------------------- 9/30/04 3/31/04 9/30/04 3/31/04 Tax-exempt income $1,420,929 $2,538,026 $4,186,443 $7,775,641 Ordinary income -- 122,453 -- 53,803 Long-term capital gain -- 1,409,907 -- -- ---------- ---------- ---------- ---------- Total $1,420,929 $4,070,386 $4,186,443 $7,829,444 --------- ---------- ---------- ---------- Minnesota Municipal Fund III Arizona Municipal Fund ---------------------------- ---------------------- 9/30/04 3/31/04 9/30/04 3/31/04 Tax-exempt income $965,094 $1,750,401 $1,575,316 $3,072,779 Ordinary Income -- 19,044 77,537 178,072 Long-term capital gain -- -- 35,787 345,992 -------- ---------- ---------- ---------- Total $965,094 $1,769,445 $1,688,640 $3,596,843 -------- ---------- ---------- ----------
30 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. DIVIDEND AND DISTRIBUTION INFORMATION (CONTINUED)
Florida Insured Municipal Fund Colorado Insured Municipal Fund -------------------------------- ------------------------------- 9/30/04 3/31/04 9/30/04 3/31/04 Tax-exempt income $1,351,558 $2,608,022 $2,577,504 $5,016,217 Ordinary Income -- -- 14,511 63,831 Long-term capital gain -- 123,426 58,046 613,104 ---------- ---------- ---------- ---------- Total $1,351,558 $2,731,448 $2,650,061 $5,693,152 ---------- ---------- ---------- ----------
As of September 30, 2004, the components of net assets on a tax basis were as follows:
Minnesota Municipal Fund Minnesota Municipal Fund II Minnesota Municipal Fund III ------------------------ --------------------------- ---------------------------- Paid in capital $35,426,619 $99,710,000 $23,985,129 Undistributed tax-exempt income 601,048 2,951,972 683,427 Undistributed long-term gains (loss) 18,582 -- -- Capital loss carry forward -- (623,509) (603,148) Unrealized appreciation (depreciation) 2,381,541 7,476,006 2,088,694 ----------- ------------ ----------- Net assets $38,427,790 $109,514,469 $26,154,102 ----------- ------------ -----------
Arizona Municipal Fund Florida Insured Municipal Fund Colorado Insured Municipal Fund ---------------------- ------------------------------ ------------------------------- Paid in capital $40,838,893 $33,361,389 $67,238,110 Undistributed tax-exempt income 990,162 922,679 1,919,088 Undistributed ordinary income 24,469 -- 124 Undistributed long-term gains (loss) -- 259,712 18,727 Unrealized appreciation (depreciation) 3,545,379 3,742,902 7,472,658 ----------- ----------- ----------- Net assets $45,398,903 $38,286,682 $76,648,707 ----------- ----------- -----------
For federal income tax purposes, certain Funds had accumulated capital losses as of March 31, 2004, which may be carried forward and applied against future capital gains. Such capital loss carry forward amounts will expire as follows:
2005 2006 2008 2009 2010 Total -------- -------- -------- -------- ------ -------- Minnesota Municipal Fund II $ 73,298 $132,129 $437,162 $175,804 $8,416 $826,809 Minnesota Municipal Fund III 455,666 6,539 56,856 153,308 -- 672,369
For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended September 30, 2004, the Funds recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications.
Minnesota Minnesota Minnesota Arizona Municipal Municipal Municipal Municipal Fund Fund II Fund III Fund --------- ------- --------- --------- Undistributed net investment income (loss) ($34,566) ($4,878) $1,176 $3,094 Accumulated realized gain (loss) 34,566 4,878 (1,176) (3,094)
5. CAPITAL STOCK Pursuant to their articles of incorporation, Minnesota Municipal Fund, Minnesota Municipal Fund II, Minnesota Municipal Fund III, Arizona Municipal Fund and Colorado Insured Municipal Fund each have 200 million shares of $0.01 par value common shares authorized. Florida Insured Municipal Fund has been authorized to issue an unlimited amount of $0.01 par value common shares. The Funds did not repurchase any shares under the Share Repurchase Program during the period ending September 30, 2004. Shares issuable under the Fund's dividend reinvestment plan are purchased by the Fund's transfer agent, Mellon Investor Services, LLC, in the open market. The Funds each have one million shares of $0.01 par value preferred shares authorized, except for Florida Insured Municipal Fund, which has an unlimited amount of $0.01 par value preferred shares authorized. Under resolutions adopted by the Board of Directors/Trustees, Minnesota Municipal Fund is allowed to issue up to 400 preferred shares, of which the entire amount was issued on August 6, 1992. On May 14, 1993, Minnesota Municipal Fund II, Arizona Municipal Fund and Florida Insured Municipal Fund issued 1,200, 500 and 400 preferred shares, respectively. On December 10, 1993, Minnesota Municipal Fund III issued 300 preferred shares and on September 23, 1993, Colorado Insured Municipal Fund issued 800 preferred shares. The preferred shares of each Fund have a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends. 31 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL STOCK (CONTINUED) Dividends for the outstanding preferred shares of each Fund are cumulative at a rate established at the initial public offering and are typically reset every 28 days based on the results of an auction. Dividend rates (adjusted for any capital gain distributions) ranged during the period ended September 30, 2004 as follows: Fund Low High - ---- ----- ----- Minnesota Municipal Fund 1.02% to 1.45% Minnesota Municipal Fund II 1.00% to 1.50% Minnesota Municipal Fund III 1.05% to 1.30% Arizona Municipal Fund 0.95% to 1.55% Florida Insured Municipal Fund 0.95% to 1.45% Colorado Insured Municipal Fund 0.97% to 2.00% Salomon Smith Barney, Inc. and Merrill Lynch Pierce, Fenner & Smith Inc. (Colorado Insured Municipal Fund only), as the remarketing agents, receive an annual fee from each of the Funds of 0.25% of the average amount of preferred stock outstanding. Under the 1940 Act, the Funds may not declare dividends or make other distributions on common shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding preferred stock is less than 200%. The preferred shares are redeemable at the option of the Funds, in whole or in part, on any dividend payment date at $50,000 per share plus any accumulated but unpaid dividends whether or not declared. The preferred shares are also subject to mandatory redemption at $50,000 per share plus any accumulated but unpaid dividends whether or not declared, if certain requirements relating to the composition of the assets and liabilities of each Fund are not satisfied. The holders of preferred shares have voting rights equal to the holders of common shares (one vote per share) and will vote together with holders of common shares as a single class. However, holders of preferred shares are also entitled to elect two of each Fund's Directors. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the preferred shares, and (b) take any action requiring a vote of security holders pursuant of Section 13(a) of the 1940 Act, including, among other things, changes in each of the Fund's subclassification as a closed-end investment company or changes in their fundamental investment restrictions. 6. CREDIT AND MARKET RISKS The Funds concentrate their investments in securities issued by municipalities. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are denoted on the Statements of Net Assets. 7. CONTRACTUAL OBLIGATIONS The Fund enters into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. TAX INFORMATION The information set forth is for the Funds' semi-annual period as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information. The information presented below is subject to change since final tax characteristics cannot be determined until fiscal year end. For the six months ended September 30, 2004, each Fund designates as long-term capital gains, ordinary income, and tax-exempt income distributions paid during the year as follows:
Long-Term Ordinary Tax Total Capital Gains Income Exempt Distributions Distributions Distributions Income (Tax Basis) Minnesota Municipal Fund -- -- 100% 100% Minnesota Municipal Fund II -- -- 100% 100% Minnesota Municipal Fund III -- -- 100% 100% Arizona Municipal Fund 2% 5% 93% 100% Florida Insured Municipal Fund -- -- 100% 100% Colorado Insured Municipal Fund 2% 1% 97% 100%
32 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS PROXY RESULTS (UNAUDITED) Shareholders of the Delaware Investments Minnesota Municipal Income Fund, Inc., Delaware Investments Minnesota Municipal Income Fund II, Inc., Delaware Investments Minnesota Municipal Income Fund III, Inc., Delaware Investments Arizona Municipal Income Fund, Inc., Delaware Investments Florida Insured Municipal Income Fund, and Delaware Investments Colorado Insured Municipal Income Fund, Inc. voted on the following proposals at the annual meeting of shareholders held on August 19, 2004. The description of each proposal and number of share voted are as follows:
Common Shareholders Preferred Shareholders Shares Shares Shares Shares Shares Shares Voted Voted Voted Voted Voted Voted For Against Abstain For Against Abstain DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND, INC: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 2,310,849 58,498 -- -- -- -- Walter P. Babich 2,309,403 59,944 -- -- -- -- John H. Durham 2,311,570 57,777 -- -- -- -- John A. Fry 2,311,137 58,210 -- -- -- -- Anthony D. Knerr 2,311,570 57,777 -- -- -- -- Ann R. Leven 2,311,787 57,560 -- -- -- -- Thomas F. Madison N/A N/A N/A 336 -- -- Janet L. Yeomans N/A N/A N/A 336 -- -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 2,261,502 40,857 66,988 336 -- -- DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND II, INC: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 6,513,487 152,513 -- -- -- -- Walter P. Babich 6,491,251 174,749 -- -- -- -- John H. Durham 6,510,851 155,149 -- -- -- -- John A. Fry 6,513,421 152,579 -- -- -- Anthony D. Knerr 6,511,563 154,437 -- -- -- -- Ann R. Leven 6,517,596 148,404 -- -- -- -- Thomas F. Madison N/A N/A N/A 1,088 1 -- Janet L. Yeomans N/A N/A N/A 1,088 1 -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 6,431,372 107,241 127,387 1,078 10 1 DELAWARE INVESTMENTS MINNESOTA MUNICIPAL INCOME FUND III, INC: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 1,622,958 51,656 -- -- -- -- Walter P. Babich 1,619,370 55,244 -- -- -- -- John H. Durham 1,622,958 51,656 -- -- -- -- John A. Fry 1,622,958 51,656 -- -- -- -- Anthony D. Knerr 1,622,958 51,656 -- -- -- -- Ann R. Leven 1,622,958 51,656 -- -- -- -- Thomas F. Madison N/A N/A N/A 272 -- -- Janet L. Yeomans N/A N/A N/A 272 -- -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 1,598,811 43,773 32,030 270 -- 2
33 DELAWARE INVESTMENTS CLOSED-END MUNICIPAL BOND FUNDS PROXY RESULTS (UNAUDITED) (CONTINUED)
Common Shareholders Preferred Shareholders Shares Shares Shares Shares Shares Shares Voted Voted Voted Voted Voted Voted For Against Abstain For Against Abstain DELAWARE INVESTMENTS ARIZONA MUNICIPAL INCOME FUND, INC: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 2,650,527 40,113 -- -- -- -- Walter P. Babich 2,649,227 41,413 -- -- -- -- John H. Durham 2,652,077 38,563 -- -- -- -- John A. Fry 2,651,377 39,263 -- -- -- -- Anthony D. Knerr 2,651,227 39,413 -- -- -- -- Ann R. Leven 2,647,677 42,963 -- -- -- -- Thomas F. Madison N/A N/A N/A 500 -- -- Janet L. Yeomans N/A N/A N/A 500 -- -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 2,577,037 53,400 60,203 497 -- 3 DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 2,277,244 22,361 -- -- -- -- Walter P. Babich 2,277,185 22,420 -- -- -- -- John H. Durham 2,276,937 22,668 -- -- -- -- John A. Fry 2,278,519 21,086 -- -- -- -- Anthony D. Knerr 2,278,437 21,168 -- -- -- -- Ann R. Leven 2,278,185 21,420 -- -- -- -- Thomas F. Madison N/A N/A N/A 448 -- -- Janet L. Yeomans N/A N/A N/A 448 -- -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 2,230,774 46,550 22,281 442 -- 6 DELAWARE INVESTMENTS COLORADO INSURED MUNICIPAL INCOME FUND, INC.: 1. To elect the Fund's Board of Directors/Trustees: Jude T. Driscoll 4,266,769 54,572 -- -- -- -- Walter P. Babich 4,266,444 54,897 -- -- -- -- John H. Durham 4,270,647 50,694 -- -- -- -- John A. Fry 4,270,669 50,672 -- -- -- -- Anthony D. Knerr 4,271,747 49,594 -- -- -- -- Ann R. Leven 4,271,949 49,391 -- -- -- -- Thomas F. Madison N/A N/A N/A 414 -- -- Janet L. Yeomans N/A N/A N/A 414 -- -- 2. To reduce the number of accountant's certificates the Fund must provide in connection with its preferred shares, which shall include an amendment to the Fund's Article of Incorporation. 4,156,683 70,073 94,585 409 -- 5
34 Delaware Investments(SM) - -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Investments Closed-End Municipal Bond Funds shareholders. The return and principal value of an investment in each Fund will fluctuate so that shares, when resold, may be worth more or less than their original cost. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that each Fund may, from time-to-time, purchase shares of its common stock on the open market at market prices.
Board of Trustees Affiliated Officers Contact Information JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA PRINCIPAL OFFICE OF THE FUNDS WALTER P. BABICH 2005 Market Street Board Chairman RICHELLE S. MAESTRO Philadelphia, PA 19103-7057 Citadel Construction Corporation Executive Vice President, King of Prussia, PA Chief Legal Officer and Secretary INDEPENDENT AUDITORS Delaware Investments Family of Funds Ernst & Young LLP JOHN H. DURHAM Philadelphia, PA 2001 Market Street Private Investor Philadelphia, PA 19103 Gwynedd Valley, PA MICHAEL P. BISHOF Senior Vice President and Treasurer REGISTRAR AND STOCK TRANSFER AGENT JOHN A. FRY Delaware Investments Family of Funds Mellon Investor Services, L.L.C. President Philadelphia, PA Overpeck Centre Franklin & Marshall College 85 Challenger Road Lancaster, PA Ridgefield Park, NJ 07660 800 851-9677 ANTHONY D. KNERR Managing Director FOR SECURITIES DEALERS AND FINANCIAL Anthony Knerr & Associates INSTITUTIONS REPRESENTATIVES New York, NY 800 362-7500 ANN R. LEVEN WEB SITE Former Treasurer/Chief Fiscal Officer www.delawareinvestments.com National Gallery of Art Washington, DC NUMBER OF RECORDHOLDERS AS OF SEPTEMBER 30, 2004: THOMAS F. MADISON Minnesota Municipal Income Fund I 325 President and Chief Executive Officer Minnesota Municipal Income Fund II 524 MLM Partners, Inc. Minnesota Municipal Income Fund III 124 Minneapolis, MN Arizona Municipal Income Fund 97 Florida Insured Municipal Income Fund 163 JANET L. YEOMANS Colorado Insured Municipal Vice President/Mergers & Acquisitions Income Fund 174 3M Corporation St. Paul, MN Thomas F. Madison and Janet L. Yeomans were elected by the preferred Shareholders of the Delaware Investments Closed-End Municipal Bond Funds.
Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. (9004) Printed in the USA SA-CEMUNI [9/04] IVES 11/04 J9850 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. Schedule of Investments Included as part of report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 9. Submission of Matters to a Vote of Security Holders Not applicable. Item 10. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. NAME OF REGISTRANT: Delaware Investments Minnesota Municipal Income Fund III, Inc. JUDE T. DRISCOLL - ----------------------- By: Jude T. Driscoll ---------------- Title: Chairman Date: 11/29/04 ---------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. JUDE T. DRISCOLL - ----------------------- By: Jude T. Driscoll ---------------- Title: Chairman Date: 11/29/04 ---------------- JOSEPH H. HASTINGS - ------------------------------- By: Joseph H. Hastings ------------------------ Title: Chief Financial Officer Date: 11/29/04 ------------------------ EX-99.CERT 2 ex99-cert.txt EXHIBIT 99.CERT EXHIBIT 99.CERT CERTIFICATION ------------- I, Jude T. Driscoll, certify that: 1. I have reviewed this report on Form N-CSR of Delaware Investments Minnesota Municipal Income Fund III, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11/29/04 ------------------- JUDE T. DRISCOLL - ------------------------ By: Jude T. Driscoll ----------------- Title: Chairman CERTIFICATION ------------- I, Joseph H. Hastings, certify that: 1. I have reviewed this report on Form N-CSR of Delaware Investments Minnesota Municipal Income Fund III, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11/29/04 -------------------------- JOSEPH H. HASTINGS - ------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer EX-99.906 3 ex99-906cert.txt EXHIBIT 99.906CERT EXHIBIT 99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the attached report of the registrant on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: 11/29/04 ------------------- JUDE T. DRISCOLL - ----------------------- By: Jude T. Driscoll ---------------- Title: Chairman JOSEPH H. HASTINGS - ------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----