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: 811-7410
Exact name of registrant as specified in charter: Delaware Investments Florida Insured Municipal Income Fund
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: David F. Connor, 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: March 31, 2006
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
DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND, information on which
is included in the following shareholder reports.
Delaware Investments
Closed-End Municipal
Bond Funds
Annual Report
March 31, 2006
[LOGO] Delaware
Investments(R)
-----------------------------------
A member of Lincoln Financial Group
Closed-End
Table of contents
Portfolio management review 1
Performance summary 6
Sector allocations and
credit rating breakdowns 8
Financial statements:
Statements of net assets 10
Statements of operations 21
Statements of changes in net assets 22
Financial highlights 23
Notes to financial statements 27
Report of independent registered
public accounting firm 33
Other fund information 34
Board of trustees/directors and
officers addendum 35
About the organization 37
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 LLC, at
800 851-9677. You will be asked to put your request in writing. If you have
shares registered in a "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, 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, distributions of net investment
income and capital gains to common shareholders will be paid in cash unless
shareholders notify Mellon Investor Services LLC 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 LLC
Dividend Reinvestment Department
Overpeck Centre
85 Challenger Road
Ridgefield, NJ 07660
800 851-9677
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
Portfolio management review
Delaware Investments Closed-End Municipal Bond Funds
April 11, 2006
Fund managers
Joseph Baxter
Portfolio Manager
Arizona Municipal Income Fund,
Colorado Insured Municipal Income Fund,
Florida Insured Municipal Income Fund,
Minnesota Municipal Income Funds II
Robert Collins
Portfolio Manager
Arizona Municipal Income Fund,
Colorado Insured Municipal Income Fund,
Florida Insured Municipal Income Fund,
Minnesota Municipal Income Funds II
Denise Franchetti
Portfolio Manager
Arizona Municipal Income Fund,
Colorado Insured Municipal Income Fund,
Florida Insured Municipal Income Fund,
Minnesota Municipal Income Funds II
Q: What was the investment environment like for municipal bond funds during the
fiscal year ended March 31, 2006?
A: Changes in interest rates and municipal bond refinancings were among the key
stories in the municipal bond market during the fiscal year.
The Federal Reserve Board remained committed to tightening U.S. monetary policy,
focused on keeping inflation in check. This included a continuous string of
eight quarter-point increases to the fed funds rate, which took this target for
short-term interest rates from 2.75% on March 22, 2005 to 4.75% as of March 31,
2006 (source: The U.S. Federal Reserve Board).
Despite the fed's actions on short-term interest rates, however, longer term
rates did not increase and generally remained low throughout the course of the
fiscal year. The 30-year AAA-rated municipal bond yield, for instance, actually
declined over the course of the fiscal year, from 4.58% to 4.48% on March 31,
2006 (source: Municipal Market Data).
Rising short-term rates, coupled with the long-term rate downward trend, created
a situation that economists typically refer to as a "flattening yield curve,"
meaning that the difference between short- and long-term bond yields grows
smaller across the spectrum of maturities.
In this type of environment, bonds with intermediate maturities -- such as those
in the three- to seven-year maturity range -- frequently underperform. We found
this to be particularly true during the second half of the fiscal year, when the
flattening of the yield curve became more pronounced.
Credit quality among municipal bond issuers generally improved during the fiscal
year, and it was another factor influencing the markets. A result of these
improving credit qualities was an increase in demand for high yield -- or
non-investment grade -- bonds, which performed well. Similarly, among investment
grade municipal bonds, lower-rated securities often outperformed higher-rated
securities by a significant margin on a total return basis.
Q: What other market-related events influenced performance of municipal bond
funds?
A: Issuance of new municipal bonds remained strong during most of the fiscal
year. Supply of new municipal bonds is typically assessed on a calendar year
basis and, for example, supply in calendar year 2005 totaled a record $408
billion (source: Municipal Market Data).
Driving the record issuance was low interest rates, which provided many issuers
with refinancing opportunities. The market's ability to absorb additional supply
was aided by non-traditional buyers (buyers more interested in the relative
valuation of the asset class than the tax-advantaged status of municipal bonds).
As more and more municipal issuers refinanced in 2005, new issuance dropped off.
During the first months of 2006, the rate of new issuance had declined
significantly.
For much of the fiscal year, a preferred strategy in all of our municipal bond
funds was to hold onto bonds purchased in prior fiscal periods, and to depend on
the attractive bond yields that already exist within our Funds. Generally, with
interest rates in decline, it became
(continued) 1
Portfolio management review
Delaware Investments Closed-End Municipal Bond Funds
increasingly difficult to identify bonds in the marketplace that were more
attractive than our holdings in the portfolio. We believed that selling older
bonds that were purchased with attractive yields would only serve to "rotate
down" the Funds' yields and potentially generate undesirable taxable gains.
Across each of the closed-end municipal bond funds, we adhered to our bottom-up
investment style, which is based on security-by-security analysis and a free
exchange of information among the various members of a deep management team that
includes portfolio managers, credit analysts, and traders. Frequently during the
year, we opted to focus our resources on monitoring the credit of legacy bonds,
which are bonds purchased in prior fiscal periods.
Arizona Municipal Income Fund
Q: What conditions prevailed in the Arizona debt market?
A: Job growth in Arizona continued to accelerate in 2005 and ranked second
nationwide. Employment grew approximately 5.3% in 2005, the most rapid rate of
annual growth since 1998 (source: Bureau of Labor Statistics). Recent job growth
was led by the construction sector, as well as the trade, transportation, and
utilities sectors. As of February 2006, the state's unemployment rate was
hovering at 4.4%, which was well below the national level of 4.8%. While
personal income grew in 2005, it was hampered by job losses in the manufacturing
and information sectors, two of the highest paid sectors in Arizona. As a
result, Arizona personal income remains below national levels at approximately
87% of the U.S. average (source: Moody's Investors Service).
In fiscal 2005, Arizona's tax revenues increased 19.4%, led by strong personal
and corporate income taxes. Arizona's Budget Stabilization Fund totaled $147
million as of June 30, 2005. Arizona's fiscal year 2006 budget totals $8.2
billion and increases base spending by about 7%. The budget includes salary
increases for state workers, tax revisions, and an establishment of a full-day
kindergarten program (source: Nelson A. Rockefeller Institute of Government and
the Fiscal Survey of States-National Governor's Association).
Q: How did the Fund perform versus its benchmark and peer group?
A: Arizona Municipal Income Fund returned 3.31%* (at net asset value with all
distributions reinvested), underper-forming both the peer group and the
benchmark. By comparison, the Lipper Other States Municipal Debt Funds gained an
average of 5.08% for the same period. The Fund's benchmark -- the national
Lehman Brothers Municipal Bond Index -- gained 3.81% (source: Lipper).
Q: What strategies affected Fund performance?
A: The Fund underperformed the benchmark due to a lack of exposure to industrial
development revenue bonds and pollution control revenue bonds (IDC/PCR) over the
12-month period. The IDR/PCR sector includes tobacco bonds, which we have not
invested in as an across-the-board policy in our municipal funds due to the
volatility associated with the sub-sector. The IDR/PCR sector was by far the
best performing segment in the Index, posting a +9.59% return for the period.
When excluding tobacco bonds, the IDR/PCR sector returned only +3.82% over 12
months.
The Fund was also negatively affected by a significant underweighting in
BBB-rated bonds. By policy, there was no exposure to non-investment grade bonds.
These two rating categories outperformed by a considerable margin, posting
returns of 6.99% and 9.12%, respectively. However, as a whole, the Lehman
Brothers Municipal Bond Index returned only 3.81% over the 12-month period.
* Past performance is not a guarantee of future results. Substantially all
dividends are exempt from federal income tax and may be subject to
alternative minimum tax that applies to certain taxpayers. Capital gains, if
any, are taxable.
2 (continued)
Portfolio management review
Delaware Investments Closed-End Municipal Bond Funds
Colorado Insured Municipal Income Fund
Q: What conditions prevailed in the Colorado debt market?
A: After experiencing a sharper economic downturn than the nation in recent
years, Colorado is now recovering at a healthy pace. The state's employment
declines bottomed out in early 2004. In 2005, non-farm payroll employment grew
over 2% even though manufacturing employment declined during that period. This
is largely attributable to growth in construction, healthcare, and education.
As of February 2006, Colorado's unemployment rate was 4.3%, which was below the
national rate (source: Bureau of Labor Statistics). Colorado's tax revenues
increased in recent years, with the growth due to increases in personal income
tax, sales tax, and, most significantly, corporate income tax. Despite this
growth, Colorado's Required Statutory Reserve was drawn down to $198 million in
2005. Voter initiatives, such as the Taxpayer Bill of Rights, have limited
Colorado's financial flexibility. In November, Referendum C was approved by
Colorado voters. This allows the state to retain tax revenue collected in excess
of the fiscal years' budget for the next five years, estimated to be $3.7
billion. The Governor's 2006-2007 budget proposes a 4.1% increase over this
year. Budget highlights include increased higher education and human services
spending (source: Nelson A. Rockefeller Institute of Government and the Fiscal
Survey of States-National Governor's Association).
Q: How did the Fund perform versus its benchmark and peer group?
A: Colorado Insured Municipal Income Fund returned 3.44%* (at net asset value
with all distributions reinvested). By comparison, the Lipper Other States
Municipal Debt Funds returned an average of 5.08% for the same period. The
Fund's benchmark -- the national Lehman Brothers Municipal Bond Index --
returned 3.81% (source: Lipper).
* Past performance is not a guarantee of future results. Substantially all
dividends are exempt from federal income tax and may be subject to
alternative minimum tax that applies to certain taxpayers. Capital gains, if
any, are taxable.
Q: What strategies affected Fund performance?
A: As an insured Fund, we were largely excluded from the industrial development
revenue bonds and pollution control revenue bonds IDR/PCR sector, which consists
primarily of mid-to-low investment grade bonds. In addition, the industrial
development revenue bonds and pollution control revenue bonds (IDR/PCR) sector
includes tobacco bonds, which we have not invested in as an across-the-board
policy in our municipal funds due to the volatility associated with this
sub-sector. The IDR/PCR sector was by far the best performing segment in the
Index, posting a +9.59% return for the period. When excluding tobacco bonds, the
IDR/PCR sector returned only +3.82% over 12 months.
The Fund underperformed the Lipper Peer Group because of our 100% investment in
insured or equivalent AAA-rated bonds, though it should be noted that the Fund's
Peer Group is not strictly an insured universe. The Fund was underweighted
compared to the benchmark in BBB-rated and non-insured bonds. Over this 12-month
period in the Lehman Municipal Bond Index, AAA-rated bonds returned just 3.65%.
The A-rated bonds returned 4.19%, BBB-rated bonds returned 6.99%, and
non-investment grade bonds posted a 9.12% return.
Florida Insured Municipal Income Fund
Q: What conditions prevailed in the Florida debt market?
A: Florida ranks as the fourth most populous state in the nation and remains one
of the nation's fastest growing states. This year showed that Florida's economy
continues to be one of the strongest in the country, with rapid job and income
growth. Despite another crippling hurricane season, which is magnified by
Florida's reliance on tourism, Florida's job growth remained robust with
non-farm payroll increasing 2.1% in 2005. The state's unemployment rate remains
very low compared to the national average, at a mere 3.2% as of February 2006
(source: Bureau of Labor Statistics).
(continued) 3
Portfolio management review
Delaware Investments Closed-End Municipal Bond Funds
Sales and use tax revenues, which account for approximately 60% of all taxes,
grew 12% for fiscal 2005. At $988 million, Florida has one of the highest
balances of any state in its budget stabilization fund. The $70.8 billion fiscal
2006 budget includes a 25% increase in the capital outlay budget, an economic
development plan, funding of reserves, and $1.5 billion in tax cuts. The tax
cuts proposed include the elimination of the intangibles tax and school property
tax savings (source: Nelson A. Rockefeller Institute of Government and the
Fiscal Survey of States-National Governor's Association).
Q: How did the Fund perform versus its benchmark and peer group?
A: Florida Insured Municipal Income Fund returned 2.76%* (at net asset value
with all distributions reinvested). By comparison, the Lipper Florida Municipal
Debt Funds gained an average of 4.84% for the same period. The Fund's benchmark
-- the national Lehman Brothers Municipal Bond Index -- returned 3.81% (source:
Lipper).
Q: What strategies affected Fund performance?
A: As an insured Fund, we were largely excluded from the industrial development
revenue bonds and pollution control revenue bonds (IDR/PCR) sector, which is
populated with mid-to-low investment grade bonds. In addition, the IDR/PCR
sector includes tobacco bonds, which we have not invested in as an
across-the-board policy in our municipal funds due to the volatility associated
with this sub-sector. The IDR/PCR sector was by far the best performing segment
in the Index, posting a +9.59% return for the period. When excluding tobacco
bonds, the IDR/PCR sector returned only +3.82% over 12 months.
The Fund underperformed the Lipper Peer Group because of our 100% investment in
insured or equivalent AAA-rated bonds, though it should be noted that the Fund's
Peer Group is not strictly an insured universe. The Fund was underweighted
compared to the benchmark in BBB-rated and non-insured bonds. Over this 12-month
period in the Lehman Brothers Municipal Bond Index, AAA-rated bonds returned
just 3.65%, while A-rated bonds returned 4.19%, BBB-rated bonds returned 6.99%,
and non-investment grade bonds posted a 9.12% return.
Minnesota's Municipal Income Fund II
Q: What conditions prevailed in the Minnesota debt market?
A: Minnesota's new issuance totaled $7.6 billion in 2005 -- a 20% increase over
2004 (source: Municipal Market Data). Minnesota continues to recover from the
2001 recession, which resulted from its manufacturing sector concentration. The
state has shown steady demographic trends, high personal income levels, and low
unemployment (source: Nelson A. Rockefeller Institute of Government and the
Fiscal Survey of States-National Governor's Association). While Minnesota's
non-farm payroll continues to grow, it is now growing at a slower pace than the
national average. Employment increased 1.04% in 2005 with gains in the services,
construction, and manufacturing sectors (source: Bureau of Labor Statistics).
However, Minnesota's unemployment rate remains below national levels at 4.4%. In
2005, tax revenues increased 7.7% due to double-digit growth in personal income
tax revenues.
Q: How did the Fund perform versus its benchmark and peer group?
A: Minnesota Municipal Income Fund II returned 4.69%* (at net asset value with
all distributions reinvested). Lipper recently moved the Fund into its Other
States Municipal Debt peer group, which averaged a 5.08% gain during the year.
The Lipper Other States category includes funds from other states, but its
average may provide a better comparison than the now-closed Minnesota category
that included just two other funds. The Fund's benchmark -- the national Lehman
Brothers Municipal Bond Index -- gained 3.81% (source: Lipper).
* Past performance is not a guarantee of future results. Substantially all
dividends are exempt from federal income tax and may be subject to
alternative minimum tax that applies to certain taxpayers. Capital gains,
if any, are taxable.
4 (continued)
Portfolio management review
Delaware Investments Closed-End Municipal Bond Funds
Q: What strategies affected Fund performance?
A: One of the reasons the Fund underperformed other Minnesota closed-end funds
was its underweighting in industrial development revenue bonds and pollution
control revenue bonds (IDR/PCR) over the 12-month period. The IDR/PCR sector was
by far the best performing segment in the Lehman Index, with a 9.59% return over
the 12-month period. The IDR/PCR sector includes tobacco bonds, in which, as
part of our management policy, we have chosen not to invest. Excluding tobacco
bonds, the IDR/PCR sector returned only 3.82% over the 12-months.
The Fund was also negatively affected by its weighting in pre-refunded bonds,
which at times during the year accounted for as much as 20% of the Fund's total
assets. When a bond becomes pre-refunded, a new bond is issued, and the proceeds
are placed in escrow to be invested in U.S. Treasury securities. The proceeds
generated are then used to pay the principal and interest on the pre-refunded
bond. As such, these bonds typically receive the highest credit ratings and
benefit from a price boost when they initially become pre-refunded. Because of
their short-to-intermediate maturities, the price performance of this group was
hurt during the 12-month period by the flattening of the yield curve, with
shorter rates rising and longer rates remaining more stable.
The Fund also experienced a number of calls on seasoned bonds with higher
coupons and attractive embedded yields during the 12-month period. As portfolio
managers, we must decide whether to sell these bonds early, forfeit the higher
interest income, and realize a capital gain in order to seek better price
performance. By holding on to the bonds, our strategy was often to let them
mature or be called by the issuer. This generally affords us the opportunity to
collect high income as long as possible while minimizing realized capital gains
in the portfolios. In some environments, however, it does impede total return
performance.
5
Performance summary
Delaware Investments
Arizona Municipal Income Fund Inc.
Fund Basics
As of March 31, 2006
--------------------------------------------------------------------------------
Fund Objective:
--------------------------------------------------------------------------------
The Fund seeks to provide current income exempt from both regular federal income
tax and from Arizona personal income tax, consistent with preservation of
capital.
--------------------------------------------------------------------------------
Total Fund Net Assets:
--------------------------------------------------------------------------------
$43.9 million
--------------------------------------------------------------------------------
Number of Holdings:
--------------------------------------------------------------------------------
49
--------------------------------------------------------------------------------
Fund Start Date:
--------------------------------------------------------------------------------
February 26, 1993
--------------------------------------------------------------------------------
Your Fund Managers:
--------------------------------------------------------------------------------
Joseph Baxter is vice president and senior portfolio manager of municipal bond
investments. Prior to joining Delaware Investments in 1999, he held investment
positions with First Union. Most recently, he served as a municipal portfolio
manager for the Evergreen Funds. Mr. Baxter is a graduate of LaSalle University.
Robert Collins is vice president and senior portfolio manager of municipal bond
investments. Prior to joining Delaware Investments, Mr. Collins was a senior
vice president and director of portfolio management in the Municipal Investment
Group within PNC Advisors. Mr. Collins earned his bachelor's degree in economics
from Ursinus College. He is a Chartered Financial Analyst and a member of the
Financial Analysts of Philadelphia.
Denise Franchetti joined Delaware Investments in 1997, having previously worked
as a fixed-income trader for Provident Mutual Life Insurance Company. Before
that, she worked as an investment analyst for General Accident Insurance
Company. Ms. Franchetti, a CFA Charterholder, is a member of the Association for
Investment Management and Research and the Financial Analysts of Philadelphia.
She received her bachelor's and MBA degrees from LaSalle University.
Andrew McCullagh ceased to serve as senior portfolio manager on Arizona
Municipal Income and Colorado Insured Municipal Income Funds effective November
23, 2005.
Delaware Investments
Colorado Insured Municipal Income Fund Inc.
Fund Basics
As of March 31, 2006
--------------------------------------------------------------------------------
Fund Objective:
--------------------------------------------------------------------------------
The Fund seeks to provide current income exempt from both regular federal income
tax and Colorado state personal income tax, consistent with preservation of
capital.
--------------------------------------------------------------------------------
Total Fund Net Assets:
--------------------------------------------------------------------------------
$73.8 million
--------------------------------------------------------------------------------
Number of Holdings:
--------------------------------------------------------------------------------
50
--------------------------------------------------------------------------------
Fund Start Date:
--------------------------------------------------------------------------------
July 29, 1993
--------------------------------------------------------------------------------
Your Fund Managers:
--------------------------------------------------------------------------------
Joseph Baxter
Robert Collins
Denise Franchetti
6 (continued)
Performance summary
Delaware Investments
Florida Insured Municipal Income Fund
Fund Basics
As of March 31, 2006
--------------------------------------------------------------------------------
Fund Objective:
--------------------------------------------------------------------------------
The Fund seeks to provide current income exempt from both regular federal income
tax and Florida state intangible personal property tax, consistent with
preservation of capital.
--------------------------------------------------------------------------------
Total Fund Net Assets:
--------------------------------------------------------------------------------
$35.5 million
--------------------------------------------------------------------------------
Number of Holdings:
--------------------------------------------------------------------------------
39
--------------------------------------------------------------------------------
Fund Start Date:
--------------------------------------------------------------------------------
February 26, 1993
--------------------------------------------------------------------------------
Your Fund Managers:
--------------------------------------------------------------------------------
Joseph Baxter
Robert Collins
Denise Franchetti
Delaware Investments
Minnesota Municipal Income Fund II Inc.
Fund Basics
As of March 31, 2006
--------------------------------------------------------------------------------
Fund Objective:
--------------------------------------------------------------------------------
The Fund seeks to provide current income exempt from both regular federal income
tax and Minnesota personal income tax, consistent with preservation of capital.
--------------------------------------------------------------------------------
Total Fund Net Assets:
--------------------------------------------------------------------------------
$169.5 million
--------------------------------------------------------------------------------
Number of Holdings:
--------------------------------------------------------------------------------
123
--------------------------------------------------------------------------------
Fund Start Date:
--------------------------------------------------------------------------------
February 26, 1993
--------------------------------------------------------------------------------
Your Fund Managers:
--------------------------------------------------------------------------------
Joseph Baxter
Robert Collins
Denise Franchetti
7
Sector allocations and credit rating
breakdowns
Sector designations may be different than the sector designations presented in
other Fund materials.
Delaware Investments Arizona
Municipal Income Fund, Inc.
As of March 31, 2006
Percentage
Sector of Net Assets
--------------------------------------------------------------------------------
Municipal Bonds 154.34%
Airport Revenue Bonds 7.04%
Convention Center/Auditorium/Hotel Revenue Bonds 2.36%
Dedicated Tax & Fees Revenue Bonds 28.21%
Electric & Gas Revenue Bonds 3.53%
Escrowed to Maturity Bonds 10.99%
Higher Education Revenue Bonds 8.40%
Hospital Revenue Bonds 19.58%
Municipal Lease Revenue Bonds 10.83%
Political Subdivision General Obligation Bonds 1.18%
Pre-Refunded Bonds 26.50%
Primary Education Revenue Bonds 2.43%
School District General Obligation Bonds 17.38%
Single Family Housing Revenue Bonds 2.51%
Student Loan Revenue Bonds 3.61%
Territorial General Obligation Bonds 4.26%
Water & Sewer Revenue Bonds 5.53%
--------------------------------------------------------------------------------
Total Market Value of Securities 154.34%
--------------------------------------------------------------------------------
Receivables and Other Assets Net of Liabilities 2.58%
--------------------------------------------------------------------------------
Liquidation Value of Preferred Stock (56.92%)
--------------------------------------------------------------------------------
Total Net Assets 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Credit Rating Breakdown
--------------------------------------------------------------------------------
AAA 81.0%
AA 10.1%
A 6.7%
BBB 2.2%
--------------------------------------------------------------------------------
Total 100.0%
--------------------------------------------------------------------------------
Delaware Investments Colorado Insured
Municipal Income Fund, Inc.
As of March 31, 2006
Percentage
Sector of Net Assets
--------------------------------------------------------------------------------
Municipal Bonds 151.47%
Airport Revenue Bonds 10.48%
Continuing Care/Retirement Revenue Bonds 3.62%
Convention Center/Auditorium/Hotel Revenue Bonds 4.18%
Dedicated Tax & Fees Revenue Bonds 3.79%
Electric & Gas Revenue Bonds 1.45%
Higher Education Revenue Bonds 29.82%
Hospital Revenue Bonds 1.93%
Municipal Lease Revenue Bonds 10.68%
Parking Revenue Bonds 3.56%
Political Subdivision General Obligation Bonds 9.16%
Pre-Refunded Bonds 36.74%
Primary Education Revenue Bonds 1.44%
School District General Obligation Bonds 9.01%
Turnpike/Toll Road Revenue Bonds 12.97%
Water & Sewer Revenue Bonds 12.64%
--------------------------------------------------------------------------------
Total Market Value of Securities 151.47%
--------------------------------------------------------------------------------
Receivables and Other Assets Net of Liabilities 2.70%
--------------------------------------------------------------------------------
Liquidation Value of Preferred Stock (54.17%)
--------------------------------------------------------------------------------
Total Net Assets 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Credit Rating Breakdown
--------------------------------------------------------------------------------
AAA 100.0%
--------------------------------------------------------------------------------
Total 100.0%
--------------------------------------------------------------------------------
8 (continued)
Sector allocations and credit rating
breakdowns
Sector designations may be different than the sector designations presented in
other Fund materials.
Delaware Investments Florida Insured
Municipal Income Fund
As of March 31, 2006
Percentage
Sector of Net Assets
--------------------------------------------------------------------------------
Municipal Bonds 152.86%
Airport Revenue Bonds 9.44%
Dedicated Tax & Fees Revenue Bonds 28.49%
Electric & Gas Revenue Bonds 5.78%
Higher Education Revenue Bonds 3.57%
Hospital Revenue Bonds 17.89%
Multifamily Housing Revenue Bonds 23.48%
Municipal Lease Revenue Bonds 15.93%
Ports & Harbors Revenue Bonds 2.89%
Pre-Refunded Bonds 20.52%
State General Obligation Bonds 5.86%
Tax Increment/Special Assessment Bonds 0.86%
Turnpike/Toll Road Revenue Bonds 2.92%
Water & Sewer Revenue Bonds 15.23%
--------------------------------------------------------------------------------
Total Market Value of Securities 152.86%
--------------------------------------------------------------------------------
Receivables and Other Assets Net of Liabilities 3.49%
--------------------------------------------------------------------------------
Liquidation Value of Preferred Stock (56.35%)
--------------------------------------------------------------------------------
Total Net Assets 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Credit Rating Breakdown
--------------------------------------------------------------------------------
AAA 100.0%
--------------------------------------------------------------------------------
Total 100.0%
--------------------------------------------------------------------------------
Delaware Investments Minnesota
Municipal Income Fund II, Inc.
As of March 31, 2006
Percentage
Sector of Net Assets
--------------------------------------------------------------------------------
Municipal Bonds 150.39%
Airport Revenue Bonds 11.30%
City General Obligation Bonds 2.14%
Continuing Care/Retirement Revenue Bonds 1.66%
Corporate-Backed Revenue Bonds 4.71%
Dedicated Tax & Fees Revenue Bonds 0.31%
Electric & Gas Revenue Bonds 17.67%
Escrowed to Maturity Bonds 19.51%
Higher Education Revenue Bonds 5.60%
Hospital Revenue Bonds 15.63%
Investor Owned Utilities Revenue Bonds 1.95%
Library/Museum Revenue Bonds 2.60%
Multifamily Housing Revenue Bonds 7.71%
Municipal Lease Revenue Bonds 11.04%
Parking Revenue Bonds 2.10%
Political Subdivision General Obligation Bonds 10.33%
Pre-Refunded Bonds 16.57%
School District General Obligation Bonds 12.46%
Single Family Housing Revenue Bonds 2.34%
State General Obligation Bonds 3.47%
Tax Increment/Special Assessment Bonds 0.63%
Territorial General Obligation Bonds 0.66%
--------------------------------------------------------------------------------
Short-Term Investments 3.44%
--------------------------------------------------------------------------------
Total Market Value of Securities 153.83%
--------------------------------------------------------------------------------
Receivables and Other Assets Net of Liabilities 2.22%
--------------------------------------------------------------------------------
Liquidation Value of Preferred Stock (56.05%)
--------------------------------------------------------------------------------
Total Net Assets 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Credit Rating Breakdown
--------------------------------------------------------------------------------
AAA 58.6%
AA 13.8%
A 16.6%
BBB 8.6%
NR 2.4%
--------------------------------------------------------------------------------
Total 100.0%
--------------------------------------------------------------------------------
9
Statements of net assets
Delaware Investments Arizona Municipal Income Fund, Inc.
March 31, 2006
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds - 154.34%
------------------------------------------------------------------------------------
Airport Revenue Bonds - 7.04%
Phoenix Civic Improvement
Corporation Airport Revenue
Senior Lien Series A
5.00% 7/1/25 (FSA) $1,000,000 $ 1,022,690
Series B 5.25% 7/1/27 (FGIC) (AMT) 2,000,000 2,068,680
-----------
3,091,370
-----------
Convention Center/Auditorium/Hotel Revenue Bonds - 2.36%
Arizona Tourism & Sports Authority Tax
Revenue Multipurpose Stadium Facilities
Series A 5.00% 7/1/31 (MBIA) 1,000,000 1,034,640
-----------
1,034,640
-----------
Dedicated Tax & Fees Revenue Bonds - 28.21%
Glendale Municipal Property Corporation
Series A 5.00% 7/1/33 (AMBAC) 3,000,000 3,096,390
Puerto Rico Commonwealth Highway &
Transportation Authority
Transportation Refunding Series D
5.00% 7/1/32 (FSA) 8,500,000 8,777,780
San Luis Civic Improvement Corporation
Municipal Facilities Excise Tax Revenue
5.00% 7/1/38 (XLCA) 500,000 516,225
-----------
12,390,395
-----------
Electric & Gas Revenue Bonds - 3.53%
Salt River Project Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 1,500,000 1,547,985
-----------
1,547,985
-----------
Escrowed to Maturity Bonds - 10.99%
Puerto Rico Commonwealth
Infrastructure Financing Series A
5.50% 10/1/40 4,500,000 4,827,555
-----------
4,827,555
-----------
Higher Education Revenue Bonds - 8.40%
Arizona State University Certificates of
Participation (Research Infrastructure
Project) 5.00% 9/1/30 (AMBAC) 1,000,000 1,035,030
Northern Arizona University
Certificates of Participation (Northern Arizona
University Research Project)
5.00% 9/1/30 (AMBAC) 1,000,000 1,038,390
South Campus Group Student Housing
Revenue (Arizona State University
South Campus Project)
5.625% 9/1/35 (MBIA) 1,000,000 1,090,500
University of Arizona
Certificates of Participation
(University of Arizona Project) Series B
5.125% 6/1/22 (AMBAC) 500,000 523,815
-----------
3,687,735
-----------
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Hospital Revenue Bonds - 19.58%
Maricopa County Industrial Development
Authority Health Facilities Revenue
(Catholic Healthcare West)
Series A 5.50% 7/1/26 $ 430,000 $ 449,823
(Mayo Clinic Hospital)
5.25% 11/15/37 2,000,000 2,070,040
Mohave County Industrial Development
Authority (Chris/Silver Ridge)
6.375% 11/1/31 (GNMA) 260,000 268,180
Scottsdale Industrial Development
Authority Hospital Revenue
(Scottsdale Healthcare)
5.80% 12/1/31 1,000,000 1,065,320
Show Low Industrial Development
Authority Hospital Revenue
(Navapache Regional Medical Center)
Series A 5.50% 12/1/17 (ACA) 1,600,000 1,649,984
University Medical Center Corporation
Arizona Hospital Revenue
5.00% 7/1/33 1,000,000 1,001,600
Yavapai County Industrial Development
Authority (Yavapai Regional
Medical Center) Series A
5.25% 8/1/21 (RADIAN) 2,000,000 2,096,500
-----------
8,601,447
-----------
Municipal Lease Revenue Bonds - 10.83%
Greater Arizona Development Authority
Infrastructure Revenue Series A
5.00% 8/1/22 (MBIA) 500,000 526,055
Nogales Development Authority
Municipal Facilities Revenue
5.00% 6/1/30 (AMBAC) 500,000 518,010
Phoenix Civic Improvement Corporation
Excise Tax Senior Lien
(Municipal Courthouse Project)
Series A 5.25% 7/1/24 1,000,000 1,049,280
Prescott Valley Municipal Property
Corporation 5.00% 1/1/27 (FGIC) 500,000 515,995
Tucson Certificates of Participation
5.60% 7/1/11 1,100,000 1,122,462
Yuma Municipal Property Corporation
5.00% 7/1/25 (AMBAC) 1,000,000 1,025,650
-----------
4,757,452
-----------
Political Subdivision General Obligation Bonds - 1.18%
DC Ranch Community Facilities
5.00% 7/15/27 (AMBAC) 500,000 518,975
-----------
518,975
-----------
ss. Pre-Refunded Bonds - 26.50%
Arizona School Facilities Board
Certificates of Participation
Series B 5.25% 9/1/19-14 (FSA) 1,000,000 1,089,150
Arizona School Facilities Board Revenue
(State School Improvement)
Series 2001 5.00% 7/1/19-11 2,000,000 2,121,440
10 (continued)
Statements of net assets
Delaware Investments Arizona Municipal Income Fund, Inc.
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds - 154.34%
------------------------------------------------------------------------------------
ss. Pre-Refunded Bonds (continued)
Arizona State Transportation Board
Highway Revenue Refunding
5.75% 7/1/18-09 $2,350,000 $ 2,498,684
Arizona Water Infrastructure Finance
Authority Revenue Water Quality
Series A 5.05% 10/1/20-11 1,500,000 1,597,260
Eagle Mountain Community Facilities
District Series A 6.40% 7/1/17-06
(Assured Gty) 1,500,000 1,525,650
Oro Valley Municipal Property
Corporation Excise Tax
5.00% 7/1/20-11 (FGIC) 1,000,000 1,049,230
Puerto Rico Commonwealth Public
Improvement Series A
5.125% 7/1/31-11 250,000 267,028
Southern Arizona Capital Facilities
Finance Corporation
(University of Arizona Project)
5.00% 9/1/23-12 (MBIA) 1,150,000 1,225,739
Yuma Industrial Development
Authority Hospital Revenue
(Yuma Regional Medical Center)
5.00% 8/1/31-11 (FSA) 250,000 266,493
-----------
11,640,674
-----------
Primary Education Revenue Bonds - 2.43%
Coconino County Unified School
District #8 (Page Impact Aid Revenue
Project of 2004) Series A
5.00% 7/1/15 (MBIA) 1,000,000 1,066,360
-----------
1,066,360
-----------
School District General Obligation Bonds - 17.38%
Maricopa County School District #6
(Washington Elementary School
Improvement Project of 2001)
Series B 5.00% 7/1/17 (FSA) 1,000,000 1,075,260
(Washington Elementary)
Series A 5.375% 7/1/13 (FSA) 3,000,000 3,271,980
Maricopa County School District #38
(Madison Elementary)
5.00% 7/1/13 (FSA) 1,250,000 1,334,000
5.00% 7/1/14 (FSA) 825,000 883,336
Tempe Union High School District #213
5.00% 7/1/14 (FSA) 1,000,000 1,070,710
-----------
7,635,286
-----------
Single Family Housing Revenue Bonds - 2.51%
Phoenix Industrial Development
Authority Single Family Statewide
Series A 5.35% 6/1/20
(GNMA) (FNMA) (FHLMC) (AMT) 540,000 550,546
Series C 5.30% 4/1/20
(GNMA) (FNMA) (FHLMC) (AMT) 425,000 427,316
Pima County Industrial Development
Authority Single Family Mortgage
Revenue Series A-1 6.125% 11/1/33
(GNMA) (FNMA) (FHLMC) (AMT) 125,000 125,305
-----------
1,103,167
-----------
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Student Loan Revenue Bonds - 3.61%
Arizona Student Loan Acquisition
Authority Revenue Series A-1
5.90% 5/1/24 (AMT) $1,500,000 $ 1,587,015
-----------
1,587,015
-----------
Territorial General Obligation Bonds - 4.26%
Puerto Rico Commonwealth Public
Improvement Series A 5.125% 7/1/31 500,000 507,890
Virgin Islands Public Finance Authority
Revenue (Gross Receipts Tax)
Series A 6.125% 10/1/29 (ACA) 1,250,000 1,361,050
-----------
1,868,940
-----------
Water & Sewer Revenue Bonds - 5.53%
Phoenix Civic Improvement Corporation
Wastewater Systems Revenue
Junior Lien
5.00% 7/1/24 (FGIC) 1,590,000 1,653,377
5.00% 7/1/26 (FGIC) 750,000 777,420
-----------
2,430,797
-----------
Total Municipal Bonds (cost $65,032,768) 67,789,793
-----------
Total Market Value of Securities - 154.34%
(cost $65,032,768) 67,789,793
Receivables and Other Assets
Net of Liabilities - 2.58% 1,133,556
Liquidation Value of Preferred Stock - (56.92%) (25,000,000)
-----------
Net Assets Applicable to 2,982,200
Shares Outstanding - 100.00% $43,923,349
===========
Net Asset Value Per Common Share
($43,923,349 / 2,982,200 Shares) $14.73
------
Components of Net Assets at March 31, 2006:
Common stock, $0.01 par value, 200 million shares
authorized to the Fund $40,838,893
Undistributed net investment income 330,793
Accumulated net realized loss on investments (3,362)
Net unrealized appreciation of investments 2,757,025
-----------
Total net assets $43,923,349
===========
ss. Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded. See Note 7 in "Notes to
financial statements."
(continued) 11
Statements of net assets
Delaware Investments Arizona Municipal Income Fund, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
Assured Gty - Insured by the Assured Guaranty Corporation
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
XLCA - Insured by XL Capital Assurance
See accompanying notes
12 (continued)
Statements of net assets
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
March 31, 2006
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds - 151.47%
------------------------------------------------------------------------------------
Airport Revenue Bonds - 10.48%
Denver City & County Airport Revenue
Series E 5.25% 11/15/23 (MBIA) $7,500,000 $ 7,738,575
-----------
7,738,575
-----------
Continuing Care/Retirement Revenue Bonds - 3.62%
Colorado Health Facilities Authority
Revenue (Porter Place) Series A
6.00% 1/20/36 (GNMA) 2,515,000 2,669,723
-----------
2,669,723
-----------
Convention Center/Auditorium/Hotel Revenue Bonds - 4.18%
Denver Convention Center Series A
5.00% 12/1/33 (XLCA) 3,000,000 3,085,380
-----------
3,085,380
-----------
Dedicated Tax & Fees Revenue Bonds - 3.79%
Broomfield County Sales & Use Tax
Revenue Refunding & Improvement
Series A 5.00% 12/1/31 (AMBAC) 650,000 671,333
Golden Sales & Use Tax Revenue
Improvement Series B
5.10% 12/1/20 (AMBAC) 1,000,000 1,053,930
Gypsum Sales Tax & General Funding
Revenue 5.25% 6/1/30 (Assured Gty) 1,000,000 1,070,890
-----------
2,796,153
-----------
Electric & Gas Revenue Bonds - 1.45%
Arkansas River Power Authority Colorado
Power Revenue Improvement
5.25% 10/1/32 (XLCA) 1,000,000 1,070,430
-----------
1,070,430
Higher Education Revenue Bonds - 29.82%
Boulder County Development Revenue
(University Corporation for
Atmospheric Research)
5.00% 9/1/26 (MBIA) 4,500,000 4,627,620
Colorado Educational & Cultural
Facilities Authority
(Johnson & Wales University Project)
Series A 5.00% 4/1/28 (XLCA) 3,000,000 3,095,580
(University of Colorado Foundation
Project) 5.00% 7/1/27 (AMBAC) 4,000,000 4,124,120
(University of Denver Project)
Series B 5.25% 3/1/35 (FGIC) 1,500,000 1,603,380
(University of Northern Colorado)
Series A 5.00% 7/1/31 (MBIA) 2,500,000 2,561,800
Colorado State Board of Governors
(Colorado University) Series B
5.00% 3/1/35 (AMBAC) 1,800,000 1,855,620
University of Northern Colorado Revenue
Refunding 5.00% 6/1/35 (FSA) 4,000,000 4,153,200
-----------
22,021,320
-----------
Hospital Revenue Bonds - 1.93%
Colorado Health Facilities Authority
(North Colorado Medical Center)
5.95% 5/15/12 (MBIA) 1,420,000 1,427,114
-----------
1,427,114
-----------
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Municipal Lease Revenue Bonds - 10.68%
Arapahoe County Library District
Certificates of Participation
5.70% 12/15/10 (MBIA) $2,000,000 $ 2,028,280
Broomfield City & County
Certificates of Participation
5.75% 12/1/24 (AMBAC) 1,500,000 1,595,970
Glendale Certificates of Participation
5.00% 12/1/25 (XLCA) 1,500,000 1,570,020
Westminster Building Authority
Certificates of Participation
5.25% 12/1/22 (MBIA) 1,555,000 1,644,755
Westminster Certificates of
Participation (Ice Centre Project)
5.40% 1/15/23 (AMBAC) 1,000,000 1,044,100
-----------
7,883,125
-----------
Parking Revenue Bonds - 3.56%
Auraria Higher Education Center
Parking Facilities System Revenue
5.50% 4/1/26 (AMBAC) 2,485,000 2,626,695
-----------
2,626,695
-----------
Political Subdivision General Obligation Bonds - 9.16%
Arapahoe County Water & Wastewater
Public Improvement District Refunding
Series A 5.125% 12/1/32 (MBIA) 1,000,000 1,045,080
Bowles Metropolitan District
5.00% 12/1/33 (FSA) 2,000,000 2,067,380
Centennial Downs Metropolitan
District 5.00% 12/1/28 (AMBAC) 1,000,000 1,043,890
Green Valley Ranch Metropolitan
District 5.75% 12/1/19 (AMBAC) 1,000,000 1,066,700
Sand Creek Metropolitan District
Refunding & Improvement
5.00% 12/1/31 (XLCA) 500,000 515,865
Stonegate Village Metropolitan District
Refunding & Improvement
Series A 5.50% 12/1/21 (FSA) 1,000,000 1,021,320
-----------
6,760,235
-----------
ss. Pre-Refunded Bonds - 36.74%
Aurora Certificates of Participation
5.50% 12/1/30-10 (AMBAC) 2,000,000 2,149,780
Burlingame Multifamily Housing
Revenue Series A
6.00% 11/1/29-09 (MBIA) 2,290,000 2,484,032
City of Colorado Springs
(Colorado Springs College Project)
5.375% 6/1/32-09 (MBIA) 5,000,000 5,298,800
Colorado Educational & Cultural
Facilities Authority
(University of Denver Project)
5.50% 3/1/21-11 (AMBAC) 3,200,000 3,454,880
Denver City & County
Certificates of Participation Series B
5.50% 12/1/25-10 (AMBAC) 2,000,000 2,171,100
(continued) 13
Statements of net assets
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
ss. Pre-Refunded Bonds (continued)
Denver City & County Excise Tax
Revenue (Colorado Convention
Center Project) Series A
5.00% 9/1/20-11 (FSA) $6,500,000 $ 6,872,904
Eagle County Certificates of Participation
5.40% 12/1/18-09 (MBIA) 1,000,000 1,067,720
Lakewood Certificates of Participation
5.375% 12/1/22-10 (AMBAC) 2,000,000 2,143,600
Pueblo County (Library District Project)
5.80% 11/1/19-09 (AMBAC) 1,395,000 1,494,115
-----------
27,136,931
-----------
Primary Education Revenue Bonds - 1.44%
Colorado Educational & Cultural
Facilities Authority Refunding
(Bromley School Project)
5.25% 9/15/32 (XLCA) 1,000,000 1,063,160
-----------
1,063,160
-----------
School District General Obligation Bonds - 9.01%
Adams & Arapahoe Counties Joint
School District #28J (Aurora)
Series A 5.00% 12/1/22 (FSA) 2,000,000 2,091,160
5.25% 12/1/25 1,000,000 1,080,090
Douglas County School District #Re-1
(Douglas & Elbert Counties)
5.00% 12/15/21 (MBIA) 1,000,000 1,043,090
Garfield Pitkin & Eagle County School
District #Re 001 Series A
(Roaring Fork County)
5.00% 12/15/27 (FSA) 1,500,000 1,564,965
Weld & Adams Counties School
District #Re-3J 5.00% 12/15/24 (FSA) 830,000 870,230
-----------
6,649,535
-----------
Turnpike/Toll Road Revenue Bonds - 12.97%
E-470 Public Highway Authority Series A
5.75% 9/1/29 (MBIA) 3,000,000 3,277,110
5.75% 9/1/35 (MBIA) 1,700,000 1,857,029
Northwest Parkway Public
Highway Authority Series A
5.25% 6/15/41 (FSA) 4,250,000 4,444,565
-----------
9,578,704
-----------
Water & Sewer Revenue Bonds - 12.64%
Colorado Water Resources &
Power Development Authority
Small Water Resources Revenue
Series A 5.80% 11/1/20 (FGIC) 2,000,000 2,167,260
Colorado Water Resources & Power
Development Authority Water
Resources Revenue (Parker Water &
Sanitation District) Series D
5.125% 9/1/34 (MBIA) 1,500,000 1,569,300
5.25% 9/1/43 (MBIA) 2,000,000 2,114,100
Lafayette Water Revenue Series A
5.00% 12/1/27 (MBIA) 1,100,000 1,142,856
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Water & Sewer Revenue Bonds (continued)
Ute Utility Water Conservancy
District Water Revenue
5.75% 6/15/20 (MBIA) $2,155,000 $ 2,335,697
------------
9,329,213
------------
Total Municipal Bonds
(cost $106,415,936) 111,836,293
------------
Total Market Value of Securities - 151.47%
(cost $106,415,936) 111,836,293
Receivables and Other Assets
Net of Liabilities - 2.70% 1,996,569
Liquidation Value of Preferred Stock - (54.17%) (40,000,000)
------------
Net Assets Applicable to 4,837,100
Shares Outstanding - 100.00% $ 73,832,862
============
Net Asset Value Per Common Share
($73,832,862 / 4,837,100 Shares) $15.26
------
Components of Net Assets at March 31, 2006:
Common stock, $0.01 par value, 200 million
shares authorized to the Fund $ 67,238,110
Undistributed net investment income 938,459
Accumulated net realized gain on investments 235,936
Net unrealized appreciation of investments 5,420,357
------------
Total net assets $ 73,832,862
============
ss. Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded. See Note 7 in "Notes to
financial statements."
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
Assured Gty - Insured by the Assured Guaranty Corporation
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
14 (continued)
Statements of net assets
Delaware Investments Florida Insured Municipal Income Fund
March 31, 2006
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds - 152.86%
------------------------------------------------------------------------------------
Airport Revenue Bonds - 9.44%
Dade County Aviation Revenue
Series B 5.60% 10/1/26 (MBIA) $1,000,000 $ 1,028,060
Miami-Dade County Aviation Revenue
(Miami International Airport)
Series B 5.00% 10/1/37 (FGIC) 2,250,000 2,322,810
-----------
3,350,870
-----------
Dedicated Tax & Fees Revenue Bonds - 28.49%
Flagler County Capital Improvements
Revenue 5.00% 10/1/35 (MBIA) 1,000,000 1,041,050
Florida State Department of
Transportation 5.00% 7/1/31 (FGIC) 1,525,000 1,577,826
Jacksonville Sales Tax Revenue
5.00% 10/1/30 (MBIA) 1,500,000 1,555,515
Jacksonville Transportation Revenue
5.25% 10/1/29 (MBIA) 2,000,000 2,112,740
Miami Beach Resort Tax Revenue
5.50% 10/1/16 (AMBAC) 1,000,000 1,029,000
(*) Miami-Dade County Special Obligation
(Capital Appreciation & Income)
Series B 5.00% 10/1/35 (MBIA) 2,000,000 1,750,940
Seminole County Sales Tax Revenue
5.00% 10/1/31 (MBIA) 1,000,000 1,043,420
-----------
10,110,491
-----------
Electric & Gas Revenue Bonds - 5.78%
JEA Electric Systems Revenue Series 3-A
5.00% 10/1/34 (FSA) 2,000,000 2,049,940
-----------
2,049,940
-----------
Higher Education Revenue Bonds - 3.57%
Florida Agriculture & Mechanical
University Revenue
(Student Apartment Facility)
5.625% 7/1/21 (MBIA) 1,250,000 1,268,275
-----------
1,268,275
-----------
Hospital Revenue Bonds - 17.89%
Escambia County Health Facilities
Authority (Florida Health Care
Facilities - VHA Program)
5.95% 7/1/20 (AMBAC) 355,000 373,804
Lee County Memorial Health System
Board of Directors Series A
5.00% 4/1/20 (FSA) 1,000,000 1,032,140
Miami-Dade County Public Facilities
Revenue (Jackson Health Systems)
Series A 5.00% 6/1/35 (MBIA) 1,500,000 1,546,635
Orange County Health Facilities
Authority Revenue
(Orlando Regional Healthcare)
Series A 6.25% 10/1/18 (MBIA) 2,000,000 2,358,140
South Broward Hospital Refunding
5.00% 5/1/35 (MBIA) 1,000,000 1,038,900
-----------
6,349,619
-----------
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds - 23.48%
Broward County Housing Finance
Authority (St. Croix Apartments
Project) Series A 5.45% 11/1/36
(FSA) (AMT) $ 935,000 $ 958,843
Florida Housing Finance Agency
(Homeowner Mortgage) Series 2
5.90% 7/1/29 (MBIA) (AMT) 565,000 577,515
(Leigh Meadows Apartments HUD)
Series N 6.30% 9/1/36
(AMBAC) (AMT) 2,510,000 2,570,816
(Woodbridge Apartments Project)
Series L
6.05% 12/1/16 (AMBAC) (AMT) 1,120,000 1,149,725
6.25% 6/1/36 (AMBAC) (AMT) 1,500,000 1,539,810
Volusia County Multifamily Housing
Finance Authority
(San Marco Apartments) Series A
5.60% 1/1/44 (FSA) (AMT) 1,500,000 1,538,370
-----------
8,335,079
-----------
Municipal Lease Revenue Bonds - 15.93%
Broward County School Board
Certificates of Participation
Series A 5.25% 7/1/24 (FSA) 1,000,000 1,061,500
Florida State Municipal Loan
(Council Revenue) Series A
5.00% 2/1/35 (MBIA) 2,000,000 2,069,900
Orange County School Board
Certificates of Participation
Series A 5.00% 8/1/27 (MBIA) 1,250,000 1,286,463
Palm Beach County School Board
Certificates of Participation
Series D 5.00% 8/1/28 (FSA) 1,200,000 1,235,004
-----------
5,652,867
-----------
Ports & Harbors Revenue Bonds - 2.89%
Florida Ports Financing Commission
State Transportation Trust Fund
5.375% 6/1/27 (MBIA) (AMT) 1,000,000 1,023,990
-----------
1,023,990
-----------
ss. Pre-Refunded Bonds - 20.52%
Florida State Board of Education
(Capital Outlay Public Education)
Series C 6.00% 6/1/21-10 (FGIC) 2,000,000 2,194,380
Indian River County Water & Sewer
Revenue 5.50% 9/1/16-06 (FGIC) 1,000,000 1,027,720
Sunrise Utility System Revenue
Series A 5.75% 10/1/26-06 (AMBAC) 1,900,000 1,940,109
Tampa Utility Tax Improvement
Series A 6.125% 10/1/19-09 (AMBAC) 1,000,000 1,088,750
Village Center Community Development
District Recreational Revenue
Series A 5.85% 11/1/16-06 (MBIA) 1,000,000 1,033,240
------------
7,284,199
------------
(continued) 15
Statements of net assets
Delaware Investments Florida Insured Municipal Income Fund
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
State General Obligation Bonds - 5.86%
Florida State Board of Education Public
Education (Capital Outlay)
Series C 5.00% 6/1/34 (AMBAC) $2,000,000 $ 2,080,560
------------
2,080,560
------------
Tax Increment/Special Assessment Bonds - 0.86%
Julington Creek Plantation Community
Development District Special
Assessment 5.00% 5/1/29 (MBIA) 295,000 304,664
------------
304,664
------------
Turnpike/Toll Road Revenue Bonds - 2.92%
Miami-Dade County Expressway
Authority Toll Systems Revenue
Series B 5.00% 7/1/33 (FGIC) 1,000,000 1,035,820
------------
1,035,820
------------
Water & Sewer Revenue Bonds - 15.23%
JEA Water & Sewer Systems Revenue
Sub-Second Crossover
5.00% 10/1/25 (MBIA) 1,000,000 1,042,530
Riviera Beach Utilities Special District
Water & Sewer Revenue
5.00% 10/1/34 (FGIC) 1,200,000 1,245,168
Village Center Community Development
District Utility Revenue
5.00% 10/1/36 (MBIA) 1,500,000 1,550,880
Winter Haven Utilities Systems Revenue
Refunding & Improvement
5.00% 10/1/30 (MBIA) 1,500,000 1,567,486
------------
5,406,064
------------
Total Municipal Bonds (cost $52,651,047) 54,252,438
------------
Total Market Value of Securities - 152.86%
(cost $52,651,047) 54,252,438
Receivables and Other Assets
Net of Liabilities - 3.49% 1,239,770
Liquidation Value of Preferred Stock - (56.35%) (20,000,000)
------------
Net Assets Applicable to 2,422,200
Shares Outstanding - 100.00% $35,492,208
===========
Net Asset Value Per Common Share
($35,492,208 / 2,422,200 Shares) $14.65
------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Components of Net Assets at March 31, 2006:
Common stock, $0.01 par value,
unlimited shares authorized to the Fund $33,361,389
Undistributed net investment income 422,158
Accumulated net realized gain on investments 107,270
Net unrealized appreciation of investments 1,601,391
-----------
Total net assets $35,492,208
===========
(*) Step coupon bond. Indicates security that has a zero coupon that remains in
effect until a predetermined date at which time the stated interest rate
becomes effective.
ss. Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded. See Note 7 in "Notes to
financial statements."
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
16 (continued)
Statements of net assets
Delaware Investments Minnesota Municipal Income Fund II, Inc.
March 31, 2006
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds - 150.39%
------------------------------------------------------------------------------------
Airport Revenue Bonds - 11.30%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
Series A 5.00% 1/1/22 (MBIA) $3,000,000 $ 3,110,130
Series A 5.00% 1/1/28 (MBIA) 2,120,000 2,190,320
Series A 5.00% 1/1/30 (AMBAC) 2,450,000 2,493,782
Series A 5.125% 1/1/25 (FGIC) 900,000 933,183
Series A 5.25% 1/1/16 (MBIA) 1,000,000 1,062,000
Series B 5.00% 1/1/35 (AMBAC) 2,000,000 2,067,880
Series B 5.25% 1/1/24 (FGIC) (AMT) 1,000,000 1,031,040
Series C 5.25% 1/1/32 (FGIC) 6,000,000 6,265,200
------------
19,153,535
------------
City General Obligation Bonds - 2.14%
Minneapolis/St. Paul Metropolitan
Council Series C 5.00% 2/1/22 1,000,000 1,045,150
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/32 (FSA) 2,500,000 2,585,325
------------
3,630,475
------------
Continuing Care/Retirement Revenue Bonds - 1.66%
St. Paul Housing & Redevelopment
Authority Revenue
(Franciscan Health Project)
5.40% 11/20/42 (GNMA) (FHA) 2,700,000 2,818,719
------------
2,818,719
------------
Corporate-Backed Revenue Bonds - 4.71%
Anoka County Solid Waste Disposal
National Rural Co-Op Utility (United
Power Association) Series A
6.95% 12/1/08 (AMT) 435,000 436,827
Cloquet Pollution Control Revenue
(Potlatch Corporation Project)
5.90% 10/1/26 5,500,000 5,602,850
Minneapolis Community Development
Agency Supported Development
Revenue (Pajor Graphics)
Series 1 6.75% 12/1/25
(LOC - US Bank NA) (AMT) 865,000 921,727
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 1,000,000 1,016,370
------------
7,977,774
------------
Dedicated Tax & Fees Revenue Bonds - 0.31%
Virgin Islands Public Finance Authority
(Matching Fund Loan Notes)
5.25% 10/1/23 500,000 529,685
------------
529,685
------------
Electric & Gas Revenue Bonds - 17.67%
Chaska Electric Revenue
(Generating Facilities)
Series A 5.25% 10/1/25 250,000 263,773
Minnesota State Municipal
Power Agency Series A
5.00% 10/1/34 6,500,000 6,626,230
5.25% 10/1/19 1,610,000 1,710,867
Rochester Electric Utility Revenue
5.25% 12/1/30 (AMBAC) 600,000 631,134
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Electric & Gas Revenue Bonds (continued)
Southern Minnesota Municipal
Power Agency Supply System
Revenue Series A
5.00% 1/1/12 (AMBAC) $1,000,000 $ 1,059,020
5.25% 1/1/15 (AMBAC) 1,270,000 1,381,747
5.25% 1/1/16 (AMBAC) 1,500,000 1,635,510
(&) Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater ROLs
Series II-R-189 7.251% 1/1/15
(AMBAC) 1,500,000 1,763,985
Series II-R-189-3 7.206% 1/1/14
(AMBAC) 7,000,000 8,160,319
Western Minnesota
Municipal Power Agency
Series A 5.00% 1/1/30 (MBIA) 5,460,000 5,647,551
Series B 5.00% 1/1/15 (MBIA) 1,000,000 1,069,730
-----------
29,949,866
-----------
Escrowed to Maturity Bonds - 19.51%
Dakota/Washington Counties Housing &
Redevelopment Authority
Bloomington Mortgage Single Family
Residential Revenue 8.375% 9/1/21
(GNMA) (FHA) (VA) (AMT) 8,055,000 11,627,393
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series A 5.75% 1/1/18 3,715,000 3,942,507
Series B 5.50% 1/1/15 (AMBAC) 390,000 413,891
Series B 5.75% 1/1/11 (FGIC) 1,000,000 1,015,060
St. Paul Housing & Redevelopment
Authority Sales Tax
(Civic Center Project)
5.55% 11/1/23 2,300,000 2,356,626
5.55% 11/1/23 (MBIA) 4,200,000 4,303,404
University of Minnesota Hospital &
Clinics 6.75% 12/1/16 2,580,000 3,088,621
University of Minnesota Series A
5.50% 7/1/21 4,000,000 4,534,960
Western Minnesota Municipal Power
Agency Series A 6.625% 1/1/16 1,535,000 1,791,345
-----------
33,073,807
-----------
Higher Education Revenue Bonds - 5.60%
Minnesota State Higher Education
Facilities Authority Revenue
(College of St. Benedict) Series 5-W
5.00% 3/1/20 2,000,000 2,047,460
5.25% 3/1/24 300,000 310,620
(St. Catherine College) Series 5-N1
5.375% 10/1/32 1,500,000 1,564,245
(St. Mary's University) Series 5-U
4.80% 10/1/23 1,400,000 1,408,848
(St. Thomas University) Series 5-Y
5.00% 10/1/24 1,000,000 1,032,140
5.25% 10/1/34 1,500,000 1,572,585
(continued) 17
Statements of net assets
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Higher Education Revenue Bonds (continued)
St. Cloud Housing & Redevelopment
Authority Revenue (State University
Foundation Project) 5.00% 5/1/23 $1,000,000 $ 1,035,190
University of the Virgin Islands
Series A 5.375% 6/1/34 500,000 520,910
------------
9,491,998
------------
Hospital Revenue Bonds - 15.63%
Bemidji Health Care Facilities
First Meeting Revenue
(North Country Health Services)
5.00% 9/1/24 (RADIAN) 1,500,000 1,544,715
Duluth Economic Development
Authority Health Care Facilities
Revenue (Benedictine Health System-
St. Mary's Hospital) 5.25% 2/15/33 5,000,000 5,104,699
Glencoe Minnesota Health Care Facilities
Revenue (Glencoe Regional Health
Services Project) 5.00% 4/1/25 2,000,000 2,026,760
Minneapolis Health Care System Revenue
(Allina Health Systems) Series A
5.75% 11/15/32 3,200,000 3,401,280
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 1,500,000 1,556,790
5.00% 11/15/34 (AMBAC) 3,250,000 3,362,775
Minnesota Agricultural & Economic
Development Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 100,000 104,868
6.375% 11/15/29 195,000 210,031
Rochester Health Care Facilities Revenue
(Mayo Foundation) Series B
5.50% 11/15/27 4,365,000 4,536,239
Shakopee Health Care Facilities Revenue
(St. Francis Regional Medical Center)
5.25% 9/1/34 810,000 831,684
St. Louis Park Health Care Facilities
Revenue (Park Nicollet Health Services)
Series B 5.25% 7/1/30 1,250,000 1,290,000
St. Paul Housing & Redevelopment
Authority Health Care Facilities
Revenue (Regions Hospital Project)
5.30% 5/15/28 1,000,000 1,011,130
Waconia Health Care Facilities Revenue
(Ridgeview Medical Center Project)
Series A 6.10% 1/1/19 (RADIAN) 1,405,000 1,506,441
------------
26,487,412
------------
Investor Owned Utilities Revenue Bonds - 1.95%
Laurentian Energy Authority I
Series A 5.00% 12/1/21 3,325,000 3,314,393
------------
3,314,393
------------
Library/Museum Revenue Bonds - 2.60%
Minneapolis Art Center Facilities
Revenue (Walker Art Center Project)
5.125% 7/1/21 4,250,000 4,410,310
------------
4,410,310
------------
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds - 7.71%
Chanhassen Multifamily Housing
Revenue (Heritage Park Apartments
Project-Section 8) 6.20% 7/1/30
(FHA) (AMT) $1,105,000 $ 1,135,531
Harmony Multifamily Housing Revenue
Section 8 (Zedakah Foundation
Project) Series A 5.95% 9/1/20 1,000,000 847,960
Minneapolis Community Development
Agency Development Revenue
(Limited Tax Supported Common
Bond Fund) Series 5 5.70% 12/1/27 375,000 380,569
Minneapolis Multifamily Housing Revenue
(Gaar Scott Loft Project)
5.95% 5/1/30 (AMT) 965,000 1,006,505
(Olson Townhomes Project)
6.00% 12/1/19 (AMT) 930,000 930,121
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 2,000,000 2,070,340
(Sumner Housing Project) Series A
5.15% 2/20/45 (GNMA) (AMT) 3,575,000 3,619,043
Minnesota State Housing
Finance Agency Rental Housing
Series A 5.00% 2/1/35 (AMT) 1,000,000 1,008,790
Series D 5.95% 2/1/18 (MBIA) 135,000 136,362
Southeastern Minnesota Multi-County
Housing & Redevelopment Authority
(Winona County) 5.35% 1/1/28 1,170,000 1,175,265
Washington County Housing &
Redevelopment Authority
Governmental Revenue
(Woodland Park Apartments Project)
4.70% 10/1/32 750,000 750,998
-----------
13,061,484
-----------
Municipal Lease Revenue Bonds - 11.04%
Andover Economic Development
Authority Public Facilities Lease
Revenue (Andover Community Center)
5.125% 2/1/24 500,000 515,575
5.20% 2/1/29 1,000,000 1,032,580
Minneapolis Development Revenue
(Limited Tax Supported Common
Bond Fund) 5.50% 12/1/24 (AMT) 1,000,000 1,047,280
Puerto Rico Public Buildings Authority
Guaranteed Government Facilities
Revenue Series D 5.25% 7/1/27 530,000 549,949
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,385,000 2,489,320
5.125% 12/1/27 1,000,000 1,045,960
5.25% 12/1/27 4,800,000 5,060,160
(Robert Street Office Building Project)
5.00% 12/1/27 3,045,000 3,167,653
Series 9 5.25% 12/1/27 2,000,000 2,115,520
18 (continued)
Statements of net assets
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
Municipal Lease Revenue Bonds (continued)
Virgina Housing & Redevelopment
Authority Health Care Facility
Lease Revenue
5.375% 10/1/30 $ 965,000 $ 988,073
5.25% 10/1/25 680,000 695,572
-----------
18,707,642
-----------
Parking Revenue Bonds - 2.10%
St. Paul Housing & Redevelopment
Authority Parking Revenue
(Block 19 Ramp Project)
Series A 5.35% 8/1/29 (FSA) 3,350,000 3,552,441
-----------
3,552,441
-----------
Political Subdivision General Obligation Bonds - 10.33%
Dakota County Community
Development Agency Governmental
Housing Series A 5.00% 1/1/23 1,100,000 1,150,281
Hennepin County Regional Railroad
Authority 5.00% 12/1/26 3,500,000 3,616,129
Hennepin County Series B
5.00% 12/1/18 2,300,000 2,408,583
Metropolitan Council Waste Water
Treatment Series B 5.00% 12/1/21 2,000,000 2,114,380
Minneapolis Sports Arena Project
5.125% 10/1/20 750,000 769,110
Moorhead Series B 5.00% 2/1/33 (MBIA) 3,250,000 3,374,573
Washington County Housing &
Redevelopment Authority Series B
5.50% 2/1/22 (MBIA) 1,705,000 1,812,620
5.50% 2/1/32 (MBIA) 2,140,000 2,260,375
-----------
17,506,051
-----------
ss. Pre-Refunded Bonds - 16.57%
Chaska Electric Revenue Series A
6.00% 10/1/25-10 1,000,000 1,095,190
Minneapolis Community Development
Agency (Limited Tax Supported
Common Bond Fund)
Series G-1 5.70% 12/1/19-11 1,100,000 1,197,251
Series G-3 5.45% 12/1/31-11 1,000,000 1,081,660
Minneapolis Health Care System Revenue
(Fairview Health Services)
Series A 5.625% 5/15/32-12 2,750,000 3,030,088
Minnesota Agricultural & Economic
Development Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 5,450,000 5,740,539
6.375% 11/15/29-10 6,105,000 6,818,002
Minnesota State Higher Education
Facilities Authority Revenue
(St. Thomas University)
Series 4-A1 5.625% 10/1/21-06 2,010,000 2,031,145
Puerto Rico Commonwealth
6.00% 7/1/26-07 1,000,000 1,044,550
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series D 5.25% 7/1/38-12 1,000,000 1,079,650
Series Y 5.50% 7/1/26-06 2,000,000 2,039,540
Principal Market
Amount Value
------------------------------------------------------------------------------------
Municipal Bonds (continued)
------------------------------------------------------------------------------------
ss. Pre-Refunded Bonds (continued)
Puerto Rico Commonwealth Public
Improvement Series A
5.00% 7/1/27-12 $1,250,000 $ 1,337,350
Puerto Rico Public Buildings Authority
Guaranteed Government Facilities
Revenue Bond Series D
5.25% 7/1/27-12 1,470,000 1,581,147
-----------
28,076,112
-----------
School District General Obligation Bonds - 12.46%
Centennial Independent School
District #012 Series 2002-A
5.00% 2/1/20 (FSA) 800,000 839,344
Elk River Independent School
District #728 Series A
5.00% 2/1/16 (FGIC) 1,500,000 1,593,645
Farmington Independent School
District #192
Series A 5.00% 2/1/23 (FSA) 2,280,000 2,385,610
Series B 5.00% 2/1/27 (FSA) 1,500,000 1,570,230
Lakeville Independent School
District #194 Series A
4.75% 2/1/22 (FSA) 2,000,000 2,054,480
Minneapolis Special School District #001
5.00% 2/1/19 (FSA) 1,675,000 1,759,370
Morris Independent School District #769
5.00% 2/1/28 (MBIA) 3,750,000 3,979,462
Mounds View Independent School
District #621 Series A
5.00% 2/1/23 (FSA) 2,020,000 2,103,446
Princeton Independent School
District #477 Series A
5.00% 2/1/24 (FSA) 1,000,000 1,050,560
Robbinsdale Independent School
District #281 5.00% 2/1/21 (FSA) 500,000 520,740
St. Michael Independent
School District #885
5.00% 2/1/22 (FSA) 2,000,000 2,084,420
5.00% 2/1/24 (FSA) 1,125,000 1,169,303
-----------
21,110,610
-----------
Single Family Housing Revenue Bonds - 2.34%
Dakota County Housing &
Redevelopment Authority Single
Family Mortgage Revenue
Series B 5.85% 10/1/30
(GNMA) (FNMA) (AMT) 28,000 28,690
Minnesota State Housing Finance Agency
Single Family Mortgage Revenue
Series 1992-C2 6.15% 7/1/23 (AMT) 920,000 920,874
Series B 5.35% 1/1/33 (AMT) 1,780,000 1,819,106
Series J 5.90% 7/1/28 (AMT) 1,155,000 1,190,158
-----------
3,958,828
-----------
(continued) 19
Statements of net assets
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
--------------------------------------------------------------------------------
State General Obligation Bonds - 3.47%
Minnesota State 5.00% 8/1/21 $5,025,000 $ 5,278,160
(&) Minnesota State,
Inverse Floater ROLs 6.832% 11/1/17 570,000 605,260
------------
5,883,420
------------
Tax Increment/Special Assessment Bonds - 0.63%
Moorhead Economic Development
Authority Tax Increment Series A
5.25% 2/1/25 (MBIA) 1,000,000 1,063,740
------------
1,063,740
------------
Territorial General Obligation Bonds - 0.66%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 1,000,000 1,127,200
------------
1,127,200
------------
Total Municipal Bonds (cost $244,945,455) 254,885,502
------------
------------------------------------------------------------------------------------
Short-Term Investments - 3.44%
------------------------------------------------------------------------------------
o Variable Rate Demand Notes - 3.44%
Minneapolis Health Care System
Revenue (Fairview Health Services)
Class A 3.16% 11/15/32
(AMBAC) (SPA - Citibank N.A.) 5,830,000 5,830,000
------------
Total Short-Term Investments
(cost $5,830,000) 5,830,000
------------
Total Market Value of Securities - 153.83%
(cost $250,775,455) 260,715,502
Receivables and Other Assets
Net of Liabilities - 2.22% 3,765,117
Liquidation Value of Preferred Stock - (56.05%) (95,000,000)
------------
Net Assets Applicable to 11,504,975
Shares Outstanding - 100.00% $169,480,619
------------
Net Asset Value Per Common Share
($169,480,619 / 11,504,975 Shares) $14.73
------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Components of Net Assets at March 31, 2006:
Common Stock, $0.01 par value,
200 million shares authorized to the Fund $158,785,529
Undistributed net investment income 969,303
Accumulated net realized loss on investments (214,260)
Net unrealized appreciation of investments 9,940,047
------------
Total net assets $169,480,619
============
ss. Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded. See Note 7 in "Notes to
financial statements."
(&) 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 March 31, 2006. See Note
7 in "Notes to financial statements."
o Variable rate security. The interest rate shown is the rate as of March 31,
2006.
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
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
ROLs - Residual Options Long
SPA - Stand-by Purchase Agreement
VA - Insured by the Veterans Administration
See accompanying notes
20
Statements of operations
Delaware Investments Closed-End Municipal Bond Funds
Year Ended March 31, 2006
Delaware Delaware Delaware Delaware
Investments Investments Investments Investments
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Income Income Income Income
Fund, Inc. Fund, Inc. Fund Fund II, Inc.
Investment Income:
Interest $ 3,301,584 $ 5,647,310 $ 2,856,992 $ 8,683,517
----------- ----------- ----------- -----------
Expenses:
Management fees 280,109 462,481 226,913 708,382
Remarketing agent fees 63,019 95,798 50,416 161,910
Accounting and administration expenses 35,499 51,337 30,869 73,892
Dividend disbursing and transfer agent fees and expenses 19,228 28,537 31,725 74,372
Legal and professional fees 17,786 20,753 16,532 102,481
Reports and statements to shareholders 16,624 20,108 12,151 57,035
Rating agency fees 12,817 12,816 12,817 12,818
Taxes (other than taxes on income) 5,781 9,102 383 10,742
Insurance 3,797 6,373 3,110 9,180
Stock exchange fees 2,832 4,621 2,214 6,614
Custodian fees 2,774 4,029 2,867 5,588
Directors'/Trustees' Fees 2,496 4,128 2,007 6,025
Pricing fees 1,428 1,735 1,268 3,378
Registration fees 634 634 634 973
Other 3,552 2,986 3,210 8,326
----------- ----------- ----------- -----------
468,376 725,438 397,116 1,241,716
Less expense paid indirectly (2,721) (3,986) (2,613) (5,475)
----------- ----------- ----------- -----------
Total operating expenses 465,655 721,452 394,503 1,236,241
----------- ----------- ----------- -----------
Net Investment Income 2,835,929 4,925,858 2,462,489 7,447,276
----------- ----------- ----------- -----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments (34,038) 411,416 806,263 217,830
Net change in unrealized appreciation/depreciation of investments (488,430) (1,020,909) (1,379,442) (1,110,246)
----------- ----------- ----------- -----------
Net Realized and Unrealized Loss on Investments (522,468) (609,493) (573,179) (892,416)
----------- ----------- ----------- -----------
Dividends on Preferred Stock (701,535) (1,058,796) (622,604) (1,840,835)
----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting from Operations $ 1,611,926 $ 3,257,569 $ 1,266,706 $ 4,714,025
=========== =========== =========== ===========
See accompanying notes
21
Statements of changes in net assets
Delaware Investments Closed-End Municipal Bond Funds
Delaware Investments Delaware Investments
Arizona Municipal Income Colorado Insured Municipal
Fund, Inc. Income Fund, Inc.
Year Ended Year Ended
3/31/06 3/31/05 3/31/06 3/31/05
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 2,835,929 $ 2,855,348 $ 4,925,858 $ 4,928,339
Net realized gain (loss) on investments (34,038) 83,408 411,416 80,722
Net change in unrealized
appreciation/depreciation of investments (488,430) (1,080,216) (1,020,909) (2,143,648)
Dividends on preferred stock (701,535) (361,013) (1,058,796) (615,308)
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations 1,611,926 1,497,527 3,257,569 2,250,105
------------ ------------ ------------ ------------
Dividends and Distributions to Common Shareholders from:
Net investment income (2,564,692) (2,862,911) (4,643,616) (4,643,616)
Net realized gain on investments (59,644) (128,235) (145,113) (145,113)
------------ ------------ ------------ ------------
(2,624,336) (2,991,146) (4,788,729) (4,788,729)
------------ ------------ ------------ ------------
Net Decrease in Net Assets (1,012,410) (1,493,619) (1,531,160) (2,538,624)
Net Assets:
Beginning of year 44,935,759 46,429,378 75,364,022 77,902,646
------------ ------------ ------------ ------------
End of year $ 43,923,349 $ 44,935,759 $ 73,832,862 $ 75,364,022
============ ============ ============ ============
Undistributed net investment income $ 330,793 $ 765,316 $ 938,459 $ 1,685,741
============ ============ ============ ============
Delaware Delaware
Investments Florida Investments Minnesota
Insured Municipal Municipal Income
Income Fund Fund II, Inc.
Year Ended Year Ended
3/31/06 3/31/05 3/31/06 3/31/05
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 2,462,489 $ 2,559,275 $ 7,447,276 $ 7,432,435
Net realized gain on investments 806,263 286,142 217,830 257,523
Net change in unrealized
appreciation/depreciation of investments (1,379,442) (1,915,443) (1,110,246) (2,017,417)
Dividends on preferred stock (622,604) (297,142) (1,840,835) (927,702)
------------- ----------- ------------- -------------
Net increase in net assets resulting from operations 1,266,706 632,832 4,714,025 4,744,839
------------- ----------- ------------- -------------
Dividends and Distributions to Common Shareholders from:
Net investment income (2,349,534) (2,470,644) (6,835,306) (7,614,810)
Net realized gain on investments (591,017) (239,798) -- --
------------- ----------- ------------- -------------
(2,940,551) (2,710,442) (6,835,306) (7,614,810)
------------- ----------- ------------- -------------
Capital Share Transactions:
Net assets from reorganization* -- -- 63,644,025 --
------------- ----------- ------------- -------------
-- -- 63,644,025 --
------------- ----------- ------------- -------------
Net Increase (Decrease) in Net Assets (1,673,845) (2,077,610) 61,522,744 (2,869,971)
Net Assets:
Beginning of year 37,166,053 39,243,663 107,957,875 110,827,846
------------- ----------- ------------- -------------
End of year $ 35,492,208 $37,166,053 $ 169,480,619 $ 107,957,875
============= =========== ============= =============
Undistributed net investment income $ 422,158 $ 799,507 $ 969,303 $ 2,250,617
============= =========== ============= =============
*See Note 6 in "Notes to Financial Statements."
See accompanying notes
22
Financial highlights
Delaware Investments Arizona Municipal Income Fund, Inc.
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
-------------------------------------------------------------------
3/31/06 3/31/05 3/31/04 3/31/03 3/31/02
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.070 $15.570 $15.480 $14.650 $14.970
Income (loss) from investment operations:
Net investment income 0.951 0.956 1.020 1.067 1.113
Net realized and unrealized gain (loss) on investments (0.177) (0.332) 0.276 0.988 (0.257)
Dividends on preferred stock from:
Net investment income (0.232) (0.118) (0.075) (0.103) (0.164)
Net realized gain on investments (0.002) (0.003) (0.016) (0.018) (0.051)
-------- -------- -------- -------- --------
Total dividends on preferred stock (0.234) (0.121) (0.091) (0.121) (0.215)
-------- -------- -------- -------- --------
Total from investment operations 0.540 0.503 1.205 1.934 0.641
-------- -------- -------- -------- --------
Less dividends and distributions to common shareholders from:
Net investment income (0.860) (0.960) (0.960) (0.940) (0.817)
Net realized gain on investments (0.020) (0.043) (0.155) (0.164) (0.144)
-------- -------- -------- -------- --------
Total dividends and distributions (0.880) (1.003) (1.115) (1.104) (0.961)
-------- -------- -------- -------- --------
Net asset value, end of period $14.730 $15.070 $15.570 $15.480 $14.650
======== ======== ======== ======== ========
Market value, end of period $15.980 $15.390 $16.560 $15.490 $14.750
======== ======== ======== ======== ========
Total investment return based on:(1)
Market value 9.74% (0.78%) 14.64% 12.74% 10.22%
Net asset value 3.31% 3.34% 7.86% 13.44% 4.21%
Ratios and supplemental data:
Net assets applicable to common shares,
end of period (000 omitted) $43,923 $44,936 $46,429 $46,167 $43,703
Ratio of expenses to average net assets
applicable to common shares(2) 1.03% 1.18% 1.05% 1.16% 1.19%
Ratio of net investment income to average net assets
applicable to common shares(2) 6.28% 6.34% 6.63% 6.96% 7.41%
Ratio of net investment income to average net assets
applicable to common shares
net of dividends to preferred shares(3) 4.72% 5.54% 6.04% 6.18% 5.99%
Portfolio turnover 2% 8% 30% 24% 43%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $25,000 $25,000 $25,000 $25,000 $25,000
Net asset coverage per share of preferred shares, end of $137,847 $139,872 $142,858 $142,334 $137,405
period
Liquidation value per share of preferred shares(4) $50,000 $50,000 $50,000 $50,000 $50,000
------------------------------------------------------------------------------------------------------------------------------
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each 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.
(2) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(3) Ratio reflects total net investment income less dividends paid to preferred
shareholders divided by average net assets applicable to common
shareholders.
(4) Excluding any accumulated but unpaid dividends.
See accompanying notes
(continued) 23
Financial highlights
Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
-------------------------------------------------------------------
3/31/06 3/31/05 3/31/04 3/31/03 3/31/02
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.580 $16.110 $15.920 $14.780 $15.260
Income (loss) from investment operations:
Net investment income 1.018 1.019 1.043 1.068 1.094
Net realized and unrealized gain (loss) on investments (0.129) (0.432) 0.324 1.324 (0.401)
Dividends on preferred stock from:
Net investment income (0.213) (0.124) (0.077) (0.098) (0.172)
Net realized gain on investments (0.006) (0.003) (0.013) (0.023) (0.051)
-------- -------- -------- -------- --------
Total dividends on preferred stock (0.219) (0.127) (0.090) (0.121) (0.223)
-------- -------- -------- -------- --------
Total from investment operations 0.670 0.460 1.277 2.271 0.470
-------- -------- -------- -------- --------
Less dividends and distributions to common shareholders from:
Net investment income (0.960) (0.960) (0.960) (0.940) (0.818)
Net realized gain on investments (0.030) (0.030) (0.127) (0.191) (0.132)
-------- -------- -------- -------- --------
Total dividends and distributions (0.990) (0.990) (1.087) (1.131) (0.950)
-------- -------- -------- -------- --------
Net asset value, end of period $15.260 $15.580 $16.110 $15.920 $14.780
======== ======== ======== ======== ========
Market value, end of period $18.650 $17.180 $16.960 $16.650 $14.700
======== ======== ======== ======== ========
Total investment return based on:(1)
Market value 14.64% 7.42% 8.76% 21.31% 7.52%
Net asset value 3.44% 2.56% 8.05% 15.37% 3.15%
Ratios and supplemental data:
Net assets applicable to common shares,
end of period (000 omitted) $73,833 $75,364 $77,903 $76,988 $71,506
Ratio of expenses to average net assets
applicable to common shares(2) 0.95% 1.03% 1.01% 1.05% 1.01%
Ratio of net investment income to average net assets
applicable to common shares(2) 6.51% 6.51% 6.54% 6.83% 7.18%
Ratio of net investment income to average net assets
applicable to common shares
net of dividends to preferred shares(3) 5.11% 5.69% 5.98% 6.08% 5.71%
Portfolio turnover 12% 5% 13% 14% 37%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $40,000 $40,000 $40,000 $40,000 $40,000
Net asset coverage per share of preferred shares, end of $142,291 $144,205 $147,379 $146,235 $139,382
period
Liquidation value per share of preferred shares(4) $50,000 $50,000 $50,000 $50,000 $50,000
------------------------------------------------------------------------------------------------------------------------------
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each 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.
(2) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(3) Ratio reflects total net investment income less dividends paid to preferred
shareholders divided by average net assets applicable to common
shareholders.
(4) Excluding any accumulated but unpaid dividends.
See accompanying notes
24 (continued)
Financial highlights
Delaware Investments Florida Insured Municipal Income Fund
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
-------------------------------------------------------------------
3/31/06 3/31/05 3/31/04 3/31/03 3/31/02
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.340 $16.200 $16.370 $15.150 $15.400
Income (loss) from investment operations:
Net investment income 1.017 1.057 1.088 1.084 1.071
Net realized and unrealized gain (loss) on investments (0.236) (0.675) (0.130) 1.186 (0.337)
Dividends on preferred stock from:
Net investment income (0.202) (0.114) (0.082) (0.109) (0.179)
Net realized gain on investments (0.055) (0.009) (0.005) - -
-------- -------- -------- -------- --------
Total dividends on preferred stock (0.257) (0.123) (0.087) (0.109) (0.179)
-------- -------- -------- -------- --------
Total from investment operations 0.524 0.259 0.871 2.161 0.555
-------- -------- -------- -------- --------
Less dividends and distributions to common shareholders from:
Net investment income (0.970) (1.020) (0.995) (0.941) (0.805)
Net realized gain on investments (0.244) (0.099) (0.046) - -
-------- -------- -------- -------- --------
Total dividends and distributions (1.214) (1.119) (1.041) (0.941) (0.805)
-------- -------- -------- -------- --------
Net asset value, end of period $14.650 $15.340 $16.200 $16.370 $15.150
======== ======== ======== ======== ========
Market value, end of period $16.050 $15.050 $16.650 $15.050 $14.020
======== ======== ======== ======== ========
Total investment return based on:(1)
Market value 14.75% (3.02%) 18.04% 14.17% 12.63%
Net asset value 2.76% 1.59% 5.59% 14.92% 4.16%
Ratios and supplemental data:
Net assets applicable to common shares,
end of period (000 omitted) $35,492 $37,166 $39,244 $39,651 $36,696
Ratio of expenses to average net assets
applicable to common shares(2) 1.07% 1.24% 1.11% 1.18% 1.34%
Ratio of net investment income to average net assets
applicable to common shares(2) 6.70% 6.75% 6.70% 6.81% 6.95%
Ratio of net investment income to average net assets
applicable to common shares
net of dividends to preferred shares(3) 5.01% 5.97% 6.16% 6.13% 5.79%
Portfolio turnover 28% 11% 3% 13% 13%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $20,000 $20,000 $20,000 $20,000 $20,000
Net asset coverage per share of preferred shares, end of $138,731 $142,915 $148,110 $149,128 $141,740
period
Liquidation value per share of preferred shares(4) $50,000 $50,000 $50,000 $50,000 $50,000
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each 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.
(2) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(3) Ratio reflects total net investment income less dividends paid to preferred
shareholders divided by average net assets applicable to common
shareholders.
(4) Excluding any accumulated but unpaid dividends.
See accompanying notes
(continued) 25
Financial highlights
Delaware Investments Minnesota Municipal Income Fund II, Inc.
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
-------------------------------------------------------------------
3/31/06 3/31/05 3/31/04 3/31/03 3/31/02
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.890 $15.280 $15.060 $14.280 $14.450
Income (loss) from investment operations:
Net investment income 0.971 1.025 1.093 1.143 1.163
Net realized and unrealized gain (loss) on investments 0.012 (0.237) 0.207 0.689 (0.313)
Dividends on preferred stock from:
Net investment income (0.243) (0.128) (0.082) (0.112) (0.182)
-------- -------- -------- -------- --------
Total dividends on preferred stock (0.243) (0.128) (0.082) (0.112) (0.182)
-------- -------- -------- -------- --------
Total from investment operations 0.740 0.660 1.218 1.720 0.668
-------- -------- -------- -------- --------
Less dividends to common shareholders from:
Net investment income (0.900) (1.050) (0.998) (0.940) (0.838)
-------- -------- -------- -------- --------
Total dividends (0.900) (1.050) (0.998) (0.940) (0.838)
-------- -------- -------- -------- --------
Net asset value, end of period $14.730 $14.890 $15.280 $15.060 $14.280
======== ======== ======== ======== ========
Market value, end of period $16.200 $16.370 $16.800 $15.300 $14.050
======== ======== ======== ======== ========
Total investment return based on:(1)
Market value 4.73% 4.02% 16.87% 15.84% 5.75%
Net asset value 4.69% 4.03% 7.99% 12.19% 4.73%
Ratios and supplemental data:
Net assets applicable to common shares,
end of period (000 omitted) $169,481 $107,958 $110,828 $109,212 $103,573
Ratio of expenses to average net assets
applicable to common shares(2) 1.07% 1.00% 0.93% 1.03% 1.06%
Ratio of net investment income to average net assets
applicable to common shares(2) 6.45% 6.85% 7.23% 7.74% 8.03%
Ratio of net investment income to average net assets
applicable to common shares
net of dividends to preferred shares(3) 4.86% 6.00% 6..69% 6.99% 6.79%
Portfolio turnover 8% 15% 34% 22% 7%
Leverage analysis:
Value of preferred shares outstanding (000 omitted) $95,000 $60,000 $60,000 $60,000 $60,000
Net asset coverage per share of preferred shares, end of $139,200 $139,965 $142,357 $141,010 $136,311
period
Liquidation value per share of preferred shares(4) $50,000 $50,000 $50,000 $50,000 $50,000
------------------------------------------------------------------------------------------------------------------------------
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each 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.
(2) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(3) Ratio reflects total net investment income less dividends paid to preferred
shareholders divided by average net assets applicable to common
shareholders.
(4) Excluding any accumulated but unpaid dividends.
See accompanying notes
26
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
March 31, 2006
Delaware Investments Arizona Municipal Income Fund, Inc. ("Arizona Municipal
Fund"); Delaware Investments Colorado Insured Municipal Income Fund, Inc.
("Colorado Insured Municipal Fund") and Delaware Investments Minnesota Municipal
Income Fund II, Inc. ("Minnesota Municipal Fund II") 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"). Arizona
Municipal Fund, Florida Insured Municipal Fund and Minnesota Municipal Fund II
are considered diversified closed-end management investment companies and
Colorado Insured Municipal Fund is considered a non-diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended. The Funds' common shares trade on the American Stock Exchange. The
Funds' preferred shares are traded privately through a remarketing agent.
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 each Fund's Board of
Directors/Trustees. In determining whether market quotations are readily
available or fair valuation will be used, various factors will be taken into
consideration, such as market closures, aftermarket trading or significant
events after local market trading (e.g., government actions or pronouncements,
trading volume or volatility on markets, exchanges among dealers, or news
events).
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(R) 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) for
financial reporting purposes. 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 or December 31 of the prior year.
The Funds receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statements of
Operations with the corresponding expense offset shown as "expense paid
indirectly."
(continued) 27
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
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 weekly net assets of each Fund,
including assets attributable to any preferred stock that may be outstanding.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting
and administration services. Effective May 19, 2005, the Funds pay DSC a monthly
fee computed at the annual rate of 0.04% of the Funds' average daily net assets
for accounting and administration services. Prior to May 19, 2005, the Funds
paid DSC a monthly fee based on average net assets subject to certain minimums
for accounting and administration services.
At March 31, 2006, each Fund had liabilities payable to affiliates as follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
Investment management fee payable to DMC $23,112 $38,137 $18,583 $88,695
Accounting administration and other expenses payable to DSC 4,024 15,224 4,842 16,607
Other expenses payable to DMC and affiliates* 1,852 2,880 663 16,402
*DMC, as part of its administrative services, pays operating expenses on behalf
of each Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax services,
stock exchange fees, custodian fees and directors/trustees' fees.
As provided in the investment management agreement, each Fund bears the cost of
certain legal services expenses, including internal legal services provided by
DMC employees. For the year ended March 31, 2006, each Fund was charged for
internal legal services provided by DMC as follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
$2,781 $4,673 $2,111 $7,246
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 year ended March 31, 2006, the Funds made purchases and sales of
investment securities other than short-term investments as follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
Purchases $3,485,125 $13,192,095 $15,814,938 $14,670,393
Sales 1,703,514 14,016,800 17,140,610 15,161,340
At March 31, 2006, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
Cost of investments $65,005,149 $106,417,031 $52,651,047 $250,456,126
=========== ============ =========== ============
Aggregate unrealized appreciation $ 2,976,262 $ 5,470,994 $ 1,754,828 $ 11,065,270
Aggregate unrealized depreciation (191,618) (51,732) (153,437) (805,894)
----------- ------------ ----------- ------------
Net unrealized appreciation $ 2,784,644 $ 5,419,262 $ 1,601,391 $ 10,259,376
=========== ============ =========== ============
28 (continued)
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
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 U.S. generally
accepted accounting principles. Additionally, net short-term gains on sales of
investment securities are treated as ordinary income for federal income tax
purposes. The tax character of dividends and distributions paid during the years
ended March 31, 2006 and 2005 was as follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
Year Ended March 31, 2006
Tax-exempt income $3,261,410 $5,673,140 $2,839,838 $8,676,141
Long-term capital gain 64,461 174,385 723,317 --
---------- ---------- ---------- ----------
Total $3,325,871 $5,847,525 $3,563,155 $8,676,141
========== ========== ========== ==========
Year Ended March 31, 2005
Tax-exempt income $3,210,970 $5,245,675 $2,745,766 $8,535,622
Ordinary income 84,725 14,636 -- 6,890
Long-term capital gain 56,464 143,726 261,818 --
---------- ---------- ---------- ----------
Total $3,352,159 $5,404,037 $3,007,584 $8,542,512
========== ========== ========== ==========
As of March 31, 2006, the components of net assets on a tax basis were as
follows:
Arizona Colorado Insured Florida Insured Minnesota
Municipal Municipal Municipal Municipal
Fund Fund Fund Fund II
Shares of beneficial interest $40,838,893 $67,238,110 $33,361,389 $158,785,529
Undistributed tax-exempt income 330,793 938,459 422,158 969,303
Undistributed long-term gains -- 237,031 107,270 --
Capital loss carryforwards (30,981) -- -- (533,589)
Unrealized appreciation of investments 2,784,644 5,419,262 1,601,391 10,259,376
----------- ----------- ----------- ------------
Net assets $43,923,349 $73,832,862 $35,492,208 $169,480,619
=========== =========== =========== ============
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales and tax treatment
of market discount on debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are primarily
due to tax treatment of dividends and distributions and market discount on
certain debt instruments. Results of operations and net assets were not affected
by these reclassifications. For the year ended March 31, 2006, the Funds
recorded the following reclassifications.
Arizona Colorado Insured
Municipal Municipal
Fund Fund
Undistributed net investment income $(11,165) $(52,449)
Accumulated net realized gains (losses) 11,165 52,449
(continued) 29
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
4. Dividend and Distribution Information (continued)
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Capital loss carryforwards
remaining at March 31, 2006 will expire as follows:
Arizona Colorado Insured
Municipal Municipal
Fund Fund
2008 $ -- $339,543
2009 -- 175,804
2010 -- 8,416
2013 -- 9,826
2014 30,981 --
------- --------
Total $30,981 $533,589
======= ========
In 2006, Minnesota Municipal Fund II utilized $241,692 of capital loss
carryforwards.
5. Capital Stock
Pursuant to their articles of incorporation, Arizona Municipal Fund, Colorado
Insured Municipal Fund and Minnesota Municipal Fund II 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 year ended March 31, 2006. Shares issuable under the Funds'
dividend reinvestment plan are purchased by the Funds' transfer agent, Mellon
Investor Services, LLC, in the open market.
For the year ended March 31, 2006, Arizona Municipal Fund, Colorado Insured
Municipal Fund and Florida Insured Municipal Fund did not have any transactions
in common shares. Minnesota Municipal Income Fund II issued common shares in
accordance with the reorganizations described in Note 6 below.
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 shared authorized. On May 14, 1993, Arizona
Municipal Fund and Florida Insured Municipal Fund issued 500 and 400 preferred
shares, respectively. Also on that date, Minnesota Municipal Fund II issued 600
Series A and 600 Series B preferred shares. 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.
In connection with the reorganizations described in Note 6 below, shareholders
of Minnesota Municipal Fund II approved amendments to its charter to create two
new series to absorb the preferred stock of Minnesota Municipal Fund and
Minnesota Municipal Fund III. These new series have identical rights and
preferences (including liquidation rights) in all material respects to the
preferred shares of Minnesota Municipal Fund and Minnesota Municipal Fund III,
and are substantially similar to the Series A and B preferred shares of
Minnesota Municipal Fund II with respect to their preferences, voting powers,
restrictions, limitation as to dividends, qualifications, liquidation rights,
and term and conditions of redemption.
Minnesota Municipal Fund II issued 400 Series C Preferred Shares to preferred
shareholders of Minnesota Municipal Fund in exchange for that Fund's preferred
shares and 300 Series D Preferred Shares to preferred shareholders of Minnesota
Municipal Fund III in exchange for that Fund's preferred shares at the close of
the reorganization on February 24, 2006.
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 year ended March 31, 2006 as
follows:
Fund Low High
---- ---- ----
Arizona Municipal Fund 2.10% to 3.40%
Colorado Insured Municipal Fund 1.00% to 3.90%
Florida Insured Municipal Fund 2.10% to 7.00%
Minnesota Municipal Fund II 1.75% to 3.40%
Citigroup Global Markets, Inc. (formerly 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.
30 (continued)
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
5. Capital Stock (continued)
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 to Section 13(a) of the 1940 Act, including, among
other things, changes in each of the Fund's subclassificiation as a closed-end
investment company or (c) changes in their fundamental investment restrictions.
6. Fund Reorganizations
At the close of business on February 24, 2006, Minnesota Municipal Fund II
acquired substantially all of the assets of Delaware Investments Minnesota
Municipal Income Fund, Inc. ("Minnesota Municipal Fund") and Delaware
Investments Minnesota Municipal Income Fund III, Inc. ("Minnesota Municipal Fund
III"), each pursuant to an Agreement and Plan of Acquisition (the
"Reorganizations"). The common shareholders of Minnesota Municipal Fund and
Minnesota Municipal Fund III each received common shares of Minnesota Municipal
Fund II equal to the aggregate net asset value of their respective shares prior
to the Reorganization. The preferred shareholders of Minnesota Municipal Fund
and Minnesota Municipal Fund III received the same number of Series C and Series
D preferred shares, respectively, of Minnesota Municipal Fund II as they held in
their respective funds prior to the Reorganization (see Note 5). The
Reorganizations were treated as non-taxable events and, accordingly, Minnesota
Municipal Fund II's basis in the securities acquired reflected the historical
cost basis as of the date of transfer. The net assets, net unrealized
appreciation and accumulated net realized gain (loss) of Minnesota Municipal
Fund and Minnesota Municipal Fund III as of the close of business on February
24, 2006, were as follows:
Net Unrealized Accumulated Net
Net Assets Appreciation Realized Gain/Loss
---------- -------------- ------------------
Minnesota Municipal Fund $38,077,404 $2,648,640 $ 2,145
Minnesota Municipal Fund III 25,566,621 1,999,455 (81,744)
The net assets of Minnesota Municipal Fund II prior to the Reorganizations were
$108,531,274. The combined net assets of Minnesota Municipal Fund II after the
Reorganization were $172,175,299.
Minnesota Municipal Fund II will continue to trade and to be listed on the
American Stock Exchange. Beginning on February 27, 2006 and going forward,
however, Minnesota Municipal Fund and Minnesota Municipal Fund III will no
longer trade or be listed on the American Stock Exchange, and their corporate
existence will be liquidated and dissolved. In January 2007, shareholders of
Minnesota Municipal Fund and Minnesota Municipal Fund III will receive Form
1099-DIV that will report the amount and character of each Fund's distributions
paid in calendar year 2006.
Common and preferred shares of Minnesota Municipal Fund II issued to
shareholders of Minnesota Municipal Fund and Minnesota Municipal Fund III in
connection with the Reorganizations were as follows:
Common Exchange Preferred Exchange
Shares Issued Ratio Shares Issued Ratio
------------- ---------- ------------- --------
Minnesota Municipal Fund 2,543,581 1.02 to 1 400 1 to 1
Minnesota Municipal Fund III 1,709,194 1.08 to 1 300 1 to 1
7. Credit and Market Risk
The Funds use leverage in the form of preferred shares. Leveraging may result in
a higher degree of volatility because each Fund's net asset value could be more
sensitive to fluctuations in short-term interest rates and changes in market
value of portfolio securities attributable to the leverage.
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, 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 identified on the Statements of Net Assets.
(continued) 31
Notes to financial statements
Delaware Investments Closed-End Municipal Bond Funds
7. Credit and Market Risk (continued)
Each Fund may invest in advanced refunded bonds, escrow secured bonds or
defeased bonds. Under current federal tax laws and regulations, state and local
government borrowers are permitted to refinance outstanding bonds by issuing new
bonds. The issuer refinances the outstanding debt to either reduce interest
costs or to remove or alter restrictive covenants imposed by the bonds being
refinanced. A refunding transaction where the municipal securities are being
refunded within 90 days from the issuance of the refunding issue is known as a
"current refunding." Advance refunded bonds are bonds in which the refunded bond
issue remains outstanding for more than 90 days following the issuance of the
refunding issue. In an advance refunding, the issuer will use the proceeds of a
new bond issue to purchase high grade interest bearing debt securities which are
then deposited in an irrevocable escrow account held by an escrow agent to
secure all future payments of principal and interest and bond premium of the
advance refunded bond. Bonds are "escrowed to maturity" when the proceeds of the
refunding issue are deposited in an escrow account for investment sufficient to
pay all of the principal and interest on the original interest payment and
maturity dates. Bonds are considered "pre-refunded" when the refunding issue's
proceeds are escrowed only until a permitted call date or dates on the refunded
issue with the refunded issue being redeemed at that time, including any
required premium. Bonds become "defeased" when the rights and interests of the
bondholders and of their lien on the pledged revenues or other security under
the terms of the bond contract are substituted with an alternative source of
revenues (the escrow securities) sufficient to meet payments of principal and
interest to maturity or to the first call dates. Escrowed secured bonds will
often receive a rating of AAA from Moody's Investors Service, Inc., Standard &
Poor's Ratings Group, and/or Fitch due to the strong credit quality of the
escrow securities and the irrevocable nature of the escrow deposit agreement.
Each Fund may invest up to 15% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair each Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
While maintaining oversight, each Fund's Board of Directors/Trustees has
delegated to DMC the day-to-day functions of determining whether individual
securities are liquid for purposes of each Fund's limitation on investments in
illiquid assets. At March 31, 2006, there were no Rule 144A securities and no
securities have been determined to be illiquid under the Funds' Liquidity
Procedures.
8. Contractual Obligations
The Funds enter into contracts in the normal course of business 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. Management has reviewed the Funds' existing
contracts and expects the risk of loss to be remote.
9. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year 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 a 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.
For the fiscal year ended March 31, 2006, each Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Tax-
Capital Gains Exempt Total
Distributions Distributions Distributions
(Tax Basis) (Tax Basis) (Tax Basis)
------------- ------------- -------------
Arizona Municipal Fund 2% 98% 100%
Colorado Insured Municipal Fund 3% 97% 100%
Florida Insured Municipal Fund 20% 80% 100%
Minnesota Municipal Fund II -- 100% 100%
(A) and (B) are based on a percentage of each Fund's total distributions.
32
Report of independent
registered public accounting firm
To the Shareholders and Board of Directors/Trustees
Delaware Investments Arizona
Municipal Income Fund, Inc.
Delaware Investments Colorado Insured
Municipal Income Fund, Inc.
Delaware Investments Florida Insured
Municipal Income Fund
Delaware Investments Minnesota
Municipal Income Fund II, Inc.
We have audited the accompanying statements of net assets of Delaware
Investments Arizona Municipal Income Fund, Inc., Delaware Investments Colorado
Insured Municipal Income Fund, Inc., Delaware Investments Florida Insured
Municipal Income Fund and Delaware Investments Minnesota Municipal Income Fund
II, Inc. (the "Funds"), as of March 31, 2006, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Funds' internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Funds' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
respective Funds at March 31, 2006, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and their financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
May 12, 2006
33
Other fund information
Delaware Investments Closed-End Municipal Bond Funds
The shareholders of Delaware Investments Minnesota Municipal Income Fund II,
Inc. (the "Fund") voted on the following proposals at the reconvened special
meeting of shareholders on January 12, 2006. The description of each proposal
and number of shares voted are as follows:
1. To approve an Agreement and Plan of Acquisition among the Fund, Delaware
Investments Minnesota Municipal Income Fund, Inc. ("Minnesota Municipal
Fund") and Delaware Management Company, a series of Delaware Management
Business Trust, that provided for: (i) the acquisition by the Fund of
substantially all of the property, assets and goodwill of Minnesota
Municipal Fund in exchange solely for: (a) full and fractional shares of
common stock, par value $0.01 per share of the Fund ("Fund Common Shares");
and (b) Series C Preferred Shares, liquidation preference $50,000.00 per
share, of the Fund ("Fund Preferred Shares" and, together with Fund Common
Shares, "Fund Shares"); (ii) the pro rata distribution of such Fund Shares
to the shareholders of Minnesota Municipal Fund according to their
respective interests in liquidation of Minnesota Municipal Fund; and (iii)
the dissolution of Minnesota Municipal Fund as soon as is practicable after
the closing.
Numbers Percentage of Percentage of
of Shares Outstanding Shares Shares Voted
------------- ------------------ -------------
Affirmative 4,095,039.401 56.457% 92.635%
Against 199,253.048 2.747% 4.508%
Abstain 126,308,388 1.741% 2.857%
------------- ------- -------
Total 4,420,600.837 60.945% 100.00%
============= ======= =======
2. To approve an Agreement and Plan of Acquisition among the Fund, Delaware
Investments Minnesota Municipal Income Fund III, Inc. ("Minnesota Municipal
Fund III") and Delaware Management Company, a series of Delaware Management
Business Trust, that provided for: (i) the acquisition by the Fund of
substantially all of the property, assets and goodwill of Minnesota
Municipal Fund III in exchange solely for: (a) full and fractional shares
of common stock, par value $0.01 per share, of the Fund ("Fund Common
Shares"); and (b) Series D Preferred Shares, liquidation preference
$50,000.00 per share, of the Fund ("Fund Preferred Shares" and, together
with Fund Common Shares, "Fund Shares"); (ii) the pro rata distribution of
such Fund Shares to the shareholders of Minnesota Municipal Fund III
according to their respective interests in liquidation of Minnesota
Municipal Fund III; and (iii) the dissolution of Minnesota Municipal Fund
III as soon as is practicable after the closing.
Numbers Percentage of Percentage of
of Shares Outstanding Shares Shares Voted
------------- ------------------ -------------
Affirmative 4,110,543.401 56.671% 92.986%
Against 186,220.048 2.567% 4.213%
Abstain 123,837.388 1.707% 2.801%
------------- ------- -------
Total 4,420,600.837 60.945% 100.00%
The Reorganizations closed on February 24, 2006.
34
Delaware Investments(R) Family of Funds
Board of trustees/directors and officers addendum
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to serve
until his or her retirement or the election of a new trustee in his or her
place. The following is a list of the Trustees and Officers with certain
background and related information.
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address Position(s) Length of Principal Occupation(s) by Trustee Held by Trustee
and Birthdate Held with Fund(s) Time Served During Past 5 Years or Officer or Officer
------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
------------------------------------------------------------------------------------------------------------------------------------
Jude T. Driscoll(2) Chairman, 5 Years - Since August 2000, 87 None
2005 Market Street President, Executive Officer Mr. Driscoll has served in
Philadelphia, PA Chief Executive various executive capacities
19103 Officer and 2 Years - at different times at
Trustee Trustee Delaware Investments(1)
March 10, 1963
------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
------------------------------------------------------------------------------------------------------------------------------------
Thomas L. Bennett Trustee Since Private Investor - 87 None
2005 Market Street March 23, 2005 (March 2004 - Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984 - March 2004)
------------------------------------------------------------------------------------------------------------------------------------
John A. Fry Trustee 4 Years President - 87 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President - Director -
May 28, 1960 University of Pennsylvania Allied Barton
(April 1995 - June 2002) Securities Holdings
------------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr Trustee 12 Years Founder/Managing Director - 87 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
------------------------------------------------------------------------------------------------------------------------------------
Lucinda S. Landreth Trustee Since Chief Investment Officer - 87 None
2005 Market Street March 23, 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002 - 2004)
June 24, 1947
------------------------------------------------------------------------------------------------------------------------------------
Ann R. Leven Trustee 16 Years Treasurer/Chief Fiscal 87 Director and
Officer -
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax Inc.
------------------------------------------------------------------------------------------------------------------------------------
(continued) 35
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address Position(s) Length of Principal Occupation(s) by Trustee Held by Trustee
and Birthdate Held with Fund(s) Time Served During Past 5 Years or Officer or Officer
------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees (continued)
------------------------------------------------------------------------------------------------------------------------------------
Thomas F. Madison Trustee 11 Years President/Chief 87 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director and Audit
Committee Member -
Digital River Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans Trustee 6 Years Vice President 87 None
2005 Market Street (January 2003 - Present)
Philadelphia, PA and Treasurer
19103 (January 2006 - Present)
3M Corporation
July 31, 1948
Ms. Yeomans has held
various management
positions at 3M
Corporation
since 1983.
------------------------------------------------------------------------------------------------------------------------------------
J. Richard Zecher Trustee Since Founder - 87 Director and Audit
2005 Market Street March 23, 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999 - Present)
Director and Audit
July 3, 1940 Committee Member -
Oxigene, Inc.
Director -
Sutton Asset
Management
------------------------------------------------------------------------------------------------------------------------------------
Officers
------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Chief Financial Mr. Bishof has served in 87 None(3)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and February 17, 2005 at different times at
19103 Chief Financial Delaware Investments.
Officer
August 18, 1962
------------------------------------------------------------------------------------------------------------------------------------
David F. Connor Vice President, Vice President since Mr. Connor has served as 87 None(3)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel and Secretary and Secretary General Counsel of
19103 since Delaware Investments
October 25, 2005 since 2000.
December 2, 1963
------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Senior Vice Senior Vice President, Mr. O'Connor has served in 87 None(3)
2005 Market Street President, General Counsel and various executive and legal
Philadelphia, PA General Counsel Chief Legal Officer capacities at different
19103 and Chief since times at Delaware Investments.
Legal Officer October 25, 2005
February 21, 1966
------------------------------------------------------------------------------------------------------------------------------------
John J. O'Connor Senior Vice President Treasurer Mr. O'Connor has served in 87 None
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 17, 2005 at different times at
19103 Delaware Investments.
June 16, 1957
------------------------------------------------------------------------------------------------------------------------------------
(1) Delaware Investments is the marketing name for Delaware Management
Holdings, Inc. and its subsidiaries, including the Fund's(s') investment
advisor.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's(s') manager.
(3) Messrs. Connor, and David P. O'Connor serve in similar capacities for the
six portfolios of the Optimum Fund Trust, which have the same investment
advisor as the registrant. Mr. John J. O'Connor also serves in a similar
capacity for Lincoln Variable Insurance Products Trust, which has the same
investment advisor as the registrant.
36
About the organization
This annual 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 the Funds may, from
time-to-time, purchase shares of their common stock on the open market at market
prices.
Board of Trustees
Jude T. Driscoll
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder/Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant Inc.
Philadelphia, PA
Ann R. Leven
Former Treasurer/Chief Fiscal Officer
National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated Officers
Michael P. Bishof
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA
David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
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 Form 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 Form 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 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.
Contact Information
Investment Manager
Delaware Management Company
Philadelphia, PA
Principal Office of the Funds
2005 Market Street
Philadelphia, PA 19103-7057
Independent Registered Public
Accounting Firm
Ernst & Young LLP
2001 Market Street
Philadelphia, PA 19103
Registrar and Stock Transfer
Agent
Mellon Investor Services, LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
800 851-9677
For Securities Dealers
and Financial Institutions
Representatives
800 362-7500
Web Site
www.delawareinvestments.com
Delaware Investments is the marketing
name of Delaware Management Holdings, Inc.
and its subsidiaries.
Number of Recordholders as of
March 31, 2006:
Arizona Municipal Income Fund 83
Colorado Insured Municipal
Income Fund 161
Florida Insured Municipal
Income Fund 143
Minnesota Municipal Income
Fund II 769
37
[LOGO] Delaware
Investments(R)
-----------------------------------
A member of Lincoln Financial Group
(439) Printed in the USA
AR-CEMUNI [3/06] CGI 5/06 ANN-0604-VOY PO10985
38
The Registrant's shareholder report is combined with the shareholder
reports of other investment company registrants. This Form N-CSR pertains to the
DELAWARE INVESTMENTS FLORIDA INSURED MUNICIPAL INCOME FUND, information on which
is included in the following shareholder reports.
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at WWW.DELAWAREINVESTMENTS.COM. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that
each member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
39
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Thomas L. Bennett (1)
Thomas F. Madison
Janet L. Yeomans (1)
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by
its independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $10,000 for
the fiscal year ended March 31, 2006.
The aggregate fees billed for services provided to the registrant by
its independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $18,950 for
the fiscal year ended March 31, 2005.
(b) Audit-related fees.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $6,700 for the
fiscal year ended March 31, 2006. The percentage of these fees relating to
services approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: agreed upon
procedures with respect to the preferred stock rating agency reports.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $15,000 for the registrant's fiscal year ended
March 31, 2006. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of agreed-upon procedures
report to the registrant's Board in connection with the pass-through of internal
legal costs relating to the operations of the registrant.
-----------------------
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Mr.
Bennett qualifies as an audit committee financial expert by virtue of his
education, Chartered Financial Analyst designation, and his experience as a
credit analyst, portfolio manager and the manager of other credit analysts and
portfolio managers. The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
40
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $6,695 for the
fiscal year ended March 31, 2005. The percentage of these fees relating to
services approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: agreed upon
procedures with respect to the preferred stock rating agency reports.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $21,350 for the registrant's fiscal year ended
March 31, 2005. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of agreed-upon procedures
reports to the registrant's Board in connection with the annual fund accounting
service agent contract renewal and the pass-through of internal legal costs
relating to the operations of the registrant.
(c) Tax fees.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $1,800 for the fiscal year
ended March 31, 2006. The percentage of these fees relating to services approved
by the registrant's Audit Committee pursuant to the de minimis exception from
the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These tax-related services were as follows: review of income tax return and
review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended March 31, 2006.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $1,750 for the fiscal year
ended March 31, 2005. The percentage of these fees relating to services approved
by the registrant's Audit Committee pursuant to the de minimis exception from
the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These tax-related services were as follows: review of income tax return and
review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's adviser and other service
providers under common control with the adviser and that relate directly to the
operations or financial reporting of the registrant were $0 for the registrant's
fiscal year ended March 31, 2005.
(d) All other fees.
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended March 31, 2006.
The aggregate fees billed for all services other than those set forth
in paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended March
31, 2006.
41
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended March 31, 2005.
The aggregate fees billed for all services other than those set forth
in paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended March
31, 2005.
(e) The registrant's Audit Committee has established pre-approval
policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X
(the "Pre-Approval Policy") with respect to services provided by the
registrant's independent auditors. Pursuant to the Pre-Approval Policy, the
Audit Committee has pre-approved the services set forth in the table below with
respect to the registrant up to the specified fee limits. Certain fee limits are
based on aggregate fees to the registrant and other registrants within the
Delaware Investments Family of Funds.
-----------------------------------------------------------------------------------------------------------------------------------
Service Range of Fees
-----------------------------------------------------------------------------------------------------------------------------------
Audit Services
-----------------------------------------------------------------------------------------------------------------------------------
Statutory audits or financial audits for new Funds up to $25,000 per Fund
-----------------------------------------------------------------------------------------------------------------------------------
Services associated with SEC registration statements (e.g., Form N-1A, Form
N-14, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters up to $10,000 per Fund
for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters
-----------------------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or up to $25,000 in the aggregate
standard-setting bodies (Note: Under SEC rules, some consultations may be considered
"audit-related services" rather than "audit services")
-----------------------------------------------------------------------------------------------------------------------------------
Audit-Related Services
-----------------------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and /or the actual or potential impact of final or
proposed rules, standards orinterpretations by the SEC, FASB, or other regulatory or up to $25,000 in the aggregate
standard-setting bodies (Note: Under SEC rules, some consultations may be considered "audit
services" rather than "audit-related services")
-----------------------------------------------------------------------------------------------------------------------------------
Tax Services
-----------------------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local and international tax planning and advice (e.g.,
consulting on statutory, regulatory or administrative developments, evaluation of Funds' up to $25,000 in the aggregate
tax compliance function, etc.)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) up to $5,000 per Fund
-----------------------------------------------------------------------------------------------------------------------------------
Review of federal, state, local and international income, franchise and other tax returns up to $5,000 per Fund
-----------------------------------------------------------------------------------------------------------------------------------
Under the Pre-Approval Policy, the Audit Committee has also
pre-approved the services set forth in the table below with respect to the
registrant's investment adviser and other entities controlling, controlled by or
under common control with the investment adviser that provide ongoing services
to the registrant (the "Control Affiliates") up to the specified fee limit. This
fee limit is based on aggregate fees to the investment adviser and its Control
Affiliates.
-----------------------------------------------------------------------------------------------------------------------------------
Service Range of Fees
-----------------------------------------------------------------------------------------------------------------------------------
Non-Audit Services
-----------------------------------------------------------------------------------------------------------------------------------
Services associated with periodic reports and other documents filed with the SEC and assistance up to $10,000 in the aggregate
in responding to SEC comment letters
-----------------------------------------------------------------------------------------------------------------------------------
The Pre-Approval Policy requires the registrant's independent auditors
to report to the Audit Committee at each of its regular meetings regarding all
services initiated since the last such report was rendered, including those
services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's independent
auditors for services rendered to the registrant and to its investment adviser
and other service providers under common control with the adviser were $199,060
and $235,079 for the registrant's fiscal years ended March 31, 2006 and March
31, 2005, respectively.
42
(h) In connection with its selection of the independent auditors, the
registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the registrant's investment adviser and other service
providers under common control with the adviser that were not required to be
pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit
Committee has determined that the independent auditors' provision of these
services is compatible with maintaining the auditors' independence.
Item 5. Audit Committee of Listed Registrants
The registrant has a separately-designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934. The members of the registrant's Audit Committee are Thomas L.
Bennett, Thomas F. Madison, Janet L. Yeomans and J. Richard Zecher.
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
The registrant has formally delegated to its investment adviser (the
"Adviser") the ability to make all proxy voting decisions in relation to
portfolio securities held by the registrant. If and when proxies need to be
voted on behalf of the registrant, the Adviser will vote such proxies pursuant
to its Proxy Voting Policies and Procedures (the "Procedures"). The Adviser has
established a Proxy Voting Committee (the "Committee") which is responsible for
overseeing the Adviser's proxy voting process for the registrant. One of the
main responsibilities of the Committee is to review and approve the Procedures
to ensure that the Procedures are designed to allow the Adviser to vote proxies
in a manner consistent with the goal of voting in the best interests of the
registrant.
In order to facilitate the actual process of voting proxies, the
Adviser has contracted with Institutional Shareholder Services ("ISS") to
analyze proxy statements on behalf of the registrant and other Adviser clients
and vote proxies generally in accordance with the Procedures. The Committee is
responsible for overseeing ISS's proxy voting activities. If a proxy has been
voted for the registrant, ISS will create a record of the vote. By no later than
August 31 of each year, information (if any) regarding how the registrant voted
proxies relating to portfolio securities during the most recently disclosed
12-month period ended June 30 is available without charge (i) through the
registrant's website at http://www.delawareinvestments.com; and (ii) on the
Commission's website at http://www.sec.gov.
The Procedures contain a general guideline that recommendations of
company management on an issue (particularly routine issues) should be given a
fair amount of weight in determining how proxy issues should be voted. However,
the Adviser will normally vote against management's position when it runs
counter to its specific Proxy Voting Guidelines (the "Guidelines"), and the
Adviser will also vote against management's recommendation when it believes that
such position is not in the best interests of the registrant.
As stated above, the Procedures also list specific Guidelines on how to
vote proxies on behalf of the registrant. Some examples of the Guidelines are as
follows: (i) generally vote for shareholder proposals asking that a majority or
more of directors be independent; (ii) generally vote against proposals to
require a supermajority shareholder vote; (iii) votes on mergers and
acquisitions should be considered on a case-by-case basis, determining whether
the transaction enhances shareholder value; (iv) generally vote against
proposals to create a new class of common stock with superior voting rights; (v)
generally vote re-incorporation proposals on a case-by-case basis; (vi) votes
with respect to equity-based compensation plans are generally determined on a
case-by-case basis; and (vii) generally vote for proposals requesting reports on
the level of greenhouse gas emissions from a company's operations and products.
Because the registrant has delegated proxy voting to the Adviser, the
registrant is not expected to encounter any conflict of interest issues
regarding proxy voting and therefore does not have procedures regarding this
matter. However, the Adviser does have a section in its Procedures that
addresses the possibility of conflicts of interest. Most proxies which the
Adviser receives on behalf of the registrant are voted by ISS in accordance with
the Procedures. Because almost all registrant proxies are voted by ISS pursuant
to the pre-determined Procedures, it normally will not be necessary for the
Adviser to make an actual determination of how to vote a particular proxy,
thereby largely eliminating conflicts of interest for the Adviser during the
proxy voting process. In the very limited instances where the Adviser is
considering voting a
43
proxy contrary to ISS's recommendation, the Committee will first assess the
issue to see if there is any possible conflict of interest involving the Adviser
or affiliated persons of the Adviser. If a member of the Committee has actual
knowledge of a conflict of interest, the Committee will normally use another
independent third party to do additional research on the particular proxy issue
in order to make a recommendation to the Committee on how to vote the proxy in
the best interests of the registrant. The Committee will then review the proxy
voting materials and recommendation provided by ISS and the independent third
party to determine how to vote the issue in a manner which the Committee
believes is consistent with the Procedures and in the best interests of the
registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable to Form N-CSRs filed for fiscal years ending on or after
December 31, 2005.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. 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 second fiscal quarter of the
period covered by the report to stockholders included herein (i.e., the
registrant's fourth fiscal quarter) that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
Item 12. 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.
44
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.
Delaware Investments Florida Insured Municipal Income Fund
Jude T. Driscoll
--------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: June 6, 2006
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: Chief Executive Officer
Date: June 6, 2006
Michael P. Bishof
--------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: June 6, 2006