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:
 
811-07420
Exact name of registrant as specified in charter: Delaware Investments® Minnesota
Municipal Income Fund II, Inc.
 
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: September 30, 2014



Item 1. Reports to Stockholders

Table of Contents

 

Delaware Investments® Closed-End Municipal

Bond Funds

Semiannual report

September 30, 2014

 

 

The figures in the semiannual report for Delaware Investments Closed-End Municipal Bond Funds represent past results, which are not a guarantee of future results. A rise or fall in interest rates can have a significant impact on bond prices. Funds that invest in bonds can lose their value as interest rates rise.

Closed-end funds

 

LOGO


Table of Contents

Table of contents

 

Fund basics

     1   

Security type / sector / state allocations

     2   

Schedules of investments

     4   

Statements of assets and liabilities

     22   

Statements of operations

     23   

Statements of changes in net assets

     24   

Statements of cash flows

     26   

Financial highlights

     27   

Notes to financial statements

     30   

Other Fund information

     36   

About the organization

     39   

Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment, and funds management services. For more information, including press releases, please visit delawareinvestments.com.

Unless otherwise noted, views expressed herein are current as of Sept. 30, 2014, and subject to change. Information is as of the date indicated and subject to change.

Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.

Mutual fund advisory services are provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.

Investments in Delaware Investments® Closed-End Municipal Bond Funds are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Funds, the repayment of capital from the Funds, or any particular rate of return.

©2014 Delaware Management Holdings, Inc.

All third-party marks cited are the property of their respective owners.


Table of Contents

Fund basics

 

Delaware Investments®

Colorado Municipal Income Fund, Inc.

As of September 30, 2014

Fund objective

The Fund seeks to provide current income exempt from both regular federal income tax and Colorado state personal income tax, consistent with the preservation of capital.

Total Fund net assets

$74 million

Number of holdings

77

Fund start date

July 29, 1993

CUSIP number

246101109

Delaware Investments

Minnesota Municipal Income Fund II, Inc.

As of September 30, 2014

Fund objective

The Fund seeks to provide current income exempt from both regular federal income tax and Minnesota state personal income tax, consistent with the preservation of capital.

Total Fund net assets

$171 million

Number of holdings

154

Fund start date

Feb. 26, 1993

CUSIP number

24610V103

Delaware Investments

National Municipal Income Fund

As of September 30, 2014

Fund objective

The Fund seeks to provide current income exempt from regular federal income tax, consistent with the preservation of capital.

Total Fund net assets

$66 million

Number of holdings

167

Fund start date

Feb. 26, 1993

CUSIP number

24610T108

 

 

     1


Table of Contents

Security type / sector / state allocations

As of September 30, 2014 (Unaudited)

Sector designations may be different than the sector designations presented in other Fund materials.

 

Delaware Investments®

Colorado Municipal Income Fund, Inc.

 

Security type / sector   

Percentage  
of net  

assets  

Municipal Bonds

   137.85%  

Corporate-Backed Revenue Bonds

   2.90%  

Education Revenue Bonds

   28.77%  

Electric Revenue Bonds

   3.53%  

Healthcare Revenue Bonds

   41.94%  

Housing Revenue Bond

   0.43%  

Lease Revenue Bonds

   9.14%  

Local General Obligation Bonds

   11.32%  

Pre-Refunded/Escrowed to Maturity Bonds

   6.16%  

Special Tax Revenue Bonds

   19.87%  

State General Obligation Bond

   0.77%  

Transportation Revenue Bonds

   9.36%  

Water & Sewer Revenue Bonds

   3.66%  

Short-Term Investment

   0.79%  

Total Value of Securities

   138.64%  

Liquidation Value of Preferred Stock

   (40.77)% 

Receivables and Other Assets Net of Liabilities

   2.13%  

Total Net Assets

   100.00%  
State / territory   

Percentage  
of net  

assets  

Colorado

   136.41%  

Guam

   1.46%  

U.S. Virgin Islands

   0.77%  

Total

  

138.64%  

 

Delaware Investments

Minnesota Municipal Income Fund II, Inc.

 

Security type / sector   

Percentage  
of net  

assets  

Municipal Bonds

   142.18%  

Corporate-Backed Revenue Bonds

   6.71%  

Education Revenue Bonds

   18.47%  

Electric Revenue Bonds

   10.44%  

Healthcare Revenue Bonds

   38.51%  

Housing Revenue Bonds

   3.74%  

Lease Revenue Bonds

   15.28%  

Local General Obligation Bonds

   7.36%  

Pre-Refunded/Escrowed to Maturity Bonds

   18.58%  

Special Tax Revenue Bonds

   5.31%  

State General Obligation Bonds

   11.64%  

Transportation Revenue Bonds

   4.52%  

Water & Sewer Revenue Bonds

   1.62%  

Total Value of Securities

   142.18%  

Liquidation Value of Preferred Stock

   (43.92)% 

Receivables and Other Assets Net of Liabilities

   1.74%  

Total Net Assets

   100.00%  
State / territory   

Percentage  
of net  

assets  

Guam

   0.09%  

Minnesota

  

142.09%  

 

Total

   142.18%  
 
 

 

2     


Table of Contents

 

Delaware Investments®

National Municipal Income Fund

 

Security type / sector    Percentage  
of net  
assets  

Municipal Bonds

   144.82%  

Corporate-Backed Revenue Bonds

   14.39%  

Education Revenue Bonds

   27.38%  

Electric Revenue Bonds

   3.75%  

Healthcare Revenue Bonds

   21.68%  

Housing Revenue Bonds

   2.59%  

Lease Revenue Bonds

   12.20%  

Local General Obligation Bonds

   1.71%  

Pre-Refunded Bond

   1.74%  

Special Tax Revenue Bonds

   19.92%  

State General Obligation Bonds

   4.76%  

Transportation Revenue Bonds

   27.90%  

Water & Sewer Revenue Bonds

   6.80%  

Total Value of Securities

   144.82%  

Liquidation Value of Preferred Stock

   (45.37)% 

Receivables and Other Assets Net of Liabilities

   0.55%  

Total Net Assets

   100.00%  
State / territory    Percentage  
of net  
assets  

Alabama

   0.87%  

Alaska

   0.50%  

Arizona

   13.76%  

California

   22.90%  

Colorado

   1.43%  

District of Columbia

   0.63%  

Florida

   6.57%  

Georgia

   5.39%  

Guam

   2.22%  

Hawaii

   0.49%  

Idaho

   1.63%  

Illinois

   4.19%  

Indiana

   0.93%  

Kansas

   0.14%  

Louisiana

   3.32%  

Maine

   0.50%  

Maryland

   4.21%  

Massachusetts

   1.45%  

Minnesota

   5.99%  

Missouri

   4.04%  

Nevada

   0.71%  

New Hampshire

   0.52%  

New Jersey

   8.86%  

New Mexico

   0.83%  

New York

   16.80%  

North Carolina

   0.44%  

North Dakota

   0.41%  

Ohio

   1.94%  

Oregon

   3.84%  

Pennsylvania

   13.43%  

Texas

   12.69%  

Virginia

   0.91%  

Washington

   0.28%  

West Virginia

   0.81%  

Wisconsin

   0.76%  

Wyoming

  

0.43%  

 

Total

   144.82%  
 
 

 

     3


Table of Contents

Schedules of investments

Delaware Investments® Colorado Municipal Income Fund, Inc.

September 30, 2014 (Unaudited)

 

      Principal
Amount°
   

Value

(U.S. $)

 

Municipal Bonds – 137.85%

  

Corporate-Backed Revenue Bonds – 2.90%

  

Public Authority for Colorado Energy Revenue
6.25% 11/15/28

     865,000      $       1,101,517   

Public Authority of Colorado Energy Natural Gas
Revenue
Series 2008 6.50% 11/15/38

     750,000        1,035,517   
    

 

 

 
       2,137,034   
    

 

 

 

Education Revenue Bonds – 28.77%

  

Colorado Educational & Cultural Facilities Authority Revenue

    

(Academy Charter School Project)
5.50% 5/1/36 (SGI)

     1,720,000        1,726,037   

(Bromley Charter School Project)
5.25% 9/15/32 (SGI)

     3,245,000        3,309,251   

(Charter School -
Community Leadership
Academy) 7.45% 8/1/48

     500,000        581,410   

(Charter School - Peak to Peak Charter)
5.00% 8/15/34

     1,000,000        1,096,700   

(Johnson & Wales
University) Series A
5.25% 4/1/37

     900,000        1,007,595   

(Liberty Charter School)
Series A 5.00% 1/15/44

     1,000,000        1,070,100   

(Littleton Charter School Project)
4.375% 1/15/36 (CIFG)

     1,200,000        1,206,168   

(Skyview Charter School)
144A 5.50% 7/1/49 #

     750,000        776,483   

(Student Housing - Campus Village Apartments)
5.00% 6/1/23

     1,065,000        1,174,759   

Colorado School of Mines Series B 5.00% 12/1/42

     2,500,000        2,755,925   

Colorado State Board of Governors
(University Enterprise System) Series A 5.00% 3/1/39

     10,000        11,219   

University of Colorado

    

5.00% 6/1/31

     3,185,000        3,619,880   

Series A 5.00% 6/1/33

     1,000,000        1,152,050   

Series A 5.375% 6/1/38

     750,000        869,220   
      Principal
Amount°
   

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

Western State College 5.00% 5/15/34

     750,000      $ 809,423   
    

 

 

 
           21,166,220   
    

 

 

 

Electric Revenue Bonds – 3.53%

  

Colorado Springs Utilities System Improvement Revenue
Series C 5.50% 11/15/48

     750,000        854,625   

Platte River Power Authority Series HH 5.00% 6/1/28

     1,500,000        1,741,170   
    

 

 

 
       2,595,795   
    

 

 

 

Healthcare Revenue Bonds – 41.94%

  

Aurora Hospital Revenue (Children’s Hospital Association Project) Series A 5.00% 12/1/40

     4,000,000        4,255,120   

Colorado Health Facilities Authority Revenue

    

(Boulder Community Hospital Project) 5.00% 10/1/32

     500,000        550,120   

(Catholic Health Initiatives)

    

Series A 5.00% 7/1/39

     750,000        815,085   

Series A 5.00% 2/1/41

     2,400,000        2,580,288   

Series A 5.25% 2/1/33

     1,625,000        1,788,183   

Series A 5.25% 1/1/45

     1,000,000        1,109,310   

Series C-1 5.10% 10/1/41 (AGM)

     1,000,000        1,060,470   

Series D 6.125% 10/1/28

     750,000        872,603   

(Christian Living Community Project)

    

6.375% 1/1/41

     615,000        663,333   

Series A 5.75% 1/1/37

     885,000        903,151   

(Covenant Retirement Communities Inc.) Series A 5.75% 12/1/36

     1,000,000        1,090,640   

(Evangelical Lutheran Good Samaritan Society)

    

5.00% 6/1/28

     1,250,000        1,355,037   

5.50% 6/1/33

     2,000,000        2,230,240   

5.625% 6/1/43

     1,000,000        1,114,900   

(Healthcare Facilities - American Baptist) 8.00% 8/1/43

     500,000        588,665   

(Mental Health Center of Denver Project) Series A 5.75% 2/1/44

     1,500,000        1,666,920   
 

 

4


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Colorado Health Facilities Authority Revenue

     

(National Jewish Health Project) 5.00% 1/1/27

     500,000       $ 517,480   

(Sisters of Charity of Leavenworth Health System) Series A 5.00% 1/1/40

     4,750,000         5,154,177   

(Total Long-Term Care) Series A 6.00% 11/15/30

     400,000         439,412   

Denver Health & Hospital Authority Health Care Revenue (Recovery Zone Facilities) 5.625% 12/1/40

     750,000         816,863   

University of Colorado Hospital Authority Revenue

     

Series A 5.00% 11/15/37

     500,000         516,495   

Series A 6.00% 11/15/29

     650,000         768,553   
     

 

 

 
            30,857,045   
     

 

 

 

Housing Revenue Bond – 0.43%

  

Colorado Housing & Finance Authority (Single Family Mortgage - Class 1) Series A 5.50% 11/1/29 (FHA) (VA) (HUD)

     305,000         316,017   
     

 

 

 
        316,017   
     

 

 

 

Lease Revenue Bonds – 9.14%

  

  

Aurora Certificates of Participation Series A 5.00% 12/1/30

     630,000         715,919   

Colorado Building Excellent Schools Today Certificates of Participation Series G 5.00% 3/15/32

     2,000,000         2,236,600   

Glendale Certificates of Participation
5.00% 12/1/25 (SGI)

     1,500,000         1,613,790   

Pueblo County Certificates of Participation (County Judicial Complex Project) 5.00% 9/15/42 (AGM)

     2,000,000         2,157,040   
     

 

 

 
        6,723,349   
     

 

 

 
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Local General Obligation Bonds – 11.32%

  

Adams 12 Five Star Schools
5.00% 12/15/25

     250,000       $ 310,150   

Arapahoe County School District No. 1 Englewood 5.00% 12/1/31

     2,935,000         3,344,520   

Boulder Larimer & Weld Counties St. Vrain Valley School District No. Re-1J 5.00% 12/15/33

     750,000         854,985   

Denver City & County (Better Denver & Zoo) Series A 5.00% 8/1/25

     650,000         749,281   

Denver International Business Center Metropolitan District No. 1
5.00% 12/1/30

     650,000         694,902   

Jefferson County School District No. R-1
5.25% 12/15/24

     750,000         944,693   

Pueblo County School District No. 70
5.00% 12/1/31

     500,000         571,375   

Rangely Hospital District
6.00% 11/1/26

     750,000         860,153   
     

 

 

 
              8,330,059   
     

 

 

 

Pre-Refunded/Escrowed to Maturity Bonds – 6.16%

  

Adams & Arapahoe Counties Joint School District No. 28J (Aurora) 6.00% 12/1/28-18§

     600,000         724,200   

Colorado State Board of Governors Series A 5.00% 3/1/39-19§

     690,000         807,369   

Regional Transportation District Revenue (FasTracks Project)

     

Series A
4.375% 11/1/31-16 (AMBAC)§

     1,250,000         1,353,600   

Series A
5.00% 11/1/28-16 (AMBAC)§

     1,500,000         1,643,775   
     

 

 

 
        4,528,944   
     

 

 

 

Special Tax Revenue Bonds – 19.87%

  

City of Commerce City 5.00% 8/1/44 (AGM)

     1,000,000         1,114,620   

Denver Convention Center Hotel Authority Revenue 5.00% 12/1/35 (SGI)

     2,875,000         2,940,291   
 

 

  (continues)                                       5


Table of Contents

Schedules of investments

Delaware Investments® Colorado Municipal Income Fund, Inc.

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Special Tax Revenue Bonds (continued)

  

Guam Government Business Privilege Tax Revenue

     

Series A 5.125% 1/1/42

     435,000       $ 462,984   

Series A 5.25% 1/1/36

     565,000         613,307   

Regional Transportation District Revenue

     

Series A 5.375% 6/1/31

     460,000         509,841   

(Denver Transit Partners) 6.00% 1/15/41

     2,175,000         2,432,303   

(FasTracks Project)

     

Series A 4.50% 11/1/36 (AGM)

     1,500,000         1,553,925   

Series A 5.00% 11/1/38

     4,085,000         4,686,639   

Tallyns Reach Metropolitan District No. 3
(Limited Tax Convertible)
5.125% 11/1/38

     295,000         301,859   
     

 

 

 
            14,615,769   
     

 

 

 

State General Obligation Bond – 0.77%

  

Virgin Islands Public Finance Authority
(Matching Fund Senior Lien)
5.00% 10/1/29 (AGM)

     500,000         566,445   
     

 

 

 
        566,445   
     

 

 

 

Transportation Revenue Bonds – 9.36%

  

Colorado High Performance Transportation Enterprise Revenue
(Senior U.S. 36 & I-25 Managed Lanes)
5.75% 1/1/44 (AMT)

     1,110,000         1,153,845   

Denver City & County Airport System Revenue

     

Series A 5.25% 11/15/36

     750,000         848,497   

Series B 5.00% 11/15/27

     1,000,000         1,161,320   

Series B 5.00% 11/15/28

     1,000,000         1,152,970   

Series B 5.00% 11/15/37

     2,000,000         2,229,200   

E-470 Public Highway Authority
Series C 5.25% 9/1/25

     310,000         343,309   
     

 

 

 
        6,889,141   
     

 

 

 
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Water & Sewer Revenue Bonds – 3.66%

  

City of Aurora Water Revenue First Lien Series A 5.00% 8/1/36 (AMBAC)

     2,000,000       $ 2,182,440   

Colorado Water Resources & Power Development Authority Series A 5.00% 3/1/17

     460,000         510,338   
     

 

 

 
        2,692,778   
     

 

 

 

Total Municipal Bonds
(cost $94,040,514)

   

     101,418,596   
     

 

 

 
                   

Short-Term Investment – 0.79%

  

Variable Rate Demand Note – 0.79%¤

  

Colorado Educational & Cultural Facilities Authority Series D3 (National Jewish Federation)
0.02% 12/1/37 (LOC - JPMorgan Chase Bank N.A.)

     585,000         585,000   
     

 

 

 

Total Short-Term Investment
(cost $585,000)

   

     585,000   
     

 

 

 

Total Value of
Securities – 138.64%
(cost $94,625,514)

    

    $ 102,003,596   
     

 

 

 

 

  #

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Sept. 30, 2014, the aggregate value of Rule 144A securities was $776,483 which represents 1.06% of the Fund’s net assets. See Note 5 in “Notes to financial statements.”

  ¤

Tax-exempt obligations that contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period (generally up to 30 days) prior to specified dates either from the issuer or by drawing on a bank letter of credit, a guarantee, or insurance issued with respect to such instrument. The rate shown is the rate as of Sept. 30, 2014.

  °

Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency.

  §

Pre-refunded bonds. Municipal bonds 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 5 in “Notes to financial statements.”

 

 

6


Table of Contents

 

 

 

Summary of abbreviations:

AGM – Insured by Assured Guaranty Municipal Corporation

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

CIFG – Insured by CIFG Assurance North America

FHA – Federal Housing Administration

HUD – Housing and Urban Development Section 8

LOC – Letter of Credit

SGI – Insured by Syncora Guarantee Inc.

VA – Veterans Administration Collateral

See accompanying notes, which are an integral part of the financial statements.

 

 

     7


Table of Contents

Schedules of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

September 30, 2014 (Unaudited)

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds – 142.18%

  

        

Corporate-Backed Revenue Bonds – 6.71%

  

Cloquet Pollution Control Revenue
(Potlatch Project) 5.90% 10/1/26

     5,500,000       $ 5,504,620   

Laurentian Energy Authority I Cogeneration Revenue
Series A 5.00% 12/1/21

     3,325,000         3,273,662   

St. Paul Port Authority Revenue
(Gerdau St. Paul Steel Mill Project) Series 7 4.50% 10/1/37 (AMT)

     2,705,000         2,680,114   
     

 

 

 
            11,458,396   
     

 

 

 

Education Revenue Bonds – 18.47%

  

Baytown Township Lease Revenue
(St. Croix Preparatory Academy) 5.75% 8/1/42

     300,000         303,705   

Deephaven Charter School (Eagle Ridge Academy Project) Series A 5.50% 7/1/43

     500,000         530,005   

Forest Lake Minnesota Charter School Revenue
(Lake International Language Academy) 5.75% 8/1/44

     705,000         767,491   

Hugo Charter School Lease Revenue
(Noble Academy Project)

     

Series A 5.00% 7/1/34

     255,000         265,998   

Series A 5.00% 7/1/44

     775,000         796,065   

Minneapolis Student Housing Revenue
(Riverton Community Housing Project)

     

5.25% 8/1/39

     205,000         205,609   

5.50% 8/1/49

     990,000         1,002,157   

Minnesota Higher Education Facilities Authority Revenue

     

(Augsburg College)
Series 6-J1 5.00% 5/1/28

     1,500,000         1,511,115   

(Carleton College)

     

Series 6-T 5.00% 1/1/28

     1,000,000         1,109,170   

Series D 5.00% 3/1/30

     1,120,000         1,272,734   

(College of St. Benedict)

     

Series 7-M 5.00% 3/1/31

     300,000         318,000   

Series 7-M 5.125% 3/1/36

     275,000         290,342   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

        

Education Revenue Bonds (continued)

  

Minnesota Higher Education Facilities Authority Revenue

     

(St. Catherine University)
Series 7-Q 5.00% 10/1/32

     700,000       $ 752,745   

(St. Scholastic College)
Series H 5.25% 12/1/35

     1,000,000         1,083,770   

(University of St. Thomas)

     

Series 6-X 5.00% 4/1/29

     2,250,000         2,440,440   

Series 7-A 5.00% 10/1/39

     1,000,000         1,111,110   

Series 7-U 5.00% 4/1/20

     495,000         581,749   

Series 7-U 5.00% 4/1/21

     450,000         531,949   

Series 7-U 5.00% 4/1/22

     750,000         891,825   

Otsego Charter School (Kaleidoscope Charter School)

     

Series A 5.00% 9/1/34

     335,000         339,697   

Series A 5.00% 9/1/44

     700,000         692,468   

St. Paul Housing & Redevelopment Authority Charter School Lease Revenue
(Nova Classical Academy)

     

Series A 6.375% 9/1/31

     750,000         833,490   

University of Minnesota

     

Series A 5.25% 12/1/28

     500,000         597,380   

Series A 5.25% 4/1/29

     1,000,000         1,156,340   

Series C 5.00% 12/1/19

     1,290,000         1,512,977   

Series D 5.00% 12/1/27

     1,110,000         1,295,026   

Series D 5.00% 12/1/28

     1,880,000         2,186,008   

Series D 5.00% 12/1/29

     2,265,000         2,620,809   

Series D 5.00% 12/1/31

     1,000,000         1,148,620   

Series D 5.00% 12/1/36

     3,000,000         3,389,520   
     

 

 

 
            31,538,314   
     

 

 

 

Electric Revenue Bonds – 10.44%

  

  

Central Minnesota Municipal Power Agency Revenue

     

(Brookings Southeast Twin Cities Transportation) 5.00% 1/1/32

     1,130,000         1,248,729   

(Brookings Twin Cities Transmission Project) 5.00% 1/1/42

     1,000,000         1,084,290   

Chaska Electric Revenue
(Generating Facilities)
Series A 5.25% 10/1/25

     250,000         262,013   
 

 

8


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Electric Revenue Bonds (continued)

  

Minnesota Municipal Power Agency Electric Revenue

     

5.00% 10/1/25

     500,000       $ 601,920   

5.00% 10/1/26

     500,000         595,265   

5.00% 10/1/27

     320,000         378,214   

Series A 5.00% 10/1/34

     1,000,000         1,000,140   

Series A 5.25% 10/1/19

     1,610,000         1,610,225   

Northern Municipal Power Agency

     

Series A 5.00% 1/1/26

     100,000         116,547   

Series A 5.00% 1/1/30

     340,000         385,778   

Rochester Electric Utility Revenue

     

Series B 5.00% 12/1/30

     1,300,000         1,529,255   

Series B 5.00% 12/1/43

     1,000,000         1,138,180   

Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.25% 1/1/30

     1,030,000         1,119,909   

Western Minnesota Municipal Power Agency Supply Revenue

     

Series A 5.00% 1/1/25

     3,000,000         3,574,530   

Series A 5.00% 1/1/26

     1,000,000         1,184,940   

Series A 5.00% 1/1/40

     750,000         859,605   

Series A 5.00% 1/1/46

     1,000,000         1,133,270   
     

 

 

 
            17,822,810   
     

 

 

 

Healthcare Revenue Bonds – 38.51%

  

Anoka Health Care Facilities Revenue
(Homestead Anoka Project)
Series A 7.00% 11/1/46

     1,200,000         1,278,612   

Center City Health Care Facilities Revenue
(Hazelden Betty Ford Foundation Project)

     

5.00% 11/1/27

     500,000         585,515   

5.00% 11/1/29

     300,000         347,070   

(Hazelden Foundation Project)

     

4.75% 11/1/31

     850,000         893,427   

5.00% 11/1/41

     1,600,000         1,703,216   

City of Hayward
(American Baptist Homes Midwest) 5.75% 2/1/44

     500,000         509,165   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Cloquet Housing Facilities Revenue
(HADC Cloquet Project) Refunding Series A 5.00% 8/1/48

     500,000       $ 500,230   

Deephaven Housing & Healthcare Revenue
(St. Therese Senior Living Project)

     

Series A 5.00% 4/1/38

     280,000         280,000   

Series A 5.00% 4/1/40

     270,000         268,842   

Duluth Economic Development Authority Revenue
(St. Luke’s Hospital Authority Obligation Group)

     

5.75% 6/15/32

     1,000,000               1,089,760   

6.00% 6/15/39

     1,000,000         1,092,630   

Fergus Falls Health Care Facilities Revenue
(Lake Region Healthcare)
5.00% 8/1/30

     1,000,000         1,028,260   

Maple Grove Health Care System Revenue
(Maple Grove Hospital)
5.25% 5/1/37

     1,100,000         1,130,701   

Minneapolis Health Care System Revenue
(Fairview Health Services)

     

Series A 6.375% 11/15/23

     1,105,000         1,292,684   

Series A 6.625% 11/15/28

     1,150,000         1,364,015   

Series B 6.50% 11/15/38 (ASSURED GTY)

     2,295,000         2,709,638   

Series D 5.00% 11/15/34 (AMBAC)

     2,000,000         2,045,080   

Minneapolis Revenue
(National Marrow Donor Program Project)
Series NMDP 4.875% 8/1/25

     1,000,000         1,038,900   

Minneapolis – St. Paul Housing & Redevelopment Authority Health Care Revenue
(Children’s Health Care Facilities) Series A1 5.00% 8/15/34 (AGM)

     500,000         537,845   
 

 

  (continues)                                9


Table of Contents

Schedules of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Minnesota Agricultural & Economic Development Board Revenue
Un-Refunded Balance

     

Series A 5.75% 11/15/26 (NATL-RE)

     100,000       $ 100,173   

Series A 6.375% 11/15/29

     195,000         195,866   

Rochester Health Care & Housing Revenue

     

(Samaritan Bethany) Series A 7.375% 12/1/41

     1,220,000         1,369,011   

(The Homestead at Rochester Project) Series A 6.875% 12/1/48

     1,220,000         1,358,031   

Rochester Health Care Facilities Revenue (Mayo Clinic)

     

4.00% 11/15/41

     4,860,000         4,999,919   

Series C 4.50% 11/15/38

     2,000,000               2,330,480   

Sartell Health Care Facilities Revenue
(Country Manor Campus Project)

     

5.25% 9/1/30

     1,000,000         1,034,980   

Series A 5.30% 9/1/37

     600,000         614,016   

Shakopee Health Care Facilities Revenue
(St. Francis Regional Medical Center)

     

4.00% 9/1/31

     205,000         211,439   

5.00% 9/1/34

     165,000         184,706   

St. Cloud Health Care Revenue
(Centracare Health System Project)

     

5.50% 5/1/39 (ASSURED GTY)

     1,500,000         1,664,610   

Series A 5.125% 5/1/30

     5,175,000         5,803,038   

St. Louis Park Health Care Facilities Revenue
(Park Nicollet Health Services)

     

5.75% 7/1/39

     3,315,000         3,733,817   

Series C 5.50% 7/1/23

     1,000,000         1,115,540   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue
(Allina Health System)

     

Series A 5.00% 11/15/18 (NATL-RE)

     1,380,000       $       1,552,817   

Series A-1 5.25% 11/15/29

     1,395,000         1,600,135   

(Health Partners Obligation Group Project) 5.25% 5/15/36

     2,000,000         2,095,060   

St. Paul Housing & Redevelopment Authority Hospital Revenue
(Health East Project)

     

6.00% 11/15/30

     2,775,000         2,901,762   

6.00% 11/15/35

     2,500,000         2,609,350   

St. Paul Housing & Redevelopment Authority Housing & Health Care Facilities Revenue

     

(Senior Carondelet Village Project) Series A 6.00% 8/1/42

     770,000         812,650   

(Senior Episcopal Homes Project)

     

5.125% 5/1/48

     1,200,000         1,214,628   

Series A 4.75% 11/1/31

     740,000         742,301   

Washington County Housing & Redevelopment Authority Revenue
(Birchwood & Woodbury Projects) Series A 5.625% 6/1/37

     1,500,000         1,528,575   

Wayzata Senior Housing Revenue
(Folkestone Senior Living Community)

     

Series A 5.50% 11/1/32

     420,000         455,360   

Series A 5.75% 11/1/39

     945,000         1,026,279   

Series A 6.00% 5/1/47

     1,475,000         1,615,951   

Winona Health Care Facilities Revenue
(Winona Health Obligation)

     

4.65% 7/1/26

     465,000         494,160   

4.75% 7/1/27

     785,000         832,854   

5.00% 7/1/23

     1,010,000         1,067,893   
 

 

10


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Winona Health Care Facilities Revenue
5.00% 7/1/34

     750,000       $ 800,813   
     

 

 

 
            65,761,804   
     

 

 

 

Housing Revenue Bonds – 3.74%

  

Minneapolis Multifamily Housing Revenue

     

(Olson Townhomes Project) 6.00% 12/1/19 (AMT)

     540,000         540,356   

(Seward Towers Project) 5.00% 5/20/36 (GNMA)

     1,960,000         1,985,990   

Minnesota State Housing Finance Agency
(Residential Housing)

     

Series D 4.75% 7/1/32 (AMT) •

     760,000         769,257   

Series I 5.15% 7/1/38 (AMT)

     555,000         560,789   

Series L 5.10% 7/1/38 (AMT)

     1,110,000         1,150,249   

Minnesota State Housing Finance Agency Homeownership (Mortgage-Backed Securities Program) 4.40% 7/1/32 (GNMA) (FNMA) (FHLMC)

     1,310,000         1,379,338   
     

 

 

 
        6,385,979   
     

 

 

 

Lease Revenue Bonds – 15.28%

  

Minnesota State General Fund Revenue
Appropriations

     

Series A 5.00% 6/1/32

     780,000         903,115   

Series A 5.00% 6/1/38

     5,500,000         6,277,645   

Series A 5.00% 6/1/43

     1,750,000         1,970,535   

Series B 4.00% 3/1/26

     3,375,000         3,684,015   

Series B 5.00% 3/1/21

     1,500,000         1,794,870   

Series B 5.00% 3/1/29

     3,525,000         4,130,066   

University of Minnesota Special Purpose Revenue
(State Supported Biomed Science Research)

     

5.00% 8/1/35

     1,040,000         1,188,834   

5.00% 8/1/36

     4,000,000         4,476,560   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Lease Revenue Bonds (continued)

  

Virginia Housing & Redevelopment Authority Health Care Facility Lease Revenue

     

5.25% 10/1/25

     680,000       $ 689,445   

5.375% 10/1/30

     965,000         981,627   
     

 

 

 
            26,096,712   
     

 

 

 

Local General Obligation Bonds – 7.36%

  

City of Willmar
(Rice Memorial Hospital Project)
Series A 4.00% 2/1/32

     2,440,000         2,573,273   

Dakota County Community Development Agency (Senior Housing Facilities)
Series A 5.00% 1/1/23

     1,100,000         1,113,288   

Hopkins Independent School District No. 270
Series A 5.00% 2/1/28

     1,000,000         1,151,630   

Rocori Independent School District No. 750
(School Building)

     

Series B 5.00% 2/1/22

     1,010,000         1,152,834   

Series B 5.00% 2/1/24

     1,075,000         1,224,597   

Series B 5.00% 2/1/25

     1,115,000         1,264,666   

Series B 5.00% 2/1/26

     1,155,000         1,310,036   

St. Paul Independent School District No. 625
(School Building)

     

Series B 5.00% 2/1/22

     1,300,000         1,567,033   

Series B 5.00% 2/1/26

     1,000,000         1,192,070   

Thief River Falls Independent School District No. 564
(School Building) Series A 4.00% 2/1/32

     20,000         21,410   
     

 

 

 
        12,570,837   
     

 

 

 

Pre-Refunded/Escrowed to Maturity Bonds – 18.58%

  

Dakota-Washington Counties Housing & Redevelopment Authority Revenue
(Bloomington Single Family Residential Mortgage)
Series B 8.375% 9/1/21 (GNMA) (FHA) (VA)

     7,055,000         9,688,420   
 

 

  (continues)                                     11


Table of Contents

Schedules of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

 

     

Principal

Amount°

    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Pre-Refunded/Escrowed to Maturity Bonds (continued)

  

Minneapolis – St. Paul Metropolitan Airports Commission Revenue
Series A 5.00% 1/1/35-15
(AMBAC) §

     2,000,000       $ 2,024,640   

Southern Minnesota Municipal Power Agency Power Supply System Revenue
Series A 5.75% 1/1/18

     2,750,000         2,868,195   

St. Paul Housing & Redevelopment Authority Sales Tax
(Civic Center Project)

     

5.55% 11/1/23

     2,300,000         2,510,496   

5.55% 11/1/23 (NATL-RE) (IBC)

     4,200,000         4,584,384   

University of Minnesota

     

Series A 5.50% 7/1/21

     4,000,000         4,854,160   

Series A 5.75% 7/1/18

     2,000,000         2,355,900   

University of Minnesota Hospital & Clinics

     

6.75% 12/1/16

     2,580,000         2,840,141   
     

 

 

 
            31,726,336   
     

 

 

 

Special Tax Revenue Bonds – 5.31%

  

Guam Government Business Privilege Tax Revenue
Series A 5.25% 1/1/36

     150,000         162,825   

Hennepin County Sales Tax Revenue
(Second Lien-Ballpark Project) Series B 4.75% 12/15/27

     1,905,000         2,089,461   

Minneapolis Community Planning & Economic Development Department (Limited Tax Supported Common Bond Fund)

     

6.25% 12/1/30

     1,000,000         1,183,300   

Series 1 5.50% 12/1/24 (AMT)

     1,000,000         1,007,840   

Series 5 5.70% 12/1/27

     375,000         377,681   

Minnesota Public Safety Radio
5.00% 6/1/23

     2,845,000         3,283,784   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Special Tax Revenue Bonds (continued)

  

St. Paul Port Authority (Brownfields Redevelopment Tax)
Series 2 5.00% 3/1/37

     895,000       $ 964,971   
     

 

 

 
        9,069,862   
     

 

 

 

State General Obligation Bonds – 11.64%

  

Minnesota State (State Trunk Highway)

     

Series B 5.00% 10/1/22

     5,500,000         6,642,075   

Series B 5.00% 10/1/29

     3,315,000         3,897,412   

(State Various Purpose)
Series D 5.00% 8/1/24

     2,700,000         3,209,760   

(Various Purposes) Series F
5.00% 10/1/22

     5,000,000         6,117,650   
     

 

 

 
        19,866,897   
     

 

 

 

Transportation Revenue Bonds – 4.52%

  

Minneapolis – St. Paul Metropolitan Airports Commission Revenue

     

5.00% 1/1/21

     2,600,000         3,090,724   

5.00% 1/1/22

     670,000         784,349   

Subordinate

     

Series B 5.00% 1/1/26

     540,000         624,564   

Series B 5.00% 1/1/26 (AMT)

     500,000         582,230   

Series B 5.00% 1/1/27

     1,190,000         1,368,714   

Series B 5.00% 1/1/30

     500,000         566,290   

Series B 5.00% 1/1/31

     250,000         281,927   

St. Paul Port Authority Revenue (Amherst H Wilder Foundation)
Series 3
5.00% 12/1/36

     380,000         413,231   
     

 

 

 
        7,712,029   
     

 

 

 

Water & Sewer Revenue Bonds – 1.62%

  

Metropolitan Council Waste Water Revenue
Series B 4.00% 9/1/27

     1,145,000         1,267,252   

St. Paul Sewer Revenue
Series D 5.00% 12/1/21

     1,325,000         1,503,756   
     

 

 

 
        2,771,008   
     

 

 

 

Total Municipal Bonds
(cost $229,427,695)

   

         242,780,984   
     

 

 

 
 

 

12


Table of Contents

 

 

 

Total Value of
Securities – 142.18%
(cost $229,427,695)

     $ 242,780,984   
     

 

 

 

 

  °

Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency.

  

Variable rate security. The rate shown is the rate as of Sept. 30, 2014. Interest rates reset periodically.

  §

Pre-refunded bonds. Municipal bonds 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 5 in “Notes to financial statements.”

Summary of abbreviations:

AGM – Insured by Assured Guaranty Municipal Corporation

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

ASSURED GTY – Insured by Assured Guaranty Corporation

FHA – Federal Housing Administration

FHLMC – Federal Home Loan Mortgage Corporation Collateral

FNMA – Federal National Mortgage Association Collateral

GNMA – Government National Mortgage Association Collateral

IBC – Insured Bond Certificate

NATL-RE – Insured by National Public Finance Guarantee Corporation

VA – Veterans Administration Collateral

See accompanying notes, which are an integral part of the financial statements.

 

 

     13


Table of Contents

Schedules of investments

Delaware Investments® National Municipal Income Fund

September 30, 2014 (Unaudited)

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds – 144.82%

  

        

Corporate-Backed Revenue Bonds – 14.39%

  

Buckeye, Ohio Tobacco Settlement Financing Authority Asset-Backed -2 Series A-2 6.50% 6/1/47

     430,000       $ 365,483   

City of Valparaiso, Indiana
(Pratt Paper Project)
7.00% 1/1/44 (AMT)

     240,000         273,278   

Gaston County Industrial Facilities & Pollution Control Financing Authority (Exempt Facilities-National Gypsum Project)
5.75% 8/1/35 (AMT)

     290,000         290,551   

Gloucester County Pollution Control Financing Authority (Keystone Urban Renewal)
5.00% 12/1/24 (AMT)

     125,000         139,099   

Golden State, California Tobacco Securitization Corporation Settlement Revenue (Asset-Backed Senior Notes) Series A-1
5.75% 6/1/47

     1,415,000               1,133,910   

Harris County, Texas Industrial Development Corporation Solid Waste Disposal Revenue
(Deer Park Refining Project) 5.00% 2/1/23

     150,000         163,049   

Illinois Railsplitter Tobacco Settlement Authority
6.25% 6/1/24

     500,000         545,155   

Louisiana Local Government Environmental Facilities & Community Development Authority (Westlake Chemical)

     

Series A 6.50% 8/1/29

     645,000         755,585   

Series A-1 6.50% 11/1/35

     255,000         294,632   

Maryland Economic Development Corporation Facilities Revenue (CNX Marine Terminals)
5.75% 9/1/25

     600,000         662,316   

M-S-R Energy Authority, California Gas
Series C 7.00% 11/1/34

     1,000,000         1,392,540   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Corporate-Backed Revenue Bonds (continued)

  

New Jersey Economic Development Authority (Continental Airlines Project)
5.625% 11/15/30 (AMT)

     225,000       $ 243,736   

New Jersey Economic Development Authority Special Facility Revenue (Continental Airlines Project)
5.25% 9/15/29 (AMT)

     500,000         525,105   

Ohio State Air Quality Development Authority Revenue (First Energy Generation)
Series A 5.70% 8/1/20

     260,000         302,302   

Pima County, Arizona Industrial Development Authority Pollution Control Revenue (Tucson Electric Power San Juan) 5.75% 9/1/29

     250,000         252,260   

St. John the Baptist Parish, Louisiana (Marathon Oil) Series A 5.125% 6/1/37

     500,000         527,175   

Suffolk County, New York Tobacco Asset Securitization
Series B 5.00% 6/1/32

     750,000         809,610   

Tobacco Settlement Financing Corporation, Louisiana Asset-Backed Note
Series A 5.25% 5/15/35

     460,000         493,111   

Town of Shoals, Indiana (National Gypsum Project)
7.25% 11/1/43 (AMT)

     310,000         344,271   
     

 

 

 
              9,513,168   
     

 

 

 

Education Revenue Bonds – 27.38%

  

Bowling Green, Ohio Student Housing Revenue (CFP I State University Project)
6.00% 6/1/45

     260,000         276,565   

California Statewide Communities Development Authority School Facility Revenue (Aspire Public Schools)
6.125% 7/1/46

     625,000         642,756   
 

 

14


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

California Statewide Communities Development Authority Student Housing Revenue (Irvine, LLC - UCI East Campus) 6.00% 5/15/23

     470,000       $ 528,773   

East Hempfield Township, Pennsylvania Industrial Development Authority (Student Services Income - Student Housing Project)
5.00% 7/1/35

     1,000,000               1,048,590   

Health & Educational Facilities Authority of the State of Missouri

     

(St. Louis College of Pharmacy Project)
5.25% 5/1/33

     500,000         545,975   

(Washington University) Series B 5.00% 11/15/30

     600,000         694,146   

Henderson Public Improvement Trust, Nevada (Touro College & University System Obligation) 5.50% 1/1/39

     135,000         147,906   

Marietta, Georgia Development Authority Revenue (Life University Income Project) 7.00% 6/15/39

     430,000         442,943   

Maryland Health & Higher Educational Facilities Authority (Loyola University) Series A 5.00% 10/1/39

     650,000         711,133   

Maryland State Economic Development Student Housing Revenue (University of Maryland College Park Projects)
5.75% 6/1/33

     370,000         397,820   

Massachusetts State Health & Educational Facilities Authority Revenue (Harvard University) Series A 5.00% 12/15/29

     600,000         700,356   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

Monroe County, New York Industrial Development Revenue
(Nazareth College Rochester Project)

5.50% 10/1/41

     495,000       $ 538,540   

Montgomery County, Pennsylvania Higher Education & Health Authority Revenue (Arcadia University) 5.25% 4/1/30

     550,000         579,353   

New Hope Cultural Education Facilities, Texas
(Chief-Collegiate Housing-Tarleton St.)
5.00% 4/1/34

     1,000,000               1,073,620   

New Jersey Economic Development Authority Revenue (MSU Student Housing Project) 5.875% 6/1/42

     450,000         496,111   

New York City, New York Trust For Cultural Resources (Whitney Museum of American Art)
5.00% 7/1/31

     500,000         558,570   

New York State Dormitory Authority

     

(Columbia University)
5.00% 10/1/41

     600,000         687,576   

(Touro College & University System)
Series A 5.50% 1/1/39

     390,000         434,998   

Oregon State Facilities Authority Revenue (Concordia University Project) Series A 144A 6.125% 9/1/30 #

     135,000         143,847   

Pennsylvania State Higher Educational Facilities Authority Revenue
(Edinboro University Foundation)
5.80% 7/1/30

     400,000         432,648   

(University Properties - East Stroudsburg University)
5.25% 7/1/19

     510,000         565,570   
 

 

  (continues)                                     15


Table of Contents

Schedules of investments

Delaware Investments® National Municipal Income Fund

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

Philadelphia Authority for Industrial Development
(1st Philadelphia Preparatory College)
7.25% 6/15/43

     370,000        $       405,324   

Phoenix, Arizona Industrial Development Authority Revenue

     

(Eagle College Preparatory Project) Series A 5.00% 7/1/43

     500,000         446,230   

(Rowan University Project) 5.00% 6/1/42

     1,000,000               1,061,700   

Pima County, Arizona Industrial Development Authority Education Revenue
(Edkey Charter School Project) Series REF 6.00% 7/1/48

     500,000         477,700   

Private Colleges & Universities Authority Revenue, Georgia

     

(Mercer University Project) Series C 5.25% 10/1/23

     600,000         691,152   

(Mercer University) Series A 5.00% 10/1/32

     135,000         144,921   

Swarthmore Borough Authority, Pennsylvania (Swarthmore College Project) 5.00% 9/15/32

     490,000         575,093   

Troy, New York Capital Resource Revenue (Rensselaer Polytechnic) Series A 5.125% 9/1/40

     600,000         652,206   

University of Arizona Series A 5.00% 6/1/39

     500,000         561,645   

University of California
Series AI 5.00% 5/15/32

     1,000,000         1,158,790   

Wyoming Community Development Authority Student Housing Revenue (CHF-Wyoming LLC) 6.50% 7/1/43

     250,000         285,215   
     

 

 

 
        18,107,772   
     

 

 

 

Electric Revenue Bonds – 3.75%

  

Jea Electric System Revenue
Series A 5.00% 10/1/33

     1,000,000         1,124,430   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Electric Revenue Bonds (continued)

  

State of California Department of Water Resources Series L 5.00% 5/1/17

     155,000        $       173,107   

Western Minnesota Municipal Power Agency
Series A 5.00% 1/1/30

     1,000,000         1,180,430   
     

 

 

 
              2,477,967   
     

 

 

 

Healthcare Revenue Bonds – 21.68%

  

Arizona Health Facilities Authority Revenue
(Catholic Healthcare West) Series D 5.00% 7/1/28

     500,000         549,900   

Brevard County, Florida Health Facilities Authority Revenue
(Health First Project) 7.00% 4/1/39

     350,000         406,157   

Butler County, Pennsylvania Hospital Authority Revenue
(Butler Health System Project) 7.125% 7/1/29

     450,000         534,919   

City of Westminster, Maryland
(Lutheran Village Millers Grant Inc.) 6.00% 7/1/34

     500,000         525,175   

Colorado Health Facilities Authority Revenue (Healthcare Facilities - American Baptist) 8.00% 8/1/43

     330,000         388,519   

Duluth, Minnesota Economic Development Authority Revenue (St. Luke’s Hospital Authority Obligation Group)
5.75% 6/15/32

     400,000         435,904   

Hawaii Pacific Health Special Purpose Revenue
Series A 5.50% 7/1/40

     300,000         326,760   

Illinois Finance Authority Revenue (Silver Cross & Medical Centers) 7.00% 8/15/44

     950,000         1,097,326   

Koyukuk, Alaska Revenue
(Tanana Chiefs Conference Health Care Facility Project)
7.75% 10/1/41

     300,000         331,653   
 

 

16


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Louisiana Public Facilities Authority Revenue
(Ochsner Clinic Foundation Project) 6.50% 5/15/37

     105,000       $         123,003   

Lycoming County, Pennsylvania Authority Health System Revenue (Susquehanna Health System Project) Series A 5.50% 7/1/28

     500,000         539,545   

Maine Health & Higher Educational Facilities Authority Revenue
(Maine General Medical Center) 6.75% 7/1/41

     300,000         332,643   

Maricopa County, Arizona Industrial Development Authority Health Facilities Revenue (Catholic Healthcare West) Series A 6.00% 7/1/39

     500,000         567,970   

Monroe County, Pennsylvania Hospital Authority Revenue (Pocono Medical Center) Series A 5.00% 1/1/41

     500,000         534,425   

Montgomery County, Pennsylvania Industrial Development Authority Revenue
(Mortgage - Whitemarsh Continuing Care) 6.25% 2/1/35

     675,000         679,603   

New Hampshire Health and Education Facilities Authority Revenue (Dartmouth - Hitchock Medical Center) 6.00% 8/1/38

     300,000         342,906   

New Jersey Health Care Facilities Financing Authority Revenue

     

(Barnabas Health) Series A 5.00% 7/1/22

     650,000         760,877   

(St. Peters University Hospital)
6.25% 7/1/35

     300,000         327,156   

New Mexico Hospital Equipment Loan Council Revenue (Presbyterian Healthcare)
5.00% 8/1/39

     500,000         547,160   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

New York State Dormitory Authority Revenue Non State Supported Debt (Orange Regional Medical Center) 6.25% 12/1/37

     500,000       $         527,740   

Orange County, Florida Health Facilities Authority Revenue (Mayflower Retirement Center)

     

5.00% 6/1/32

     400,000         427,052   

5.00% 6/1/36

     250,000         265,850   

5.125% 6/1/42

     750,000         799,830   

Oregon State Facilities Authority Revenue (Peacehealth Project) Series A 5.00% 11/15/29

     500,000         573,585   

Palm Beach County Health Facilities Authority, Florida (Sinai Residences Boca Raton Project)

     

7.25% 6/1/34

     20,000         22,431   

7.50% 6/1/49

     105,000         118,173   

State of Ohio (Cleveland Clinic Health) Series A 5.50% 1/1/39

     300,000         335,376   

University Medical Center, Tuscon, Arizona Hospital Revenue
6.50% 7/1/39

     500,000         583,585   

West Virginia Hospital Finance Authority Revenue (Highland Hospital Obligation Group)
9.125% 10/1/41

     500,000         538,905   

Yavapai County, Arizona Industrial Development Authority Revenue (Yavapai Regional Medical Center) Series A 5.00% 8/1/28

     720,000         793,390   
     

 

 

 
        14,337,518   
     

 

 

 

Housing Revenue Bonds – 2.59%

  

California Municipal Finance Authority Mobile Home Park Revenue
(Caritas Project)

     

Series A 5.50% 8/15/47

     750,000         821,325   

Series A 6.40% 8/15/45

     425,000         476,612   
 

 

  (continues)                                     17


Table of Contents

Schedules of investments

Delaware Investments® National Municipal Fund

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

        

Housing Revenue Bonds (continued)

  

City of Williston, North Dakota (Eagle Crest Apartments Project) 7.75% 9/1/38

     255,000        $       268,890   

Florida HomeLoan (Homeowner Mortgage Revenue) Series 2 5.90% 7/1/29 (AMT) (NATL-RE)

     145,000         145,977   
     

 

 

 
              1,712,804   
     

 

 

 

Lease Revenue Bonds – 12.20%

  

California State Public Works Board Lease Revenue
(Various Capital Projects) Series A 5.00% 4/1/37

     1,000,000         1,104,130   

California Statewide Communities Development Authority Student Housing Revenue (Lancer Plaza Project)
5.625% 11/1/33

     1,000,000         1,054,860   

Idaho State Building Authority Revenue

     

(Health & Welfare Project) Series A 5.00% 9/1/24

     135,000         165,036   

(State Police) Series I 5.00% 9/1/23

     760,000         914,075   

Minnesota State General Revenue Appropriations Series B 5.00% 3/1/29

     2,000,000         2,343,300   

New Jersey Economic Development Authority
(School Facilities Construction) Series EE 5.00% 9/1/18

     100,000         112,762   

New York City, New York Industrial Development Agency
(Senior Trips) Series A 5.00% 7/1/28 (AMT)

     250,000         273,215   

Pima County, Arizona Industrial Development Authority Metro Police Facility Revenue
(Nevada Project)

     

Series A 5.25% 7/1/31

     500,000         511,990   

Series A 5.375% 7/1/39

     500,000         512,040   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

        

Lease Revenue Bonds (continued)

  

Public Finance Authority, Wisconsin Airport Facilities Revenue (AFCO Investors II Portfolio) 5.75% 10/1/31

     500,000        $       499,730   

San Jose, California Financing Authority Revenue (Civic Center Project) Series A 5.00% 6/1/28

     500,000         578,505   
     

 

 

 
              8,069,643   
     

 

 

 

Local General Obligation Bonds – 1.71%

  

City of New York, New York

     

Series A-1 5.25% 8/15/21

     250,000         290,700   

Series I-1 5.375% 4/1/36

     250,000         288,173   

Gila County, Arizona Unified School District No. 10 (Payson School Improvement Project of 2006) Series A
5.25% 7/1/27 (AMBAC)

     500,000         548,675   
     

 

 

 
        1,127,548   
     

 

 

 

Pre-Refunded Bond – 1.74%

  

Bay Area, California Toll Authority Toll Bridge Revenue (San Francisco Bay Area) Series F1
5.00% 4/1/34-18§

     1,000,000         1,151,170   
     

 

 

 
        1,151,170   
     

 

 

 

Special Tax Revenue Bonds – 19.92%

  

Anne Arundel County, Maryland Special Obligation Revenue
(National Business Park - North Project) 6.10% 7/1/40

     200,000         214,326   

Brooklyn Arena Local Development, New York Pilot Revenue (Barclays Center Project)

     

6.25% 7/15/40

     940,000         1,064,071   

6.50% 7/15/30

     300,000         347,856   

California State Economic Recovery
Series A 5.25% 7/1/21

     260,000         308,638   
 

 

18


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

        

Special Tax Revenue Bonds (continued)

  

California Statewide Communities Development Authority Revenue (Statewide Inland Regional Center Project)
5.375% 12/1/37

     500,000        $       521,610   

Guam Government Business Privilege Tax Revenue

     

Series A 5.00% 1/1/22

     775,000         896,365   

Series B-1 5.00% 1/1/42

     540,000         573,151   

Massachusetts Bay Transportation Authority Senior Series A 5.25% 7/1/29

     200,000         255,940   

Miami-Dade County, Florida Special Obligation
(Capital Appreciation & Income) Series B 5.00% 10/1/35 (NATL-RE)

     1,000,000               1,032,670   

Mosaic District, Virginia Community Development Authority Revenue Series A 6.875% 3/1/36

     520,000         601,042   

New Jersey Economic Development Authority Revenue

     

5.00% 6/15/28

     200,000         221,600   

5.00% 6/15/29

     800,000         881,840   

(School Facilities Construction) Series AA 5.50% 12/15/29

     900,000         997,857   

New York City, New York Industrial Development Agency Civic Facility Revenue (YMCA of Greater New York Project) 5.00% 8/1/36

     595,000         605,662   

New York State Dormitory Authority

     

Series A 5.00% 3/15/33

     1,000,000         1,142,400   

(State Personal Income Tax Revenue-Education)
Series A 5.00% 3/15/38

     570,000         643,598   

Northampton County, Pennsylvania Industrial Development Authority Revenue
(Route 33 Project)
7.00% 7/1/32

     230,000         249,426   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

        

Special Tax Revenue Bonds (continued)

  

Peoria, Arizona Municipal Development Authority Sales Tax & Excise Shared Revenue (Senior Lien & Subordinate Lien) 5.00% 1/1/18

     1,085,000        $       1,226,343   

Regional Transportation District, Colorado Tax Revenue (Denver Transit Partners) 6.00% 1/15/41

     500,000         559,150   

State of Nevada 5.00% 6/1/17

     290,000         324,037   

Texas Public Finance Authority (Assessment- Unemployment Compensation) 5.00% 1/1/17

     375,000         413,243   

Wyandotte County, Kansas City, Kansas Unified Government Special Obligation Revenue (Capital Appreciation) Sales Tax Subordinate Lien 6.07% 6/1/21 ^

     130,000         91,172   
     

 

 

 
        13,171,997   
     

 

 

 

State General Obligation Bonds – 4.76%

  

California State

     

5.00% 2/1/17

     110,000         121,571   

5.25% 11/1/40

     320,000         364,832   

(Various Purposes)

     

5.00% 10/1/41

     440,000         488,607   

5.00% 10/1/44

     805,000         910,157   

6.00% 4/1/38

     105,000         125,625   

State of New York Series A 5.00% 2/15/39

     300,000         338,979   

State of Oregon Series K 5.00% 5/1/22

     500,000         608,840   

State of Washington (Various Purposes) Series R-2010A 5.00% 1/1/17

     170,000         187,257   
     

 

 

 
        3,145,868   
     

 

 

 

Transportation Revenue Bonds – 27.90%

  

Bay Area, California Toll Authority Revenue
(San Francisco Bay Area) 5.00% 4/1/27

     750,000         891,817   
 

 

  (continues)                                     19


Table of Contents

Schedules of investments

Delaware Investments® National Municipal Income Fund

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Transportation Revenue Bonds (continued)

  

Central Texas Regional Mobility Authority Revenue Senior Lien 6.00% 1/1/41

     520,000        $       591,313   

City of Atlanta, Georgia Department of Aviation Series B 5.00% 1/1/29

     1,000,000               1,160,940   

City of Chicago, Illinois O’Hare International Airport Revenue (General-Senior Lien) Series D 5.25% 1/1/34

     1,000,000         1,127,120   

Maryland State Economic Development Revenue (Transportation Facilities Project) Series A 5.75% 6/1/35

     255,000         274,342   

Metropolitan Transit Authority of Harris County, Texas Series A 5.00% 11/1/24

     500,000         590,715   

Metropolitan Transportation Authority, New York Series A 5.00% 11/15/41

     500,000         554,395   

Metropolitan Washington Airports Authority Series B 5.00% 10/1/16 (AMT)

     135,000         147,232   

Metropolitan Washington D.C. Airports Authority Dulles Toll Road Revenue (First Senior Lien) Series A 5.25% 10/1/44

     245,000         267,160   

New Jersey State Turnpike Authority Revenue Series A 5.00% 1/1/27

     1,000,000         1,151,950   

New York Liberty Development Revenue (1 World Trade Center Port Authority Construction)
5.00% 12/15/41

     500,000         550,570   

North Texas Tollway Authority
(Toll 2nd Tier) Series F 5.75% 1/1/38

     1,100,000         1,223,541   

North Texas Tollway Authority Special Projects System Series A 5.00% 9/1/20

     250,000         297,633   

Pennsylvania Turnpike Commission
Series A-1 5.00% 12/1/43

     500,000         544,685   
      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Transportation Revenue Bonds (continued)

  

Pennsylvania Turnpike Commission Subordinate (Special Motor License Foundation)

     

5.00% 12/1/22

     500,000        $       575,945   

Series B 5.00% 12/1/41

     500,000         545,015   

Port Authority of Allegheny County, Pennsylvania 5.75% 3/1/29

     900,000         1,068,417   

Port Authority of New York & New Jersey Special Project (JFK International Air Terminal)

     

6.00% 12/1/42

     230,000         266,623   

6.50% 12/1/28

     500,000         530,350   

St. Louis, Missouri Airport Revenue (Lambert St. Louis International)

     

5.00% 7/1/32 (AMT)

     1,000,000               1,056,810   

Series A-1 6.625% 7/1/34

     325,000         374,780   

State of Oregon Department of Transportation Series A 5.00% 11/15/26

     1,000,000         1,215,000   

Texas Private Activity Bond Surface Transportation Corporate Senior Lien Revenue
(LBJ Infrastructure)

     

7.00% 6/30/40

     285,000         343,525   

7.50% 6/30/33

     665,000         826,894   

(Mobility Partners) 7.50% 12/31/31

     500,000         611,500   

(NTE Mobility Partners)

     

6.75% 6/30/43 (AMT)

     225,000         271,589   

6.875% 12/31/39

     1,000,000         1,183,510   

7.00% 12/31/38 (AMT)

     165,000         203,986   
     

 

 

 
        18,447,357   
     

 

 

 

Water & Sewer Revenue Bonds – 6.80%

  

Atlanta, Georgia Water & Wastewater Revenue
Series A 6.25% 11/1/39

     950,000         1,126,349   

County of Jefferson, Alabama Sewer Revenue
(Sub Lien - Warrants) Series D 6.50% 10/1/53

     500,000         574,645   
 

 

20


Table of Contents

 

 

 

      Principal
Amount°
    

Value

(U.S. $)

 

Municipal Bonds (continued)

  

Water & Sewer Revenue Bonds (continued)

  

Los Angeles, California Wastewater System Revenue
Series A 5.00% 6/1/27

     500,000       $ 596,980   

Phoenix, Arizona Civic Improvement Wastewater Systems Revenue (Junior Lien)
Series A 5.00% 7/1/39

     900,000         1,008,180   

San Francisco, California City & County Public Utilities Commission Water Revenue
Series F 5.00% 11/1/27

     500,000         593,780   

Texas State
Series C 5.00% 8/1/22

     500,000         599,185   
     

 

 

 
        4,499,119   
     

 

 

 

Total Municipal Bonds
(cost $88,851,842)

        95,761,931   
     

 

 

 

Total Value of Securities – 144.82%
(cost $88,851,842)

   

    $ 95,761,931   
     

 

 

 

 

  #

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Sept. 30, 2014, the aggregate value of Rule 144A securities was $143,847, which represents 0.22% of the Fund’s net assets. See Note 5 in “Notes to financial statements.”

  °

Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency.

  ^

Zero coupon security. The rate shown is the yield at the time of purchase.

  §

Pre-refunded bonds. Municipal bonds 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 5 in “Notes to financial statements.”

Summary of abbreviations:

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

NATL-RE – Insured by National Public Finance Guarantee Corporation

See accompanying notes, which are an integral part of the financial statements.

 

 

     21


Table of Contents

Statements of assets and liabilities

Delaware Investments® Closed-End Municipal Bond Funds

September 30, 2014 (Unaudited)

 

     Delaware
Investments
Colorado
Municipal
Income
Fund, Inc.
    Delaware
Investments
Minnesota
Municipal
Income
Fund II, Inc.
    Delaware
Investments
National
Municipal
Income
Fund
 

Assets:

      

Investments, at value1

   $ 101,418,596      $ 242,780,984      $ 95,761,931   

Short-term investments, at value2

     585,000                 

Cash

     136,103                 

Interest income receivable

     1,388,427        3,525,876        1,359,595   

Receivables for securities sold

            20,220          

Offering cost for preferred shareholders

     120,669        215,896        175,942   
  

 

 

   

 

 

   

 

 

 

Total assets

     103,648,795        246,542,976        97,297,468   
  

 

 

   

 

 

   

 

 

 

Liabilities:

      

Cash overdraft

            62,469        197,350   

Liquidation value of preferred stock

     30,000,000        75,000,000        30,000,000   

Payable for securities purchased

            573,995        906,720   

Investment management fees payable

     33,950        80,588        31,513   

Other accrued expenses

     24,403        63,963        21,047   

Audit fees payable

     15,065        9,329        14,019   

Other affiliates payable

     1,062        2,485        964   

Directors’/Trustees’ fees and expenses payable

     184        429        166   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     30,074,664        75,793,258        31,171,779   
  

 

 

   

 

 

   

 

 

 

Total Net Assets Applicable to Common Shareholders

   $ 73,574,131      $ 170,749,718      $ 66,125,689   
  

 

 

   

 

 

   

 

 

 

Net Assets Applicable to Common Shareholders Consist of:

      

Paid-in capital ($0.001 par value)3,4

   $ 66,918,121      $ 157,931,075      $ 60,617,476   

Undistributed net investment income

     897,982        1,177,848        679,844   

Accumulated net realized loss on investments

     (1,620,054     (1,712,494     (2,081,720

Net unrealized appreciation of investments

     7,378,082        13,353,289        6,910,089   
  

 

 

   

 

 

   

 

 

 

Total Net Assets Applicable to Common Shareholders

   $ 73,574,131      $ 170,749,718      $ 66,125,689   
  

 

 

   

 

 

   

 

 

 

Net Asset Value per Common Share

   $ 15.21      $ 14.84      $ 14.60   
  

 

 

   

 

 

   

 

 

 

1Investments, at cost

     94,040,514        229,427,695        88,851,842   

2Short-term investments, at cost

     585,000                 

3Common shares outstanding

     4,837,100        11,504,975        4,528,443   

4Common shares authorized

     200 million        200 million        unlimited   

See accompanying notes, which are an integral part of the financial statements.

 

22


Table of Contents

Statements of operations

Delaware Investments® Closed-End Municipal Bond Funds

Six months ended September 30, 2014 (Unaudited)

 

     Delaware
Investments
Colorado
Municipal
Income
Fund, Inc.
     Delaware
Investments
Minnesota
Municipal
Income
Fund II, Inc.
     Delaware
Investments
National
Municipal
Income
Fund
 

Investment Income:

        

Interest

   $ 2,232,125       $ 4,895,470       $ 2,126,515   
  

 

 

    

 

 

    

 

 

 

Expenses:

        

Management fees

     204,783         488,391         190,196   

Interest expense

     190,011         475,028         190,011   

Rating agency fees

     25,064         21,578         23,001   

Audit and tax

     21,370         23,473         17,212   

Offering costs

     20,143         42,586         27,602   

Accounting and administration expenses

     16,996         40,537         15,786   

Dividend disbursing and transfer agent fees and expenses

     14,788         34,288         13,709   

Reports and statements to shareholders

     9,633         16,494         12,055   

Legal fees

     6,240         14,798         6,595   

Custodian fees

     2,031         4,939         1,644   

Directors’/Trustees’ fees and expenses

     1,622         3,756         1,442   

Stock exchange fees

     1,169         5,575         2,087   

Registration fees

     678         1,238         678   

Other

     5,283         10,802         8,874   
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     519,811         1,183,483         510,892   
  

 

 

    

 

 

    

 

 

 

Net Investment Income

     1,712,314         3,711,987         1,615,623   
  

 

 

    

 

 

    

 

 

 

Net Realized and Unrealized Gain:

        

Net realized gain on investments

     164,668         20,503         336,101   

Net change in unrealized appreciation (depreciation) of investments

     3,585,406         6,387,684         3,368,706   
  

 

 

    

 

 

    

 

 

 

Net Realized and Unrealized Gain

     3,750,074         6,408,187         3,704,807   
  

 

 

    

 

 

    

 

 

 

Net Increase in Net Assets Resulting from Operations

   $ 5,462,388       $ 10,120,174       $ 5,320,430   
  

 

 

    

 

 

    

 

 

 

See accompanying notes, which are an integral part of the financial statements.

 

23


Table of Contents

Statements of changes in net assets

Delaware Investments® Closed-End Municipal Bond Funds

 

     Delaware Investments
Colorado Municipal

Income Fund, Inc.
 
     Six months
ended
9/30/14
(Unaudited)
    Year ended
3/31/14
 

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 1,712,314      $ 3,388,364   

Net realized gain (loss)

     164,668        (1,803,532

Net change in unrealized appreciation (depreciation)

     3,585,406        (2,742,772
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     5,462,388        (1,157,940
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (1,668,800     (3,337,599

Net realized gain

            (72,556
  

 

 

   

 

 

 
     (1,668,800     (3,410,155
  

 

 

   

 

 

 

Net Increase (Decrease) in Net Assets Applicable to Common Shareholders

     3,793,588        (4,568,095

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     69,780,543        74,348,638   
  

 

 

   

 

 

 

End of period

   $ 73,574,131      $ 69,780,543   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 897,982      $ 854,468   
  

 

 

   

 

 

 
     Delaware Investments
Minnesota Municipal
Income Fund II, Inc.
 
     Six months
ended
9/30/14
(Unaudited)
    Year ended
3/31/14
 

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 3,711,987      $ 7,451,908   

Net realized gain (loss)

     20,503        (1,865,333

Net change in unrealized appreciation (depreciation)

     6,387,684        (7,344,025
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     10,120,174        (1,757,450
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (3,969,216     (7,938,433

Net realized gain

            (1,334,577
  

 

 

   

 

 

 
     (3,969,216     (9,273,010
  

 

 

   

 

 

 

Net Increase (Decrease) in Net Assets Applicable to Common Shareholders

     6,150,958        (11,030,460

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     164,598,760        175,629,220   
  

 

 

   

 

 

 

End of period

   $ 170,749,718      $ 164,598,760   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 1,177,848      $ 1,435,077   
  

 

 

   

 

 

 

 

24


Table of Contents

 

 

 

     Delaware Investments
National Municipal
Income Fund
 
     Six months
ended
9/30/14
(Unaudited)
    Year ended
3/31/14
 

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 1,615,623      $ 3,213,761   

Net realized gain (loss)

     336,101        (2,041,010

Net change in unrealized appreciation (depreciation)

     3,368,706        (3,307,566
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     5,320,430        (2,134,815
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (1,720,808     (3,215,195
  

 

 

   

 

 

 
     (1,720,808     (3,215,195
  

 

 

   

 

 

 

Net Increase (Decrease) in Net Assets Applicable to Common Shareholders

     3,599,622        (5,350,010

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     62,526,067        67,876,077   
  

 

 

   

 

 

 

End of period

   $ 66,125,689      $ 62,526,067   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 679,844      $ 785,029   
  

 

 

   

 

 

 

See accompanying notes, which are an integral part of the financial statements.

 

     25


Table of Contents

Statements of cash flows

Delaware Investments® Closed-End Municipal Bond Funds

Six months ended September 30, 2014 (Unaudited)

 

     Delaware
Investments
Colorado
Municipal
Income
Fund, Inc.
    Delaware
Investments
Minnesota
Municipal
Income
Fund II, Inc.
    Delaware
Investments
National
Municipal
Income
Fund
 

Net Cash Provided by (Used for) Operating Activities:

      

Net increase in net assets resulting from operations

   $ 5,462,388      $ 10,120,174      $ 5,320,430   
  

 

 

   

 

 

   

 

 

 

Adjustments to reconcile net increase in net assets from operations to cash provided by (used for) operating activities:

      

Amortization of premium and accretion of discount on investments

     169,958        862,533        219,475   

Amortization of offering costs for preferred shareholders

     28,456        50,914        35,936   

Purchase of investment securities

     (5,780,253     (9,685,868     (17,903,469

Proceeds from disposition of investment securities

     6,086,988        9,217,056        17,000,755   

(Purchase of) proceeds from short-term investment securities, net

     (585,000            500,000   

Net realized gain on investments

     (164,668     (20,503     (336,101

Net change in net unrealized appreciation (depreciation) of investments

     (3,585,406     (6,387,684     (3,368,706

Decrease in receivable for securities sold

            52,781        10,148   

Increase (decrease) in interest receivable

     21,547        (855     (25,132

Increase (decrease) in payable for securities purchased

            573,995        (201,180

Increase (decrease) in investment management fees payable

     149        (748     149   

Increase in Directors’/Trustees’ fees and expenses payable

     (11     (36     (10

Increase in audit fees payable

     (18,470     (24,206     (19,516

Increase in other affiliates payable

     (1,566     (3,065     (3,285

Decrease in other accrued expenses

     19,382        21,175        11,601   
  

 

 

   

 

 

   

 

 

 

Total adjustments

     (3,808,894     (5,344,511     (4,079,335
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     1,653,494        4,775,663        1,241,095   
  

 

 

   

 

 

   

 

 

 

Cash Flows Used for Financing Activities:

      

Cash dividends and distributions paid to common shareholders

     (1,668,800     (3,969,216     (1,720,808
  

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (1,668,800     (3,969,216     (1,720,808
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (15,306     806,447        (479,713

Cash at beginning of period

     151,409        (868,916     282,363   
  

 

 

   

 

 

   

 

 

 

Cash at end of period

   $ 136,103      $ (62,469   $ (197,350
  

 

 

   

 

 

   

 

 

 

Cash paid for interest on leverage

   $ 190,011      $ 475,028      $ 190,011   
  

 

 

   

 

 

   

 

 

 

See accompanying notes, which are an integral part of the financial statements.

 

26


Table of Contents

Financial highlights

Delaware Investments® Colorado Municipal Income Fund, Inc.

Selected data for each share of the Fund outstanding throughout each period were as follows:

 

     Six months                                
     ended     Year ended  
     9/30/141     3/31/14     3/31/13     3/31/12     3/31/11     3/31/10  
      (Unaudited)                                     

Net asset value, beginning of period

   $ 14.430      $ 15.370      $ 15.010      $ 13.370      $ 13.990      $ 13.220   

Income (loss) from investment operations:

            

Net investment income2

     0.354        0.700        0.733        0.638        0.601        0.607   

Net realized and unrealized gain (loss)

     0.771        (0.935     0.416        1.582        (0.651     0.733   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     1.125        (0.235     1.149        2.220        (0.050     1.340   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.345     (0.690     (0.690     (0.580     (0.570     (0.570

Net realized gain

            (0.015     (0.099                     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.345     (0.705     (0.789     (0.580     (0.570     (0.570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 15.210      $ 14.430      $ 15.370      $ 15.010      $ 13.370      $ 13.990   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 14.790      $ 13.330      $ 14.840      $ 14.600      $ 12.450      $ 13.390   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     12.33%        (5.25%)        6.92%        22.41%        (3.00%)        24.49%   

Net asset value

     8.02%        (0.97%)        7.71%        17.19%        (0.30%)        10.55%   

Ratios and supplemental data:

            

Net assets applicable to common shares, end of period (000 omitted)

   $ 73,574      $ 69,781      $ 74,349      $ 72,613      $ 64,689      $ 67,651   

Ratio of expenses to average net assets applicable to common shareholders4

     1.44%        1.49%        1.44%        0.95%        0.56%        0.56%   

Ratio of net investment income to average net assets applicable to common shareholders5

     4.74%        4.90%        4.72%        4.46%        4.31%        4.41%   

Portfolio turnover

     6%        26%        8%        64%        10%        20%   

Leverage analysis:

            

Value of preferred shares outstanding (000 omitted)6

   $ 30,000      $ 30,000      $ 30,000      $ 30,000      $      $   

Net asset coverage per share of preferred shares, end of period6

   $ 345,247      $ 332,602      $ 347,829      $ 342,045      $      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,0007      $ 100,0007      $      $   

 

1 

Ratios have been annualized and total return and portfolio turnover have not been annualized.

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.039, $0.078, $0.079, and $0.031 per share for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012, respectively, and from realized capital gains of $0.002, $0.006 and $0.000 per share for the years ended March 31, 2014, 2013, and 2012, respectively.

3

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.

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 0.91%, 0.94%, 0.89% and 0.73%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5

The ratio of net investment income excluding interest expense for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 5.27%, 5.45%, 5.27% and 4.68%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

In November 2011, the Fund issued a new series of 300 variable rate preferred shares, with a liquidation preference of $100,000 per share.

7 

Excluding any accumulated but unpaid dividends.

See accompanying notes, which are an integral part of the financial statements.

 

 

  (continues)    27


Table of Contents

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:

 

     Six months                                
     ended     Year ended  
     9/30/141     3/31/14     3/31/13     3/31/12     3/31/11     3/31/10  
      (Unaudited)                                     

Net asset value, beginning of period

   $ 14.310      $ 15.270      $ 14.940      $ 13.700      $ 14.060      $ 13.140   

Income (loss) from investment operations:

            

Net investment income2

     0.323        0.648        0.715        0.640        0.612        0.602   

Net realized and unrealized gain (loss)

     0.552        (0.802     0.345        1.180        (0.402     0.888   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     0.875        (0.154     1.060        1.820        0.210        1.490   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.345     (0.690     (0.690     (0.580     (0.570     (0.570

Net realized gain

            (0.116     (0.040                     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.345     (0.806     (0.730     (0.580     (0.570     (0.570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.840      $ 14.310      $ 15.270      $ 14.940      $ 13.700      $ 14.060   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 13.490      $ 13.340      $ 15.630      $ 14.230      $ 12.600      $ 12.740   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     3.74%        (9.26%)        15.18%        17.95%        3.32%        18.58%   

Net asset value

     6.30%        (0.36%)        7.18%        13.90%        1.80%        12.04%   

Ratios and supplemental data:

            

Net assets applicable to common shares, end of period (000 omitted)

   $ 170,750      $ 164,599      $ 175,629      $ 171,835      $ 157,655      $ 161,723   

Ratio of expenses to average net assets applicable to common shareholders4

     1.40%        1.51%        1.40%        0.93%        0.56%        0.56%   

Ratio of net investment income to average net assets applicable to common shareholders5

     4.39%        4.54%        4.65%        4.44%        4.35%        4.36%   

Portfolio turnover

     4%        17%        24%        44%        9%        19%   

Leverage analysis:

            

Value of preferred shares outstanding (000 omitted)6

   $ 75,000      $ 75,000      $ 75,000      $ 75,000      $      $   

Net asset coverage per share of preferred shares, end of period6

   $ 327,666      $ 319,465      $ 334,172      $ 329,113      $      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,0007      $ 100,0007      $      $   

 

1 

Ratios have been annualized and total return and portfolio turnover have not been annualized.

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.041, $0.076, $0.084, and $0.033 per share for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013, and 2012, respectively, and from realized capital gains of $0.014, $0.005, and $0.000 per share for the years ended March 31, 2014, 2013, and 2012, respectively.

3 

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.

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 0.84%, 0.88%, 0.82% and 0.70%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5

The ratio of net investment income excluding interest expense to average net assets for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 4.95%, 5.17%, 5.23% and 4.67%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

In November 2011, the Fund issued a new series of 750 variable rate preferred shares, with a liquidation preference of $100,000 per share.

7  Excluding any accumulated but unpaid dividends.

See accompanying notes, which are an integral part of the financial statements.

 

28


Table of Contents

Financial highlights

Delaware Investments® National Municipal Income Fund, Inc.

Selected data for each share of the Fund outstanding throughout each period were as follows:

 

     Six months                                
     ended     Year ended  
     9/30/141     3/31/14     3/31/13     3/31/12     3/31/11     3/31/10  
     (Unaudited)                                

 

 

Net asset value, beginning of period

   $ 13.810      $ 14.990      $ 14.020      $ 12.620      $ 13.070      $ 11.960   

Income (loss) from investment operations:

            

Net investment income2

     0.357        0.710        0.722        0.531        0.610        0.571   

Net realized and unrealized gain (loss)

     0.813        (1.180     0.858        1.409        (0.532     1.049   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     1.170        (0.470     1.580        1.940        0.078        1.620   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.380     (0.710     (0.610     (0.540     (0.528     (0.510
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.380     (0.710     (0.610     (0.540     (0.528     (0.510
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.600      $ 13.810      $ 14.990      $ 14.020      $ 12.620      $ 13.070   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 12.760      $ 12.350      $ 14.480      $ 13.240      $ 12.200      $ 12.140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     6.40%        (9.65%)        14.12%        13.19%        4.78%        16.69%   

Net asset value

     8.87%        (2.41%)        11.56%        15.87%        0.67%        13.97%   

Ratios and supplemental data:

            

Net assets applicable to common shares, end of period (000 omitted)

   $ 66,126      $ 62,526      $ 67,876      $ 63,487      $ 30,559      $ 31,650   

Ratio of expenses to average net assets applicable to common shareholders4

     1.57%        1.58%        1.56%        1.02%        0.65%        0.63%   

Ratio of net investment income to average net assets applicable to common shareholders5

     4.97%        5.17%        4.86%        3.96%        4.64%        4.48%   

Portfolio turnover

     18%        40%        42%        101%        50%        69%   

Leverage analysis:

            

Value of preferred shares outstanding (000 omitted)6

   $ 30,000      $ 30,000      $ 30,000      $ 30,000      $      $   

Net asset coverage per share of preferred shares, end of period6

   $ 320,419      $ 308,420      $ 326,254      $ 311,625      $      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,0007      $ 100,0007      $      $   

 

1

Ratios have been annualized and total return and portfolio turnover have not been annualized.

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.042, $0.085, $0.090, and $0.004 per share for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013, and 2012, respectively.

3

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.

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 0.99%, 0.96%, 0.96% and 0.99%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5

The ratio of net investment income excluding interest expense to average net assets for the six months ended Sept. 30, 2014 and the years ended March 31, 2014, 2013 and 2012 were 5.55%, 5.79%, 5.46% and 3.99%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

In March 2012, the Fund issued a new series of 300 variable rate preferred shares, with a liquidation preference of $100,000 per share.

7

Excluding any accumulated but unpaid dividends.

See accompanying notes, which are an integral part of the financial statements.

 

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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

September 30, 2014 (Unaudited)

Delaware Investments Colorado Municipal Income Fund, Inc. (Colorado Municipal Fund) and Delaware Investments Minnesota Municipal Income Fund II, Inc. (Minnesota Municipal Fund II) are organized as Minnesota corporations and Delaware Investments National Municipal Income Fund (National Municipal Fund) is organized as a Massachusetts business trust (each referred to as a Fund and collectively as the Funds). Colorado Municipal Fund, Minnesota Municipal Fund II, and National Municipal Fund are considered diversified closed-end management investment companies under the Investment Company Act of 1940, as amended. The Funds’ shares trade on the New York Stock Exchange MKT, the successor to the American Stock Exchange.

The investment objective of each of the Colorado Municipal Fund and Minnesota Municipal Fund II is to provide current income exempt from federal income tax and from state personal income tax, if any, consistent with the preservation of capital. The investment objective of the National Municipal Fund is to provide current income exempt from federal income tax, consistent with the preservation of capital. Each of Colorado Municipal Fund and Minnesota Municipal Fund II 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 at the time of investment. The National Municipal Fund seeks to achieve its investment objective by investing at least 80% of its net assets in securities the income from which is exempt from federal income tax.

1. Significant Accounting Policies

The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Funds.

Security Valuation — Debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. Generally, 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 (each a Board, or collectively, the Boards). 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 or suspension of trading in a security.

Federal Income Taxes — No provision for federal income taxes has been made as each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Funds evaluate tax positions taken or expected to be taken in the course of preparing each Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed each Fund’s tax positions taken for all open federal income tax years (March 31, 2011–March 31, 2014), and has concluded that no provision for federal income tax is required in each Fund’s financial statements.

Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent 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 and the differences could be material.

Other — Expenses directly attributable to each Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such 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 on debt securities are amortized to interest income over the lives of the respective securities using the effective interest method. Each Fund declares and pays dividends from net investment income monthly and distributions from net realized gain on investments, if any, annually. Each Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.

Each Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no earnings credits for the six months ended Sept. 30, 2014.

 

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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 based on each Fund’s adjusted average daily net assets.

Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to each Fund. For these services, the Funds pay DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value basis. For the six months ended Sept. 30, 2014, each Fund was charged for these services as follows:

 

     Colorado
Municipal
        Fund        
   Minnesota
Municipal
        Fund II        
   National
Municipal
Fund
   $2,449    $5,842    $2,275

As provided in the investment management agreement, each Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to each Fund. For the six months ended Sept. 30, 2014, each Fund was charged for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees as follows:

 

    

Colorado

Municipal

        Fund        

   Minnesota
Municipal
        Fund II        
   National
Municipal
Fund
   $6,285    $14,703    $5,661

Directors’/Trustees’ fees include expenses accrued by each Fund for each Director’s/Trustee’s retainer and meeting fees. Certain officers of DMC and DSC are officers and/or Directors/Trustees of the Trust. These officers and Directors/Trustees are paid no compensation by the Funds.

3. Investments

For the six months ended Sept. 30, 2014, each Fund made purchases and sales of investment securities other than short-term investments as follows:

 

     Colorado
Municipal
        Fund        
   Minnesota
Municipal
        Fund II        
   National
Municipal
Fund

Purchases

       $5,780,253          $9,685,868        $ 17,903,469  

Sales

       6,086,988          9,217,056          17,000,755  

At Sept. 30, 2014, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At Sept. 30, 2014, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:

 

     Colorado
Municipal
        Fund        
  Minnesota
Municipal
        Fund II        
  National
Municipal
Fund

Cost of investments

     $ 94,625,514       $ 229,427,695       $ 88,875,347  
    

 

 

     

 

 

     

 

 

 

Aggregate unrealized appreciation

     $ 7,414,811       $ 13,595,863       $ 6,995,203  

Aggregate unrealized depreciation

       (36,729 )       (242,574 )       (108,619 )
    

 

 

     

 

 

     

 

 

 

Net unrealized appreciation

     $ 7,378,082       $ 13,353,289       $ 6,886,584  
    

 

 

     

 

 

     

 

 

 

 

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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

 

3. Investments (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, 2014, if not utilized in future years, will expire as follows:

 

Year of Expiration

     Colorado
Municipal
Fund
     Minnesota
Municipal
Fund II
     National
Municipal
Fund
 

2018

     $—      $—        $407,888   

On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Losses that will be carried forward under the Act are as follows:

 

     Colorado
Municipal
Fund
     Minnesota
Municipal
Fund II
     National
Municipal
Fund
 

Loss carryforward character:

        

Short-term

   $ 259,063       $ 803,182       $ 1,516,439   

Long-term

   $ 1,533,560       $ 1,054,684       $ 492,271   

U.S. GAAP defines fair value as the price that each Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. Each Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.

 

Level 1     Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts)
Level 2     Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities)
Level 3     Significant unobservable inputs, including each Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities)

Level 3 investments are valued using significant unobservable inputs. Each Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.

 

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The following tables summarize the valuation of each Fund’s investments by fair value hierarchy levels as of Sept. 30, 2014:

 

     Colorado Municipal Fund
     Level 2

Municipal Bonds

       $101,418,596   

Short-Term Investments

       585,000   
    

 

 

 

Total

       $102,003,596   
    

 

 

 
    

Minnesota

Municipal Fund II

     Level 2

Municipal Bonds

       $242,780,984   
    

 

 

 
     National Municipal Fund
     Level 2

Municipal Bonds

       $  95,761,931   
    

 

 

 

During the six months ended Sept. 30, 2014, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a material impact to the Funds. The Funds’ policy is to recognize transfers between levels at the beginning of the reporting period.

4. Capital Stock

Pursuant to their articles of incorporation, Colorado Municipal Fund and Minnesota Municipal Fund II each have 200 million shares of $0.01 par value common shares authorized. National 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 six months ended Sept. 30, 2014. Shares issuable under each Fund’s dividend reinvestment plan are purchased by each Fund’s transfer agent, Computershare, Inc., in the open market.

On Nov. 15, 2011, Delaware Investments® Colorado Municipal Income Fund, Inc. (VCF) and Delaware Investments Minnesota Municipal Income Fund II, Inc. (VMM), issued $30,000,000 and $75,000,000, respectively, of Series 2016 Variable Rate MuniFund Term Preferred (VMTP) Shares, with $100,000 liquidation value per share in a privately negotiated offering. On March 15, 2012, Delaware Investments National Municipal Income Fund (National Municipal Fund) issued $30,000,000 Series 2017 VMTP Shares, with $100,000 liquidation value per share in a privately negotiated offering. Proceeds from the issuance of VMTP Shares, net of offering expenses, were invested in accordance with each Fund’s investment objective. The VMTP Shares were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

Colorado Municipal Fund and Minnesota Municipal Fund II are obligated to redeem their VMTP Shares on Dec. 1, 2016, unless earlier redeemed or repurchased by the Fund. National Municipal Fund is obligated to redeem its VMTP Shares on April 1, 2017, unless earlier redeemed or repurchased by the Fund. VMTP Shares are subject to optional and mandatory redemption in certain circumstances. The VMTP Shares were redeemable at the option of a Fund, subject to payment of a premium until Dec. 1, 2013 (with respect to Minnesota Municipal Fund II and Colorado Municipal Fund) and April 1, 2014 (with respect to National Municipal Fund), and at par thereafter. A Fund may be obligated to redeem certain of the VMTP Shares if the Fund fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The redemption price per share is equal to the sum of the liquidation value per share plus any accumulated but unpaid dividends. Dividends on the VMTP Shares are set weekly, subject to adjustments in certain circumstances. The weighted average dividend rates for the six months ended Sept. 30, 2014 were as follows:

 

   

Colorado
Municipal
Fund

  Minnesota
Municipal
Fund II
  National
Municipal
Fund
  1.3%   1.4%   1.3%

The Funds use leverage because their managers believe that, over time, leveraging may provide opportunities for additional income and total return for common shareholders. However, the use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage; accordingly, the use of structural leverage may hurt a Fund’s overall performance.

 

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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

 

4. Capital Stock (continued)

Leverage may also cause the Funds to incur certain costs. In the event that a Fund is unable to meet certain criteria (including, but not limited to, maintaining certain ratings with Fitch Ratings and Moody’s Investors Service (Moody’s), funding dividend payments, or funding redemptions), that Fund will pay additional fees with respect to the leverage.

For financial reporting purposes, the VMTP Shares are considered debt of the issuer; therefore, the liquidation value which approximates fair value of the VMTP Shares is recorded as a liability in the statements of assets and liabilities. Dividends accrued and paid on the VMTP Shares are included as a component of interest expense in the statements of operations. The VMTP Shares are treated as equity for legal and tax purposes. Dividends paid to holders of the VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes.

5. Geographic, Credit, and Market Risk

The Funds concentrate their investments in securities issued by municipalities. Because each of the Colorado Municipal Income Fund and the Minnesota Municipal Income Fund invest substantially all of its net assets in municipal obligations of its respective state at the time of investment, events in that state may have a significant impact on the performance and investments of the Colorado Municipal Income Fund and the Minnesota Municipal Fund. These events may include economic or political policy changes, tax base erosion, state constitutional limits on tax increases, budget deficits and other financial difficulties, changes in the credit ratings assigned to the state’s municipal issuers, the effects of natural or human-made disasters, or other economic, legislative, or political or social issues. Any downgrade to the credit rating of the securities issued by the U.S. government may result in a downgrade of securities issued by the states or U.S. territories. The National Municipal Fund will be subject to these risks as well but to a lesser extent because it invests at least 80% of its net assets in securities, the income from which is exempt from federal income tax and is not limited to investing substantially all of its assets in municipal obligations of a single state. From time to time and consistent with its investment policies, the National Municipal Income Fund may invest a considerable portion of its assets in certain municipalities. As of Sept. 30, 2014, the National Municipal Income Fund has invested 22.90%, 16.80%, and 13.76% (each as a percentage of fixed income investments) in securities issued by the State of California, the State of New York, and the State of Arizona, respectively. These investments could make the National Municipal Income Fund more sensitive to economic conditions in those states than other more geographically diversified national municipal income funds.

Each Fund may invest a percentage of assets in obligations of governments of U.S. territories, commonwealths, and possessions such as Puerto Rico, the U.S. Virgin Islands, or Guam. To the extent a Fund invests in such obligations, that Fund may be adversely affected by local political and economic conditions and developments within these U.S. territories, commonwealths, and possessions. In the recent past, Puerto Rico has experienced volatile economic conditions. If the situation in Puerto Rico changes, the volatility, credit quality and performance of the Funds could be affected to the extent a Fund holds Puerto Rican securities.

Many municipalities insure repayment for their obligations. Although bond insurance may reduce 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. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in each Fund. At Sept. 30, 2014, the percentages of each Fund’s net assets insured by insurers are listed below and these securities have been identified on the “Schedules of investments.”

 

   

Colorado
Municipal
Fund

  Minnesota
Municipal
Fund II
  National
Municipal
Fund
  26.41%   6.23%   2.61%

Each Fund invests a portion of its assets in high yield fixed income securities, which are securities rated BB or lower by Standard & Poor’s (S&P) and/or Ba or lower by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.

The Funds 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

 

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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 the 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, S&P, and/or Fitch Ratings due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement.

Each Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction, or through a combination of such approaches. The Funds will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.

Each Fund may invest up to 15% of its net 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, the Boards have 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 securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to each Fund’s 15% limit on investments in illiquid securities. As of Sept. 30, 2014, no securities have been determined to be illiquid under the Funds’ Liquidity Procedures. Rule 144A securities held by the Fund have been identified on the “Schedules of investments.”

6. Contractual Obligations

Each Fund enters into contracts in the normal course of business that contain a variety of indemnifications. Each Fund’s maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed each Fund’s existing contracts and expects the risk of loss to be remote.

7. Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after Dec. 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Funds’ financial statement disclosures.

8. Subsequent Events

Effective Nov. 1, 2014, Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Funds. Also effective Nov. 1, 2014, DIFSC is the transfer agent and dividend disbursing agent of the Funds.

Management has determined that no other material events or transactions occurred subsequent to Sept. 30, 2014 that would require recognition or disclosure in the Funds’ financial statements.

 

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Table of Contents

Other Fund information

(Unaudited)

Delaware Investments® Closed-End Municipal Bond Funds

Fund management

Joseph R. Baxter

Senior Vice President, Head of Municipal Bond Department,

Senior Portfolio Manager

Joseph R. Baxter is the head of the municipal bond department and is responsible for setting the department’s investment strategy. He is also a co-portfolio manager of the firm’s municipal bond funds and several client accounts. Before joining Delaware Investments in 1999 as head municipal bond trader, he held investment positions with First Union, most recently as a municipal portfolio manager with the Evergreen Funds. Baxter received a bachelor’s degree in finance and marketing from La Salle University.

Stephen J. Czepiel

Senior Vice President, Senior Portfolio Manager

Stephen J. Czepiel is a member of the firm’s municipal fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He is a co-portfolio manager of the firm’s municipal bond funds and client accounts. He joined Delaware Investments in July 2004 as a senior bond trader. Previously, he was vice president at both Mesirow Financial and Loop Capital Markets. He began his career in the securities industry in 1982 as a municipal bond trader at Kidder Peabody and now has more than 20 years of experience in the municipal securities industry. Czepiel earned his bachelor’s degree in finance and economics from Duquesne University.

Denise A. Franchetti, CFA

Vice President, Portfolio Manager, Senior Research Analyst

Denise A. Franchetti is a senior research analyst for the municipal bond department. Currently, she is responsible for following the airport, education, hotel, cogeneration, and cargo sectors for the group. In 2003, she was also named as portfolio manager on the tax-exempt closed-end funds in addition to her research duties. Prior to joining Delaware Investments in 1997 as a municipal bond analyst, she was a fixed income trader at Provident Mutual Life Insurance and an investment analyst at General Accident Insurance. Franchetti received her bachelor’s degree and an MBA from La Salle University. She is a member of the Financial Analysts of Philadelphia.

Gregory A. Gizzi

Senior Vice President, Senior Portfolio Manager

Gregory A. Gizzi is a member of the firm’s municipal fixed income portfolio management team. He is also a co-portfolio manager of the firm’s municipal bond funds and several client accounts. Before joining Delaware Investments in January 2008 as head of municipal bond trading, he spent six years as a vice president at Lehman Brothers for the firm’s tax-exempt institutional sales effort. Prior to that, he spent two years trading corporate bonds for UBS before joining Lehman Brothers in a sales capacity. Gizzi has more than 20 years of trading experience in the municipal securities industry, beginning at Kidder Peabody in 1984, where he started as a municipal bond trader and worked his way up to institutional block trading desk manager. He later worked in the same capacity at Dillon Read. Gizzi earned his bachelor’s degree in economics from Harvard University.

Board Consideration of Delaware Investments Colorado Municipal Income Fund, Inc.; Delaware Investments National Municipal Income Fund; and Delaware Investments Minnesota Municipal Income Fund II, Inc. Investment Management Agreements

At a meeting held on August 19-21, 2014 (the “Annual Meeting”), the Board of Directors (the “Board”), including a majority of disinterested or independent Directors, approved the renewal of the Investment Management Agreements for Delaware Investments Colorado Municipal Income Fund, Inc., Delaware Investments Minnesota Municipal Income Fund II, and Delaware Investments National Municipal Income Fund (each, a “Fund” and together, the “Funds”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreements with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Funds, the costs of such services to the Funds, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with

 

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the Annual Meeting, reports were provided to the Directors in May 2014 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). The Lipper reports compared each Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Directors reviewed and discussed the Lipper reports with independent legal counsel to the Independent Directors. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.

In considering information relating to the approval of each Fund’s advisory agreement, the Independent Directors received assistance and advice from and met separately with independent legal counsel to the Independent Directors. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.

Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Funds and their shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Funds, compliance of portfolio managers with the investment policies, strategies and restrictions for the Funds, compliance by DMC (“Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Funds’ investment manager and the emphasis placed on research in the investment process. The Board recognized DMC’s recent receipt of several industry distinctions. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.

Investment Performance. The Board placed significant emphasis on the investment performance of the Funds in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for each Fund showed the investment performance of its shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the highest performance ranked first, and a fund with the lowest ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the lowest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for each Fund was shown for the past one-, three-, five- and ten-year periods, to the extent applicable, ended March 31, 2014. The Board’s objective is that each Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraphs summarize the performance results for the Funds and the Board’s view of such performance.

Delaware Investments Colorado Municipal Income Fund, Inc. – The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end other state municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-year period was in the third quartile of its Performance Universe and the Fund’s total return for the five-and ten-year periods was in the fourth quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the improved one-year performance result and numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

Delaware Investments Minnesota Municipal Income Fund II, Inc. – The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end other state municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-, five- and ten-year periods was in the fourth quartile of its Performance Universe. The Fund’s long-term performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the strong one-year performance result and numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

Delaware Investments National Municipal Income Fund – The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end general and insured municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return

 

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Other Fund information

(Unaudited)

Delaware Investments® Closed-End Municipal Bond Funds

 

Board Consideration of Delaware Investments Colorado Municipal Income Fund, Inc.; Delaware Investments National Municipal Income Fund; and Delaware Investments Minnesota Municipal Income Fund II, Inc. Investment Management Agreements (continued)

for the one-, three-, five- and ten-year periods was in the fourth quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the re-leveraging of the Fund in 2012. The Board also considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

Comparative Expenses. The Board considered expense comparison data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for each Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of each Fund versus effective management fees and expense ratios of a group of similar closed-end funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, each Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. Each Fund’s total expenses were also compared with those of its Expense Group. The Board considered fees paid to Delaware Investments for non-management services. The Board’s objective is to limit each Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraphs summarize the expense results for the Funds and the Board’s view of such expenses.

Delaware Investments Colorado Municipal Income Fund, Inc. – The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group.

Delaware Investments Minnesota Municipal Income Fund II, Inc. – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group.

Delaware Investments National Municipal Income Fund – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee, but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating total expenses, the Board considered the limited number of funds in the Expense Group. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.

Management Profitability. The Board considered the level of profits, if any, realized by Delaware Investments in connection with the operation of the Funds. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflects recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the profitability of Delaware Investments.

Economies of Scale. As closed-end funds, the Funds do not issue shares on a continuous basis. Fund assets increase only to the extent that the values of the underlying securities in the Fund increase. Accordingly, the Board determined that each Fund was not likely to experience significant economies of scale due to asset growth and, therefore, a fee schedule with breakpoints to pass the benefit of economies of scale on to shareholders was not likely to provide the intended effect.

 

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About the organization

This semiannual report is for the information of Delaware Investments® Closed-End Municipal Bond Funds shareholders. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Funds may, from time to time, purchase shares of their common stock on the open market at market prices.

 

Board of directors/trustees

Patrick P. Coyne

Chairman, President, and

Chief Executive Officer

Delaware Investments Family of Funds Philadelphia, PA

Thomas L. Bennett

Private Investor

Rosemont, PA

Joseph W. Chow

Former Executive Vice President

State Street Corporation Brookline, MA

John A. Fry

President

Drexel University

Philadelphia, PA

Lucinda S. Landreth

Former Chief Investment Officer Assurant, Inc.

Philadelphia, PA

Frances A. Sevilla-Sacasa

Chief Executive Officer

Banco Itaú International

Miami, FL

Thomas K. Whitford

Former Vice Chairman

PNC Financial Services Group Pittsburgh, PA

Janet L. Yeomans

Former Vice President and Treasurer

3M Corporation

St. Paul, MN

J. Richard Zecher

Founder

Investor Analytics

Scottsdale, AZ

Affiliated officers

David F. Connor

Senior Vice President, Deputy General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA

Daniel V. Geatens

Vice President and Treasurer

Delaware Investments Family of Funds Philadelphia, PA

David P. O’Connor

Executive Vice President, General Counsel and Chief Legal Officer Delaware Investments Family of Funds Philadelphia, PA

Richard Salus

Senior Vice President and

Chief Financial Officer

Delaware Investments Family of Funds Philadelphia, PA

Investment manager

Delaware Management Company, a series of Delaware Management Business Trust Philadelphia, PA

Principal office of the Funds

2005 Market Street

Philadelphia, PA 19103-7057

Independent registered public accounting firm

PricewaterhouseCoopers LLP

2001 Market Street

Philadelphia, PA 19103

Registrar and stock transfer agent

Computershare, Inc.

480 Washington Blvd.

Jersey City, NJ 07310

866 437-0252

For securities dealers and financial institutions representatives

800 362-7500

Website

delawareinvestments.com

Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.

Number of recordholders as of

Sept. 30, 2014

 

Colorado Municipal Income Fund

     77   

Minnesota Municipal Income Fund II

     382   

National Municipal Income Fund

     93   

Your reinvestment options

Each of the Funds offers an automatic dividend reinvestment program. If you would like to reinvest dividends, and shares are registered in your name, contact Computershare, Inc. at 866 437-0252. You will be asked to put your request in writing. If you have shares registered in “street” name, contact the broker/dealer holding the shares or your financial advisor. If you choose to receive your dividends in cash, you may now elect to receive them by ACH transfer. Contact Computershare at the number above for more information.

Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 866 437-0252; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and each Fund’s Schedule of Investments are available without charge on the Funds’ website at delawareinvestments.com. Each Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; 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 the Funds’ website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov.

 

 

39


Item 2. Code of Ethics

Not applicable.

Item 3. Audit Committee Financial Expert

Not applicable.

Item 4. Principal Accountant Fees and Services

Not applicable.

Item 5. Audit Committee of Listed Registrants

Not applicable.

Item 6. Investments

(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.

(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.

Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable.

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 second 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.



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® MINNESOTA MUNICIPAL INCOME FUND II, INC.

/s/ PATRICK P. COYNE
By: Patrick P. Coyne
Title:   Chief Executive Officer
Date: December 1, 2014

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.

/s/ PATRICK P. COYNE
By: Patrick P. Coyne
Title:   Chief Executive Officer
Date: December 1, 2014
 
/s/ RICHARD SALUS
By: Richard Salus
Title: Chief Financial Officer
Date: December 1, 2014