Edgar Filing: Delaware Investments Colorado Municipal Income Fund, Inc.

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: 811-07810

Exact name of registrant as specified in charter:
Delaware Investments Colorado Municipal Income Fund, 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: March 31, 2009

Item 1. Reports to Stockholders


	Annual Report	Delaware
		Investments
		Closed-End
		Municipal Bond
		Funds

		March 31, 2009







		Closed-end funds

Table of contents

	> Portfolio management review	1

	> Fund basics	7

	> Sector/State allocations and credit quality breakdowns	8

	> Statements of net assets	11

	> Statements of assets and liabilities	22

	> Statements of operations	23

	> Statements of changes in net assets	24

	> Financial highlights	25

	> Notes to financial statements	29

	> Report of independent registered public accounting firm	36

	> Other Fund information	37

	> Board of trustees/directors and officers addendum	40

	> About the organization	43

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

Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management
Business Trust, which is a registered investment advisor.

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

Portfolio management review

Delaware Investments Closed-End Municipal Bond Funds

April 7, 2009

Economic and market environment

Although investors have experienced many extremes since the start of the credit crisis, none compared to the historic economic and market events that took place during the latter half of the fiscal period. These were among the events:

The federal funds target rate dropped to effectively zero.
Yields on 10-year Treasury notes declined to almost 2.0%.
The S&P 500 Index completed its worst calendar year (2008) since the Great Depression.
Corporate bond spreads exceeded 6% in investment grade bonds and 19% in high yield bonds.
For 30-year fixed mortgage loans that met Freddie Mac and Fannie Mae requirements, interest rates approached record lows of nearly 4.7%.

Further, historic weakness across a wide range of indicators, including employment data, retail, housing and auto sales, and forecasted gross domestic product fueled a flight to higher-quality investments across sectors.

An equally momentous set of events took place within the municipal bond market during the reporting period, as the market underwent a change in its basic structure and risk characteristics. In particular, the municipal bond market became increasingly split, with a strict separation between the highest grade bonds and all others within the universe. Bids for AAA-rated bond issues, for example, remained both plentiful and strong, while bids for lower investment grades were often scant and weak. In a way, this mimicked the taxable market, where Treasury issues were popular while demand for everything else paled in comparison. The reasons for the split within the municipal market are listed below:

The crumbling of monoline insurance
The resulting collapse of the auction-rate securities (ARS) market
Deleveraging by nontraditional participants
Balance sheet constraints at broker/dealers
General risk avoidance

Although the first round of monoline insurance company downgrades (from their AAA-status) took place just prior to the beginning of the fiscal year, this action impacted the municipal market throughout the reporting period, virtually freezing the sales of auction-rate securities (ARS) and requiring ARS investors to continue to hold their investments. ARS are fixed income investments for which the interest rate is reset at frequent auctions, which are typically held every 35 days or less. Failed auctions forced some ARS holders, who may have originally viewed ARS as short-term liquid investments, to hold their ARS indefinitely.

Severe selling pressure from nontraditional buyers (including participants in tender-option bond programs and hedge fund investment managers) created additional difficulties for municipal investors during the reporting period. Historically, support from these nontraditional buyers helped the municipal market outperform Treasury bonds even during periods of record and near-record numbers of newly issued bonds.

In addition, as these municipal investors were forced to deleverage in response to tightening liquidity conditions, they sold any assets they could, including billions of dollars worth of municipal bonds. Severe capitalization constraints within the investment banking community compounded municipal market problems. Once the capital positions of many investment banks were compromised, bank executives were less willing to provide liquidity to the municipal market.

Interest in municipal bonds wavered as investors fled virtually every asset class other than Treasurys. In October 2008, for example, three consecutive weeks of outflows exceeded $1 billion each, ranking among the 10 highest outflow weeks on record (source: Barclays Capital). Though this marked a high point for outflows, the October flood was indicative of the broader flight toward Treasurys that developed during the annual period.

The views expressed are current as of March 31, 2009, and are subject to change.

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Portfolio management review

Delaware Investments Closed-End Municipal Bond Funds

The technical environment

One of the year’s most notable developments, in our opinion, was that municipal bonds became a “cheap” asset class. A brief comparison of municipal bond yields to Treasury bond yields can provide perspective about the relative attractiveness of municipal bonds.

Municipal bonds normally trade with lower yields than Treasury bonds due to their favorable tax treatment (bond yields move in the opposite direction to their price). Yet as the credit crisis evolved, investors began to accept virtually no yield for Treasury bonds because of their lower risk. At the same time, they expected yield premiums from all other asset classes, including municipal bonds.

The ratio of municipal bond yields (AAA-rated, with 30 years to maturity) to Treasury bond yields peaked as high as 208% in December 2008. Subsequently, the ratio declined, finishing the annual period at 188%. To put these figures in perspective, this ratio has averaged 93.77% over the past 20 years ( source: Thomson). For investors in the 28% or 35% tax bracket, yields of this size represented value, in our opinion, offering investors the ability to buy tax-exempt bonds with yields similar to or above those of taxable bonds.

Furthermore, the spread between municipal bonds with 2 years to maturity and those with 30 years to maturity widened significantly during the reporting period, resulting in a markedly steeper yield curve at the end of the period than at its start. As the credit crisis deepened, spreads widened beyond 3.00%, and finished the period at 3.64%. The average historical spread between 2-year and 30-year municipal bonds is 2.00%. (Source: Thomson.)

Fund positioning

Broadly speaking, as the cost of “risk” began to rise during the early stages of the credit crisis, prospects improved for bond investors to achieve higher yield premiums for lower credit bonds. We are not suggesting that the municipal market has reached its cheapest levels, or that we have seen the end of the credit crisis. However, we believe that in today’s market, investors are being properly compensated for credit risk.

That said, we implemented what we believed to be a fairly conservative investment strategy in managing the Funds over the fiscal year while remaining true to our core philosophy of generating competitive tax-exempt income. In each of the Funds, for example, we maintained significant positions in pre-refunded bonds (described below) as well as those with shorter maturities. We also minimized the Funds’ exposure to insured bonds during the period. These decisions contributed positively to each Fund’s performance.

Pre-refunded bonds were the best-performing bonds within the entire municipal market. These bonds are found on the short end of the yield curve, and face little if any credit risk. This is because they are backed by the invested debt proceeds of a second bond issue, which typically consists of U.S. Treasury bonds.

The Funds’ significant positions in bonds with 10 or fewer years to maturity generally helped performance, as these bonds were less impacted by rising rates than were many longer-term bonds. Our decision to take an underweight position in insured bonds helped the Funds’ performance compared to their peer funds, which were frequently more exposed to the collapse of the monoline insurers. Our positioning resulted from credit research. For example, research helped us find value among municipal bond issues that may have been deemed risky by the market due to a low-rated insurer, or a lack of insurance, but we were able to confirm the existence of strong fundamentals at the issuer, despite the market’s perception.

Unfortunately, these contributions were partially offset by our emphasis on lower-rated investment grade credit. During a year when only the highest-rated credit performed well, the Funds’ slightly overweight positions in A- and BBB-rated securities detracted from returns. Though limited, exposure to continuing care retirement communities (CCRCs) also reduced returns. CCRCs are retirement communities that have independent-living and assisted-living components, as well as nursing homes. The independent-living component is exposed to the housing market, and the nursing home component is exposed to the healthcare industry. This nonrated sector traded lower in value as yields rose during the period.

Redemption of preferred shares

Extremely illiquid market conditions as well as an unprecedented escalation of commercial paper rates and other short-term municipal interest rates led the Funds to call their preferred shares for redemption and to eliminate each Fund’s use of leverage during the reporting period.

In the late summer and fall of 2008, the lack of liquidity and confidence in the markets caused the cost of short-term borrowing to increase significantly. These market conditions contrasted with previous years, when the leverage provided by the preferred shares was frequently beneficial to the common shares, as it had enabled the common shares to borrow at very competitive rates and seek a higher net rate of return with the borrowings. Conversely, when a mutual fund is not able to invest the assets attributable to its preferred shares in securities that provide a higher net rate of return than the current dividend rate payable to the preferred shareholders, the effect of the leverage may cause holders of shares of the common stock to realize a lower rate of return than if that mutual fund was not leveraged.

The Funds’ management came to believe that under those market conditions, leverage within the Funds was no longer desirable from an investment perspective, and that the costs associated with the preferred shares were having a negative impact on the Funds’ common shareholders.

As a result, the Funds’ board of directors/trustees and the Funds’ management believed that the elimination of the Funds’ leverage was in the best interests of both common and preferred shareholders. By early November 2008, each of the Funds had redeemed all of its preferred shares at par value.

Within the industry, more than $30 billion worth of preferred shares issued by more than 34 fund families remain outstanding as of March 31, 2009 (source: Thomas J. Herzfeld Advisors). This figure represents half of the preferred shares market total prior to the liquidity crisis in 2008 and reflects the complexity of issues surrounding refinancing or redeeming preferred shares.

To date, Delaware Investments remains one of only seven fund families to have completely redeemed all preferred shares issued by its Funds. Since December 2008, several closed-end funds with outstanding preferred shares announced delays in payment of dividends to those funds’ common shareholders.

This delay in payment is triggered when asset coverage ratios have exceeded their allowable coverage, typically 200% for equity instruments and 300% for debt instruments. Payment of any dividends is prohibited until the asset coverage ratio is “cured” by reducing the amount of leverage outstanding, in this case by redeeming preferred shares, or by waiting until such a time that asset levels increase to meet coverage requirements. Because the Delaware Investments Funds redeemed their preferred shares, they were able to avoid situations where low asset coverage ratios could have required them to suspend or delay payments of dividends to holders of common shares.

The Funds’ management continues to evaluate new potential methods of leverage and may seek to employ leverage on the Funds again in the future if conditions and new methods warrant doing so. For additional information on the Redemption of Preferred Shares, see Note 7 on page 32 (Notes to financial statements).

Delaware Investments Arizona Municipal Income Fund, Inc.

Conditions in the Arizona economy

Arizona was heavily affected by the housing downturn. Its unemployment rate climbed to 7.4% in February, though it remained slightly lower than the national rate of 8.5% (source: Bureau of Labor Statistics). Nonfarm payrolls shrank by 6.5% over the 12-month period ended Feb. 28, 2009 (source: www.workforce.az.gov).

The state’s 2008 budget summary reflected a significant drawdown of total General Fund balances. State government also faced a potential $1.6 billion shortfall in its January 2009 budget (which totaled $9.9 billion). The new governor funded the gap through spending cuts and use of stimulus money, as well as transfers of special purpose funds. The treasurer authorized using the last of the cash in the state’s “rainy day fund.” (Source: Arizona Treasury.)

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Portfolio management review

Delaware Investments Closed-End Municipal Bond Funds

Yet, Arizona was in the black due to an emergency distribution of $307 million of federal stimulus monies, as well as a one-time transfer of $218 million from special purpose funds. Even with these injections, though, the state did not have enough reserves to meet spending obligations in April 2009. The gap could reach $500 million by the end of the state’s 2008 fiscal year in June 2009, and state officials have set the stage for Arizona to borrow money for the first time in modern history. Unfortunately, next fiscal year 2009 could be even worse because reserves will already be depleted and the state faces a $2.8 billion deficit. (Source: Arizona Treasury Media Files.)

Nationally, new issue volume for calendar year 2008 fell more than 9% short of the 2007 record total. The combined par value totaled $390.6 billion. Arizona issuance increased 6.9% in 2008 to total $9.6 billion. (Source: The Bond Buyer.)

Noteworthy sectors and securities

Alternatively, among the Fund’s largest detractors was an industrial development authority (IDA) bond issued by Pima County. The bond was rated BBB- by S&P and matures in 2037. IDA bonds are bonds issued by a government agency on behalf of a private entity to be used generally for the purchase or lease of land, buildings, machinery, or equipment.

Delaware Investments Colorado Municipal Income Fund, Inc.

Conditions in the Colorado economy

Colorado’s economy continued to show modest, resilient growth despite the weakness in the national economy. As of January 2009, the state’s unemployment rate was 6.6%, well below the national rate of 7.6% at that time (source: Bureau of Labor Statistics). Although certain parts of the state have been distressed by foreclosures, the residential real estate market remained substantially stronger in Colorado than the rest of the country. According to the S&P/Case-Shiller^® Home Price Index, Denver’s real estate market was one of the strongest of any major metropolitan area of the country (source: S&P).

However, recent economic data suggest that Colorado could experience a mild slowdown. Colorado’s General Fund balance decreased in calendar year 2008 by 2.4% of expenditures. Gross General Fund revenues are anticipated to remain relatively level in fiscal 2009, as income tax collections are projected to offset lower excise revenues. Yet beyond fiscal 2009, individual income taxes are forecast to remain suppressed because of projected negative job growth through much of 2009. Retail sales are not anticipated to grow substantially above the projected rate of inflation. General Fund revenue shortfalls are estimated at $631.9 million in the current fiscal year and $1.03 billion in fiscal 2010. (Source: Office of State Planning and Budgeting.)

As part of a budget contingency plan, the governor has implemented a hiring freeze, requested institutions and state agencies delay the start of new construction and directed department heads to scrutinize budgets for additional savings to prepare for weaker-than-expected revenues. The governor has balanced the current budget through a reduction in spending in Medicaid, human services, policy changes, reserve changes, and transfers from other funds. The governor’s plan for a fiscal 2010 shortfall includes additional General Fund spending reductions in Medicaid, human services, capital construction reduction, and policy changes. (Source: Office of State Planning and Budgeting.)

Nationally, new-issue volume for calendar year 2008 fell more than 9% short of the 2007 record total. The combined par value totaled $390.6 billion. Within Colorado, issuance decreased by 4.7% in 2008 to total $7.9 billion. (Source: The Bond Buyer.)

Noteworthy sectors and securities

During the credit crisis in the municipal bond market, credit spreads widened considerably and the yield curve steepened dramatically. Therefore, higher-rated bonds outperformed lower-rated bonds and shorter-maturity bonds outperformed longer-maturity bonds. Pre-refunded bonds, or those that are escrowed in U.S. government securities, also performed well, as they are considered to be of the highest quality. Even though their ratings do not always reflect that quality, investors typically rely on the escrow in U.S. government securities in determining quality. Against this backdrop, a bond issued to fund the Denver Convention Center as well as education bonds issued to fund the University of Denver contributed to the Fund’s return. These bonds mature in 2013 and 2016, respectively, and the Convention Center bond was pre-refunded.

Notable detractors included those issued to fund student housing and charter school projects (specifically a bond issued to fund housing at the University of Northern Colorado and a bond used to finance Bromley Charter School). These subsectors of the municipal market involve smaller, less liquid deals, and are considered riskier securities. They have not performed well during the credit crisis.

Delaware Investments Minnesota Municipal Income Fund II, Inc.

Conditions in the Minnesota economy

Minnesota’s economy appears fundamentally sound; it features a diverse mix of manufacturing, services, and trade similar to that of the nation. Yet, weaker labor markets, a slump in home prices, and accelerating foreclosure rates all indicated that the state’s economy may be underperforming its long-term potential. Over the past three years, for example, the state was behind the nation in employment and personal income growth (source: S&P). As of January 2009, Minnesota’s unemployment rate was 8.7% and higher than the national level of 7.6% at that time (source: Bureau of Labor Statistics).

Minnesota’s General Fund ended fiscal 2008 with a $437 million decrease in funds from fiscal year 2007. The state partly attributed the drawdown to grants issued to businesses and residents of southeastern Minnesota for flooding damage as well as settlement payments to the victims of the Interstate Highway 35W bridge collapse. (Source: Minnesota Management and Budget.)

In addition, revenues have been weaker than forecast, with the net General Fund coming in $131 million less than forecast from November to December 2008. This left a projected $426 million deficit for the 2008 and 2009 fiscal years. To balance the budget, the state used the remaining funds from its budget reserve account, which brought the reserve balance to zero. Additionally, officials plan to reduce the budget through unexpended allotments from previous transfers and appropriations from the General Fund. These include a $73 million reduction in human service payments, $66 million in reduced local government aid to cities, $44 million in cutbacks to county program aid, and $40 million in reductions to each operations and higher education state agency. The state is now expected to end the 2008 and 2009 fiscal years with a remaining balance of $236 million and a cash flow account of $350 million. (Source: Minnesota Management and Budget.)

Nationally, new-issue volume for the calendar year 2008 fell more than 9% short of the 2007 record total. The combined par value totaled $390.6 billion. Minnesota issuance increased 1.7% in 2008 to $6.8 billion. (Source: The Bond Buyer.)

Noteworthy sectors and securities

During the credit crisis in the municipal bond market, credit spreads widened considerably and the yield curve steepened dramatically. Therefore, higher-rated bonds outperformed lower-rated bonds, and shorter-maturity bonds outperformed longer-maturity bonds. Pre-refunded bonds, or those that are escrowed in U.S. government securities, also performed well, as they are considered to be of the highest quality. Even though ratings do not always reflect that quality, investors typically rely on the escrow in U.S. government securities in determining quality. Against this backdrop, two of the Fund’s top contributors were pre-refunded. Both bonds, issued to finance University of Minnesota Hospital and Clinics and Park Nicollet Health Services, featured shorter maturities (2016 and 2014, respectively).

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Portfolio management review

Delaware Investments Closed-End Municipal Bond Funds

Alternatively, the Fund was hurt by a longer-term education bond to fund St. Catherine College due to mature in 2032, as well as an industrial development bond issued by Cloquet, Minn., for Potlatch Corporation due to mature in 2026. Industrial development bonds are issued by a government agency on behalf of a private entity to be used generally for the purchase or lease of land, buildings, machinery, or equipment.

Delaware Investments National Municipal Income Fund

Highlights of the national municipal debt markets

The weak economy generated great fiscal stress among states. Combined budget gaps for the remainder of the current fiscal year and the next two years are estimated to total more than $350 billion (source: Center for Budget and Policy Priorities). Since the recession began in December 2007, approximately 4.4 million jobs have been lost, with more than half of the decrease occurring during the four-month period ended February 2009. The unemployment rate increased significantly to 8.5%, as of March 2009 (sources: Nelson A. Rockefeller State Revenue Report #74 and the Bureau of Labor Statistics).

State tax revenues declined 3.6% during the fourth quarter of calendar 2008, with preliminary estimates for January showing continued deterioration. Total tax revenues declined during the fourth quarter in 35 of the 47 states that reported early figures. This is the weakest performance since the second quarter of 2002. Recent stock market declines and continued job losses could depress revenues further. (Source: Center for Budget and Policy Priorities.)

State spending levels were generally low even before the crisis. Aggregate spending fell sharply after the 2001 recession, and it remained below the 2001 level when states adopted their 2008 budgets. Despite the states’ more prudent approach to spending, weak revenues have led to budget gaps. States have already used substantial budget reserves to address funding gaps, and these reserves are limited today. Most states have also cut services, raised taxes, closed loopholes, restricted tax credits, or implemented other revenue-raising measures. The American Recovery and Reinvestment Act of 2009 recognized the need for assistance through federal Medicaid funding and state fiscal stabilization fund revenues to help states close budget gaps. However, additional cuts or revenue-raising measures could be needed because federal monies cover only approximately 40% of the projected budget gaps over the next two years. (Source: Center on Budget and Policy Priorities.)

Nationally, new issuance in 2008 fell 9.1% short of the 2007 record total. The municipal market was hit especially hard by the broader credit crisis, with new issues plummeting over the last four months, including a more than 50% drop in October. New money issuance declined 22.8% while refunding increased 42.9%. We believe this is reflective of the need for issuers to restructure certain types of debt, such as auction-rate securities. (Source: The Bond Buyer.)

Noteworthy sectors and securities

Notable detractors included an industrial development bond issued by Brazos, Texas, for Dow Chemical (due in 2038 and rated BBB by S&P) and a bond issued by a Marietta, Ga., Development Authority for Life University (due in 2033 and rated Baa2 by Moody’s).

Fund basics

Delaware Investments
Arizona Municipal Income Fund, Inc.

As of March 31, 2009

Fund objective

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

Total Fund net assets

$38 million

Number of holdings

Fund start date

Feb. 26, 1993

Cusip number

246100101

Delaware Investments
Colorado Municipal Income Fund, Inc.

As of March 31, 2009

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

$64 million

Number of holdings

Fund start date

July 29, 1993

Cusip number

246101109

Delaware Investments
Minnesota Municipal Income Fund II, Inc.

As of March 31, 2009

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

$151 million

Number of holdings

Fund start date

Feb. 26, 1993

Cusip number

24610V103

Delaware Investments
National Municipal Income Fund

As of March 31, 2009

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

$29 million

Number of holdings

Fund start date

Feb. 26, 1993

Cusip number

24610T108

Sector/State allocations and credit quality breakdowns

As of March 31, 2009

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

Delaware Investments
Arizona Municipal Income Fund, Inc.
	Percentage
Sector	of Net Assets
Municipal Bonds	92.66	%
Education Revenue Bonds	13.87	%
Electric Revenue Bonds	7.41	%
Health Care Revenue Bonds	17.25	%
Housing Revenue Bonds	2.59	%
Lease Revenue Bonds	2.61	%
Local General Obligation Bonds	5.67	%
Pre-Refunded Bonds	16.59	%
Special Tax Revenue Bonds	14.34	%
Transportation Revenue Bonds	5.43	%
Water & Sewer Revenue Bonds	6.90	%
Short-Term Investment	1.06	%
Total Value of Securities	93.72	%
Receivables and Other Assets Net of Liabilities	6.28	%
Total Net Assets	100.00	%

Credit Quality Breakdown
(as a % of fixed income investments)*
AAA	19.06	%
AA	41.95	%
A	14.60	%
BBB	24.39	%
Total	100.00	%

*Bond ratings are determined by independent, nationally recognized statistical rating organizations.

Delaware Investments
Colorado Municipal Income Fund, Inc.
	Percentage
Sector	of Net Assets
Municipal Bonds	97.92	%
Education Revenue Bonds	18.33	%
Electric Revenue Bond	2.38	%
Health Care Revenue Bonds	6.53	%
Housing Revenue Bonds	2.86	%
Lease Revenue Bonds	5.71	%
Local General Obligation Bonds	8.81	%
Pre-Refunded Bonds	32.97	%
Special Tax Revenue Bonds	7.58	%
State General Obligation Bond	3.37	%
Water & Sewer Revenue Bonds	9.38	%
Short-Term Investment	0.78	%
Total Value of Securities	98.70	%
Receivables and Other Assets Net of Liabilities	1.30	%
Total Net Assets	100.00	%

Credit Quality Breakdown
(as a % of fixed income investments)*
AAA	32.23	%
AA	43.36	%
A	16.23	%
BBB	2.28	%
Not Rated	5.90	%
Total	100.00	%

*Bond ratings are determined by independent, nationally recognized statistical rating organizations.

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

Delaware Investments
Minnesota Municipal Income Fund II, Inc.
	Percentage
Sector	of Net Assets
Municipal Bonds	97.42	%
Corporate-Backed Revenue Bonds	5.17	%
Education Revenue Bonds	4.51	%
Electric Revenue Bonds	15.97	%
Escrowed to Maturity Bonds	17.55	%
Health Care Revenue Bonds	10.60	%
Housing Revenue Bonds	8.51	%
Lease Revenue Bonds	6.45	%
Local General Obligation Bonds	8.42	%
Pre-Refunded Bonds	7.56	%
Special Tax Revenue Bonds	1.54	%
State General Obligation Bonds	3.13	%
Transportation Revenue Bonds	8.01	%
Short-Term Investments	1.19	%
Total Value of Securities	98.61	%
Receivables and Other Assets Net of Liabilities	1.39	%
Total Net Assets	100.00	%

Credit Quality Breakdown
(as a % of fixed income investments)*
AAA	28.52	%
AA	31.21	%
A	20.11	%
BBB	14.55	%
BB	2.51	%
B	0.52	%
Not Rated	2.58	%
Total	100.00	%

*Bond ratings are determined by independent, nationally recognized statistical rating organizations.

Delaware Investments
National Municipal Income Fund
	Percentage
Sector	of Net Assets
Municipal Bonds	98.11	%
Corporate-Backed Revenue Bonds	3.76	%
Education Revenue Bonds	3.84	%
Electric Revenue Bonds	3.60	%
Health Care Revenue Bonds	17.43	%
Housing Revenue Bonds	15.43	%
Lease Revenue Bonds	6.10	%
Local General Obligation Bonds	4.72	%
Special Tax Revenue Bonds	17.95	%
State General Obligation Bonds	8.02	%
Transportation Revenue Bonds	9.24	%
Water & Sewer Revenue Bonds	8.02	%
Short Term Investments	1.38	%
Total Value of Securities	99.49	%
Receivables and Other Assets Net of Liabilities	0.51	%
Total Net Assets	100.00	%

State
(as a % of fixed income investments)
Arizona	2.20	%
California	7.30	%
Florida	64.86	%
Georgia	0.60	%
Iowa	1.76	%
Idaho	0.88	%
Massachusetts	1.67	%
Maryland	1.42	%
New York	9.17	%
Pennsylvania	0.16	%
Puerto Rico	5.07	%
Texas	2.19	%
Virginia	2.72	%
Total	100.00	%

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Sector/State allocations and credit quality breakdowns

Delaware Investments
National Municipal Income Fund (continued)

Credit Quality Breakdown
(as a % of fixed income investments)*
AAA	18.90	%
AA	53.78	%
A	18.15	%
BBB	5.27	%
BB	0.60	%
Not Rated	3.30	%
Total	100.00	%

*Bond ratings are determined by independent, nationally recognized statistical rating organizations.

Statements of net assets

Delaware Investments Arizona Municipal Income Fund, Inc.

March 31, 2009

		Principal
		Amount		Value
Municipal Bonds – 92.66%
Education Revenue Bonds – 13.87%
	Arizona Board of Regents System
	Revenue (Arizona State University)
	Series 8-A
	5.00% 6/1/18	$	200,000	$	223,160
	5.00% 6/1/19		375,000		412,373
	Arizona Student Loan Acquisition
	Authority Revenue Refunding
	Series A-1 5.90% 5/1/24 (AMT)		1,500,000		1,457,654
	Glendale Industrial Development
	Authority Revenue Refunding
	(Midwestern University)
	5.00% 5/15/31		350,000		295,880
	Northern Arizona University
	Certificates of Participation
	(Northern Arizona University
	Research Project)
	5.00% 9/1/30 (AMBAC)		1,000,000		909,400
	Pima County Industrial Development
	Authority Educational Revenue
	Refunding (Tucson Country Day
	School Project) 5.00% 6/1/37		500,000		298,175
	South Campus Group Student
	Housing Revenue (Arizona State
	University - South Campus Project)
	5.625% 9/1/35 (MBIA)		1,000,000		958,210
	University of Puerto Rico System
	Revenue Series Q 5.00% 6/1/36		1,000,000		707,250
					5,262,102
Electric Revenue Bonds – 7.41%
	Salt River Project Agricultural
	Improvement & Power District
	Electric System Revenue
	Series A
	5.00% 1/1/16		500,000		560,670
	5.00% 1/1/31		1,000,000		983,000
	Series B 5.00% 1/1/25		1,250,000		1,269,538
					2,813,208
Health Care Revenue Bonds – 17.25%
	Arizona Health Facilities Authority
	Revenue (Banner Health)
	Series D 5.50% 1/1/21		500,000		498,885
	Glendale Industrial Development
	Authority Hospital Refunding
	Revenue (John C. Lincoln Health)
	5.00% 12/1/42		1,500,000		1,002,975
	Maricopa County Industrial
	Development Authority
	Health Facilities Revenue
	(Catholic Healthcare West)
	Series A 5.25% 7/1/32		400,000		328,240
	Scottsdale Industrial Development
	Authority Hospital Revenue
	Refunding (Scottsdale Healthcare)
	Series A 5.25% 9/1/30		500,000		417,400
	Show Low Industrial Development
	Authority Hospital Revenue
	(Navapache Regional Medical
	Center) Series A
	5.50% 12/1/17 (ACA)		1,600,000		1,518,944
	University Medical Center
	Hospital Revenue
	5.00% 7/1/33		1,000,000		740,640
	5.00% 7/1/35		500,000		368,010
	Yavapai County Industrial
	Development Authority Revenue
	(Yavapai Regional Medical Center)
	Series A 5.25% 8/1/21 (RADIAN)		2,000,000		1,670,819
					6,545,913
Housing Revenue Bonds – 2.59%
	Phoenix Industrial Development
	Authority Single Family Mortgage
	Statewide Revenue
	Series A 5.35% 6/1/20 (GNMA)
	(FNMA) (FHLMC) (AMT)		380,000		380,209
	Series C 5.30% 4/1/20 (GNMA)
	(FNMA) (FHLMC) (AMT)		370,000		375,043
	Pima County Industrial Development
	Authority Single Family Mortgage
	Housing Revenue Series A-1
	6.125% 11/1/33 (GNMA) (FNMA)
	(FHLMC) (AMT)		40,000		40,029
	Puerto Rico Housing Finance
	Authority Sub-Cap Foundation
	Modernization 5.50% 12/1/18		175,000		187,422
					982,703
Lease Revenue Bonds – 2.61%
	Arizona Game & Fishing Department &
	Commission Beneficial Interest
	Certificates (AGF Administration
	Building Project) 5.00% 7/1/26		640,000		602,547
	Nogales Development Authority
	Municipal Facilities Revenue
	5.00% 6/1/30 (AMBAC)		500,000		388,105
					990,652
Local General Obligation Bonds – 5.67%
f	Gila County Unified School District #10
	(Payson School Improvement
	Project of 2006) Series A
	1.00% 7/1/27 (AMBAC)		500,000		466,740
	Maricopa County School District #6
	(Washington Elementary)
	Refunding Series A
	5.375% 7/1/13 (FSA)		1,500,000		1,685,040
					2,151,780
§Pre-Refunded Bonds – 16.59%
	Arizona School Facilities Board
	Revenue (State School Trust)
	Series A 5.75% 7/1/18-14 (AMBAC)		500,000		592,575

(continues) 11

Statements of net assets

Delaware Investments Arizona Municipal Income Fund, Inc.

		Principal
		Amount		Value
Municipal Bonds (continued)
§Pre-Refunded Bonds (continued)
	Oro Valley Municipal Property Excise Tax
	5.00% 7/1/20-11 (FGIC)	$	1,000,000	$	1,099,130
	Puerto Rico Commonwealth Public
	Improvement Revenue Series A
	5.125% 7/1/31-11		250,000		273,443
	Scottsdale Industrial Development
	Authority Hospital Revenue
	(Scottsdale Healthcare)
	5.80% 12/1/31-11		1,000,000		1,122,170
	Southern Arizona Capital Facilities
	Finance (University of Arizona
	Project) 5.00% 9/1/23-12 (MBIA)		1,150,000		1,293,992
	University of Arizona Certificates
	of Participation (University of
	Arizona Project) Series B
	5.125% 6/1/22-12 (AMBAC)		500,000		559,715
	Virgin Islands Public Finance
	Authority Revenue (Gross Receipts
	Tax Loan Note) Series A
	6.125% 10/1/29-10 (ACA)		1,250,000		1,356,174
					6,297,199
Special Tax Revenue Bonds – 14.34%
	Flagstaff Aspen Place Sawmill
	Improvement District 5.00% 1/1/32		385,000		351,763
	Gilbert Public Facilities Municipal
	Property 5.00% 7/1/25		500,000		493,395
	Glendale Municipal Property Series A
	5.00% 7/1/33 (AMBAC)		2,000,000		1,972,200
	Marana Tangerine Farm Road
	Improvement District Revenue
	4.60% 1/1/26		963,000		677,480
	Peoria Municipal Development
	Authority Sales Tax & Excise
	Shared Revenue (Senior Lien &
	Sub Lien) 5.00% 1/1/18		1,085,000		1,209,298
	Queen Creek Improvement District #1
	5.00% 1/1/32		1,000,000		736,780
					5,440,916
Transportation Revenue Bonds – 5.43%
	Arizona Transportation Board Grant
	Anticipation Notes Series A
	5.00% 7/1/14		250,000		280,955
	Phoenix Civic Improvement
	Airport Revenue Series B
	5.25% 7/1/27 (FGIC) (AMT)		2,000,000		1,777,900
					2,058,855
Water & Sewer Revenue Bonds – 6.90%
	Phoenix Civic Improvement
	Wastewater Systems Revenue
	Junior Lien 5.00% 7/1/19 (MBIA)		850,000		915,680
	Refunding 5.00% 7/1/24 (FGIC)		1,000,000		1,006,470
	Scottsdale Water & Sewer Revenue
	Refunding 5.00% 7/1/19		600,000		695,136
					2,617,286
Total Municipal Bonds
	(cost $37,663,707)				35,160,614

·Short-Term Investment – 1.06%
Variable Rate Demand Note – 1.06%
	Arizona Health Facilities Authority
	Revenue (Catholic West Health
	Facilities) Series B 0.43% 7/1/35
	(LOC – Bank of America N.A.)		400,000		400,000
Total Short-Term Investment
	(cost $400,000)				400,000

Total Value of Securities – 93.72%
	(cost $38,063,707)				35,560,614
Receivables and Other Assets
	Net of Liabilities – 6.28%				2,383,566
Net Assets Applicable to 2,982,200
	Shares Outstanding; Equivalent to
	$12.72 Per Share – 100.00%			$	37,944,180

Components of Net Assets at March 31, 2009:
Common stock, $0.01 par value, 200 million shares
	authorized to the Fund			$	40,651,205
Accumulated net realized loss on investments					(203,932	)
Net unrealized depreciation of investments					(2,503,093	)
Total net assets				$	37,944,180

f	Step coupon bond. Coupon increases periodically based on a predetermined schedule. Stated rate in effect at March 31, 2009.

§	Pre-Refunded bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 9 in “Notes to financial statements.”
·	Variable rate security. The rate shown is the rate as of March 31, 2009.

Summary of Abbreviations:

ACA — Insured by the American Capital Access

AMBAC — Insured by the AMBAC Assurance Corporation

AMT — Subject to Alternative Minimum Tax

FGIC — Insured by the Financial Guaranty Insurance Company

FHLMC — Federal Home Loan Mortgage Corporation Collateral

FNMA — Federal National Mortgage Association Collateral

FSA — Insured by Financial Security Assurance

GNMA — Government National Mortgage Association Collateral

LOC — Letter of Credit

MBIA — Insured by the Municipal Bond Insurance Association

RADIAN — Insured by Radian Asset Assurance

See accompanying notes

Delaware Investments Colorado Municipal Income Fund, Inc.

March 31, 2009

		Principal
		Amount		Value
Municipal Bonds – 97.92%
Education Revenue Bonds – 18.33%
	Boulder County Development Revenue
	Refunding (University Corporation
	for Atmospheric Research)
	5.00% 9/1/26 (MBIA)	$	3,000,000	$	2,992,950
	Colorado Board of Governors
	Revenue (University Enterprise
	System) Series A 5.00% 3/1/39		700,000		690,347
	Colorado Educational & Cultural
	Facilities Authority Revenue
	(Bromley Charter School Project)
	Refunding 5.25% 9/15/32 (XLCA)		1,000,000		832,760
	(Johnson & Wales University Project)
	Series A 5.00% 4/1/28 (XLCA)		3,000,000		2,487,330
	(Littleton Charter School Project)
	Refunding 4.375% 1/15/36 (CIFG)		1,200,000		946,956
	Student Housing (Campus Village
	Apartments) Refunding
	5.00% 6/1/23		1,065,000		981,046
	Student Housing (University of
	Northern Colorado) Series A
	5.00% 7/1/31 (MBIA)		2,500,000		2,029,100
	University of Colorado Enterprise
	Systems Revenue Series A
	5.375% 6/1/38		750,000		764,955
					11,725,444
Electric Revenue Bond – 2.38%
	Platte River Power Authority Power
	Revenue Series HH 5.00% 6/1/28		1,500,000		1,522,605
					1,522,605
Health Care Revenue Bonds – 6.53%
	Colorado Health Facilities
	Authority Revenue
	(Catholic Health Initiatives)
	Series D 6.125% 10/1/28		750,000		777,308
	(Evangelical Lutheran)
	5.25% 6/1/23		1,000,000		871,470
	(Porter Place) Series A
	6.00% 1/20/36 (GNMA)		2,515,000		2,524,355
					4,173,133
Housing Revenue Bonds – 2.86%
	Colorado Housing & Finance
	Authority (Single Family
	Mortgage – Class I) Series A
	5.50% 11/1/29 (FHA)		500,000		505,760
	Puerto Rico Housing Finance
	Authority Sub-Cap
	Foundation Modernization
	5.125% 12/1/27		1,000,000		1,003,330
	5.50% 12/1/18		300,000		321,294
					1,830,384
Lease Revenue Bonds – 5.71%
	Glendale Certificates Participation
	5.00% 12/1/25 (XLCA)		1,500,000		1,401,645
·	Puerto Rico Public Buildings Authority
	Revenue Guaranteed Refunding
	(Government Facilities) Series M-2
	5.50% 7/1/35 (AMBAC)		700,000		638,225
	Westminster Building Authority
	Certificates of Participation
	5.25% 12/1/22 (MBIA)		1,555,000		1,608,787
					3,648,657
Local General Obligation Bonds – 8.81%
	Adams & Arapahoe Counties Joint
	School District #28J (Aurora)
	6.00% 12/1/28		600,000		654,636
	Arapahoe County Water &
	Wastewater Public Improvement
	District Refunding Series A
	5.125% 12/1/32 (MBIA)		635,000		596,456
	Boulder Larimer & Weld Counties
	Vrain Valley School District Re-1J
	5.00% 12/15/33		750,000		751,658
	Bowles Metropolitan District
	Refunding 5.00% 12/1/33 (FSA)		2,000,000		1,971,959
	Denver City & County School District #1
	Series A 5.00% 12/1/29		240,000		240,552
	Green Valley Ranch Metropolitan
	District Refunding
	5.75% 12/1/19 (AMBAC)		1,000,000		1,025,130
	Sand Creek Metropolitan District
	Refunding & Improvement
	5.00% 12/1/31 (XLCA)		500,000		396,185
					5,636,576
§Pre-Refunded Bonds – 32.97%
	Colorado Educational & Cultural
	Facilities Authority
	(University of Colorado
	Foundation Project)
	5.00% 7/1/27-12 (AMBAC)		4,000,000		4,468,720
	(University of Denver Project)
	Refunding & Improvement
	5.50% 3/1/21-11 (AMBAC)		2,200,000		2,389,310
	Series B 5.25% 3/1/35-16 (FGIC)		1,000,000		1,176,090
	Denver Convention Center Hotel
	Authority Revenue Series A
	5.00% 12/1/33-13 (XLCA)		3,000,000		3,382,170
	E-470 Public Highway Authority
	Revenue Series A
	5.75% 9/1/29-10 (MBIA)		3,000,000		3,258,510
	5.75% 9/1/35-10 (MBIA)		1,700,000		1,846,489
	Northwest Parkway Public Highway
	Authority Series A
	5.25% 6/15/41-11 (FSA)		4,150,000		4,565,623
					21,086,912

(continues) 13

Statements of net assets

Delaware Investments Colorado Municipal Income Fund, Inc.

		Principal
		Amount		Value
Municipal Bonds (continued)
Special Tax Revenue Bonds – 7.58%
	Denver Convention Center Hotel
	Authority Revenue Refunding
	5.00% 12/1/35 (XLCA)	$	1,575,000	$	1,024,412
	Regional Transportation District
	Colorado Sales Tax Revenue
	(Fastracks Project) Series A
	4.375% 11/1/31 (AMBAC)		1,250,000		1,119,962
	4.50% 11/1/36 (FSA)		3,000,000		2,702,160
					4,846,534
State General Obligation Bond – 3.37%
	Puerto Rico Commonwealth
	Refunding (Public Improvement)
	Series A 5.50% 7/1/19 (MBIA)		2,250,000		2,152,125
					2,152,125
Water & Sewer Revenue Bonds – 9.38%
	Colorado Water Resources & Power
	Development Authority Small Water
	Revenue Un-Refunded Balance
	Series A 5.80% 11/1/20 (FGIC)		780,000		769,813
	Colorado Water Resources & Power
	Development Authority Water
	Resources Revenue (Parker Water
	& Sanitation District) Series D
	5.125% 9/1/34 (MBIA)		1,500,000		1,298,370
	5.25% 9/1/43 (MBIA)		2,000,000		1,718,860
	Ute Water Conservancy District
	Revenue 5.75% 6/15/20 (MBIA)		2,155,000		2,209,220
					5,996,263
Total Municipal Bonds
	(cost $63,912,085)				62,618,633

·Short-Term Investment – 0.78%
Variable Rate Demand Note – 0.78%
	Colorado Educational & Cultural
	Facilities Authority Revenue
	(National Jewish Foundation Bond)
	Series A-5 0.50% 4/1/34
	(LOC – Bank of America N.A.)		500,000		500,000
Total Short-Term Investment
	(cost $500,000)				500,000

Total Value of Securities – 98.70%
	(cost $64,412,085)				63,118,633
Receivables and Other Assets
	Net of Liabilities – 1.30%				833,853
Net Assets Applicable to 4,837,100
	Shares Outstanding; Equivalent to
	$13.22 Per Share – 100.00%			$	63,952,486

Components of Net Assets at March 31, 2009:
Common stock, $0.01 par value, 200 million shares
	authorized to the Fund			$	66,918,121
Accumulated net realized loss on investments					(1,672,183	)
Net unrealized depreciation of investments					(1,293,452	)
Total net assets				$	63,952,486

§	Pre-Refunded bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 9 in “Notes to financial statements.”
·	Variable rate security. The rate shown is the rate as of March 31, 2009.

Summary of Abbreviations:
AMBAC — Insured by the AMBAC Assurance Corporation
CIFG — CDC IXIS Financial Guaranty
FGIC — Insured by the Financial Guaranty Insurance Company
FHA — Federal Housing Administration
FSA — Insured by Financial Security Assurance
GNMA — Government National Mortgage Association Collateral
LOC — Letter of Credit
MBIA — Insured by the Municipal Bond Insurance Association
XLCA — Insured by XL Capital Assurance

See accompanying notes

Delaware Investments Minnesota Municipal Income Fund II, Inc.

March 31, 2009

		Principal
		Amount		Value
Municipal Bonds – 97.42%
Corporate-Backed Revenue Bonds – 5.17%
	Cloquet Pollution Control Revenue
	Refunding (Potlatch Project)
	5.90% 10/1/26	$	5,500,000	$	3,628,899
	Laurentian Energy Authority I
	Cogeneration Revenue Series A
	5.00% 12/1/21		3,325,000		2,681,746
	Minneapolis Community
	Development Agency Supported
	(Limited Tax Common Bond Fund)
	Series A 6.75% 12/1/25 (AMT)		865,000		869,550
	Sartell Environmental Improvement
	Revenue Refunding
	(International Paper) Series A
	5.20% 6/1/27		1,000,000		631,260
					7,811,455
Education Revenue Bonds – 4.51%
	Minnesota Higher Education
	Facilities Authority Revenue
	(Augsburg College) Series 6-J1
	5.00% 5/1/28		1,500,000		1,278,495
	(Carleton College) Series 6-T
	5.00% 1/1/28		1,000,000		1,009,810
	(College of St. Benedict) Series 5-W
	5.00% 3/1/20		2,000,000		1,877,220
	(St. Mary’s University) Series 5-U
	4.80% 10/1/23		1,400,000		1,220,982
	University of Minnesota Series A
	5.25% 4/1/29		1,000,000		1,045,110
	University of the Virgin Islands
	Improvement Series A
	5.375% 6/1/34		500,000		389,560
					6,821,177
Electric Revenue Bonds – 15.97%
	Chaska Electric Revenue Refunding
	(Generating Facilities) Series A
	5.25% 10/1/25		250,000		250,410
	Minnesota Municipal Power Agency
	Electric Revenue Series A
	5.00% 10/1/34		1,900,000		1,813,132
	5.25% 10/1/19		1,610,000		1,663,275
	Northern Municipal Power Agency
	Electric Revenue Series A
	5.00% 1/1/14 (ASSURED GTY)		1,000,000		1,068,680
	5.00% 1/1/16 (ASSURED GTY)		1,500,000		1,598,835
	Southern Minnesota Municipal Power
	Agency Power Supply System
	Series A 5.25% 1/1/14 (AMBAC)		12,000,000		12,943,680
	Western Minnesota Municipal Power
	Agency Power Supply Revenue
	Series A 5.00% 1/1/30 (MBIA)		5,000,000		4,800,000
					24,138,012
Escrowed to Maturity Bonds – 17.55%
	Dakota-Washington Counties
	Housing & Redevelopment
	Authority Revenue
	(Bloomington Single Family
	Residential Mortgage)
	8.375% 9/1/21 (GNMA)
	(FHA) (VA) (AMT)		7,055,000		9,887,793
	Southern Minnesota Municipal
	Power Agency Power Supply
	System Revenue Refunding
	Series B 5.50% 1/1/15 (AMBAC)		390,000		413,225
	St. Paul Housing & Redevelopment
	Authority Sales Tax
	(Civic Center Project)
	5.55% 11/1/23		2,300,000		2,394,645
	5.55% 11/1/23 (MBIA)		4,200,000		4,372,830
	University of Minnesota Hospital &
	Clinics 6.75% 12/1/16		2,580,000		3,201,341
	University of Minnesota Series A
	5.50% 7/1/21		4,000,000		4,473,360
	Western Minnesota Municipal Power
	Agency Power Supply Revenue
	Series A 6.625% 1/1/16		1,535,000		1,792,420
					26,535,614
Health Care Revenue Bonds – 10.60%
	Bemidji Health Care Facilities First
	Mortgage Revenue (North
	Country Health Services)
	5.00% 9/1/24 (RADIAN)		1,500,000		1,358,820
	Glencoe Health Care Facilities
	Revenue (Glencoe Regional
	Health Services Project)
	5.00% 4/1/25		2,000,000		1,570,740
	Maple Grove Health Care Facilities
	Revenue (Maple Grove Hospital)
	5.25% 5/1/37		1,000,000		884,550
	Minneapolis Health Care
	System Revenue (Fairview
	Health Services)
	Series A 6.625% 11/15/28		600,000		621,072
	Series B 6.50% 11/15/38
	(ASSURED GTY)		295,000		314,972
	Series D 5.00% 11/15/34
	(AMBAC)		2,000,000		1,676,920
	Minnesota Agricultural & Economic
	Development Board Revenue
	Un-Refunded Balance (Fairview
	Health Care System) Series A
	5.75% 11/15/26 (MBIA)		100,000		90,060
	6.375% 11/15/29		195,000		194,760
	Shakopee Health Care Facilities
	Revenue (St. Francis Regional
	Medical Center) 5.25% 9/1/34		1,560,000		1,244,755

(continues) 15

Statements of net assets

Delaware Investments Minnesota Municipal Income Fund II, Inc.

		Principal
		Amount		Value
Municipal Bonds (continued)
Health Care Revenue Bonds (continued)
	St. Louis Park Health Care
	Facilities Revenue Refunding
	(Park Nicollet Health Services)
	Series C 5.50% 7/1/23	$	1,000,000	$	996,490
	St. Paul Housing & Redevelopment
	Authority Health Care Facilities
	Revenue
	(Allina Health System)
	Series A 5.00% 11/15/18 (MBIA)		1,380,000		1,384,720
	(Health Partners Obligation
	Group Project) 5.25% 5/15/36		2,000,000		1,513,780
	(Regions Hospital Project)
	5.30% 5/15/28		1,000,000		815,060
	St. Paul Housing & Redevelopment
	Authority Revenue (Franciscan
	Elderly Health Project)
	5.40% 11/20/42 (GNMA) (FHA)		2,700,000		2,507,057
	Winona Health Care Facilities
	Revenue Refunding (Winona
	Health Obligation Group)
	5.00% 7/1/23		1,010,000		846,047
					16,019,803
Housing Revenue Bonds – 8.51%
	Chanhassen Multifamily Housing
	Revenue Refunding (Heritage
	Park Apartments Project)
	6.20% 7/1/30 (FHA) (AMT)
	(HUD Section 8)		1,105,000		1,105,199
	Dakota County Housing &
	Redevelopment Authority
	Single Family Mortgage
	Revenue 5.85% 10/1/30
	(GNMA) (FNMA) (AMT)		11,000		11,006
@	Harmony Multifamily Housing
	Revenue Refunding (Zedakah
	Foundation Project) Series A
	5.95% 9/1/20 (HUD Section 8)		1,000,000		774,930
	Minneapolis Multifamily
	Housing Revenue
	·(Gaar Scott Loft Project)
	5.95% 5/1/30 (AMT)
	(LOC - U.S. Bank N.A.)		920,000		936,818
	(Olson Townhomes Project)
	6.00% 12/1/19 (AMT)		800,000		800,608
	(Seward Towers Project)
	Series A 5.00% 5/20/36 (GNMA)		2,000,000		1,849,160
	(Sumner Housing Project)
	Series A 5.15% 2/20/45
	(GNMA) (AMT)		2,000,000		1,779,880
	Minnesota Housing Finance
	Agency Revenue
	(Rental Housing)
	Series A 5.00% 2/1/35 (AMT)		1,000,000		880,140
	Series D 5.95% 2/1/18 (MBIA)		130,000		130,478
	Minnesota Housing Finance
	Agency Revenue
	(Residential Housing)
	Series B-1 5.35% 1/1/33 (AMT)		1,675,000		1,557,934
	·Series D 4.75% 7/1/32 (AMT)		1,000,000		896,740
	Series I 5.15% 7/1/38 (AMT)		745,000		669,420
	(Single Family Mortgage)
	Series J 5.90% 7/1/28 (AMT)		770,000		770,978
	Washington County Housing &
	Redevelopment Authority
	Revenue Refunding (Woodland
	Park Apartments Project)
	4.70% 10/1/32		750,000		701,400
					12,864,691
Lease Revenue Bonds – 6.45%
	Andover Economic Development
	Authority Public Facilities Lease
	Revenue Refunding (Andover
	Community Center)
	5.125% 2/1/24		205,000		224,032
	5.20% 2/1/29		410,000		450,401
	Puerto Rico Public Buildings
	Authority Revenue Guaranteed
	Un-Refunded Balance
	(Government Facilities Bond)
	Series D 5.25% 7/1/27		530,000		427,254
	St. Paul Port Authority
	Lease Revenue
	(Cedar Street Office
	Building Project)
	5.00% 12/1/22		2,385,000		2,447,034
	5.25% 12/1/27		2,800,000		2,844,521
	(Robert Street Office Building
	Project) Series 3-11
	5.00% 12/1/27		2,000,000		2,018,920
	Virginia Housing & Redevelopment
	Authority Health Care Facility
	Lease Revenue
	5.25% 10/1/25		680,000		569,602
	5.375% 10/1/30		965,000		768,970
					9,750,734
Local General Obligation Bonds – 8.42%
	Dakota County Community
	Development Agency
	Governmental Housing
	Refunding (Senior Housing
	Facilities) Series A
	5.00% 1/1/23		1,100,000		1,139,358
	Hennepin County Series B
	5.00% 12/1/18		2,300,000		2,374,060
	Minneapolis Special School District #1
	5.00% 2/1/19 (FSA)		1,175,000		1,244,537
	Morris Independent School
	District #769 5.00% 2/1/28 (MBIA)		3,750,000		4,071,937

		Principal
		Amount		Value
Municipal Bonds (continued)
Local General Obligation Bonds (continued)
	Washington County Housing &
	Redevelopment Authority
	Refunding Series B
	5.50% 2/1/22 (MBIA)	$	1,705,000	$	1,745,903
	5.50% 2/1/32 (MBIA)		2,140,000		2,147,597
					12,723,392
§Pre-Refunded Bonds – 7.56%
	Andover Economic Development
	Authority Public Facilities
	Lease Revenue (Andover
	Community Center)
	5.125% 2/1/24-14		295,000		322,388
	5.20% 2/1/29-14		590,000		648,139
	Minneapolis Community Development
	Agency Supported (Limited Tax
	Common Bond Fund)
	Series G-1 5.70% 12/1/19-11		1,100,000		1,205,908
	Series G-3 5.45% 12/1/31-11		1,000,000		1,108,150
	Puerto Rico Commonwealth
	Highway & Transportation
	Authority Revenue Series D
	5.25% 7/1/38-12		1,000,000		1,110,580
	Puerto Rico Public Buildings
	Authority Revenue Guaranteed
	(Government Facilities Bond)
	Series D 5.25% 7/1/27-12		1,470,000		1,622,733
	Southern Minnesota Municipal
	Power Agency Power Supply
	System Revenue Series A
	5.75% 1/1/18-13		3,715,000		3,973,229
	St. Louis Park Health Care
	Facilities Revenue (Park Nicollet
	Health Services) Series B
	5.25% 7/1/30-14		1,250,000		1,443,713
					11,434,840
Special Tax Revenue Bonds – 1.54%
	Minneapolis Community
	Development Agency
	Supported Common Bond Fund
	Series 5 5.70% 12/1/27		375,000		375,116
	Minneapolis Development Revenue
	(Limited Tax Supported
	Common Bond Fund) Series 1
	5.50% 12/1/24 (AMT)		1,000,000		981,300
	Puerto Rico Commonwealth
	Infrastructure Financing Authority
	Special Tax Revenue Series B
	5.00% 7/1/46		800,000		561,512
	Virgin Islands Public Finance
	Authority Revenue (Senior Lien
	Matching Fund Loan Notes)
	Series A 5.25% 10/1/23		500,000		417,090
					2,335,018
State General Obligation Bonds – 3.13%
	Puerto Rico Commonwealth Public
	Improvement Refunding Series A
	5.00% 7/1/16 (ASSURED GTY)		750,000		754,928
	5.25% 7/1/15		1,100,000		1,047,244
	5.50% 7/1/17		1,100,000		1,027,488
	5.50% 7/1/19 (MBIA)		1,000,000		956,500
	Puerto Rico Government
	Development Bank Senior
	Notes Series B 5.00% 12/1/14		1,000,000		947,140
					4,733,300
Transportation Revenue Bonds – 8.01%
	Minneapolis-St. Paul Metropolitan
	Airports Commission Revenue
	Series A
	5.00% 1/1/22 (MBIA)		3,000,000		3,042,750
	5.00% 1/1/28 (MBIA)		2,120,000		2,062,018
	5.25% 1/1/16 (MBIA)		1,000,000		1,056,620
	Series B
	5.00% 1/1/35 (AMBAC)		2,000,000		1,883,960
	5.25% 1/1/24 (FGIC) (AMT)		1,000,000		945,880
	St. Paul Housing & Redevelopment
	Authority Parking Revenue
	(Block 19 Ramp Project)
	Series A 5.35% 8/1/29 (FSA)		3,350,000		3,118,180
					12,109,408
	Total Municipal Bonds
	(cost $151,336,103)				147,277,444

·Short-Term Investments – 1.19%
Variable Rate Demand Notes – 1.19%
	Minneapolis Health Care
	System Revenue (Fairview
	Health Services)
	Series E 0.25% 11/15/47
	(LOC – Wells Fargo Bank N.A.)		300,000		300,000
	University of Minnesota
	Series C 0.30% 12/1/36
	(SPA – JP Morgan Chase Bank)		1,500,000		1,500,000
Total Short-Term Investments
	(cost $1,800,000)				1,800,000

Total Value of Securities – 98.61%
	(cost $153,136,103)				149,077,444
Receivables and Other Assets
	Net of Liabilities – 1.39%				2,106,121
Net Assets Applicable to 11,504,975
	Shares Outstanding; Equivalent to
	$13.14 Per Share – 100.00%			$	151,183,565

(continues) 17

Statements of net assets

Delaware Investments Minnesota Municipal Income Fund II, Inc.


Components of Net Assets at March 31, 2009:
Common stock, $0.01 par value, 200 million shares
authorized to the Fund	$	157,939,491
Accumulated net realized loss on investments		(2,697,267	)
Net unrealized depreciation of investments		(4,058,659	)
Total net assets	$	151,183,565

§	Pre-Refunded bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 9 in “Notes to financial statements.”

·	Variable rate security. The rate shown is the rate as of March 31, 2009.

@	Illiquid security. At March 31, 2009, the aggregate amount of illiquid securities was $774,930, which represented 0.51% of the Fund’s net assets. See Note 9 in “Notes to financial statements.”

Summary of Abbreviations:
AMBAC — Insured by the AMBAC Assurance Corporation
AMT — Subject to Alternative Minimum Tax
ASSURED GTY — Insured by the Assured Guaranty Corporation
FGIC — Insured by the Financial Guaranty Insurance Company
FHA — Federal Housing Authority
FNMA — Federal National Mortgage Association Collateral
FSA — Insured by Financial Security Assurance
GNMA – Government National Mortgage Association Collateral
HUD — Housing and Urban Development
LOC — Letter of Credit
MBIA — Insured by the Municipal Bond Insurance Association
RADIAN — Insured by Radian Asset Assurance
SPA — Stand-by Purchase Agreement
VA — Insured by the Veterans Administration

See accompanying notes

Delaware Investments National Municipal Income Fund

March 31, 2009

		Principal
		Amount		Value
Municipal Bonds – 98.11%
Corporate-Backed Revenue Bonds – 3.76%
·	Brazos, Texas Harbor Industrial
	Development Environmental
	Facilities Revenue (Dow Chemical
	Project) 5.90% 5/1/38 (AMT)	$	125,000	$	84,133
·	Chesapeake, Virginia Economic
	Development Authority Pollution
	Control Revenue (Virginia Electric
	& Power Project) Series A
	3.60% 2/1/32		500,000		497,610
	Iowa Finance Authority Pollution
	Control Facilities Revenue
	Refunding (Interstate Power)
	5.00% 7/1/14 (FGIC)		500,000		507,800
					1,089,543
Education Revenue Bonds – 3.84%
	California Educational Facilities
	Authority Revenue (University
	of Southern California) Series A
	5.00% 10/1/39		250,000		246,915
	California Statewide Communities
	Development Authority Student
	Housing Revenue (Irvine, LLC - UCI
	East Campus) 6.00% 5/15/23		470,000		417,797
	Marietta, Georgia Development
	Authority Revenue Refunding
	(Life University Income Project)
	7.00% 6/15/39		230,000		168,314
	Maryland State Economic
	Development Student Housing
	Revenue (University of Maryland
	College Park Projects)
	5.75% 6/1/33		370,000		280,094
					1,113,120
Electric Revenue Bonds – 3.60%
	JEA Florida Electric Systems Revenue
	Series 3-A 5.00% 10/1/34 (FSA)		1,000,000		965,360
	Long Island, New York Power
	Authority Electric System
	Revenue Series A 5.75% 4/1/39		75,000		76,042
					1,041,402
Health Care Revenue Bonds – 17.43%
	Albany, New York Industrial
	Development Agency Civic
	Facility Revenue (St. Peter’s
	Hospital of Albany Project)
	Series A 5.25% 11/15/32		500,000		373,430
	Arizona Health Facilities Authority
	Revenue (Banner Health)
	Series A 5.00% 1/1/17		310,000		311,460
	Escambia County, Florida Health
	Facilities Authority (VHA Program)
	5.95% 7/1/20 (AMBAC)		330,000		336,940
	Lee Memorial Health System Board
	of Directors Florida Revenue
	Refunding Series A
	5.00% 4/1/20 (FSA)		1,000,000		1,006,780
·	Maryland State Health & Higher
	Education Facilities Authority
	Revenue (John Hopkins Health
	Systems) 5.00% 5/15/48		115,000		122,444
	Massachusetts State Health &
	Education Facilities Authority
	Revenue (Caregroup) Refunding
	Series E-2 5.375% 7/1/19		500,000		478,310
	Orange County, Florida Health
	Facilities Authority Revenue
	(Orlando Regional Healthcare)
	Series A 6.25% 10/1/18 (MBIA)		2,000,000		2,098,519
	Scottsdale, Arizona Industrial
	Development Authority Hospital
	Revenue Refunding (Scottsdale
	Healthcare) Series A 5.00% 9/1/23		360,000		319,356
					5,047,239
Housing Revenue Bonds – 15.43%
	California Housing Finance Agency
	Revenue (Home Mortgage)
	Series M 5.95% 8/1/25 (AMT)		250,000		232,933
	Florida Housing Finance Agency
	(Homeowner Mortgage)
	Series 2 5.90% 7/1/29
	(MBIA) (AMT)		310,000		309,950
	(Leigh Meadows Apartments)
	Series N 6.30% 9/1/36 (AMBAC)
	(AMT) (HUD Section 8)		2,510,000		2,509,674
	Volusia County, Florida Multifamily
	Housing Finance Authority
	(San Marco Apartments)
	Series A 5.60% 1/1/44
	(FSA) (AMT)		1,500,000		1,416,825
					4,469,382
Lease Revenue Bonds – 6.10%
	Florida State Municipal Loan
	Council Revenue Series A
	5.00% 2/1/35 (MBIA)		665,000		589,303
	Orange County, Florida School Board
	Certificates of Participation
	Series A 5.00% 8/1/27 (MBIA)		1,250,000		1,178,300
					1,767,603
Local General Obligation Bonds – 4.72%
	Desert, California Community
	College District Election 2004
	Series C 5.00% 8/1/37 (FSA)		295,000		277,955
	Idaho Bond Bank Authority Revenue
	Series A 5.00% 9/15/28		250,000		252,535

(continues) 19

Statements of net assets

Delaware Investments National Municipal Income Fund

		Principal
		Amount		Value
Municipal Bonds (continued)
Local General Obligation Bonds (continued)
	Los Angeles, California Unified
	School District Election of 2005
	Series F 5.00% 1/1/34	$	610,000	$	576,053
	New York City, New York
	Fiscal 2009 Sub-Series A-1
	5.25% 8/15/21		250,000		260,140
					1,366,683
Special Tax Revenue Bonds – 17.95%
	Jacksonville, Florida Sales Tax
	Revenue (Better Jacksonville)
	5.00% 10/1/30 (MBIA)		1,300,000		1,258,413
	Jacksonville, Florida Transportation
	Revenue Refunding
	5.25% 10/1/29 (MBIA)		1,000,000		1,001,160
W	Miami-Dade County, Florida Special
	Obligation (Capital Appreciation
	& Income) Series B
	5.00% 10/1/35 (MBIA)		2,000,000		1,693,939
	New York State Dormitory Authority
	(State Personal Income Tax
	Revenue - Education) Series A
	5.00% 3/15/38		570,000		553,852
	New York State Toll Way Authority
	(State Personal Income Tax
	Revenue - Transportation) Series A
	5.00% 3/15/22		425,000		448,243
	New York State Urban Development
	Corporation Revenue (State
	Personal Income Tax) Series B-1
	5.00% 3/15/36		250,000		244,918
					5,200,525
State General Obligation Bonds – 8.02%
	California State (Various Purposes)
	6.00% 4/1/38		295,000		295,218
	New York State Refunding
	Series A 5.00% 2/15/39		300,000		297,681
	Puerto Rico Commonwealth Refunding
	(Public Improvement) Series A
	5.00% 7/1/16 (ASSURED GTY)		250,000		251,643
	5.50% 7/1/19 (MBIA)		1,250,000		1,195,625
	Virginia State Commonwealth
	Refunding Series B 5.00% 6/1/20		250,000		282,590
					2,322,757
Transportation Revenue Bonds – 9.24%
	Florida Ports Financing
	Commission Revenue
	(State Transportation Trust Fund)
	5.375% 6/1/27 (MBIA) (AMT)		1,000,000		902,660
	Miami-Dade County, Florida
	Aviation Revenue (Miami
	International Airport Hub) Series B
	5.00% 10/1/37 (FGIC)		1,000,000		860,610
	North Texas Tollway Authority
	Revenue (First Tier System)
	Refunding
	Series A 6.00% 1/1/19		500,000		538,345
·	Triborough, New York Bridge &
	Tunnel Authority Revenue
	Series B-3 5.00% 11/15/38		350,000		375,071
					2,676,686
Water & Sewer Revenue Bonds – 8.02%
	Florida Water Pollution Control
	Financing Corporation Revenue
	Series A 5.00% 1/15/25		235,000		240,095
	Riviera Beach, Florida Utility Special
	District Water & Sewer Revenue
	5.00% 10/1/34 (FGIC)		1,200,000		926,976
	Village Center Community
	Development District, Florida
	Utility Revenue
	5.00% 10/1/36 (MBIA)		235,000		198,002
	Winter Haven, Florida Utilities
	Systems Revenue
	5.00% 10/1/30 (MBIA)		1,000,000		959,299
					2,324,372
Total Municipal Bonds
	(cost $30,351,444)				28,419,312

·Short-Term Investments – 1.38%
Variable Rate Demand Notes – 1.38%
	Allegheny County, Pennsylvania
	Industrial Development Authority
	Revenue (United Jewish Federation)
	Series B 0.49% 10/1/25
	(LOC – PNC Bank N.A.)		200,000		200,000
	California Statewide Communities
	Development Authority
	Multifamily Revenue Refunding
	(Housing IAC Project)
	Series W-2 1.50% 9/15/29 (AMT)
	(LOC – Wells Fargo Bank N.A.)		200,000		200,000
Total Short-Term Investments
	(cost $400,000)				400,000

Total Value of Securities – 99.49%
	(cost $30,751,444)				28,819,312
Receivables and Other Assets
	Net of Liabilities – 0.51%				147,330
Net Assets Applicable to 2,422,200
	Shares Outstanding; Equivalent
	to $11.96 Per Share – 100.00%			$	28,966,642


Components of Net Assets at March 31, 2009:
Common stock, $0.01 par value, unlimited shares
authorized to the Fund	$	33,208,317
Accumulated net realized loss on investments		(2,309,543	)
Net unrealized depreciation of investments		(1,932,132	)
Total net assets	$	28,966,642

W	Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective.

·	Variable rate security. The rate shown is the rate as of March 31, 2009.

Summary of Abbreviations:
AMBAC — Insured by the AMBAC Assurance Corporation
AMT — Subject to Alternative Minimum Tax
ASSURED GTY — Insured by the Assured Guaranty Corporation
FGIC — Insured by the Financial Guaranty Insurance Company
FSA — Insured by Financial Security Assurance
HUD — Housing and Urban Development
LOC — Letter of Credit
MBIA — Insured by the Municipal Bond Insurance Association
VHA — Veterans Health Administration

See accompanying notes

(continues) 21

Statements of assets and liabilities

Delaware Investments Closed-End Municipal Bond Funds

March 31, 2009

	Delaware		Delaware		Delaware		Delaware
	Investments		Investments		Investments		Investments
	Arizona		Colorado		Minnesota		National
	Municipal		Municipal		Municipal		Municipal
	Income		Income		Income		Income
	Fund, Inc.		Fund, Inc.		Fund II, Inc.		Fund
Assets:
Investments, at value	$	35,560,614	$	63,118,633	$	149,077,444	$	28,819,312
Cash		1,925,856		779,338		12,028		21,886
Receivables for securities sold		—		326,489		—		114,255
Interest receivable		504,255		810,267		2,259,073		452,582
Total assets		37,990,725		65,034,727		151,348,545		29,408,035

Liabilities:
Payables for securities purchased		—		989,870		—		404,521
Due to manager and affiliates		14,058		23,382		55,158		10,764
Other accrued expenses		32,487		68,989		109,822		26,108
Total liabilities		46,545		1,082,241		164,980		441,393

Total Net Assets	$	37,944,180	$	63,952,486	$	151,183,565	$	28,966,642

Investments, at cost	$	38,063,707	$	64,412,085	$	153,136,103	$	30,751,444

See accompanying notes

Statements of operations

Delaware Investments Closed-End Municipal Bond Funds

Year Ended March 31, 2009

	Delaware			Delaware			Delaware			Delaware
	Investments			Investments			Investments			Investments
	Arizona			Colorado			Minnesota			National
	Municipal			Municipal			Municipal			Municipal
	Income			Income			Income			Income
	Fund, Inc.			Fund, Inc.			Fund II, Inc.			Fund
Investment Income:
Interest	$	2,485,830		$	4,250,593		$	10,452,985		$	2,025,519

Expenses:
Management fees		211,194			350,520			832,314			164,556
Remarketing agent fees		36,458			59,167			153,958			29,583
Interest and related expenses		—			—			152,154			—
Legal fees		24,340			43,237			63,485			31,024
Dividend disbursing and transfer agent fees and expenses		23,596			33,859			81,291			31,786
Accounting and administration expenses		21,093			35,008			83,133			16,436
Reports and statements to shareholders		17,932			24,882			52,343			14,353
Audit and tax		13,076			14,493			19,352			12,670
Rating agency fees		10,850			7,200			25,750			10,847
Taxes (other than taxes on income)		6,000			8,800			14,000			—
Pricing fees		5,304			5,944			11,317			2,697
Stock exchange fees		2,743			4,449			10,989			2,228
Directors’/Trustees’ fees		2,574			4,322			10,201			1,982
Dues and services		1,115			1,984			3,753			862
Insurance fees		851			1,549			4,127			624
Custodian fees		669			1,094			3,251			711
Registration fees		643			643			643			643
Consulting fees		444			740			1,759			345
Directors’/Trustees’ expenses		187			315			744			144
		379,069			598,206			1,524,564			321,491
Less expense paid indirectly		(636	)		(979	)		(2,145	)		(639	)
Total operating expenses		378,433			597,227			1,522,419			320,852
Net Investment Income		2,107,397			3,653,366			8,930,566			1,704,667

Net Realized and Unrealized Loss on Investments:
Net realized loss on investments		(198,104	)		(1,425,714	)		(3,108,067	)		(2,108,853	)
Net change in unrealized appreciation/depreciation of investments		(3,039,177	)		(3,237,138	)		(8,600,912	)		(1,210,078	)
Net Realized and Unrealized Loss on Investments		(3,237,281	)		(4,662,852	)		(11,708,979	)		(3,318,931	)

Dividends on Preferred Stock		(520,055	)		(835,572	)		(2,008,388	)		(416,044	)
Net Decrease in Net Assets Resulting from Operations	$	(1,649,939	)	$	(1,845,058	)	$	(4,786,801	)	$	(2,030,308	)

See accompanying notes

Statements of changes in net assets

Delaware Investments Closed-End Municipal Bond Funds

	Delaware Investments						Delaware Investments
	Arizona Municipal						Colorado Municipal
	Income Fund, Inc.						Income Fund, Inc.

	Year Ended						Year Ended
	3/31/09			3/31/08			3/31/09			3/31/08
Increase (Decrease) in Net Assets from Operations:
Net investment income	$	2,107,397		$	2,702,193		$	3,653,366		$	4,531,590
Net realized gain (loss) on investments		(198,104	)		(28,897	)		(1,425,714	)		258,749
Net change in unrealized appreciation/depreciation of investments		(3,039,177	)		(2,303,717	)		(3,237,138	)		(3,201,151	)
Dividends on preferred stock		(520,055	)		(999,630	)		(835,572	)		(1,516,756	)
Net increase (decrease) in net assets resulting from operations		(1,649,939	)		(630,051	)		(1,845,058	)		72,432

Dividends and Distributions to Common Shareholders from:
Net investment income		(1,699,854	)		(1,819,142	)		(3,175,556	)		(3,482,712	)
Net realized gain on investments		—			(172,967	)		—			(672,357	)
		(1,699,854	)		(1,992,109	)		(3,175,556	)		(4,155,069	)
Net Decrease in Net Assets		(3,349,793	)		(2,622,160	)		(5,020,614	)		(4,082,637	)

Net Assets:
Beginning of year		41,293,973			43,916,133			68,973,100			73,055,737
End of year	$	37,944,180		$	41,293,973		$	63,952,486		$	68,973,100

Undistributed (Distributions in excess of) net investment income	$	—		$	(15,481	)	$	—		$	37,773

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

	Year Ended						Year Ended
	3/31/09			3/31/08			3/31/09			3/31/08
Increase (Decrease) in Net Assets from Operations:
Net investment income	$	8,930,566		$	11,067,616		$	1,704,667		$	2,225,929
Net realized gain (loss) on investments		(3,108,067	)		95,113			(2,108,853	)		(200,690	)
Net change in unrealized appreciation/depreciation of investments		(8,600,912	)		(7,753,436	)		(1,210,078	)		(2,402,718	)
Dividends on preferred stock		(2,008,388	)		(3,654,473	)		(416,044	)		(789,957	)
Net decrease in net assets resulting from operations		(4,786,801	)		(245,180	)		(2,030,308	)		(1,167,436	)

Dividends and Distributions to Common Shareholders from:
Net investment income		(7,334,488	)		(7,593,284	)		(1,368,543	)		(1,616,819	)
Net realized gain on investments		—			—			—			(106,577	)
		(7,334,488	)		(7,593,284	)		(1,368,543	)		(1,723,396	)
Net Decrease in Net Assets		(12,121,289	)		(7,838,464	)		(3,398,851	)		(2,890,832	)

Net Assets:
Beginning of year		163,304,854			171,143,318			32,365,493			35,256,325
End of year	$	151,183,565		$	163,304,854		$	28,966,642		$	32,365,493

Distributions in excess of net investment income	$	—		$	(58,932	)	$	—		$	(12,384	)

See accompanying notes

Financial highlights

Delaware Investments Arizona Municipal Income Fund, Inc.

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

	Year Ended
		3/31/09		3/31/08		3/31/07		3/31/06		3/31/05
Net asset value, beginning of period		$13.850		$14.730		$14.730		$15.070		$15.570

Income (loss) from investment operations:
Net investment income		0.707		0.906		0.932		0.951		0.956
Net realized and unrealized gain (loss) on investments		(1.093	)	(0.783	)	0.160		(0.177	)	(0.332	)
Dividends on preferred stock from:
Net investment income		(0.174	)	(0.312	)	(0.297	)	(0.232	)	(0.118	)
Net realized gain on investments		—		(0.023	)	(0.013	)	(0.002	)	(0.003	)
Total dividends on preferred stock		(0.174	)	(0.335	)	(0.310	)	(0.234	)	(0.121	)
Total from investment operations		(0.560	)	(0.212	)	0.782		0.540		0.503

Less dividends and distributions to common shareholders from:
Net investment income		(0.570	)	(0.610	)	(0.750	)	(0.860	)	(0.960	)
Net realized gain on investments		—		(0.058	)	(0.032	)	(0.020	)	(0.043	)
Total dividends and distributions		(0.570	)	(0.668	)	(0.782	)	(0.880	)	(1.003	)

Net asset value, end of period		$12.720		$13.850		$14.730		$14.730		$15.070

Market value, end of period		$9.900		$12.390		$14.790		$15.980		$15.390

Total investment return based on:¹
Market value		(15.86%	)	(11.86%	)	(2.58%	)	9.74%		(0.78%	)
Net asset value		(3.29%	)	(1.08%	)	5.26%		3.31%		3.34%

Ratios and supplemental data:
Net assets applicable to common shares, end of period (000 omitted)		$37,944		$41,294		$43,916		$43,923		$44,936
Ratio of expenses to average net assets applicable to common shares²		0.96%		1.07%		1.05%		1.03%		1.18%
Ratio of net investment income to average net assets
applicable to common shares²		5.37%		6.34%		6.34%		6.28%		6.34%
Ratio of net investment income to average net assets
applicable to common shares net of dividends to preferred shares³		4.05%		3.99%		4.23%		4.72%		5.54%
Portfolio turnover		4%		18%		17%		2%		8%

Leverage analysis:
Value of preferred shares outstanding (000 omitted)⁴		$—		$25,000		$25,000		$25,000		$25,000
Net asset coverage per share of preferred shares, end of period⁴		$—		$132,588		$137,832		$137,847		$139,872
Liquidation value per share of preferred shares^4,5		$—		$50,000		$50,000		$50,000		$50,000

¹Total 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.

²Ratios do not reflect the effect of dividend payments to preferred shareholders.

³Ratio reflects total net investment income less dividends paid to preferred shareholders divided by average net assets applicable to common shareholders.

⁴In 2008, the Fund redeemed all of its preferred shares at par plus accumulated dividends amounting to $25,024,395. See Note 7 in “Notes to financial statements.”

⁵Excluding any accumulated but unpaid dividends.

See accompanying notes

(continues) 25

Financial highlights

Delaware Investments Colorado Municipal Income Fund, Inc.

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

	Year Ended
	3/31/09			3/31/08			3/31/07			3/31/06			3/31/05
Net asset value, beginning of period		$14.260			$15.100			$15.260			$15.580			$16.110

Income (loss) from investment operations:
Net investment income		0.755			0.937			0.985			1.018			1.019
Net realized and unrealized gain (loss) on investments		(0.965	)		(0.604	)		0.069			(0.129	)		(0.432	)
Dividends on preferred stock from:
Net investment income		(0.173	)		(0.264	)		(0.274	)		(0.213	)		(0.124	)
Net realized gain on investments		—			(0.050	)		(0.019	)		(0.006	)		(0.003	)
Total dividends on preferred stock		(0.173	)		(0.314	)		(0.293	)		(0.219	)		(0.127	)
Total from investment operations		(0.383	)		0.019			0.761			0.670			0.460

Less dividends and distributions to common shareholders from:
Net investment income		(0.657	)		(0.720	)		(0.850	)		(0.960	)		(0.960	)
Net realized gain on investments		—			(0.139	)		(0.071	)		(0.030	)		(0.030	)
Total dividends and distributions		(0.657	)		(0.859	)		(0.921	)		(0.990	)		(0.990	)

Net asset value, end of period		$13.220			$14.260			$15.100			$15.260			$15.580

Market value, end of period		$11.240			$15.060			$15.940			$18.650			$17.180

Total investment return based on:¹
Market value		(21.63%	)		(0.14%	)		(9.86%	)		14.64%			7.42%
Net asset value		(2.66%	)		(0.19%	)		4.35%			3.44%			2.56%

Ratios and supplemental data:
Net assets applicable to common shares, end of period (000 omitted)		$63,952			$68,973			$73,056			$73,833			$75,364
Ratio of expenses to average net assets applicable to common shares²		0.91%			1.03%			1.01%			0.95%			1.03%
Ratio of net investment income to average net assets
applicable to common shares²		5.55%			6.37%			6.49%			6.51%			6.51%
Ratio of net investment income to average net assets
applicable to common shares net of dividends to preferred shares³		4.28%			4.23%			4.56%			5.11%			5.69%
Portfolio turnover		16%			16%			11%			12%			5%

Leverage analysis:
Value of preferred shares outstanding (000 omitted)⁴		$—			$40,000			$40,000			$40,000			$40,000
Net asset coverage per share of preferred shares, end of period⁴		$—			$136,216			$141,320			$142,291			$144,205
Liquidation value per share of preferred shares^4,5		$—			$50,000			$50,000			$50,000			$50,000

¹ Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods.

² Ratios do not reflect the effect of dividend payments to preferred shareholders.

³ Ratio reflects total net investment income less dividends paid to preferred shareholders divided by average net assets applicable to common shareholders.

⁴ In 2008, the Fund redeemed all of its preferred shares at par plus accumulated dividends amounting to $40,042,778. See Note 7 in “Notes to financial statements.”

⁵ Excluding any accumulated but unpaid dividends.

See accompanying notes

Delaware Investments Minnesota Municipal Income Fund II, Inc.

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

	Year Ended
	3/31/09			3/31/08			3/31/07			3/31/06			3/31/05
Net asset value, beginning of period		$14.190			$14.880			$14.730			$14.890			$15.280

Income (loss) from investment operations:
Net investment income		0.776			0.962			0.963			0.971			1.025
Net realized and unrealized gain (loss) on investments		(1.013	)		(0.674	)		0.225			0.012			(0.237	)
Dividends on preferred stock from:
Net investment income		(0.175	)		(0.318	)		(0.298	)		(0.243	)		(0.128	)
Total dividends on preferred stock		(0.175	)		(0.318	)		(0.298	)		(0.243	)		(0.128	)
Total from investment operations		(0.412	)		(0.030	)		0.890			0.740			0.660

Less dividends to common shareholders from:
Net investment income		(0.638	)		(0.660	)		(0.740	)		(0.900	)		(1.050	)
Total dividends		(0.638	)		(0.660	)		(0.740	)		(0.900	)		(1.050	)

Net asset value, end of period		$13.140			$14.190			$14.880			$14.730			$14.890

Market value, end of period		$11.250			$13.450			$14.640			$16.200			$16.370

Total investment return based on:¹
Market value		(11.91%	)		(3.58%	)		(5.13%	)		4.73%			4.02%
Net asset value		(2.48%	)		0.08%			6.05%			4.69%			4.03%

Ratios and supplemental data:
Net assets applicable to common shares, end of period (000 omitted)		$151,184			$163,305			$171,143			$169,481			$107,958
Ratio of expenses to average net assets applicable to common shares^2,4		0.98%			1.18%			1.20%			1.07%			1.00%
Ratio of net investment income to average net assets
applicable to common shares²		5.74%			6.61%			6.52%			6.45%			6.85%
Ratio of net investment income to average net assets
applicable to common shares net of dividends to preferred shares³		4.45%			4.43%			4.50%			4.86%			6.00%
Portfolio turnover		15%			6%			3%			8%			15%

Leverage analysis:
Value of preferred shares outstanding (000 omitted)⁵		$—			$95,000			$95,000			$95,000			$60,000
Net asset coverage per share of preferred shares, end of period⁵		$—			$135,950			$140,075			$139,200			$139,965
Liquidation value per share of preferred shares^5,6		$—			$50,000			$50,000			$50,000			$50,000

¹ Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods.

² Ratios do not reflect the effect of dividend payments to preferred shareholders.

³ Ratio reflects total net investment income less dividends paid to preferred shareholders divided by average net assets applicable to common shareholders.

⁴ The ratio of expenses to average net assets applicable to common shares includes interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees, and trustees’ fees in connection with the Fund’s participation in inverse floater programs for the years ended March 31, 2009, 2008, and 2007. See Notes 1 and 8 in “Notes to financial statements.”

⁵ In 2008, the Fund redeemed all of its preferred shares at par plus accumulated dividends amounting to $95,083,577. See Note 7 in “Notes to financial statements.”

⁶ Excluding any accumulated but unpaid dividends.

See accompanying notes

(continues) 27

Financial highlights

Delaware Investments National Municipal Income Fund

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

	Year Ended
	3/31/09			3/31/08			3/31/07			3/31/06			3/31/05
Net asset value, beginning of period		$13.360			$14.560			$14.650			$15.340			$16.200

Income (loss) from investment operations:
Net investment income		0.704			0.919			0.960			1.017			1.057
Net realized and unrealized gain (loss) on investments		(1.367	)		(1.081	)		0.141			(0.236	)		(0.675	)
Dividends on preferred stock from:
Net investment income		(0.172	)		(0.311	)		(0.285	)		(0.202	)		(0.114	)
Net realized gain on investments		—			(0.015	)		(0.018	)		(0.055	)		(0.009	)
Total dividends on preferred stock		(0.172	)		(0.326	)		(0.303	)		(0.257	)		(0.123	)
Total from investment operations		(0.835	)		(0.488	)		0.798			0.524			0.259

Less dividends and distributions to common shareholders from:
Net investment income		(0.565	)		(0.668	)		(0.820	)		(0.970	)		(1.020	)
Net realized gain on investments		—			(0.044	)		(0.068	)		(0.244	)		(0.099	)
Total dividends and distributions		(0.565	)		(0.712	)		(0.888	)		(1.214	)		(1.119	)

Net asset value, end of period		$11.960			$13.360			$14.560			$14.650			$15.340

Market value, end of period		$10.850			$11.950			$14.530			$16.050			$15.050

Total investment return based on:¹
Market value		(4.31%	)		(13.11%	)		(4.12%	)		14.75%			(3.02%	)
Net asset value		(5.65%	)		(3.05%	)		5.27%			2.76%			1.59%

Ratios and supplemental data:
Net assets applicable to common shares, end of period (000 omitted)		$28,967			$32,365			$35,256			$35,492			$37,166
Ratio of expenses to average net assets applicable to common shares²		1.06%			1.16%			1.10%			1.07%			1.24%
Ratio of net investment income to average net assets
applicable to common shares²		5.63%			6.54%			6.58%			6.70%			6.75%
Ratio of net investment income to average net assets
applicable to common shares net of dividends to preferred shares³		4.25%			4.22%			4.51%			5.01%			5.97%
Portfolio turnover		36%			17%			9%			28%			11%

Leverage analysis:
Value of preferred shares outstanding (000 omitted)⁴		$—			$20,000			$20,000			$20,000			$20,000
Net asset coverage per share of preferred shares, end of period⁴		$—			$130,914			$138,141			$138,731			$142,915
Liquidation value per share of preferred shares^4,5		$—			$50,000			$50,000			$50,000			$50,000

¹ Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods.

² Ratios do not reflect the effect of dividend payments to preferred shareholders.

³ Ratio reflects total net investment income less dividends paid to preferred shareholders divided by average net assets applicable to common shareholders.

⁴ In 2008, the Fund redeemed all of its preferred shares at par plus accumulated dividends amounting to $20,019,516. See Note 7 in “Notes to financial statements.”

⁵ Excluding any accumulated but unpaid dividends.

See accompanying notes

Notes to financial statements

Delaware Investments Closed-End Municipal Bond Funds

March 31, 2009

Delaware Investments Arizona Municipal Income Fund, Inc. (Arizona Municipal Fund), 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). Arizona Municipal Fund, 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 NYSE Alternext, the successor to the American Stock Exchange.

The investment objective of each Fund is to provide high current income exempt from federal income tax and from state personal income tax, if any, consistent with the preservation of capital. Each Fund, except National Municipal Income Fund will seek to achieve its investment objective by investing substantially all of its net assets in investment grade, tax-exempt municipal obligations of its respective state.

1. Significant Accounting Policies

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

Security Valuation — Long-term debt securities are valued by an independent pricing service or broker. 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. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. 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, and 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 the Funds’ 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. The Funds did not record any tax benefit or expense in the current period.

Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Interest and Related Expenses — Interest and related expenses include, but are not limited to, interest expense, remarketing fees, liquidity fees, and trustees’ fees from the Minnesota Municipal Fund II’s participation in inverse floater programs where the Fund has transferred its own bonds to a trust that issues floating rate securities with an aggregate principal amount equal to the principal of the transferred bonds. In conveyance of the bond, the Fund receives the inverse floating rate securities and cash from the trust. As a result of certain rights retained by the Fund, the transfer of the bond is not considered a sale, but rather a form of financing for accounting purposes whereby the cash received is recorded as a liability and interest expense is recorded based on the interest rate of the floating rate securities. Remarketing fees, liquidity fees, and trustees’ expenses are recorded on the accrual basis.

Minnesota Municipal Fund II sold out of its inverse floater positions on September 29, 2008. For the period ended September 29, 2008, the Fund had an average daily liability from the participation in inverse floater programs of $8,500,000 and recorded interest expense at an average rate of 3.59%.

Other — Expenses directly attributable to a Fund are charged directly to that Fund. Other expenses common to various funds within the Delaware Investments^® Family of Funds are generally allocated amongst 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 are amortized to interest income over the lives of the respective securities. Each Fund declares and pays dividends from net investment income monthly and distributions from net realized gain on investments, if any, annually.

The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under this arrangement is included in custodian fees on the statements of operations with the corresponding expense offset shown as “expense paid indirectly.”

(continues) 29

Notes to financial statements

Delaware Investments Closed-End Municipal Bond Funds

2. Investment Management, Administration Agreements and Other Transactions with Affiliates

In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee of 0.40% which is calculated daily based on the average weekly net assets of each Fund, excluding the liquidation value of any preferred shares outstanding.

Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Funds. 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 year ended March 31, 2009, the Funds were charged as follows:

Arizona		Colorado		Minnesota		National
Municipal		Municipal		Municipal		Municipal
Fund		Fund		Fund II		Fund
$	2,637	$	4,376	$	10,392	$	2,054

At March 31, 2009, each Fund had liabilities payable to affiliates as follows:

	Arizona		Colorado		Minnesota		National
	Municipal		Municipal		Municipal		Municipal
	Fund		Fund		Fund II		Fund
Investment management fee payable to DMC	$	12,602	$	21,222	$	50,091	$	9,602
Accounting administration and other expenses
payable to DSC		160		270		638		122
Other expenses payable to DMC and affiliates*		1,296		1,890		4,429		1,040

*DMC, as part of its administrative services, pays operating expenses on behalf of each Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, stock exchange fees, custodian fees and directors/trustees’ fees.

As provided in the investment management agreement, each Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to each Fund by DMC and/or its affiliates’ employees. For the year ended March 31, 2009, each Fund was charged for internal legal and tax services provided by DMC and/or its affiliates’ employees as follows:

Arizona		Colorado		Minnesota		National
Municipal		Municipal		Municipal		Municipal
Fund		Fund		Fund II		Fund
$	2,876	$	4,832	$	11,416	$	2,216

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

3. Investments

For the year ended March 31, 2009, the Funds made purchases and sales of investment securities other than short-term investments as follows:

	Arizona		Colorado		Minnesota		National
	Municipal		Municipal		Municipal		Municipal
	Fund		Fund		Fund II		Fund
Purchases	$	1,969,135	$	13,589,588	$	30,231,023	$	14,191,743
Sales		28,497,501		53,092,293		123,563,781		32,970,150

3. Investments (continued)

At March 31, 2009, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows:

	Arizona				Colorado				Minnesota				National
	Municipal				Municipal				Municipal				Municipal
	Fund				Fund				Fund II				Fund
Cost of investments		$	38,046,264			$	64,412,085			$	153,115,251			$	30,751,444
Aggregate unrealized appreciation		$	915,771			$	2,617,076			$	5,386,558			$	112,294
Aggregate unrealized depreciation			(3,401,421	)			(3,910,528	)			(9,424,365	)			(2,044,426	)
Net unrealized depreciation		$	(2,485,650	)		$	(1,293,452	)		$	(4,037,807	)		$	(1,932,132	)

Effective April 1, 2008, the Funds adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 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. FAS 157 also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements 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-tier hierarchy of inputs is summarized below.

Level 1 – inputs are quoted prices in active markets

Level 2 – inputs are observable, directly or indirectly

Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity

The following table summarizes the valuation of each Fund’s investments by the FAS 157 fair value hierarchy levels as of March 31, 2009:

	Arizona			Colorado			Minnesota			National
	Municipal			Municipal			Municipal			Municipal
	Fund			Fund			Fund II			Fund
Level 1		$	—		$	—		$	—		$	—
Level 2			35,560,614			63,118,633			149,077,444			28,819,312
Level 3			—			—			—			—
Total		$	35,560,614		$	63,118,633		$	149,077,444		$	28,819,312

There were no Level 3 securities at the beginning or end of the year.

4. Dividend and Distribution Information

Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended March 31, 2009 and 2008 was as follows:

	Arizona			Colorado			Minnesota			National
	Municipal			Municipal			Municipal			Municipal
	Fund			Fund			Fund II			Fund
Year Ended 3/31/09
Ordinary income		$	129,029		$	319,989		$	637,277		$	92,304
Tax-exempt income			2,090,880			3,691,139			8,705,599			1,692,283
Total		$	2,219,909		$	4,011,128		$	9,342,876		$	1,784,587

Year Ended 3/31/08
Ordinary income		$	58,659		$	—		$	32,679		$	60,768
Tax-exempt income			2,700,762			4,758,605			11,215,078			2,310,133
Long-term capital gain			232,318			913,220			—			142,452
Total		$	2,991,739		$	5,671,825		$	11,247,757		$	2,513,353

(continues) 31

Notes to financial statements

Delaware Investments Closed-End Municipal Bond Funds

5. Components of Net Assets on a Tax Basis

As of March 31, 2009, the components of net assets on a tax basis were as follows:

	Arizona				Colorado				Minnesota				National
	Municipal				Municipal				Municipal				Municipal
	Fund				Fund				Fund II				Fund
Shares of beneficial interest		$	40,651,205			$	66,918,121			$	157,939,491			$	33,208,317
Post-October losses			—				(19,237	)			(716,008	)			(519,963	)
Capital loss carryforwards			(221,375	)			(1,652,946	)			(2,002,111	)			(1,789,580	)
Unrealized depreciation of investments			(2,485,650	)			(1,293,452	)			(4,037,807	)			(1,932,132	)
Net assets		$	37,944,180			$	63,952,486			$	151,183,565			$	28,966,642

The difference between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales and tax treatment of market discount on debt instruments.

Post-October losses represent losses realized on investment transactions from November 1, 2008 through March 31, 2009 that in accordance with federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following year.

For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of dividends and distributions, capital loss carryforward expiration and tax treatment of market discount on debt instruments. Results of operations and net assets were not affected by these reclassifications. For the year ended March 31, 2009, the Funds recorded the following reclassifications:

	Arizona				Colorado				Minnesota				National
	Municipal				Municipal				Municipal				Municipal
	Fund				Fund				Fund II				Fund
Paid-in capital		$	(129,029	)		$	(319,989	)		$	(810,931	)		$	(92,304	)
Undistributed net investment income			127,993				319,989				471,242				92,304
Accumulated net realized loss			1,036				—				339,689				—

For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. In 2009, $175,804 of capital loss carryforwards expired for the Minnesota Municipal Fund II. Capital loss carryforwards remaining at March 31, 2009 will expire as follows:

	Arizona			Colorado			Minnesota			National
	Municipal			Municipal			Municipal			Municipal
Year of Expiration	Fund			Fund			Fund II			Fund
2010		$	—		$	—		$	8,416		$	—
2013			—			—			9,826			—
2016			—			—			—			18,596
2017			221,375			1,652,946			1,983,869			1,770,984
Total		$	221,375		$	1,652,946		$	2,002,111		$	1,789,580

6. Capital Stock

Pursuant to their articles of incorporation, Arizona Municipal Fund, 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 year ended March 31, 2009. Shares issuable under the Funds’ dividend reinvestment plan are purchased by the Funds’ transfer agent, BNY Mellon Investor Services, Inc., in the open market.

For the year ended March 31, 2009, the Funds did not have any transactions in common shares.

7. Redemption of Preferred Shares

On October 7, 2008, the Funds’ Board approved a plan to redeem all outstanding preferred shares issued by the Funds. The plan was intended to better position each Fund to pursue its investment objectives in light of current and unprecedented market volatility, which has resulted in higher short-term interest rates. Management recommended the redemption of the Funds’ preferred shares based on its expectation that at that time it may become increasingly difficult for the Funds to invest the assets attributable to the preferred shares in securities that provide a sufficient rate of return compared to the dividend rates payable on the preferred shares, which had remained elevated in recent remarketings. These higher costs, in conjunction with market conditions at that time, could cause the Funds to realize an overall lower rate of return than if the Funds were not leveraged. Each Fund’s Board may consider adding some form of leverage to the Funds in the future if warranted by economic conditions at that time.

7. Redemption of Preferred Shares (continued)

Prior to the redemption of the preferred shares, each Fund had a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends. The effective dates and redemption values are as follows:

Arizona Municipal Fund
Effective 10/24/08	Shares Redeemed	Total
Series A	250	$	12,512,197.50
Series B	250		12,512,197.50
Total	500	$	25,024,395.00

Colorado Municipal Fund
Effective 10/22/08
Series A	270	$	13,516,758.90
Series B	270		13,516,758.90
		$	27,033,517.80
Effective 10/29/08
Colorado A	95	$	4,753,593.85
Colorado B	95		4,753,593.85
		$	9,507,187.70
Effective 11/5/08
Series A	35	$	1,751,036.00
Series B	35		1,751,036.00
		$	3,502,072.00
Total	800	$	40,042,777.50

Minnesota Municipal Fund II
Effective 10/22/08
Series B	355	$	17,772,038.40

Effective 10/24/08
Series A	355	$	17,767,320.45
Series C	227		11,361,075.33
Series D	177		8,858,635.83
		$	37,987,031.61
Effective 10/29/08 and 10/31/08
Series A	115	$	5,753,645.50
Series B	115		5,754,350.45
Series C	80		4,002,536.00
Series D	60		3,001,902.00
		$	18,512,433.95
Effective 11/5/08 and 11/7/08
Series B	130	$	6,503,848.00
Series A	130		6,503,738.80
Series C	93		4,652,674.68
Series D	63		3,151,811.88
		$	20,812,073.36
Total	1,900	$	95,083,577.32

National Municipal Fund
Effective 10/24/08
Series A	200	$	10,009,758.00
Series B	200		10,009,758.00
Total	400	$	20,019,516.00

In connection with these transactions, each Fund liquidated a corresponding amount of its investments to fund the redemptions.

(continues) 33

Notes to financial statements

Delaware Investments Closed-End Municipal Bond Funds

8. Inverse Floaters

Each Fund may participate in inverse floater programs where a fund transfers its own bonds to a trust that issues floating rate securities and inverse floating rate securities (inverse floaters) with an aggregate principal amount equal to the principal of the transferred bonds. The inverse floaters received by the Funds are derivative tax-exempt obligations with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of the inverse floaters will generally be more volatile than other tax-exempt investments. The Funds typically use inverse floaters to adjust the duration of their portfolio. Duration measures a portfolio’s sensitivity to changes in interest rates. By holding inverse floaters with a different duration than the underlying bonds that a Fund transferred to the trust, the Fund seeks to adjust its portfolio’s sensitivity to changes in interest rates. The Funds may also invest in inverse floaters to add additional income to the Funds or to adjust the Funds’ exposure to a specific segment of the yield curve. At March 31, 2009, the Funds held no investments in inverse floaters.

9. Credit and Market Risk

The Funds concentrate their investments in securities issued by municipalities. The value of these investments may be adversely affected by new legislation within the states, regional or local and national economic conditions, as applicable and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that 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 the Funds. At March 31, 2009, the percentages of each Fund’s net assets insured by bond insurers were as follows:

Arizona Municipal Fund	35%
Colorado Municipal Fund	47%
Minnesota Municipal Fund II	32%
National Municipal Fund	71%

These securities have been identified in the statements of net assets.

The Funds invest a portion of their assets in high yield fixed income securities, which carry ratings of BB or lower by Standard & Poor’s Ratings Group (S&P) and/or Ba or lower by Moody’s Investors Service, Inc. (Moody’s). 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 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 and 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 (Fitch) due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement.

Each Fund may invest up to 15% of its 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, each Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund’s limitation on investments in illiquid assets. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Funds’ 15% limit on investments in illiquid securities. As of March 31, 2009, there were no Rule 144A securities. Illiquid securities have been identified on the statements of net assets.

10. Contractual Obligations

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

11. Delaware Investments National Municipal Income Fund - Investments in Municipal Securities Issued by the State of Florida

On September 13, 2007, shareholders of Delaware Investments National Municipal Income Fund (formerly Delaware Investments Florida Insured Municipal Income Fund) approved (1) the elimination of the Fund’s fundamental investment policy that required the Fund to invest primarily in insured municipal securities issued by the State of Florida and (2) t