UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number: 811-07420
 
Exact name of registrant as specified in charter: Delaware Investments® Minnesota
Municipal Income Fund II, Inc.
 
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
 
Name and address of agent for service: David F. Connor, Esq.
2005 Market Street
Philadelphia, PA 19103
 
Registrant’s telephone number, including area code: (800) 523-1918
 
Date of fiscal year end: March 31
 
Date of reporting period: September 30, 2015



Item 1. Reports to Stockholders

Table of Contents

 

 

 

Delaware Investments® Closed-End Municipal Bond Funds

 

Semiannual report

 

September 30, 2015

 

 

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

Closed-end funds

 

LOGO


Table of Contents

Table of contents

 

Fund basics

     1   

Security type / sector / state allocations

     2   

Schedule of investments

     4   

Statements of assets and liabilities

     21   

Statements of operations

     22   

Statements of changes in net assets

     23   

Statements of cash flows

     25   

Financial highlights

     26   

Notes to financial statements

     29   

Other Fund information

     35   

About the organization

     39   

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

Unless otherwise noted, views expressed herein are current as of Sept. 30, 2015, and subject to change for events occurring after such date. Information is as of the date indicated and subject to change.

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

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

Neither Delaware Investments nor its affiliates noted in this document are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.

©2015 Delaware Management Holdings, Inc.

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


Table of Contents

Fund basics

 

 

Delaware Investments®

   Delaware Investments

Colorado Municipal Income Fund, Inc.

   National Municipal Income Fund

As of September 30, 2015

   As of September 30, 2015

Fund objective

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

Total Fund net assets

   $66 million

$74 million

  
   Number of holdings

Number of holdings

   166

80

  
   Fund start date

Fund start date

   Feb. 26, 1993

July 29, 1993

  
   CUSIP number

CUSIP number

   24610T108

246101109

  

Delaware Investments

  

Minnesota Municipal Income Fund II, Inc.

  

As of September 30, 2015

  

Fund objective

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

Total Fund net assets

  

$171 million

  

Number of holdings

  

170

  

Fund start date

  

Feb. 26, 1993

  

CUSIP number

  

24610V103

  

 

   1


Table of Contents

Security type / sector / state allocations

As of September 30, 2015 (Unaudited)

 

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

 

Delaware Investments®

Colorado Municipal Income Fund, Inc.

 

Security type / sector   

Percentage   

of net   

assets   

 

 

 

Municipal Bonds*

     135.47%      

Corporate-Backed Revenue Bonds

     4.59%      

Education Revenue Bonds

     26.98%      

Electric Revenue Bonds

     4.61%      

Healthcare Revenue Bonds

     41.81%      

Lease Revenue Bonds

     8.02%      

Local General Obligation Bonds

     12.45%      

Pre-Refunded/Escrowed to Maturity Bonds

     3.17%      

Special Tax Revenue Bonds

     23.10%      

Transportation Revenue Bonds

     7.86%      

Water & Sewer Revenue Bonds

     2.88%      

 

 

Total Value of Securities

     135.47%      

 

 

Liquidation Value of Preferred Stock

     (40.61)%     

 

 

Receivables and Other Assets Net of Liabilities

     5.14%      

 

 

Total Net Assets

     100.00%      

 

 

* As of the date of this report, Delaware Investments Colorado Municipal Income Fund, Inc. held bonds issued by or on behalf of territories and the states of the United States as follows:

    
State / territory    Percentage
of net assets
 

 

 

Colorado

     133.22%      

Guam

     1.48%      

U.S. Virgin Islands

 

    

 

0.77%   

 

  

 

 

 

Total

 

    

 

135.47%   

 

  

 

 

 

 

Delaware Investments

Minnesota Municipal Income Fund II, Inc.

 

Security type / sector    Percentage   
of net   
assets   
 

 

 

Municipal Bonds*

     142.47%      

Corporate-Backed Revenue Bonds

     6.68%      

Education Revenue Bonds

     20.03%      

Electric Revenue Bonds

     9.72%      

Healthcare Revenue Bonds

     33.09%      

Housing Revenue Bonds

     4.81%      

Lease Revenue Bonds

     14.95%      

Local General Obligation Bonds

     6.98%      

Pre-Refunded/Escrowed to Maturity Bonds

     22.65%      

Special Tax Revenue Bonds

     5.89%      

State General Obligation Bonds

     11.58%      

Transportation Revenue Bonds

     4.49%      

Water & Sewer Revenue Bonds

     1.60%      

 

 

Total Value of Securities

     142.47%      

 

 

Liquidation Value of Preferred Stock

     (43.98)%     

 

 

Receivables and Other Assets Net of Liabilities

     1.51%      

 

 

Total Net Assets

     100.00%      

 

 

* As of the date of this report, Delaware Investments Minnesota Municipal Income Fund II, Inc. held bonds issued by or on behalf of territories and the states of the United States as follows:

    
State / territory    Percentage
of net assets
 

 

 

Guam

     0.09%      

Minnesota

 

    

 

142.38%   

 

  

 

 

 

Total

 

    

 

142.47%   

 

  

 

 

 
 

 

2


Table of Contents

 

 

Delaware Investments®

National Municipal Income Fund

 

Security type / sector    Percentage   
of net   
assets   
 

 

 

Municipal Bonds*

     141.50%      

Corporate-Backed Revenue Bonds

     15.97%      

Education Revenue Bonds

     26.27%      

Electric Revenue Bonds

     2.16%      

Healthcare Revenue Bonds

     17.77%      

Housing Revenue Bonds

     1.24%      

Lease Revenue Bonds

     11.07%      

Local General Obligation Bonds

     1.60%      

Pre-Refunded/Escrowed to Maturity Bonds

     11.58%      

Special Tax Revenue Bonds

     19.59%      

State General Obligation Bonds

     3.65%      

Transportation Revenue Bonds

     25.93%      

Water & Sewer Revenue Bonds

     4.67%      

 

 

Short-Term Investment

     1.05%      

 

 

Total Value of Securities

     142.55%      

 

 

Liquidation Value of Preferred Stock

     (45.20)%     

 

 

Receivables and Other Assets Net of Liabilities

     2.65%      

 

 

Total Net Assets

     100.00%      

 

 

 

* As of the date of this report, Delaware Investments National Municipal Income Fund held bonds issued by or on behalf of territories and the states of the United States as follows:

 

State / territory    Percentage   
of net   
assets   
 

 

 

Alabama

     1.26%      

Alaska

     0.52%      

Arizona

     11.78%      

California

     16.73%      

Colorado

     1.44%      

District of Columbia

     0.41%      

Florida

     7.81%      

Georgia

     4.37%      

Guam

     2.21%      

Hawaii

     0.50%      

Idaho

     1.58%      

Illinois

     4.99%      

Indiana

     0.96%      

Kansas

     0.42%      

Louisiana

     5.30%      

Maine

     0.51%      

Maryland

     4.02%      

Massachusetts

     1.42%      

Minnesota

     3.47%      

Mississippi

     1.05%      

Missouri

     4.04%      

Nevada

     0.22%      

New Hampshire

     0.52%      

New Jersey

     9.15%      

New Mexico

     0.82%      

New York

     17.73%      

North Carolina

     0.44%      

North Dakota

     0.40%      

Ohio

     3.95%      

Oregon

     3.81%      

Pennsylvania

     15.46%      

Texas

     11.01%      

Virginia

     0.89%      

Washington

     1.33%      

West Virginia

     0.84%      

Wisconsin

     0.76%      

Wyoming

     0.43%      

 

 

Total

 

    

 

142.55%   

 

  

 

 

 
 

 

   3


Table of Contents

Schedule of investments

Delaware Investments® Colorado Municipal Income Fund, Inc.

September 30, 2015 (Unaudited)

 

    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds – 135.47%

  

 

 

Corporate-Backed Revenue Bonds – 4.59%

  

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

    865,000      $     1,082,375   

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

    1,750,000        2,310,490   
   

 

 

 
      3,392,865   
   

 

 

 

Education Revenue Bonds – 26.98%

  

Colorado Educational & Cultural Facilities Authority Revenue 144A 5.00% 7/1/36 #

    500,000        501,110   

5.125% 11/1/49

    765,000        772,275   

144A 5.25% 7/1/46 #

    500,000        501,995   

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

    1,720,000        1,726,054   

(Charter School - Atlas Preparatory School) 144A 5.25% 4/1/45 #

    700,000        674,597   

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

    500,000        583,290   

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

    1,000,000        1,104,710   

(Improvement - Charter School - University Lab School Building) 144A 5.00% 12/15/45 #

    500,000        488,535   

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

    900,000        1,008,810   

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

    1,000,000        1,069,920   

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

    1,200,000        1,206,528   

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

    750,000        793,350   

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

    1,065,000        1,154,577   

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

    2,500,000        2,782,750   
    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Education Revenue Bonds (continued)

  

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

    10,000      $ 11,040   

University of Colorado 5.00% 6/1/31

    3,185,000        3,587,202   

Series A 5.00% 6/1/33

    1,000,000        1,144,180   

Western State College 5.00% 5/15/34

    750,000        818,745   
   

 

 

 
          19,929,668   
   

 

 

 

Electric Revenue Bonds – 4.61%

  

Colorado Springs Utilities System Improvement Revenue Series A 5.00% 11/15/45

    750,000        856,875   

Series C 5.50% 11/15/48

    750,000        856,823   

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

    1,500,000        1,691,130   
   

 

 

 
      3,404,828   
   

 

 

 

Healthcare Revenue Bonds – 41.81%

  

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

    4,000,000        4,346,000   

Colorado Health Facilities Authority Revenue (Catholic Health Initiatives) Series A 5.00% 7/1/39

    750,000        805,313   

Series A 5.00% 2/1/41

    2,400,000        2,588,880   

Series A 5.25% 2/1/33

    1,625,000        1,788,410   

Series A 5.25% 1/1/45

    1,000,000        1,090,110   

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

    1,000,000        1,055,570   

Series D 6.125% 10/1/28

    750,000        847,380   

(Christian Living Community Project) 6.375% 1/1/41

    615,000        665,528   

Series A 5.75% 1/1/37

    885,000        897,771   

(Covenant Retirement Communities Inc.) 5.00% 12/1/35

    1,000,000        1,068,310   

Series A 5.75% 12/1/36

    1,000,000        1,094,250   
 

 

4


Table of Contents

    

 

    

 

    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Healthcare Revenue Bonds (continued)

  

Colorado Health Facilities Authority Revenue (Evangelical Lutheran Good Samaritan Society) 5.00% 6/1/28

    1,250,000      $ 1,354,187   

5.50% 6/1/33

    2,000,000        2,212,340   

5.625% 6/1/43

    1,000,000        1,100,460   

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

    500,000        591,075   

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

    1,500,000        1,681,605   

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

    500,000        519,675   

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

    4,750,000        5,160,067   

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

    400,000        444,444   

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

    750,000        820,830   

University of Colorado Hospital Authority Revenue Series A 6.00% 11/15/29

    650,000        748,540   
   

 

 

 
      30,880,745   
   

 

 

 

Lease Revenue Bonds – 8.02%

  

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

    630,000        707,333   

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

    2,000,000        2,270,100   

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

    1,500,000        1,568,310   

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

    1,250,000        1,380,325   
   

 

 

 
      5,926,068   
   

 

 

 
    Principal
Amount°
    Value    
(U.S. $)    
 

 

 

Municipal Bonds (continued)

  

 

 

Local General Obligation Bonds – 12.45%

  

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

    250,000      $ 313,243   

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

    2,935,000        3,403,661   

Beacon Point Metropolitan District 5.00% 12/1/30 (AGM)

    600,000        686,928   

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

    750,000        835,800   

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

    650,000        733,343   

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

    650,000        683,767   

Eaton Area Park & Recreation District 5.25% 12/1/34

    190,000        195,337   

5.50% 12/1/38

    245,000        254,626   

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

    750,000        943,523   

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

    250,000        280,488   

Rangely Hospital District 6.00% 11/1/26

    750,000        868,335   
   

 

 

 
      9,199,051   
   

 

 

 

Pre-Refunded/Escrowed to Maturity Bonds – 3.17%

  

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

    600,000        696,036   

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

    690,000        780,873   

University of Colorado Series A 5.375% 6/1/38-19§

    750,000        865,470   
   

 

 

 
      2,342,379   
   

 

 

 
 

 

(continues)

   5


Table of Contents

Schedule of investments

Delaware Investments® Colorado Municipal Income Fund, Inc.

 

   

Principal

Amount°

   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Special Tax Revenue Bonds – 23.10%

  

Central Platte Valley Metropolitan District 5.00% 12/1/43

    375,000      $ 386,524   

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

    1,000,000        1,115,530   

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

    2,875,000        2,930,027   

Fountain Urban Renewal Authority Tax Increment Revenue (Academy Highlands Project) Series A 5.50% 11/1/44

    1,405,000        1,429,082   

Guam Government Business Privilege Tax Revenue Series A 5.125% 1/1/42

    435,000        470,557   

Series A 5.25% 1/1/36

    565,000        621,398   

Regional Transportation District Revenue Series A 5.375% 6/1/31

    460,000        524,262   

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

    2,175,000        2,455,814   

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

    1,500,000        1,579,215   

Series A 5.00% 11/1/38

    4,085,000        4,670,789   

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

    295,000        306,765   

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

    500,000        572,095   
   

 

 

 
      17,062,058   
   

 

 

 

Transportation Revenue Bonds – 7.86%

  

Colorado High Performance Transportation Enterprise Revenue

   

(Senior U.S. 36 & I-25 Managed Lanes) 5.75% 1/1/44 (AMT)

    1,110,000        1,189,287   
    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Transportation Revenue Bonds (continued)

  

Denver City & County Airport System Revenue Series A 5.25% 11/15/36

    750,000      $ 841,687   

Series B 5.00% 11/15/28

    1,000,000        1,178,920   

Series B 5.00% 11/15/37

    2,000,000        2,248,000   

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

    310,000        348,105   
   

 

 

 
      5,805,999   
   

 

 

 

Water & Sewer Revenue Bonds – 2.88%

  

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

    2,000,000        2,123,540   
   

 

 

 
      2,123,540   
   

 

 

 

Total Municipal Bonds
(cost $92,762,831)

      100,067,201   
   

 

 

 

Total Value of Securities – 135.47%
(cost $92,762,831)

   

   $ 100,067,201   
   

 

 

 

 

  #

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Sept. 30, 2015, the aggregate value of Rule 144A securities was $2,959,587, which represents 4.01% of the Fund’s net assets. See Note 5 in “Notes to financial statements.”

  °

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

  §

Pre-refunded bonds. Municipal bonds that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 5 in “Notes to financial statements.”

Summary of abbreviations:

AGC – Insured by Assured Guaranty Corporation

AGM – Insured by Assured Guaranty Municipal Corporation

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

SGI – Insured by Syncora Guarantee Inc.

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

 

 

6


Table of Contents

 

 

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

September 30, 2015 (Unaudited)

 

    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds – 142.47%

  

 

 

Corporate-Backed Revenue Bonds – 6.68%

  

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

    5,500,000      $ 5,505,500   

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

    3,325,000        3,310,835   

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

    2,705,000        2,568,668   
   

 

 

 
          11,385,003   
   

 

 

 

Education Revenue Bonds – 20.03%

  

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

    300,000        304,206   

Brooklyn Park Charter School Lease (Prairie Seeds Academy Project) Series A 5.00% 3/1/34

    990,000        995,871   

Series A 5.00% 3/1/39

    170,000        168,142   

Cologne Charter School Lease Revenue (Cologne Academy Project) Series A 5.00% 7/1/29

    270,000        287,779   

Series A 5.00% 7/1/45

    445,000        458,768   

Deephaven Charter School (Eagle Ridge Academy Project) Series A 5.25% 7/1/37

    740,000        741,058   

Series A 5.25% 7/1/40

    500,000        502,230   

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

    705,000        770,191   

Hugo Charter School Lease Revenue (Noble Academy Project) Series A 5.00% 7/1/34

    255,000        271,022   

Series A 5.00% 7/1/44

    775,000        813,239   

Minneapolis Student Housing Revenue (Riverton Community Housing Project) 5.25% 8/1/39

    205,000        208,317   
    Principal
Amount°
   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Education Revenue Bonds (continued)

  

Minneapolis Student Housing Revenue 5.50% 8/1/49

    990,000      $ 1,012,532   

Minnesota Higher Education Facilities Authority Revenue (Carleton College) Series 6-T 5.00% 1/1/28

    1,000,000        1,080,930   

Series D 5.00% 3/1/30

    1,120,000        1,241,229   

(College of St. Benedict) Series 7-M 5.00% 3/1/31

    300,000        323,622   

Series 7-M 5.125% 3/1/36

    275,000        295,240   

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

    700,000        755,685   

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

    1,000,000            1,081,810   

(University of St. Thomas) Series 6-X 5.00% 4/1/29

    2,250,000        2,371,185   

Series 7-A 5.00% 10/1/39

    1,000,000        1,112,610   

Series 7-U 5.00% 4/1/22

    750,000        883,327   

Otsego Charter School (Kaleidoscope Charter School) Series A 5.00% 9/1/34

    335,000        345,442   

Series A 5.00% 9/1/44

    700,000        710,542   

Rice County Educational Facilities Revenue (Shattuck-St. Mary’s School) Series A 144A 5.00% 8/1/22 #

    1,250,000        1,299,025   

St. Paul Housing & Redevelopment Authority Charter School Lease Revenue (Academia Cesar Chavez School Project) Series A 5.25% 7/1/50

    880,000        826,602   

(Nova Classical Academy) Series A 6.375% 9/1/31

    750,000        849,578   

(Twin Cities Academy Project) Series A 5.30% 7/1/45

    630,000        632,898   

University of Minnesota Series A 5.25% 12/1/28

    500,000        586,475   

Series A 5.25% 4/1/29

    1,000,000        1,127,650   

Series C 5.00% 12/1/19

    1,290,000        1,474,341   

Series D 5.00% 12/1/27

    1,110,000        1,292,873   
 

 

(continues)

   7


Table of Contents

Schedule of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

 

   

Principal

Amount°

   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Education Revenue Bonds (continued)

  

University of Minnesota Series D 5.00% 12/1/28

    1,880,000      $ 2,180,104   

Series D 5.00% 12/1/29

    2,265,000        2,613,402   

Series D 5.00% 12/1/31

    1,000,000        1,143,310   

Series D 5.00% 12/1/36

    3,000,000        3,385,950   
   

 

 

 
          34,147,185   
   

 

 

 

Electric Revenue Bonds – 9.72%

  

Central Minnesota Municipal Power Agency Revenue (Brookings Southeast Twin Cities Transportation) 5.00% 1/1/32

    1,130,000        1,251,814   

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

    1,000,000        1,092,340   

Chaska Electric Revenue Series A 5.00% 10/1/28

    445,000        528,291   

Minnesota Municipal Power Agency Electric Revenue 5.00% 10/1/25

    500,000        602,670   

5.00% 10/1/26

    500,000        596,320   

5.00% 10/1/27

    320,000        378,262   

Northern Municipal Power Agency Series A 5.00% 1/1/26

    100,000        116,341   

Series A 5.00% 1/1/30

    340,000        384,720   

Rochester Electric Utility Revenue Series B 5.00% 12/1/30

    1,300,000        1,511,627   

Series B 5.00% 12/1/43

    1,000,000        1,127,690   

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

    1,030,000        1,131,805   

Western Minnesota Municipal Power Agency Supply Revenue Series A 5.00% 1/1/25

    3,000,000        3,564,600   

Series A 5.00% 1/1/26

    1,000,000        1,177,190   

Series A 5.00% 1/1/33

    1,000,000        1,146,780   

Series A 5.00% 1/1/40

    750,000        844,305   

Series A 5.00% 1/1/46

    1,000,000        1,118,060   
   

 

 

 
      16,572,815   
   

 

 

 

Healthcare Revenue Bonds – 33.09%

  

Anoka Health Care Facilities Revenue 5.375% 11/1/34

    610,000        637,956   
   

Principal

Amount°

   

Value    

(U.S. $)    

 

 

 

Municipal Bonds (continued)

  

 

 

Healthcare Revenue Bonds (continued)

  

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

    1,200,000      $     1,286,196   

Center City Health Care Facilities Revenue (Hazelden Betty Ford Foundation Project) 5.00% 11/1/27

    500,000        583,110   

5.00% 11/1/29

    300,000        345,726   

(Hazelden Foundation Project) 4.75% 11/1/31

    850,000        887,629   

5.00% 11/1/41

    1,600,000        1,690,272   

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

    500,000        500,735   

Deephaven Housing & Healthcare Revenue (St. Therese Senior Living Project) Series A 5.00% 4/1/38

    280,000        284,021   

Series A 5.00% 4/1/40

    270,000        273,537   

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

    1,400,000        1,546,706   

6.00% 6/15/39

    1,000,000        1,109,140   

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

    1,000,000        1,021,570   

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

    500,000        519,785   

Hayward Health Care Facilities Revenue (St. John’s Lutheran Home of Albert Lea) 5.375% 10/1/44

    680,000        685,671   

Maple Grove Health Care Facilities Revenue (North Memorial Health Care) 5.00% 9/1/30

    865,000        973,315   
 

 

8


Table of Contents

    

 

    

 

    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Healthcare Revenue Bonds (continued)

  

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

    1,100,000      $     1,146,552   

Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.00% 11/15/33

    500,000        565,050   

Series A 5.00% 11/15/34

    500,000        561,870   

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

    1,000,000        1,006,020   

(Unrefunded -Fairview Health Services) Series B 6.50% 11/15/38 (ASSURED GTY)

    1,940,000        2,207,332   

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

    1,000,000        1,033,330   

Minneapolis Senior Housing & Healthcare Revenue (Ecumen Mill City Quarter) 5.00% 11/1/35

    220,000        221,232   

5.25% 11/1/45

    850,000        859,231   

5.375% 11/1/50

    200,000        201,104   

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

    500,000        552,665   

Rochester Health Care & Housing Revenue (Samaritan Bethany)

Series A 7.375% 12/1/41

    1,220,000        1,358,995   

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

    1,220,000        1,373,525   

Rochester Health Care Facilities Revenue (Mayo Clinic) 4.00% 11/15/41

    4,860,000        4,999,531   

Series C 4.50% 11/15/38 ·

    1,750,000        2,021,757   

Sartell Health Care Facilities Revenue (Country Manor Campus Project)

   
    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Healthcare Revenue Bonds (continued)

  

Sartell Health Care Facilities Revenue 5.25% 9/1/30

    1,000,000      $     1,053,140   

Series A 5.30% 9/1/37

    600,000        627,912   

Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 4.00% 9/1/31

    205,000        211,917   

5.00% 9/1/34

    165,000        183,884   

St. Cloud Health Care Revenue (Centracare Health System Project) 5.50% 5/1/39 (ASSURED GTY)

    1,500,000        1,636,155   

Series A 5.125% 5/1/30

    5,175,000        5,715,167   

Series B 5.00% 5/1/24

    1,400,000        1,673,518   

St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue (Allina Health System) Series A-1 5.25% 11/15/29

    1,395,000        1,569,654   

(Health Partners Obligation Group Project) 5.00% 7/1/32

    600,000        680,958   

St. Paul Housing & Redevelopment Authority Hospital Facility (Healtheast Care System Project) Series A 5.00% 11/15/29

    395,000        432,252   

Series A 5.00% 11/15/30

    290,000        315,827   

St. Paul Housing & Redevelopment Authority Housing & Health Care Facilities Revenue (Senior Carondelet Village Project) Series A 6.00% 8/1/42

    770,000        802,086   

(Senior Episcopal Homes Project) 5.125% 5/1/48

    1,200,000        1,236,936   

Series A 4.75% 11/1/31

    740,000        752,676   
 

 

(continues)

   9


Table of Contents

Schedule of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

 

    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

 

Healthcare Revenue Bonds (continued)

  

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

    1,500,000      $ 1,573,095   

Wayzata Senior Housing Revenue (Folkestone Senior Living Community) Series A 5.50% 11/1/32

    420,000        455,335   

Series A 5.75% 11/1/39

    945,000        1,018,908   

Series A 6.00% 5/1/47

    1,475,000        1,600,080   

Winona Health Care Facilities Revenue (Winona Health Obligation) 4.65% 7/1/26

    465,000        493,123   

4.75% 7/1/27

    785,000        832,547   

5.00% 7/1/23

    1,010,000        1,050,178   

5.00% 7/1/34

    750,000        797,468   

Woodbury Housing & Redevelopment Authority Revenue (St. Therese of Woodbury) 5.125% 12/1/44

    1,250,000        1,268,413   
   

 

 

 
          56,434,792   
   

 

 

 

Housing Revenue Bonds – 4.81%

  

Minneapolis Multifamily Housing Revenue (Olson Townhomes Project) 6.00% 12/1/19 (AMT)

    475,000        475,356   

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

    1,910,000        1,916,265   

Minnesota Housing Finance Agency (Non Ace - State Appropriated Housing) 5.00% 8/1/33

    1,390,000        1,588,089   

Minnesota State Housing Finance Agency (Residential Housing) Series D 4.75% 7/1/32 (AMT) ·

    730,000        734,650   

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

    530,000        531,277   

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

    1,065,000        1,091,987   
    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Housing Revenue Bonds (continued)

  

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

    1,225,000      $ 1,314,817   

Northwest Multi-County Housing & Redevelopment Authority (Pooled Housing Program) 5.50% 7/1/45

    560,000        556,702   
   

 

 

 
      8,209,143   
   

 

 

 

Lease Revenue Bonds – 14.95%

  

Minnesota State General Fund Revenue Appropriations Series A 5.00% 6/1/32

    780,000        893,038   

Series A 5.00% 6/1/38

    5,500,000        6,220,225   

Series A 5.00% 6/1/43

    1,750,000        1,952,563   

Series B 4.00% 3/1/26

    3,000,000        3,272,490   

Series B 5.00% 3/1/21

    1,500,000        1,772,775   

Series B 5.00% 3/1/29

    3,525,000        4,058,509   

University of Minnesota Special Purpose Revenue (State Supported Biomed Science Research) 5.00% 8/1/35

    1,040,000        1,177,426   

5.00% 8/1/36

    4,000,000        4,500,440   

Virginia Housing & Redevelopment Authority Health Care Facility Lease Revenue 5.25% 10/1/25

    680,000        681,244   

5.375% 10/1/30

    965,000        966,534   
   

 

 

 
          25,495,244   
   

 

 

 

Local General Obligation Bonds – 6.98%

  

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

    1,000,000        1,143,730   

Mahtomedi Independent School District No 832 (School Building) Series A 5.00% 2/1/28

    515,000        622,784   
 

 

10


Table of Contents

    

 

    

 

    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Local General Obligation Bonds (continued)

  

Rocori Independent School District No. 750 (School Building) Series B 5.00% 2/1/22

    1,010,000      $ 1,126,453   

Series B 5.00% 2/1/24

    1,075,000        1,198,238   

Series B 5.00% 2/1/25

    1,115,000        1,239,735   

Series B 5.00% 2/1/26

    1,155,000        1,284,210   

St. Paul Independent School District No. 625 (School Building) Series B 5.00% 2/1/22

    1,300,000        1,557,842   

Series B 5.00% 2/1/26

    1,000,000        1,180,840   

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

    2,440,000        2,552,045   
   

 

 

 
          11,905,877   
   

 

 

 

Pre-Refunded/Escrowed to Maturity Bonds – 22.65%

  

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

    7,055,000        9,548,025   

Deephaven Charter School (Eagle Ridge Academy Project) Series A 5.50% 7/1/43-23 §

    500,000        608,255   

Minneapolis Health Care System Revenue (Fairview Health Services) Series A 6.375% 11/15/23-18 §

    1,105,000        1,288,949   

Series A 6.625%
11/15/28-18 §

    1,150,000        1,350,273   

Series B 6.50%
11/15/38-18 (ASSURED GTY) §

    355,000        415,460   

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

    2,120,000        2,173,509   

St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) 5.75% 7/1/39-19 §

    3,565,000        4,166,273   
    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Pre-Refunded/Escrowed to Maturity Bonds (continued)

  

St. Louis Park Health Care Facilities Revenue Series C 5.50% 7/1/23-18 §

    1,000,000      $ 1,128,720   

St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue (Health Partners Obligation Group Project) 5.25% 5/15/36-16 §

    2,000,000        2,110,100   

St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) 6.00% 11/15/30-15 §

    775,000        780,533   

St. Paul Housing & Redevelopment Authority Sales Tax (Civic Center Project) 5.55% 11/1/23

    2,125,000        2,219,414   

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

    3,875,000        4,047,166   

University of Minnesota Series A 5.50% 7/1/21

    4,000,000        4,709,720   

Series A 5.75% 7/1/18

    1,750,000        1,988,193   

University of Minnesota Hospital & Clinics 6.75% 12/1/16

    2,000,000        2,082,220   
   

 

 

 
          38,616,810   
   

 

 

 

Special Tax Revenue Bonds – 5.89%

  

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

    150,000        164,973   

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

    1,905,000        2,050,942   

Minneapolis Community Planning & Economic Development Department (Limited Tax Supported Common Bond Fund) 6.25% 12/1/30

    1,000,000        1,192,650   

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

    1,000,000        1,008,130   

Series 5 5.70% 12/1/27

    375,000        377,775   
 

 

(continues)

   11


Table of Contents

Schedule of investments

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

 

    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Special Tax Revenue Bonds (continued)

  

Minnesota Public Safety Radio 5.00% 6/1/23

    2,845,000      $ 3,237,041   

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

    895,000        937,987   

St. Paul Sales Tax Revenue Series G 5.00% 11/1/30

    935,000        1,077,915   
   

 

 

 
          10,047,413   
   

 

 

 

State General Obligation Bonds – 11.58%

  

Minnesota State (State Trunk Highway) Series B 5.00% 10/1/22

    5,500,000        6,637,950   

Series B 5.00% 10/1/29

    3,315,000        3,892,307   

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

    2,700,000        3,137,940   

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

    5,000,000        6,084,050   
   

 

 

 
          19,752,247   
   

 

 

 

Transportation Revenue Bonds – 4.49%

  

Minneapolis – St. Paul Metropolitan Airports Commission Revenue 5.00% 1/1/21

    2,600,000        3,053,648   

5.00% 1/1/22

    670,000        778,078   

Subordinate Series B 5.00% 1/1/26

    540,000        624,785   

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

    500,000        576,950   

Series B 5.00% 1/1/27

    1,190,000        1,366,370   

Series B 5.00% 1/1/30

    500,000        564,205   

Series B 5.00% 1/1/31

    250,000        281,795   

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

    380,000        414,797   
   

 

 

 
      7,660,628   
   

 

 

 

Water & Sewer Revenue Bonds – 1.60%

  

Metropolitan Council Waste Water Revenue

   

Series B 4.00% 9/1/27

    1,145,000        1,265,752   
    Principal     Value      
    Amount°     (U.S. $)      

 

 

Municipal Bonds (continued)

  

 

 

Water & Sewer Revenue Bonds (continued)

  

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

    1,325,000      $ 1,463,489   
   

 

 

 
      2,729,241   
   

 

 

 

Total Municipal Bonds
(cost $230,184,798)

      242,956,398   
   

 

 

 

Total Value of
Securities – 142.47%

(cost $230,184,798)

    $ 242,956,398   
   

 

 

 

 

  #

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Sept. 30, 2015, the aggregate value of Rule 144A securities was $1,299,025, which represents 0.76% of the Fund’s net assets. See Note 5 in “Notes to financial statements.”

  °

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

  ·

Variable rate security.The rate shown is the rate as of Sept. 30, 2015. Interest rates reset periodically.

  §

Pre-refunded bonds. Municipal bonds that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 5 in “Notes to financial statements.”

Summary of abbreviations:

AGM – Insured by Assured Guaranty Municipal Corporation

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

ASSURED GTY – Insured by Assured Guaranty Corporation

FNMA – Federal National Mortgage Association Collateral

GNMA – Government National Mortgage Association Collateral

IBC – Insured Bond Certificate

NATL-RE – Insured by National Public Finance Guarantee Corporation

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

 

 

12


Table of Contents

Delaware Investments® National Municipal Income Fund

September 30, 2015 (Unaudited)

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds – 141.50%

  

Corporate-Backed Revenue Bonds – 15.97%

  

Buckeye, Ohio Tobacco Settlement Financing Authority Asset-Backed -2 Series A-2 5.875% 6/1/47

    1,600,000      $ 1,331,744   

Series A-2 6.50% 6/1/47

    430,000        387,684   

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

    290,000        290,360   

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

    125,000        140,396   

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

    830,000        744,742   

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

    150,000        164,507   

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

    500,000        519,345   

Louisiana Local Government Environmental Facilities & Community Development Authority (Westlake Chemical) Series A 6.50% 8/1/29

    645,000        756,991   

Series A-1 6.50% 11/1/35

    255,000        300,755   

Louisiana Public Facilities Authority (LA Pellets Inc. Project) 144A 7.75% 7/1/39 (AMT)#

    240,000        240,257   
    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Corporate-Backed Revenue Bonds (continued)

  

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

    520,000      $ 523,286   

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

    1,000,000        1,382,910   

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

    225,000        251,010   

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

    500,000        541,720   

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

    260,000        284,263   

Selma, Alabama Industrial Development Board (Zilkha Biomass Selma LLC Project) 144A 7.50% 5/1/25 (AMT)#

    265,000        262,573   

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

    310,000        345,331   

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

    500,000        509,075   

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

    750,000        818,228   

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

    460,000        508,972   

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

    240,000        293,378   
   

 

 

 
      10,597,527   
   

 

 

 
 

 

   (continues)    13


Table of Contents

Schedule of investments

Delaware Investments® National Municipal Income Fund

 

     Principal      Value  
      Amount°      (U.S. $)  

Municipal Bonds (continued)

  

Education Revenue Bonds – 26.27%

  

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

     260,000       $ 276,411   

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

     625,000         663,950   

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

     470,000         519,867   

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

     1,000,000         1,042,110   

Health & Educational Facilities Authority of the State of Missouri (St. Louis College of Pharmacy Project)
5.25% 5/1/33

     500,000         548,760   

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

     600,000         693,900   

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

     135,000         144,002   

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

     430,000         450,348   

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

     650,000         719,875   

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

     370,000         400,214   
     Principal      Value  
      Amount°      (U.S. $)  

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

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

     600,000       $ 687,816   

Monroe County, New York Industrial Development Revenue (Nazareth College Rochester Project)
5.50% 10/1/41

     495,000         535,649   

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

     550,000         587,411   

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

     1,000,000         1,043,940   

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

     450,000         499,225   

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

     500,000         553,105   

New York State Dormitory Authority (Columbia University)
5.00% 10/1/41

     600,000         688,632   

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

     390,000         421,153   

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

     135,000         143,629   

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

     400,000         425,240   
 

 

14


Table of Contents

    

 

    

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Education Revenue Bonds (continued)

  

Pennsylvania State Higher Educational Facilities Authority Revenue (University Properties - East Stroudsburg University) 5.25% 7/1/19

    510,000      $ 556,721   

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

    370,000        418,389   

Phoenix, Arizona Industrial Development Authority Revenue (Eagle College Preparatory Project) Series A 5.00% 7/1/43

    500,000        483,220   

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

    1,000,000        1,071,890   

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

    500,000        478,560   

Private Colleges & Universities Authority Revenue, Georgia (Mercer University) Series A 5.00% 10/1/32

    135,000        147,559   

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

    490,000        570,982   

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

    600,000        666,012   

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

    500,000        555,210   

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

    1,000,000        1,156,020   

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

    250,000        283,088   
   

 

 

 
      17,432,888   
   

 

 

 
    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Electric Revenue Bonds – 2.16%

  

 

JEA Electric System Revenue, Florida Series A 5.00% 10/1/33

    1,000,000      $ 1,156,750   

Long Island Power Authority, New York Series A 5.00% 9/1/44

    250,000        276,293   
   

 

 

 
      1,433,043   
   

 

 

 

Healthcare Revenue Bonds – 17.77%

  

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

    500,000        545,805   

Capital Trust Agency, Florida (Tuscan Gardens Senior Living Center) Series A 7.00% 4/1/49

    375,000        371,314   

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

    330,000        390,109   

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

    300,000        333,678   

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

    300,000        344,664   

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

    105,000        125,145   

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

    500,000        542,365   

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

    300,000        340,842   

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

    500,000        564,975   
 

 

   (continues)    15


Table of Contents

Schedule of investments

Delaware Investments® National Municipal Income Fund

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

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

    500,000      $ 532,940   

Montgomery County, Pennsylvania Industrial Development Authority Revenue (Whitemarsh Continuing Care) 5.375% 1/1/50

    750,000        760,717   

Moon, Pennsylvania Industrial Development Authority (Baptist Homes Society Obligation) 6.125% 7/1/50

    750,000        754,395   

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

    300,000        344,448   

New Jersey Health Care Facilities Financing Authority Revenue (St. Peters University Hospital) 6.25% 7/1/35

    300,000        324,117   

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

    500,000        546,205   

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

    500,000        547,170   

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

    300,000        338,358   

Orange County, Florida Health Facilities Authority Revenue (Mayflower Retirement Center) 5.00% 6/1/32

    400,000        425,200   

5.00% 6/1/36

    250,000        264,963   

5.125% 6/1/42

    750,000        797,663   

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

    500,000        572,825   
    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Healthcare Revenue Bonds (continued)

  

Palm Beach County Health Facilities Authority, Florida (Sinai Residences Boca Raton Project) 7.25% 6/1/34

    20,000      $ 22,934   

7.50% 6/1/49

    105,000        121,492   

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

    500,000        556,575   

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

    500,000        534,685   

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

    720,000        791,827   
   

 

 

 
      11,795,411   
   

 

 

 

Housing Revenue Bonds – 1.24%

  

California Municipal Finance Authority Mobile Home Park Revenue (Caritas Project) Series A 6.40% 8/15/45

    420,000        461,878   

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

    95,000        95,533   

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

    255,000        267,084   
   

 

 

 
      824,495   
   

 

 

 

Lease Revenue Bonds – 11.07%

  

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

    1,000,000        1,125,530   

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

    1,000,000        1,017,150   
 

 

16


Table of Contents

    

 

    

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Lease Revenue Bonds (continued)

  

Idaho State Building Authority Revenue (Health & Welfare Project) Series A 5.00% 9/1/24

    135,000      $ 159,135   

(State Police) Series I 5.00% 9/1/23

    760,000        892,628   

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

    2,000,000        2,302,700   

New Jersey Economic Development Authority Series WW
5.25% 6/15/30

    1,000,000        1,048,770   

(School Facilities Construction)
5.00% 9/1/18

    25,000        26,487   

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

    250,000        269,003   

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

    500,000        504,725   
   

 

 

 
          7,346,128   
   

 

 

 

Local General Obligation Bonds – 1.60%

  

Chicago, Illinois Series A 5.50% 1/1/34

    500,000        500,670   

New York, New York Series A-1 5.25% 8/15/21

    250,000        280,625   

Series I-1 5.375% 4/1/36

    250,000        282,255   
   

 

 

 
      1,063,550   
   

 

 

 

Pre-Refunded/Escrowed to Maturity Bonds – 11.58%

  

Atlanta, Georgia Water & Wastewater Revenue Series A 6.25% 11/1/39-19§

    950,000        1,146,697   

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

    1,000,000        1,105,710   
    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Pre-Refunded/Escrowed to Maturity Bonds (continued)

  

Brevard County, Florida Health Facilities Authority Revenue (Health First Project) 7.00% 4/1/39-19§

    350,000      $ 421,977   

Butler County, Pennsylvania Hospital Authority Revenue (Butler Health System Project) 7.125% 7/1/29-19§

    450,000        549,306   

California State Economic Recovery Series A 5.25% 7/1/21-19§

    260,000        301,272   

California Statewide Communities Development Authority Revenue (Statewide Inland Regional Center Project) 5.375%
12/1/37-17§

    500,000            551,660   

Gila County, Arizona Unified School District No. 10 (Payson School Improvement Project of 2006) Series A 5.25% 7/1/27-17 (AMBAC)

    500,000        540,795   

Illinois Finance Authority Revenue (Silver Cross & Medical Centers) 7.00% 8/15/44-19§

    950,000        1,163,883   

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

    75,000        83,981   

North Texas Tollway Authority (Toll 2nd Tier) Series F 5.75% 1/1/38-18§

    1,100,000        1,223,013   

University Medical Center, Tucson, Arizona Hospital Revenue 6.50% 7/1/39-19§

    500,000        597,865   
   

 

 

 
      7,686,159   
   

 

 

 

Special Tax Revenue Bonds – 19.59%

  

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

    200,000        211,942   
 

 

(continues)

   17


Table of Contents

Schedule of investments

Delaware Investments® National Municipal Income Fund

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

Special Tax Revenue Bonds (continued)

  

Brooklyn Arena Local Development, New York Pilot Revenue (Barclays Center Project) 6.25% 7/15/40

    940,000      $ 1,071,459   

6.50% 7/15/30

    300,000        347,604   

Celebration Pointe Community Development District, Florida 5.00% 5/1/34

    500,000        502,900   

Central Puget Sound, Washington Regional Transit Authority (Green Bond - Improvement) Series S-1 5.00% 11/1/35

    750,000        880,410   

Guam Government Business Privilege Tax Revenue Series A 5.00% 1/1/22

    775,000            887,445   

Series B-1 5.00% 1/1/42

    540,000        578,524   

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

    200,000        256,660   

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

    1,000,000        1,003,470   

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

    520,000        592,410   

New Jersey Economic Development Authority Revenue 5.00% 6/15/28

    200,000        210,734   

5.00% 6/15/29

    800,000        838,936   

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

    900,000        946,989   

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

    595,000        610,143   
     Principal      Value  
      Amount°      (U.S. $)  

Municipal Bonds (continued)

  

Special Tax Revenue Bonds (continued)

  

New York State Dormitory Authority Series A 5.00% 3/15/33

     1,000,000       $ 1,150,410   

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

     570,000         634,131   

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

     230,000             249,966   

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

     1,085,000         1,185,243   

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

     500,000         564,555   

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

     65,000         47,691   

(Sales Tax - Vacation Village Project A) Series A 5.75% 9/1/32

     235,000         233,238   
     

 

 

 
        13,004,860   
     

 

 

 

State General Obligation Bonds – 3.65%

  

California State
5.25% 11/1/40

     320,000         373,424   
 

 

18


Table of Contents

 

 

    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

State General Obligation Bonds (continued)

  

California State (Various Purposes) 5.00% 10/1/41

    440,000      $ 492,628   

5.00% 10/1/44

    440,000        497,482   

6.00% 4/1/38

    105,000        122,513   

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

    300,000        334,506   

Oregon State Series K 5.00% 5/1/22

    500,000        602,755   
   

 

 

 
      2,423,308   
   

 

 

 

Transportation Revenue Bonds – 25.93%

  

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

    1,000,000        1,155,490   

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

    520,000        594,854   

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

    1,000,000        1,127,560   

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

    255,000        279,011   

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

    500,000        589,200   

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

    500,000        559,385   

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

    245,000        272,910   

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

    1,000,000        1,160,840   

New Orleans, Louisiana Aviation Board Series B 5.00% 1/1/45 (AMT)

    1,000,000        1,079,050   
    Principal     Value  
     Amount°     (U.S. $)  

Municipal Bonds (continued)

  

       

Transportation Revenue Bonds (continued)

  

 

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

    500,000      $ 561,660   

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

    250,000        292,417   

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

    1,000,000        1,207,990   

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

    500,000        541,630   

Pennsylvania Turnpike Commission Subordinate (Special Motor License Foundation) 5.00% 12/1/22

    500,000        575,535   

Series B 5.00% 12/1/41

    500,000        547,365   

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

    900,000        1,054,098   

Port Authority of New York & New Jersey Special Project (JFK International Air Terminal) 6.00% 12/1/42

    230,000        267,890   

6.50% 12/1/28

    500,000        504,965   

St. Louis, Missouri Airport Revenue (Lambert St. Louis International) 5.00% 7/1/32 (AMT)

    1,000,000        1,064,080   

Series A-1 6.625% 7/1/34

    325,000        375,375   

Texas Private Activity Bond Surface Transportation Corporate Senior Lien Revenue (LBJ Infrastructure) 7.00% 6/30/40

    285,000        339,415   

7.50% 6/30/33

    665,000        809,677   

(Mobility Partners) 7.50% 12/31/31

    500,000        597,280   

(NTE Mobility Partners) 6.75% 6/30/43 (AMT)

    225,000        273,713   

6.875% 12/31/39

    1,000,000        1,170,250   

7.00% 12/31/38 (AMT)

    165,000        205,503   
   

 

 

 
      17,207,143   
   

 

 

 
 

 

(continues)

   19


Table of Contents

Schedule of investments

Delaware Investments® National Municipal Income Fund

 

     Principal      Value  
      Amount°      (U.S. $)  

Municipal Bonds (continued)

  

Water & Sewer Revenue Bonds – 4.67%

  

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

     500,000       $ 575,595   

New York City Water & Sewer System, New York (2nd Generation Fiscal 2013) Series CC 5.00% 6/15/47

     345,000         384,737   

Philadelphia, Pennsylvania Water & Wastewater Revenue Series A 5.00% 7/1/45

     500,000         549,765   

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

     900,000         1,000,584   

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

     500,000         585,465   
     

 

 

 
        3,096,146   
     

 

 

 

Total Municipal Bonds
(cost $86,931,743)

        93,910,658   
     

 

 

 

 

Short-Term Investment – 1.05%

  

Variable Rate Demand Note – 1.05%¤

  

Mississippi Business Finance Series G (Chevron USA) 0.01% 11/1/35

     700,000         700,000   
     

 

 

 

Total Short-Term Investment
(cost $700,000)

        700,000   
     

 

 

 

Total Value of Securities – 142.55%

  

(cost $87,631,743)

      $ 94,610,658   
     

 

 

 

 

 

#

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Sept. 30, 2015, the aggregate value of Rule 144A securities was $646,459, which represents 0.97% of the Fund’s net assets. See Note 5 in “Notes to financial statements.”

¤

Tax-exempt obligations that contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period (generally up to 30 days) prior to specified dates either from the issuer or by drawing on a bank letter of credit, a guarantee, or insurance issued with respect to such instrument. The rate shown is the rate as of Sept. 30, 2015.

°

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

^

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

§

Pre-refunded bonds. Municipal bonds that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 5 in “Notes to financial statements.”

Summary of abbreviations:

AMBAC – Insured by AMBAC Assurance Corporation

AMT – Subject to Alternative Minimum Tax

NATL-RE – Insured by National Public Finance Guarantee Corporation

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

 

 

20


Table of Contents

Statements of assets and liabilities

Delaware Investments® Closed-End Municipal Bond Funds

September 30, 2015 (Unaudited)

 

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

Assets:

      

Investments, at value1

   $ 100,067,201      $ 242,956,398      $ 93,910,658   

Short-term investments, at value2

                   700,000   

Cash

     3,244,012               447,183   

Interest income receivable

     1,402,512        3,443,710        1,364,026   

Receivables for securities sold

                   151,019   

Offering cost for preferred shareholders

     63,911        114,346        104,267   
  

 

 

   

 

 

   

 

 

 

Total assets

     104,777,636        246,514,454        96,677,153   
  

 

 

   

 

 

   

 

 

 

Liabilities:

      

Cash overdraft

            312,112          

Liquidation value of preferred stock

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

Payable for securities purchased

     841,477        519,306        233,237   

Audit fees payable

     18,657        18,657        18,657   

Investment management fees payable

     33,901        80,121        31,454   

Other accrued expenses

     16,039        51,169        20,224   

Other affiliates payable

     3,285        6,678        4,010   

Directors’/Trustees’ fees and expenses payable

     195        448        175   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     30,913,554        75,988,491        30,307,757   
  

 

 

   

 

 

   

 

 

 

Total Net Assets Applicable to Common Shareholders

   $ 73,864,082      $ 170,525,963      $ 66,369,396   
  

 

 

   

 

 

   

 

 

 

Net Assets Applicable to Common Shareholders Consist of:

      

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

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

Undistributed net investment income

     957,264        1,268,913        393,229   

Accumulated net realized loss on investments

     (1,315,673     (1,445,625     (1,620,224

Net unrealized appreciation of investments

     7,304,370        12,771,600        6,978,915   
  

 

 

   

 

 

   

 

 

 

Total Net Assets Applicable to Common Shareholders

   $ 73,864,082      $ 170,525,963      $ 66,369,396   
  

 

 

   

 

 

   

 

 

 

Net Asset Value per Common Share

   $ 15.27      $ 14.82      $ 14.66   
  

 

 

   

 

 

   

 

 

 

1Investments, at cost

     92,762,831        230,184,798        86,931,743   

2Short-term investments, at cost

                   700,000   

3Common shares outstanding

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

4Common shares authorized

     200 million        200 million        unlimited   

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

 

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Statements of operations

Delaware Investments® Closed-End Municipal Bond Funds

Six months ended September 30, 2015 (Unaudited)

 

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

Investment Income:

      

Interest

   $ 2,274,229      $ 5,002,632      $ 2,163,741   
  

 

 

   

 

 

   

 

 

 

Expenses:

      

Management fees

     207,240        489,169        192,593   

Interest expense

     188,063        470,159        188,063   

Rating agency fees

     26,314        22,328        22,834   

Audit and tax

     21,770        23,339        18,657   

Offering costs

     20,143        42,586        27,602   

Accounting and administration expenses

     16,456        38,842        15,293   

Dividend disbursing and transfer agent fees and expenses

     14,834        33,715        17,512   

Reports and statements to shareholders

     11,139        19,502        5,539   

Legal fees

     10,490        28,504        12,508   

Stock exchange fees

     2,380        5,473        2,147   

Directors’/Trustees’ fees and expenses

     1,749        4,026        1,594   

Custodian fees

     1,694        3,918        1,597   

Registration fees

     484        484        532   

Other

     6,181        12,711        10,379   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     528,937        1,194,756        516,850   
  

 

 

   

 

 

   

 

 

 

Net Investment Income

     1,745,292        3,807,876        1,646,891   
  

 

 

   

 

 

   

 

 

 

Net Realized and Unrealized Gain (Loss):

      

Net realized gain on investments

     179,215        222,985        169,574   

Net change in unrealized appreciation (depreciation) of investments

     (1,569,284     (2,160,827     (1,484,851
  

 

 

   

 

 

   

 

 

 

Net Realized and Unrealized Loss

     (1,390,069     (1,937,842     (1,315,277
  

 

 

   

 

 

   

 

 

 

Net Increase in Net Assets Resulting from Operations

   $ 355,223      $ 1,870,034      $ 331,614   
  

 

 

   

 

 

   

 

 

 

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

 

22


Table of Contents

Statements of changes in net assets

Delaware Investments® Closed-End Municipal Bond Funds

 

     Delaware Investments  
     Colorado Municipal  
     Income Fund, Inc.  
     Six months        
     ended        
     9/30/15     Year ended  
     (Unaudited)     3/31/15  

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 1,745,292      $ 3,415,659   

Net realized gain

     179,215        286,449   

Net change in unrealized appreciation (depreciation)

     (1,569,284     5,080,978   
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     355,223        8,783,086   
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (1,717,171     (3,337,599
  

 

 

   

 

 

 
     (1,717,171     (3,337,599
  

 

 

   

 

 

 

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

     (1,361,948     5,445,487   

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     75,226,030        69,780,543   
  

 

 

   

 

 

 

End of period

   $ 73,864,082      $ 75,226,030   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 957,264      $ 929,143   
  

 

 

   

 

 

 
     Delaware Investments  
     Minnesota Municipal  
     Income Fund II, Inc.  
     Six months        
     ended        
     9/30/15     Year ended  
     (Unaudited)     3/31/15  

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 3,807,876      $ 7,370,894   

Net realized gain

     222,985        51,853   

Net change in unrealized appreciation (depreciation)

     (2,160,827     7,966,822   
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     1,870,034        15,389,569   
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (3,624,067     (7,708,333
  

 

 

   

 

 

 
     (3,624,067     (7,708,333
  

 

 

   

 

 

 

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

     (1,754,033     7,681,236   

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     172,279,996        164,598,760   
  

 

 

   

 

 

 

End of period

   $ 170,525,963      $ 172,279,996   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 1,268,913      $ 1,085,104   
  

 

 

   

 

 

 

 

23


Table of Contents

Statements of changes in net assets

Delaware Investments® Closed-End Municipal Bond Funds

 

     Delaware Investments  
     National Municipal  
     Income Fund  
     Six months        
     ended        
     9/30/15     Year ended  
     (Unaudited)     3/31/15  

Increase (Decrease) in Net Assets from Operations:

    

Net investment income

   $ 1,646,891      $ 3,219,861   

Net realized gain

     169,574        622,465   

Net change in unrealized appreciation (depreciation)

     (1,484,851     4,922,383   
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     331,614        8,764,709   
  

 

 

   

 

 

 

Dividends and Distributions to Common Shareholders from:

    

Net investment income

     (1,766,093     (3,486,901
  

 

 

   

 

 

 
     (1,766,093     (3,486,901
  

 

 

   

 

 

 

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

     (1,434,479     5,277,808   

Net Assets Applicable to Common Shareholders:

    

Beginning of period

     67,803,875        62,526,067   
  

 

 

   

 

 

 

End of period

   $ 66,369,396      $ 67,803,875   
  

 

 

   

 

 

 

Undistributed net investment income

   $ 393,229      $ 512,431   
  

 

 

   

 

 

 

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

 

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Table of Contents

Statements of cash flows

Delaware Investments® Closed-End Municipal Bond Funds

Six months ended September 30, 2015 (Unaudited)

 

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

Net Cash Provided by (Used for) Operating Activities:

      

Net increase in net assets resulting from operations

   $ 355,223      $ 1,870,034      $ 331,614   
  

 

 

   

 

 

   

 

 

 

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

      

Amortization of premium and accretion of discount on investments

     154,232        773,223        210,253   

Amortization of offering costs for preferred shareholders

     28,457        50,914        35,936   

Purchase of investment securities

     (4,341,445     (12,739,195     (5,378,543

Proceeds from disposition of investment securities

     6,451,463        11,530,310        5,851,006   

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

     400,000               (200,000

Net realized gain on investments

     (179,215     (222,985     (169,574

Net change in net unrealized appreciation (depreciation) of investments

     1,569,284        2,160,827        1,484,851   

Increase (decrease) in receivable for securities sold

                   (145,945

Increase (decrease) in interest receivable

     (37,348     120,338        (14,581

Increase (decrease) in payable for securities purchased

     (923,289     519,306        233,238   

Increase in investment management fees payable

     (1,738     (3,655     (1,667

Decrease in Directors’/Trustees’ fees and expenses payable

     3        7        2   

Increase in audit fees payable

     (18,657     (18,925     (18,657

Decrease in other affiliates payable

     1,181        1,922        1,507   

Decrease in other accrued expenses

     15,270        12,042        2,978   
  

 

 

   

 

 

   

 

 

 

Total adjustments

     3,118,198        2,184,129        1,890,804   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     3,473,421        4,054,163        2,222,418   
  

 

 

   

 

 

   

 

 

 

Cash Flows Used for Financing Activities:

      

Cash dividends and distributions paid to common shareholders

     (1,717,171     (3,624,067     (1,766,093
  

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (1,717,171     (3,624,067     (1,766,093
  

 

 

   

 

 

   

 

 

 

Net increase in cash

     1,756,250        430,096        456,325   

Cash at beginning of period

     1,487,762        (742,208     (9,142
  

 

 

   

 

 

   

 

 

 

Cash at end of period

   $ 3,244,012      $ (312,112   $ 447,183   
  

 

 

   

 

 

   

 

 

 

Cash paid for interest on leverage

   $ 188,063      $ 470,159      $ 188,063   
  

 

 

   

 

 

   

 

 

 

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

 

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Table of Contents

Financial highlights

Delaware Investments® Colorado Municipal Income Fund, Inc.

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

 

     Six months                                
     ended                                
     9/30/151     Year ended  
      (Unaudited)     3/31/15     3/31/14     3/31/13     3/31/12     3/31/11  

Net asset value, beginning of period

   $ 15.550      $ 14.430      $ 15.370      $ 15.010      $ 13.370      $ 13.990   

Income (loss) from investment operations:

            

Net investment income2

     0.361        0.706        0.700        0.733        0.638        0.601   

Net realized and unrealized gain (loss)

     (0.286     1.104        (0.935     0.416        1.582        (0.651
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     0.075        1.810        (0.235     1.149        2.220        (0.050
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.355     (0.690     (0.690     (0.690     (0.580     (0.570

Net realized gain

                   (0.015     (0.099              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.355     (0.690     (0.705     (0.789     (0.580     (0.570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 15.270      $ 15.550      $ 14.430      $ 15.370      $ 15.010      $ 13.370   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 14.050      $ 14.350      $ 13.330      $ 14.840      $ 14.600      $ 12.450   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     0.45%        13.01%        (5.25%     6.92%        22.41%        (3.00%

Net asset value

     0.75%        13.12%        (0.97%     7.71%        17.19%        (0.30%

Ratios and supplemental data:

            

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

   $ 73,864      $ 75,226      $ 69,781      $ 74,349      $ 72,613      $ 64,689   

Ratio of expenses to average net assets applicable to common shareholders4

     1.44%        1.43%        1.49%        1.44%        0.95%        0.56%   

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

     4.74%        4.65%        4.90%        4.72%        4.46%        4.31%   

Portfolio turnover

     6%        14%        26%        8%        64%        10%   

Leverage analysis:

            

Value of preferred shares outstanding
(000 omitted)6

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

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

   $ 346,214      $ 350,753      $ 332,602      $ 347,829      $ 342,045      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,000      $ 100,000 7    $ 100,000 7    $   

 

 

 

1 

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

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.039, $0.077, $0.078, $0.079, and $0.031 per share for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012, respectively, and from realized capital gains of $0.002, $0.006, and $0.000 per share for the years ended March 31, 2014, 2013, and 2012, respectively.

3 

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

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012 were 0.93%, 0.92%, 0.94%, 0.89%, and 0.73%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5 

The ratio of net investment income excluding interest expense for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013 and 2012 were 5.25%, 5.16%, 5.45%, 5.27%, and 4.68%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

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

7 

Excluding any accumulated but unpaid dividends.

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

 

26


Table of Contents

Delaware Investments® Minnesota Municipal Income Fund II, Inc.

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

 

     Six months                                
     ended                                
     9/30/151     Year ended  
      (Unaudited)     3/31/15     3/31/14     3/31/13     3/31/12     3/31/11  

Net asset value, beginning of period

   $ 14.970      $ 14.310      $ 15.270      $ 14.940      $ 13.700      $ 14.060   

Income (loss) from investment operations:

            

Net investment income2

     0.331        0.641        0.648        0.715        0.640        0.612   

Net realized and unrealized gain (loss)

     (0.166     0.689        (0.802     0.345        1.180        (0.402
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     0.165        1.330        (0.154     1.060        1.820        0.210   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.315     (0.670     (0.690     (0.690     (0.580     (0.570

Net realized gain

                   (0.116     (0.040              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.315     (0.670     (0.806     (0.730     (0.580     (0.570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.820      $ 14.970      $ 14.310      $ 15.270      $ 14.940      $ 13.700   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 13.150      $ 13.850      $ 13.340      $ 15.630      $ 14.230      $ 12.600   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     (2.80%     8.97%        (9.26%     15.18%        17.95%        3.32%   

Net asset value

     1.35%        9.80%        (0.36%     7.18%        13.90%        1.80%   

Ratios and supplemental data:

            

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

   $ 170,526      $ 172,280      $ 164,599      $ 175,629      $ 171,835      $ 157,655   

Ratio of expenses to average net assets applicable to common shareholders4

     1.41%        1.40%        1.51%        1.40%        0.93%        0.56%   

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

     4.49%        4.33%        4.54%        4.65%        4.44%        4.35%   

Portfolio turnover

     7%        10%        17%        24%        44%        9%   

Leverage analysis:

            

Value of preferred shares outstanding
(000 omitted)6

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

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

   $ 327,368      $ 329,707      $ 319,465      $ 334,172      $ 329,113      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,000      $ 100,000 7    $ 100,000 7    $   

 

 

 

1 

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

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.041, $0.081, $0.076, $0.084, and $0.033 per share for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012, respectively, and from realized capital gains of $0.014, $0.005, and $0.000 per share for the years ended March 31, 2014, 2013, and 2012, respectively.

3 

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

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012 were 0.86%, 0.85%, 0.88%, 0.82%, and 0.70%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5 

The ratio of net investment income excluding interest expense to average net assets for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012 were 5.04%, 4.88%, 5.17%, 5.23%, and 4.67%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

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

7 

Excluding any accumulated but unpaid dividends.

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

 

   (continues)    27


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Financial highlights

Delaware Investments® National Municipal Income Fund

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

 

     Six months                                
     ended                                
     9/30/151     Year ended  
      (Unaudited)     3/31/15     3/31/14     3/31/13     3/31/12     3/31/11  

Net asset value, beginning of period

   $ 14.970      $ 13.810      $ 14.990      $ 14.020      $ 12.620      $ 13.070   

Income (loss) from investment operations:

            

Net investment income2

     0.364        0.711        0.710        0.722        0.531        0.610   

Net realized and unrealized gain (loss)

     (0.284     1.219        (1.180     0.858        1.409        (0.532
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     0.080        1.930        (0.470     1.580        1.940        0.078   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to common shareholders from:

            

Net investment income

     (0.390     (0.770     (0.710     (0.610     (0.540     (0.528
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

     (0.390     (0.770     (0.710     (0.610     (0.540     (0.528
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.660      $ 14.970      $ 13.810      $ 14.990      $ 14.020      $ 12.620   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of period

   $ 12.800      $ 13.140      $ 12.350      $ 14.480      $ 13.240      $ 12.200   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on:3

            

Market value

     0.42%        12.87%        (9.65%     14.12%        13.19%        4.78%   

Net asset value

     0.95%        14.99%        (2.41%     11.56%        15.87%        0.67%   

Ratios and supplemental data:

            

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

   $ 66,369      $ 67,804      $ 62,526      $ 67,876      $ 63,487      $ 30,559   

Ratio of expenses to average net assets applicable to common shareholders4

     1.56%        1.60%        1.58%        1.56%        1.02%        0.65%   

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

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

Portfolio turnover

     8%        38%        40%        42%        101%        50%   

Leverage analysis:

            

Value of preferred shares outstanding
(000 omitted)6

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

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

   $ 321,231      $ 326,013      $ 308,420      $ 326,254      $ 311,625      $   

Liquidation value per share of preferred shares6

   $ 100,000      $ 100,000      $ 100,000      $ 100,000 7    $ 100,000 7    $   

 

 

 

1 

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

2 

Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.042, $0.083, $0.085, $0.090, and $0.004 per share for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012, respectively.

3 

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

4 

The ratio of expenses to average net assets applicable to common shareholders excluding interest expense for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012 were 0.99%, 1.03%, 0.96%, 0.96%, and 0.99%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

5 

The ratio of net investment income excluding interest expense to average net assets for the six months ended Sept. 30, 2015 and the years ended March 31, 2015, 2014, 2013, and 2012 were 5.54%, 5.44%, 5.79%, 5.46%, and 3.99%, respectively. There was no interest expense for the years ended March 31, 2011 and 2010.

6 

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

7 

Excluding any accumulated but unpaid dividends.

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

 

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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

September 30, 2015 (Unaudited)

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

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

1. Significant Accounting Policies

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

Security Valuation — Debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund’s Board of Directors/Trustees (each a Board, or collectively, the Boards). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.

Federal Income Taxes — No provision for federal income taxes has been made as each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Funds evaluate tax positions taken or expected to be taken in the course of preparing each Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed each Fund’s tax positions taken for all open federal income tax years (March 31, 2012–March 31, 2015), and has concluded that no provision for federal income tax is required in any Fund’s financial statements.

Use of Estimates — Each Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, each Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.

Other — Expenses directly attributable to each Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Each Fund declares and pays dividends from net investment income monthly and distributions from net realized gain on investments, if any, annually. Each Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.

Each Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended Sept. 30, 2015.

 

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

Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to each Fund. For these services, DIFSC’s fees are calculated 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 DIFSC 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. These amounts are included on the “Statements of operations” under “Accounting and Administration expenses.” For the six months ended Sept. 30, 2015, each Fund was charged for these services as follows:

 

     Colorado    Minnesota    National
     Municipal    Municipal    Municipal
             Fund                  Fund II          Fund
       $2,452               $5,787               $2,278       

As provided in the investment management agreement, each Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to each Fund. These amounts are included on the “Statements of operations” under “Legal fees.” For the six months ended Sept. 30, 2015, each Fund was charged for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees as follows:

 

    Colorado    Minnesota    National
    Municipal    Municipal    Municipal
            Fund                  Fund II          Fund
      $8,549               $19,669               $7,695       

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

3. Investments

For the six months ended Sept. 30, 2015, each Fund made purchases and sales of investment securities other than short-term investments as follows:

 

     Colorado    Minnesota    National
     Municipal    Municipal    Municipal
             Fund                  Fund II          Fund

Purchases

   $4,341,445      $12,739,195      $5,378,543

Sales

   6,451,463    11,530,310      5,851,006

At Sept. 30, 2015, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At Sept. 30, 2015, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:

 

     Colorado   Minnesota   National
     Municipal   Municipal   Municipal
             Fund                 Fund II         Fund

Cost of investments

     $ 92,754,759       $ 230,126,603       $ 87,610,610  
    

 

 

     

 

 

     

 

 

 

Aggregate unrealized appreciation of investments

     $ 7,346,437       $ 13,144,088       $ 7,067,723  

Aggregate unrealized depreciation of investments

       (33,995 )       (314,293 )       (67,675 )
    

 

 

     

 

 

     

 

 

 

Net unrealized appreciation of investments

     $ 7,312,442       $ 12,829,795       $ 7,000,048  
    

 

 

     

 

 

     

 

 

 

 

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For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at March 31, 2015, if not utilized in future years, will expire as follows:

 

     Colorado    Minnesota    National  
     Municipal    Municipal    Municipal  

Year of Expiration

   Fund    Fund II    Fund  

2018

   $—    $—      $407,888   

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

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

 

     Loss carryforward character  
     Short-term    

Long-term

 

Colorado Municipal Fund

   $ (163,249   $ (1,342,525

Minnesota Municipal Fund II

     (798,305     (1,003,143

National Municipal Fund

   $ (1,262,745   $ (115,436

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

 

Level 1

 

  Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts)

Level 2

 

  Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities)

Level 3

 

  Significant unobservable inputs, including each Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities)

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

 

   (continues)    31


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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

 

3. Investments (continued)

The following tables summarize the valuation of each Fund’s investments by fair value hierarchy levels as of Sept. 30, 2015:

 

    

Colorado Municipal Fund

Securities

  

Level 2

Municipal Bonds

     $ 100,067,201  
    

 

 

 
     Minnesota
    

Municipal Fund II

Securities

  

Level 2

Municipal Bonds

     $ 242,956,398  
    

 

 

 
    

National Municipal Fund

Securities

  

Level 2

Municipal Bonds

     $ 93,910,658  

Short-Term Investments

       700,000  
    

 

 

 

Total Value of Securities

     $ 94,610,658  
    

 

 

 

During the six months ended Sept. 30, 2015, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a material impact to the Funds. The Funds’ policy is to recognize transfers between levels at the beginning of the reporting period.

4. Capital Stock

Pursuant to their articles of incorporation, Colorado Municipal Fund and Minnesota Municipal Fund II each have 200 million shares of $0.01 par value common shares authorized. National Municipal Fund has been authorized to issue an unlimited amount of $0.01 par value common shares. The Funds did not repurchase any shares under the Share Repurchase Program during the six months ended Sept. 30, 2015. Shares issuable under each Fund’s dividend reinvestment plan are purchased by each Fund’s transfer agent, Computershare, Inc., in the open market.

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

Colorado Municipal Fund and Minnesota Municipal Fund II are obligated to redeem their VMTP Shares on Dec. 1, 2016, unless earlier redeemed or repurchased by the Fund. National Municipal Fund is obligated to redeem its VMTP Shares on April 1, 2017, unless earlier redeemed or repurchased by the Fund. VMTP Shares are subject to optional and mandatory redemption in certain circumstances. The VMTP Shares were redeemable at the option of a Fund, subject to payment of a premium until Dec. 1, 2013 (with respect to Minnesota Municipal Fund II and Colorado Municipal Fund) and April 1, 2014 (with respect to National Municipal Fund), and at par thereafter. A Fund may be obligated to redeem certain of the VMTP Shares if the Fund fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The redemption price per share is equal to the sum of the liquidation value per share plus any accumulated but unpaid dividends. Dividends on the VMTP Shares are set weekly, subject to adjustments in certain circumstances. The weighted average dividend rates for the year ended Sept. 30, 2015 were as follows:

 

    Colorado    Minnesota    National
    Municipal    Municipal    Municipal
    Fund    Fund II    Fund
      1.3%           1.3%           1.3%   

The Funds use leverage because their managers believe that, over time, leveraging may provide opportunities for additional income and total return for common shareholders. However, the use of leverage also can expose common shareholders to additional volatility. For example, as

 

32


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the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage; accordingly, the use of structural leverage may hurt a Fund’s overall performance.

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

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

Offering costs for VMTP Shares are recorded as a deferred charge and amortized over the 5-year life of the VMTP Shares. These are presented as “Offering cost for preferred shareholders” on the “Statements of assets and liabilities” and “Offering costs” on the “Statements of operations.”

5. Geographic, Credit, and Market Risk

The Funds concentrate their investments in securities issued by municipalities. Because each of the Colorado Municipal Fund and the Minnesota Municipal Fund II invest substantially all of its net assets in municipal obligations of its respective state at the time of investment, events in that state may have a significant impact on the performance and investments of the Colorado Municipal Fund and the Minnesota Municipal Fund II. These events may include economic or political policy changes, tax base erosion, state constitutional limits on tax increases, budget deficits and other financial difficulties, changes in the credit ratings assigned to the state’s municipal issuers, the effects of natural or human-made disasters, or other economic, legislative, or political or social issues. Any downgrade to the credit rating of the securities issued by the U.S. government may result in a downgrade of securities issued by the states or U.S. territories. The National Municipal Fund will be subject to these risks as well but to a lesser extent because it invests at least 80% of its net assets in securities, the income from which is exempt from federal income tax and is not limited to investing substantially all of its assets in municipal obligations of a single state. From time to time and consistent with its investment policies, the National Municipal Fund may invest a considerable portion of its assets in certain municipalities. As of Sept. 30, 2015, the National Municipal Fund has invested 16.73%, 17.73%, 15.46%, 11.78%, and 11.01% (each as a percentage of net assets) in securities issued by the State of California, the State of New York, the Commonwealth of Pennsylvania, the State of Arizona, and the State of Texas, respectively. These investments could make the National Municipal Fund more sensitive to economic conditions in those states than other more geographically diversified national municipal income funds.

Each Fund may invest a percentage of assets in obligations of governments of U.S. territories, commonwealths, and possessions such as Puerto Rico, the U.S. Virgin Islands, or Guam. To the extent a Fund invests in such obligations, that Fund may be adversely affected by local political and economic conditions and developments within these U.S. territories, commonwealths, and possessions.

Many municipalities insure repayment for their obligations. Although bond insurance may reduce the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons, and there is no assurance that the insurance company will meet its obligations. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in each Fund. At Sept. 30, 2015, the percentages of each Fund’s net assets insured by insurers are listed below and these securities have been identified on the “Schedules of investments.”

 

    Colorado    Minnesota    National
    Municipal    Municipal    Municipal
    Fund    Fund II    Fund
      21.59%           3.17%           2.47%   

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

The Funds may invest in advanced refunded bonds, escrow secured bonds, or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the

 

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Notes to financial statements

Delaware Investments® Closed-End Municipal Bond Funds

5. Geographic, Credit, and Market Risk (continued)

 

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 are substituted with an alternative source of revenues (the escrow securities) sufficient to meet payments of principal and interest to maturity or to the first call dates. Escrowed secured bonds will often receive a rating of AAA from Moody’s, S&P, and/or Fitch Ratings due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement.

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

Each Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Boards have delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to each Fund’s 15% limit on investments in illiquid securities. As of Sept. 30, 2015, no securities have been determined to be illiquid under the Funds’ Liquidity Procedures. Rule 144A securities held by each Fund have been identified on the “Schedules of investments.”

6. Contractual Obligations

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

7. Recent Accounting Pronouncements

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share.” The amendments in this update are effective for the Funds for fiscal years beginning after Dec. 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (NAV) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. At this time, management is evaluating the implications of ASU No. 2015-07 and its impact on the financial statement disclosures has not yet been determined.

8. Subsequent Events

Management has determined that no material events or transactions occurred subsequent to Sept. 30, 2015 that would require recognition or disclosure in the Funds’ financial statements.

 

34


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Other Fund information

(Unaudited)

Delaware Investments® Closed-End Municipal Bond Funds

Proxy Results

At the annual meeting on Aug. 19, 2015, the Funds’ shareholders elected eight directors/trustees. The results of the voting at the meeting were as follows:

Delaware Investments Colorado Municipal Income Fund, Inc.

 

     Common shareholders    Preferred shareholders
          Shares voted         Shares voted
     Shares    withheld    Shares    withheld
    

voted for

  

authority

  

voted for

  

authority

Thomas L. Bennett

       4,272,769          89,787          300          0  

Ann D. Borowiec

       4,248,617          113,939          300          0  

Joseph W. Chow

       4,270,912          91,644          300          0  

John A. Fry

       4,253,353          109,203          300          0  

Lucinda S. Landreth

                 300          0  

Frances Sevilla-Sacasa

       4,246,140          116,416          300          0  

Thomas K. Whitford

       4,273,689          88,867          300          0  

Janet L. Yeomans

                 300          0  

Delaware Investments Minnesota Municipal Income Fund II, Inc.

 

  

     Common shareholders    Preferred shareholders
          Shares voted         Shares voted
     Shares    withheld    Shares    withheld
    

voted for

  

authority

  

voted for

  

authority

Thomas L. Bennett

       9,217,173          173,087          750          0  

Ann D. Borowiec

       9,234,252          156,007          750          0  

Joseph W. Chow

       9,219,270          170,990          750          0  

John A. Fry

       9,219,893          170,366          750          0  

Lucinda S. Landreth

                 750          0  

Frances A. Sevilla-Sacasa

       9,219,893          170,366          750          0  

Thomas K. Whitford

       9,219,893          170,366          750          0  

Janet L. Yeomans

                 750          0  

Delaware Investments National Municipal Income Fund

 

  

     Common shareholders    Preferred shareholders
    

Shares

  

Shares voted

withheld

  

Shares

  

Shares voted

withheld

    

voted for

  

authority

  

voted for

  

authority

Thomas L. Bennett

       3,660,959          192,667          300          0  

Ann D. Borowiec

       3,661,338          192,288          300          0  

Joseph W. Chow

       3,661,338          192,288          300          0  

John A. Fry

       3,653,393          200,233          300          0  

Lucinda S. Landreth

                 300          0  

Frances A. Sevilla-Sacasa

       3,659,063          194,563          300          0  

Thomas K. Whitford

       3,661,338          192,288          300          0  

Janet L. Yeomans

                 300          0  

 

   (continues)    35


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Other Fund information

(Unaudited)

Delaware Investments® Closed-End Municipal Bond Funds

 

Fund management

Joseph R. Baxter

Senior Vice President, Head of Municipal Bond Department, Senior Portfolio Manager

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

Stephen J. Czepiel

Senior Vice President, Senior Portfolio Manager

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

Denise A. Franchetti, CFA

Vice President, Portfolio Manager, Senior Research Analyst

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

Gregory A. Gizzi

Senior Vice President, Senior Portfolio Manager

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

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

At a meeting held on Aug. 18-20, 2015 (the “Annual Meeting”), the Board of Directors (collectively referred to here as the “Board”), including a majority of disinterested or independent Directors, approved the renewal of the Investment Advisory Agreements for Delaware Investments Colorado Municipal Income Fund, Inc.; Delaware Investments Minnesota Municipal Income Fund II, Inc.; and Delaware Investments National Municipal Income Fund (each, a “Fund” and together, the “Funds”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreements with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Funds; the costs of such services to the Funds; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Directors in May 2015 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). The Lipper reports compared each Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Directors reviewed and discussed the Lipper reports

 

36


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with independent legal counsel to the Independent Directors. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.

In considering information relating to the approval of the Funds’ advisory agreements, the Independent Directors received assistance and advice from and met separately with independent legal counsel to the Independent Directors. They also engaged a consultant to assist them in analyzing portions of the data received. The Independent Directors reviewed and discussed with such consultant two reports prepared by the consultant with respect to such data. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.

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

Investment performance. The Board placed significant emphasis on the investment performance of each Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for each Fund showed the investment performance of its shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the highest performance ranked first, and a fund with the lowest ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the lowest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for each Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended March 31, 2015. The Board’s objective is that each Fund’s performance for the periods considered be at or above the median of its Performance Universe.

The following paragraphs summarize the performance results for the Funds and the Board’s view of such performance.

Delaware Investments Colorado Municipal Income Fund, Inc. — The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end “other states” municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the 1- and 3-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the 5-year period was in the third quartile of its Performance Universe and the Fund’s total return for the 10-year period was in the fourth quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the improved 1- and 3-year performance results. They also considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

Delaware Investments Minnesota Municipal Income Fund II, Inc. — The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end “other states” municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the 1-, 5-, and 10-year periods was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the 3-year period was in the third quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

Delaware Investments® National Municipal Income Fund — The Performance Universe for the Fund consisted of the Fund and all leveraged closed-end general and insured municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the 1-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the

 

   (continues)    37


Table of Contents

Other Fund information

(Unaudited)

Delaware Investments® Closed-End Municipal Bond Funds

 

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

3-year period was in third quartile of its Performance Universe and the Fund’s total return for the 5- and 10-year periods was in the fourth quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the re-leveraging of the Fund in 2012 and the subsequent improved performance. The Board also considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.

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

The following paragraphs summarize the expense results for the Funds and the Board’s view of such expenses.

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

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

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

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

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

 

38


Table of Contents

About the organization

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

 

Board of directors/trustees

Shawn K. Lytle

President and

Chief Executive Officer

Delaware Investments Family of Funds

Philadelphia, PA

Thomas L. Bennett

Chairman of the Board

Delaware Investments Family of Funds

Private Investor

Rosemont, PA

Ann D. Borowiec

Former Chief Executive Officer

Private Wealth Management

J.P. Morgan Chase & Co.

New York, NY

Joseph W. Chow

Former Executive Vice President

State Street Corporation

Brookline, MA

John A. Fry

President

Drexel University

Philadelphia, PA

Lucinda S. Landreth

Former Chief Investment Officer Assurant, Inc.

New York, NY

Frances A. Sevilla-Sacasa

Chief Executive Officer

Banco Itaú International

Miami, FL

Thomas K. Whitford

Former Vice Chairman

PNC Financial Services Group

Pittsburgh, PA

Janet L. Yeomans

Former Vice President and Treasurer

3M Corporation

St. Paul, MN

Affiliated officers

David F. Connor

Senior Vice President, General Counsel, and Secretary

Delaware Investments Family of

Funds

Philadelphia, PA

Daniel V. Geatens

Vice President and Treasurer

Delaware Investments Family of

Funds

Philadelphia, PA

Richard Salus

Senior Vice President and

Chief Financial Officer

Delaware Investments Family of

Funds

Philadelphia, PA

Investment manager

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

Principal office of the Funds

2005 Market Street

Philadelphia, PA 19103-7057

Independent registered public accounting firm

PricewaterhouseCoopers LLP

2001 Market Street

Philadelphia, PA 19103

Registrar and stock transfer agent

Computershare, Inc.

480 Washington Blvd.

Jersey City, NJ 07310

866 437-0252

For securities dealers and financial institutions representatives

800 362-7500

Website

delawareinvestments.com

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

Number of recordholders as of

Sept. 30, 2015

 

Colorado Municipal Income Fund

     71   

Minnesota Municipal Income Fund II

     367   

National Municipal Income Fund

     84   

Your reinvestment options

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

Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 866 437-0252; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Funds use to determine how to vote proxies (if any) relating to portfolio securities and the Schedules of Investments included in the Funds’ most recent Forms N-Q are available without charge on the Funds’ website at delawareinvestments.com. Each Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Funds’ website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov.

 

 

39




Item 2. Code of Ethics

Not applicable.

Item 3. Audit Committee Financial Expert

Not applicable.

Item 4. Principal Accountant Fees and Services

Not applicable.

Item 5. Audit Committee of Listed Registrants

Not applicable.

Item 6. Investments

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

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

Not applicable.

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

Not applicable.

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

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.



There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits

(a) (1) Code of Ethics

Not applicable.

(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.

(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.

Not applicable.

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.

DELAWARE INVESTMENTS® MINNESOTA MUNICIPAL INCOME FUND II, INC.

/s/ SHAWN LYTLE
By: Shawn Lytle
Title:     Chief Executive Officer
Date: December 2, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ SHAWN LYTLE
By: Shawn Lytle
Title:     Chief Executive Officer
Date: December 2, 2015
 
 
/s/ RICHARD SALUS
By: Richard Salus
Title: Chief Financial Officer
Date: December 2, 2015