Statements of assets and
liabilities
Delaware Investments
®
Closed-End
Municipal Bond Funds
September 30, 2012
(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 value
|
|
$
|
104,512,878
|
|
$
|
255,081,927
|
|
$
|
96,658,357
|
Short-term investments,
at value
|
|
|
|
|
|
|
|
|
750,000
|
Cash
|
|
|
206,904
|
|
|
1,342,667
|
|
|
165,765
|
Receivable for
securities sold
|
|
|
|
|
|
2,447,240
|
|
|
15,221
|
Interest income receivable
|
|
|
1,370,568
|
|
|
3,518,020
|
|
|
1,291,741
|
Organization expense for
preferred shareholders
|
|
|
211,242
|
|
|
362,284
|
|
|
60,212
|
Other assets
|
|
|
|
|
|
|
|
|
218,403
|
Total assets
|
|
|
106,301,592
|
|
|
262,752,138
|
|
|
99,159,699
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Liquidation value of preferred stock
|
|
|
30,000,000
|
|
|
75,000,000
|
|
|
30,000,000
|
Payable for securities
purchased
|
|
|
|
|
|
8,367,462
|
|
|
893,558
|
Due to manager and affiliates
|
|
|
36,099
|
|
|
86,615
|
|
|
33,412
|
Other accrued
expenses
|
|
|
19,613
|
|
|
19,938
|
|
|
|
Distributions payable
|
|
|
756,783
|
|
|
745,627
|
|
|
282,701
|
Total
liabilities
|
|
|
30,812,495
|
|
|
84,219,642
|
|
|
31,209,671
|
|
Total net assets
|
|
$
|
75,489,097
|
|
$
|
178,532,496
|
|
$
|
67,950,028
|
|
Investments, at
cost
|
|
$
|
96,709,911
|
|
$
|
236,711,360
|
|
$
|
88,585,350
|
Short-term investments, at cost
|
|
|
|
|
|
|
|
|
750,000
|
See accompanying notes, which are an
integral part of the financial statements.
17
Statements of operations
Delaware Investments
®
Closed-End
Municipal Bond Funds
Six Months Ended
September 30, 2012 (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
|
|
$
|
2,319,932
|
|
|
$
|
5,444,837
|
|
|
$
|
2,122,895
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
|
209,552
|
|
|
|
502,631
|
|
|
|
192,547
|
|
Legal fees
|
|
|
31,205
|
|
|
|
69,796
|
|
|
|
60,517
|
|
Accounting and
administration expenses
|
|
|
20,392
|
|
|
|
48,912
|
|
|
|
18,737
|
|
Dividend disbursing and transfer agent fees and expenses
|
|
|
18,065
|
|
|
|
36,428
|
|
|
|
21,649
|
|
Rating agency
fees
|
|
|
15,848
|
|
|
|
15,631
|
|
|
|
15,835
|
|
Audit and tax
|
|
|
8,762
|
|
|
|
10,539
|
|
|
|
8,813
|
|
Reports and
statements to shareholders
|
|
|
7,456
|
|
|
|
12,644
|
|
|
|
8,518
|
|
Pricing fees
|
|
|
3,508
|
|
|
|
5,648
|
|
|
|
6,936
|
|
Taxes (Pennsylvania franchise tax)
|
|
|
2,500
|
|
|
|
6,000
|
|
|
|
|
|
Stock exchange fees
|
|
|
2,339
|
|
|
|
5,616
|
|
|
|
2,045
|
|
Directors/Trustees fees
|
|
|
1,624
|
|
|
|
3,828
|
|
|
|
1,435
|
|
Dues and services
|
|
|
702
|
|
|
|
1,954
|
|
|
|
1,006
|
|
Custodian
fees
|
|
|
653
|
|
|
|
1,602
|
|
|
|
739
|
|
Insurance fees
|
|
|
511
|
|
|
|
1,883
|
|
|
|
607
|
|
Consulting
fees
|
|
|
390
|
|
|
|
906
|
|
|
|
311
|
|
Registration fees
|
|
|
308
|
|
|
|
308
|
|
|
|
308
|
|
Directors/Trustees expenses
|
|
|
57
|
|
|
|
143
|
|
|
|
48
|
|
Total operating expenses
|
|
|
323,872
|
|
|
|
724,469
|
|
|
|
340,051
|
|
Net Investment Income
|
|
|
1,996,060
|
|
|
|
4,720,368
|
|
|
|
1,782,844
|
|
|
Net Realized and
Unrealized Gain:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized
gain on investments
|
|
|
20,905
|
|
|
|
642,526
|
|
|
|
333,320
|
|
Net change in unrealized appreciation (depreciation) of
investments
|
|
|
3,183,782
|
|
|
|
5,823,264
|
|
|
|
3,821,951
|
|
Net Realized and Unrealized
Gain
|
|
|
3,204,687
|
|
|
|
6,465,790
|
|
|
|
4,155,271
|
|
|
Dividends and
Distributions to Preferred Shareholders
|
|
|
(211,226
|
)
|
|
|
(519,009
|
)
|
|
|
(207,603
|
)
|
Net Increase in Net Assets Resulting
from Operations
|
|
$
|
4,989,521
|
|
|
$
|
10,667,149
|
|
|
$
|
5,730,512
|
|
See accompanying notes, which are an
integral part of the financial statements.
18
Statements of changes in net
assets
Delaware Investments
®
Closed-End
Municipal Bond Funds
|
|
Delaware
Investments
|
|
Delaware
Investments
|
|
|
Colorado
Municipal
|
|
Minnesota
Municipal
|
|
|
Income Fund,
Inc.
|
|
Income Fund II,
Inc.
|
|
|
Six Months
|
|
Year
|
|
Six Months
|
|
Year
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
9/30/12
|
|
3/31/12
|
|
9/30/12
|
|
3/31/12
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
Increase (Decrease) in Net Assets from
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
1,996,060
|
|
|
$
|
3,233,923
|
|
|
$
|
4,720,368
|
|
|
$
|
7,747,076
|
|
Net realized
gain
|
|
|
20,905
|
|
|
|
976,769
|
|
|
|
642,526
|
|
|
|
1,701,330
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
3,183,782
|
|
|
|
6,668,604
|
|
|
|
5,823,264
|
|
|
|
11,778,378
|
|
Dividends and
distributions to preferred shareholders
|
|
|
(211,226
|
)
|
|
|
(149,762
|
)
|
|
|
(519,009
|
)
|
|
|
(374,404
|
)
|
Net increase in net assets resulting from operations
|
|
|
4,989,521
|
|
|
|
10,729,534
|
|
|
|
10,667,149
|
|
|
|
20,852,380
|
|
|
Dividends and Distributions to Common
Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(1,668,800
|
)
|
|
|
(2,805,518
|
)
|
|
|
(3,969,216
|
)
|
|
|
(6,672,886
|
)
|
Net realized
gain
|
|
|
(445,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,113,813
|
)
|
|
|
(2,805,518
|
)
|
|
|
(3,969,216
|
)
|
|
|
(6,672,886
|
)
|
|
Net Increase in Net Assets
|
|
|
2,875,708
|
|
|
|
7,924,016
|
|
|
|
6,697,933
|
|
|
|
14,179,494
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
72,613,389
|
|
|
|
64,689,373
|
|
|
|
171,834,563
|
|
|
|
157,655,069
|
|
End of period
|
|
$
|
75,489,097
|
|
|
$
|
72,613,389
|
|
|
$
|
178,532,496
|
|
|
$
|
171,834,563
|
|
|
Undistributed net
investment income
|
|
$
|
711,778
|
|
|
$
|
598,215
|
|
|
$
|
1,716,382
|
|
|
$
|
1,504,205
|
|
|
|
Delaware Investments
|
|
|
National Municipal
|
|
|
Income Fund
|
|
|
Six Months
|
|
Year
|
|
|
Ended
|
|
Ended
|
|
|
9/30/12
|
|
3/31/12
|
|
|
(Unaudited)
|
|
|
|
|
Increase (Decrease) in Net
Assets from Operations:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
1,782,844
|
|
|
$
|
2,343,640
|
|
Net realized gain
|
|
|
333,320
|
|
|
|
909,697
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
3,821,951
|
|
|
|
4,515,112
|
|
Dividends and distributions to preferred shareholders
|
|
|
(207,603
|
)
|
|
|
(18,904
|
)
|
Net increase in net assets resulting from operations
|
|
|
5,730,512
|
|
|
|
7,749,545
|
|
|
Dividends and
Distributions to Common Shareholders from:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(1,267,964
|
)
|
|
|
(2,295,215
|
)
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
|
(1,267,964
|
)
|
|
|
(2,295,215
|
)
|
|
Capital Share
Transactions:
|
|
|
|
|
|
|
|
|
Net assets from merger to Common Shareholders*
|
|
|
|
|
|
|
40,715,147
|
|
Tender offer**
|
|
|
|
|
|
|
(13,240,759
|
)
|
|
|
|
|
|
|
|
27,474,388
|
|
|
Net Increase in Net
Assets
|
|
|
4,462,548
|
|
|
|
32,928,718
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
63,487,480
|
|
|
|
30,558,762
|
|
End of period
|
|
$
|
67,950,028
|
|
|
$
|
63,487,480
|
|
|
Undistributed net investment
income
|
|
$
|
648,862
|
|
|
$
|
376,432
|
|
*
|
See Note 7 in Notes to
financial statements.
|
**
|
See Note 6 in Notes to
financial statements.
|
See accompanying notes, which are an
integral part of the financial statements.
19
Financial highlights
Delaware Investments
®
Colorado
Municipal Income Fund, Inc.
Selected data for each share of the Fund
outstanding throughout each period were as follows:
|
|
Six
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
Year
Ended
|
|
|
9/30/12
1
|
|
|
3/31/12
|
|
3/31/11
|
|
3/31/10
|
|
3/31/09
|
|
3/31/08
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$15.010
|
|
|
|
|
$13.370
|
|
|
$13.990
|
|
|
$13.220
|
|
|
$14.260
|
|
|
$15.100
|
|
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
0.413
|
|
|
|
|
0.669
|
|
|
0.601
|
|
|
0.607
|
|
|
0.755
|
|
|
0.937
|
|
|
Net
realized and unrealized gain (loss)
|
|
|
0.668
|
|
|
|
|
1.582
|
|
|
(0.651
|
)
|
|
0.733
|
|
|
(0.965
|
)
|
|
(0.604
|
)
|
|
Dividends and
distributions on preferred stock from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.044
|
)
|
|
|
|
(0.031
|
)
|
|
|
|
|
|
|
|
(0.173
|
)
|
|
(0.264
|
)
|
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.050
|
)
|
|
Total
dividends and distributions on preferred stock
|
|
|
(0.044
|
)
|
|
|
|
(0.031
|
)
|
|
|
|
|
|
|
|
(0.173
|
)
|
|
(0.314
|
)
|
|
Total from investment
operations
|
|
|
1.037
|
|
|
|
|
2.220
|
|
|
(0.050
|
)
|
|
1.340
|
|
|
(0.383
|
)
|
|
0.019
|
|
|
|
|
Less dividends and distributions to common shareholders
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.345
|
)
|
|
|
|
(0.580
|
)
|
|
(0.570
|
)
|
|
(0.570
|
)
|
|
(0.657
|
)
|
|
(0.720
|
)
|
|
Net
realized gain
|
|
|
(0.092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.139
|
)
|
|
Total dividends and
distributions
|
|
|
(0.437
|
)
|
|
|
|
(0.580
|
)
|
|
(0.570
|
)
|
|
(0.570
|
)
|
|
(0.657
|
)
|
|
(0.859
|
)
|
|
|
|
Net asset value, end of period
|
|
|
$15.610
|
|
|
|
|
$15.010
|
|
|
$13.370
|
|
|
$13.990
|
|
|
$13.220
|
|
|
$14.260
|
|
|
|
|
Market value, end of period
|
|
|
$15.150
|
|
|
|
|
$14.600
|
|
|
$12.450
|
|
|
$13.390
|
|
|
$11.240
|
|
|
$15.060
|
|
|
|
|
Total investment return based on:
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
value
|
|
|
6.72%
|
|
|
|
|
22.41%
|
|
|
(3.00%
|
)
|
|
24.49%
|
|
|
(21.63%
|
)
|
|
(0.14%
|
)
|
|
Net
asset value
|
|
|
6.96%
|
|
|
|
|
17.19%
|
|
|
(0.30%
|
)
|
|
10.55%
|
|
|
(2.66%
|
)
|
|
(0.19%
|
)
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable
to common shares, end of period (000 omitted)
|
|
|
$75,489
|
|
|
|
|
$72,613
|
|
|
$64,689
|
|
|
$67,651
|
|
|
$63,952
|
|
|
$68,973
|
|
|
Ratio
of expenses to average net assets applicable to common
shares
3
|
|
|
0.87%
|
|
|
|
|
0.73%
|
|
|
0.56%
|
|
|
0.56%
|
|
|
0.91%
|
|
|
1.03%
|
|
|
Ratio of net
investment income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common
shares
3
|
|
|
5.34%
|
|
|
|
|
4.68%
|
|
|
4.31%
|
|
|
4.41%
|
|
|
5.55%
|
|
|
6.37%
|
|
|
Ratio
of net investment income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common shares
net of dividends to preferred shares
4
|
|
|
4.78%
|
|
|
|
|
4.46%
|
|
|
4.31%
|
|
|
4.41%
|
|
|
4.28%
|
|
|
4.23%
|
|
|
Portfolio
turnover
|
|
|
2%
|
|
|
|
|
64%
|
|
|
10%
|
|
|
20%
|
|
|
16%
|
|
|
16%
|
|
|
|
|
Leverage analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of preferred
shares outstanding (000 omitted)
5
|
|
|
$30,000
|
|
|
|
|
$30,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$40,000
|
|
|
Net
asset coverage per share of preferred shares, end of
period
5
|
|
|
$351,630
|
|
|
|
|
$342,045
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$136,216
|
|
|
Liquidation value per share of preferred
shares
5,6
|
|
|
$100,000
|
|
|
|
|
$100,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$50,000
|
|
|
1
Ratios have been
annualized and total return and portfolio turnover have not been
annualized.
2
Total investment
return is calculated assuming a purchase of common stock on the opening of the
first day and a sale on the closing of the last day of each period reported.
Dividends and distributions, if any, are assumed for the purposes of this
calculation to be reinvested at prices obtained under the Funds dividend
reinvestment plan. Generally, total investment return based on net asset value
will be higher than total investment return based on market value in periods
where there is an increase in the discount or a decrease in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value will be
lower than total investment return based on market value in periods where there
is a decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such
periods.
3
Ratios do not reflect
the effect of dividend payments to preferred shareholders, if
applicable.
4
Ratio reflects
total net investment income less dividends paid to preferred shareholders, if
applicable, divided by average net assets applicable to common
shareholders.
5
In 2008, the
Fund redeemed all of its preferred shares at par plus accumulated dividends
amounting to $40,042,778. In November 2011, the Fund issued a new series of 300
variable rate preferred shares, with a liquidation preference of $100,000 per
share.
6
Excluding any
accumulated but unpaid dividends.
See accompanying notes, which are an
integral part of the financial statements.
20
Delaware Investments
®
Minnesota
Municipal Income Fund II, Inc.
Selected data for each share of the Fund
outstanding throughout each period were as follows:
|
|
Six
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
Year Ended
|
|
|
9/30/12
1
|
|
|
3/31/12
|
|
3/31/11
|
|
3/31/10
|
|
3/31/09
|
|
3/31/08
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
|
|
$14.940
|
|
|
|
|
$13.700
|
|
|
$14.060
|
|
|
$13.140
|
|
|
$14.190
|
|
|
$14.880
|
|
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
0.410
|
|
|
|
|
0.673
|
|
|
0.612
|
|
|
0.602
|
|
|
0.776
|
|
|
0.962
|
|
|
Net
realized and unrealized gain (loss)
|
|
|
0.560
|
|
|
|
|
1.180
|
|
|
(0.402
|
)
|
|
0.888
|
|
|
(1.013
|
)
|
|
(0.674
|
)
|
|
Dividends and
distributions on preferred stock from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.045
|
)
|
|
|
|
(0.033
|
)
|
|
|
|
|
|
|
|
(0.175
|
)
|
|
(0.318
|
)
|
|
Total dividends and
distributions on preferred stock
|
|
|
(0.045
|
)
|
|
|
|
(0.033
|
)
|
|
|
|
|
|
|
|
(0.175
|
)
|
|
(0.318
|
)
|
|
Total
from investment operations
|
|
|
0.925
|
|
|
|
|
1.820
|
|
|
0.210
|
|
|
1.490
|
|
|
(0.412
|
)
|
|
(0.030
|
)
|
|
|
|
Less
dividends to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.345
|
)
|
|
|
|
(0.580
|
)
|
|
(0.570
|
)
|
|
(0.570
|
)
|
|
(0.638
|
)
|
|
(0.660
|
)
|
|
Total
dividends
|
|
|
(0.345
|
)
|
|
|
|
(0.580
|
)
|
|
(0.570
|
)
|
|
(0.570
|
)
|
|
(0.638
|
)
|
|
(0.660
|
)
|
|
|
|
Net
asset value, end of period
|
|
|
$15.520
|
|
|
|
|
$14.940
|
|
|
$13.700
|
|
|
$14.060
|
|
|
$13.140
|
|
|
$14.190
|
|
|
|
|
Market value, end of period
|
|
|
$15.420
|
|
|
|
|
$14.230
|
|
|
$12.600
|
|
|
$12.740
|
|
|
$11.250
|
|
|
$13.450
|
|
|
|
|
Total
investment return based on:
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value
|
|
|
10.87%
|
|
|
|
|
17.95%
|
|
|
3.32%
|
|
|
18.58%
|
|
|
(11.91%
|
)
|
|
(3.58%
|
)
|
|
Net
asset value
|
|
|
6.29%
|
|
|
|
|
13.90%
|
|
|
1.80%
|
|
|
12.04%
|
|
|
(2.48%
|
)
|
|
0.08%
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to
common shares, end of period (000 omitted)
|
|
|
$178,532
|
|
|
|
|
$171,835
|
|
|
$157,655
|
|
|
$161,723
|
|
|
$151,184
|
|
|
$163,305
|
|
|
Ratio of
expenses to average net assets applicable to common
shares
3,5
|
|
|
0.82%
|
|
|
|
|
0.70%
|
|
|
0.56%
|
|
|
0.56%
|
|
|
0.98%
|
|
|
1.18%
|
|
|
Ratio of net investment
income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common
shares
3
|
|
|
5.36%
|
|
|
|
|
4.67%
|
|
|
4.35%
|
|
|
4.36%
|
|
|
5.74%
|
|
|
6.61%
|
|
|
Ratio of
net investment income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common shares
net of dividends to preferred shares
4
|
|
|
4.77%
|
|
|
|
|
4.44%
|
|
|
4.35%
|
|
|
4.36%
|
|
|
4.45%
|
|
|
4.43%
|
|
|
Portfolio
turnover
|
|
|
11%
|
|
|
|
|
44%
|
|
|
9%
|
|
|
19%
|
|
|
15%
|
|
|
6%
|
|
|
|
|
Leverage analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of preferred
shares outstanding (000 omitted)
6
|
|
|
$75,000
|
|
|
|
|
$75,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$95,000
|
|
|
Net
asset coverage per share of preferred shares, end of
period
6
|
|
|
$338,043
|
|
|
|
|
$329,113
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$135,950
|
|
|
Liquidation value per share of preferred
shares
6,7
|
|
|
$100,000
|
|
|
|
|
$100,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$50,000
|
|
|
1
Ratios have been
annualized and total return and portfolio turnover have not been
annualized.
2
Total investment
return is calculated assuming a purchase of common stock on the opening of the
first day and a sale on the closing of the last day of each period reported.
Dividends and distributions, if any, are assumed for the purposes of this
calculation to be reinvested at prices obtained under the Funds dividend
reinvestment plan. Generally, total investment return based on net asset value
will be higher than total investment return based on market value in periods
where there is an increase in the discount or a decrease in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value will be
lower than total investment return based on market value in periods where there
is a decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such
periods.
3
Ratios do not reflect
the effect of dividend payments to preferred shareholders, if
applicable.
4
Ratio reflects
total net investment income less dividends paid to preferred shareholders, if
applicable, divided by average net assets applicable to common
shareholders.
5
The ratio of
expenses to average net assets applicable to common shares includes interest and
related expenses which include, but are not limited to, interest expense,
remarketing fees, liquidity fees, and trustees fees in connection with the
Funds participation in inverse floater programs for the years ended March 31,
2009 and 2008. See Notes 1 and 8 in Notes to financial
statements.
6
In 2008, the Fund
redeemed all of its preferred shares at par plus accumulated dividends amounting
to $95,083,577. 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)
21
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
|
|
Year
Ended
|
|
|
9/30/12
1
|
|
|
3/31/12
|
|
3/31/11
|
|
3/31/10
|
|
3/31/09
|
|
3/31/08
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$14.020
|
|
|
|
|
$12.620
|
|
|
$13.070
|
|
|
$11.960
|
|
|
$13.360
|
|
|
$14.560
|
|
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
0.394
|
|
|
|
|
0.535
|
|
|
0.610
|
|
|
0.571
|
|
|
0.704
|
|
|
0.919
|
|
|
Net
realized and unrealized gain (loss)
|
|
|
0.922
|
|
|
|
|
1.409
|
|
|
(0.532
|
)
|
|
1.049
|
|
|
(1.367
|
)
|
|
(1.081
|
)
|
|
Dividends and
distributions on preferred stock from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.046
|
)
|
|
|
|
(0.004
|
)
|
|
|
|
|
|
|
|
(0.172
|
)
|
|
(0.311
|
)
|
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.015
|
)
|
|
Total
dividends and distributions on preferred stock
|
|
|
(0.046
|
)
|
|
|
|
(0.004
|
)
|
|
|
|
|
|
|
|
(0.172
|
)
|
|
(0.326
|
)
|
|
Total from investment
operations
|
|
|
1.270
|
|
|
|
|
1.940
|
|
|
0.078
|
|
|
1.620
|
|
|
(0.835
|
)
|
|
(0.488
|
)
|
|
|
|
Less dividends and distributions to common shareholders
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
(0.280
|
)
|
|
|
|
(0.540
|
)
|
|
(0.528
|
)
|
|
(0.510
|
)
|
|
(0.565
|
)
|
|
(0.668
|
)
|
|
Net
realized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.044
|
)
|
|
Total dividends and
distributions
|
|
|
(0.280
|
)
|
|
|
|
(0.540
|
)
|
|
(0.528
|
)
|
|
(0.510
|
)
|
|
(0.565
|
)
|
|
(0.712
|
)
|
|
|
|
Net asset value, end of period
|
|
|
$15.010
|
|
|
|
|
$14.020
|
|
|
$12.620
|
|
|
$13.070
|
|
|
$11.960
|
|
|
$13.360
|
|
|
|
|
Market value, end of period
|
|
|
$14.180
|
|
|
|
|
$13.240
|
|
|
$12.200
|
|
|
$12.140
|
|
|
$10.850
|
|
|
$11.950
|
|
|
|
|
Total investment return based on:
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
value
|
|
|
9.28%
|
|
|
|
|
13.19%
|
|
|
4.78%
|
|
|
16.69%
|
|
|
(4.31%
|
)
|
|
(13.11%
|
)
|
|
Net
asset value
|
|
|
9.24%
|
|
|
|
|
15.87%
|
|
|
0.67%
|
|
|
13.97%
|
|
|
(5.65%
|
)
|
|
(3.05%
|
)
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable
to common shares, end of period (000 omitted)
|
|
|
$67,950
|
|
|
|
|
$63,487
|
|
|
$30,559
|
|
|
$31,650
|
|
|
$28,967
|
|
|
$32,365
|
|
|
Ratio
of expenses to average net assets applicable to common
shares
3
|
|
|
1.03%
|
|
|
|
|
0.99%
|
|
|
0.65%
|
|
|
0.63%
|
|
|
1.06%
|
|
|
1.16%
|
|
|
Ratio of net
investment income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common
shares
3
|
|
|
5.39%
|
|
|
|
|
3.99%
|
|
|
4.64%
|
|
|
4.48%
|
|
|
5.63%
|
|
|
6.54%
|
|
|
Ratio
of net investment income to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable to common shares
net of dividends to preferred shares
4
|
|
|
4.76%
|
|
|
|
|
3.96%
|
|
|
4.64%
|
|
|
4.48%
|
|
|
4.25%
|
|
|
4.22%
|
|
|
Portfolio
turnover
|
|
|
19%
|
|
|
|
|
101%
|
|
|
50%
|
|
|
69%
|
|
|
36%
|
|
|
17%
|
|
|
|
|
Leverage analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of preferred
shares outstanding (000 omitted)
5
|
|
|
$30,000
|
|
|
|
|
$30,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$20,000
|
|
|
Net
asset coverage per share of preferred shares, end of
period
5
|
|
|
$326,500
|
|
|
|
|
$311,625
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$130,914
|
|
|
Liquidation value per share of preferred
shares
5,6
|
|
|
$100,000
|
|
|
|
|
$100,000
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$50,000
|
|
|
1
Ratios have been
annualized and total return and portfolio turnover have not been
annualized.
2
Total investment
return is calculated assuming a purchase of common stock on the opening of the
first day and a sale on the closing of the last day of each period reported.
Dividends and distributions, if any, are assumed for the purposes of this
calculation to be reinvested at prices obtained under the Funds dividend
reinvestment plan. Generally, total investment return based on net asset value
will be higher than total investment return based on market value in periods
where there is an increase in the discount or a decrease in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value will be
lower than total investment return based on market value in periods where there
is a decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such
periods.
3
Ratios do not reflect
the effect of dividend payments to preferred shareholders, if
applicable.
4
Ratio reflects
total net investment income less dividends paid to preferred shareholders, if
applicable, divided by average net assets applicable to common
shareholders.
5
In 2008, the
Fund redeemed all of its preferred shares at par plus accumulated dividends
amounting to $20,019,516. In March 2012, the Fund issued a new series of 300
variable rate preferred shares, with a liquidation preference of $100,000 per
share.
6
Excluding any
accumulated but unpaid dividends.
See accompanying notes, which are an
integral part of the financial statements.
22
Notes to financial statements
Delaware Investments
®
Closed-End
Municipal Bond Funds
September 30, 2012
(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 NYSE MKT, the
successor to the American Stock Exchange.
The investment objective of each Fund is
to provide current income exempt from federal income tax and from state personal
income tax, if any, consistent with the preservation of capital. Each of
Colorado Municipal Fund and Minnesota Municipal Fund II seek to achieve its
investment objective by investing substantially all of its net assets in
investment grade, tax-exempt municipal obligations of its respective state at
the time of investment. The National Municipal Fund seeks to achieve its
investment objective by investing at least 80% of its net assets in securities
the income from which is exempt from federal income tax.
1. Significant Accounting
Policies
The following accounting policies are in
accordance with U.S. generally accepted accounting principles (U.S. GAAP) and
are consistently followed by the Funds.
Security Valuation
Debt securities are valued based upon valuations provided by
an independent pricing service or broker and reviewed by management. To the
extent current market prices are not available, the pricing service may take
into account developments related to the specific security, as well as
transactions in comparable securities. Valuations for fixed income securities
utilize matrix systems, which reflect such factors as security prices, yields,
maturities, and ratings, and are supplemented by dealer and exchange quotations.
Generally, other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith under the
direction of each Funds Board of Directors/Trustees (each a Board, and
collectively, the Boards). In determining whether market quotations are readily
available or fair valuation will be used, various factors will be taken into
consideration, such as market closures or suspension of trading in a
security.
Federal Income Taxes
No provision for federal income taxes has been made as each
Fund intends to continue to qualify for federal income tax purposes as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended, and make the requisite distributions to shareholders. The
Funds evaluate tax positions taken or expected to be taken in the course of
preparing the Funds tax returns to determine whether the tax positions are
more-likely-than-not of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold are recorded as
a tax benefit or expense in the current year. Management has analyzed the Funds
tax positions taken for all open federal income tax years and has concluded that
no provision for federal income tax is required in the Funds financial
statements.
Interest and Related Expenses
Interest and related expenses include, but
are not limited to, interest expense, remarketing fees, liquidity fees, and
trustees fees from the Funds participation in inverse floater programs where a
Fund has transferred its own bonds to a trust that issues floating rate
securities with an aggregate principal amount equal to the principal of the
transferred bonds. In conveyance of the bond, the Funds receive the inverse
floating rate securities and cash from the trust. As a result of certain rights
retained by the Funds, the transfer of the bond is not considered a sale, but
rather a form of financing for accounting purposes whereby the cash received is
recorded as a liability and interest expense is recorded based on the interest
rate of the floating rate securities. Remarketing fees, liquidity fees, and
trustees expenses are recorded on the accrual basis. There were no interest and
related expenses for the six months ended September 30, 2012.
Use of Estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the
fair value of investments, the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and the
differences could be material.
Other
Expenses directly attributable to a Fund are charged directly to that
Fund. Other expenses common to various funds within the Delaware
Investments
®
Family of Funds are generally allocated amongst such
funds on the basis of average net assets. Management fees and some other
expenses are paid monthly. Security transactions are recorded on the date the
securities are purchased or sold (trade date) for financial reporting purposes.
Costs used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recorded on the accrual basis. Discounts and premiums on debt securities are
amortized to interest income over the lives of the respective securities using
the effective interest method. Each Fund declares and pays dividends from net
investment income monthly and distributions from net realized gain on
investments, if any, annually. Each Fund may distribute income dividends and
capital gains more frequently, if necessary for tax purposes. Dividends and
distributions, if any, are recorded on the ex-dividend date.
The Funds may receive earnings credits
from their custodian when positive cash balances are maintained, which are used
to offset custody fees. There were no earnings credits for the six months ended
September 30, 2012.
The Funds may receive earnings credits
from their transfer agent when positive cash balances are maintained, which are
used to offset transfer agent fees. There were no earnings credits for the six
months ended September 30, 2012.
(continues)
23
Notes to financial
statements
Delaware
Investments
®
Closed-End Municipal Bond Funds
2. Investment Management,
Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its
respective investment management agreement, each Fund pays Delaware Management
Company (DMC), a series of Delaware Management Business Trust and the investment
manager, an annual fee of 0.40% which is calculated daily based on the adjusted
average daily net assets of each Fund.
Delaware Service Company, Inc. (DSC), an
affiliate of DMC, provides fund accounting and financial administration
oversight services to the Funds. For these services, the Funds pay DSC fees
based on the aggregate daily net assets of the Delaware Investments
®
Family of Funds at the following annual rate: 0.0050% of the first $30 billion;
0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of
aggregate average daily net assets in excess of $50 billion. The fees payable to
DSC under the service agreement described above are allocated among all Funds in
the Delaware Investments Family of Funds on a relative net asset value basis.
For the six months ended September 30, 2012, the Funds were charged as
follows:
|
Colorado
|
|
Minnesota
|
|
National
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
Fund
|
|
Fund II
|
|
Fund
|
|
$2,556
|
|
$6,132
|
|
$2,349
|
At September 30, 2012, each Fund had
liabilities payable to affiliates as follows:
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
Investment management
fees payable to DMC
|
|
|
$
|
34,542
|
|
|
|
$
|
82,925
|
|
|
|
$
|
32,008
|
|
Accounting administration and other
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payable to DSC
|
|
|
|
420
|
|
|
|
|
1,009
|
|
|
|
|
389
|
|
Other expenses
payable to DMC and affiliates*
|
|
|
|
1,137
|
|
|
|
|
2,681
|
|
|
|
|
1,015
|
|
*DMC, as part of its administrative
services, pays operating expenses on behalf of each Fund and is reimbursed on a
periodic basis. Expenses include items such as printing of shareholder reports,
fees for audit, legal and tax services, registration fees and
directors/trustees fees.
As provided in the investment management
agreement, each Fund bears the cost of certain legal and tax services, including
internal legal and tax services provided to each Fund by DMC and/or its
affiliates employees. For the six months ended September 30, 2012, each Fund
was charged for internal legal and tax services provided by DMC and/or its
affiliates employees as follows:
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
|
|
$5,377
|
|
$12,633
|
|
$13,230
|
Directors/Trustees fees include expenses
accrued by the Funds for each Directors/Trustees 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 September 30,
2012, the Funds 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
|
|
|
$
|
2,535,022
|
|
|
|
$
|
31,203,565
|
|
|
|
$
|
33,546,545
|
|
Sales
|
|
|
|
1,759,456
|
|
|
|
|
27,020,189
|
|
|
|
|
17,398,713
|
|
At September 30, 2012, the cost of
investments for federal income tax purposes has been estimated since final tax
characteristics cannot be determined until fiscal year end. At September 30,
2012, 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
|
|
|
$
|
96,696,237
|
|
|
|
$
|
236,583,479
|
|
|
|
|
$
|
89,339,508
|
|
|
Aggregate unrealized
appreciation
|
|
|
$
|
7,816,641
|
|
|
|
$
|
18,510,003
|
|
|
|
|
$
|
8,094,838
|
|
|
Aggregate unrealized
depreciation
|
|
|
|
|
|
|
|
|
(11,555
|
)
|
|
|
|
|
(25,989
|
)
|
|
Net unrealized appreciation
|
|
|
$
|
7,816,641
|
|
|
|
$
|
18,498,448
|
|
|
|
|
$
|
8,068,849
|
|
|
24
U.S. GAAP defines fair value as the price
that the Funds 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 entitys own assumptions about the assumptions that market
participants would use in pricing the asset or liability developed based on the
best information available under the circumstances. Each Funds 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 (e.g., 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) (e.g., 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
|
inputs are significant unobservable inputs
(including the Funds own assumptions used to determine the fair value of
investments)
(e.g., broker-quoted securities, fair
valued securities)
|
Level 3 investments are valued using
significant unobservable inputs, which may include prior transaction prices
(acquisition cost) that did not occur during the period, financial or news
information released by the company, and other relevant information for the
investment to determine the fair value of the investment. The 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.
The following table summarizes the
valuation of each Funds investments by fair value hierarchy levels as of
September 30, 2012:
|
|
Colorado Municipal Fund
|
|
|
Level 2
|
Municipal
Bonds
|
|
|
$
|
104,512,878
|
|
|
|
|
|
Minnesota Municipal Fund
II
|
|
|
Level 2
|
Municipal
Bonds
|
|
|
$
|
255,081,927
|
|
|
|
|
|
National Municipal Fund
|
|
|
Level 2
|
Municipal
Bonds
|
|
|
$
|
96,658,357
|
|
Short-Term Investments
|
|
|
|
750,000
|
|
Total
|
|
|
$
|
97,408,357
|
|
During the six months ended September 30,
2012, 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.
(continues)
25
Notes to financial
statements
Delaware
Investments
®
Closed-End Municipal Bond Funds
4. Dividend and Distribution
Information
Income and long-term capital gain
distributions are determined in accordance with federal income tax regulations,
which may differ from U.S. GAAP. Additionally, distributions from net short-term
gains on sales of investment securities are treated as ordinary income for
federal income tax purposes. The tax character of dividends and distributions
paid during the six months ended September 30, 2012 and the year ended March 31,
2012 was as follows:
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
Six Months Ended
9/30/12*
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
5,144
|
|
$
|
89,753
|
|
$
|
7,263
|
Tax-exempt income
|
|
|
1,663,656
|
|
|
3,879,463
|
|
|
1,260,701
|
Long-term capital gain
|
|
|
445,013
|
|
|
|
|
|
|
Total
|
|
$
|
2,113,813
|
|
$
|
3,969,216
|
|
$
|
1,267,964
|
|
Year Ended
3/31/12
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
959
|
|
$
|
533
|
|
$
|
8,868
|
Tax-exempt income
|
|
|
2,804,559
|
|
|
6,672,353
|
|
|
2,286,347
|
Total
|
|
$
|
2,805,518
|
|
$
|
6,672,886
|
|
$
|
2,295,215
|
*Tax information for the six months ended
September 30, 2012 is an estimate and the tax character of dividends and
distributions may be redesigned at fiscal year end.
5. Components of Net Assets on a Tax
Basis
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
Shares of beneficial interest
|
|
$
|
66,918,121
|
|
|
$
|
157,931,075
|
|
|
$
|
60,617,476
|
|
Undistributed tax-exempt income
|
|
|
1,468,561
|
|
|
|
2,462,009
|
|
|
|
897,927
|
|
Undistributed ordinary income
|
|
|
19,828
|
|
|
|
316,780
|
|
|
|
|
|
Undistributed long-term capital gains
|
|
|
22,729
|
|
|
|
69,811
|
|
|
|
|
|
Distribution payable
|
|
|
(756,783
|
)
|
|
|
(745,627
|
)
|
|
|
(249,065
|
)
|
Realized gains 4/1/12 9/30/12
|
|
|
|
|
|
|
257,166
|
|
|
|
362,677
|
|
Capital loss carryforwards as of
3/31/12
|
|
|
|
|
|
|
(257,166
|
)
|
|
|
(1,747,836
|
)
|
Unrealized appreciation
|
|
|
7,816,641
|
|
|
|
18,498,448
|
|
|
|
8,068,849
|
|
Net assets
|
|
$
|
75,489,097
|
|
|
$
|
178,532,496
|
|
|
$
|
67,950,028
|
|
The differences between book basis and tax
basis components of net assets are primarily attributable to tax treatment of
market discount on debt instruments.
For financial reporting purposes, capital
accounts are adjusted to reflect the tax character of permanent book/tax
differences. Reclassifications are primarily due to tax treatment of market
discount on debt instruments. Results of operations and net assets were not
affected by these reclassifications. For the six months ended September 30,
2012, the Funds recorded an estimate of these differences since final tax
characteristics cannot be determined until fiscal year end.
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
Undistributed net investment
income
|
|
$
|
(2,471
|
)
|
|
$
|
(19,966
|
)
|
|
$
|
(34,847
|
)
|
Accumulated net realized gain (loss)
|
|
|
2,471
|
|
|
|
19,966
|
|
|
|
34,847
|
|
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, 2012 will expire as
follows:
|
|
Colorado
|
|
Minnesota
|
|
National
|
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
Year of Expiration
|
|
|
Fund
|
|
Fund II
|
|
Fund
|
2017
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
888,041
|
2018
|
|
|
|
|
|
|
|
|
257,166
|
|
|
|
859,795
|
Total
|
|
|
$
|
|
|
|
|
$
|
257,166
|
|
|
$
|
1,747,836
|
26
On December 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 are 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.
For the six months ended September 30,
2012, the Funds had capital gains, as follows, which may reduce the capital loss
carryforwards:
|
Colorado
|
|
Minnesota
|
|
National
|
|
Municipal
|
|
Municipal
|
|
Municipal
|
|
Fund
|
|
Fund II
|
|
Fund
|
|
$
|
|
$257,166
|
|
$362,677
|
6. 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 September 30, 2012. Shares
issuable under the Funds dividend reinvestment plan are purchased by the Funds
transfer agent, Computershare Shareowner Services LLC (Computershare), in the
open market.
On February 18, 2011, the National Municipal Funds Board approved
a tender offer for shares of the Arizona Municipal Funds common stock. The
tender offer authorized the National Municipal Fund to purchase for cash up to
18% of the then-outstanding shares of the Arizona Municipal Funds common stock
after the reorganization (Common Stock) at a per share price equal to 99% of the
net asset value per share of the Common Stock at the expiration of the tender
offer.
In connection with the tender offer, the
National Municipal Fund purchased 994,051 shares of capital stock at a total
cost of approximately $13,240,759. The tender offer was oversubscribed and all
tenders of shares were subject to pro-ration (at a ratio of approximately
0.58504231) in accordance with the terms of its tender offer.
On November 15, 2011, Colorado Municipal
Fund and Minnesota Municipal Fund II, 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, National Municipal 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 funds 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 December 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 may be redeemed at the
option of a Fund, subject to payment of a premium until December 1, 2013 (with
respect to VMM and VCF) and April 1, 2014 (with respect to VFL), 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 (which are
treated as interest payments for financial reporting purposes) are set
weekly.
The Funds use leverage because their
managers believe that, over time, leveraging may provide opportunities for
additional income and total return for common shareholders. However, the use of
leverage also can expose common shareholders to additional volatility. For
example, as the prices of securities held by a fund decline, the negative impact
of these valuation changes on common share net asset value and common
shareholder total return is magnified by the use of leverage; accordingly, the
use of structural leverage may hurt a funds 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 Moodys Investor Service, funding dividend payments or funding redemptions),
that Fund will pay additional fees with respect to the
leverage.
(continues)
27
Notes to financial
statements
Delaware
Investments
®
Closed-End Municipal Bond Funds
7. Fund Merger
On June 20, 2011, the National Municipal
Fund acquired all of the assets of the Delaware Investments Arizona Municipal
Fund, Inc. (Acquired Fund), a closed-end investment company, in exchange for the
shares of the National Municipal Fund (Acquiring Fund) pursuant to a Plan and
Agreement of Reorganization (Reorganization). The shareholders of the Acquired
Fund received shares of the Acquiring Fund equal to the aggregate net asset
value of their share in the Acquired Fund prior to the Reorganization, as shown
in the following table:
Proxy Results
At the Annual Meeting on August 22, 2012,
the Funds Shareholders elected nine 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
|
|
4,464,878.156
|
|
106,130.539
|
|
300
|
|
0
|
Patrick P. Coyne
|
|
4,465,008.087
|
|
106,000.608
|
|
300
|
|
0
|
John A. Fry
|
|
4,453,631.108
|
|
117,377.587
|
|
300
|
|
0
|
Anthony D. Knerr
|
|
4,401,636.130
|
|
169,372.565
|
|
300
|
|
0
|
Lucinda S.
Landreth
|
|
4,464,878.156
|
|
106,130.539
|
|
300
|
|
0
|
Ann R. Leven
|
|
4,460,660.482
|
|
110,348.213
|
|
300
|
|
0
|
Frances
Sevilla-Sacasa
|
|
4,405,872.358
|
|
165,136.337
|
|
300
|
|
0
|
Janet L. Yeomans
|
|
|
|
|
|
300
|
|
0
|
J. Richard
Zecher
|
|
|
|
|
|
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
|
|
10,197,036.559
|
|
274,443.055
|
|
750
|
|
0
|
Patrick P. Coyne
|
|
10,124,676.956
|
|
346,802.658
|
|
750
|
|
0
|
John A. Fry
|
|
10,188,434.342
|
|
283,045.272
|
|
750
|
|
0
|
Anthony D. Knerr
|
|
10,147,425.018
|
|
324,054.596
|
|
750
|
|
0
|
Lucinda S.
Landreth
|
|
10,207,627.569
|
|
263,852.045
|
|
750
|
|
0
|
Ann R. Leven
|
|
10,182,214.447
|
|
289,265.167
|
|
750
|
|
0
|
Frances
Sevilla-Sacasa
|
|
10,136,010.616
|
|
335,468.998
|
|
750
|
|
0
|
Janet L. Yeomans
|
|
|
|
|
|
750
|
|
0
|
J. Richard
Zecher
|
|
|
|
|
|
750
|
|
0
|
|
Delaware Investments
National Municipal Income Fund
|
|
|
|
Common
Shareholders
|
|
Preferred
Shareholders
|
|
|
|
|
Shares voted
|
|
|
|
Shares voted
|
|
|
Shares
|
|
Withheld
|
|
Shares
|
|
Withheld
|
|
|
Voted For
|
|
Authority
|
|
Voted For
|
|
Authority
|
Thomas L.
Bennett
|
|
4,040,259.193
|
|
264,632.122
|
|
300
|
|
0
|
Patrick P. Coyne
|
|
4,041,180.676
|
|
263,710.639
|
|
300
|
|
0
|
John A. Fry
|
|
4,041,660.668
|
|
263,230.647
|
|
300
|
|
0
|
Anthony D. Knerr
|
|
4,041,831.165
|
|
263,060.150
|
|
300
|
|
0
|
Lucinda S.
Landreth
|
|
4,040,198.694
|
|
264,692.621
|
|
300
|
|
0
|
Ann R. Leven
|
|
4,039,257.023
|
|
265,634.292
|
|
300
|
|
0
|
Frances
Sevilla-Sacasa
|
|
4,040,395.691
|
|
264,495.624
|
|
300
|
|
0
|
Janet L. Yeomans
|
|
|
|
|
|
300
|
|
0
|
J. Richard
Zecher
|
|
|
|
|
|
300
|
|
0
|
(continues)
31
Other Fund information
(Unaudited)
Delaware
Investments
®
Closed-End Municipal Bond Funds
Dividend Reinvestment
Plan
Each Fund offers an automatic dividend
reinvestment program (Plan). Under the current policies of Minnesota Municipal
Income Fund II and National Municipal Income Fund all distributions of net
investment income and capital gains to common shareholders are automatically
reinvested in additional shares unless shareholders elect to receive all
dividends and other distributions in cash paid by check mailed directly to
shareholders by the dividend plan agent. Under the current policies of Colorado Municipal
Income Fund, distributions of net investment income and capital gains to common
shareholders will be paid in cash unless shareholders notify Computershare
Shareowner Services LLC (formerly BNY Mellon Shareowner Services LLC)
(Computershare) of their desire to participate in the dividend reinvestment
program. Shareholders who hold their shares through a bank, broker or other
nominee should request the bank, broker or nominee to participate in the Plan on
their behalf. This can be done as long as the bank, broker or nominee provides a
dividend reinvestment service for the Funds. If the bank, broker or nominee does
not provide this service, such shareholders must have their shares taken out of
street or nominee name and re-registered in their own name in order to
participate in the Plan.
Computershare will apply all cash
dividends, capital gains and other distributions (collectively, Distributions)
on each Funds shares of common stock which become payable to each Plan
participant to the purchase of outstanding shares of each Funds common stock
for such participant. These purchases may be made on a securities exchange or in
the over-the-counter market, and may be subject to such terms of price, delivery
and related matters to which Computershare may agree. The Funds will not issue
new shares in connection with the Plan.
Distributions reinvested for participants
are subject to income taxes just as if they had been paid directly to the
shareholder in cash. Participants will receive a year-end statement showing
distributions reinvested, and any brokerage commissions paid on such
participants behalf.
Shareholders holding shares of a Fund in
their own names who wish to terminate their participation in the Plan may do so
by sending written instruction to Computershare so that Computershare receives
such instructions at least 10 days prior to the Distribution record date.
Shareholders with shares held in account by a bank, broker or other nominee
should contact such bank, broker or other nominee to determine the procedure for
withdrawal from the Plan.
If written instructions are not received
by Computershare at least 10 days prior to the record date for a particular
Distribution, that Distribution may be reinvested at the sole discretion of
Computershare. After a shareholders instructions to terminate participation in
the Plan become effective, Distributions will be paid to shareholders in cash.
Upon termination, a shareholder may elect to receive either stock or cash for
all the full shares in the account. If cash is elected, Computershare will sell
such shares at the then current market value and then send the net proceeds to
the shareholder, after deducting brokerage commissions and related expenses. Any
fractional shares at the time of termination will be paid in cash at the current
market price, less brokerage commissions and related expenses, if any.
Shareholders may at any time request a full or partial withdrawal of shares from
the Plan, without terminating participation in the Plan. When shares outside of
the Plan are liquidated, Distributions on shares held under the Plan will
continue to be reinvested unless Computershare is notified of the shareholders
withdrawal from the Plan.
An investor holding shares that
participate in the Plan in a brokerage account may not be able to transfer the
shares to another broker and continue to participate in the Plan. Please contact
your broker/dealer for additional details.
Computershare will charge participants
their proportional share of brokerage commissions on market purchases.
Participants may obtain a certificate or certificates for all or part of the
full shares credited to their accounts at any time by making a request in
writing to Computershare. A fee may be charged to the participant for each
certificate issuance.
If you have any questions and shares are
registered in street name, contact the broker/dealer holding the shares or
your financial advisor. If you have any questions and shares are registered in
your name, contact Computershare at
866 437-0252.
32
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 Advisory Agreement
At a meeting held on August 21-23, 2012
(the Annual Meeting), the Board of Directors (the Board), including a
majority of disinterested or independent Directors, approved the renewal of the
Investment Advisory Agreements for each of the Delaware Investments Colorado
Municipal Income Fund, Inc.; Delaware Investments National Municipal Income
Fund; and Delaware Investments Minnesota Municipal Income Fund II, Inc. (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 Advisory
Agreements with Delaware Management Company (DMC) included materials provided
by DMC and its affiliates (Delaware Investments) concerning, among other
things, the nature, extent and quality of services provided to the Funds, the
costs of such services to the Funds, economies of scale and the financial
condition and profitability of Delaware Investments. In addition, in connection
with the Annual Meeting, reports were provided in May 2012 and included
independent historical and comparative reports provided by Lipper, Inc., an
independent statistical compilation organization (Lipper). The Lipper reports
compared each Funds investment performance and expenses with those of other
comparable mutual funds. The Independent Directors reviewed and discussed the
Lipper reports with independent legal counsel to the Independent Directors. The
Board requested and received information regarding DMCs policy with respect to
advisory fee levels and its breakpoint philosophy; the structure of portfolio
manager compensation; the investment managers profitability; comparative client
fee information; and any constraints or limitations on the availability of
securities in certain investment styles, which had in the past year inhibited,
or which were likely in the future to inhibit, DMCs ability to invest fully in
accordance with Fund policies.
In considering information relating to the
approval of each Funds advisory agreement, the Independent Directors received
assistance and advice from and met separately with independent legal counsel to
the Independent Directors. Although the Board gave attention to all information
furnished, the following discussion identifies, under separate headings, the
primary factors taken into account by the Board during its contract renewal
considerations.
Nature, Extent And Quality of Service.
The Board considered the services provided by
Delaware Investments to the Funds and their shareholders. In reviewing the
nature, extent and quality of services, the Board considered reports furnished
to it throughout the year, which covered matters such as the relative
performance of the Funds, compliance of portfolio managers with the investment
policies, strategies and restrictions for the Funds, compliance by DMC
(Management) personnel with the Code of Ethics adopted throughout the Delaware
Investments Family of Funds complex and adherence to fair value pricing
procedures as established by the Board. The Board was pleased with the current
staffing of the Funds investment advisor and the emphasis placed on research in
the investment process. The Board recognized DMCs receipt of several industry
distinctions. The Board gave favorable consideration to DMCs efforts to control expenditures while maintaining service levels committed to fund matters. The Board was satisfied with the nature, extent and quality of the
overall services provided by Delaware Investments.
Investment Performance.
The Board placed significant emphasis on the investment
performance of the Funds in view of the importance of investment performance to
shareholders. Although the Board gave appropriate consideration to performance
reports and discussions with portfolio managers at Board meetings throughout the
year, the Board gave particular weight to the Lipper reports furnished for the
Annual Meeting. The Lipper reports prepared for each Fund showed the investment
performance of its shares in comparison to a group of similar funds as selected
by Lipper (the Performance Universe). A fund with the highest performance
ranked first, and a fund with the lowest ranked last. The highest/best
performing 25% of funds in the Performance Universe make up the first quartile;
the next 25%, the second quartile; the next 25%, the third quartile; and the
lowest/worst performing 25% of funds in the Performance Universe make up the
fourth quartile. Comparative annualized performance for each Fund was shown for
the past one-, three-, five- and ten-year periods ended March 31, 2012. The
Boards objective is that each Funds 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 Boards view of such
performance.
Delaware Investments Colorado Municipal
Income Fund, Inc. The Performance Universe for the Fund consisted of the Fund
and all closedend other state municipal debt funds as selected by Lipper. The
Lipper report comparison showed that the Funds total return for the one-year
period was in the third quartile of its Performance Universe. The report further
showed that the Funds total return for the three-, five- and ten- year periods
was in the fourth quartile. The Funds performance results were not in line with
the Boards objective. In evaluating the Funds performance, the Board
considered the numerous investment and performance reports delivered by
Management personnel to the Boards Investments Committee. The Board was
satisfied that Management was taking action to improve Fund performance and meet
the Boards performance objective.
Delaware Investments Minnesota Municipal
Income Fund II, Inc. The Performance Universe for the Fund consisted of the
Fund and all closedend other state municipal debt funds as selected by Lipper.
The Lipper report comparison showed that the Funds total return for the one-,
three-, five- and ten-year periods was in the fourth quartile of its Performance
Universe. The Funds performance results were not in line with the Boards
objective. In evaluating the Funds performance, the Board considered the
numerous investment and performance reports delivered by Management personnel to
the Boards Investments Committee. The Board was satisfied that Management was
taking action to improve Fund performance and to meet the Boards performance
objective.
(continues)
33
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 Advisory Agreement (continued)
Delaware Investments National Municipal
Income Fund The Performance Universe for the Fund consisted of the Fund and
all non-leveraged closedend general and insured municipal debt funds as
selected by Lipper. The Lipper report comparison showed that the Funds total
return for the one-year period was in the first quartile of its Performance
Universe. The report further showed that the Funds total return for the
three-year period was in the second quartile and that the Funds total return
for the five- and ten-year periods was ranked fourth and third of the four funds
in the Performance Universe, respectively. In evaluating the Funds performance,
the Board considered the limited size of the Funds Performance Universe. The
Board also considered the numerous investment and performance reports delivered
by Management personnel to the Boards Investments Committee. The Board was
satisfied that Management was taking effective action to enhance Fund
performance and meet the Boards performance objective.
Comparative Expenses.
The Board considered expense comparison data for the Delaware
Investments Family of Funds. Management provided the Board with information on
pricing levels and fee structures for each Fund as of its most recently
completed fiscal year. The Board also focused on the comparative analysis of
effective management fees and total expense ratios of each Fund versus effective
management fees and expense ratios of a group of similar closed-end funds as
selected by Lipper (the Expense Group). In reviewing comparative costs, each
Funds 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 Funds total expenses were also
compared with those of its Expense Group. The Board considered fees paid to
Delaware Investments for non-management services. The Boards objective is to
limit each Funds total expense ratio to be competitive with that of the Expense
Group. The following paragraphs summarize the expense results for the Funds and the
Boards 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
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 management
fee was ranked first of the three funds in the Expense Group and its total
expenses were ranked second of the three funds in the Expense Group. In
evaluating the Funds total expenses, the Board considered the limited number of
funds in the Expense Group. The Board was satisfied with Managements efforts to
improve the Funds total expense ratio and bring it in line with the Boards
objective.
Management
Profitability.
The Board considered the level
of profits, if any, realized by Delaware Investments in connection with the
operation of the Funds. In this respect, the Board reviewed the Investment
Management Profitability Analysis that addressed the overall profitability of
Delaware Investments business in providing management and other services to
each of the individual funds and the Delaware Investments Family of Funds as a
whole. Specific attention was given to the methodology followed in allocating
costs for the purpose of determining profitability. Management stated that the
level of profits of Delaware Investments, to a certain extent, reflects recent
operational cost savings and efficiencies initiated by Delaware Investments. The
Board considered Delaware Investments efforts to improve services provided to
fund shareholders and to meet additional regulatory and compliance requirements
resulting from recent industry-wide Securities and Exchange Commission
initiatives. The Board also considered the extent to which Delaware Investments
might derive ancillary benefits from fund operations, including the potential
for procuring additional business as a result of the prestige and visibility
associated with its role as service provider to the Delaware Investments Family
of Funds and the benefits from allocation of fund brokerage to improve trading
efficiencies. The Board found that the management fees were reasonable in light
of the services rendered and the profitability of Delaware
Investments.
Economies of Scale.
As
closed-end funds, the Funds do not issue shares on a continuous basis. Fund assets increase only to the extent that the
values of the underlying securities in the Fund increase. Accordingly, the Board determined that 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.
34
Change in Independent Registered Public
Accounting Firm
Due to independence matters under the
Securities and Exchange Commissions auditor independence rules relating to the
January 4, 2010 acquisition of Delaware Investments (including DMC) by Macquarie
Group, Ernst & Young LLP (E&Y) has resigned as the independent
registered public accounting firm for Delaware Investments
®
Colorado
Municipal Income Fund, Inc., Delaware Investments Minnesota Municipal Income
Fund II, Inc., and Delaware Investments National Municipal Income Fund (the
Funds) effective May 27, 2010. At a meeting held on February 18, 2010, the Board
of Directors/Trustees of the Funds, upon recommendation of the Audit Committee,
selected PricewaterhouseCoopers LLP (PwC) to serve as the independent registered
public accounting firm for the Funds for the fiscal year ending March 31, 2011.
During the fiscal years ended March 31, 2010 and 2009, E&Ys audit reports
on the financial statements of the Funds did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. In addition, there were no disagreements
between the Funds and E&Y on accounting principles, financial statements
disclosures or audit scope, which, if not resolved to the satisfaction of
E&Y, would have caused them to make reference to the disagreement in their
reports. None of the Funds nor anyone on its behalf has consulted with PwC at
any time prior to their selection with respect to the application of accounting
principles to a specified transaction, either completed or proposed or the type
of audit opinion that might be rendered on the Funds financial
statements.
35
About the
organization
This
semiannual report is for the information of Delaware Investments
®
Closed-End Municipal Bond Funds shareholders. Notice is hereby given in
accordance with Section 23(c) of the Investment Company Act of 1940 that the
Funds may, from time to time, purchase shares of their common stock on the open
market at market prices.
Board of
directors/trustees
Patrick P. Coyne
Chairman, President,
and Chief Executive
Officer
Delaware Investments
Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Drexel University
Philadelphia,
PA
Anthony D. Knerr
Founder and Managing Director
Anthony Knerr &
Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant,
Inc.
Philadelphia, PA
Frances A.
Sevilla-Sacasa
Chief Executive Officer
Banco Itaú Europa International
Miami,
FL
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul,
MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
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 Shareowner Services
LLC 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.
Affiliated
officers
David F.
Connor
Vice President, Deputy General
Counsel, and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
Daniel V. Geatens
Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
David P. OConnor
Executive Vice President, General Counsel and Chief Legal
Officer
Delaware Investments Family of Funds
Philadelphia, PA
Richard Salus
Senior Vice President and
Chief Financial
Officer
Delaware Investments Family of Funds
Philadelphia, PA
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 Funds 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 800 523-1918; and (ii) on
the SECs website at sec.gov. In addition, a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities and each Funds Schedule of Investments are available
without charge on the Funds website at delawareinvestments.com. Each Funds Forms
N-Q may be reviewed and copied at the SECs 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 SECs website
at sec.gov.
Contact
information
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 Shareowner
Services LLC
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
|
|
|
September 30,
2012
|
|
|
Colorado Municipal
|
|
|
Income Fund
|
|
88
|
Minnesota Municipal
Income
|
|
|
Fund II
|
|
455
|
National
Municipal Income Fund
|
|
109
|
36