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 | |
Registrants telephone number, including area code: | (800) 523-1918 |
Date of fiscal year end: | March 31 |
Date of reporting period: | March 31, 2013 |
Item 1. Reports to Stockholders
Annual Report Delaware Investments® Closed-End Municipal Bond Funds |
March 31, 2013
|
The figures in
the annual 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 | |
Table of contents
> Portfolio management review | 1 | |
> Fund basics | 2 | |
> Security type/Sector/State allocations | 3 | |
> Statements of net assets | 5 | |
> Statements of assets and liabilities | 17 | |
> Statements of operations | 18 | |
> Statements of changes in net assets | 19 | |
> Financial highlights | 20 | |
> Notes to financial statements | 23 | |
> Report of independent registered public accounting firm | 31 | |
> Other Fund information | 32 | |
> Board of trustees/directors and officers addendum | 34 | |
> About the organization | 37 |
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 March 31, 2013, and subject to change. Information is as of the date indicated and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services are provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
Investments in Delaware Investments® Closed-End Municipal Bond Funds are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Funds, the repayment of capital from the Funds, or any particular rate of return.
© 2013 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Portfolio management review
Delaware Investments® Closed-End
Municipal Bond Funds
April 9,
2013
Municipal bond market conditions
During the Funds fiscal year ended March 31, 2013, the U.S. tax-exempt bond market, as measured by the Barclays Municipal Bond Index, returned 5.25%. In this favorable environment, higher yielding, lower-rated municipal bonds fared the best overall, with below-investment-grade issues gaining 14.23%, compared to returns of 6.50% and 3.78% generated by the higher-rated BBB and AAA segments of the market, respectively. (Data: Barclays.)
On Jan. 1, 2013, an agreement was reached in Washington, D.C., known as the American Taxpayer Relief Act of 2012. The good news for the municipal market was that the deal did not include a 28% cap on the municipal tax exemption.
Fund positioning: maintaining a long-standing approach
Our portfolio management strategy remained consistent throughout the Funds fiscal year. We continued investing by utilizing a bottom-up approach to portfolio construction, meaning that we evaluated investment opportunities individually based on thorough research; ultimately, we selected bonds that we believed offered a favorable balance between risk and potential reward.
We were also mindful of market shifts that could lead to new opportunities (or risks) for investors. Several such situations occurred during the fiscal year, as risks emerged that we believed justified making the portfolio slightly more defensive.
One of these shifts took place in the final months of the fiscal year. Especially in light of back-to-back years of strong performance in the municipal bond market, we thought it prudent to take a defensive position in an effort to seek to mitigate some of the risk to the Funds from a potential rise in long-term interest rates. This entailed modestly reducing the Funds exposure to longer-maturity securities. In addition, given global macroeconomic challenges, we limited the Funds allocations to certain lower-rated bonds that we believed were potentially at risk. We should note that this shift represented only subtle changes to the Funds portfolios. Throughout the Funds fiscal year, we maintained our usual focus on seeking to generate relative outperformance by emphasizing bonds within the lower tiers of the investment-grade credit ratings.
This is a segment of the market in which we believe our credit research capabilities have the potential to add value to the overall investment process.
Performance effects
Although we slightly reduced the Funds exposure to lower rated credit and decreased positions in bonds with longer maturities, these credits were among the strongest-performing bonds within the Funds. Additionally, the typically maintained overweight positions in these securities during the fiscal year.
Within Delaware Investments Colorado Municipal Income Fund, Inc., the strongest performing bonds tended to include issues within the healthcare sector (one example was issued by the Colorado Health Facilities Authority, with a coupon of 5% and a maturity date of 2040). The weaker performers, meanwhile, included an issue by the Puerto Rico Infrastructure Financing Authority, which felt much pressure among that commonwealths pension-related challenges and uncertainty surrounding a newly elected governor.
Within Delaware Investments Minnesota Municipal Income Fund, II Inc., notable performers included bonds issued by the Dakota and Washington Counties Housing and Redevelopment Authority. These bonds were issued with a 8.375% coupon, and are scheduled to mature in 2021. Other contributors included tobacco settlement bonds, with an S&P rating of A- and a maturity date of 2031. The positive effects generated by these bonds were offset somewhat by the underperformance of bonds such as those issued by the Laurentian Energy Authority, with a 5.0% coupon and a maturity of 2021. Puerto Rican bonds likewise posed a mild drag on the Funds performance, including bonds issued by the Puerto Rico Electric Power Authority.
Delaware Investments National Municipal Income Fund experienced a positive contribution from so-called tobacco settlement bonds. Another notable contributor to the Funds performance was a bond issued by the West Virginia Hospital Finance Authority, with a stated coupon of 9.125% and a maturity date of 2041. Bonds issued out of Puerto Rico, including an issue by the Puerto Rico Sales Tax Financing Corporation, were the weakest performers across the Fund.
1
Fund basics
Delaware Investments®
Colorado
Municipal Income Fund, Inc.
As of March 31, 2013
Fund objective |
The Fund seeks to provide current income exempt from both regular federal income tax and Colorado state personal income tax, consistent with the preservation of capital. |
Total Fund net assets |
$74 million |
Number of holdings |
78 |
Fund start date |
July 29, 1993 |
CUSIP number |
246101109 |
Delaware
Investments Minnesota Municipal Income Fund II, Inc. As of March 31, 2013 |
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 |
$176 million |
Number of holdings |
139 |
Fund start date |
Feb. 26, 1993 |
CUSIP number |
24610V103 |
Delaware
Investments National Municipal Income Fund As of March 31, 2013 |
Fund objective |
The Fund seeks to provide current income exempt from regular federal income tax, consistent with the preservation of capital. |
Total Fund net assets |
$68 million |
Number of holdings |
163 |
Fund start date |
Feb. 26, 1993 |
CUSIP number |
24610T108 |
2
Security type/Sector/State
allocations
As of March 31, 2013
(Unaudited)
Sector designations may be different than the sector designations presented in other Fund materials.
Delaware Investments® | |||||
Colorado Municipal Income Fund, Inc. | |||||
Percentage | |||||
Security type/Sector | of Net Assets | ||||
Municipal Bonds* | 138.04 | % | |||
Corporate-Backed Revenue Bond | 1.39 | % | |||
Education Revenue Bonds | 21.32 | % | |||
Electric Revenue Bonds | 6.41 | % | |||
Healthcare Revenue Bonds | 29.67 | % | |||
Housing Revenue Bonds | 2.38 | % | |||
Lease Revenue Bonds | 10.56 | % | |||
Local General Obligation Bonds | 13.81 | % | |||
Pre-Refunded Bonds | 7.54 | % | |||
Special Tax Revenue Bonds | 33.52 | % | |||
State & Territory General Obligation Bonds | 1.80 | % | |||
Transportation Revenue Bonds | 8.12 | % | |||
Water & Sewer Revenue Bond | 1.52 | % | |||
Short-Term Investment | 0.27 | % | |||
Total Value of Securities | 138.31 | % | |||
Liquidation Value of Preferred Stock | (40.35 | %) | |||
Receivables and Other Assets Net of Liabilities | 2.04 | % | |||
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 of the United States as follows: | ||||
Territory | (as a % of fixed income investments) | ||||
Guam | 1.1 | % | |||
Puerto Rico | 12.4 | % |
Delaware Investments | |||||
Minnesota Municipal Income Fund II, Inc. | |||||
Percentage | |||||
Security type/Sector | of Net Assets | ||||
Municipal Bonds | 140.31 | % | |||
Corporate-Backed Revenue Bonds | 7.39 | % | |||
Education Revenue Bonds | 16.90 | % | |||
Electric Revenue Bonds | 6.43 | % | |||
Healthcare Revenue Bonds | 40.12 | % | |||
Housing Revenue Bonds | 6.31 | % | |||
Lease Revenue Bonds | 14.94 | % | |||
Local General Obligation Bonds | 8.45 | % | |||
Pre-Refunded/Escrowed to Maturity Bonds | 17.94 | % | |||
Special Tax Revenue Bonds | 7.69 | % | |||
State & Territory General Obligation Bonds | 9.16 | % | |||
Transportation Revenue Bonds | 3.37 | % | |||
Water & Sewer Revenue Bonds | 1.61 | % | |||
Total Value of Securities | 140.31 | % | |||
Liquidation Value of Preferred Stock | (42.70 | %) | |||
Receivables and Other Assets Net of Liabilities | 2.39 | % | |||
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 of the United States as follows: | ||||
Territory | (as a % of fixed income investments) | ||||
Guam | 0.1 | % | |||
Puerto Rico | 2.3 | % |
Security type/Sector/State allocations
As of March 31, 2013 (Unaudited)
Sector designations may be different than the sector designations presented in other Fund materials.
Delaware Investments®
National
Municipal Income Fund
Percentage | |||
Security type/Sector | of Net Assets | ||
Municipal Bonds | 143.61 | % | |
Corporate-Backed Revenue Bonds | 15.82 | % | |
Education Revenue Bonds | 24.78 | % | |
Electric Revenue Bonds | 4.75 | % | |
Healthcare Revenue Bonds | 20.02 | % | |
Housing Revenue Bonds | 2.44 | % | |
Lease Revenue Bonds | 12.35 | % | |
Local General Obligation Bonds | 3.33 | % | |
Special Tax Revenue Bonds | 25.68 | % | |
State & Territory General Obligation Bonds | 6.30 | % | |
Transportation Revenue Bonds | 22.55 | % | |
Water & Sewer Revenue Bonds | 5.59 | % | |
Total Value of Securities | 143.61 | % | |
Liquidation Value of Preferred Stock | (44.20 | %) | |
Receivables and Other Assets Net of Liabilities | 0.59 | % | |
Total Net Assets | 100.00 | % |
State/Territory | (as a % of fixed income investments) | |||
Alaska | 0.35 | % | ||
Arizona | 12.52 | % | ||
California | 11.70 | % | ||
Colorado | 1.21 | % | ||
Florida | 2.92 | % | ||
Georgia | 1.62 | % | ||
Guam | 2.06 | % | ||
Hawaii | 0.34 | % | ||
Idaho | 1.12 | % | ||
Illinois | 1.38 | % | ||
Indiana | 1.02 | % | ||
Iowa | 0.55 | % | ||
Kansas | 0.16 | % | ||
Louisiana | 2.40 | % | ||
Maine | 0.37 | % | ||
Maryland | 2.55 | % | ||
Massachusetts | 0.99 | % | ||
Minnesota | 1.28 | % | ||
Missouri | 2.21 | % | ||
New Hampshire | 0.36 | % | ||
New Jersey | 5.42 | % | ||
New Mexico | 0.56 | % | ||
New York | 18.02 | % | ||
Ohio | 1.85 | % | ||
Oregon | 4.01 | % | ||
Pennsylvania | 6.39 | % | ||
Puerto Rico | 6.48 | % | ||
Texas | 6.57 | % | ||
Virginia | 1.85 | % | ||
Washington D.C. | 0.28 | % | ||
West Virginia | 0.66 | % | ||
Wisconsin | 0.51 | % | ||
Wyoming | 0.29 | % | ||
Total | 100.00 | % |
4
Statements of net assets
Delaware Investments® Colorado
Municipal Income Fund, Inc.
March 31,
2013
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds 138.04% | |||||||
Corporate-Backed Revenue Bond 1.39% | |||||||
Public Authority for Colorado Energy | |||||||
Natural Gas Revenue Series 2008 | |||||||
6.50% 11/15/38 | $ | 750,000 | $ | 1,030,680 | |||
1,030,680 | |||||||
Education Revenue Bonds 21.32% | |||||||
Colorado Educational & Cultural | |||||||
Facilities Authority Revenue | |||||||
(Academy Charter School Project) | |||||||
5.50% 5/1/36 (SGI) | 1,720,000 | 1,784,552 | |||||
(Bromley Charter School Project) | |||||||
5.25% 9/15/32 (SGI) | 3,245,000 | 3,331,187 | |||||
(Johnson & Wales University Project) | |||||||
Series A 5.00% 4/1/28 (SGI) | 3,000,000 | 3,002,850 | |||||
(Littleton Charter School Project) | |||||||
4.375% 1/15/36 (ASSURED GTY) | 1,200,000 | 1,201,800 | |||||
(Student Housing - Campus | |||||||
Village Apartments) 5.00% 6/1/23 | 1,065,000 | 1,187,400 | |||||
Colorado State Board of Governors | |||||||
Revenue (University Enterprise | |||||||
System) Series A 5.00% 3/1/39 | 700,000 | 780,087 | |||||
University of Colorado 5.00% 6/1/31 | 3,185,000 | 3,677,337 | |||||
University of Colorado Enterprise | |||||||
Systems Revenue | |||||||
Series A 5.375% 6/1/38 | 750,000 | 883,208 | |||||
15,848,421 | |||||||
Electric Revenue Bonds 6.41% | |||||||
Colorado Springs Utilities System | |||||||
Improvement Revenue | |||||||
Series C 5.50% 11/15/48 | 750,000 | 866,955 | |||||
Platte River Power Authority Revenue | |||||||
Series HH 5.00% 6/1/28 | 1,500,000 | 1,781,130 | |||||
Puerto Rico Electric Power | |||||||
Authority Revenue | |||||||
Series A 5.00% 7/1/42 | 500,000 | 460,735 | |||||
Series TT 5.00% 7/1/37 | 685,000 | 639,804 | |||||
Series WW 5.50% 7/1/38 | 300,000 | 299,364 | |||||
Series XX 5.25% 7/1/40 | 750,000 | 720,030 | |||||
4,768,018 | |||||||
Healthcare Revenue Bonds 29.67% | |||||||
Aurora Hospital Revenue (Childrens | |||||||
Hospital Association Project) | |||||||
Series A 5.00% 12/1/40 | 2,000,000 | 2,185,480 | |||||
Colorado Health Facilities | |||||||
Authority Revenue | |||||||
(Boulder Community Hospital | |||||||
Project) 5.00% 10/1/32 | 500,000 | 556,155 | |||||
(Catholic Health Initiatives) | |||||||
Series A 5.00% 7/1/39 | 750,000 | 819,488 | |||||
Series A 5.00% 2/1/41 | 2,400,000 | 2,623,391 | |||||
Series A 5.25% 2/1/33 | 1,625,000 | 1,861,015 | |||||
Series C-1 5.10% 10/1/41 (AGM) | 1,000,000 | 1,079,830 | |||||
Series D 6.125% 10/1/28 | 750,000 | 900,075 | |||||
(Christian Living | |||||||
Communities Project) | |||||||
6.375% 1/1/41 | 615,000 | 702,441 | |||||
Series A 5.75% 1/1/37 | 885,000 | 943,260 | |||||
(Covenant Retirement | |||||||
Communities) 5.00% 12/1/33 | 1,000,000 | 1,059,340 | |||||
(Evangelical Lutheran Good | |||||||
Samaritan Society) 5.25% 6/1/23 | 1,000,000 | 1,072,410 | |||||
(National Jewish Health Project) | |||||||
5.00% 1/1/27 | 500,000 | 534,510 | |||||
(Sisters of Charity of Leavenworth | |||||||
Health System) 5.00% 1/1/40 | 4,750,000 | 5,141,067 | |||||
(Total Long-Term Care) | |||||||
Series A 6.00% 11/15/30 | 400,000 | 452,560 | |||||
Denver Health & Hospital Authority | |||||||
Revenue (Recovery Zone Facilities) | |||||||
5.625% 12/1/40 | 750,000 | 817,140 | |||||
University of Colorado Hospital | |||||||
Authority Revenue Series A | |||||||
5.00% 11/15/37 | 500,000 | 535,030 | |||||
6.00% 11/15/29 | 650,000 | 773,533 | |||||
22,056,725 | |||||||
Housing Revenue Bonds 2.38% | |||||||
Colorado Housing & Finance | |||||||
Authority (Single Family | |||||||
Mortgage - Class 1) Series A | |||||||
5.50% 11/1/29 (FHA) (VA) (HUD) | 365,000 | 378,808 | |||||
Puerto Rico Housing Finance | |||||||
Authority Subordinated-Capital | |||||||
Fund Modernization | |||||||
5.125% 12/1/27 (HUD) | 1,000,000 | 1,052,770 | |||||
5.50% 12/1/18 (HUD) | 300,000 | 339,978 | |||||
1,771,556 | |||||||
Lease Revenue Bonds 10.56% | |||||||
Aurora Certificates of Participation | |||||||
Refunding Series A 5.00% 12/1/30 | 630,000 | 721,545 | |||||
Colorado State Building Excellent | |||||||
Schools Today Certificates | |||||||
of Participation | |||||||
Series G 5.00% 3/15/32 | 2,000,000 | 2,244,581 | |||||
Glendale Certificates of Participation | |||||||
5.00% 12/1/25 (SGI) | 1,500,000 | 1,604,565 | |||||
Pueblo County Certificates of | |||||||
Participation (County Judicial | |||||||
Complex Project) | |||||||
5.00% 9/15/42 (AGM) | 2,000,000 | 2,227,100 |
Statements of net assets
Delaware Investments® Colorado Municipal Income Fund, Inc.
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds (continued) | |||||||
Lease Revenue Bonds (continued) | |||||||
| Puerto Rico Public Buildings | ||||||
Authority Revenue (Guaranteed | |||||||
Government Facilities) | |||||||
Series M-2 5.50% 7/1/35 (AMBAC) | $ | 500,000 | $ | 531,925 | |||
Regional Transportation District | |||||||
Certificates of Participation | |||||||
Series A 5.375% 6/1/31 | 460,000 | 518,323 | |||||
7,848,039 | |||||||
Local General Obligation Bonds 13.81% | |||||||
Arapahoe County School District #1 | |||||||
Englewood 5.00% 12/1/31 | 2,935,000 | 3,418,071 | |||||
Boulder, Larimer & Weld Counties | |||||||
St. Vrain Valley School District | |||||||
No. Re-1J 5.00% 12/15/33 | 750,000 | 852,570 | |||||
Bowles Metropolitan District | |||||||
5.00% 12/1/33 (AGM) | 2,000,000 | 2,021,680 | |||||
Denver City & County | |||||||
(Better Denver & Zoo) | |||||||
Series A 5.00% 8/1/25 | 650,000 | 779,246 | |||||
Denver International Business Center | |||||||
Metropolitan District #1 | |||||||
5.00% 12/1/30 | 650,000 | 681,824 | |||||
Jefferson County School District #R-1 | |||||||
5.25% 12/15/24 | 750,000 | 967,733 | |||||
Pueblo County School District #70 | |||||||
5.00% 12/1/31 | 500,000 | 585,020 | |||||
Rangely Hospital District | |||||||
6.00% 11/1/26 | 750,000 | 893,715 | |||||
Sand Creek Metropolitan District | |||||||
5.00% 12/1/31 (SGI) | 70,000 | 70,237 | |||||
10,270,096 | |||||||
§Pre-Refunded Bonds 7.54% | |||||||
Adams & Arapahoe Counties Joint | |||||||
School District #28J (Aurora) | |||||||
6.00% 12/1/28-18 | 600,000 | 766,776 | |||||
Colorado Health Facilities Authority | |||||||
Revenue (Evangelical Lutheran | |||||||
Good Samaritan Society) | |||||||
Series A 6.125% 6/1/38-14 | 750,000 | 801,180 | |||||
Colorado Water Resources & Power | |||||||
Development Authority Revenue | |||||||
(Parker Water & Sanitation | |||||||
District) Series D | |||||||
5.125% 9/1/34-14 (NATL-RE) | 1,500,000 | 1,598,625 | |||||
5.25% 9/1/43-14 (NATL-RE) | 2,000,000 | 2,138,600 | |||||
Sand Creek Metropolitan District | |||||||
5.00% 12/1/31-13 (SGI) | 295,000 | 304,582 | |||||
5,609,763 | |||||||
Special Tax Revenue Bonds 33.52% | |||||||
Castle Rock Sales & Use Tax Revenue | |||||||
5.00% 6/1/35 | 750,000 | 861,150 | |||||
Denver Convention Center Hotel | |||||||
Authority Revenue Refunding | |||||||
5.00% 12/1/35 (SGI) | 2,795,000 | 2,899,393 | |||||
Guam Government Business Privilege | |||||||
Tax Revenue Series A | |||||||
5.125% 1/1/42 | 435,000 | 478,082 | |||||
5.25% 1/1/36 | 565,000 | 630,642 | |||||
Puerto Rico Infrastructure Financing | |||||||
Authority Special Tax Revenue | |||||||
Series B 5.00% 7/1/41 | 2,475,000 | 2,228,144 | |||||
Puerto Rico Sales Tax Financing | |||||||
Revenue First Subordinate | |||||||
Series A 5.50% 8/1/37 | 700,000 | 722,267 | |||||
Series A 5.50% 8/1/42 | 1,000,000 | 1,027,720 | |||||
Series A 5.75% 8/1/37 | 590,000 | 628,751 | |||||
Series A-1 5.00% 8/1/43 | 2,000,000 | 1,995,220 | |||||
Series C 5.00% 8/1/40 | 1,000,000 | 1,035,450 | |||||
Series C 6.00% 8/1/39 | 500,000 | 541,055 | |||||
Regional Transportation District | |||||||
Revenue (FasTracks Project) Series A | |||||||
4.375% 11/1/31 (AMBAC) | 1,250,000 | 1,303,100 | |||||
4.50% 11/1/36 (AGM) | 3,000,000 | 3,158,040 | |||||
5.00% 11/1/28 (AMBAC) | 2,500,000 | 2,815,650 | |||||
5.00% 11/1/38 | 4,085,000 | 4,598,974 | |||||
24,923,638 | |||||||
State & Territory General Obligation Bonds 1.80% | |||||||
Puerto Rico Commonwealth | |||||||
(Public Improvement) | |||||||
Series C 6.00% 7/1/39 | 505,000 | 515,090 | |||||
Western State College | |||||||
5.00% 5/15/34 | 750,000 | 824,805 | |||||
1,339,895 | |||||||
Transportation Revenue Bonds 8.12% | |||||||
Denver City & County Airport | |||||||
System Revenue | |||||||
Series A 5.25% 11/15/36 | 750,000 | 844,275 | |||||
Series B 5.00% 11/15/27 | 1,000,000 | 1,176,060 | |||||
Series B 5.00% 11/15/28 | 1,000,000 | 1,168,450 | |||||
E-470 Public Highway Authority | |||||||
Revenue Series C 5.25% 9/1/25 | 310,000 | 343,911 | |||||
Regional Transportation District | |||||||
Revenue (Denver Transit Partners) | |||||||
6.00% 1/15/41 | 2,175,000 | 2,504,991 | |||||
6,037,687 | |||||||
Water & Sewer Revenue Bond 1.52% | |||||||
Parker Water & Sanitation District | |||||||
5.00% 8/1/43 | 1,000,000 | 1,127,520 | |||||
1,127,520 | |||||||
Total Municipal Bonds | |||||||
(cost $96,096,590) | 102,632,038 |
6
Principal | ||||||||
Amount | Value | |||||||
Short-Term Investment 0.27% | ||||||||
¤ Variable Rate Demand Note 0.27% | ||||||||
Colorado State Educational & | ||||||||
Cultural Facilities Authority | ||||||||
Revenue (National Jewish | ||||||||
Federation Bond Program) | ||||||||
Series D-5 0.15% 10/1/38 | ||||||||
(LOC-JPMorgan Chase Bank N.A.) | $ | 200,000 | $ | 200,000 | ||||
Total Short-Term Investments | ||||||||
(cost $200,000) | 200,000 | |||||||
Total Value of Securities 138.31% | ||||||||
(cost $96,296,590) | 102,832,038 | |||||||
Liquidation Value of Preferred | ||||||||
Stock (40.35%) | (30,000,000 | ) | ||||||
Receivables and Other Assets | ||||||||
Net of Liabilities 2.04% | 1,516,600 | |||||||
Net Assets Applicable to 4,837,100 | ||||||||
Shares Outstanding; Equivalent to | ||||||||
$15.37 Per Share 100.00% | $ | 74,348,638 |
Components of Net Assets at March 31, 2013: | |||||||
Common stock, $0.01 par value, 200 million shares | |||||||
authorized to the Fund | $ | 66,918,121 | |||||
Undistributed net investment income | 800,128 | ||||||
Accumulated net realized gain on investments | 94,941 | ||||||
Net unrealized appreciation of investments | 6,535,448 | ||||||
Total net assets | $ | 74,348,638 |
Summary of
Abbreviations:
AGM Insured by Assured
Guaranty Municipal Corporation
AMBAC Insured by AMBAC Assurance
Corporation
ASSURED GTY Insured by Assured Guaranty Corporation
FHA
Federal Housing Administration
HUD Housing & Urban Development Section
8
LOC Letter of Credit
NATL-RE Insured
by National Public Finance Guarantee Corporation
SGI Insured by Syncora
Guarantee Inc.
VA Veterans Administration
collateral
See accompanying notes, which are an integral part of the financial statements.
(continues) 7
Statements of net assets
Delaware Investments® Minnesota
Municipal Income Fund II, Inc.
March 31, 2013
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds 140.31% | |||||||
Corporate-Backed Revenue Bonds 7.39% | |||||||
Cloquet Pollution Control Revenue | |||||||
(Potlatch Project) 5.90% 10/1/26 | $ | 5,500,000 | $ | 5,520,515 | |||
Laurentian Energy Authority | |||||||
Cogeneration Revenue | |||||||
Series A 5.00% 12/1/21 | 3,325,000 | 3,268,575 | |||||
Sartell Environmental Improvement | |||||||
Revenue (International Paper) | |||||||
Series A 5.20% 6/1/27 | 1,000,000 | 1,006,910 | |||||
St. Paul Port Authority Revenue | |||||||
(Gerdau St. Paul Steel Mill Project) | |||||||
Series 7 4.50% 10/1/37 (AMT) | 3,155,000 | 3,182,953 | |||||
12,978,953 | |||||||
Education Revenue Bonds 16.90% | |||||||
Bayton Township Lease Revenue | |||||||
(St. Croix Preparatory Academy) | |||||||
5.75% 8/1/42 | 300,000 | 302,715 | |||||
Minnesota Higher Education Facilities | |||||||
Authority Revenue | |||||||
(Augsburg College) | |||||||
Series 6-J1 5.00% 5/1/28 | 1,500,000 | 1,534,140 | |||||
(Carleton College) | |||||||
Series D 5.00% 3/1/30 | 1,120,000 | 1,271,637 | |||||
Series 6-T 5.00% 1/1/28 | 1,000,000 | 1,138,660 | |||||
(College of St. Benedict) | |||||||
Series 7-M 5.00% 3/1/31 | 300,000 | 319,194 | |||||
Series 7-M 5.125% 3/1/36 | 275,000 | 291,242 | |||||
(Macalester College) | |||||||
Series 7-S 4.00% 5/1/43 | 1,250,000 | 1,294,125 | |||||
(St. Catherine University) | |||||||
Series 7-Q 5.00% 10/1/32 | 700,000 | 780,402 | |||||
(St. Marys University) | |||||||
Series 5-U 4.80% 10/1/23 | 1,400,000 | 1,411,312 | |||||
(St. Scholastic College) | |||||||
Series H 5.25% 12/1/35 | 1,000,000 | 1,089,960 | |||||
(University of St. Thomas) | |||||||
Series 6-X 5.00% 4/1/29 | 2,250,000 | 2,519,258 | |||||
Series 7-A 5.00% 10/1/39 | 1,000,000 | 1,104,690 | |||||
Series 7-U 5.00% 4/1/20 | 495,000 | 600,415 | |||||
Series 7-U 5.00% 4/1/21 | 450,000 | 549,180 | |||||
Series 7-U 5.00% 4/1/22 | 750,000 | 919,590 | |||||
St. Paul Housing & Redevelopment | |||||||
Authority Charter School | |||||||
Lease Revenue | |||||||
(Nova Classical Academy) | |||||||
Series A 6.375% 9/1/31 | 750,000 | 833,505 | |||||
University of Minnesota | |||||||
Series A | |||||||
5.00% 12/1/27 | 1,110,000 | 1,333,421 | |||||
5.00% 12/1/28 | 1,880,000 | 2,248,480 | |||||
5.00% 12/1/29 | 2,265,000 | 2,695,327 | |||||
5.00% 12/1/31 | 1,000,000 | 1,180,600 | |||||
5.00% 12/1/36 | 3,000,000 | 3,486,269 | |||||
5.25% 4/1/29 | 1,000,000 | 1,189,680 | |||||
Series C 5.00% 12/1/19 | 1,290,000 | 1,582,443 | |||||
29,676,245 | |||||||
Electric Revenue Bonds 6.43% | |||||||
Central Minnesota Municipal | |||||||
Power Agency Revenue | |||||||
(Brookings Southeast Twin | |||||||
Cities Transportation) | |||||||
5.00% 1/1/32 | 1,130,000 | 1,278,245 | |||||
Chaska Electric Revenue | |||||||
(Generating Facilities) | |||||||
Series A 5.25% 10/1/25 | 250,000 | 276,550 | |||||
Minnesota Municipal Power Agency | |||||||
Electric Revenue Series A | |||||||
5.00% 10/1/34 | 1,900,000 | 2,007,160 | |||||
5.25% 10/1/19 | 1,610,000 | 1,721,283 | |||||
Southern Minnesota Municipal | |||||||
Power Agency Supply Revenue | |||||||
Series A 5.25% 1/1/30 | 1,000,000 | 1,117,850 | |||||
Western Minnesota Municipal Power | |||||||
Agency Supply Revenue Series A | |||||||
5.00% 1/1/25 | 3,000,000 | 3,676,350 | |||||
5.00% 1/1/26 | 1,000,000 | 1,213,810 | |||||
11,291,248 | |||||||
Healthcare Revenue Bonds 40.12% | |||||||
Anoka Health Care Facility | |||||||
Revenue (Homestead | |||||||
Anoka Income Project) | |||||||
Series A 7.00% 11/1/46 | 1,200,000 | 1,294,644 | |||||
Center City Health Care | |||||||
Facilities Revenue (Hazelden | |||||||
Foundation Project) | |||||||
4.75% 11/1/31 | 850,000 | 900,482 | |||||
5.00% 11/1/41 | 1,600,000 | 1,724,032 | |||||
Duluth Economic Development | |||||||
Authority Revenue | |||||||
(St. Lukes Hospital | |||||||
Authority Obligation Group) | |||||||
5.75% 6/15/32 | 200,000 | 213,538 | |||||
6.00% 6/15/39 | 1,000,000 | 1,079,150 | |||||
Fergus Falls Health Care Facilities | |||||||
Revenue (Lake Region Healthcare) | |||||||
5.00% 8/1/30 | 1,000,000 | 1,041,670 | |||||
Glencoe Health Care Facilities | |||||||
Revenue (Glencoe Regional | |||||||
Health Services Project) | |||||||
5.00% 4/1/25 | 2,000,000 | 2,020,780 | |||||
Maple Grove Health Care System | |||||||
Revenue (Maple Grove Hospital) | |||||||
5.25% 5/1/37 | 1,100,000 | 1,146,112 | |||||
Minneapolis Health Care System | |||||||
Revenue (Fairview Health Services) | |||||||
Series A 6.375% 11/15/23 | 605,000 | 735,160 | |||||
Series A 6.625% 11/15/28 | 1,040,000 | 1,270,766 | |||||
Series B 6.50% 11/15/38 | |||||||
(ASSURED GTY) | 2,295,000 | 2,806,418 | |||||
Series D 5.00% 11/15/34 | |||||||
(AMBAC) | 2,000,000 | 2,057,180 |
8
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds (continued) | |||||||
Healthcare Revenue Bonds (continued) | |||||||
Minneapolis Revenue (National | |||||||
Marrow Donor Program Project) | |||||||
4.875% 8/1/25 | $ | 1,000,000 | $ | 1,038,390 | |||
Minnesota Agricultural & Economic | |||||||
Development Board Revenue | |||||||
Un-Refunded Balance Series A | |||||||
5.75% 11/15/26 (NATL-RE) | 100,000 | 100,173 | |||||
6.375% 11/15/29 | 195,000 | 195,778 | |||||
Rochester Health Care & Housing | |||||||
Revenue (Samaritan Bethany) | |||||||
Series A 7.375% 12/1/41 | 1,220,000 | 1,370,694 | |||||
Rochester Health Care Facilities | |||||||
Revenue (Mayo Clinic) | |||||||
4.00% 11/15/41 | 8,780,000 | 9,151,657 | |||||
Series A 4.00% 11/15/30 | 1,240,000 | 1,430,154 | |||||
Series C 4.50% 11/15/38 | 2,000,000 | 2,384,520 | |||||
Sartell Health Care Facility Revenue | |||||||
(Country Manor Campus Project) | |||||||
5.25% 9/1/30 | 1,000,000 | 1,024,230 | |||||
Shakopee Health Care Facilities | |||||||
Revenue (St. Francis Regional | |||||||
Medical Center) 5.25% 9/1/34 | 1,560,000 | 1,583,353 | |||||
St. Cloud Health Care Revenue | |||||||
(Centracare Health System Project) | |||||||
5.50% 5/1/39 (ASSURED GTY) | 1,500,000 | 1,648,740 | |||||
Series A 5.125% 5/1/30 | 4,425,000 | 4,883,209 | |||||
St. Louis Park Health Care | |||||||
Facilities Revenue | |||||||
(Park Nicollet Health Services) | |||||||
5.75% 7/1/39 | 3,315,000 | 3,721,850 | |||||
Series C 5.50% 7/1/23 | 1,000,000 | 1,123,320 | |||||
St. Paul Housing & Redevelopment | |||||||
Authority Health Care Revenue | |||||||
(Allina Health System) | |||||||
Series A 5.00% 11/15/18 (NATL-RE) | 1,380,000 | 1,608,114 | |||||
Series A-1 5.25% 11/15/29 | 1,395,000 | 1,558,745 | |||||
(Childrens Health Care Facilities) | |||||||
Series A1 5.00% 8/15/34 (AGM) | 500,000 | 544,150 | |||||
(Episcopal Homes Project) | |||||||
Series A 4.75% 11/1/31 | 740,000 | 745,128 | |||||
(Franciscan Health Elderly Project) | |||||||
5.40% 11/20/42 (GNMA) (FHA) | 2,700,000 | 2,703,213 | |||||
(Health East Project) | |||||||
6.00% 11/15/30 | 2,775,000 | 2,982,848 | |||||
6.00% 11/15/35 | 2,500,000 | 2,677,425 | |||||
(Health Partners Obligation Group | |||||||
Project) 5.25% 5/15/36 | 2,000,000 | 2,090,820 | |||||
(Regions Hospital Project) | |||||||
5.30% 5/15/28 | 1,000,000 | 1,001,150 | |||||
(Senior Carondelet Village Project) | |||||||
Series A 6.00% 8/1/42 | 770,000 | 817,062 | |||||
Washington County Housing & | |||||||
Redevelopment Authority | |||||||
Revenue (Birchwood & Woodbury | |||||||
Projects) Series A 5.625% 6/1/37 | 1,500,000 | 1,533,405 | |||||
Wayzata Senior Housing Revenue | |||||||
(Folkestone Senior Living | |||||||
Community) Series A | |||||||
5.50% 11/1/32 | 420,000 | 447,031 | |||||
5.75% 11/1/39 | 945,000 | 1,014,883 | |||||
6.00% 5/1/47 | 1,475,000 | 1,595,257 | |||||
Winona Health Care Facilities | |||||||
Revenue (Winona Health | |||||||
Obligated Group) | |||||||
4.65% 7/1/26 | 465,000 | 488,492 | |||||
4.75% 7/1/27 | 785,000 | 821,793 | |||||
5.00% 7/1/23 | 1,010,000 | 1,095,820 | |||||
5.00% 7/1/34 | 750,000 | 785,325 | |||||
70,456,661 | |||||||
Housing Revenue Bonds 6.31% | |||||||
Minneapolis Multifamily | |||||||
Housing Revenue | |||||||
(Gaar Scott Loft Project) | |||||||
5.95% 5/1/30 (AMT) | |||||||
(LOC-U.S. Bank N.A.) | 835,000 | 837,689 | |||||
(Olson Townhomes Project) | |||||||
6.00% 12/1/19 (AMT) | 600,000 | 600,240 | |||||
(Seward Towers Project) | |||||||
5.00% 5/20/36 (GNMA) | 2,000,000 | 2,044,119 | |||||
(Sumner Housing Project) Series A | |||||||
5.15% 2/20/45 (GNMA) (AMT) | 2,000,000 | 2,010,100 | |||||
Minnesota State Housing Finance | |||||||
Agency Revenue (Mortgage- | |||||||
Backed Securities Program) | |||||||
4.40% 7/1/32 (GNMA) | |||||||
(FNMA) (FHLMC) | 1,460,000 | 1,616,804 | |||||
(Rental Housing) | |||||||
Series A 5.00% 2/1/35 (AMT) | 1,000,000 | 1,003,620 | |||||
(Residential Housing) | |||||||
Series D 4.75% 7/1/32 (AMT) | 880,000 | 905,485 | |||||
Series I 5.15% 7/1/38 (AMT) | 625,000 | 642,981 | |||||
Series L 5.10% 7/1/38 (AMT) | 1,330,000 | 1,420,906 | |||||
11,081,944 | |||||||
Lease Revenue Bonds 14.94% | |||||||
Andover Economic Development | |||||||
Authority Public Facilities | |||||||
Lease Revenue (Andover | |||||||
Community Center) | |||||||
5.125% 2/1/24 | 205,000 | 212,442 | |||||
5.20% 2/1/29 | 410,000 | 425,141 |
(continues) 9
Statements of net assets
Delaware Investments® Minnesota Municipal Income Fund II, Inc.
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds (continued) | |||||||
Lease Revenue Bonds (continued) | |||||||
St. Paul Port Authority Lease Revenue | |||||||
(Cedar Street Office Building Project) | |||||||
5.00% 12/1/22 | $ | 2,385,000 | $ | 2,394,302 | |||
5.25% 12/1/27 | 2,800,000 | 2,810,640 | |||||
(Robert Street Office | |||||||
Building Project) | |||||||
Series 3-11 5.00% 12/1/27 | 2,000,000 | 2,057,900 | |||||
State of Minnesota General Fund | |||||||
Revenue Appropriations Series B | |||||||
4.00% 3/1/26 | 3,720,000 | 4,123,620 | |||||
5.00% 3/1/27 | 2,160,000 | 2,574,871 | |||||
5.00% 3/1/29 | 3,525,000 | 4,147,304 | |||||
University of Minnesota | |||||||
Special Purpose Revenue | |||||||
(State Supported Biomed | |||||||
Science Research) | |||||||
5.00% 8/1/35 | 1,040,000 | 1,192,703 | |||||
5.00% 8/1/36 | 4,000,000 | 4,597,519 | |||||
Virginia Housing & Redevelopment | |||||||
Authority Health Care Facility | |||||||
Lease Revenue | |||||||
5.25% 10/1/25 | 680,000 | 703,705 | |||||
5.375% 10/1/30 | 965,000 | 1,006,080 | |||||
26,246,227 | |||||||
Local General Obligation Bonds 8.45% | |||||||
City of Willmar (Rice Memorial | |||||||
Hospital Project) | |||||||
Series A 4.00% 2/1/32 | 2,940,000 | 3,128,130 | |||||
Dakota County Community | |||||||
Development Agency | |||||||
(Senior Housing Facilities) | |||||||
Series A 5.00% 1/1/23 | 1,100,000 | 1,184,623 | |||||
Hopkins Independent School | |||||||
District #270 Series A 5.00% 2/1/28 | 1,000,000 | 1,172,710 | |||||
Rocori Independent School District #750 | |||||||
(School Building) Series B | |||||||
5.00% 2/1/22 | 1,010,000 | 1,193,588 | |||||
5.00% 2/1/24 | 1,075,000 | 1,264,523 | |||||
5.00% 2/1/25 | 1,115,000 | 1,307,527 | |||||
5.00% 2/1/26 | 1,155,000 | 1,354,434 | |||||
Shakopee Independent School | |||||||
District #720 | |||||||
(School Building-Crossover) | |||||||
5.00% 2/1/23 | 1,440,000 | 1,803,398 | |||||
Thief River Falls Independent School | |||||||
District #564 (School Building) | |||||||
Series A 4.00% 2/1/32 | 1,160,000 | 1,252,742 | |||||
Washington County Housing & | |||||||
Redevelopment Authority Series B | |||||||
5.50% 2/1/22 (NATL-RE) | 525,000 | 527,037 | |||||
5.50% 2/1/32 (NATL-RE) | 655,000 | 657,260 | |||||
14,845,972 | |||||||
§Pre-Refunded/Escrowed to Maturity Bonds 17.94% | |||||||
Dakota-Washington Counties | |||||||
Housing & Redevelopment | |||||||
Authority Revenue | |||||||
(Bloomington Single Family | |||||||
Residential Mortgage) | |||||||
Series B 8.375% 9/1/21 | |||||||
(GNMA) (FHA) (VA) (AMT) | 7,055,000 | 10,162,022 | |||||
Southern Minnesota Municipal | |||||||
Power Agency Supply | |||||||
Revenue Refunding | |||||||
Series A 5.75% 1/1/18-13 | 3,350,000 | 3,585,472 | |||||
St. Paul Housing & Redevelopment | |||||||
Authority Sales Tax | |||||||
(Civic Center Project) | |||||||
5.55% 11/1/23 | 2,300,000 | 2,573,631 | |||||
5.55% 11/1/23 (NATL-RE) (IBC) | 4,200,000 | 4,699,674 | |||||
University of Minnesota Hospital & | |||||||
Clinics 6.75% 12/1/16 | 2,580,000 | 3,041,175 | |||||
University of Minnesota Series A | |||||||
5.50% 7/1/21 | 4,000,000 | 4,992,360 | |||||
5.75% 7/1/18 | 2,000,000 | 2,458,900 | |||||
31,513,234 | |||||||
Special Tax Revenue Bonds 7.69% | |||||||
Guam Government Business | |||||||
Privilege Tax Revenue | |||||||
Series A 5.25% 1/1/36 | 150,000 | 167,427 | |||||
Hennepin County Sales Tax Revenue | |||||||
(Second Lien-Ballpark Project) | |||||||
Series B 4.75% 12/15/27 | 1,905,000 | 2,146,440 | |||||
Minneapolis Community Planning & | |||||||
Economic Development | |||||||
Department (Limited Tax | |||||||
Supported Common Bond Fund) | |||||||
6.25% 12/1/30 | 1,000,000 | 1,210,210 | |||||
Series 1 5.50% 12/1/24 (AMT) | 1,000,000 | 1,069,760 | |||||
Series 5 5.70% 12/1/27 | 375,000 | 377,194 | |||||
Minnesota Public Safety Radio | |||||||
5.00% 6/1/23 | 2,845,000 | 3,352,149 | |||||
Puerto Rico Sales Tax | |||||||
Financing Revenue | |||||||
^(Capital Appreciation) Series A | |||||||
5.73% 8/1/44 (NATL-RE) | 8,485,000 | 1,371,515 | |||||
First Subordinate | |||||||
Series A 5.75% 8/1/37 | 1,200,000 | 1,278,816 | |||||
Series C | |||||||
5.00% 8/1/40 | 985,000 | 1,019,918 | |||||
5.25% 8/1/40 | 485,000 | 510,555 | |||||
St. Paul Port Authority (Brownsfields | |||||||
Redevelopment Tax) Series 2 | |||||||
5.00% 3/1/37 | 895,000 | 995,464 | |||||
13,499,448 |
10
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
State & Territory General Obligation Bonds 9.16% | ||||||||
Minnesota State Refunding | ||||||||
(State Various Purpose) | ||||||||
Series D 5.00% 8/1/24 | $ | 2,700,000 | $ | 3,270,753 | ||||
Minnesota State (State Trunk Highway) | ||||||||
Series B | ||||||||
5.00% 10/1/22 | 5,500,000 | 6,875,275 | ||||||
5.00% 10/1/29 | 3,715,000 | 4,436,973 | ||||||
Puerto Rico Commonwealth | ||||||||
Public Improvement | ||||||||
Series A 5.75% 7/1/41 | 1,500,000 | 1,506,210 | ||||||
16,089,211 | ||||||||
Transportation Revenue Bonds 3.37% | ||||||||
Minneapolis - St. Paul Metropolitan | ||||||||
Airports Commission Revenue | ||||||||
5.00% 1/1/22 | 670,000 | 802,848 | ||||||
Series A 5.00% 1/1/35 (AMBAC) | 2,000,000 | 2,108,260 | ||||||
Series B 5.00% 1/1/26 | 540,000 | 632,826 | ||||||
Series B 5.00% 1/1/27 | 1,190,000 | 1,384,517 | ||||||
Series B 5.00% 1/1/30 | 500,000 | 572,560 | ||||||
St. Paul Port Authority Revenue | ||||||||
(Amherst H Wilder Foundation) | ||||||||
Series 3 5.00% 12/1/36 | 380,000 | 424,148 | ||||||
5,925,159 | ||||||||
Water & Sewer Revenue Bonds 1.61% | ||||||||
Metropolitan Council Wastewater | ||||||||
Revenue Series B 4.00% 9/1/27 | 1,145,000 | 1,262,901 | ||||||
St. Paul Sewer Revenue | ||||||||
Series D 5.00% 12/1/21 | 1,325,000 | 1,564,758 | ||||||
2,827,659 | ||||||||
Total Municipal Bonds | ||||||||
(cost $232,122,331) | 246,431,961 | |||||||
Total Value of Securities 140.31% | ||||||||
(cost $232,122,331) | 246,431,961 | |||||||
Liquidation Value of Preferred | ||||||||
Stock (42.70%) | (75,000,000 | ) | ||||||
Receivables and Other Assets Net of | ||||||||
Liabilities 2.39% | 4,197,259 | |||||||
Net Assets Applicable to 11,504,975 | ||||||||
Shares Outstanding; Equivalent to | ||||||||
$15.27 Per Share 100.00% | $ | 175,629,220 | ||||||
Components of Net Assets at March 31, 2013: | ||||||||
Common stock, $0.01 par value, 200 million shares | ||||||||
authorized to the Fund | $ | 157,931,075 | ||||||
Undistributed net investment income | 1,759,475 | |||||||
Accumulated net realized gain on investments | 1,629,040 | |||||||
Net unrealized appreciation of investments | 14,309,630 | |||||||
Total net assets | $ | 175,629,220 |
Summary of
Abbreviations:
AGM Insured by Assured
Guaranty Municipal Corporation
AMBAC Insured by AMBAC Assurance Corporation
AMT Subject to Alternative Minimum Tax
ASSURED GTY Insured by
Assured Guaranty Corporation
FHA Federal Housing Administration
FHLMC
Federal Home Loan Mortgage Corporation collateral
FNMA Federal National
Mortgage Association collateral
GNMA Government National Mortgage
Association collateral
IBC Insured Bond Certificate
LOC Letter of
Credit
NATL-RE Insured by National Public Finance Guarantee Corporation
VA Veterans Administration collateral
See accompanying notes, which are an integral part of the financial statements.
(continues) 11
Statements of net assets
Delaware Investments®
National Municipal Income Fund
March 31, 2013
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds 143.61% | |||||||
Corporate-Backed Revenue Bonds 15.82% | |||||||
Buckeye, Ohio Tobacco Settlement | |||||||
Financing Authority Asset-Backed | |||||||
Senior Turbo Series A-2 | |||||||
5.875% 6/1/47 | $ | 480,000 | $ | 427,642 | |||
6.50% 6/1/47 | 430,000 | 419,022 | |||||
Golden State, California Tobacco | |||||||
Securitization Corporate Settlement | |||||||
Revenue (Asset-Backed Senior | |||||||
Notes) Series A-1 | |||||||
5.125% 6/1/47 | 500,000 | 439,320 | |||||
5.75% 6/1/47 | 1,615,000 | 1,554,210 | |||||
Harris County, Texas Industrial | |||||||
Development Solid Waste | |||||||
Disposal Revenue (Deer Park | |||||||
Refining Project) 5.00% 2/1/23 | 150,000 | 167,156 | |||||
Illinois Railsplitter Tobacco Settlement | |||||||
Authority 6.25% 6/1/24 | 500,000 | 555,800 | |||||
Louisiana Local Government | |||||||
Environmental Facilities & | |||||||
Community Development | |||||||
Authority (Westlake Chemical) | |||||||
Series A 6.50% 8/1/29 | 645,000 | 765,338 | |||||
Series A-1 6.50% 11/1/35 | 255,000 | 300,301 | |||||
Maryland Economic Development | |||||||
Port Facilities Revenue (CNX | |||||||
Marine Terminals) 5.75% 9/1/25 | 260,000 | 289,060 | |||||
M-S-R Energy Authority, California | |||||||
Gas Series C 7.00% 11/1/34 | 1,000,000 | 1,400,420 | |||||
| Navajo County, Arizona Pollution | ||||||
Control Revenue | |||||||
Series D 5.75% 6/1/34 | 500,000 | 562,400 | |||||
New Jersey Economic Development | |||||||
Authority Special Facilities | |||||||
Revenue (Continental Airlines | |||||||
Project) 5.25% 9/15/29 (AMT) | 500,000 | 516,880 | |||||
New York Liberty Development | |||||||
Revenue (Goldman Sachs | |||||||
Headquarters) 5.25% 10/1/35 | 500,000 | 586,020 | |||||
Ohio State Air Quality Development | |||||||
Authority Revenue (First Energy | |||||||
Generation) Series A | |||||||
5.70% 8/1/20 | 260,000 | 310,666 | |||||
Pennsylvania Economic Development | |||||||
Financing Authority Exempt | |||||||
Facilities Revenue (Allegheny | |||||||
Energy Supply) 7.00% 7/15/39 | 345,000 | 411,292 | |||||
Pima County, Arizona Industrial | |||||||
Development Authority Pollution | |||||||
Control Revenue (Tucson Electric | |||||||
Power San Juan) 5.75% 9/1/29 | 250,000 | 263,758 | |||||
Salt Verde Financial, Arizona Gas | |||||||
Revenue Senior Note | |||||||
5.00% 12/1/37 | 400,000 | 447,496 | |||||
St. John the Baptist Parish, Louisiana | |||||||
(Marathon Oil) Series A | |||||||
5.125% 6/1/37 | 500,000 | 530,085 | |||||
Suffolk County, New York Tobacco | |||||||
Asset Securitization Series B | |||||||
5.00% 6/1/32 | 750,000 | 792,615 | |||||
10,739,481 | |||||||
Education Revenue Bonds 24.78% | |||||||
Arizona Board of Regents System | |||||||
Revenue (University of | |||||||
Arizona) Series A | |||||||
5.00% 7/1/33 | 1,000,000 | 1,150,549 | |||||
5.00% 6/1/39 | 500,000 | 559,405 | |||||
Bowling Green, Ohio Student | |||||||
Housing Revenue (CFP I State | |||||||
University Project) 6.00% 6/1/45 | 270,000 | 299,819 | |||||
Build New York City, New York | |||||||
Resource (International Leadership | |||||||
Charter School) | |||||||
6.00% 7/1/43 | 500,000 | 501,465 | |||||
California Statewide Communities | |||||||
Development Authority School | |||||||
Facility Revenue (Aspire Public | |||||||
Schools) 6.125% 7/1/46 | 625,000 | 661,350 | |||||
California Statewide Communities | |||||||
Development Authority Student | |||||||
Housing Revenue (Irvine, LLC - | |||||||
UCI East Campus) 6.00% 5/15/23 | 470,000 | 530,367 | |||||
Delaware County, Pennsylvania | |||||||
Authority (Villanova University) | |||||||
5.00% 8/1/20 | 500,000 | 601,030 | |||||
Iowa Higher Education Loan Authority | |||||||
Revenue (Private College Facility) | |||||||
5.00% 10/1/38 | 500,000 | 532,785 | |||||
Marietta, Georgia Development | |||||||
Authority Revenue (Life University | |||||||
Income Project) 7.00% 6/15/39 | 430,000 | 462,267 | |||||
Maryland Health & Higher | |||||||
Educational Facilities Authority | |||||||
(Loyola University) Series A | |||||||
5.00% 10/1/39 | 650,000 | 735,300 | |||||
Maryland State Economic | |||||||
Development Student Housing | |||||||
Revenue (University of Maryland | |||||||
College Park Projects) 5.75% 6/1/33 | 370,000 | 402,590 | |||||
Massachusetts State Health & | |||||||
Educational Facilities Authority | |||||||
Revenue (Harvard University) | |||||||
Series A 5.00% 12/15/29 | 600,000 | 711,630 | |||||
Missouri State Health & Educational | |||||||
Facilities Authority Revenue | |||||||
(Washington University) | |||||||
Series B 5.00% 11/15/30 | 600,000 | 713,472 | |||||
Monroe County, New York Industrial | |||||||
Development Revenue (Nazareth | |||||||
College Rochester Project) | |||||||
5.50% 10/1/41 | 495,000 | 546,411 |
12
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds (continued) | |||||||
Education Revenue Bonds (continued) | |||||||
Montgomery County, Pennsylvania | |||||||
Higher Education & Health | |||||||
Authority Revenue | |||||||
(Arcadia University) | |||||||
5.25% 4/1/30 | $ | 550,000 | $ | 593,571 | |||
New Jersey Economic Development | |||||||
Authority Revenue | |||||||
(MSU Student Housing Project) | |||||||
5.875% 6/1/42 | 735,000 | 826,022 | |||||
New York City, New York Trust for | |||||||
Cultural Resources (Whitney | |||||||
Museum of American Art) | |||||||
5.00% 7/1/31 | 500,000 | 555,390 | |||||
New York State Dormitory | |||||||
Authority (Columbia University) | |||||||
5.00% 10/1/41 | 600,000 | 691,086 | |||||
Oregon State Facilities Authority | |||||||
Revenue (CHF-Ashland) | |||||||
5.00% 7/1/44 (AGM) | 1,000,000 | 1,094,090 | |||||
#(Concordia University Project) | |||||||
Series A 144A 6.125% 9/1/30 | 135,000 | 146,583 | |||||
Pennsylvania State Higher Educational | |||||||
Facilities Authority Student Housing | |||||||
Revenue (Edinboro University | |||||||
Foundation) 5.80% 7/1/30 | 400,000 | 451,928 | |||||
(University Properties - East | |||||||
Stroudsburg University) | |||||||
5.25% 7/1/19 | 510,000 | 565,794 | |||||
Phoenix, Arizona Industrial | |||||||
Development Authority Revenue | |||||||
(Eagle College Prep Project) | |||||||
Series A 5.00% 7/1/43 | 500,000 | 499,960 | |||||
(Rowan University) 5.00% 6/1/42 | 1,000,000 | 1,075,710 | |||||
Pima County, Arizona Industrial | |||||||
Development Authority Revenue | |||||||
(Edkey Charter Schools Project) | |||||||
6.00% 7/1/48 | 500,000 | 501,420 | |||||
Private Colleges & Universities | |||||||
Authority Revenue (Mercer | |||||||
University Project) Series A | |||||||
5.00% 10/1/32 | 135,000 | 146,428 | |||||
St. Lawrence County, New York | |||||||
Industrial Development Agency | |||||||
(St. Lawrence University Project) | |||||||
5.00% 7/1/26 | 270,000 | 320,911 | |||||
Troy, New York Capital Resource | |||||||
Revenue (Rensselaer Polytechnic) | |||||||
Series A 5.125% 9/1/40 | 600,000 | 656,886 | |||||
Wyoming Community Development | |||||||
Authority Student Housing | |||||||
Revenue (CHF-Wyoming LLC) | |||||||
6.50% 7/1/43 | 250,000 | 284,555 | |||||
16,818,774 | |||||||
Electric Revenue Bonds 4.75% | |||||||
Puerto Rico Electric Power | |||||||
Authority Revenue | |||||||
Series A 5.00% 7/1/42 | 830,000 | 764,820 | |||||
Series TT 5.00% 7/1/26 | 1,165,000 | 1,153,233 | |||||
Series WW 5.50% 7/1/38 | 200,000 | 199,576 | |||||
Series XX 5.25% 7/1/40 | 805,000 | 772,832 | |||||
Series ZZ 5.25% 7/1/26 | 330,000 | 332,845 | |||||
3,223,306 | |||||||
Healthcare Revenue Bonds 20.02% | |||||||
Arizona Health Facilities Authority | |||||||
Revenue (Catholic Healthcare | |||||||
West) Series D 5.00% 7/1/28 | 500,000 | 543,995 | |||||
Brevard County, Florida Health | |||||||
Facilities Authority Revenue | |||||||
(Heath First Project) 7.00% 4/1/39 | 90,000 | 109,963 | |||||
Butler County, Pennsylvania Hospital | |||||||
Authority Revenue (Butler Health | |||||||
System Project) 7.125% 7/1/29 | 300,000 | 373,311 | |||||
Hawaii Pacific Health Special Purpose | |||||||
Revenue Series A 5.50% 7/1/40 | 300,000 | 328,581 | |||||
Illinois Finance Authority Revenue | |||||||
(Franciscan Communities) | |||||||
Series A 5.125% 5/15/43 | 250,000 | 256,443 | |||||
(Silver Cross & Medical Centers) | |||||||
7.00% 8/15/44 | 450,000 | 531,864 | |||||
Koyukuk, Alaska Revenue (Tanana | |||||||
Chiefs Conference Health Care | |||||||
Facility Project) 7.75% 10/1/41 | 300,000 | 340,191 | |||||
Louisiana Public Facilities Authority | |||||||
Revenue (Ochsner Clinic | |||||||
Foundation Project) 6.50% 5/15/37 | 105,000 | 124,785 | |||||
Lycoming County, Pennsylvania | |||||||
Authority Health System | |||||||
Revenue (Susquehanna Health | |||||||
System Project) | |||||||
Series A 5.50% 7/1/28 | 500,000 | 546,770 | |||||
Maine Health & Higher Educational | |||||||
Facilities Authority Revenue | |||||||
(Maine General Medical Center) | |||||||
6.75% 7/1/41 | 300,000 | 360,672 | |||||
Maricopa County, Arizona Industrial | |||||||
Development Authority | |||||||
Health Facilities Revenue | |||||||
(Catholic Healthcare West) | |||||||
Series A 6.00% 7/1/39 | 500,000 | 568,325 | |||||
Maryland Health & Higher Educational | |||||||
Facilities Authority Revenue (Carroll | |||||||
Hospital) Series A 5.00% 7/1/37 | 500,000 | 549,915 | |||||
Monroe County, Pennsylvania | |||||||
Hospital Authority Revenue | |||||||
(Pocono Medical Center) | |||||||
Series A 5.00% 1/1/41 | 500,000 | 534,130 | |||||
Montgomery County, Pennsylvania | |||||||
Industrial Development Authority | |||||||
Revenue (Mortgage-Whitemarsh | |||||||
Continuing Care) 6.25% 2/1/35 | 675,000 | 685,402 |
(continues) 13
Statements of net assets
Delaware
Investments® National Municipal Income Fund
Principal | ||||||
Amount | Value | |||||
Municipal Bonds (continued) | ||||||
Healthcare Revenue Bonds (continued) | ||||||
New Hampshire Health & Education | ||||||
Facilities Authority Revenue | ||||||
(Dartmouth-Hitchcock Medical | ||||||
Center) 6.00% 8/1/38 | $ | 300,000 | $ | 348,321 | ||
New Jersey Health Care Facilities | ||||||
Financing Authority Revenue | ||||||
Refunding (St. Peters University | ||||||
Hospital) 6.25% 7/1/35 | 300,000 | 349,461 | ||||
New Mexico State Hospital | ||||||
Equipment Loan Council Revenue | ||||||
(Presbyterian Healthcare) | ||||||
5.00% 8/1/39 | 500,000 | 546,405 | ||||
New York State Dormitory Authority | ||||||
Revenue Non State Supported | ||||||
Debt (Orange Regional Medical | ||||||
Center) 6.25% 12/1/37 | 500,000 | 553,370 | ||||
Ohio State Hospital Facilities Revenue | ||||||
Refunding (Cleveland Clinic | ||||||
Health) Series A 5.50% 1/1/39 | 300,000 | 347,019 | ||||
Orange County, Florida Health | ||||||
Facilities Authority Revenue | ||||||
(Mayflower Retirement Center) | ||||||
5.00% 6/1/32 | 400,000 | 423,488 | ||||
5.00% 6/1/36 | 250,000 | 262,733 | ||||
5.125% 6/1/42 | 750,000 | 790,373 | ||||
Oregon Health & Science University | ||||||
Series E 4.00% 7/1/29 | 1,000,000 | 1,056,639 | ||||
Philadelphia, Pennsylvania Hospitals & | ||||||
Higher Education Facilities Authority | ||||||
Revenue (Temple University Health | ||||||
System) Series A 5.50% 7/1/30 | 300,000 | 320,223 | ||||
University Medical Center, Tuscon, | ||||||
Arizona Hospital Revenue | ||||||
6.50% 7/1/39 | 500,000 | 576,785 | ||||
West Virginia Hospital Finance | ||||||
Authority (Highland Hospital | ||||||
Obligation Group) 9.125% 10/1/41 | 500,000 | 639,230 | ||||
Yavapai County, Arizona Industrial | ||||||
Development Authority Revenue | ||||||
(Yavapai Regional Medical Center) | ||||||
Series A 5.25% 8/1/21 (RADIAN) | 1,500,000 | 1,523,999 | ||||
13,592,393 | ||||||
Housing Revenue Bonds 2.44% | ||||||
California Municipal Finance Authority | ||||||
Mobile Home Park Revenue | ||||||
(Caritas Projects) Series A | ||||||
5.50% 8/15/47 | 750,000 | 796,807 | ||||
6.40% 8/15/45 | 430,000 | 474,272 | ||||
Florida Housing Finance Homeowner | ||||||
Mortgage Revenue Series 2 | ||||||
5.90% 7/1/29 (NATL-RE) (AMT) | 185,000 | 187,004 | ||||
Puerto Rico Housing Finance | ||||||
Authority (Subordinated-Capital | ||||||
Fund Modernization) | ||||||
5.50% 12/1/18 (HUD) | 175,000 | 198,321 | ||||
1,656,404 | ||||||
Lease Revenue Bonds 12.35% | ||||||
California State Public Works Board | ||||||
Lease Revenue (Various Capital | ||||||
Projects) Series A 5.00% 4/1/37 | 1,000,000 | 1,081,700 | ||||
Hudson Yards, New York | ||||||
Infrastructure Revenue | ||||||
Series A 5.75% 2/15/47 | 1,100,000 | 1,289,958 | ||||
Idaho State Building Authority | ||||||
Revenue (Health & Welfare Project) | ||||||
Series A 5.00% 9/1/24 | 135,000 | 164,487 | ||||
(State Police) Series I 5.00% 9/1/23 | 760,000 | 926,539 | ||||
Minnesota State General Revenue | ||||||
Series B 5.00% 3/1/22 | 1,000,000 | 1,252,070 | ||||
New Jersey Economic Development | ||||||
Authority (School Facilities | ||||||
Construction) Series EE | ||||||
5.00% 9/1/18 | 100,000 | 119,424 | ||||
New York City, New York Industrial | ||||||
Development Agency (Senior Trips) | ||||||
Series A 5.00% 7/1/28 (AMT) | 250,000 | 265,195 | ||||
New York Liberty Development | ||||||
Revenue (4 World Trade Center) | ||||||
5.75% 11/15/51 | 970,000 | 1,137,238 | ||||
Pima County, Arizona Industrial | ||||||
Development Authority Metro | ||||||
Police Facility Revenue | ||||||
(Nevada Project) Series A | ||||||
5.25% 7/1/31 | 500,000 | 539,290 | ||||
5.375% 7/1/39 | 500,000 | 543,755 | ||||
Public Finance Authority, Wisconsin | ||||||
Airport Facilities Refunding | ||||||
(AFCO Investors II Portfolio) | ||||||
5.75% 10/1/31 (AMT) | 500,000 | 496,340 | ||||
Ventura County, California Public | ||||||
Financing Authority | ||||||
Series A 5.00% 11/1/32 | 500,000 | 564,340 | ||||
8,380,336 | ||||||
Local General Obligation Bonds 3.33% | ||||||
Gila County, Arizona Unified School | ||||||
District #10 (Payson School | ||||||
Improvement Project of 2006) | ||||||
Series A 5.25% 7/1/27 (AMBAC) | 500,000 | 565,890 | ||||
New York City, New York | ||||||
Series A-1 5.25% 8/15/21 | 250,000 | 301,068 | ||||
Series I-1 5.375% 4/1/36 | 250,000 | 294,060 | ||||
Ramapo Local Development, New York | ||||||
Revenue Refunding Guaranteed | ||||||
5.00% 3/15/33 | 1,000,000 | 1,101,800 | ||||
2,262,818 | ||||||
Special Tax Revenue Bonds 25.68% | ||||||
Anne Arundel County, Maryland | ||||||
Special Obligation Revenue | ||||||
(National Business Park - | ||||||
North Project) | ||||||
6.10% 7/1/40 | 200,000 | 217,986 |
14
Principal | ||||||
Amount | Value | |||||
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 | $ | 1,126,223 | ||
6.50% 7/15/30 | 300,000 | 368,151 | ||||
California State Economic Recovery | ||||||
Series A 5.25% 7/1/21 | 260,000 | 317,595 | ||||
California Statewide Communities | ||||||
Development Authority Revenue | ||||||
(Statewide Inland Regional Center | ||||||
Project) 5.375% 12/1/37 | 500,000 | 528,585 | ||||
Guam Government Business Privilege | ||||||
Tax Revenue | ||||||
Series A 5.00% 1/1/22 | 775,000 | 922,831 | ||||
Series B-1 5.00% 1/1/42 | 1,000,000 | 1,089,800 | ||||
Louisiana Stadium & Exposition | ||||||
District Refunding Senior | ||||||
Series A 5.00% 7/1/36 | 550,000 | 615,280 | ||||
Massachusetts Bay Transportation | ||||||
Authority Senior | ||||||
Series A 5.25% 7/1/29 | 200,000 | 255,024 | ||||
Miami-Dade County, Florida | ||||||
Special Obligation (Capital | ||||||
Appreciation & Income) | ||||||
Series B 5.00% 10/1/35 (NATL-RE) | 1,000,000 | 1,075,970 | ||||
Mosaic District, Virginia Community | ||||||
Development Authority Revenue | ||||||
Series A 6.875% 3/1/36 | 520,000 | 602,290 | ||||
New Jersey Economic Development | ||||||
Authority Revenue | ||||||
5.00% 6/15/28 | 200,000 | 223,360 | ||||
5.00% 6/15/29 | 800,000 | 887,456 | ||||
New Jersey Transportation Trust Fund | ||||||
Authority Series AA 5.00% 6/15/21 | 1,000,000 | 1,203,660 | ||||
New York City, New York Industrial | ||||||
Development Agency Civic Facility | ||||||
Revenue (YMCA of Greater New | ||||||
York Project) 5.00% 8/1/36 | 1,000,000 | 1,040,620 | ||||
New York City, New York Transitional | ||||||
Finance Authority Building Aid | ||||||
Revenue Series S1 5.00% 7/15/21 | 750,000 | 925,793 | ||||
New York State Dormitory Authority | ||||||
(State Personal Income Tax | ||||||
Revenue-Education) | ||||||
Series A 5.00% 3/15/38 | 570,000 | 645,690 | ||||
Peoria, Arizona Municipal | ||||||
Development Authority Sales Tax & | ||||||
Excise Shared Revenue (Senior Lien | ||||||
& Subordinate Lien) 5.00% 1/1/18 | 1,085,000 | 1,264,449 | ||||
Puerto Rico Sales Tax | ||||||
Financing Revenue | ||||||
Series C 5.00% 8/1/40 | 600,000 | 621,270 | ||||
First Subordinate | ||||||
Series A 5.75% 8/1/37 | 245,000 | 261,092 | ||||
Series C 5.00% 8/1/22 | 530,000 | 619,406 | ||||
Series C 6.00% 8/1/39 | 300,000 | 324,633 | ||||
Ω(Convertible Capital Appreciation | ||||||
Bonds) Series A 6.75% 8/1/32 | 220,000 | 227,759 | ||||
Regional Transportation District, | ||||||
Colorado Tax Revenue (FasTracks | ||||||
Project) Series A 5.00% 11/1/26 | 500,000 | 602,125 | ||||
San Mateo, California Special Tax | ||||||
Community Facilities District | ||||||
#2008-1 (Bay Meadows) | ||||||
6.00% 9/1/42 | 95,000 | 103,935 | ||||
Virginia Public Building Authority | ||||||
Series A 5.00% 8/1/26 | 1,000,000 | 1,199,900 | ||||
^Wyandotte County, Kansas City, | ||||||
Kansas Unified Government | ||||||
Special Obligation Revenue | ||||||
(Capital Appreciation) Sales | ||||||
Tax Subordinate Lien Series B | ||||||
6.07% 6/1/21 | 240,000 | 159,120 | ||||
17,430,003 | ||||||
State & Territory General Obligation Bonds 6.30% | ||||||
California State Various Purposes | ||||||
5.00% 9/1/41 | 460,000 | 501,717 | ||||
5.00% 10/1/41 | 440,000 | 480,251 | ||||
5.25% 11/1/40 | 320,000 | 368,666 | ||||
6.00% 4/1/38 | 105,000 | 125,610 | ||||
New York State Series A 5.00% 2/15/39 | 300,000 | 343,773 | ||||
Oregon State Series K 5.00% 5/1/22 | 1,275,000 | 1,613,921 | ||||
Puerto Rico Commonwealth | ||||||
(Public Improvement) | ||||||
Series A 5.75% 7/1/41 | 500,000 | 502,070 | ||||
Series C 6.00% 7/1/39 | 335,000 | 341,693 | ||||
4,277,701 | ||||||
Transportation Revenue Bonds 22.55% | ||||||
Bay Area, California Toll Authority | ||||||
Revenue (San Francisco Bay Area) | ||||||
5.00% 4/1/27 | 750,000 | 887,978 | ||||
Central Texas Regional Mobility | ||||||
Authority Revenue Senior Lien | ||||||
6.00% 1/1/41 | 520,000 | 603,221 | ||||
Dallas/Fort Worth, Texas International | ||||||
Airport Series G 5.00% 11/1/33 | 1,000,000 | 1,115,090 | ||||
Harris County, Texas Metropolitan | ||||||
Transit Authority | ||||||
Series A 5.00% 11/1/24 | 500,000 | 601,365 | ||||
Indiana Finance Authority Revenue | ||||||
(Private Activity-Ohio River Bridges) | ||||||
5.00% 7/1/40 (AMT) | 960,000 | 998,630 | ||||
Maryland State Economic | ||||||
Development Revenue | ||||||
(Transportation Facilities Project) | ||||||
Series A 5.75% 6/1/35 | 255,000 | 289,642 | ||||
Metropolitan Transportation Authority, | ||||||
New York | ||||||
Series A 5.00% 11/15/41 | 500,000 | 550,150 | ||||
Series E 4.00% 11/15/38 | 1,000,000 | 1,000,910 |
(continues) 15
Statements of net assets
Delaware
Investments® National Municipal Income Fund
Principal | |||||||
Amount | Value | ||||||
Municipal Bonds (continued) | |||||||
Transportation Revenue Bonds (continued) | |||||||
Metropolitan Washington D.C. | |||||||
Airports Authority Dulles Toll | |||||||
Road Revenue (First Senior Lien) | |||||||
Series A 5.25% 10/1/44 | $ | 245,000 | $ | 270,585 | |||
New Jersey State Turnpike Authority | |||||||
Revenue Series A 5.00% 1/1/27 | 1,000,000 | 1,153,160 | |||||
New York Liberty Development | |||||||
Revenue (1 World Trade Center | |||||||
Port Authority Construction) | |||||||
5.00% 12/15/41 | 500,000 | 558,470 | |||||
North Texas Tollway Authority | |||||||
Special Projects System | |||||||
Series A 5.00% 9/1/20 | 250,000 | 306,358 | |||||
Pennsylvania Turnpike Commission | |||||||
Subordinate (Special Motor | |||||||
License Foundation) | |||||||
5.00% 12/1/22 | 500,000 | 590,075 | |||||
Series B 5.00% 12/1/41 | 500,000 | 552,715 | |||||
Port Authority of New York & New | |||||||
Jersey Special Obligation Revenue | |||||||
(JFK International Air Terminal) | |||||||
6.00% 12/1/42 | 230,000 | 269,408 | |||||
6.50% 12/1/28 | 500,000 | 551,965 | |||||
Regional Transportation, Colorado | |||||||
District Revenue (Denver Transit | |||||||
Partners) 6.00% 1/15/41 | 500,000 | 575,860 | |||||
St. Louis, Missouri Airport Revenue | |||||||
(Lambert St. Louis International) | |||||||
5.00% 7/1/32 (AMT) | 1,000,000 | 1,057,240 | |||||
Series A-1 6.625% 7/1/34 | 325,000 | 383,919 | |||||
Texas Private Activity Bond Surface | |||||||
Transportation Senior Lien Revenue | |||||||
(LBJ Infrastructure) | |||||||
7.00% 6/30/40 | 285,000 | 344,648 | |||||
7.50% 6/30/33 | 665,000 | 834,821 | |||||
(NTE Mobility Partners) | |||||||
6.875% 12/31/39 | 1,000,000 | 1,189,159 | |||||
7.50% 12/31/31 | 500,000 | 618,175 | |||||
15,303,544 | |||||||
Water & Sewer Revenue Bonds 5.59% | |||||||
Atlanta, Georgia Water & Wastewater | |||||||
Revenue Series A 6.25% 11/1/39 | 800,000 | 973,384 | |||||
New York City, New York Municipal | |||||||
Water Finance Authority (Second | |||||||
Generation Resolution) Fiscal 2012 | |||||||
Series BB 5.25% 6/15/44 | 525,000 | 590,735 | |||||
Phoenix, Arizona Civic Improvement | |||||||
Wastewater Systems Revenue | |||||||
(Junior Lien) Series A 5.00% 7/1/39 | 900,000 | 1,018,314 | |||||
San Francisco, California City & | |||||||
County Public Utilities | |||||||
Commission Subordinate | |||||||
Series F 5.00% 11/1/27 | 500,000 | 588,470 | |||||
Texas State Series C 5.00% 8/1/22 | 500,000 | 621,870 | |||||
3,792,773 | |||||||
Total Municipal Bonds | |||||||
(cost $90,628,584) | $ | 97,477,533 | |||||
Total Value of Securities 143.61% | |||||||
(cost $90,628,584) | 97,477,533 | ||||||
Liquidation Value of Preferred Stock (44.20%) | (30,000,000 | ) | |||||
Receivables and Other Assets | |||||||
Net of Liabilities 0.59% | 398,544 | ||||||
Net Assets Applicable to 4,528,443 | |||||||
Shares Outstanding; Equivalent to | |||||||
$14.99 Per Share 100.00% | $ | 67,876,077 | |||||
Components of Net Assets at March 31, 2013: | |||||||
Common stock, $0.01 par value, unlimited shares | |||||||
authorized to the Fund | $ | 60,617,476 | |||||
Undistributed net investment income | 792,940 | ||||||
Accumulated net realized loss on investments | (383,288 | ) | |||||
Net unrealized appreciation of investments | 6,848,949 | ||||||
Total net assets | $ | 67,876,077 |
| Variable rate security. The rate shown is the rate as of March 31, 2013. Interest rates reset periodically. |
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At March 31, 2013, the aggregate value of Rule 144A securities was $146,583, which represented 0.22% of the Funds net assets. See Note 9 in Notes to financial statements. |
W | Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective. |
^ | Zero coupon security. The rate shown is the yield at the time of purchase. |
| See Note 6 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
HUD Housing &
Urban Development Section 8
NATL-RE Insured
by National Public Finance Guarantee Corporation
RADIAN Insured by Radian
Asset Assurance
See accompanying notes, which are an integral part of the financial statements.
16
Statements of assets and liabilities
Delaware Investments® Closed-End
Municipal Bond Funds
March 31,
2013
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 | $ | 102,632,038 | $ | 246,431,961 | $ | 97,477,533 | |||
Short-term investments, at value | 200,000 | | | ||||||
Cash | 28,648 | 524,036 | 71,600 | ||||||
Receivable for securities sold | | 5,055 | 15,221 | ||||||
Interest income receivable | 1,366,817 | 3,510,614 | 1,260,801 | ||||||
Offering cost for preferred shareholders | 205,883 | 368,361 | 283,553 | ||||||
Total assets | 104,433,386 | 250,840,027 | 99,108,708 | ||||||
Liabilities: | |||||||||
Liquidation value of preferred stock | 30,000,000 | 75,000,000 | 30,000,000 | ||||||
Payable for securities purchased | | | 1,141,250 | ||||||
Due to manager and affiliates | 18,106 | 43,252 | 14,085 | ||||||
Other accrued expenses | 33,248 | 84,069 | 43,902 | ||||||
Distributions payable | 33,394 | 83,486 | 33,394 | ||||||
Total liabilities | 30,084,748 | 75,210,807 | 31,232,631 | ||||||
Total net assets | $ | 74,348,638 | $ | 175,629,220 | $ | 67,876,077 | |||
Investments, at cost | $ | 96,096,590 | $ | 232,122,331 | $ | 90,628,584 | |||
Short-term investments, at cost | 200,000 | | |
See accompanying notes, which are an integral part of the financial statements.
17
Statements of operations
Delaware Investments® Closed-End
Municipal Bond Funds
Year Ended March 31,
2013
Delaware | Delaware | Delaware | ||||||||||
Investments | Investments | Investments | ||||||||||
Colorado | Minnesota | National | ||||||||||
Municipal | Municipal | Municipal | ||||||||||
Income | Income | Income | ||||||||||
Fund, Inc. | Fund II, Inc. | Fund | ||||||||||
Investment Income: | ||||||||||||
Interest | $ | 4,627,063 | $ | 10,693,539 | $ | 4,325,925 | ||||||
Expenses: | ||||||||||||
Management fees | 420,228 | 1,007,362 | 389,540 | |||||||||
Offering cost | 41,896 | 89,457 | 57,464 | |||||||||
Accounting and administration expenses | 40,835 | 97,888 | 37,852 | |||||||||
Rating agency fees | 38,283 | 35,580 | 31,624 | |||||||||
Dividend disbursing and transfer agent fees and expenses | 34,674 | 70,814 | 34,868 | |||||||||
Legal fees | 31,098 | 37,986 | 34,618 | |||||||||
Audit and tax | 18,180 | 16,780 | 14,559 | |||||||||
Reports and statements to shareholders | 17,467 | 32,205 | 23,112 | |||||||||
Pricing fees | 7,313 | 12,239 | 14,432 | |||||||||
Taxes (Pennsylvania franchise tax) | 5,000 | 12,000 | | |||||||||
Stock exchange fees | 4,678 | 11,232 | | |||||||||
Directors/Trustees fees | 3,546 | 8,082 | 3,200 | |||||||||
Dues and services | 1,554 | 3,970 | 1,803 | |||||||||
Custodian fees | 1,345 | 3,258 | 1,428 | |||||||||
Insurance fees | 1,128 | 3,726 | 1,217 | |||||||||
Registration fees | 868 | 868 | 868 | |||||||||
Consulting fees | 799 | 1,877 | 676 | |||||||||
Directors/Trustees expenses | 224 | 536 | 199 | |||||||||
Total operating expenses | 669,116 | 1,445,860 | 647,460 | |||||||||
Net Investment Income | 3,957,947 | 9,247,679 | 3,678,465 | |||||||||
Net Realized and Unrealized Gain: | ||||||||||||
Net realized gain on investments | 89,037 | 2,208,718 | 1,281,216 | |||||||||
Net change in unrealized appreciation (depreciation) of investments | 1,916,263 | 1,762,327 | 2,597,893 | |||||||||
Net Realized and Unrealized Gain | 2,005,300 | 3,971,045 | 3,879,109 | |||||||||
Dividends and Distributions to Preferred Shareholders | (411,526 | ) | (1,025,435 | ) | (406,627 | ) | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 5,551,721 | $ | 12,193,289 | $ | 7,150,947 |
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. | |||||||||||||||
Year Ended | Year Ended | |||||||||||||||
3/31/13 | 3/31/12 | 3/31/13 | 3/31/12 | |||||||||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||
Net investment income | $ | 3,957,947 | $ | 3,233,923 | $ | 9,247,679 | $ | 7,747,076 | ||||||||
Net realized gain | 89,037 | 976,769 | 2,208,718 | 1,701,330 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 1,916,263 | 6,668,604 | 1,762,327 | 11,778,378 | ||||||||||||
Dividends and distributions to preferred shareholders | (411,526 | ) | (149,762 | ) | (1,025,435 | ) | (374,404 | ) | ||||||||
Net increase in net assets resulting from operations | 5,551,721 | 10,729,534 | 12,193,289 | 20,852,380 | ||||||||||||
Dividends and Distributions to Common Shareholders from: | ||||||||||||||||
Net investment income | (3,337,599 | ) | (2,805,518 | ) | (7,938,433 | ) | (6,672,886 | ) | ||||||||
Net realized gain | (478,873 | ) | | (460,199 | ) | | ||||||||||
(3,816,472 | ) | (2,805,518 | ) | (8,398,632 | ) | (6,672,886 | ) | |||||||||
Net Increase in Net Assets | 1,735,249 | 7,924,016 | 3,794,657 | 14,179,494 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 72,613,389 | 64,689,373 | 171,834,563 | 157,655,069 | ||||||||||||
End of year | $ | 74,348,638 | $ | 72,613,389 | $ | 175,629,220 | $ | 171,834,563 | ||||||||
Undistributed net investment income | $ | 800,128 | $ | 598,215 | $ | 1,759,475 | $ | 1,504,205 |
Delaware Investments | ||||||||
National Municipal | ||||||||
Income Fund | ||||||||
Year Ended | ||||||||
3/31/13 | 3/31/12 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 3,678,465 | $ | 2,343,640 | ||||
Net realized gain | 1,281,216 | 909,697 | ||||||
Net change in unrealized appreciation (depreciation) | 2,597,893 | 4,515,112 | ||||||
Dividends and distributions to preferred shareholders | (406,627 | ) | (18,904 | ) | ||||
Net increase in net assets resulting from operations | 7,150,947 | 7,749,545 | ||||||
Dividends and Distributions to Common Shareholders from: | ||||||||
Net investment income | (2,762,350 | ) | (2,295,215 | ) | ||||
(2,762,350 | ) | (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 | 4,388,597 | 32,928,718 | ||||||
Net Assets: | ||||||||
Beginning of year | 63,487,480 | 30,558,762 | ||||||
End of year | $ | 67,876,077 | $ | 63,487,480 | ||||
Undistributed net investment income | $ | 792,940 | $ | 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:
Year Ended | ||||||||||||||||||||
3/31/13 | 3/31/12 | 3/31/11 | 3/31/10 | 3/31/09 | ||||||||||||||||
Net asset value, beginning of period | $15.010 | $13.370 | $13.990 | $13.220 | $14.260 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | 0.818 | 0.669 | 0.601 | 0.607 | 0.755 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.416 | 1.582 | (0.651 | ) | 0.733 | (0.965 | ) | |||||||||||||
Dividends and distributions on preferred stock from: | ||||||||||||||||||||
Net investment income | (0.085 | ) | (0.031 | ) | | | (0.173 | ) | ||||||||||||
Total dividends and distributions on preferred stock | (0.085 | ) | (0.031 | ) | | | (0.173 | ) | ||||||||||||
Total from investment operations | 1.149 | 2.220 | (0.050 | ) | 1.340 | (0.383 | ) | |||||||||||||
Less dividends and distributions to common shareholders from: | ||||||||||||||||||||
Net investment income | (0.690 | ) | (0.580 | ) | (0.570 | ) | (0.570 | ) | (0.657 | ) | ||||||||||
Net realized gain | (0.099 | ) | | | | | ||||||||||||||
Total dividends and distributions | (0.789 | ) | (0.580 | ) | (0.570 | ) | (0.570 | ) | (0.657 | ) | ||||||||||
Net asset value, end of period | $15.370 | $15.010 | $13.370 | $13.990 | $13.220 | |||||||||||||||
Market value, end of period | $14.840 | $14.600 | $12.450 | $13.390 | $11.240 | |||||||||||||||
Total investment return based on:1 | ||||||||||||||||||||
Market value | 6.92% | 22.41% | (3.00% | ) | 24.49% | (21.63% | ) | |||||||||||||
Net asset value | 7.71% | 17.19% | (0.30% | ) | 10.55% | (2.66% | ) | |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets applicable to common shares, end of period (000 omitted) | $74,349 | $72,613 | $64,689 | $67,651 | $63,952 | |||||||||||||||
Ratio of expenses to average net assets applicable to common shares2 | 0.89% | 0.73% | 0.56% | 0.56% | 0.91% | |||||||||||||||
Ratio of net investment income to average net assets | ||||||||||||||||||||
applicable to common shares2 | 5.27% | 4.68% | 4.31% | 4.41% | 5.55% | |||||||||||||||
Ratio of net investment income to average net assets | ||||||||||||||||||||
applicable to common shares net of dividends to preferred shares3 | 4.72% | 4.46% | 4.31% | 4.41% | 4.28% | |||||||||||||||
Portfolio turnover | 8% | 64% | 10% | 20% | 16% | |||||||||||||||
Leverage analysis: | ||||||||||||||||||||
Value of preferred shares outstanding (000 omitted)4 | $30,000 | $30,000 | $ | $ | $ | |||||||||||||||
Net asset coverage per share of preferred shares, end of period4 | $ | 347,829 | $ | 342,045 | $ | $ | $ | |||||||||||||
Liquidation value per share of preferred shares4,5 | $ | 100,000 | $ | 100,000 | $ | $ | $ |
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:
Year Ended | |||||||||||||||||||||
3/31/13 | 3/31/12 | 3/31/11 | 3/31/10 | 3/31/09 | |||||||||||||||||
Net asset value, beginning of period | $14.940 | $13.700 | $14.060 | $13.140 | $14.190 | ||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||
Net investment income | 0.804 | 0.673 | 0.612 | 0.602 | 0.776 | ||||||||||||||||
Net realized and unrealized gain (loss) | 0.345 | 1.180 | (0.402 | ) | 0.888 | (1.013 | ) | ||||||||||||||
Dividends and distributions on preferred stock from: | |||||||||||||||||||||
Net investment income | (0.089 | ) | (0.033 | ) | | | (0.175 | ) | |||||||||||||
Total dividends and distributions on preferred stock | (0.089 | ) | (0.033 | ) | | | (0.175 | ) | |||||||||||||
Total from investment operations | 1.060 | 1.820 | 0.210 | 1.490 | (0.412 | ) | |||||||||||||||
Less dividends to common shareholders from: | |||||||||||||||||||||
Net investment income | (0.690 | ) | (0.580 | ) | (0.570 | ) | (0.570 | ) | (0.638 | ) | |||||||||||
Net realized gain | (0.040 | ) | | | | | |||||||||||||||
Total dividends | (0.730 | ) | (0.580 | ) | (0.570 | ) | (0.570 | ) | (0.638 | ) | |||||||||||
Net asset value, end of period | $15.270 | $14.940 | $13.700 | $14.060 | $13.140 | ||||||||||||||||
Market value, end of period | $15.630 | $14.230 | $12.600 | $12.740 | $11.250 | ||||||||||||||||
Total investment return based on:1 | |||||||||||||||||||||
Market value | 15.18% | 17.95% | 3.32% | 18.58% | (11.91% | ) | |||||||||||||||
Net asset value | 7.18% | 13.90% | 1.80% | 12.04% | (2.48% | ) | |||||||||||||||
Ratios and supplemental data: | |||||||||||||||||||||
Net assets applicable to common shares, end of period (000 omitted) | $ | 175,629 | $ | 171,835 | $ | 157,655 | $ | 161,723 | $ | 151,184 | |||||||||||
Ratio of expenses to average net assets applicable to common shares2,4 | 0.82% | 0.70% | 0.56% | 0.56% | 0.98% | ||||||||||||||||
Ratio of net investment income to average net assets | |||||||||||||||||||||
applicable to common shares2 | 5.23% | 4.67% | 4.35% | 4.36% | 5.74% | ||||||||||||||||
Ratio of net investment income to average net assets | |||||||||||||||||||||
applicable to common shares net of dividends to preferred shares3 | 4.65% | 4.44% | 4.35% | 4.36% | 4.45% | ||||||||||||||||
Portfolio turnover | 24% | 44% | 9% | 19% | 15% | ||||||||||||||||
Leverage analysis: | |||||||||||||||||||||
Value of preferred shares outstanding (000 omitted)5 | $75,000 | $75,000 | $ | $ | $ | ||||||||||||||||
Net asset coverage per share of preferred shares, end of period5 | $ | 334,172 | $ | 329,113 | $ | $ | $ | ||||||||||||||
Liquidation value per share of preferred shares5,6 | $ | 100,000 | $ | 100,000 | $ | $ | $ |
See accompanying notes, which are an integral part of the financial statements.
Financial highlights
Delaware Investments® National Municipal Income Fund
Selected data for each share of the Fund outstanding throughout each period were as follows:
Year Ended | |||||||||||||||||
3/31/13 | 3/31/12 | 3/31/11 | 3/31/10 | 3/31/09 | |||||||||||||
Net asset value, beginning of period | $14.020 | $12.620 | $13.070 | $11.960 | $13.360 | ||||||||||||
Income (loss) from investment operations: | |||||||||||||||||
Net investment income | 0.812 | 0.535 | 0.610 | 0.571 | 0.704 | ||||||||||||
Net realized and unrealized gain (loss) | 0.858 | 1.409 | (0.532 | ) | 1.049 | (1.367 | ) | ||||||||||
Dividends and distributions on preferred stock from: | |||||||||||||||||
Net investment income | (0.090 | ) | (0.004 | ) | | | (0.172 | ) | |||||||||
Total dividends and distributions on preferred stock | (0.090 | ) | (0.004 | ) | | | (0.172 | ) | |||||||||
Total from investment operations | 1.580 | 1.940 | 0.078 | 1.620 | (0.835 | ) | |||||||||||
Less dividends and distributions to common shareholders from: | |||||||||||||||||
Net investment income | (0.610 | ) | (0.540 | ) | (0.528 | ) | (0.510 | ) | (0.565 | ) | |||||||
Net realized gain | | | | | | ||||||||||||
Total dividends and distributions | (0.610 | ) | (0.540 | ) | (0.528 | ) | (0.510 | ) | (0.565 | ) | |||||||
Net asset value, end of period | $14.990 | $14.020 | $12.620 | $13.070 | $11.960 | ||||||||||||
Market value, end of period | $14.480 | $13.240 | $12.200 | $12.140 | $10.850 | ||||||||||||
Total investment return based on:1 | |||||||||||||||||
Market value | 14.12% | 13.19% | 4.78% | 16.69% | (4.31% | ) | |||||||||||
Net asset value | 11.56% | 15.87% | 0.67% | 13.97% | (5.65% | ) | |||||||||||
Ratios and supplemental data: | |||||||||||||||||
Net assets applicable to common shares, end of period (000 omitted) | $67,876 | $63,487 | $30,559 | $31,650 | $28,967 | ||||||||||||
Ratio of expenses to average net assets applicable to common shares2 | 0.96% | 0.99% | 0.65% | 0.63% | 1.06% | ||||||||||||
Ratio of net investment income to average net assets | |||||||||||||||||
applicable to common shares2 | 5.46% | 3.99% | 4.64% | 4.48% | 5.63% | ||||||||||||
Ratio of net investment income to average net assets | |||||||||||||||||
applicable to common shares net of dividends to preferred shares3 | 4.86% | 3.96% | 4.64% | 4.48% | 4.25% | ||||||||||||
Portfolio turnover | 42% | 101% | 50% | 69% | 36% | ||||||||||||
Leverage analysis: | |||||||||||||||||
Value of preferred shares outstanding (000 omitted)4 | $30,000 | $30,000 | $ | $ | $ | ||||||||||||
Net asset coverage per share of preferred shares, end of period4 | $326,254 | $311,625 | $ | $ | $ | ||||||||||||
Liquidation value per share of preferred shares4,5 | $100,000 | $100,000 | $ | $ | $ |
1 Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purposes of this calculation to be reinvested at prices obtained under the 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. |
2 Ratios do not reflect the effect of dividend payments to preferred shareholders, if applicable. |
3 Ratio reflects total net investment income less dividends paid to preferred shareholders, if applicable, divided by average net assets applicable to common shareholders. |
4 In March 2012, the Fund issued a new series of 300 variable rate preferred shares, with a liquidation preference of $100,000 per share. |
5 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
March 31,
2013
Delaware Investments Colorado Municipal Income Fund, Inc. (Colorado Municipal Fund) and Delaware Investments Minnesota Municipal Income Fund II, Inc. (Minnesota Municipal Fund II) are organized as Minnesota corporations and Delaware Investments National Municipal Income Fund (National Municipal Fund) is organized as a Massachusetts business trust (each referred to as a Fund and collectively as the Funds). Colorado Municipal Fund, Minnesota Municipal Fund II and National Municipal Fund are considered diversified closed-end management investment companies under the Investment Company Act of 1940, as amended. The Funds shares trade on the New York Stock Exchange MKT, the successor to the American Stock Exchange.
The investment objective of each of the Colorado Municipal Fund and Minnesota Municipal Fund II is to provide current income exempt from federal income tax and from state personal income tax, if any, consistent with the preservation of capital. The investment objective of the National Municipal Fund is to provide current income exempt from federal income tax, consistent with the preservation of capital. Each of Colorado Municipal Fund and Minnesota Municipal Fund II seek to achieve its investment objective by investing substantially all of its net assets in investment grade, tax-exempt municipal obligations of its respective state at the time of investment. The National Municipal Fund seeks to achieve its investment objective by investing at least 80% of its net assets in securities the income from which is exempt from federal income tax.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Funds.
Security Valuation Debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each 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 (March 31, 2010March 31, 2013), 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 year ended March 31, 2013.
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 year ended March 31, 2013.
(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 year ended March 31, 2013, the Funds were charged as follows:
Colorado | Minnesota | National | ||||
Municipal | Municipal | Municipal | ||||
Fund | Fund II | Fund | ||||
$5,114 | $12,259 | $4,740 |
At March 31, 2013, 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 | $ | 35,563 | $ | 85,213 | $ | 33,291 | ||||||
Accounting administration and other expenses | 431 | 1,031 | 403 | |||||||||
payable to DSC | ||||||||||||
Other expenses payable to DMC and affiliates* | 1,106 | 2,262 | 879 |
*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, 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 year ended March 31, 2013, 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 | ||||
$20,507 | $22,518 | $16,399 |
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 year ended March 31, 2013, 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 | $ | 8,066,552 | $ | 59,619,912 | $ | 57,084,937 | ||||||
Sales | 7,836,556 | 61,059,486 | 39,709,982 |
At March 31, 2013, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows:
Colorado | Minnesota | National | ||||||||||||||||
Municipal | Municipal | Municipal | ||||||||||||||||
Fund | Fund II | Fund | ||||||||||||||||
Cost of investments | $ | 96,282,229 | $ | 231,990,607 | $ | 90,603,984 | ||||||||||||
Aggregate unrealized appreciation | $ | 6,857,406 | $ | 15,052,517 | $ | 7,287,651 | ||||||||||||
Aggregate unrealized depreciation | (307,597 | ) | (611,163 | ) | (414,102 | ) | ||||||||||||
Net unrealized appreciation | $ | 6,549,809 | $ | 14,441,354 | $ | 6,873,549 |
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. 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 March 31, 2013:
Colorado Municipal Fund | ||||
Level 2 | ||||
Municipal Bonds | $ | 102,632,038 | ||
Short-Term Investments | 200,000 | |||
Total | $ | 102,832,038 |
Minnesota Municipal Fund II | ||||
Level 2 | ||||
Municipal Bonds | $ | 246,431,961 |
National Municipal Fund | ||||
Level 2 | ||||
Municipal Bonds | $ | 97,477,533 |
During the year ended March 31, 2013, 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 years ended March 31, 2013 and 2012 was as follows:
Colorado | Minnesota | National | |||||||||||||
Municipal | Municipal | Municipal | |||||||||||||
Fund | Fund II | Fund | |||||||||||||
Year Ended 3/31/13 | |||||||||||||||
Ordinary income | $ | 11,156 | $ | 345,149 | $ | 4,581 | |||||||||
Tax-exempt income | 3,337,599 | 7,938,433 | 2,757,769 | ||||||||||||
Long-term capital gain | 467,717 | 115,050 | | ||||||||||||
Total | $ | 3,816,472 | $ | 8,398,632 | $ | 2,762,350 | |||||||||
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 |
5. Components of Net Assets on a Tax Basis
As of March 31, 2013, the components of net assets on a tax basis were as follows:
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 | 833,522 | 1,833,037 | 826,334 | |||||||||||||||
Undistributed ordinary income | 10,968 | 559,635 | | |||||||||||||||
Undistributed long-term capital gains | 69,612 | 947,605 | | |||||||||||||||
Distributions payable | (33,394 | ) | (83,486 | ) | (33,394 | ) | ||||||||||||
Capital loss carryforwards | | | (407,888 | ) | ||||||||||||||
Unrealized appreciation | 6,549,809 | 14,441,354 | 6,873,549 | |||||||||||||||
Net assets | $ | 74,348,638 | $ | 175,629,220 | $ | 67,876,077 |
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 year ended March 31, 2013, the Funds recorded the following reclassifications.
Colorado | Minnesota | National | ||||||||||||||||
Municipal | Municipal | Municipal | ||||||||||||||||
Fund | Fund II | Fund | ||||||||||||||||
Undistributed net investment income | $ | (6,909 | ) | $ | (28,541 | ) | $ | (92,980 | ) | |||||||||
Accumulated net realized gain (loss) | 6,909 | 28,541 | 92,980 |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. At March 31, 2013, the Funds utilized capital loss carryforwards as follows:
Colorado | Minnesota | National | |||
Municipal | Municipal | Municipal | |||
Fund | Fund | Fund | |||
$ | $257,166 | $1,339,948 |
26
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, 2013 will expire as follows:
Colorado | Minnesota | National | |||||
Municipal | Municipal | Municipal | |||||
Year of Expiration | Fund | Fund II | Fund | ||||
2018 | $ | $ | $407,888 |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the 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 will be 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.
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 year ended March 31, 2013. 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, Delaware Investments Colorado Municipal Income Fund, Inc. (Colorado Municipal Fund) and Delaware Investments Minnesota Municipal Income Fund II, Inc. (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, Delaware Investments National Municipal Income Fund (National Municipal Fund) issued $30,000,000 Series 2017 VMTP Shares, with $100,000 liquidation value per share in a privately negotiated offering. Proceeds from the issuance of VMTP Shares, net of offering expenses, were invested in accordance with each 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 respective 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 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 weight average dividend rates for the year ended March 31, 2013 were as follows:
Colorado | Minnesota | National | |||
Municipal | Municipal | Municipal | |||
Fund | Fund II | Fund | |||
1.4% | 1.4% | 1.4% |
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:
Acquiring | Acquired | |||||
Fund | Fund | |||||
Shares | Shares | Value | ||||
Common Stock | 2,422,200 | 3,100,925 | $40,715,147 |
The Reorganization was treated as a non-taxable event and, accordingly, the Acquired Funds basis in securities acquired reflected historical cost basis as of the date of transfer. The net assets and net unrealized appreciation of the Acquired Fund as of the close of business on June 17, 2011, were as follows:
Net assets | $ | 40,715,147 |
Net unrealized appreciation | 65,229 |
The net assets of the Acquiring Fund before the acquisition were $31,792,649. The net assets of the Acquiring Fund immediately following the acquisition were $72,507,796.
Assuming that the acquisition had been completed on April 1, 2011, the beginning of the Acquiring Funds reporting period, the Acquiring Funds pro forma results of operations for the year ended March 31, 2012, are as follows:
Net investment income | $ | 2,611,659 |
Net realized gain on investments | 909,699 | |
Change in unrealized appreciation | 5,974,605 | |
Net increase in net assets resulting from operations | 9,477,059 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Acquired Fund that have been included in the National Municipal Funds statement of operations since June 20, 2011.
8. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: 1) how and why an entity uses derivatives; 2) how they are accounted for; and 3) how they affect an entitys results of operations and financial position.
Inverse Floaters Each Fund may participate in inverse floater programs where a Fund transfers its own bonds to a trust that issues floating rate securities and inverse floating rate securities (inverse floaters) with an aggregate principal amount equal to the principal of the transferred bonds. The inverse floaters received by the Funds are derivative tax-exempt obligations with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of the inverse floaters will generally be more volatile than other tax-exempt investments. The Funds typically use inverse floaters to adjust the duration of their portfolio. Duration measures a portfolios sensitivity to changes in interest rates. By holding inverse floaters with a different duration than the underlying bonds that a Fund transferred to the trust, the Fund seeks to adjust its portfolios sensitivity to changes in interest rates. The Funds may also invest in inverse floaters to add additional income to the Funds or to adjust the Funds exposure to a specific segment of the yield curve. At March 31, 2013, and during the year then ended, the Funds held no investments in inverse floaters.
9. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities. Because each of the Colorado Municipal Income Fund and the Minnesota Municipal Income Fund invest substantially all of its net assets in municipal obligations of its respective state at the time of investment, events in that state may have a significant impact on the performance and investments of the Colorado Municipal Income Fund and the Minnesota Municipal Income Fund. These events may include economic or political policy changes, tax base erosion, state constitutional limits on tax increases, budget deficits and other financial difficulties, changes in the credit ratings assigned to the states 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.
28
Each Fund may invest a percentage of assets in obligations of governments of U.S. territories, commonwealths and possessions such as Puerto Rico, the 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. Currently Puerto Rico is experiencing financial difficulties, causing ratings organizations to downgrade Puerto Rican general obligation bonds as well as a number of other bonds issued in Puerto Rico, which negatively affects the market values and marketability of many or all Puerto Rican municipal obligations. The Funds hold some of these securities, which may negatively impact the Funds performance. If the economic situation in Puerto Rico changes, the volatility, credit quality and performance of the Funds could be affected to the extent a Fund holds Puerto Rican securities.
Many municipalities insure repayment for their obligations. Although bond insurance may reduce the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in each Fund. At March 31, 2013, the percentages of each Funds net assets insured by insurers are listed below and these securities have been identified in the statements of net assets.
Colorado Municipal Fund | 36 | % |
Minnesota Municipal Fund II | 8 | % |
National Municipal Fund | 7 | % |
The Funds invest a portion of their assets in high yield fixed income securities, which are securities rated BB or lower by Standard & Poors (S&P) and/or Ba or lower by Moodys Investors Service, Inc. (Moodys), or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Funds may invest in advanced refunded bonds, escrow secured bonds or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the outstanding debt to either reduce interest costs or to remove or alter restrictive covenants imposed by the bonds being refinanced. A refunding transaction where the municipal securities are being refunded within 90 days from the issuance of the refunding issue is known as a current 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 issues 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 Moodys, 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.
Certain obligations held by the Fund may have liquidity protection 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 Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
Each Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, each Funds Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Funds limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Funds 15% limit on investments in illiquid securities. As of March 31, 2013, no securities have been determined to be illiquid under the Funds Liquidity Procedures. Rule 144A securities have been identified on the statements of net assets.
10. Contractual Obligations
The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed each Funds existing contracts and expects the risk of loss to be remote.
29
Notes to financial statements
Delaware Investments® Closed-End Municipal Bond Funds
11. National Municipal Income Fund Investments in Municipal Securities Issued by Certain States
From time to time and consistent with its investment policies, the National Municipal Income Fund may invest a considerable portion of its assets in certain municipalities. As of the date of this report, the National Municipal Income Fund has invested 11.70% and 18.02% (each as a percentage of fixed income investments), respectively, in securities issued by the State of California and the State of New York, respectively. These investments could make the National Municipal Income Fund more sensitive to economic conditions in those states.
On May 23, 2011, shareholders of the National Municipal Fund and shareholders of the Delaware Investments Arizona Municipal Income Fund, Inc. (Arizona Muni Fund) approved the acquisition of substantially all of the assets of Arizona Muni Fund in exchange for newly issued common shares of the National Municipal Fund, which was structured as a tax-free transaction. This acquisition was completed after the close of business on June 17, 2011. As of March 31, 2013, municipal bonds issued by the State of Arizona constitute approximately 13% of the National Municipal Income Funds portfolio. These investments could make the National Municipal Fund more sensitive to economic conditions in Arizona than other more geographically diversified national municipal income funds.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to March 31, 2013 that would require recognition or disclosure in the Funds financial statements.
30
Report of independent
registered public
accounting firm
To the Board of Directors/Trustees and the
Shareholders of
Delaware Investments Colorado Municipal Income Fund,
Inc.,
Delaware Investments Minnesota Municipal Income Fund II, Inc.
and
Delaware Investments National Municipal Income Fund:
In our opinion, the accompanying statements of net assets, statements of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Delaware Investments Colorado Municipal Income Fund, Inc., Delaware Investments Minnesota Municipal Income Fund II, Inc. and Delaware Investments National Municipal Income Fund (hereafter referred to as the Funds) at March 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2013 by correspondence with the custodian, provide a reasonable basis for our opinion. The financial highlights for each of the two years in the period ended March 31, 2010 were audited by other independent accountants whose report dated May 19, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
May 21,
2013
(continues) 31
Other Fund information
(Unaudited)
Delaware Investments® Closed-End Municipal Bond Funds
Tax Information (Unaudited)
The information set forth below is for each Funds fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All designations are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring designation, it is the intention of each Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended March 31, 2013, each Fund designates distributions paid during the year as follows:
(A) | (B) | (C) | |||||||||
Ordinary | Tax-Exempt | Long-Term | |||||||||
Income | Income | Capital Gain | Total | ||||||||
Distributions | Distributions | Distributions | Distributions | ||||||||
(Tax Basis) | (Tax Basis) | (Tax Basis) | (Tax Basis) | ||||||||
Colorado Municipal Fund | 0.27% | 88.67% | 11.06 | % | 100.00% | ||||||
Minnesota Municipal Fund II | 3.66% | 95.12% | 1.22 | % | 100.00% | ||||||
National Municipal Fund | 0.14% | 99.86% | | 100.00% |
(A) (B) and (C) are based on a percentage of each Funds total distributions.
32
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 departments investment strategy. He is also a co-portfolio manager of the firms 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 bachelors 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 firms municipal fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He is a co-portfolio manager of the firms 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 bachelors 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 bachelors 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 firms municipal fixed income portfolio management team. He is also a co-portfolio manager of the firms 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 firms 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 bachelors degree in economics from Harvard University.
(continues) 33
Board of trustees/directors
and
officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (Trustees), which has oversight responsibility for the management of a funds business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of | |||||
Portfolios in Fund | Other | ||||
Name, | Complex Overseen | Directorships | |||
Address, | Position(s) | Length of | Principal Occupation(s) | by Trustee | Held by |
and Birth Date | Held with Fund(s) | Time Served | During Past 5 Years | or Officer | Trustee or Officer |
Interested Trustee | |||||
Patrick P. Coyne1 | Chairman, | Chairman and Trustee | Patrick P. Coyne has served in | 70 | Director and Audit |
2005 Market Street | President, | since August 16, 2006 | various executive capacities | Committee Member | |
Philadelphia, PA | Chief Executive | at different times at | Kaydon Corp. | ||
19103 | Officer, and | Delaware Investments.2 | |||
Trustee | |||||
April 1963 | President and | Board of Governors | |||
Chief Executive Officer | Member | ||||
since August 1, 2006 | Investment Company | ||||
Institute (ICI) | |||||
Independent Trustees | |||||
Thomas L. Bennett | Trustee | Since | Private Investor | 70 | Director |
2005 Market Street | March 2005 | (March 2004Present) | Bryn Mawr | ||
Philadelphia, PA | Bank Corp. (BMTC) | ||||
19103 | (20072011) | ||||
October 1947 | |||||
Joseph W. Chow | Trustee | Since | Executive Vice President | 70 | Director and Audit Committee |
2005 Market Street | January 2013 | (Emerging Economies | Member Hercules | ||
Philadelphia, PA | Strategies, Risk and | Technology Growth | |||
19103 | Corporate Administration) | Capital, Inc. | |||
State Street Corporation | |||||
January 1953 | (July 2004March 2011) | ||||
John A. Fry | Trustee | Since | President | 70 | Board of |
2005 Market Street | January 2001 | Drexel University | Governors Member | ||
Philadelphia, PA | (August 2010Present) | NASDAQ OMX | |||
19103 | PHLX LLC | ||||
President | |||||
May 1960 | Franklin & Marshall College | Director and Audit | |||
(July 2002July 2010) | Committee Member | ||||
Community Health | |||||
Systems | |||||
Director Ecore | |||||
International | |||||
(20092010) | |||||
Anthony D. Knerr | Trustee | Since | Managing Director | 70 | None |
2005 Market Street | April 1990 | Anthony Knerr & Associates | |||
Philadelphia, PA | (Strategic Consulting) | ||||
19103 | (1990Present) | ||||
December 1938 | |||||
34
Number of | |||||
Portfolios in Fund | Other | ||||
Name, | Complex Overseen | Directorships | |||
Address, | Position(s) | Length of | Principal Occupation(s) | by Trustee | Held by |
and Birth Date | Held with Fund(s) | Time Served | During Past 5 Years | or Officer | Trustee or Officer |
Independent Trustees (continued) | |||||
Lucinda S. Landreth | Trustee | Since | Private Investor | 70 | None |
2005 Market Street | March 2005 | (2004Present) | |||
Philadelphia, PA | |||||
19103 | |||||
June 1947 | |||||
Frances A. Sevilla-Sacasa | Trustee | Since | Chief Executive Officer | 70 | Trust Manager and |
2005 Market Street | September 2011 | Banco Itaú Europa | Audit Committee | ||
Philadelphia, PA | International | Member Camden | |||
19103 | (April 2012Present) | Property Trust | |||
January 1956 | Executive Advisor to Dean | ||||
(August 2011March 2012) and | |||||
Interim Dean | |||||
(January 2011July 2011) | |||||
University of Miami School of | |||||
Business Administration | |||||
President U.S. Trust, | |||||
Bank of America Private | |||||
Wealth Management | |||||
(Private Banking) | |||||
(July 2007December 2008) | |||||
Thomas K. Whitford | Trustee | Since | Vice Chairman | 70 | None |
2005 Market Street | January 2013 | (2010April 2013) | |||
Philadelphia, PA | Chief Administrative | ||||
19103 | Officer (20082010) | ||||
and Executive Vice | |||||
March 1956 | President and Chief | ||||
Administrative Officer | |||||
(20072009) | |||||
PNC Financial | |||||
Services Group | |||||
Janet L. Yeomans | Trustee | Since | Vice President and Treasurer | 70 | Director, Audit |
2005 Market Street | April 1999 | (January 2006July 2012) | Committee Member and | ||
Philadelphia, PA | Vice President Mergers & | Investment Committee | |||
19103 | Acquisitions | Member | |||
(January 2003January 2006), | Okabena Company | ||||
July 1948 | and Vice President | ||||
and Treasurer | Chair 3M Investment | ||||
(July 1995January 2003) | Management Company | ||||
3M Corporation | (20052012) | ||||
J. Richard Zecher | Trustee | Since | Founder | 70 | Director and |
2005 Market Street | March 2005 | Investor Analytics | Compensation | ||
Philadelphia, PA | (Risk Management) | Committee Member | |||
19103 | (May 1999Present) | Investor Analytics | |||
July 1940 | Founder | Director P/E Investments | |||
P/E Investments | |||||
(Hedge Fund) | |||||
(September 1996Present) | |||||
(continues) 35
Number of | |||||
Portfolios in Fund | Other | ||||
Name, | Complex Overseen | Directorships | |||
Address, | Position(s) | Length of | Principal Occupation(s) | by Trustee | Held by |
and Birth Date | Held with Fund(s) | Time Served | During Past 5 Years | or Officer | Trustee or Officer |
Officers | |||||
David F. Connor | Vice President, | Vice President since | David F. Connor has served as | 70 | None3 |
2005 Market Street | Deputy General | September 2000 | Vice President and Deputy | ||
Philadelphia, PA | Counsel, and Secretary | and Secretary | General Counsel of | ||
19103 | since | Delaware Investments | |||
October 2005 | since 2000. | ||||
December 1963 | |||||
Daniel V. Geatens | Vice President | Treasurer | Daniel V. Geatens has served | 70 | None3 |
2005 Market Street | and Treasurer | since | in various capacities at | ||
Philadelphia, PA | October 2007 | different times at | |||
19103 | Delaware Investments. | ||||
October 1972 | |||||
David P. OConnor | Executive Vice | Executive | David P. OConnor has served in | 70 | None3 |
2005 Market Street | President, | Vice President | various executive and legal | ||
Philadelphia, PA | General Counsel | since February 2012; | capacities at different times | ||
19103 | and Chief | Senior Vice President | at Delaware Investments. | ||
Legal Officer | October 2005 | ||||
February 1966 | February 2012; | ||||
General Counsel and | |||||
Chief Legal Officer | |||||
since | |||||
October 2005 | |||||
Richard Salus | Senior | Chief Financial | Richard Salus has served in | 70 | None3 |
2005 Market Street | Vice President | Officer since | various executive capacities | ||
Philadelphia, PA | and | November 2006 | at different times at | ||
19103 | Chief Financial | Delaware Investments. | |||
Officer | |||||
October 1963 | |||||
36
About the organization
This annual report is for the information of Delaware Investments Closed-End Municipal Bond Funds shareholders. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Funds may, from time to time, purchase shares of their common stock on the open market at market prices.
Board of directors/trustees
Patrick P.
Coyne
Chairman,
President,
and Chief Executive Officer
Delaware Investments® Family of Funds
Philadelphia, PA
Thomas L.
Bennett
Private
Investor
Rosemont, PA
Joseph W.
Chow
Former Executive Vice
President
State Street Corporation
Brookline, MA
John A.
Fry
President
Drexel
University
Philadelphia, PA
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
Thomas K.
Whitford
Former Vice
Chairman
PNC Financial Services Group
Pittsburgh, PA
Janet L.
Yeomans
Former Vice President
and Treasurer
3M Corporation
St. Paul, MN
J. Richard
Zecher
Founder
Investor Analytics
Scottsdale, AZ
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 866
437-0252; 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.
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
March 31, 2013
Colorado Municipal | ||
Income Fund |
84 | |
Minnesota Municipal Income | ||
Fund II | 442 | |
National Municipal Income Fund | 106 |
37
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrants Code of Business Ethics has been posted on the Delaware Investments Internet Web site at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrants Board of Trustees/Directors has determined that certain members of the registrants Audit Committee are audit committee financial experts, as defined below. For purposes of this item, an audit committee financial expert is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrants financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An audit committee financial expert shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrants Board of Trustees/Directors has also determined that each member of the registrants Audit Committee is independent. In order to be independent for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an interested person of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrants Audit Committee are set forth below:
Thomas L. Bennett1
John A. Fry
Frances A.
Sevilla-Sacasa
Janet L. Yeomans
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrants annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $19,030 for the fiscal year ended March 31, 2013.
____________________
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on other relevant experience. The Board of Trustees/Directors has determined that Mr. Bennett qualifies as an audit committee financial expert by virtue of: his education and Chartered Financial Analyst designation; his experience as a credit analyst, portfolio manager and the manager of other credit analysts and portfolio managers; and his prior service on the audit committees of public companies.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrants annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $13,434 for the fiscal year ended March 31, 2012.
(b) Audit-related fees.
The aggregate fees billed by the registrants independent auditors for services relating to the performance of the audit of the registrants financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended March 31, 2013.
The aggregate fees billed by the registrants independent auditors for services relating to the performance of the audit of the financial statements of the registrants investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $565,000 for the registrants fiscal year ended March 31, 2013. The percentage of these fees relating to services approved by the registrants Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures; reporting up and subsidiary statutory audits.
The aggregate fees billed by the registrants independent auditors for services relating to the performance of the audit of the registrants financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended March 31, 2012.
The aggregate fees billed by the registrants independent auditors for services relating to the performance of the audit of the financial statements of the registrants investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $416,500 for the registrants fiscal year ended March 31, 2012. The percentage of these fees relating to services approved by the registrants Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures; reporting up and subsidiary statutory audits.
(c) Tax fees.
The aggregate fees billed by the registrants independent auditors for tax-related services provided to the registrant were $2,750 for the fiscal year ended March 31, 2013. The percentage of these fees relating to services approved by the registrants Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrants independent auditors for tax-related services provided to the registrants investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrants fiscal year ended March 31, 2013.
The aggregate fees billed by the registrants independent auditors for tax-related services provided to the registrant were $2,650 for the fiscal year ended March 31, 2012. The percentage of these fees relating to services approved by the registrants Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrants independent auditors for tax-related services provided to the registrants investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrants fiscal year ended March 31, 2012.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended March 31, 2013.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrants independent auditors to the registrants adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrants fiscal year ended March 31, 2013.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended March 31, 2012.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrants independent auditors to the registrants adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $25,000 for the registrants fiscal year ended March 31, 2012. The percentage of these fees relating to services approved by the registrants Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These other services were as follows: attest examination of management's assertion to the controls in place at the transfer agent to be in compliance with Rule 17ad-13(a)(3) of the Securities Exchange Act of 1934.
(e) The registrants Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the Pre-Approval Policy) with respect to services provided by the registrants independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments® Family of Funds.
Service | Range of Fees |
Audit Services | |
Statutory audits or financial audits for new Funds | up to $40,000 per Fund |
Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered audit-related services rather than audit services) | up to $25,000 in the aggregate |
Audit-Related Services | |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered audit services rather than audit-related services) | up to $25,000 in the aggregate |
Tax Services | |
U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds tax compliance function, etc.) | up to $25,000 in the aggregate |
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrants investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the Control Affiliates) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
Service | Range of Fees |
Non-Audit Services | |
Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters |
up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrants independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrants independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $10,584,953 and $10,901,705 for the registrants fiscal years ended March 31, 2013 and March 31, 2012, respectively.
(h) In connection with its selection of the independent auditors, the registrants Audit Committee has considered the independent auditors provision of non-audit services to the registrants investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors provision of these services is compatible with maintaining the auditors independence.
Item 5. Audit Committee of Listed Registrants
The registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the registrants Audit Committee are Thomas L. Bennett, Joseph W. Chow, John A. Fry, Frances A. Sevilla-Sacasa and Janet L. Yeomans.
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
The registrant has formally delegated to its investment adviser(s) (the Adviser) the responsibility for making all proxy voting decisions in relation to portfolio securities held by the registrant. If and when proxies need to be voted on behalf of the registrant, the Adviser will vote such proxies pursuant to its Proxy Voting Policies and Procedures (the Procedures). The Adviser has established a Proxy Voting Committee (the Committee) which is responsible for overseeing the Advisers proxy voting process for the registrant. One of the main responsibilities of the Committee is to review and approve the Procedures to ensure that the Procedures are designed to allow the Adviser to vote proxies in a manner consistent with the goal of voting in the best interests of the registrant.
In order to facilitate the actual process of voting proxies, the Adviser has contracted with Institutional Shareholder Services (ISS), which is a subsidiary of MSCI Inc., to analyze proxy statements on behalf of the registrant and other Adviser clients and vote proxies generally in accordance with the Procedures. The Committee is responsible for overseeing ISSs proxy voting activities. If a proxy has been voted for the registrant, ISS will create a record of the vote. By no later than August 31 of each year, information (if any) regarding how the registrant voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the registrants website at www.delawareinvestments.com; and (ii) on the Commissions website at www.sec.gov.
The Procedures contain a general guideline that recommendations of company management on an issue (particularly routine issues) should be given a fair amount of weight in determining how proxy issues should be voted. However, the Adviser will normally vote against managements position when it runs counter to its specific Proxy Voting Guidelines (the Guidelines), and the Adviser will also vote against managements recommendation when it believes that such position is not in the best interests of the registrant.
As stated above, the Procedures also list specific Guidelines on how to vote proxies on behalf of the registrant. Some examples of the Guidelines are as follows: (i) generally vote for shareholder proposals asking that a majority or more of directors be independent; (ii) generally vote against proposals to require a supermajority shareholder vote; (iii) votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value; (iv) generally vote against proposals at companies with more than one class of common stock to increase the number of authorized shares of the class that has superior voting rights; (v) generally vote re-incorporation proposals on a case-by-case basis; (vi) votes with respect to equity-based compensation plans are generally determined on a case-by-case basis; and (vii) generally vote for proposals requesting reports on the level of greenhouse gas emissions from a companys operations and products.
Because the registrant has delegated proxy voting to the Adviser, the registrant is not expected to encounter any conflict of interest issues regarding proxy voting and therefore does not have procedures regarding this matter. However, the Adviser does have a section in its Procedures that addresses the possibility of conflicts of interest. Most proxies which the Adviser receives on behalf of the registrant are voted by ISS in accordance with the Procedures. Because almost all registrant proxies are voted by ISS pursuant to the pre-determined Procedures, it normally will not be necessary for the Adviser to make an actual determination of how to vote a particular proxy, thereby largely eliminating conflicts of interest for the Adviser during the proxy voting process. In the very limited instances where the Adviser is considering voting a proxy contrary to ISSs recommendation, the Committee will first assess the issue to see if there is any possible conflict of interest involving the Adviser or affiliated persons of the Adviser. If a member of the Committee has actual knowledge of a conflict of interest, the Committee will normally use another independent third party to do additional research on the particular proxy issue in order to make a recommendation to the Committee on how to vote the proxy in the best interests of the registrant. The Committee will then review the proxy voting materials and recommendation provided by ISS and the independent third party to determine how to vote the issue in a manner which the Committee believes is consistent with the Procedures and in the best interests of the registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Other Accounts
Managed
The following chart lists certain information about types of
other accounts for which each portfolio manager is primarily responsible as of
March 31, 2013, unless otherwise noted. Any accounts managed in a personal
capacity appear under Other Accounts along with the other accounts managed on
a professional basis. The personal account information is current as of June 30,
2012.
No. of Accounts with | Total Assets in Accounts | |||||||
No. of | Total Assets | Performance- | with Performance- | |||||
Accounts | Managed | Based Fees | Based Fees | |||||
Joseph R. Baxter | ||||||||
Registered Investment | 17 | $5.2 billion | 0 | $0 | ||||
Companies | ||||||||
Other Pooled | 0 | $0 | 0 | $0 | ||||
Investment Vehicles | ||||||||
Other Accounts | 40 | $2.9 billion | 0 | $0 | ||||
Stephen J. Czepiel | ||||||||
Registered Investment | 17 | $5.2 billion | 0 | $0 | ||||
Companies | ||||||||
Other Pooled | 0 | $0 | 0 | $0 | ||||
Investment Vehicles | ||||||||
Other Accounts | 39 | $2.7 billion | 0 | $0 | ||||
Denise A. Franchetti | ||||||||
Registered Investment | 3 | $452.8 million | 0 | $0 | ||||
Companies | ||||||||
Other Pooled | 0 | $0 | 0 | $0 | ||||
Investment Vehicles | ||||||||
Other Accounts | 2 | Under $1 million | 0 | $0 | ||||
Gregory A. Gizzi | ||||||||
Registered Investment | 17 | $5.2 billion | 0 | $0 | ||||
Companies | ||||||||
Other Pooled | 0 | $0 | 0 | $0 | ||||
Investment Vehicles | ||||||||
Other Accounts | 62 | $3.1 billion | 0 | $0 |
DESCRIPTION OF MATERIAL CONFLICTS OF
INTEREST
Individual portfolio managers may perform investment management services
for other funds or accounts similar to those provided to the Funds and the
investment action for such other fund or account and the Funds may differ. For
example, an account or fund may be selling a security, while another account or
Fund may be purchasing or holding the same security. As a result, transactions
executed for one fund or account may adversely affect the value of securities
held by another fund, account or Fund. Additionally, the management of multiple
other funds or accounts and the Funds may give rise to potential conflicts of
interest, as a portfolio manager must allocate time and effort to multiple funds
or accounts and the Funds. A portfolio manager may discover an investment
opportunity that may be suitable for more than one account or fund. The
investment opportunity may be limited, however, so that all funds or accounts
for which the investment would be suitable may not be able to participate. The
Manager has adopted procedures designed to allocate investments fairly across
multiple funds or accounts.
A portfolio managers management of personal accounts also may present certain conflicts of interest. While Delawares code of ethics is designed to address these potential conflicts, there is no guarantee that it will do so.
Compensation
Structure
Each portfolios managers compensation
consists of the following:
Base Salary - Each named portfolio manager receives a fixed base salary. Salaries are determined by a comparison to industry data prepared by third parties to ensure that portfolio manager salaries are in line with salaries paid at peer investment advisory firms.
Bonus - An objective component is added to the bonus for each manager that is reflective of account performance relative to an appropriate peer group or database. The following paragraph describes the structure of the non-guaranteed bonus.
Each portfolio manager is eligible to receive an annual cash bonus, which is based on quantitative and qualitative factors. There is one pool for bonus payments for the fixed income department. The amount of the pool for bonus payments is determined by assets managed (including investment companies, insurance product-related accounts and other separate accounts), management fees and related expenses (including fund waiver expenses) for registered investment companies, pooled vehicles, and managed separate accounts. Generally, 60%-75% of the bonus is quantitatively determined. For more senior portfolio managers, a higher percentage of the bonus is quantitatively determined. For investment companies, each manager is compensated according the Funds Lipper or Morningstar peer group percentile ranking on a one-year, three-year, and five-year basis, with longer-term performance more heavily weighted. For managed separate accounts the portfolio managers are compensated according to the composite percentile ranking against the BNY Mellon, eVestment Alliance, and Callan Associates databases (or similar sources of relative performance data) on a one-year, three-year, and five-year basis, with longer term performance more heavily weighted. There is no objective award for a fund that falls below the 50th percentile, but incentives reach maximum potential at the 25th-30th percentile. There is a sliding scale for investment companies that are ranked above the 50th percentile. The remaining 25%-40% portion of the bonus is discretionary as determined by Delaware Investments and takes into account subjective factors.
For new and recently transitioned portfolio managers, the compensation may be weighted more heavily towards a portfolio managers actual contribution and ability to influence performance, rather than longer-term performance. Management intends to move the compensation structure towards longer-term performance for these portfolio managers over time.
Incentive Unit Plan - Portfolio managers may be awarded incentive unit awards (Awards) relating to the underlying shares of common stock of Delaware Management Holdings, Inc. issuable pursuant to the terms of the Delaware Investments Incentive Unit Plan (the Plan) adopted on November 30, 2010. Awards are no longer granted under the Delaware Investments U.S., Inc. 2009 Incentive Compensation Plan or the Amended and Restated Delaware Investments U.S., Inc. Incentive Compensation Plan, which was established in 2001.
The Plan was adopted in order to: assist the Manager in attracting, retaining, and rewarding key employees of the company; enable such employees to acquire or increase an equity interest in the company in order to align the interest of such employees and the Manager; and provide such employees with incentives to expend their maximum efforts. Subject to the terms of the Plan and applicable award agreements, Awards typically vest in 25% increments on a four-year schedule, and shares of common stock underlying the Awards are issued after vesting. The fair market value of the shares of Delaware Management Holdings, Inc., is normally determined as of each March 31, June 30, September 30 and December 31 by an independent appraiser. Generally, a stockholder may put shares back to the company during the put period communicated in connection with the applicable valuation.
Other Compensation - Portfolio managers may also participate in benefit plans and programs available generally to all employees.
Ownership of Securities
As of April 30, 2013, the portfolio
managers did not own any shares of the Fund.
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 registrants principal executive officer and principal financial officer have evaluated the registrants 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 registrants 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 registrants fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrants 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.
Name of Registrant: DELAWARE INVESTMENTS® MINNESOTA MUNICIPAL INCOME FUND II, INC.
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | June 5, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | June 5, 2013 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | June 5, 2013 |