<PAGE>
MINNESOTA
MUNICIPAL
TERM
TRUSTS
* * *
SEMIANNUAL
REPORT
1996
<PAGE>
TABLE OF CONTENTS
AVERAGE ANNUALIZED TOTAL RETURNS ......................... 1
FUND PERFORMANCE ......................................... 2
LETTER TO SHAREHOLDERS ................................... 3
FINANCIAL STATEMENTS AND NOTES ........................... 8
INVESTMENTS IN SECURITIES
MNA ................................................... 19
MNB ................................................... 22
MINNESOTA MUNICIPAL TERM TRUSTS
Minnesota Municipal Term Trust (MNA) and Minnesota Municipal Term Trust II
(MNB) are non-diversified, closed-end investment management companies. The
investment objectives of MNA and MNB are to provide high current income exempt
from regular federal income tax and Minnesota personal income tax and to
return $10 per share on or shortly before April 15, 2002, and April 25, 2003,
respectively - although each fund's termination may be extended up to five
years if necessary to assist the fund in reaching its $10 per share objective.
To realize their objectives, the funds invest in investment-grade, tax-exempt
Minnesota municipal obligations, including municipal zero-coupon securities.
As with other investment companies, there can be no assurance these funds will
achieve their objectives. Since MNA's and MNB's inceptions, Sept. 26, 1991,
and April 24, 1992, respectively, they have been rated Af by Standard & Poor's
Mutual Funds Rating Group (S&P).* Minnesota Municipal Term Trust shares trade
on the New York Stock Exchange under the symbol MNA, and Minnesota Municipal
Term Trust II shares trade on the American Stock Exchange under the symbol MNB.
*THE FUNDS ARE RATED Af, WHICH MEANS INVESTMENTS IN EACH FUND HAVE AN OVERALL
CREDIT QUALITY OF A. CREDIT QUALITIES ARE ASSESSED BY STANDARD & POOR'S MUTUAL
FUNDS RATING GROUP. S&P DOES NOT EVALUATE THE MARKET RISK OF AN INVESTMENT WHEN
ASSIGNING A CREDIT RATING. SEE STANDARD & POOR'S CORPORATE AND MUNICIPAL RATING
DEFINITIONS FOR AN EXPLANATION OF A.
THE FUNDS ALSO HAVE BEEN GIVEN MARKET RISK RATINGS BY S&P, WHICH WE CANNOT
PUBLISH DUE TO NASD REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS
THAT CAN AFFECT THE PERFORMANCE OF A BOND FUND AND INDICATE THE FUNDS' OVERALL
STABILITY AND SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE
AVAILABLE BY CALLING S&P AT 1 800 424-FUND.
Call For More Information
If you would like to be put on our mailing list to receive quarterly fund
updates for the Minnesota Municipal Term Trusts, call our Mutual Fund Services
Department at 1 800 866-7778. In addition, you can call that same number and
listen to portfolio manager commentaries for the funds, which will be updated
monthly.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
MINNESOTA MUNICIPAL TERM TRUST (MNA)
[GRAPH]
MINNESOTA MUNICIPAL TERM TRUST II (MNB)
[GRAPH]
AVERAGE ANNUALIZED TOTAL RETURN FIGURES ARE THROUGH JUNE 30, 1996, ARE BASED ON
THE CHANGE IN NET ASSET VALUE (NAV) AND REFLECT THE REINVESTMENT OF
DISTRIBUTIONS BUT DO NOT REFLECT SALES CHARGES. NAV-BASED PERFORMANCE IS USED TO
MEASURE INVESTMENT MANAGEMENT RESULTS.
AVERAGE ANNUALIZED TOTAL RETURN FIGURES BASED ON THE CHANGE IN MARKET PRICE FOR
THE ONE-YEAR, THREE-YEAR AND SINCE INCEPTION PERIODS ENDED JUNE 30, 1996, WERE
3.35% 3.04% AND 5.47% FOR MNA AND 4.62%, 3.35% AND 4.68% FOR MNB. THESE FIGURES
ALSO ASSUME REINVESTED DISTRIBUTIONS AND DO NOT REFLECT SALES CHARGES.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
THE LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT
REPRESENTS THE 7-YEAR, HIGH-QUALITY, TAX-EXEMPT BOND MARKET. IT ASSUMES ALL
DISTRIBUTIONS ARE REINVESTED.
THE SINCE INCEPTION NUMBERS FOR THE LEHMAN INDEX ARE CALCULATED FROM THE MONTH
END CLOSEST TO THE FUNDS' INCEPTIONS THROUGH JUNE 30, 1996.
1
<PAGE>
FUND PERFORMANCE
NET ASSET VALUE SUMMARY PER SHARE
(COMMON SHARES)
<TABLE>
<CAPTION>
Minnesota Minnesota
Municipal Municipal
Term Trust Term Trust II
INCEPTION INCEPTION
9/26/91 4/24/92
<S> <C> <C>
Initial Offering Price ................................ $10.00 $10.00
Initial Offering and Underwriting Expenses ............ -$0.66 -$0.67
(Common and Preferred Stock)
Accumulated Realized Gains or Losses
At 6/30/96 ............................................ $0.00 $0.00
------ ------
SUBTOTAL .............................................. $ 9.34 $ 9.33
Undistributed Net Investment Income
(Dividend Reserve) At 6/30/96 ......................... +$0.62 +$0.43
Unrealized Appreciation on Investments
At 6/30/96 ............................................ +$1.07 +$0.77
------ ------
NET ASSET VALUE ON 6/30/96 ............................ $11.03 $10.53
</TABLE>
DISTRIBUTION HISTORY
<TABLE>
<CAPTION>
Minnesota Minnesota
Municipal Municipal
Term Trust Term Trust II
INCEPTION INCEPTION
9/26/91 4/24/92
<S> <C> <C>
Total Monthly Income Dividends
Through 6/30/96
Common Shareholders ................................ $2.78 $2.36
Preferred Shareholders (On a Common Share Basis) ... $0.70 $0.60
Total Capital Gains Distributions to
Common Shareholders Through 6/30/96 .................... $0.01 $0.01
</TABLE>
2
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
[PHOTO]
FPO 55%
[PHOTO]
FPO 56%
DOUG WHITE, CFA, (TOP)
SHARES RESPONSIBILITY FOR THE MANAGEMENT OF THE MINNESOTA MUNICIPAL TERM TRUSTS.
HE HAS 13 YEARS OF FINANCIAL EXPERIENCE.
RON REUSS, ISFA, (BOTTOM)
SHARES RESPONSIBILITY FOR THE MANAGEMENT OF THE MINNESOTA MUNICIPAL TERM TRUSTS.
HE HAS 27 YEARS OF FINANCIAL EXPERIENCE.
August 15, 1996
Dear Shareholders:
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996, THE NET ASSET VALUE TOTAL
RETURNS FOR THE MINNESOTA MUNICIPAL TERM TRUSTS (MNA AND MNB) WERE -0.31% AND
- -1.04% RESPECTIVELY.* Comparatively, the Lehman Brothers 7-Year Municipal Bond
Index had a total return of 0.07% during the same six-month period. Based on
market price, the funds' total returns for the period were -4.79% and -4.98%.
(NAV and market price total returns listed assume that distributions were
reinvested and do not include sales charges.) During the period, MNA and MNB
maintained their common stock distribution yields of 6.10% and 5.90%,
respectively, which have been unchanged since each fund's inception.**
TO EVALUATE THE FUNDS' PERFORMANCE, WE RECOMMEND THAT YOU REFER TO THE CHARTS
ON THE PAGE TO THE LEFT INSTEAD OF DRAWING COMPARISONS TO ANY BENCHMARK. The
charts show each fund's net asset value and the history of distributions paid
by each fund since inception. For many reasons, it is difficult to measure the
Minnesota Municipal Term Trusts' performance relative to a benchmark. These
funds are among a very small number of tax-exempt funds with defined
termination dates. Also, as they
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN
SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
** THESE FIGURES REPRESENT ANNUALIZED YIELDS FOR THE ONE-YEAR PERIOD ENDED
JUNE 30, 1996, BASED ON THE INITIAL OFFERING PRICE OF $10 PER SHARE. ACTUAL
YIELDS MAY DIFFER, DEPENDING ON THE INDIVIDUAL SHAREHOLDER'S COST BASIS. THESE
YIELD FIGURES REPRESENT PAST PERFORMANCE. YIELDS ON FUND SHARES MAY FLUCTUATE.
3
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
PORTFOLIO COMPOSITION
MINNESOTA MUNICIPAL TERM TRUST (MNA)
JUNE 30, 1996
[GRAPH]
MINNESOTA MUNICIPAL TERM TRUST II (MNB)
JUNE 30, 1996
[GRAPH]
near their termination dates, we will continue to shorten their average
maturities to reduce interest rate risk. We have used the Lehman index to
provide comparative information; however, we do not try to replicate the
index's performance. Instead, our primary goal is to meet the funds'
investment objectives of providing high current income exempt from regular
federal income tax and returning $10 per share to investors upon the funds'
termination dates. For these reasons, effective with the next reporting
period, we will no longer be comparing the funds' performance to a benchmark
index.
DURING THIS SIX-MONTH REPORTING PERIOD, BONDS GENERALLY HAD NEGATIVE RETURNS
BECAUSE OF THE RISE IN INTEREST RATES. However, municipal bonds, including those
in the Minnesota Municipal Term Trusts, performed better than most of their
taxable counterparts. Municipal prices fell less drastically for three principal
reasons: subsiding concerns about tax reform, a decreased supply of new issues
during the period, and favorable after-tax yields for municipal bonds in
comparison to taxable bonds.
4
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
PREFERRED STOCK
Preferred stock pays dividends at a specified rate and has preference over
common stock in the payments of dividends and the liquidation of assets. Rates
paid on preferred stock are reset every seven days and are based on
short-term, tax-exempt interest rates. Preferred shareholders accept these
short-term rates in exchange for low credit risk (shares of preferred stock
are rated AAA by Moody's and S&P) and high liquidity (shares of preferred
stock trade at par and are remarketed every seven days). The proceeds from the
sale of preferred stock are invested at intermediate- and long-term tax-exempt
rates. Because these intermediate- and long-term rates are normally higher
than the short-term rates paid on preferred stock, common shareholders benefit
by receiving higher dividends and/or an increase to the dividend reserve.
However, the risk of having preferred stock is that if short-term rates rise
higher than intermediate- and long-term rates, creating an inverted yield
curve, common shareholders may receive a lower rate of return than if their
fund did not have any preferred stock outstanding. This type of economic
environment is unusual and historically has been short term in nature.
Investors should also be aware that the issuance of preferred stock results in
the leveraging of common stock which increases the volatility of both the net
asset value of the fund and the market value of shares of common stock.
THE VOLATILE BOND MARKET DURING THE PERIOD CAUSED THE FUNDS' NET ASSET VALUES TO
DECREASE. However, they all remained above their targeted termination price of
$10 per share. On June 30, 1996, the net asset values for MNA and MNB were
$11.03 and $10.53, respectively. A number of bonds in each fund's portfolio are
currently trading above their par or premium call or maturity values. However,
as the funds approach maturity, these bonds will amortize toward the par or
premium call, thereby reducing net asset values. On the other hand, the funds
continue to earn more than their common and preferred stock dividends and add to
their dividend reserves. (Please remember these reserves may be reduced or
eliminated over time to pay dividends.)
MINNESOTA CONTINUES TO ENJOY A DIVERSE ECONOMY, WHICH MINIMIZES THE CONCERN OF
GEOGRAPHIC NON-DIVERSIFICATION THAT MANY OTHER STATE-SPECIFIC FUNDS EXPERIENCE.
No single company or industry dominates in Minnesota. As a result, the state
usually has less severe cycles of expansion and recession than most other
states.
WE MADE NO SUBSTANTIAL CHANGES TO THE FUNDS DURING THE SIX-MONTH PERIOD,
BECAUSE WE BELIEVE THEY ARE STRUCTURED APPROPRIATELY TO MEET THEIR INVESTMENT
OBJECTIVES, GIVEN THE CURRENT ENVIRONMENT. However, we continue to monitor the
funds' progress
5
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
PERCENTAGE OF BONDS MATURING WITHIN A YEAR OF TERMINATION
The graph below illustrates the percentage of bonds in each portfolio with
maturity dates within a year of their termination dates. As the funds near
termination, we continue to make reductions in longer-maturity bonds and
increase holdings in shorter-maturity bonds, which shortens the funds' average
maturities and reduces interest rate risk. However, the bonds will still be
subject to credit risk.
AT THE FUND'S AS OF
INCEPTION AUGUST 1, 1996
MNA 0% 46%
MNB 0% 27%
closely and will reduce average maturity, as appropriate, as the funds near
their termination dates. In reducing average maturity, we may sell bonds. If
we do so at a net gain, this may cause the funds to pay capital gains
distributions, which are taxable, to shareholders. As of the end of June, the
funds remained fully invested in investment-grade or comparable quality
municipal bonds with higher yields than those available today on bonds with
similar quality and maturities.
OUR STRATEGIES HAVE REMAINED THE SAME SINCE THE FUNDS' INCEPTIONS. IN AN
EFFORT TO RETURN $10 PER SHARE AT MATURITY, WE HAVE GRADUALLY REDUCED THE
FUNDS' HOLDINGS IN LONGER-MATURITY BONDS. (See above chart.) The funds'
average maturities have been reduced since inception, primarily through the
prerefunding of bonds by their issuers. This has reduced the funds' interest
rate risk - an important part of our strategy as we move closer to the funds'
termination dates. When an issuer prerefunds a bond, the time until the bond
matures is reduced and the maturity or call price is established. The closer
the maturity date of a bond is to the fund's termination date, the more
certain we can be of the value of the bond at termination (in other words, the
value of the bond will be less affected by
6
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
interest rates at the time of termination). Keep in mind, however, that prior
to their maturity dates, these prerefunded bonds are subject to interest rate
risk and will fluctuate in value.
LOOKING FORWARD, WE EXPECT THE SUPPLY OF OUTSTANDING MUNICIPAL BONDS TO SHRINK
FOR THE THIRD CONSECUTIVE YEAR IN 1996, WHICH SHOULD CAUSE TAX-FREE BONDS TO
CONTINUE TO OUTPERFORM TAXABLE BONDS. In this environment, we will continue to
try to selectively position the funds more defensively as they near their
termination dates.
Thank you for your investment in the Minnesota Municipal Term Trusts. We
consider it a privilege to manage your investment and remain committed to
providing you with the best service.
Sincerely,
/s/ Douglas J. White
Douglas J. White
Portfolio Manager
/s/ Ronald R. Reuss
Ronald R. Reuss
Portfolio Manager
7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (Unaudited)
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
Minnesota
Minnesota Municipal
Municipal Term Trust
Term Trust II
----------- -----------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) .... $ 90,108,601 52,708,141
Cash in bank on demand deposit ........................... 126,971 87,817
Other assets ............................................. 8,357 --
Accrued interest receivable .............................. 1,835,497 1,023,129
----------- -----------
Total assets ......................................... 92,079,426 53,819,087
----------- -----------
LIABILITIES:
Preferred stock dividends payable (note 3) ............... 14,400 4,979
Accrued investment management fee ........................ 18,763 10,949
Accrued remarketing agent fee ............................ 5,400 4,218
Accrued administrative fee ............................... 11,257 6,570
Other accrued expenses ................................... 11,257 6,570
----------- -----------
Total liabilities .................................... 61,077 33,286
----------- -----------
Net assets applicable to outstanding capital stock ....... $ 92,018,349 53,785,801
----------- -----------
----------- -----------
REPRESENTED BY:
Preferred stock - authorized 1 million shares for each
fund of $25,000 liquidation preference per share;
outstanding, 1,152 shares and 694 shares, respectively
(note 3) ............................................. $ 28,800,000 17,350,000
----------- -----------
Common stock - authorized 200 million shares for each fund
of $0.01 par value; outstanding, 5,732,710 shares and
3,460,000 shares, respectively ......................... 57,327 34,600
Additional paid-in capital ............................... 53,479,400 32,251,775
Undistributed net investment income ...................... 3,538,155 1,484,371
Accumulated net realized gain on investments ............. 5,001 5,030
Unrealized appreciation of investments ................... 6,138,466 2,660,025
----------- -----------
Total - representing net assets applicable to
outstanding common stock ........................... 63,218,349 36,435,801
----------- -----------
Total net assets ................................... $ 92,018,349 53,785,801
----------- -----------
----------- -----------
Net asset value per share of outstanding common stock (net
assets divided by 5,732,710 and 3,460,000 shares of common
stock outstanding, respectively) ....................... $ 11.03 10.53
----------- -----------
----------- -----------
* Investments in securities at identified cost ........... $ 83,970,135 50,048,116
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Minnesota
Minnesota Municipal
Municipal Term Trust
Term Trust II
----------- ------------
<S> <C> <C>
INCOME:
Interest ............................................... $ 2,811,143 1,621,991
----------- ------------
EXPENSES (NOTE 5):
Investment management fee ................................ 115,083 67,287
Administrative fee ....................................... 69,050 40,372
Remarketing agent fee .................................... 36,400 21,929
Custodian, accounting and transfer agent fees ............ 24,007 9,980
Reports to shareholders .................................. 7,913 5,526
Directors' fees .......................................... 5,756 5,756
Audit and legal fees ..................................... 20,404 14,050
Other expenses ........................................... 20,916 6,549
----------- ------------
Total expenses ....................................... 299,529 171,449
Less expenses paid indirectly ............................ (2,135) (1,489)
----------- ------------
Total net expenses ................................... 297,394 169,960
----------- ------------
Net investment income ................................ 2,513,749 1,452,031
----------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) ................ 5,000 --
Net change in unrealized appreciation or depreciation of
investments ............................................ (2,170,902) (1,543,842)
----------- ------------
Net loss on investments ................................ (2,165,902) (1,543,842)
----------- ------------
Net increase (decrease) in net assets resulting from
operations ....................................... $ 347,847 (91,811)
----------- ------------
----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
MINNESOTA MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Six Months
Ended
6/30/96 Year Ended
(Unaudited) 12/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 2,513,749 5,072,365
Net realized gain on investments ......................... 5,000 32,605
Net change in unrealized appreciation or depreciation of
investments ............................................ (2,170,902) 6,647,563
------------ ------------
Net increase in net assets resulting from operations ... 347,847 11,752,533
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (1,458,975) (3,501,539)
Preferred stock dividends .............................. (485,359) (1,081,916)
From net realized gains:
Common stock dividends ................................. -- (18,345)
Preferred stock dividends .............................. -- (5,679)
------------ ------------
Total distributions .................................. (1,944,334) (4,607,479)
------------ ------------
Total increase (decrease) in net assets ............ (1,596,487) 7,145,054
Net assets at beginning of period .......................... 93,614,836 86,469,782
------------ ------------
Net assets at end of period .............................. $ 92,018,349 93,614,836
------------ ------------
------------ ------------
Undistributed net investment income ...................... $ 3,538,155 2,968,740
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
MINNESOTA MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Six Months
Ended
6/30/96 Year Ended
(Unaudited) 12/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 1,452,031 2,857,450
Net realized gain on investments ......................... -- 161,204
Net change in unrealized appreciation or depreciation of
investments ............................................ (1,543,842) 4,573,638
------------ ------------
Net increase (decrease) in net assets resulting from
operations ........................................... (91,811) 7,592,292
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (851,160) (2,042,784)
Preferred stock dividends .............................. (292,017) (645,061)
From net realized gains:
Common stock dividends ................................. -- (29,756)
Preferred stock dividends .............................. -- (9,501)
------------ ------------
Total distributions .................................. (1,143,177) (2,727,102)
------------ ------------
Total increase (decrease) in net assets ............ (1,234,988) 4,865,190
Net assets at beginning of period .......................... 55,020,789 50,155,599
------------ ------------
Net assets at end of period .............................. $ 53,785,801 55,020,789
------------ ------------
------------ ------------
Undistributed net investment income ...................... $ 1,484,371 1,175,517
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II (the funds) are registered under the Investment
Company Act of 1940 (as amended) as non-diversified, closed-end
management investment companies. Minnesota Municipal Term Trust
Inc. and Minnesota Municipal Term Trust Inc. II expect to
terminate operations and distribute all of their net assets to
shareholders on or shortly before April 15, 2002, and April 15,
2003, respectively; although termination may be extended to a
date no later than April 15, 2007, and April 15, 2008,
respectively. The funds invest in investment-grade, tax-exempt
Minnesota municipal obligations including municipal zero-coupon
securities. Shares of Minnesota Municipal Term Trust Inc. are
listed on the New York Stock Exchange under the symbol MNA;
shares of Minnesota Municipal Term Trust Inc. II are listed on
the American Stock Exchange under the symbol MNB.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using
pricing services or prices quoted by independent brokers.
Exchange-listed options are valued at the last sales price, and
open financial futures contracts are valued at the last
settlement price. When market quotations are not readily
available, securities are valued at fair value according to
methods selected in good faith by the board of directors.
Short-term securities with maturities of 60 days or less are
valued at amortized cost which approximates market value.
Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium computed on
a level-yield basis, is accrued daily.
The funds concentrate their investments in Minnesota and,
therefore, may have more credit risk related to the economic
conditions of Minnesota than portfolios with a broader
geographical diversification.
FUTURES TRANSACTIONS
In order to gain exposure to or protect from changes in the
market, the funds may buy and sell financial futures contracts
and related options. Risks of entering into futures contracts
and related options
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
include the possibility that there may be an illiquid market and
that a change in the value of the contract or option may not
correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the funds
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The funds recognize a realized gain or loss
when the contract is closed or expires.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the funds on a forward-commitment or when-issued basis can take
place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior
to their delivery. Each fund maintains, in segregated accounts
with the custodian, assets with a market value equal to the
amount of its purchase commitments. The purchase of securities
on a when-issued or forward-commitment basis may increase the
volatility of each fund's net asset value if the funds make such
purchases while remaining substantially fully invested. As of
June 30, 1996, the funds had no outstanding when-issued or
forward-commitments.
FEDERAL TAXES
Each fund is treated separately for federal income tax purposes.
Each fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and not be subject to federal income tax. Therefore,
no income tax provision is required. In addition, on a
calendar-year basis, the funds will distribute substantially all
of their taxable net investment income and realized gains, if
any, to avoid the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization.
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The character of distributions made during the year from net
investment income or net realized gains may differ from its
ultimate characterization for federal income tax purposes. In
addition, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the
year that the income or realized gains (losses) were recorded by
the funds.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders.
Common stock distributions are recorded as of the close of
business on the ex-dividend date and preferred stock dividends
are accrued daily. Realized capital gains, if any, will be
distributed at least annually. Distributions are payable in cash
or, for common shareholders pursuant to the funds' dividend
reinvestment plans, reinvested in additional shares of the
funds' common stock. Under the plans, common shares will be
purchased in the open market.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities. Management is also required to make
disclosures of contingent assets and liabilities at the date of
the financial statements and the reported results of operations
during the reporting period. Actual results could differ from
those estimates.
(3) REMARKETED PREFERRED STOCK
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II have issued and, as of June 30, 1996, have
outstanding 1,152 shares and 694 shares, respectively, of
remarketed preferred stock (RP) with a liquidation preference of
$25,000 per share for each fund. The dividend rate on the RP is
adjusted every seven days as determined by the remarketing
agent. On June 30, 1996, Minnesota Municipal Term Trust Inc. and
Minnesota Term Trust Inc. II had a dividend rate of 3.65% and
3.375%, respectively. Remarketed preferred stock (RP) is a
registered trademark of Merrill Lynch & Co., Inc.
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(4) INVESTMENT SECURITY TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the six
months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Minnesota Minnesota
Municipal Municipal
Term Term
Trust Trust II
-------- --------
<S> <C> <C>
Purchases ................................. $ 200,212 618,052
Proceeds from sales ....................... $ 286,000 --
</TABLE>
For the six months ended June 30, 1996, no brokerage commissions
were paid to Piper Jaffray Inc., an affiliated broker.
(5) EXPENSES
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee equal to an annualized rate of
0.25% of the funds' average weekly net assets (computed by
subtracting liabilities, which exclude preferred stock, from the
value of the total assets of the funds). For its fee, the
adviser provides investment advice and, in general, conducts the
management and investment activity of the funds.
The administration agreement provides the administrator with a
monthly fee equal to an annualized rate of 0.15% of the funds'
average weekly net assets (computed by subtracting liabilities,
which exclude preferred stock, from the value of the total
assets of the funds). For its fee, the administrator provides
certain reporting, regulatory and record-keeping services for
the funds.
The funds have entered into a remarketing agent agreement with
Merrill Lynch, Pierce, Fenner & Smith (the remarketing agent).
The remarketing agreement provides the remarketing agent with a
monthly fee in an amount equal to an annualized rate of 0.25% of
the funds' average amount of RP outstanding. For its fee, the
remarketing agent will remarket shares of RP tendered to it, on
behalf of shareholders thereof, and will determine the
applicable dividend rate for each seven-day dividend period.
In addition to the investment management, administrative and the
remarketing agent fees, the funds are responsible for paying
most
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
other operating expenses including: outside directors' fees and
expenses; custodian fees; registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal,
auditing and accounting services; insurance; interest; taxes and
other miscellaneous expenses.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained by the funds.
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL HIGHLIGHTS
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Six months
ended Fiscal year ended December 31, Period
6/30/96 -------------------------------------------- ended
(Unaudited) 1995 1994 1993 1992 12/31/91 (e)
----------- ------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, common stock, beginning of
period ....................................... $ 11.31 10.06 11.33 10.15 9.68 9.45
----------- ------- -------- ------- ------- ------
Operations:
Net investment income .......................... 0.44 0.88 0.89 0.87 0.86 0.17
Net realized and unrealized gains (losses) on
investments .................................. (0.39) 1.17 (1.41) 1.04 0.37 0.29
----------- ------- -------- ------- ------- ------
Total from operations ........................ 0.05 2.05 (0.52) 1.91 1.23 0.46
----------- ------- -------- ------- ------- ------
Distributions to shareholders:
From net investment income
Paid to common shareholders .................. (0.25) (0.61) (0.61) (0.61) (0.60) (0.10)
Paid to preferred shareholders ............... (0.08) (0.19) (0.14) (0.12) (0.15) (0.02)
From net realized gains
Paid to common shareholders .................. -- -- -- -- (0.01) --
Paid to preferred shareholders ............... -- -- -- -- --
----------- ------- -------- ------- ------- ------
Total distributions to shareholders .......... (0.33) (0.80) (0.75) (0.73) (0.76) (0.12)
----------- ------- -------- ------- ------- ------
Offering costs and underwriting discounts
associated with the remarketed preferred
stock .......................................... -- -- -- -- -- (0.11)
----------- ------- -------- ------- ------- ------
Net asset value, common stock, end of period ... $ 11.03 11.31 10.06 11.33 10.15 9.68
----------- ------- -------- ------- ------- ------
----------- ------- -------- ------- ------- ------
Market value, common stock, end of period ...... $ 9.88 10.63 9.25 11.25 10.38 10.63
----------- ------- -------- ------- ------- ------
----------- ------- -------- ------- ------- ------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ............................................ (0.31)% 18.86% (6.01%) 17.96% 11.49% 3.51%
Total return, common stock, market value (b) ..... (4.79)% 21.91% (12.73%) 14.50% 3.54% 7.29%
Net assets at end of period (in millions) ...... $ 92 94 86 94 87 84
Ratio of expenses to average weekly net assets
(c) ............................................ 0.65%(f) 0.65% 0.62% 0.63% 0.66% 0.55%(f)
Ratio of net investment income to average weekly
net assets ..................................... 5.46%(f) 5.57% 5.69% 5.49% 5.80% 5.66%(f)
Portfolio turnover rate (excluding short-term
securities) .................................... 0% 9% 2% 1% 17% 23%
Remarketed preferred stock outstanding end of
period (in millions) ......................... $ 29 29 29 29 29 29
Asset coverage ratio (d) ......................... 320% 325% 300% 325% 302% 293%
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) BASED ON THE CHANGE IN MARKET PRICE OF A COMMON SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(E) COMMENCEMENT OF OPERATIONS WAS SEPTEMBER 26, 1991.
(F) ADJUSTED TO AN ANNUAL BASIS.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Six months Fiscal year ended December 31,
ended Period
6/30/96 -------------------------------- ended
(Unaudited) 1995 1994 1993 12/31/92(e)
----------- ------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, common stock,
beginning of period .......................... $ 10.89 9.48 10.92 9.76 9.45
----------- ------- -------- ------- ------
Operations:
Net investment income .......................... 0.42 0.83 0.83 0.82 0.50
Net realized and unrealized gains (losses) on
investments .................................. (0.45) 1.37 (1.54) 1.05 0.34
----------- ------- -------- ------- ------
Total from operations ........................ (0.03) 2.20 (0.71) 1.87 0.84
----------- ------- -------- ------- ------
Distributions to shareholders:
From net investment income
Paid to common shareholders .................. (0.25) (0.59) (0.59) (0.59) (0.34)
Paid to preferred shareholders ............... (0.08) (0.19) (0.14) (0.12) (0.07)
From net realized gains
Paid to common shareholders .................. -- (0.01) -- -- --
Paid to preferred shareholders ............... -- -- -- --
----------- ------- -------- ------- ------
Total distributions to shareholders .......... (0.33) (0.79) (0.73) (0.71) (0.41)
----------- ------- -------- ------- ------
Offering costs and underwriting discounts
associated with the remarketed preferred
stock .......................................... -- -- -- -- (0.12)
----------- ------- -------- ------- ------
Net asset value, common stock, end of period . $ 10.53 10.89 9.48 10.92 9.76
----------- ------- -------- ------- ------
----------- ------- -------- ------- ------
Market value, common stock, end of period ...... $ 9.63 10.38 8.63 11.38 10.38
----------- ------- -------- ------- ------
----------- ------- -------- ------- ------
SELECTED INFORMATION
Total return, common stock, net asset value (a) . (1.04)% 21.57% (7.91%) 18.23% 7.01%
Total return, common stock, market value (b) ..... (4.98)% 27.63% (19.55%) 15.65% 7.22%
Net assets at end of period (in millions) ...... $ 54 55 50 55 51
Ratio of expenses to average weekly net assets
(c) ............................................ 0.63%(f) 0.72% 0.69% 0.70% 0.60%(f)
Ratio of net investment income to average weekly
net assets ..................................... 5.39%(f) 5.36% 5.51% 5.25% 5.51%(f)
Portfolio turnover rate (excluding short-term
securities) .................................... 0% 9% 4% 1% 42%
Remarketed preferred stock outstanding end of
period (in millions) ......................... $ 17 17 17 17 17
Asset coverage ratio (d) ......................... 310% 317% 289% 318% 295%
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE
(B) BASED ON THE CHANGE IN MARKET PRICE OF A COMMON SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(E) COMMENCEMENT OF OPERATIONS WAS APRIL 24, 1992.
(F) ADJUSTED TO AN ANNUAL BASIS.
18
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (Unaudited)
MINNESOTA MUNICIPAL TERM TRUST
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (97.2%):
Electric Revenue (8.4%):
Northern Municipal Power, 7.25%, 1/1/16 ............. $ 4,850,000 5,152,688
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................... 3,340,000(b) 1,638,172
Southern Municipal Power Agency (AMBAC), 5.00%,
1/1/12 ............................................... 1,000,000 914,590
-----------
7,705,450
-----------
General Obligations (19.7%):
Anoka/Hennepin County School District, 5.00%,
2/1/10 ............................................... 1,000,000 952,070
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................... 300,000(d) 329,691
Farmington School District (MBIA), 6.80%, 2/1/12 ...... 800,000 851,808
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................... 1,000,000(d) 1,068,610
Minneapolis and St. Paul Metropolitan Council, 6.75%,
9/1/08 ............................................... 2,990,000 3,218,496
Prior Lake Independent School District, 6.30%,
2/1/06 ............................................... 500,000 533,060
St. Paul Metropolitan Airport Commission, 6.60%,
1/1/09 ............................................... 3,150,000 3,367,413
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ........................................ 5,000,000(d) 5,434,950
State General Obligation, Zero-Coupon, 5.95%,
8/1/01 ............................................... 3,000,000(b) 2,373,960
-----------
18,130,058
-----------
Health Service/HMO's (1.2%):
Minneapolis and St. Paul Health Care Systems, 6.75%,
12/1/13 .............................................. 1,000,000 1,075,030
-----------
Hospital Revenue (18.5%):
Bemidji Hospital Facilities (Prerefunded to 9/1/01),
7.00%, 9/1/21 ........................................ 3,200,000(d) 3,576,032
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity to 5/1/12), 6.76%, 5/1/12 ................... 1,000,000(b) 372,610
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 ............. 2,000,000(d) 2,275,180
Minneapolis Health Facility, Fairview (MBIA),
6.50%-6.70%, 1/1/11-1/1/17 ........................... 1,025,000 1,081,851
Minneapolis Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 ....... 2,000,000(d) 2,223,000
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................... 1,300,000(d) 1,440,400
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
19
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00), 7.25%, 7/1/15 .......................... $ 5,500,000(d) 6,099,335
-----------
17,068,408
-----------
Housing Revenue (19.0%):
Burnsville Oak Leaf Apartments, 7.05%-7.15%,
1/1/12-1/1/25 ........................................ 3,855,000 4,024,248
City of Coon Rapids (FHA), 6.75%, 8/1/23 .............. 1,980,000 2,032,965
Minneapolis Housing-Churchill Apartments, 7.05%,
10/1/22 .............................................. 5,645,000 5,877,856
St. Paul Housing and Redevelopment Authority, 6.90%,
12/1/11-12/1/21 ...................................... 494,000 510,437
State Housing and Finance Agency, 6.85%-6.95%,
8/1/12-1/1/24 ........................................ 4,770,000 5,005,185
-----------
17,450,691
-----------
IDR - Solid Waste Disposal (4.7%):
Anoka County Solid Waste Disposal Revenue (CFC), 6.95%,
12/1/08 .............................................. 4,100,000 4,358,382
-----------
Leasing Revenue (6.0%):
Hennepin County Certificates of Participation,
6.70%-6.75%, 11/15/09-11/15/11 ....................... 4,085,000 4,412,640
Washington County Jail Facility (MBIA) (Prerefunded to
2/1/02), 7.00%, 2/1/12 ............................... 1,000,000(d) 1,105,430
-----------
5,518,070
-----------
Other Revenue (2.2%):
Minneapolis and St. Paul Metropolitan Council Hubert H.
Humphrey Sports Facility, 6.00%, 10/1/09 ............. 1,110,000 1,139,293
Minneapolis Community Development Authority,
7.15%-7.35%, 12/1/03-12/1/09 ......................... 835,000 883,821
-----------
2,023,114
-----------
Parking Revenue (1.2%):
St. Paul Housing and Finance Authority (Prerefunded to
8/1/00), 6.55%, 8/1/12 ............................... 1,000,000(d) 1,081,310
-----------
Sales Tax Revenue (4.4%):
Minneapolis Community Development Authority, Special
Tax Assessment, Zero-Coupon (MBIA), 6.71%-7.01%,
3/1/07-3/1/09 ........................................ 7,585,000(b) 4,020,198
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
20
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Water/Pollution Control Revenue (11.9%):
State Public Facilities Authority, 6.65%-6.70%,
3/1/08-3/1/13 ...................................... $ 10,000,000 10,977,890
-----------
Total Municipal Long-Term Securities
(cost: $83,270,135) ................................ 89,408,601
-----------
MUNICIPAL SHORT-TERM SECURITIES (0.7%):
Dakota County Housing and Redevelopment Authority,
3.45%, 12/1/16
(cost: $700,000) ..................................... 700,000(c) 700,000
-----------
Total Investments in Securities
(cost: $83,970,135) (e) ........................... $ 90,108,601
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) VARIABLE DEMAND RATE NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON JUNE 30, 1996. THE MATURITY
DATE SHOWN REPRESENTS FINAL MATURITY.
(D) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. CROSSOVER
REFUNDED ISSUES ARE BACKED BY THE CREDIT OF THE REFUNDING ISSUER. IN BOTH
CASES THE BONDS ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(E) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
</TABLE>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 6,138,466
GROSS UNREALIZED DEPRECIATION ...... 0
-----------
NET UNREALIZED APPRECIATION .... $ 6,138,466
-----------
-----------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (Unaudited)
MINNESOTA MUNICIPAL TERM TRUST II
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (98.0%):
Education Revenue (8.1%):
Higher Education Facility-Augsburg College (Connie
Lee), 6.50%, 1/1/11 ................................ $ 2,055,000 2,139,152
Higher Education Facility-Macalester College,
6.30%-6.40%, 3/1/14-3/1/22 ........................... 2,125,000 2,218,358
-----------
4,357,510
-----------
Electric Revenue (15.7%):
Northern Municipal Power (AMBAC), 6.00%, 1/1/19 ....... 2,000,000 2,007,120
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................... 9,690,000(b) 4,526,426
Southern Municipal Power (Prerefunded to 7/1/16),
5.75%, 1/1/18 1,000,000(d) 977,680
Southern Municipal Power Agency, 5.00%, 1/1/12 ........ 1,000,000 914,590
-----------
8,425,816
-----------
General Obligations (19.1%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................... 350,000(d) 370,377
Hopkins Blake School Project Revenue, 6.45%,
9/1/13-9/1/14 ........................................ 385,000 408,048
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................... 2,300,000(d) 2,457,803
Metropolitan Council, 6.75%, 9/1/10-9/1/11 ............ 2,500,000 2,691,050
Minneapolis and St. Paul Metropolitan Airport
Commission, 6.60%, 1/1/11 ............................ 1,000,000 1,064,090
St. Paul Independent School District, 6.45%-6.50%,
2/1/09-2/1/10 . 875,000 936,509
State General Obligation, 5.00%, 8/1/03 ............... 1,800,000 1,818,648
Willmar Independent School District (AMBAC), 6.25%,
2/1/15 ............................................... 500,000 511,420
-----------
10,257,945
-----------
Hospital Revenue (17.7%):
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%, 2/15/20 ..... 2,000,000(d) 2,280,280
Duluth Hospital Facility, St. Lukes (Connie Lee),
6.40%, 5/1/10-5/1/18 ................................. 800,000 828,684
Minneapolis and St. Paul Health Care Facilities (MBIA),
6.75%, 8/15/14 ....................................... 2,500,000 2,663,850
Red Wing Health Care Facility, 6.40%, 9/1/12 .......... 220,000 220,882
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
22
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Rochester Health Care, 6.03%-6.25%,
11/15/15-11/15/21 .................................. $ 3,500,000 3,515,965
-----------
9,509,661
-----------
Housing Revenue (13.7%):
City of Moorhead - Phoenix Project, 6.35%-7.00%,
6/1/03-6/1/20 . 1,260,000 1,285,904
Olmsted County Housing Redevelopment Authority,
6.10%, 2/1/13 ........................................ 1,000,000 1,009,820
St. Paul Housing and Redevelopment Authority, 6.90%,
12/1/11 .............................................. 10,000 10,089
State Housing and Finance Agency, 6.50%-6.85%,
2/1/07-1/1/26 ........................................ 4,820,000 5,053,097
-----------
7,358,910
-----------
IDR - Miscellaneous Projects (6.7%):
Duluth Seaway Port Authority, Cargill Inc. Project,
6.80%, 5/1/12 . 2,090,000(c) 2,258,788
East Grand Forks, Pollution Control, 7.75%, 4/1/18 .... 1,300,000 1,363,323
-----------
3,622,111
-----------
Parking Revenue (4.9%):
St. Paul Housing and Finance Authority (Prerefunded to
8/1/00), 6.55%, 8/1/12 ............................... 2,415,000(d) 2,611,364
-----------
Special Tax Assessment Revenue (2.8%):
Minneapolis Community Development, Special Tax
Assessment, 7.10%-7.40%, 12/1/02-12/1/21 ............. 1,425,000 1,550,141
-----------
1,550,141
-----------
Water/Pollution Control Revenue (9.3%):
State Public Facilities Authority, 6.50%, 3/1/14 ...... 4,695,000 5,014,683
-----------
Total Municipal Long-Term Securities
(cost: $50,048,116) ................................ 52,708,141
-----------
Total Investments in Securities
(cost: $50,048,116) (e) ........................... $ 52,708,141
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
23
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
<TABLE>
<S> <C> <C>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) SECURITIES PURCHASED WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AN MAY
BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(D) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. CROSSOVER
REFUNDED ISSUES ARE BACKED BY THE CREDIT OF THE REFUNDING ISSUER. IN BOTH
CASES THE BONDS ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(E) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
</TABLE>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 2,686,397
GROSS UNREALIZED DEPRECIATION ...... (26,372)
-----------
NET UNREALIZED APPRECIATION .... $ 2,660,025
-----------
-----------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC.,
USL PRODUCTS, INC., KIEFER BUILT, INC., OF
COUNSEL, GRAY, PLANT, MOOTY, MOOTY & BENNETT,
P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY
COMPANIES INC., PIPER CAPITAL MANAGEMENT
INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL,
RELIASTAR FINANCIAL CORP., HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL
EQUITY FUNDS
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND
TREASURER
Susan S. Miley, SECRETARY
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
25
<PAGE>
----------------
PIPER CAPITAL BULK RATE
MANAGEMENT U.S. POSTAGE
PAID
Permit No. 3008
PIPER CAPITAL MANAGEMENT INCORPORATED Mpls., MN
222 SOUTH NINTH STREET ----------------
MINNEAPOLIS, MN 55402-3804
THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
[LOGO] 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's shareholder reports. This householding
process should allow us to mail one report to each
address where one or more registered shareholders with
the same last name reside. If you would like to have
additional reports mailed to your address, please call our
Shareholder Services area at 1 800 866-7778, or mail
your request to:
Piper Capital Management
Attn: Communications Department
222 South Ninth Street
Minneapolis, MN 55402-3804
#21300 8/1996 189-96
STAPLES
|
|
V
