<PAGE>
MINNESOTA
MUNICIPAL
TERM
TRUSTS
* * *
ANNUAL REPORT
1995
<PAGE>
TABLE OF CONTENTS
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,
September 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 TO RECEIVE QUARTERLY MNA AND MNB UPDATES
If you would like to be put on our mailing list to receive quarterly fund
updates for the Minnesota Municipal Term Trusts, call our Shareholder
Services Department at 1 800 866-7778. Please identify which fund updates
(MNA or MNB) you would like to receive.
AVERAGE ANNUALIZED TOTAL RETURNS . . . 1
FUND PERFORMANCE . . . . . . . . . . . 2
LETTER TO SHAREHOLDERS . . . . . . . . 3
SUMMARY OF MATURITY AND CALL DATES . . 9
TAX REFORM PROPOSALS . . . . . . . . . 10
FINANCIAL STATEMENTS AND NOTES . . . . 11
INVESTMENTS IN SECURITIES
MNA. . . . . . . . . . . . . . . . . 21
MNB. . . . . . . . . . . . . . . . . 24
INDEPENDENT AUDITORS' REPORT . . . . . 27
FEDERAL TAX INFORMATION . . . . . . . 28
SHAREHOLDER UPDATE . . . . . . . . . . 30
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
MINNESOTA MUNICIPAL TERM TRUST (MNA)
[GRAPHIC REPRESENTATION OF BAR CHART]
MINNESOTA MUNICIPAL LEHMAN BROTHERS 7-YEAR
TERM TRUST MUNICIPAL BOND INDEX
------------------- ----------------------
One Year 18.86% 14.15%
Three Year 9.68% 7.02%
Since Inception 9/26/91 10.36% 7.98%
MINNESOTA MUNICIPAL TERM TRUST II (MNB)
[GRAPHIC REPRESENTATION OF BAR CHART]
MINNESOTA MUNICIPAL LEHMAN BROTHERS 7-YEAR
TERM TRUST II MUNICIPAL BOND INDEX
------------------- ----------------------
One Year 21.57% 14.15%
Three Year 9.81% 7.02%
Since Inception 4/24/92 9.91% 8.11%
Average annualized total return figures are through December 31, 1995, and
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 December 31,
1995, were 21.91%, 6.83% and 7.36% for MNA and 27.63%, 5.94% and 6.80% for
MNB.
These figures also assume reinvested distributions and do not reflect, sales
charges.
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.
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.
1
<PAGE>
FUND PERFORMANCE
NET ASSET VALUE SUMMARY PER SHARE
(COMMON SHARES) MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
INCEPTION INCEPTION
9/26/91 4/24/92
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 12/31/95 . . . . . . . . . . . . . . . . . . . $0.00 $0.00
------- -------
SUBTOTAL . . . . . . . . . . . . . . . . . . . . . $9.34 $9.33
Undistributed Net Investment Income
(Dividend Reserve) At 12/31/95 . . . . . . . . . . +$0.52 +$0.34
Unrealized Appreciation on Investments
At 12/31/95. . . . . . . . . . . . . . . . . . . . +$1.45 +$1.22
------- -------
NET ASSET VALUE ON 12/31/95. . . . . . . . . . . . $11.31 $10.89
DISTRIBUTION HISTORY
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
INCEPTION INCEPTION
9/26/91 4/24/92
Total Monthly Income Dividends
Through 12/31/95
Common Shareholders . . . . . . . . . $2.53 $2.11
Preferred Shareholders (On a Common
Share Basis) . . . . . . . . . . . . . $0.62 $0.52
Total Capital Gains Distributions to
Common Shareholders Through 12/31/95 . . . . . . . $0.01 $0.01
2
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
[PHOTO] February 15, 1996
Dear Shareholders:
FPO 55% THE NET ASSET VALUE TOTAL RETURNS FOR THE MINNESOTA
MUNICIPAL TERM TRUSTS (MNA AND MNB) IN 1995 WERE
DOUG WHITE, CFA, 18.86% AND 21.57%*, RESPECTIVELY, ASSUMING
(ABOVE) SHARES DISTRIBUTIONS WERE REINVESTED AND NOT INCLUDING
RESPONSIBILITY FOR SALES CHARGES. Comparatively, the Lehman Brothers
THE MANAGEMENT OF 7-Year Municipal Bond Index had a total return of
THE MINNESOTA 14.15% during the same one-year period. The higher
MUNICIPAL TERM returns of MNA and MNB were due to their longer
TRUSTS. HE HAS 13 effective durations relative to the index resulting
YEARS OF FINANCIAL from their use of leverage, in the form of
EXPERIENCE. preferred stock, which magnified the effect of
declining market interest rates. Based on market
price, the funds' total returns for the one-year
[PHOTO] period ended December 31, 1995, were 21.91% and
27.63%, respectively, assuming distributions were
reinvested and not including sales charges. During
the year, MNA and MNB maintained their common stock
FPO 56% distribution yields of 6.10% and 5.90%,
respectively, which have been unchanged since each
RON REUSS, (BELOW) fund's inception.**
SHARES
RESPONSIBILITY FOR THE NET ASSET VALUES OF THE FUNDS INCREASED DURING
THE MANAGEMENT OF 1995 AND ARE CURRENTLY HIGHER THAN OUR TARGETED
THE MINNESOTA TERMINATION PRICE OF $10 PER SHARE. The net asset
MUNICIPAL TERM values for MNA and MNB on December 31, 1995, were
TRUSTS. HE HAS 27 $11.31 and $10.89,
YEARS OF FINANCIAL
EXPERIENCE. * 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 DECEMBER 31, 1995, 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
respectively. The funds, along with other municipal bond investments, were
generally well-rewarded during the year due to decreasing market interest
rates, a declining supply of new municipal bond issues and a declining supply
of outstanding municipal bonds. Municipal investors enjoyed strong returns
despite ongoing concerns about proposed tax reforms (see page 10 for more
information) and competition from a robust stock market. Although these
factors caused the municipal bond market to slightly lag the Treasury bond
market, on an after-tax basis most municipal investors likely found their
tax-exempt yields to be higher than the yields of their taxable counterparts.
Even though we expect to see some further market volatility in 1996 - due to
the ongoing tax-reform debate - we believe municipal bonds will benefit this
year from a declining supply of outstanding bonds and strong demand for
municipal issues.
AS THE FUNDS MOVE CLOSER TO THEIR TERMINATION DATES, YOU SHOULD NOT EXPECT
THEIR NET ASSET VALUES TO REMAIN AT SUCH HIGH LEVELS. The net asset values of
the funds will likely begin to decrease at some point in the future since the
market values of most of the bonds in the funds (except for the zero-coupon
bonds)are currently higher than they will be at maturity. As these bonds move
closer to maturity, their market values will decline toward their maturity or
call values, which are at par or a slight premium.
[GRAPHIC REPRESENTATION OF PIE CHART]
MINNESOTA MUNICIPAL TERM TRUST (MNA) PORTFOLIO COMPOSITION
DECEMBER 31, 1995
Miscellaneous Revenue 2%
Industrial Development Revenue 5%
Water/Pollution Control Revenue 12%
Other Assets 2%
Sales Tax 4%
Leasing Revenue 6%
Electrical Revenue 9%
Parking Revenue 1%
Health Service/HMO 1%
Housing Revenue 19%
Hospital Revenue 19%
General Obligations 20%
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
4
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
AS THE CHARTS ON PAGE 9 ILLUSTRATE, THE FUNDS' HOLDINGS OF LONGER-MATURITY
BONDS HAVE BEEN REDUCED SINCE EACH FUND'S INCEPTION, PRIMARILY THROUGH THE
PREREFUNDING OR CROSSOVER REFUNDING OF BONDS BY THEIR ISSUERS. This has
reduced each fund's effective duration and interest rate risk - an important
part of our strategy as we move closer to the funds' termination dates. When
an issuer prerefunds or crossover refunds a bond, the time until the bond
matures is reduced. As of December 31, 1995, 24% and 16% of the bonds in MNA
and MNB, respectively, had been prerefunded or crossover refunded to dates
within a year of the fund's termination date. 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 interest rates at the time of termination.) Keep in mind,
however, that prior to their maturity dates, these prerefunded and crossover
refunded bonds, like other bonds in the funds' portfolios, are still subject
to interest rate risk and will fluctuate in value. We will likely see an
increase in the number of prerefunded and crossover refunded bonds in the
funds should interest rates remain at current levels or decline.
WE WILL CONTINUE OUR STRATEGY OF GRADUALLY SHORTENING THE EFFECTIVE DURATIONS
OF THE PORTFOLIOS, WHICH MAY CAUSE THE FUNDS TO PAY CAPITAL GAINS
DISTRIBUTIONS. Because part of our objective is to provide high current
income exempt
[GRAPHIC REPRESENTATION OF PIE CHART]
MINNESOTA MUNICIPAL TERM TRUST II (MNB) PORTFOLIO COMPOSITION
DECEMBER 31, 1995
Water/Pollution Control Revenue 9%
Other Assets 2%
Housing Revenue 14%
Education Revenue 8%
Electrical Revenue 16%
Parking Revenue 5%
Special Assesments 3%
General Obligations 19%
Hospital Revenue 17%
Industrial Development Revenue 7%
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
5
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
from federal income tax, we would like to avoid paying capital gains
distributions, which are taxable distributions for shareholders. However, as
we strive to meet the objective of returning $10 per share upon termination,
when appropriate we will follow our strategy of positioning the funds more
defensively by increasing the percentage of shorter-term securities in the
portfolios as the funds near their termination dates. Due to appreciation of
the funds' securities, the funds currently have substantial unrealized
capital gains. Consequently, the funds may have to pay capital gains
distributions (which would decrease their net asset values penny for penny)if
we sold any of these bonds at a gain and were unable to offset that gain by
selling another bond at a loss. Additionally, the proceeds from the sale of
these bonds may have to be reinvested in lower-yielding securities, which may
lower the income earned in the funds.
SINCE THEIR INCEPTIONS, THE FUNDS HAVE BEEN GENERATING HIGH INCOME LEVELS AND
THEIR DIVIDEND RESERVES HAVE BEEN INCREASING. The dividend reserves have been
increasing primarily due to the funds' issuance of preferred stock, which has
proved beneficial to common shareholders to date. Long-term interest rates
have remained higher than short-term rates, allowing the funds to earn income
in excess of the monthly common and preferred stock dividends they are paying
out. As a result, we have been able to add to each fund's dividend reserve.
These reserves are an important part of our strategy as we seek to return $10
per share. The retention of income
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.
6
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
helps replace the funds' initial offering and underwriting expenses (see
chart on page 2). While the reserves are not guaranteed, they can also be
used to help maintain common stock distributions in times when the funds may
be paying higher rates on preferred stock. Rates paid on preferred stock
(3.03% for MNA and 3.05% for MNB on February 15) are reset every seven days
and are based on short-term, tax-exempt interest rates.
IF THE FUNDS CONTINUE TO ADD TO THEIR DIVIDEND RESERVES, THE FUNDS MAY BE
REQUIRED TO PAY EXTRA DIVIDENDS TO SATISFY STATE OR FEDERAL TAX DISTRIBUTION
REQUIREMENTS. This is likely to occur sooner in MNA than in MNB; however, we
are not certain it will occur in either fund.
MINNESOTA CONTINUES TO ENJOY A DIVERSE ECONOMY, WHICH MINIMIZES THE CONCERN
OF GEOGRAPHIC DIVERSIFICATION THAT MANY OTHER STATE-SPECIFIC FUNDS
EXPERIENCE. No single company or industry dominates in Minnesota; seven
industries each account for 8% to 20% of the state's economy. As a result,
Minnesota usually has less severe cycles of expansion and recession than most
other states and even the United States as a whole. The state's unemployment
rate is typically lower than the national average. In addition, the credit
quality of many Minnesota school district issues has been raised by a program
that allows school districts to apply for state guarantees. This enables the
school districts to receive the state's AA credit rating and reduces the
school districts' cost of borrowing.
OUR PROPRIETARY CREDIT ANALYSIS ON THE FUNDS' HOLDINGS HAS HELPED THE FUNDS
AVOID ANY PAYMENT DEFAULTS. We continue to manage credit risk, or the risk of
failure of an issuer to make payment, through extensive due diligence and
credit analysis prior to purchasing bonds as well as while
7
<PAGE>
MINNESOTA MUNICIPAL TERM TRUSTS
the bonds are held in the portfolios. This research, which goes beyond the
ratings issued by Moody's or S&P, helps ensure we maintain the quality of the
portfolios. While we have not experienced any problems associated with
payment defaults so far, keep in mind that these funds, and any funds
investing in municipal securities, continue to have credit risk, and the
failure of an issuer to make payments could result in a decrease in net asset
value and a decrease in the income earned by the fund.
THE FUNDS REMAIN FULLY INVESTED IN INVESTMENT-GRADE, MINNESOTA TAX-EXEMPT
MUNICIPAL BONDS AT YIELDS THAT ARE GENERALLY HIGHER THAN YIELDS ON BONDS
AVAILABLE TODAY WITH SIMILAR QUALITY AND MATURITIES. In addition, the
portfolios' average call protection continues to extend approximately to the
funds' termination dates.
Thank you for your investment in the Minnesota Municipal Term Trusts, and if
you have any questions, please contact your investment professional.
Sincerely,
/S/ DOUGLAS J. WHITE
Douglas J. White
Portfolio Manager
/S/ RONALD R. REUSS
Ronald R. Reuss
Portfolio Manager
8
<PAGE>
SUMMARY OF MATURITY OR CALL DATES
The graphs below illustrate the maturity dates of the securities within each
portfolio at each fund's inception and as of December 31, 1995. You will
notice a reduction in longer-maturity bonds and an increase in
shorter-maturity bonds, which shortens the funds' effective durations and
reduces interest rate risk.
MINNESOTA MUNICIPAL TERM TRUST (MNA)
[GRAPHIC REPRESENTATION OF BAR CHART]
AS OF THE FUND'S INCEPTION AS OF DECEMBER 31, 1995
-------------------------- -----------------------
2000 to 2002 0% 24%
2003 to 2007 8% 7%
After 2008 92% 69%
MINNESOTA MUNICIPAL TERM TRUST II (MNB)
[GRAPHIC REPRESENTATION OF BAR CHART]
AS OF THE FUND'S INCEPTION AS OF DECEMBER 31, 1995
-------------------------- -----------------------
2000 to 2002 0% 19%
2003 to 2007 8% 7%
After 2008 92% 74%
9
<PAGE>
TAX REFORM PROPOSALS
Tossing out the current U.S. tax code and replacing it with a simpler tax
system became a hot issue among politicians in 1995. One proposal in
particular - the flat tax - became the most popular among congressional
leaders and presidential candidates.
While there are many varying flat tax proposals, they all share some common
elements of which municipal bond investors should be aware. Many flat tax
proposals would only tax income from wages and salary and would exempt from
tax the interest, dividends and capital gains earned on investments and real
estate. Proponents of a flat tax argue that this would encourage more people
to save money and would be good for investments. However, opponents of a flat
tax say it would hurt tax-exempt municipal bond investors because municipal
bonds currently have interest yields that are lower than taxable interest
yields since the interest paid on municipal bonds is free from federal income
tax. If all interest income were free of taxes, the advantage of investing in
municipal securities would be eliminated and their prices would likely fall
because municipal bonds pay lower interest yields than taxable bonds with
similar maturities and credit quality.
Most flat tax proposals would also do away with current deductions,
exemptions and credits such as interest on home mortgage loans, charitable
contributions, state and local taxes, and medical expenses.
In spite of tax reform's increased popularity, many outspoken critics of a
flat tax have emerged. These include Jerry Brown, the former governor of
California, who was one of the first proponents of the flat tax. He stated
that the flat tax by itself would not balance the budget, which is one
benefit flat tax proponents are touting. The budget could only possibly be
balanced with an additional wealth tax, Brown said.
Other critics agree that the flat tax proposal is unfair. The U.S. tax system
has always been based on a graduated system, where those with more money pay
more taxes because of their ability to do so. Homeowners and municipal bond
investors and issuers, among others, have also begun to realize that they
have too much to lose not to challenge this issue.
We anticipate that the flat tax debate will continue during 1996 but will
subside after the November elections. In the meantime, we will continue to
closely monitor this issue. We encourage you to keep an eye on the tax reform
debate as well, but strongly suggest you continue to take advantage of the
tax-free income that can be earned by investing in municipal bonds.
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
Minnesota Minnesota
Municipal Municipal
Term Trust Term Trust II
-------------- --------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) .... $ 92,060,291 54,133,931
Cash in bank on demand deposit ........................... 78,179 88,311
Accrued interest receivable .............................. 1,844,326 1,033,716
-------------- --------------
Total assets ......................................... 93,982,796 55,255,958
-------------- --------------
LIABILITIES:
Common stock dividends payable ($0.0509 and $0.0492 per
share, respectively) ................................... 291,795 170,232
Capital gain distribution payable ........................ 18,345 29,756
Preferred stock dividends payable (note 3) ............... 13,808 5,704
Accrued investment management fee ........................ 19,837 11,654
Accrued remarketing agent fee ............................ 2,600 2,533
Accrued administrative fee ............................... 11,902 6,993
Other accrued expenses ................................... 9,673 8,297
-------------- --------------
Total liabilities .................................... 367,960 235,169
-------------- --------------
Net assets applicable to outstanding capital stock ....... $ 93,614,836 55,020,789
-------------- --------------
-------------- --------------
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 ...................... 2,968,740 1,175,517
Accumulated net realized gain on investments ............. 1 5,030
Unrealized appreciation of investments ................... 8,309,368 4,203,867
-------------- --------------
Total - representing net assets applicable to
outstanding common stock ........................... 64,814,836 37,670,789
-------------- --------------
Total net assets ................................... $ 93,614,836 55,020,789
-------------- --------------
-------------- --------------
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) ....................... $ 11.31 10.89
-------------- --------------
-------------- --------------
* Investments in securities at identified cost ........... $ 83,750,923 49,930,064
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Minnesota Minnesota
Municipal Municipal
Term Trust Term Trust II
-------------- --------------
<S> <C> <C>
INCOME:
Interest ............................................... $ 5,657,299 3,236,692
-------------- --------------
EXPENSES (NOTE 5):
Investment management fee ................................ 227,757 133,259
Administrative fee ....................................... 136,654 79,956
Remarketing agent fee .................................... 73,000 44,099
Custodian, accounting and transfer agent fees ............ 38,986 25,874
Reports to shareholders .................................. 18,004 15,403
Directors' fees .......................................... 10,956 10,956
Audit and legal fees ..................................... 40,452 40,441
Other expenses ........................................... 47,865 35,930
-------------- --------------
Total expenses ....................................... 593,674 385,918
Less expenses paid indirectly ............................ (8,740) (6,676)
-------------- --------------
Total net expenses ................................... 584,934 379,242
-------------- --------------
Net investment income ................................ 5,072,365 2,857,450
-------------- --------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investments (note 4) ................ 32,605 161,204
Net change in unrealized appreciation or depreciation of
investments ............................................ 6,647,563 4,573,638
-------------- --------------
Net gain on investments ................................ 6,680,168 4,734,842
-------------- --------------
Net increase in net assets resulting from
operations ....................................... $ 11,752,533 7,592,292
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
MINNESOTA MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 5,072,365 5,085,774
Net realized gain (loss) on investments .................. 32,605 (8,402)
Net change in unrealized appreciation or depreciation of
investments ............................................ 6,647,563 (8,009,076)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ........................................... 11,752,533 (2,931,704)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (3,501,539) (3,501,539)
Preferred stock dividends .............................. (1,081,916) (821,480)
From net realized gains:
Common stock dividends ................................. (18,345) --
Preferred stock dividends .............................. (5,679) --
-------------- --------------
Total distributions .................................. (4,607,479) (4,323,019)
-------------- --------------
Total increase (decrease) in net assets ............ 7,145,054 (7,254,723)
Net assets at beginning of year ............................ 86,469,782 93,724,505
-------------- --------------
Net assets at end of year ................................ $ 93,614,836 86,469,782
-------------- --------------
-------------- --------------
Undistributed net investment income ...................... $ 2,968,740 2,479,879
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
MINNESOTA MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 2,857,450 2,869,277
Net realized gain on investments ......................... 161,204 18,640
Net change in unrealized appreciation or depreciation of
investments ............................................ 4,573,638 (5,327,336)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ........................................... 7,592,292 (2,439,419)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (2,042,784) (2,042,784)
Preferred stock dividends .............................. (645,061) (498,520)
From net realized gains:
Common stock dividends ................................. (29,756) --
Preferred stock dividends .............................. (9,501) --
-------------- --------------
Total distributions .................................. (2,727,102) (2,541,304)
-------------- --------------
Total increase (decrease) in net assets ............ 4,865,190 (4,980,723)
Net assets at beginning of year ............................ 50,155,599 55,136,322
-------------- --------------
Net assets at end of year ................................ $ 55,020,789 50,155,599
-------------- --------------
-------------- --------------
Undistributed net investment income ...................... $ 1,175,517 1,011,091
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Minnesota Municipal Term Trust and Minnesota Municipal Term
Trust II (the funds) are registered under the Investment Company
Act of 1940 (as amended) as non-diversified, closed-end
management investment companies. Shares of the Minnesota
Municipal Term Trust are listed on the New York Stock Exchange;
shares of the Minnesota Municipal Term Trust II are listed on
the American Stock Exchange. Minnesota Municipal Term Trust and
Minnesota Municipal Term Trust II will 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, to assist the
funds in meeting their objective of returning $10 per share on
common stock. To realize these objectives, the funds invest in
investment grade municipal obligations including municipal
zero-coupon securities.
(2) SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using
pricing services or prices quoted by independent brokers. 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 risks related to the economic
conditions of Minnesota than portfolios with a broader
geographical diversification.
FUTURES TRANSACTIONS
In order to gain exposure to or protect against changes in the
market, the funds may buy and sell financial futures contracts
and related options. Risks of entering into futures contracts
and related
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
options include the possibility 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. The funds maintain, in segregated accounts
with their custodian, assets with a market value equal to the
amount of their purchase commitments. The purchase of securities
on a when-issued or forward-commitment basis may increase the
volatility of the funds' NAVs, to the extent the funds make such
purchases while remaining substantially
fully invested. As of December 31, 1995, the funds had no
outstanding when-issued or forward commitments.
FEDERAL TAXES
The funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to shareholders.
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 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 and losses deferred due to "wash
sale" transactions. The character of distributions made during
the year from net investment income or net realized gains may
also differ from their ultimate characterization for federal
income tax purposes.
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made on a monthly
basis for common shareholders and a weekly basis for preferred
stock 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 on an annual basis. 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 and disclosure 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 and Minnesota Municipal Term
Trust II have issued and, as of December 31, 1995, have
outstanding 1,152 shares and 694 shares, respectively, of
remarketed preferred stock ("RP-Registered Trademark-") with a
liquidation preference of $25,000 per share for each fund. The
dividend rate on the RP-Registered Trademark- is adjusted every
seven days as determined by the remarketing agent. On December
31, 1995, the Minnesota Municipal Term Trust and Minnesota
Municipal Term Trust II had a dividend rate of 3.50% and 4.00%,
respectively.
(4) SECURITIES
TRANSACTIONS
Purchases of securities and proceeds from sales, other than
temporary investments in short-term securities, for the year
ended December 31, 1995, were $7,721,273 and $7,717,984,
respectively, for Minnesota Municipal Term Trust, and $4,444,620
and $4,755,270, respectively, for Minnesota Municipal Term Trust
II.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(5) FEES AND
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 calculated at the 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 will provide investment advice and, in general, conduct
the management and investment activity of the funds.
The administration agreement provides the administrator with a
monthly fee in an amount 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 fund). For its fee, the administrator
will provide 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 fund's average amount of RP-Registered Trademark-
outstanding. For its fee, the remarketing agent will remarket
shares of RP-Registered Trademark- 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 advisory, the administrative, and the
remarketing agent fees, the funds are responsible for paying
most other operational expenses including outside directors'
fees and expenses, custodian and registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal,
auditing and accounting services; insurance, interest and other
miscellaneous expenses.
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL
HIGHLIGHTS
Per share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Period
from
Year Ended December 31, 9/26/91(a)
----------------------------------------------- to
1995 1994 1993 1992 12/31/91
-------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, common stock, beginning of
period .................................... $ 10.06 11.33 10.15 9.68 9.45
------ -------- -------- -------- --------
Operations:
Net investment income ....................... 0.88 0.89 0.87 0.86 0.17
Net realized and unrealized gains (losses) on
investments ............................... 1.17 (1.41) 1.04 0.37 0.29
------ -------- -------- -------- --------
Total from operations ..................... 2.05 (0.52) 1.91 1.23 0.46
------ -------- -------- -------- --------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............... (0.61) (0.61) (0.61) (0.60) (0.10)
Paid to preferred shareholders ............ (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 ..... (0.80) (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 ................................. $ 11.31 10.06 11.33 10.15 9.68
------ -------- -------- -------- --------
------ -------- -------- -------- --------
Market value, common stock,
end of period ............................. $ 10.63 9.25 11.25 10.38 10.63
------ -------- -------- -------- --------
------ -------- -------- -------- --------
Total return, common stock, market value (b) . 21.91% (12.73%) 14.50% 3.54% 7.29%
Total return, common stock, net asset value
(c) ......................................... 18.86% (6.01%) 17.96% 11.49% 3.51%
Net assets at end of period (in millions) ... $ 94 86 94 87 84
Ratio of expenses to average weekly
net assets (d) .............................. 0.65% 0.62% 0.63% 0.66% 0.55%(e)
Ratio of net investment income to average
weekly net assets ........................... 5.57% 5.69% 5.49% 5.80% 5.66%(e)
Portfolio turnover rate (excluding short-term
securities) ................................. 9% 2% 1% 17% 23%
Remarketed preferred stock, outstanding (in
millions) ................................. $ 29 29 29 29 29
Asset coverage ratio (f) ...................... 325% 300% 325% 302% 293%
</TABLE>
(A) COMMENCEMENT OF OPERATIONS.
(B) TOTAL RETURN, MARKET VALUE, IS 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 DIVIDEND REINVESTMENT PLAN.
(C) TOTAL RETURN, NET ASSET VALUE, IS BASED ON THE CHANGE IN NET ASSET VALUE OF
A COMMON SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS
AT NET ASSET VALUE.
(D) 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.
(E) ADJUSTED TO AN ANNUAL BASIS.
(F) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Period
from
Year Ended December 31, 4/24/92(a)
----------------------------------------- to
1995 1994 1993 12/31/92
------------ --------- --------- --------
<S> <C> <C> <C> <C>
Net asset value, common stock, beginning
of period .......................................... $ 9.48 10.92 9.76 9.45
------ --------- --------- --------
Operations:
Net investment income ................................ 0.83 0.83 0.82 0.50
Net realized and unrealized gains (losses) on
investments ........................................ 1.37 (1.54) 1.05 0.34
------ --------- --------- --------
Total from operations .............................. 2.20 (0.71) 1.87 0.84
------ --------- --------- --------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........................ (0.59) (0.59) (0.59) (0.34)
Paid to preferred shareholders ..................... (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 ................ (0.79) (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 ...................................... $ 10.89 9.48 10.92 9.76
------ --------- --------- --------
------ --------- --------- --------
Market value, common stock,
end of period ...................................... $ 10.38 8.63 11.38 10.38
------ --------- --------- --------
------ --------- --------- --------
Total return, common stock, market value (b) ........... 27.63% (19.55%) 15.65% 7.22%
Total return, common stock, net asset value (c) ........ 21.57% (7.91%) 18.23% 7.01%
Net assets at end of period (in millions) ............ $ 55 50 55 51
Ratio of expenses to average weekly net assets (d) ..... 0.72% 0.69% 0.70% 0.60%(e)
Ratio of net investment income to average weekly
net assets ........................................... 5.36% 5.51% 5.25% 5.51%(e)
Portfolio turnover rate (excluding short-term
securities) . 9% 4% 1% 42%
Remarketed preferred stock, outstanding (in
millions) .......................................... $ 17 17 17 17
Asset coverage ratio (f) ............................... 317% 289% 318% 295%
</TABLE>
(A) COMMENCEMENT OF OPERATIONS.
(B) TOTAL RETURN, MARKET VALUE, IS 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 DIVIDEND REINVESTMENT PLAN.
(C) TOTAL RETURN, NET ASSET VALUE, IS BASED ON THE CHANGE IN NET ASSET VALUE OF
A COMMON SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS
AT NET ASSET VALUE.
(D) 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.
(E) ADJUSTED TO AN ANNUAL BASIS.
(F) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
20
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
MINNESOTA MUNICIPAL TERM TRUST
DECEMBER 31, 1995
<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 (97.9%):
ELECTRIC REVENUE (8.7%):
Northern Municipal Power, 7.25%, 1/1/16 ............. $ 4,850,000 5,225,487
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................... 3,340,000(b) 1,708,689
Southern Municipal Power (Prerefunded to 1/1/96),
6.75%, 1/1/13 ........................................ 250,000(d) 255,043
Southern Municipal Power Agency (AMBAC), 5.00%,
1/1/12 ............................................... 1,000,000 988,610
----------
8,177,829
----------
GENERAL OBLIGATIONS (19.9%):
Anoka/Hennepin County School District, 5.00%,
2/1/10 ............................................... 1,000,000 1,002,030
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................... 300,000(d) 340,194
Farmington School District (MBIA), 6.80%, 2/1/12 ...... 800,000 883,392
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................... 1,000,000(d) 1,103,680
Minneapolis and St. Paul Metro Council, 6.75%,
9/1/08 ............................................... 2,990,000 3,284,246
Prior Lake Independent School District, 6.30%,
2/1/06 ............................................... 500,000 549,155
St. Paul Metropolitan Airport Commission, 6.60%,
1/1/09 ............................................... 3,150,000 3,453,975
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ........................................ 5,000,000(d) 5,606,100
State General Obligation, Zero Coupon, 5.95%,
8/1/01 ............................................... 3,000,000(b) 2,382,030
----------
18,604,802
----------
HEALTH SERVICE/HMO'S (1.2%):
Minneapolis and St. Paul Health Care Systems, 6.75%,
12/1/13 .............................................. 1,000,000 1,078,230
----------
HOSPITAL REVENUE (18.7%):
Bemidji Hospital Facilities, 7.00%, 9/1/21 ............ 3,200,000 3,533,984
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity), 6.76%, 5/1/12 ............................. 1,000,000(b) 408,180
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 ............. 2,000,000(d) 2,354,120
Minneapolis Health Facility, Fairview (MBIA),
6.50%-6.70%, 1/1/11-1/1/17 ........................... 1,025,000 1,125,809
Minneapolis Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 ....... 2,000,000 2,302,980
St. Louis Park Hospital Facilities (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................... 1,300,000(d) 1,483,365
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
21
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
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) 6,285,509
----------
17,493,947
----------
HOUSING REVENUE (19.0%):
Burnsville Oak Leaf Apartments, 7.05%-7.15%,
1/1/12-1/1/25 ........................................ 3,855,000 4,105,627
City of Coon Rapids (FHA), 6.75%, 8/1/23 .............. 1,980,000 2,067,496
Minneapolis Housing-Churchill Apartments, 7.05%,
10/1/22 .............................................. 5,645,000 5,993,184
Minnesota Housing and Finance Authority, 6.85%-6.95%,
8/1/12-1/1/24 ........................................ 4,770,000 5,078,668
St. Paul Housing and Redevelopment Authority, 6.90%,
12/1/11-12/1/21 ...................................... 505,000 530,671
----------
17,775,646
----------
IDR - SOLID WASTE DISPOSAL (4.7%):
Anoka County Solid Waste Disposal Revenue, 6.95%,
12/1/08 .............................................. 4,100,000 4,426,729
----------
LEASING REVENUE (6.0%):
Hennepin County Certificates of Participation,
6.70%-6.75%, 11/15/09-11/15/11 ....................... 4,085,000 4,513,574
Washington County Jail Facility (MBIA) (Prerefunded to
2/1/02), 7.00%, 2/1/12 ............................... 1,000,000(d) 1,140,940
----------
5,654,514
----------
OTHER REVENUE (2.2%):
Minneapolis and St. Paul Metro Council Hubert H.
Humphrey Sports Facility, 6.00%, 10/1/09 ............. 1,110,000 1,170,517
Minneapolis Community Development Authority,
7.15%-7.35%, 12/1/03-12/1/09 ......................... 835,000 901,864
----------
2,072,381
----------
PARKING REVENUE (1.2%):
St. Paul Housing and Finance Authority (Prerefunded to
8/1/00), 6.55%, 8/1/12 ............................... 1,000,000 1,111,420
----------
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) 4,156,474
----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
22
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
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 11,108,319
----------
Total Municipal Long-Term Securities
(cost: $83,350,923) ................................ 91,660,291
----------
MUNICIPAL SHORT-TERM SECURITIES (0.4%):
Minneapolis International Center, 2.55%, 9/1/13
(cost: $400,000) ..................................... 400,000(c) 400,000
----------
Total Investments in Securities
(cost: $83,750,923) (e) ........................... $ 92,060,291
----------
----------
</TABLE>
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 RATE DEMAND NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON DECEMBER 31, 1995.
(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) ON DECEMBER 31, 1995, FOR FEDERAL INCOME TAX PUPOSES, THE COST OF
INVESTMENTS WAS $83,728,760. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 8,331,531
GROSS UNREALIZED DEPRECIATION ...... --
----------
NET UNREALIZED APPRECIATION .... $ 8,331,531
----------
----------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
MINNESOTA MUNICIPAL TERM TRUST II
DECEMBER 31, 1995
<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 (97.5%):
EDUCATION REVENUE (8.1%):
Higher Education Facility-Augsburg College (Connie
Lee), 6.50%, 1/1/11 ................................ $ 2,055,000 2,192,788
Higher Education Facility-Macalester College,
6.30%-6.40%, 3/1/14-3/1/22 ........................... 2,125,000 2,256,206
----------
4,448,994
----------
ELECTRIC REVENUE (15.9%):
Northern Municipal Power (AMBAC), 6.00%, 1/1/19 ....... 2,000,000 2,044,260
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................... 9,690,000(b) 4,737,298
Southern Municipal Power, 5.00%, 1/1/12 ............... 1,000,000 972,630
Southern Municipal Power (Prerefunded to 7/1/16),
5.75%, 1/1/18 ........................................ 1,000,000(e) 1,015,080
----------
8,769,268
----------
GENERAL OBLIGATIONS (19.1%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................... 350,000(e) 381,049
Hopkins Blake School Project Revenue, 6.45%,
9/1/13-9/1/14 ........................................ 385,000 417,984
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................... 2,300,000(e) 2,538,464
Metropolitan Council, 6.75%, 9/1/10-9/1/11 ............ 2,500,000 2,745,365
Minneapolis and St. Paul Metropolitan Airport
Commission, 6.60%, 1/1/11 ............................ 1,000,000 1,091,590
St. Paul Independent School District, 6.45%-6.50%,
2/1/09-2/1/10 875,000 929,571
State General Obligation, 5.00%, 8/1/03 ............... 1,800,000 1,870,740
Willmar Independent School District (AMBAC), 6.25%,
2/1/15 ............................................... 500,000 531,220
----------
10,505,983
----------
HOSPITAL REVENUE (16.9%):
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%, 2/15/20 ..... 2,000,000(e) 2,351,140
Duluth Hospital Facility, St. Lukes (Connie Lee),
6.40%, 5/1/10-5/1/18 ................................. 800,000 861,583
Minneapolis and St. Paul Health Care Facilities (MBIA),
6.75%, 8/15/14 ....................................... 2,500,000 2,729,750
Red Wing Health Care Facility, 6.40%, 9/1/12 .......... 220,000 229,645
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
24
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
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 .................................. $ 3,000,000 3,148,510
----------
9,320,628
----------
HOUSING REVENUE (13.6%):
City of Moorhead - Phoenix Project, 6.35%-7.00%,
6/1/03-6/1/20 ........................................ 1,260,000 1,306,593
Minnesota Housing and Finance Authority, 6.50%-6.85%,
2/1/07-1/1/26 ........................................ 4,820,000 5,132,628
Olmsted County Housing Redevelopment Authority, 6.10%,
2/1/13 ............................................... 1,000,000 1,024,400
St. Paul Housing and Redevelopment Authority, 6.90%,
12/1/11 .............................................. 10,000 10,250
----------
7,473,871
----------
IDR - MISCELLANEOUS PROJECTS (6.7%):
Duluth Seaway Port Authority, Cargill Inc. Project,
6.80%, 5/1/12 2,090,000(c) 2,302,198
East Grand Forks, Pollution Control, 7.75%, 4/1/18 .... 1,300,000 1,389,752
----------
3,691,950
----------
PARKING REVENUE (4.9%):
St. Paul Housing and Finance Authority (Escrowed to
maturity), 6.55%, 8/1/12 ............................. 2,415,000 2,684,079
----------
SPECIAL TAX ASSESSMENT REVENUE (2.9%):
Minneapolis Community Development, Special Tax
Assessment, 7.10%-7.40%, 12/1/02-12/1/21 ............. 1,425,000 1,580,292
----------
WATER/POLLUTION CONTROL REVENUE (9.4%):
State Public Facilities Authority, 6.50%, 3/1/14 ...... 4,695,000 5,158,866
----------
Total Municipal Long-Term Securities
(cost: $49,430,064) ................................ 53,633,931
----------
MUNICIPAL SHORT-TERM SECURITIES (0.9%):
Minneapolis International Center, 2.55%, 9/1/13
(cost: $500,000) ..................................... 500,000(d) 500,000
----------
Total Investments in Securities
(cost: $49,930,064) (f) ........................... $ 54,133,931
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
25
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
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 AND MAY
BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(D) VARIABLE RATE DEMAND NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON DECEMBER 31, 1995.
(E) 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.
(F) ON DECEMBER 31, 1995, FOR FEDERAL INCOME TAX PUPOSES, THE COST OF
INVESTMENTS WAS $49,903,835. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 4,230,096
GROSS UNREALIZED DEPRECIATION ...... --
----------
NET UNREALIZED APPRECIATION .... $ 4,230,096
----------
----------
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
MINNESOTA MUNICIPAL TERM TRUST INC.
MINNESOTA MUNICIPAL TERM TRUST INC. II:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of Minnesota Municipal Term Trust
Inc. and Minnesota Municipal Term Trust Inc. II, as of December 31, 1995, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period ended
December 31, 1995 and the financial highlights presented in footnote 6 to the
financial statements. These financial statements and the financial highlights
are the responsibility of the funds' management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term Trust Inc. II
as of December 31, 1995, and the results of their operations for the year then
ended, changes in their net assets for each of the years in the two-year period
ended December 31, 1995 and the financial highlights presented in footnote 6 to
the financial statements, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 30, 1996
27
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
Fiscal Year Ended December 31, 1995
Federal tax information is presented as an aid to you in
reporting distributions. Please consult a tax adviser on
how to report these distributions at the state and local
levels.
SOURCE OF DISTRIBUTIONS
During the year ended December 31, 1995, 100% of
Minnesota Municipal Term Trust distributions and 100% of
Minnesota Muncipal Term Trust II distributions were
derived from interest on municipal securities and
qualify as exempt-interest dividends for federal and
state tax purposes.
FEDERAL TAXATION
Exempt-interest dividends are exempt from federal income
taxes and should not be included in your gross income,
but need to be reported on your income tax return for
informational purposes.
Minnesota Municipal Term Trust Inc.
<TABLE>
<CAPTION>
COMMON STOCK
Payable Date Per Share
- ------------------------------------------------ -----------
<S> <C>
February 22, 1995 ............................ $ 0.0509
March 29, 1995 ................................. 0.0509
April 26, 1995 ................................. 0.0509
May 24, 1995 ................................... 0.0509
June 28, 1995 .................................. 0.0509
July 26, 1995 .................................. 0.0509
August 23, 1995 ................................ 0.0509
September 27, 1995 ............................. 0.0509
October 25, 1995 ............................... 0.0509
November 22, 1995 .............................. 0.0509
December 27, 1995 .............................. 0.0509
January 11, 1996 ............................... 0.0541(a)
-----------
$ 0.6140
-----------
-----------
(A) THIS DISTRIBUTION INCLUDES $0.0032 OF LONG-TERM CAPITAL
GAINS.
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
Minnesota Municipal Term Trust Inc. (Continued)
<TABLE>
<CAPTION>
PREFERRED STOCK
(at $25,000/share) Per Share
- ------------------------------------------------ -----------
<S> <C>
Total ........................................ $ 944.09(b)
-----------
-----------
(B) THIS DISTRIBUTION INCLUDES $4.93 OF LONG-TERM CAPITAL
GAINS.
</TABLE>
Minnesota Municipal Term Trust II Inc.
<TABLE>
<CAPTION>
COMMON STOCK
Payable Date Per Share
- ------------------------------------------------ -----------
<S> <C>
February 22, 1995 ............................ $ 0.0492
March 26, 1995 ................................. 0.0492
April 26, 1995 ................................. 0.0492
May 24, 1995 ................................... 0.0492
June 28, 1995 .................................. 0.0492
July 26, 1995 .................................. 0.0492
August 23, 1995 ................................ 0.0492
September 27, 1995 ............................. 0.0492
October 25, 1995 ............................... 0.0492
November 22, 1995 .............................. 0.0492
December 27, 1995 .............................. 0.0492
January 11, 1996 ............................... 0.0578(a)
-----------
$ 0.5990
-----------
-----------
(A) THIS DISTRIBUTION INCLUDES $0.0086 OF LONG-TERM CAPITAL
GAINS.
<CAPTION>
PREFERRED STOCK
(at $25,000/share) Per Share
- ------------------------------------------------ -----------
<S> <C>
Total ........................................ $ 943.17(b)
-----------
-----------
(B) THIS DISTRIBUTION INCLUDES $13.69 OF LONG-TERM CAPITAL
GAINS.
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
ANNUAL MEETING RESULTS
An annual meeting of the funds' shareholders was held on August 17, 1995. Each
matter voted upon at the meeting, as well as the number of votes cast for,
against or withheld, and the number of abstentions, with respect to such matter,
are set forth below.
1. The funds' preferred shareholders elected the following two directors:
MINNESOTA MUNICIPAL TERM TRUST INC. (MNA)
<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
David T. Bennett............................. 643 8
William H. Ellis............................. 643 8
</TABLE>
MINNESOTA MUNICIPAL TERM TRUST INC. II (MNB)
<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
David T. Bennett............................. 375 --
William H. Ellis............................. 375 --
</TABLE>
2. The funds' preferred and common shareholders, voting as a class, elected the
following four directors.
MINNESOTA MUNICIPAL TERM TRUST INC. (MNA)
<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
Jaye F. Dyer................................. 5,144,459 74,588
Karol D. Emmerich............................ 5,146,659 72,388
Luella G. Goldberg........................... 5,144,843 74,204
George Latimer............................... 5,141,232 77,815
</TABLE>
MINNESOTA MUNICIPAL TERM TRUST INC. II (MNB)
<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
Jaye F. Dyer............................... 3,244,134 64,246
Karol D. Emmerich.......................... 3,249,134 59,246
Luella G. Goldberg......................... 3,249,134 59,246
George Latimer............................. 3,245,707 62,673
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
3. The funds' preferred and common shareholders, voting as a class, ratified
the selection by a majority of the independent members of the funds' Board
of Directors of KPMG Peat Marwick LLP as the independent public accountants
for the fund for the fiscal year ending December 31, 1995. The following
votes were cast regarding this matter:
<TABLE>
<CAPTION>
Shares Shares
Voted "For" Voted "Against" Abstentions
------------ ---------------- -----------
<S> <C> <C> <C>
MNA................................. 5,161,488 17,082 40,476
MNB................................. 3,246,605 26,859 34,915
</TABLE>
SHARE REPURCHASE PROGRAM
Your fund's board of directors has voted to discontinue the share repurchase
program, effective February 6, 1996. This program had enabled the fund to 'buy
back' shares of its common stock in the open market.
TERMS AND CONDITIONS OF THE TERM TRUST DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in your fund's Term Trust
Dividend Reinvestment Plan. It is a convenient and economical way to buy
additional shares of the fund by automatically reinvesting dividends and capital
gains. The plan is administered by Investors Fiduciary Trust Company (IFTC), the
plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions will begin with
the next distribution paid, provided your enrollment card is received at least
10 days before the record date for that distribution.
If your shares are in certificate form, you may join the plan directly and have
your distributions reinvested in additional shares of the fund. To enroll in
this plan, call IFTC at 1-800-543-1627. If your shares are registered in your
brokerage firm's name or another name, ask the holder of your shares how you may
participate.
Banks, brokers or nominees, on behalf of their beneficial owners who wish to
reinvest dividend and capital gain distributions, may participate in the plan by
informing IFTC at least 10 days before each share's dividend and/or capital
gains distribution.
PLAN ADMINISTRATION
Beginning no more than five business days before the dividend payment date, IFTC
will buy shares of the fund on the New York or American Stock Exchanges or
elsewhere on the open market.
31
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
The fund will not issue any new shares in connection with the plan. All
reinvestments will be at a market price plus a pro rata share of any brokerage
commissions, which may be more or less than the fund's net asset value per
share. The number of shares allocated to you is determined by dividing the
amount of the dividend or distribution by the applicable price per share.
There is no direct charge for reinvestment of dividends and capital gains, since
IFTC fees are paid for by the fund. However, each participant pays a pro rata
portion of the brokerage commissions. Brokerage charges are expected to be lower
than those for individual transactions because shares are purchased for all
participants in blocks. As long as you continue to participate in the plan,
distributions paid on the shares in your term trust account will be reinvested.
IFTC maintains accounts for plan participants holding shares in certificate
form. You will receive a monthly statement detailing total dividend and capital
gain distributions, date of investment, shares acquired, price per share, and
total shares held in your account, both certificate-form shares and unissued
shares acquired through the plan.
TAX INFORMATION
Distributions reinvested in additional shares of the fund are subject to income
tax, just as they would be if received in cash. In general, the tax basis of
such shares will equal the price paid by IFTC plus the pro rata share of any
commission. Each January, you will receive IRS Form 1099 regarding the federal
tax status of the prior year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate your
participation in the plan at any time by giving written notice to IFTC. If your
shares are registered in your brokerage firm's name, you may terminate your
participation via verbal or written instructions to your investment
professional. Written instructions should include your name and address as they
appear on the certificate or account.
If notice is received at least 10 days before the record date, all future
distributions will be paid directly to the shareholder of record.
If your shares are in certificate form and you discontinue your participation in
the plan, you (or your nominee) will receive an additional certificate for all
full shares and a check for any fractional shares in your account.
32
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
PLAN AMENDMENT/TERMINATION
The funds reserve the right to amend or terminate the plan. Should the plan be
terminated, participants will be notified in writing at least 90 days before the
record date for the next dividend or distribution. The plan may also be amended
or terminated by IFTC with at least 90 days' written notice to participants in
the plan.
Any questions about the plan should be directed to your investment professional
or to Investors Fiduciary Trust Company, P.O. Box 419432, Kansas City, Missouri
64141, 1-800-543-1627.
EFFECTIVE DURATION
Effective duration estimates the interest rate risk of a security, in other
words how much the value of the security is expected to change with a given
change in interest rates. The longer a security's effective duration, the more
sensitive its price is to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant.
It is important to understand that, while a valuable measure, effective duration
is based upon certain assumptions and has several limitations. It is most
effective as a measure of interest rate risk when interest rate changes are
small, rapid and occur equally across all the different points of the yield
curve. In addition, effective duration is difficult to calculate precisely
especially in the case of a bond that is callable prior to maturity.
33
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
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
FUND, INC.
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Ronald R. Reuss, PRESIDENT
Douglas J. White, EXECUTIVE/SENIOR VICE PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND TREASURER
Molly J. Destro, VICE PRESIDENT
Susan S. Miley, SECRETARY
INVESTMENT Piper Capital Management Incorporated
ADVISER 222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST TENTH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 4200 NORWEST CENTER, MINNEAPOLIS, MN 55402
</TABLE>
34
<PAGE>
PIPER CAPITAL
MANAGEMENT
PIPER CAPITAL MANAGEMENT INCORPORATED Bulk Rate
222 SOUTH NINTH STREET U.S. Postage
MINNEAPOLIS, MN 55402-3804 PAID
Permit No. 3008
Mpls., MN
PIPER JAFFRAY INC., FUND SPONSOR AND NASD MEMBER.
Recycle 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 annual and semiannual 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:
Corporate Communications
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804
081-96 MXA 01 2/96
STAPLES
