<PAGE>
Minnesota Municipal Term Trusts - 1997 Semiannual Report
1997 Semiannual Report
MINNESOTA
MUNICIPAL
TERM
TRUSTS
[LOGO]
<PAGE>
[LOGO]
CONTENTS
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . .2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .7
Investments in Securities
MNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
*** This report includes a glossary to help you understand financial terms used
in the portfolio managers' letter. When you see this symbol, it indicates a word
that is defined in the glossary.
MINNESOTA MUNICIPAL TERM TRUSTS
- -------------------------------
PRIMARY INVESTMENTS
Investment-grade, tax-exempt Minnesota municipal obligations including municipal
zero-coupon securities.
FUND OBJECTIVE
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
to investors on or before April 15, 2002; and April 15, 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. The funds' income
may be subject to federal and/or state of Minnesota alternative minimum tax.
Investors should consult their tax advisers. As with other investment companies,
there can be no assurance that each fund will achieve its objective.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the period ended June 30, 1997
- --------------------------------------------------------------------------------
[EDGAR REPRESENTATION OF CHART]
<TABLE>
<CAPTION>
ONE FIVE SINCE
YEAR YEAR INCEPTION
---- ---- ---------
<S> <C> <C> <C>
Minnesota Municipal Term Trust (MNA, inception 9/26/91) 7.25% 8.35% 8.82%
Minnesota Municipal Term Trust II (MNB, inception 4/24/92) 8.17% 8.36% 8.36%
</TABLE>
All total return figures are through June 30, 1997, and reflect the reinvestment
of distributions but not sales charges. NAV-based performance is used to measure
investment management results. At the end of June, the six-month NAV total
returns for MNA and MNB were 2.58% and 2.89%, respectively. As noted in our last
shareholder report to you, we no longer compare the funds' NAV performance to a
market benchmark. This is because our primary goal is to meet the funds'
investment objectives of providing high current income exempt from regular
federal and state of Minnesota personal income tax and returning $10 per share
to investors at the funds' termination dates.
Based on market price, the six-month total returns for MNA and MNB were 4.13%
and 2.88%, respectively. Average annualized total return figures based on the
change in market price for the one-year, five-year and since inception periods
ended June 30, 1997, were 14.13%, 7.02% and 6.93% for MNA and 12.94%, 6.20% and
6.23% for MNB.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THESE INVESTMENTS. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. 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. Closed-end funds, such as these funds, often
trade at discounts to net asset value. Therefore, you may be unable to realize
the full net asset value of your shares when you sell.
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1997 Semiannual Report 1 Minnesota Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER
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[PHOTO]
DOUG WHITE, CFA,
shares responsibility for the management of the Minnesota Municipal
Term Trusts. He has 14 years of financial experience.
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August 18, 1997
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DEAR SHAREHOLDERS:
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997, WE ARE PLEASED TO REPORT THAT THE
MINNESOTA MUNICIPAL TERM TRUSTS (MNA AND MNB) REMAINED ON TARGET TO MEET THEIR
INVESTMENT OBJECTIVES. The funds continued to earn more than their monthly
common and preferred stock*** dividends and add to their dividend reserves. This
enabled the funds to maintain their monthly common stock distributions of 5.09
cents and 4.92 cents, respectively, which have been unchanged since their
inceptions. In addition, net asset values for the funds remained above the $10
per share objective. As of June 30, 1997, the net asset values for MNA and MNB
were $11.18 and $10.77, respectively. (Please refer to the charts below and on
page 4 for each fund's distribution and net asset value history since
inception.)
DURING THE FIRST SIX MONTHS OF 1997, INTEREST RATES AND, IN TURN, BOND PRICES
WERE VOLATILE. The economy showed signs of strength early in the period,
prompting the Federal Reserve (the Fed) to raise the federal funds rate*** in
March from 5.25% to 5.50%. That caused bond yields to rise and prices to fall.
It was the first time in more than two years that the Fed had adopted a
tightening monetary policy. Beginning in mid-April, however, concerns of
DISTRIBUTION HISTORY
- --------------------------------------------------------------------------------
MNA MNB
Inception Inception
9/26/91 4/24/92
Total Monthly Income Distributions Through 6/30/97
- --------------------------------------------------------------------------------
Common Shareholders $3.39 $2.95
- --------------------------------------------------------------------------------
Preferred Shareholders (On a Common Share Basis) $0.87 $0.76
- --------------------------------------------------------------------------------
Total Capital Gains Distributions to Common
Shareholders Through 6/30/97 $0.02 $0.02
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1997 Semiannual Report 2 Minnesota Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
[PHOTO]
RON REUSS, ISFA,
shares responsibility for the management of the Minnesota Municipal
Term Trusts. He has 28 years of financial experience.
- --------------------------------------------------------------------------------
an overheating economy were replaced by signs that the economy was beginning to
slow and inflation was decelerating. As a result, interest rates trended
downward and bond prices increased in the final three months.
FOR THE PERIOD, TAX-EXEMPT BONDS OUTPERFORMED THEIR TAXABLE COUNTERPARTS. The
prices of 30-year, AAA-rated municipal bonds ended the period basically
unchanged, compared to a decrease in the prices of 30-year Treasuries.
Municipals outperformed mainly because of a decrease in the supply of new issues
and, to a lesser degree, because of a pickup in demand. In our report to you six
months ago, we were anticipating an increase in the supply of new national
municipal bonds in 1997. However, year-to-date new Minnesota issues are down 35%
compared to 1996.
DURING THE PERIOD, WE CONTINUED TO REDUCE OUR EXPOSURE TO LONGER MATURITY BONDS
AND INCREASE OUR POSITION IN BONDS THAT COME DUE CLOSER TO THE FUNDS'
TERMINATION DATES. (See chart below.) This strategy is designed to help achieve
the funds' objective of returning $10 per share at maturity. The closer a bond's
maturity date*** is to the termination date of the fund, the less sensitive the
bond's price will be to interest rate changes and the more certain we can be of
its value at termination. This strategy slightly lowered income, but as noted
earlier, the funds earned more than their monthly common and preferred stock
dividends and added to their dividend reserves. (See each fund's dividend
reserve amount in the chart on page 4.)
BONDS MATURING WITHIN A YEAR OF TERMINATION
- --------------------------------------------------------------------------------
The chart below illustrates the percentage of bonds in each fund with maturity
dates within a year of the funds' termination dates.
MNA MNB
Inception Inception
9/26/91 4/24/92
At the Fund's Inception 0% 0%
- --------------------------------------------------------------------------------
As of June 30, 1997 49% 31%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1997 Semiannual Report 3 Minnesota Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
GIVEN THE RECENT DECLINE IN INTEREST RATES, WE ARE NOT CURRENTLY IMPLEMENTING
OUR STRATEGY OF SELLING LONGER MATURITY BONDS TO PURCHASE SHORTER MATURITY
BONDS. Lower rates have increased the prices of the longer maturity bonds in the
funds, creating the potential for additional taxable capital gains distributions
if the funds sell these bonds. Moreover, lower rates have reduced the income
available from shorter maturity bonds in which the fund would invest. This
strategy, however, has been effective in the past, and we do plan to employ it
again in the appropriate economic environment.
AS THE FUNDS APPROACH THEIR TERMINATIONS, WE EXPECT THEIR NET ASSET VALUES TO
DECLINE DUE TO THREE FACTORS. First, at some point we will continue to sell
longer maturity bonds in favor of bonds with lower coupons*** that come due
closer to the funds' termination dates. If these shorter-maturity bonds pay
insufficient income to maintain our current dividends, the funds' dividend
reserves may be used to pay common and/or preferred dividends. Second, part of
the unrealized appreciation in the funds is the result of bonds that are
currently trading at unrealized gains.*** As the maturity and/or refunding
dates*** of these bonds approach, their market
- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY
- --------------------------------------------------------------------------------
Common Shares
MNA MNB
Inception Inception
9/26/91 4/24/92
Initial Offering Price $10.00 $10.00
- --------------------------------------------------------------------------------
Initial Offering and Underwriting Expenses
(Common and Preferred Stock) - $0.66 - $0.67
- --------------------------------------------------------------------------------
Accumulated Realized Gains or Losses at 6/30/97 +$0.01 +$0.03
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBTOTAL $9.35 $9.36
- --------------------------------------------------------------------------------
Dividend Reserve
(Undistributed Net Investment Income) at 6/30/97 + $0.71 + $0.49
- --------------------------------------------------------------------------------
Unrealized Appreciation on Investments at 6/30/97 + $1.12 + $0.92
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ON 6/30/97 $11.18 $10.77
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1997 Semiannual Report 4 Minnesota Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
prices will converge toward a price that is at or near par.*** Third, any
realized gains*** in the funds will have to be paid out before or at
termination. All three of these factors could reduce the funds' net asset
values. In addition, keep in mind that the funds are always subject to interest
rate risk*** and credit risk,*** which could have an impact on net asset value.
Please refer to the chart on page 4 for each fund's current dividend reserve,
unrealized appreciation and accumulated realized gains.
LOOKING AHEAD, WE REMAIN POSITIVE ABOUT THE TAX-EXEMPT MARKET. The economy
appears to be growing at a moderate pace, which should help keep inflation under
control. Given this scenario, the Fed is not likely to raise interest rates.
However, we believe the Fed will continue to be vigilant about controlling
economic growth and inflation and may increase short-term interest rates
if inflation becomes a major concern. Should interest rates rise, we would again
look to trade longer maturity bonds for shorter maturities while attempting to
keep the impact on each fund's income-producing potential to a minimum.
AS ALWAYS, WE WILL CONTINUE TO APPLY OUR PROPRIETARY CREDIT ANALYSIS TO EXISTING
HOLDINGS AND NEW PURCHASES as we work toward meeting the funds' objectives. Our
credit analysis is designed to help ensure that the municipalities in which we
invest meet our high-quality criteria and remain able to repay interest and
principal in a timely manner.
Thank you for your investment in the Minnesota Municipal Term Trusts. We remain
committed to providing you with quality service and look forward to helping you
achieve your financial goals.
Sincerely,
/s/ Douglas J. White /s/ Ronald R. Reuss
Douglas J. White Ronald R. Reuss
Portfolio Manager Portfolio Manager
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Semiannual Report 5 Minnesota Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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PORTFOLIO COMPOSITIONS
- --------------------------------------------------------------------------------
As a percentage of total assets on June 30, 1997
MINNESOTA MUNICIPAL TERM TRUST (MNA)
[EDGAR REPRESENTATION OF CHART]
Water/Sewer/Pollution Control Revenue... 12%
Multiple Utility Revenue................ 5%
Leasing Revenue......................... 6%
Other Assets............................ 3%
Sales/Excise Tax Revenue................ 5%
General Obligations..................... 18%
Hospital Revenue........................ 20%
Miscellaneous Revenue................... 2%
Nursing Home Revenue.................... 1%
Electric Revenue........................ 8%
Parking Revenue......................... 1%
Housing Revenue......................... 19%
MINNESOTA MUNICIPAL TERM TRUST II (MNB)
[EDGAR REPRESENTATION OF CHART]
General Obligations..................... 19%
Nursing Home Revenue.................... 1%
Education Revenue....................... 6%
Other Assets............................ 2%
Parking Revenue......................... 5%
Housing Revenue......................... 15%
Hospital Revenue........................ 18%
Water/Sewer/Pollution Control Revenue... 9%
Special Tax Revenue..................... 3%
Industrial Development Revenue.......... 7%
Electric Revenue........................ 15%
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1997 Semiannual Report 6 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1997
..................................................................
<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $91,135,475 $53,556,844
Cash in bank on demand deposit ............................. 36,217 93,461
Accrued interest receivable ................................ 1,800,007 995,319
------------ ------------
Total assets ............................................. 92,971,699 54,645,624
------------ ------------
LIABILITIES:
Preferred stock dividends payable (note 3) ................. 16,570 6,560
Accrued investment management fee .......................... 19,080 11,213
Accrued remarketing agent fee .............................. 6,000 3,615
Accrued administrative fee ................................. 11,448 6,728
------------ ------------
Total liabilities ........................................ 53,098 28,116
------------ ------------
Net assets applicable to outstanding capital stock ....... $92,918,601 $54,617,508
------------ ------------
------------ ------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ......................................... $82,336,727 $49,636,375
Undistributed net investment income ........................ 4,089,762 1,679,725
Accumulated net realized gain on investments ............... 70,279 95,666
Unrealized appreciation of investments ..................... 6,421,833 3,205,742
------------ ------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $92,918,601 $54,617,508
------------ ------------
------------ ------------
* Investments in securities at identified cost ............. 84,713,642 50,351,102
------------ ------------
------------ ------------
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $64,118,601 $37,267,508
Shares of common stock outstanding ......................... 5,732,710 3,460,000
Net asset value ............................................ $ 11.18 $ 10.77
Market price ............................................... $ 10.63 $ 10.25
LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to preferred stock (note 3) .......... $28,800,000 $17,350,000
Shares of preferred stock outstanding ...................... 1,152 694
Liquidation preference per share ........................... $ 25,000 $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 7 Minnesota Municipal Term Trust
<PAGE>
Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 1997
..................................................................
<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
----------- -----------
<S> <C> <C>
INCOME:
Interest ................................................... $2,822,416 $1,607,881
----------- -----------
EXPENSES (NOTE 5):
Investment management fee .................................. 114,742 67,331
Administrative fee ......................................... 68,845 40,398
Remarketing agent fee ...................................... 36,200 21,809
Custodian and accounting fees .............................. 29,514 21,798
Transfer agent fees ........................................ 1,421 1,063
Reports to shareholders .................................... 8,001 6,407
Directors' fees ............................................ 8,986 8,986
Audit and legal fees ....................................... 31,360 31,360
Other expenses ............................................. 32,676 16,790
----------- -----------
Total expenses ........................................... 331,745 215,942
Less expenses paid indirectly .......................... (4,350) (3,419)
----------- -----------
Total net expenses ....................................... 327,395 212,523
----------- -----------
Net investment income .................................... 2,495,021 1,395,358
----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 70,279 55,828
Net change in unrealized appreciation or depreciation of
investments .............................................. (395,081) (92,425)
----------- -----------
Net loss on investments .................................. (324,802) (36,597)
----------- -----------
Net increase in net assets resulting from operations ... $2,170,219 $1,358,761
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 8 Minnesota Municipal Term Trust
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST
----------------------------
Six Months
Ended 6/30/97 Year Ended
(Unaudited) 12/31/96
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,495,021 $ 5,017,621
Net realized gain on investments ........................... 70,279 71,877
Net change in unrealized appreciation or depreciation of
investments .............................................. (395,081) (1,492,454)
------------- ------------
Net increase in net assets resulting from operations ..... 2,170,219 3,597,044
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (1,458,975) (3,501,539)
Preferred stock dividends ................................ (499,548) (931,044)
From net realized gains:
Common stock dividends ................................... -- (55,607)
Preferred stock dividends ................................ -- (16,785)
------------- ------------
Total distributions ...................................... (1,958,523) (4,504,975)
------------- ------------
Total increase (decrease) in net assets ................ 211,696 (907,931)
Net assets at beginning of period .......................... 92,706,905 93,614,836
------------- ------------
Net assets at end of period ................................ $ 92,918,601 $ 92,706,905
------------- ------------
------------- ------------
Undistributed net investment income ........................ $ 4,089,762 $ 3,553,264
------------- ------------
------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 9 Minnesota Municipal Term Trust
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST II
----------------------------
Six Months
Ended 6/30/97 Year Ended
(Unaudited) 12/31/96
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 1,395,358 $ 2,844,407
Net realized gain on investments ........................... 55,828 79,749
Net change in unrealized appreciation or depreciation of
investments .............................................. (92,425) (905,700)
------------- ------------
Net increase in net assets resulting from operations ..... 1,358,761 2,018,456
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (851,160) (2,042,784)
Preferred stock dividends ................................ (291,237) (550,376)
From net realized gains:
Common stock dividends ................................... -- (34,254)
Preferred stock dividends ................................ -- (10,687)
------------- ------------
Total distributions ...................................... (1,142,397) (2,638,101)
------------- ------------
Total increase (decrease) in net assets ................ 216,364 (619,645)
Net assets at beginning of period .......................... 54,401,144 55,020,789
------------- ------------
Net assets at end of period ................................ $ 54,617,508 $ 54,401,144
------------- ------------
------------- ------------
Undistributed net investment income ........................ $ 1,679,725 $ 1,426,764
------------- ------------
------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 10 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (Unaudited)
- ---------------------------------------------------------------------
(1) ORGANIZATION
................................
Minnesota Municipal Term Trust Inc. (MNA) and Minnesota Municipal
Term Trust Inc. II (MNB) (the funds) are registered under the
Investment Company Act of 1940 (as amended) as non-diversified,
closed-end management investment companies. MNA and MNB 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 primarily in high quality
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
Portfolio securities for which market quotations are readily
available are valued at current market value. If market
quotations or valuations are not available, or if Piper Capital
Management Incorporated believes such quotations or valuations
are inaccurate, unreliable or not reflective of market value,
portfolio securities are valued according to procedures adopted
by the funds' board of directors in good faith at "fair value",
that is, a price that the funds might reasonably expect to
receive for the security or other asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an independent
pricing service but where an active market exists are valued
using market quotations obtained from one or more dealers that
make markets in the securities or from a widely-used quotation
system. Short-term securities with maturities of 60 days or less
are valued at amortized cost, which approximates market value.
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1997 Semiannual Report 11 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
Securities transactions are accounted for on the date 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, is recorded on an
accrual basis.
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.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the funds on a when-issued or forward-commitment 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 segregate, 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' net asset value if the funds make such purchases while
remaining substantially fully invested. As of June 30, 1997, 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. The funds also intend to distribute 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. The character of distributions made
during the year from net investment income or net realized gains
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1997 Semiannual Report 12 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
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. Net realized gains distributions, if any, will be made 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
in the financial statements. Actual results could differ from
these estimates.
(3) REMARKETED
PREFERRED
STOCK
................................
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II have issued and, as of June 30, 1997, 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, 1997, the dividend rates were 3.50% and 3.45% for
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II, respectively.
RP is a registered trademark of Merrill Lynch & Company.
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1997 Semiannual Report 13 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
(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, 1997, were as follows:
<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
----------- -----------
<S> <C> <C>
Purchases ................................... $ 2,618,844 $1,624,604
Proceeds from sales ......................... $ 2,087,545 $1,454,547
</TABLE>
(5) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
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 in an amount 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 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 funds). For its fee, the administrator will
provide regulatory reporting and record-keeping services for the
funds.
REMARKETING AGENT FEE
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.
- ---------------------------------------------------------------------
1997 Semiannual Report 14 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
OTHER FEES AND EXPENSES
In addition to the investment management, administrative and the
remarketing agent fees, the funds are responsible for paying most
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 miscellaneous cash balances maintained by the
funds.
- ---------------------------------------------------------------------
1997 Semiannual Report 15 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(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 Year ended December 31,
6/30/97 --------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $11.15 $ 11.31 $ 10.06 $ 11.33 $ 10.15 $ 9.68
------- ------- ------- -------- ------- -------
Operations:
Net investment income ..................... 0.44 0.87 0.88 0.89 0.87 0.86
Net realized and unrealized gains (losses)
on investments .......................... (0.07) (0.25) 1.17 (1.41) 1.04 0.37
------- ------- ------- -------- ------- -------
Total from operations ................... 0.37 0.62 2.05 (0.52) 1.91 1.23
------- ------- ------- -------- ------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............. (0.25) (0.61) (0.61) (0.61) (0.61) (0.60)
Paid to preferred shareholders .......... (0.09) (0.16) (0.19) (0.14) (0.12) (0.15)
From net realized gains
Paid to common shareholders ............. -- (0.01) -- -- -- (0.01)
------- ------- ------- -------- ------- -------
Total distributions to shareholders ..... (0.34) (0.78) (0.80) (0.75) (0.73) (0.76)
------- ------- ------- -------- ------- -------
Net asset value, common stock, end of
period .................................... $11.18 $ 11.15 $ 11.31 $ 10.06 $ 11.33 $ 10.15
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Market value, common stock, end of period ... $10.63 $ 10.50 $ 10.63 $ 9.25 $ 11.25 $ 10.38
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 2.58% 4.23% 18.86% (6.01%) 17.96% 11.49%
Total return, common stock, market value
(b) ....................................... 4.13% 4.86% 21.91% (12.73%) 14.50% 3.54%
Net assets at end of period (in millions) ... $ 93 $ 93 $ 94 $ 86 $ 94 $ 87
Ratio of expenses to total average weekly net
assets .................................... 0.72%(e) 0.68% 0.65% 0.62% 0.63% 0.66%
Ratio of expenses to average weekly net
assets applicable to common stock ......... 1.05%(e) 0.99% 0.95% 0.92% 0.92% 1.00%
Ratio of net investment income to total
average weekly net assets ................. 5.44%(e) 5.42% 5.57% 5.69% 5.49% 5.80%
Ratio of net investment income to average
weekly net assets a pplicable to common
stock (c) ................................. 6.31%(e) 6.40% 6.38% 7.06% 6.95% 7.18%
Portfolio turnover rate (excluding short-term
securities) ............................... 2% 2% 9% 2% 1% 17%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 29 $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage ratio (d) .................... 323% 322% 325% 300% 325% 302%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S REINVESTMENT PLAN.
(c) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY NET ASSETS APPLICABLE TO
COMMON SHARES.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(e) ANNUALIZED.
- ---------------------------------------------------------------------
1997 Semiannual Report 16 Minnesota Municipal Term Trust
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(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 II
<TABLE>
<CAPTION>
Six
Months Period
Ended Year ended December 31, Ended
6/30/97 -------------------------------------------- 12/31/92
(Unaudited) 1996 1995 1994 1993 (e)
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $10.71 $ 10.89 $ 9.48 $ 10.92 $ 9.76 $ 9.45
------- ------- ------- -------- ------- -------
Operations:
Net investment income ..................... 0.40 0.82 0.83 0.83 0.82 0.50
Net realized and unrealized gains (losses)
on investments .......................... (0.01) (0.24) 1.37 (1.54) 1.05 0.34
------- ------- ------- -------- ------- -------
Total from operations ................... 0.39 0.58 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) (0.59) (0.34)
Paid to preferred shareholders .......... (0.08) (0.16) (0.19) (0.14) (0.12) (0.07)
From net realized gains
Paid to common shareholders ............. -- (0.01) (0.01) -- -- --
------- ------- ------- -------- ------- -------
Total distributions to shareholders ..... (0.33) (0.76) (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 .................................... $10.77 $ 10.71 $ 10.89 $ 9.48 $ 10.92 $ 9.76
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Market value, common stock, end of period ... $10.25 $ 10.25 $ 10.38 $ 8.63 $ 11.38 $10.38
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 2.89% 4.04% 21.57% (7.91%) 18.23% 7.01%
Total return, common stock, market value
(b) ....................................... 2.88% 4.88% 27.63% (19.55%) 15.65% 7.22%
Net assets at end of period (in millions) ... $ 55 $ 54 $ 55 $ 50 $ 55 $ 51
Ratio of expenses to total average weekly net
assets .................................... 0.80%(f) 0.73% 0.72% 0.69% 0.70% 0.60%(f)
Ratio of expenses to average weekly net
assets applicable to common stock ......... 1.18%(f) 1.07% 1.06% 1.03% 1.03% 0.75%(f)
Ratio of net investment income to total
average weekly net assets ................. 5.18%(f) 5.25% 5.36% 5.51% 5.25% 5.51%(f)
Ratio of net investment income to average
weekly net assets applicable to common
stock (c) ................................. 6.02%(f) 6.20% 6.10% 6.78% 6.60% 5.97%(f)
Portfolio turnover rate (excluding short-term
securities) ............................... 3% 4% 9% 4% 1% 42%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 17 $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage ratio (d) .................... 315% 314% 317% 289% 318% 295%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S REINVESTMENT PLAN.
(c) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY NET ASSETS APPLICABLE TO
COMMON SHARES.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(e) COMMENCEMENT OF OPERATIONS WAS APRIL 24, 1992.
(f) ANNUALIZED
- ---------------------------------------------------------------------
1997 Semiannual Report 17 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST June 30, 1997
........................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (96.5%):
ELECTRIC REVENUE (8.0%):
Northern Municipal Power (Callable 1/1/99 at 102),
7.25%, 1/1/16 ..................................... $ 4,850,000 $ 5,127,711
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................ 3,340,000(b) 1,799,329
Western Municipal Power Agency (AMBAC), 4.80%,
1/1/02 ............................................ 465,000 471,668
------------
7,398,708
------------
GENERAL OBLIGATIONS (17.9%):
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................ 300,000(d) 327,024
Farmington School District (MBIA) (Callable 2/1/01 at
100), 6.80%, 2/1/12 ............................... 200,000 212,786
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 1,000,000(d) 1,071,570
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00), 6.75%, 9/1/08 ..... 2,990,000(d) 3,200,077
Prior Lake Independent School District (Callable
2/1/03 at 100), 6.30%, 2/1/06 ..................... 500,000 537,990
St. Paul Metropolitan Airport Commission (Callable
1/1/02 at 100), AMT, 6.60%, 1/1/09 ................ 3,150,000(e) 3,372,548
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ..................................... 5,000,000(d) 5,440,150
State General Obligation, Zero-Coupon, 5.95%,
8/1/01 ............................................ 3,000,000(b) 2,497,230
------------
16,659,375
------------
HOSPITAL REVENUE (19.8%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 4.90%-5.00%,
11/15/01-11/15/02 ................................. 1,635,000 1,665,093
Bemidji Hospital Facilities (Prerefunded to 9/1/01),
7.00%, 9/1/21 ..................................... 3,200,000(d) 3,572,768
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity to 5/1/12), 6.76%, 5/1/12 ................ 1,000,000(b) 407,700
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 .......... 2,000,000(d) 2,250,040
Minneapolis Health Facility, Fairview (MBIA)
(Callable 1/1/02 at 102), 6.50%, 1/1/11 ........... 750,000 804,195
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 18 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
Minneapolis Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 .... $ 2,000,000(d) $ 2,222,420
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................ 1,300,000(d) 1,427,907
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00), 7.25%, 7/1/15 ......................... 5,500,000(d) 6,055,060
------------
18,405,183
------------
HOUSING REVENUE (19.6%):
Burnsville Oak Leaf Apartments (Callable 7/1/01 at
103), 7.05%-7.15%, 1/1/12-1/1/25 .................. 3,810,000 3,996,161
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
AMT, 6.75%, 8/1/23 ................................ 1,980,000(e) 2,056,408
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................... 5,645,000 5,904,727
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%,
12/1/11-12/1/21 ................................... 466,000 485,679
State Housing and Finance Agency, 4.85%-4.95%,
7/1/02-7/1/03 ..................................... 755,000 762,727
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.95%, 2/1/14 ............................... 3,400,000 3,575,610
State Housing and Finance Agency (Callable 2/1/02 at
102), 6.90%, 8/1/12 ............................... 495,000 523,314
State Housing and Finance Agency (Callable 7/1/02 at
102), AMT, 6.85%, 1/1/24 .......................... 875,000(e) 915,495
------------
18,220,121
------------
IDR - SOLID WASTE DISPOSAL (4.7%):
Anoka County Solid Waste Disposal Revenue (CFC)
(Callable 6/1/00 at 102), AMT, 6.95%, 12/1/08 ..... 4,100,000(e) 4,407,705
------------
LEASING REVENUE (6.0%):
Hennepin County Certificates of Participation
(Callable 11/15/01 at 100), 6.70%-6.75%,
11/15/09-11/15/11 ................................. 4,085,000 4,424,924
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02), 7.00%, 2/1/12 ......................... 1,000,000(d) 1,106,650
------------
5,531,574
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 19 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
NURSING HOME REVENUE (0.5%):
Maplewood Health Care Facilities Revenue (Callable
11/15/01 at 102), 5.70%, 11/15/02 ................. $ 500,000 $ 507,116
------------
OTHER REVENUE (2.2%):
Minneapolis and St. Paul Metropolitan Council Hubert
H. Humphrey Sports Facility (Callable 10/1/02 at
100), 6.00%, 10/1/09 .............................. 1,110,000 1,155,843
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.15%-7.35%, 12/1/03-12/1/09 ..... 835,000 885,754
------------
2,041,597
------------
PARKING REVENUE (1.2%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 1,000,000(d) 1,082,020
------------
SALES TAX REVENUE (4.8%):
Minneapolis Community Development Authority, Special
Tax, Zero-Coupon (MBIA), 6.71%-7.01%,
3/1/07-3/1/09 ..................................... 7,585,000(b) 4,458,316
------------
WATER/POLLUTION CONTROL REVENUE (11.8%):
State Public Facilities Authority (Prerefunded to
3/1/01), 6.65%-6.70%, 3/1/08-3/1/13 ............... 10,000,000(d) 10,973,760
------------
Total Municipal Long-Term Securities
(cost: $83,263,642) ............................ 89,685,475
------------
MUNICIPAL SHORT-TERM SECURITIES (1.6%):
Mankato, MN, 4.15%, 2/1/18 .......................... 400,000(c) 400,000
Minneapolis Commercial Development
Revenue-International Centre, 4.15%, 9/1/13 ....... 900,000(c) 900,000
Bloomington, MN, Port Authority, 4.20%, 2/1/13 ...... 150,000(c) 150,000
------------
Total Municipal Short-Term Securities
(cost: $1,450,000) ............................. 1,450,000
------------
Total Investments in Securities
(cost: $84,713,642) (f) ........................ $ 91,135,475
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 20 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
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) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON JUNE
30, 1997. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH ALLOWS THE
RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT EXCEEDING
ONE YEAR, ON UP TO 30 DAYS' NOTICE. 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) AMT - ALTERNATIVE MINIMUM TAX. AS OF JUNE 30, 1997, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $10,752,156,
WHICH REPRESENTS 11.57% OF NET ASSETS.
(f) 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>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 6,421,833
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 6,421,833
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 21 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST II June 30, 1997
.......................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (97.3%):
EDUCATION REVENUE (6.1%):
Higher Education Facility-Augsburg College (Connie
Lee) (Callable 1/1/00 at 102), 6.50%, 1/1/11 ...... $ 2,055,000 $ 2,160,750
Higher Education Facility-Macalester College
(Callable 3/1/02 at 100), 6.30%, 3/1/14 ........... 1,125,000 1,190,171
------------
3,350,921
------------
ELECTRIC REVENUE (14.7%):
Northern Municipal Power (AMBAC) (Callable 1/1/99 at
100), 6.00%, 1/1/19 ............................... 2,000,000 2,029,900
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................ 9,690,000(b) 4,992,555
Western Municipal Power Agency (AMBAC), 4.90%,
1/1/03 ............................................ 1,000,000 1,017,110
------------
8,039,565
------------
GENERAL OBLIGATIONS (18.9%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................ 350,000(d) 370,058
Hopkins Blake School Project Revenue (Callable 9/1/04
at 100), 6.45%, 9/1/13-9/1/14 ..................... 385,000 418,296
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 2,300,000(d) 2,464,611
Metropolitan Council (Crossover refunded to 9/1/00),
6.75%, 9/1/10-9/1/11 .............................. 2,500,000(d) 2,675,650
Minneapolis and St. Paul Metropolitan Airport
Commission (Callable 1/1/02 at 100), AMT, 6.60%,
1/1/11 ............................................ 1,000,000(f) 1,068,570
St. Paul Independent School District (Prerefunded to
2/1/01), 6.45%-6.50%, 2/1/09-2/1/10 ............... 875,000(d) 936,935
State General Obligation, 5.00%, 8/1/03 ............. 1,800,000 1,845,936
Willmar Independent School District (AMBAC) (Callable
2/1/02 at 100), 6.25%, 2/1/15 ..................... 500,000 537,905
------------
10,317,961
------------
HOSPITAL REVENUE (18.0%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 5.00%,
11/15/03 .......................................... 695,000 707,482
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%,
2/15/20 ........................................... 2,000,000(d) 2,237,380
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10 ........... 300,000 321,408
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 22 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Callable 8/15/00 at 102), 6.75%,
8/15/14 ........................................... $ 2,500,000 $ 2,680,950
Red Wing Health Care Facility (Callable 9/1/03 at
102), 6.40%, 9/1/12 ............................... 220,000 226,037
Rochester Health Care (Callable 11/15/02 at 102),
6.03%-6.25%, 11/15/15-11/15/21 .................... 3,500,000 3,651,785
------------
9,825,042
------------
HOUSING REVENUE (15.0%):
City of Moorhead - Phoenix Project (Callable 6/1/02
at 101), AMT, 6.35%-7.00%, 6/1/03-6/1/20 .......... 1,260,000(f) 1,297,346
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... 1,000,000 1,032,340
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 10,000 10,183
State Housing and Finance Agency, 5.05%,
1/1/04-7/1/04 ..................................... 815,000 825,674
State Housing and Finance Agency (Callable 1/1/03 at
102), AMT, 6.50%, 1/1/26 .......................... 380,000(f) 392,734
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,102,381
State Housing and Finance Agency (Callable 7/1/02 at
102), AMT, 6.75%-6.85%, 7/1/12-1/1/24 ............. 1,475,000(f) 1,543,343
------------
8,204,001
------------
IDR - MISCELLANEOUS PROJECTS (6.8%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 5/1/02 at 102), 6.80%, 5/1/12 ........... 2,090,000(c) 2,287,589
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ 1,300,000 1,403,506
------------
3,691,095
------------
NURSING HOME REVENUE (0.9%):
Maplewood Healthcare Facility (Callable 11/15/01 at
102), 5.80%, 11/15/03 ............................. 500,000 507,940
------------
PARKING REVENUE (4.8%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 2,415,000(d) 2,613,078
------------
SPECIAL TAX ASSESSMENT REVENUE (2.8%):
Minneapolis Community Development, Special Tax
Assessment (Callable 12/1/01 at 102), 7.10%-7.40%,
12/1/02-12/1/21 ................................... 1,425,000 1,508,094
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 23 Minnesota Municipal Term Trust
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
WATER/POLLUTION CONTROL REVENUE (9.3%):
State Public Facilities Authority (Callable 3/1/02 at
102), 6.50%, 3/1/14 ............................... $ 4,695,000 $ 5,099,147
------------
Total Municipal Long-Term Securities
(cost: $49,951,102) ............................ 53,156,844
------------
MUNICIPAL SHORT-TERM SECURITIES (0.7%):
Bloomington, MN, Port Authority, 4.20%, 2/1/13
(cost: $400,000) .................................. 400,000(e) 400,000
------------
Total Investments in Securities
(cost: $50,351,102) (g) ........................ $ 53,556,844
------------
------------
</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) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY BE
SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS. THESE
PRIVATE PLACEMENTS ARE CONSIDERED ILLIQUID BY THE ADVISER. AS OF JUNE 30,
1997, THE AGGREGATE MARKET VALUE OF SUCH SECURITIES IS $2,287,589, WHICH
REPRESENTS 4.19% OF NET ASSETS.
(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) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON JUNE
30, 1997. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH ALLOWS THE
RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT EXCEEDING
ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN REPRESENTS FINAL
MATURITY.
(f) AMT - ALTERNATIVE MINIMUM TAX. AS OF JUNE 30, 1997, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $4,301,993,
WHICH REPRESENTS 7.88% OF NET ASSETS.
(g) 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>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 3,205,742
GROSS UNREALIZED DEPRECIATION ...... --
-----------
NET UNREALIZED APPRECIATION ...... $ 3,205,742
-----------
-----------
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 24 Minnesota Municipal Term Trust
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
1997 Semiannual Report 25 Minnesota Municipal Term Trusts
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
1997 Semiannual Report 26 Minnesota Municipal Term Trusts
<PAGE>
GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------
COUPON
The interest rate on a bond that the issuer promises to pay to the holder until
the bond matures or resets its rate. It is expressed as an annual percentage of
face value.
CREDIT RISK
The risk that a bond issuer will not make timely principal and interest payments
and a loss to the investor will result.
FEDERAL FUNDS RATE
The federal funds rate is the interest rate charged by banks with excess
reserves at a Federal Reserve district bank to banks needing overnight loans to
meet reserve requirements. The federal funds rate is the most sensitive
indicator of the direction of interest rates, since it is set daily by the
market, unlike the prime rate and the discount rate, which are periodically
changed by banks and by the Federal Reserve Board, respectively.
INTEREST RATE RISK
The risk that after an investor purchases a bond, interest rates will rise and
the price of the bond will go down.
MATURITY DATE
The date on which the principal amount of a bond is due and payable to the
investor.
PAR
The dollar amount of a bond at the time it was issued and the amount that will
be repaid at maturity.
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.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Semiannual Report 27 Minnesota Municipal Term Trusts
<PAGE>
GLOSSARY OF TERMS (CONTINUED)
REFUNDING DATE
The specific date when a bond is redeemed before maturity.
REALIZED GAINS
Profits earned by a fund from the sale of a security at a market price that is
higher than its cost basis.
UNREALIZED GAINS
A bond is said to be trading at unrealized gains when its current market price
is higher than its cost basis.
- --------------------------------------------------------------------------------
1997 Semiannual Report 28 Minnesota Municipal Term Trusts
<PAGE>
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.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
ROBERT H. NELSON, Vice President and Treasurer
SUSAN SHARP MILEY, Secretary
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804
CUSTODIAN, ACCOUNTING AND TRANSFER AGENT
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street, Kansas City, MO 64105-1716
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
By Phone [GRAPHIC]
1 800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.
By Mail [GRAPHIC]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the funds' 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 Mutual
Fund Services area at 1 800 866-7778, or mail a request to us.
On-Line [GRAPHIC]
http://www.piperjaffray.com/
<PAGE>
[LOGO]
PIPER CAPITAL MANAGEMENT INCORPORATED ---------------
222 SOUTH NINTH STREET Bulk Rate
MINNEAPOLIS, MN 55402-3804 U.S. Postage
PAID
Permit No. 3008
[GRAPHIC] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM Mpls., MN
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE. ---------------
#21300 8/1997 234-97
