MINNESOTA MUNICIPAL TERM TRUST INC, N-30D, 1997-02-26

MINNESOTA MUNICIPAL TERM TRUST INC
N-30D, 1997-02-26

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<PAGE>

1996 ANNUAL REPORT

MINNESOTA MUNICIPAL TERM TRUSTS - 1996 ANNUAL REPORT

MINNESOTA
MUNICIPAL
TERM
TRUSTS

MNA

MNB

[LOGO]

<PAGE>

[LOGO]

CONTENTS

President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . 8
Investments in Securities
MNA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MNB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . 26
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . 27
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

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.

<PAGE>

PRESIDENT'S LETTER
- --------------------------------------------------------------------------------

[PHOTO]
WILLIAM H. ELLIS
President
Piper Capital
Management
- -------------------------------------------------------------------------------

February 18, 1997
- -------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

Check out the best sellers' list at your local bookstore. You'll notice a
number of books about companies that have gone through dramatic changes in
recent years. Surprising? Not really. Every company experiences change
periodically. And we're no exception. At Piper Capital Management, we've made
significant changes to enhance our ability to achieve consistent, competitive
performance and provide a higher level of quality service.

We've upgraded our toll-free telephone system so you spend less time
listening to voice response and more time receiving information you can put to
use. Also, when calling our toll-free number, you now have the option to listen
to our portfolio managers talk about their current investment strategies. Find
out the many ways to reach us on the back page of this report.

Take a close look at the annual report in your hand. We've made our
portfolio managers' commentaries simpler and more inviting, and added a glossary
of terms at the back to help you understand commonly used financial terms.
Whenever you see this symbol ***, it indicates a term defined in the glossary.

You'll hear the word "team" more often when we talk about our portfolio
managers. We've enhanced our approach, allowing managers to interact more
frequently and share their best ideas to improve the investment capabilities of
Piper Capital.

The recent changes we have made represent a new way of doing business at
Piper Capital - an approach we believe will enable us to establish an
unparalleled reputation for prudent investing and high-quality service.

That said, we look forward to serving your future financial needs and
exceeding your expectations in every way we can. Thank you for your investment.

Sincerely,

/s/ William H. Ellis
William H. Ellis

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

- --------------------------------------------------------------------------------

1996 Annual Report 1 Minnesota Municipal Term Trusts

<PAGE>

AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the period ended December 31, 1996.
- -------------------------------------------------------------------------------

MINNESOTA MUNICIPAL TERM TRUST (MNA)

ONE YEAR..................................... 4.23%
FIVE YEAR.................................... 8.91%
SINCE INCEPTION 9/26/91...................... 9.16%

MINNESOTA MUNICIPAL TERM TRUST II (MNB)

ONE YEAR..................................... 4.04%
FIVE YEAR.................................... 5.23%
SINCE INCEPTION 4/24/92...................... 8.62%

Average annualized total return figures are through December 31, 1996, are based
on the change in net asset value (NAV) and reflect the reinvestment of
distributions but not 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, five-year and since inception periods ended December 31, 1996,
were 4.86%, 5.76% and 6.78% for MNA. The one-year, three-year and since
inception figures were 4.88%, 2.49% and 6.26% for MNB. These figures also assume
reinvested distributions and do not reflect sales charges.

PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. 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.

- --------------------------------------------------------------------------------

1996 Annual Report 2 Minnesota Municipal Term Trusts

<PAGE>

MINNESOTA MUNICIPAL TERM TRUSTS
- -------------------------------------------------------------------------------

[PHOTO]
DOUG WHITE, CFA,
shares responsibility
for the management
of the Minnesota
Municipal Term
Trusts. He has 14
years of financial
experience.
- -------------------------------------------------------------------------------

February 18,1997
- -------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

WE WERE PLEASED WITH THE PERFORMANCE OF THE MINNESOTA MUNICIPAL TERM TRUSTS (MNA
AND MNB) DURING FISCAL YEAR 1996. They continued to earn a high level of current
income, and their net asset values remained above the investment objective of
$10 per share at termination, despite a slight decrease during the year due to a
rise in interest rates. The charts below and on the following page will help you
evaluate the funds' performance. They show each fund's net asset value and the
history of distributions paid by each fund since inception. On December 31,
1996, the net asset values for MNA and MNB were $11.15 and $10.71, respectively.
In addition, the funds maintained their monthly common stock distributions of
$0.0509 and $0.0492, respectively, which have been unchanged since each fund's
inception.

- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY PER SHARE
- --------------------------------------------------------------------------------
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 12/31/96 +$0.00 +$0.01
- -------------------------------------------------------------------------------
SUBTOTAL $9.34 $9.34

Undistributed Net Investment Income
(Dividend Reserve) At 12/31/96 + $0.62 + $0.41

Unrealized Appreciation on Investments At 12/31/96 + $1.19 + $0.96

NET ASSET VALUE on 12/31/96 $11.15 $10.71

- -------------------------------------------------------------------------------

1996 Annual Report 3 Minnesota Municipal Term Trusts

<PAGE>

MINNESOTA MUNICIPAL TERM TRUSTS (CONTINUED)
- -------------------------------------------------------------------------------

[PHOTO]
RON REUSS, ISFA,
shares responsibility
for the management
of the Minnesota
Municipal Term
Trusts. He has 28
years of financial
experience.
- -------------------------------------------------------------------------------

FOR THE YEAR ENDED DECEMBER 31, 1996, THE NET ASSET VALUE TOTAL RETURNS FOR MNA
AND MNB WERE 4.23% AND 4.04%, RESPECTIVELY. Based on market price, the funds'
total returns for the year were 4.86% and 4.88%.* Beginning with this annual
report, we have stopped comparing the funds' performance to a market
benchmark,*** because our primary goal is to meet the funds' investment
objectives of providing high current income exempt from regular federal and
Minnesota personal income tax and returning $10 per share to investors upon the
funds' termination dates. As the funds approach their termination dates, we will
continue to shorten their average maturities, so a benchmark comparison becomes
less and less useful in measuring results.

THROUGHOUT THE YEAR, BONDS REACTED TO VOLATILITY IN INTEREST RATES. In the first
half of 1996, bonds generally had negative returns because of a rise in interest
rates. However, municipal bonds, including those in the Minnesota Municipal Term
Trusts, performed better than most of their taxable counterparts for three
principal reasons: subsiding concerns about tax reform, a decreased supply of
new issues, and favorable after-tax yields for municipal bonds in comparison to
taxable bonds. This favorable

* All returns include reinvested distributions, but not sales charges. Past
performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that fund shares, when sold,
may be worth more or less than their original cost.

- -------------------------------------------------------------------------------
DISTRIBUTION HISTORY

MNA MNB
Inception Inception
9/26/91 4/24/92
Total Monthly Income Distributions Through 12/31/96
Common Shareholders $3.14 $2.70
Preferred Shareholders (On a Common Share Basis) $0.78 $0.68
Total Capital Gains Distributions to Common
Shareholders Through 12/31/96 $0.02 $0.02

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

- -------------------------------------------------------------------------------

1996 Annual Report 4 Minnesota Municipal Term Trusts
<PAGE>

MINNESOTA MUNICIPAL TERM TRUSTS (CONTINUED)
- --------------------------------------------------------------------------------

performance continued for most of the year, before making a sharp reversal in
October when a substantial drop in yields during September prompted municipal
issuers to flood the market with new bonds, which forced prices down. Rates fell
(and prices rose) in November, but then mixed signals about inflation triggered
rising municipal interest rates from early December through year-end, with a
corresponding drop in municipal bond prices.

IN THIS ENVIRONMENT, WE CONTINUED OUR STRATEGY OF SHORTENING EACH FUND'S AVERAGE
MATURITY AS IT MOVES TOWARD ITS SCHEDULED TERMINATION DATE. We do this by
reducing holdings in longer-maturity bonds and adding securities with maturities
near the funds' termination dates. (See chart below.) These steps reduce
interest rate risk *** and help move the funds toward their objective of
returning $10 per share at maturity. The closer a bond's maturity date 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 rate fluctuations at the time of termination. Please note the security
may still be subject to credit risk. Also, income on shorter-maturity bonds may
be lower; as a result, the funds' income levels may decrease as they near
termination. We continue to monitor the funds' progress closely as they move
toward their termination dates and make adjustments as appropriate.

DUE TO THIS MATURITY-SHORTENING ACTIVITY OVER THE PAST YEAR, THE FUNDS REALIZED
SMALL NET LONG-TERM CAPITAL GAINS, WHICH ARE TAXABLE TO

- --------------------------------------------------------------------------------
PERCENTAGE OF BONDS MATURING WITHIN A YEAR OF TERMINATION
- --------------------------------------------------------------------------------
The graph 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 December 31, 1996 49% 29%

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

- -------------------------------------------------------------------------------

1996 Annual Report 5 Minnesota Municipal Term Trusts

<PAGE>

MINNESOTA MUNICIPAL TERM TRUSTS (CONTINUED)
- -------------------------------------------------------------------------------

SHAREHOLDERS. Because interest rates are now lower than when the funds were
originally structured, most holdings are currently at unrealized gains.
Therefore, unless interest rates on municipal bonds rise (and, therefore, prices
fall) before or during any future trading, the funds may incur capital gains on
the sales transactions and may pay out additional capital gains. This maturity-
shortening activity also slightly reduced the funds' income, though the funds
continue to earn more than their monthly common and preferred stock ***
dividends and add to their dividend reserves. (Please remember these reserves
may be reduced or eliminated over time to pay dividends.)

THE SUPPLY OF NEW MUNICIPAL BONDS IN THE UNITED STATES IS EXPECTED TO INCREASE
8%-12% IN 1997 VERSUS 1996, TO APPROXIMATELY $193 BILLION. If the current modest
pace of economic growth and comparatively low inflation continues, we would
expect a relatively benign interest rate environment in 1997. In this scenario,
the funds should remain attractive vehicles for investors seeking income free
from regular federal and Minnesota personal income tax. As always, we will apply
our proprietary credit analysis to existing holdings and new purchases as we
work toward meeting the funds' objectives.

We appreciate your investment in the Minnesota Municipal Term Trusts. We look
forward to continuing our relationship with you and helping you meet your
investment goals in the new fiscal year and beyond.

Sincerely,

/s/ Douglas J. White
Douglas J. White
Portfolio Manager

/s/ Ronald R. Reuss
Ronald R. Reuss
Portfolio Manager

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

- --------------------------------------------------------------------------------

1996 Annual Report 6 Minnesota Municipal Term Trusts
<PAGE>

MINNESOTA MUNICIPAL TERM TRUSTS (CONTINUED)
- --------------------------------------------------------------------------------

PORTFOLIO COMPOSITIONS
As a percentage of total assets on December 31, 1996.

Minnesota Municipal Term Trust (MNA)

Water/Sewer/Pollution Control Revenue.................................... 12%
Industrial Development Revenue........................................... 5%
Leasing Revenue.......................................................... 6%
Other Assets............................................................. 4%
Sales/Excise Tax Revenue................................................. 4%
General Obligations...................................................... 20%
Hospital Revenue......................................................... 18%
Miscellaneous Revenue.................................................... 2%
Nursing Home Revenue..................................................... 1%
Electric Revenue......................................................... 8%
Parking Revenue.......................................................... 1%
Housing Revenue.......................................................... 19%

Minnesota Municipal Term Trust II (MNB)

General Obligations...................................................... 19%
Other Assets............................................................. 3%
Nursing Home Revenue..................................................... 1%
Education Revenue........................................................ 6%
Parking Revenue.......................................................... 5%
Housing Revenue.......................................................... 13%
Hospital Revenue......................................................... 18%
Water/Sewer/Pollution Control Revenue.................................... 9%
Special Tax Revenue...................................................... 3%
Industrial Development Revenue........................................... 7%
Electric Revenue......................................................... 16%

- --------------------------------------------------------------------------------

1996 Annual Report 7 Minnesota Municipal Term Trusts

<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1996
..................................................................

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $91,178,978 $53,523,384
Cash in bank on demand deposit ............................. 34,354 78,750
Accrued interest receivable ................................ 1,822,254 997,018
------------ ------------
Total assets ............................................. 93,035,586 54,599,152
------------ ------------

LIABILITIES:
Common stock dividends payable ($0.0509 and $0.0492 per
share, respectively) ..................................... 291,795 170,232
Preferred stock dividends payable (note 3) ................. 2,406 6,536
Accrued investment management fee .......................... 19,675 11,541
Accrued remarketing agent fee .............................. 3,000 2,775
Accrued administrative fee ................................. 11,805 6,924
------------ ------------
Total liabilities ........................................ 328,681 198,008
------------ ------------
Net assets applicable to outstanding capital stock ......... $92,706,905 $54,401,144
------------ ------------
------------ ------------

REPRESENTED BY:
Preferred stock - authorized 1 million shares for each fund
of $25,000 liquidation preference per share; outstanding,
1,152 shares and 694 shares, respectively (note 3) ....... $28,800,000 $17,350,000
------------ ------------
Common stock - authorized 200 million shares for each fund
of $0.01 par value; outstanding, 5,732,710 shares and
3,460,000 shares, respectively ........................... 57,327 34,600
Additional paid-in capital ................................. 53,479,400 32,251,775
Undistributed net investment income ........................ 3,553,264 1,426,764
Accumulated net realized gain (loss) on investments ........ -- 39,838
Unrealized appreciation of investments ..................... 6,816,914 3,298,167
------------ ------------

Total - representing net assets applicable to outstanding
common stock ........................................... 63,906,905 37,051,144
------------ ------------

Total net assets ......................................... $92,706,905 $54,401,144
------------ ------------
------------ ------------

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) ......................... $ 11.15 $ 10.71
------------ ------------
------------ ------------

* Investments in securities at identified cost ............. $84,362,064 $50,225,217
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- ---------------------------------------------------------------------

1996 Annual Report 8 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Year Ended December 31, 1996
..................................................................

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ -----------
<S> <C> <C>
INCOME:
Interest ................................................... $ 5,641,665 $3,236,932
------------ -----------

EXPENSES (NOTE 5):
Investment management fee .................................. 231,359 135,441
Administrative fee ......................................... 138,816 81,265
Remarketing agent fee ...................................... 73,200 44,099
Custodian and accounting fees .............................. 56,920 39,564
Transfer agent fees ........................................ 6,765 4,687
Reports to shareholders .................................... 18,473 18,099
Directors' fees ............................................ 8,812 8,812
Audit and legal fees ....................................... 42,445 42,515
Other expenses ............................................. 53,117 22,393
------------ -----------
Total expenses ........................................... 629,907 396,875
Less expenses paid indirectly .............................. (5,863) (4,350)
------------ -----------

Total net expenses ....................................... 624,044 392,525
------------ -----------

Net investment income .................................... 5,017,621 2,844,407
------------ -----------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 71,877 79,749
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,492,454) (905,700)
------------ -----------

Net loss on investments .................................. (1,420,577) (825,951)
------------ -----------

Net increase in net assets resulting from operations ..... $ 3,597,044 $2,018,456
------------ -----------
------------ -----------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- ---------------------------------------------------------------------

1996 Annual Report 9 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
..................................................................

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST
----------------------------
Year Ended Year Ended
12/31/96 12/31/95
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 5,017,621 $ 5,072,365
Net realized gain on investments ........................... 71,877 32,605
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,492,454) 6,647,563
------------- ------------

Net increase in net assets resulting from operations ..... 3,597,044 11,752,533
------------- ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,501,539) (3,501,539)
Preferred stock dividends ................................ (931,044) (1,081,916)
From net realized gains:
Common stock dividends ................................... (55,607) (18,345)
Preferred stock dividends ................................ (16,785) (5,679)
------------- ------------
Total distributions ...................................... (4,504,975) (4,607,479)
------------- ------------
Total increase (decrease) in net assets ................ (907,931) 7,145,054

Net assets at beginning of year ............................ 93,614,836 86,469,782
------------- ------------

Net assets at end of year .................................. $92,706,905 $ 93,614,836
------------- ------------
------------- ------------

Undistributed net investment income ........................ $ 3,553,264 $ 2,968,740
------------- ------------
------------- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- ---------------------------------------------------------------------

1996 Annual Report 10 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
..................................................................

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST II
----------------------------
Year Ended Year Ended
12/31/96 12/31/95
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,844,407 $ 2,857,450
Net realized gain on investments ........................... 79,749 161,204
Net change in unrealized appreciation or depreciation of
investments .............................................. (905,700) 4,573,638
------------- ------------

Net increase in net assets resulting from operations ..... 2,018,456 7,592,292
------------- ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (2,042,784) (2,042,784)
Preferred stock dividends ................................ (550,376) (645,061)
From net realized gains:
Common stock dividends ................................... (34,254) (29,756)
Preferred stock dividends ................................ (10,687) (9,501)
------------- ------------
Total distributions ...................................... (2,638,101) (2,727,102)
------------- ------------
Total increase (decrease) in net assets ................ (619,645) 4,865,190

Net assets at beginning of year ............................ 55,020,789 50,155,599
------------- ------------

Net assets at end of year .................................. $54,401,144 $ 55,020,789
------------- ------------
------------- ------------

Undistributed net investment income ........................ $ 1,426,764 $ 1,175,517
------------- ------------
------------- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1996 Annual Report 11 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements
- ----------------------------------------

(1) ORGANIZATION
................................
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II (the funds) are registered under the Investment
Company Act of 1940 (as amended) as non-diversified, closed-end
management investment companies. Minnesota Municipal Term Trust
Inc. and Minnesota Municipal Term Trust Inc. II expect to
terminate operations and distribute all of their net assets to
shareholders on or shortly before April 15, 2002, and April 15,
2003, respectively; although termination may be extended to a
date no later than April 15, 2007, and April 15, 2008,
respectively. The funds invest in investment-grade, tax-exempt
Minnesota municipal obligations including municipal zero-coupon
securities. Shares of Minnesota Municipal Term Trust Inc. are
listed on the New York Stock Exchange under the symbol MNA;
shares of Minnesota Municipal Term Trust Inc. II are listed on
the American Stock Exchange under the symbol MNB.

(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
The values of certain fixed income securities will be provided by
an independent pricing service, which determines these valuations
at a time earlier than the close of the New York Stock Exchange.
Fixed income securities for which prices are not available from
an independent pricing service but where an active market exists
will be valued using market quotations obtained from one or more
dealers that make markets in the securities.

Occasionally, events affecting the value of such securities may
occur between the time valuations are determined and the close of
the New York Stock Exchange. If events materially affecting the
value of such securities occur, if the fund's management
determines for any other reason that valuations provided by the
pricing service or dealer are inaccurate or when market
quotations are not readily available, securities will be valued
at their fair value according to procedures decided upon 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.

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1996 Annual Report 12 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------

Financial futures are valued at the last settlement price
established each day by the board of trade or exchange on which
they are traded. Such valuations are determined using independent
pricing services or prices quoted by independent brokers.

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium computed on a
level-yield basis, is accrued daily.

The funds concentrate their investments in Minnesota and,
therefore, may have more credit risk related to the economic
conditions of Minnesota than portfolios with a broader
geographical diversification.

FUTURES TRANSACTIONS
For hedging purposes, the funds may buy and sell financial
futures contracts and related options. Risks of entering into
futures contracts and related options include the possibility
that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in
the value of the underlying securities.

Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the funds
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The funds recognize a realized gain or loss
when the contract is closed or expires.

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the funds on a when-issued or forward-commitment basis can take
place a month or more after the transaction date. During this

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1996 Annual Report 13 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
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 values if the funds make such purchases while
remaining substantially fully invested. As of December 31, 1996,
the funds had no outstanding when-issued or forward-commitments.

FEDERAL TAXES
Each fund is treated separately for federal income tax purposes.
Each fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and not
be subject to federal income tax. Therefore, no income tax
provision is required. The funds also intend to distribute their
taxable net investment income and realized gains, if any, in
amounts sufficient 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 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.

On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, a reclassification adjustment
has been made to decrease undistributed net investment income and
decrease accumulated net realized loss on investments by $514 for
Minnesota Municipal Term Trust Inc.

- ---------------------------------------------------------------------

1996 Annual Report 14 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders. Common
stock distributions are recorded as of the close of business on
the ex-dividend date and preferred stock dividends are accrued
daily. Realized capital gains, if any, will be distributed at
least annually. Distributions are payable in cash or, for common
shareholders pursuant to the funds' dividend reinvestment plans,
reinvested in additional shares of the funds' common stock. Under
the plans, common shares will be purchased in the open market.

USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
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 December 31, 1996, have
outstanding 1,152 shares and 694 shares, respectively, of
remarketed preferred stock (RP) with a liquidation preference of
$25,000 per share for each fund. The dividend rate on the RP is
adjusted every seven days as determined by the remarketing agent.
On December 31, 1996, Minnesota Municipal Term Trust Inc. and
Minnesota Term Trust Inc. II had a dividend rate of 3.05% and
2.75%, respectively.

RP is a registered trademark of Merrill Lynch & Company.

(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the year
ended December 31, 1996, were as follows:

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
----------- -----------
<S> <C> <C>
Purchases ................................... $ 1,389,937 $2,233,004
Proceeds from sales ......................... $ 2,150,673 $2,017,601
</TABLE>

For the year ended December 31, 1996, no brokerage commissions
were paid to Piper Jaffray Inc., an affiliated broker.

- ---------------------------------------------------------------------

1996 Annual Report 15 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------

(5) EXPENSES
................................
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):

The investment advisory agreement provides the adviser with a
monthly investment management fee equal to an annualized rate of
0.25% of the funds' average weekly net assets (computed by
subtracting liabilities, which exclude preferred stock, from the
value of the total assets of the funds). For its fee, the adviser
provides investment advice and, in general, conducts the
management and investment activity of the funds.

The administration agreement provides the administrator with a
monthly fee 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 reporting, regulatory and record-keeping services for the
funds.

The funds have entered into a remarketing agent agreement with
Merrill Lynch, Pierce, Fenner & Smith (the remarketing agent).
The remarketing agreement provides the remarketing agent with a
monthly fee in an amount equal to an annualized rate of 0.25% of
the funds' average amount of RP outstanding. For its fee, the
remarketing agent will remarket shares of RP tendered to it, on
behalf of shareholders thereof, and will determine the applicable
dividend rate for each seven-day dividend period.

In addition to the investment management, administrative and the
remarketing agent fees, the funds are responsible for paying most
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.

- ---------------------------------------------------------------------

1996 Annual Report 16 Minnesota Municipal Term Trusts
<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>
Fiscal year ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $ 11.31 $ 10.06 $ 11.33 $ 10.15 $ 9.68
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.87 0.88 0.89 0.87 0.86
Net realized and unrealized gains (losses)
on investments .......................... (0.25) 1.17 (1.41) 1.04 0.37
------- ------- ------- ------- -------
Total from operations ................... 0.62 2.05 (0.52) 1.91 1.23
------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............. (0.61) (0.61) (0.61) (0.61) (0.60)
Paid to preferred shareholders .......... (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 ..... (0.78) (0.80) (0.75) (0.73) (0.76)
------- ------- ------- ------- -------
Net asset value, common stock, end of
period .................................... $ 11.15 $ 11.31 $ 10.06 $ 11.33 $ 10.15
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, common stock, end of period ... $ 10.50 $ 10.63 $ 9.25 $ 11.25 $ 10.38
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 4.23% 18.86% (6.01%) 17.96% 11.49%
Total return, common stock, market value
(b) ....................................... 4.86% 21.91% (12.73%) 14.50% 3.54%
Net assets at end of period (in millions) ... $ 93 $ 94 $ 86 $ 94 $ 87
Ratio of expenses to average weekly net
assets (c) ................................ 0.68% 0.65% 0.62% 0.63% 0.66%
Ratio of expenses to average weekly net
assets applicable to common stock (c) ..... 0.99% 0.95% 0.92% 0.92% 1.00%
Ratio of net investment income to average
weekly net assets ......................... 5.42% 5.57% 5.69% 5.49% 5.80%
Ratio of net investment income to average
weekly net assets applicable to common
stock(d) .................................. 6.40% 6.38% 7.06% 6.95% 7.18%
Portfolio turnover rate (excluding short-term
securities) ............................... 2% 9% 2% 1% 17%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage ratio (e) .................... 322% 325% 300% 325% 302%
</TABLE>

(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) BASED ON THE CHANGE IN MARKET PRICE OF A COMMON SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON STOCK.
(E) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.

- ---------------------------------------------------------------------

1996 Annual Report 17 Minnesota Municipal Term Trusts
<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>
Fiscal year ended December 31, Period
------------------------------------------- Ended
1996 1995 1994 1993 12/31/92(f)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $ 10.89 $ 9.48 $ 10.92 $ 9.76 $ 9.45
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.82 0.83 0.83 0.82 0.50
Net realized and unrealized gains (losses)
on investments .......................... (0.24) 1.37 (1.54) 1.05 0.34
------- ------- ------- ------- -------
Total from operations ................... 0.58 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) (0.59) (0.34)
Paid to preferred shareholders .......... (0.16) (0.18) (0.14) (0.12) (0.07)
From net realized gains
Paid to common shareholders ............. (0.01) (0.01) -- -- --
------- ------- ------- ------- -------
Total distributions to shareholders ..... (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 .................................... $ 10.71 $ 10.89 $ 9.48 $ 10.92 $ 9.76
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, common stock, end of period ... $ 10.25 $ 10.38 $ 8.63 $ 11.38 $10.38
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 4.04% 21.57% (7.91%) 18.23% 7.01%
Total return, common stock, market value
(b) ....................................... 4.88% 27.63% (19.55%) 15.65% 7.22%
Net assets at end of period (in millions) ... $ 54 $ 55 $ 50 $ 55 $ 51
Ratio of expenses to average weekly net
assets (c) ................................ 0.73% 0.72% 0.69% 0.70% 0.60%(g)
Ratio of expenses to average weekly net
assets applicable to common stock (c) ..... 1.07% 1.06% 1.03% 1.03% 0.75%(g)
Ratio of net investment income to average
weekly net assets ......................... 5.25% 5.36% 5.51% 5.25% 5.51%(g)
Ratio of net investment income to average
weekly net assets applicable to common
stock (d) ................................. 6.20% 6.10% 6.78% 6.60% 5.97%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 4% 9% 4% 1% 42%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage ratio (e) .................... 314% 317% 289% 318% 295%
</TABLE>

- ---------------------------------------------------------------------

1996 Annual Report 18 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST December 31, 1996
........................................................................................

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 (8.4%):
Northern Municipal Power (Callable 1/1/99 at 102),
7.25%, 1/1/16 ..................................... $ 4,850,000 $ 5,154,144
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................ 3,340,000(b) 1,749,168
Southern Municipal Power Agency (AMBAC) (Callable
1/1/03 at 102), 5.00%, 1/1/12 ..................... 500,000 475,915
Western Municipal Power Agency (AMBAC), 4.80%,
1/1/02 ............................................ 465,000 470,645
------------
7,849,872
------------

GENERAL OBLIGATIONS (19.8%):
Anoka/Hennepin County School District (Callable
2/1/03 at 100), 5.00%, 2/1/10 ..................... 1,000,000 983,470
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................ 300,000(d) 330,564
Farmington School District (MBIA) (Callable 2/1/01 at
100), 6.80%, 2/1/12 ............................... 800,000 861,568
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 1,000,000(d) 1,078,940
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00), 6.75%, 9/1/08 ..... 2,990,000(d) 3,226,360
Prior Lake Independent School District (Callable
2/1/03 at 100), 6.30%, 2/1/06 ..................... 500,000 540,095
St. Paul Metropolitan Airport Commission (Callable
1/1/02 at 100), 6.60%, 1/1/09 ..................... 3,150,000 3,391,448
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ..................................... 5,000,000(d) 5,467,400
State General Obligation, Zero-Coupon, 5.95%,
8/1/01 ............................................ 3,000,000(b) 2,463,000
------------
18,342,845
------------

HOSPITAL REVENUE (18.2%):
Bemidji Hospital Facilities (Prerefunded to 9/1/01),
7.00%, 9/1/21 ..................................... 3,200,000(d) 3,590,144
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity), 6.76%, 5/1/12 .......................... 1,000,000(b) 396,800
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 .......... 2,000,000(d) 2,275,200
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1996 Annual Report 19 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
Minneapolis Health Facility, Fairview (MBIA)
(Callable 1/1/02 at 102), 6.50%, 1/1/11 ........... $ 750,000 $ 807,553
Minneapolis Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 .... 2,000,000(d) 2,234,000
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................ 1,300,000(d) 1,441,752
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00), 7.25%, 7/1/15 ......................... 5,500,000(d) 6,110,170
------------
16,855,619
------------

HOUSING REVENUE (18.9%):
Burnsville Oak Leaf Apartments (Callable 7/1/01 at
103), 7.05%-7.15%, 1/1/12-1/1/25 .................. 3,835,000 4,027,321
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
6.75%, 8/1/23 ..................................... 1,980,000 2,050,686
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................... 5,645,000 5,911,952
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%,
12/1/11-12/1/21 ................................... 477,000 497,438
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.95%, 2/1/14 ............................... 3,400,000 3,585,062
State Housing and Finance Agency (Callable 2/1/02 at
102), 6.90%, 8/1/12 ............................... 495,000 522,705
State Housing and Finance Agency (Callable 7/1/02 at
102), 6.85%, 1/1/24 ............................... 875,000 911,899
------------
17,507,063
------------

IDR - SOLID WASTE DISPOSAL (4.8%):
Anoka County Solid Waste Disposal Revenue (CFC)
(Callable 6/1/00 at 102), 6.95%, 12/1/08 .......... 4,100,000 4,418,488
------------

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 4,426,031
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02), 7.00%, 2/1/12 ......................... 1,000,000(d) 1,113,040
------------
5,539,071
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1996 Annual Report 20 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities (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 $ 503,230
------------

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 1,145,585
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.15%-7.35%, 12/1/03-12/1/09 ..... 835,000 897,460
------------
2,043,045
------------

PARKING REVENUE (1.2%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 1,000,000(d) 1,088,080
------------

SALES TAX REVENUE (4.6%):
Minneapolis Community Development Authority, Special
Tax, Zero-Coupon (MBIA), 6.71%-7.01%,
3/1/07-3/1/09 ..................................... 7,585,000(b) 4,305,295
------------

WATER/POLLUTION CONTROL REVENUE (11.9%):
State Public Facilities Authority (Prerefunded to
3/1/01), 6.65%-6.70%, 3/1/08-3/1/13 ............... 10,000,000(d) 11,026,370
------------

Total Municipal Long-Term Securities
(cost: $82,662,064) ............................ 89,478,978
------------

MUNICIPAL SHORT-TERM SECURITIES (1.8%):
Bloomington, MN, Port Authority, VRDN, 4.20%,
2/1/13 ............................................ 500,000(c) 500,000
Mankato, 3.95%, 2/1/18 .............................. 1,200,000(c) 1,200,000
------------

Total Municipal Short-Term Securities
(cost: $1,700,000) ............................. 1,700,000
------------

Total Investments in Securities
(cost: $84,362,064) (e) ........................ $ 91,178,978
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1996 Annual Report 21 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities (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
DECEMBER 31, 1996. 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) ON DECEMBER 31, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $84,328,157. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 6,850,821
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 6,850,821
------------
------------
</TABLE>

- ---------------------------------------------------------------------

1996 Annual Report 22 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST II December 31, 1996
.......................................................................................

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 (97.5%):
EDUCATION REVENUE (6.2%):
Higher Education Facility-Augsburg College (Connie
Lee) (Callable 1/1/00 at 102), 6.50%, 1/1/11 ...... $ 2,055,000 $ 2,169,135
Higher Education Facility-Macalester College
(Callable 3/1/02 at 100), 6.30%, 3/1/14 ........... 1,125,000 1,184,760
------------
3,353,895
------------

ELECTRIC REVENUE (16.2%):
Northern Municipal Power (AMBAC) (Callable 1/1/99 at
100), 6.00%, 1/1/19 ............................... 2,000,000 2,020,020
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................ 9,690,000(b) 4,850,251
Southern Municipal Power Agency (Callable 1/1/03 at
102), 5.00%, 1/1/12 ............................... 1,000,000 936,760
Western Municipal Power Agency (AMBAC), 4.90%,
1/1/03 ............................................ 1,000,000 1,016,310
------------
8,823,341
------------

GENERAL OBLIGATIONS (19.0%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................ 350,000(d) 372,731
Hopkins Blake School Project Revenue (Callable 9/1/04
at 100), 6.45%, 9/1/13-9/1/14 ..................... 385,000 414,865
Mankato School District (CGIC) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 2,300,000(d) 2,481,562
Metropolitan Council (Crossover refunded to 9/1/00),
6.75%, 9/1/10-9/1/11 .............................. 2,500,000(d) 2,697,625
Minneapolis and St. Paul Metropolitan Airport
Commission (Callable 1/1/02 at 100), 6.60%,
1/1/11 ............................................ 1,000,000 1,072,980
St. Paul Independent School District (Prerefunded to
2/1/01), 6.45%-6.50%, 2/1/09-2/1/10 ............... 875,000(d) 941,078
State General Obligation, 5.00%, 8/1/03 ............. 1,800,000 1,853,100
Willmar Independent School District (AMBAC) (Callable
2/1/02 at 100), 6.25%, 2/1/15 ..................... 500,000 523,275
------------
10,357,216
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1996 Annual Report 23 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
HOSPITAL REVENUE (17.8%):
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%,
2/15/20 ........................................... $ 2,000,000(d) $ 2,267,780
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10-5/1/18 .... 800,000 851,916
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Callable 8/15/00 at 102), 6.75%,
8/15/14 ........................................... 2,500,000 2,706,175
Red Wing Health Care Facility (Callable 9/1/03 at
102), 6.40%, 9/1/12 ............................... 220,000 224,398
Rochester Health Care (Callable 11/15/02 at 102),
6.03%-6.25%, 11/15/15-11/15/21 .................... 3,500,000 3,619,275
------------
9,669,544
------------

HOUSING REVENUE (13.6%):
City of Moorhead - Phoenix Project (Callable 6/1/02
at 101), 6.35%-7.00%, 6/1/03-6/1/20 ............... 1,260,000 1,296,566
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... 1,000,000 1,027,800
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 10,000 10,178
State Housing and Finance Agency (Callable 1/1/03 at
102), 6.50%, 1/1/26 ............................... 400,000 408,996
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,105,738
State Housing and Finance Agency (Callable 7/1/02 at
102), 6.75%-6.85%, 7/1/12-1/1/24 .................. 1,475,000 1,537,581
------------
7,386,859
------------

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) 2,282,782
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ 1,300,000 1,395,160
------------
3,677,942
------------

NURSING HOME REVENUE (0.9%):
Maplewood Health Care Facilities Revenue (Callable
11/15/01 at 102), 5.80%, 11/15/03 ................. 500,000 501,985
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1996 Annual Report 24 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
PARKING REVENUE (4.8%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... $ 2,415,000(d) $ 2,627,713
------------

SPECIAL TAX ASSESSMENT REVENUE (2.9%):
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 1,552,646
------------

WATER/POLLUTION CONTROL REVENUE (9.3%):
State Public Facilities Authority (Callable 3/1/02 at
102), 6.50%, 3/1/14 ............................... 4,695,000 5,072,243
------------

Total Municipal Long-Term Securities
(cost: $49,725,217) ............................ 53,023,384
------------

MUNICIPAL SHORT-TERM SECURITIES (0.9%):
Mankato, 3.95%, 2/1/18
(cost: $500,000) .................................. 500,000(e) 500,000
------------

Total Investments in Securities
(cost: $50,225,217) (f) ........................ $ 53,523,384
------------
------------
</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 PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933.
(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
DECEMBER 31, 1996. 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) ON DECEMBER 31, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $50,207,198. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 3,316,186
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 3,316,186
------------
------------
</TABLE>

- ---------------------------------------------------------------------

1996 Annual Report 25 Minnesota Municipal Term Trusts
<PAGE>
Independent Auditors' Report
- ----------------------------------------

THE BOARD OF DIRECTORS AND SHAREHOLDERS
MINNESOTA MUNICIPAL TERM TRUST INC. AND
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, 1996, 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 then ended
and the financial highlights presented in note 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, 1996, and the results of their operations, the changes in
their net assets and the financial highlights for the periods stated in the
first paragraph above, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1997

- ---------------------------------------------------------------------

1996 Annual Report 26 Minnesota Municipal Term Trusts
<PAGE>
Federal Income Tax Information
- ----------------------------------------

The following per-share information describes the federal tax
treatment of distributions made during the fiscal year. Exempt-
interest dividends are exempt from federal income tax and should
not be included in your gross income, but need to be reported on
your income tax return for informational purposes. Please consult
a tax adviser on how to report these distributions at the state
and local levels.

COMMON STOCK INCOME DISTRIBUTIONS
99.98% AND 100% QUALIFYING AS EXEMPT-INTEREST DIVIDENDS,
RESPECTIVELY

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
PAYABLE DATE TERM TRUST II
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
February 21, 1996................................. $ 0.0509 $ 0.0492
March 27, 1996.................................... 0.0509 0.0492
April 24, 1996.................................... 0.0509 0.0492
May 29, 1996...................................... 0.0509 0.0492
June 26, 1996..................................... 0.0509 0.0492
July 24, 1996..................................... 0.0509 0.0492
August 28, 1996................................... 0.0509 0.0492
September 25, 1996................................ 0.0509 0.0492
October 23, 1996.................................. 0.0509 0.0492
November 27, 1996................................. 0.0509 0.0492
December 18, 1996................................. 0.0509 0.0492
January 10, 1997.................................. 0.0509 0.0492
----------- ------------
Total............................................. $ 0.6108 $ 0.5904
----------- ------------
----------- ------------
</TABLE>

COMMON STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)

- ---------------------------------------------------------------------

1996 Annual Report 27 Minnesota Municipal Term Trusts
<PAGE>
Federal Income Tax Information (continued)
- ---------------------------------------------------------------------

PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.98% AND 100% QUALIFYING
AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
----------- ------------
<S> <C> <C>
Total............................................ $ 808.1979 $ 793.0490
----------- ------------
----------- ------------
</TABLE>

PREFERRED STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)

- ---------------------------------------------------------------------

1996 Annual Report 28 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update
- ----------------------------------------

ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
23, 1996. Each matter voted upon at the meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.

(1) The funds' preferred shareholders elected the following
directors:

<TABLE>
<CAPTION>
SHARES VOTED SHARES WITHHOLDING
"FOR" AUTHORITY TO VOTE
--------------- -------------------------
<S> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST
David T. Bennett......................... 675 1
William H. Ellis......................... 675 1
MINNESOTA MUNICIPAL TERM TRUST II
David T. Bennett 694 0
William H. Ellis......................... 694 0
</TABLE>

(2) The funds' preferred and common shareholders, voting as a
class, elected the following directors:

<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------ -------------------
<S> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST
Jaye F. Dyer............................. 5,256,058 126,473
Karol D. Emmerich........................ 5,258,958 123,573
Luella G. Goldberg....................... 5,253,558 128,973
George Latimer........................... 5,234,616 147,915
MINNESOTA MUNICIPAL TERM TRUST II
Jaye F. Dyer............................. 3,208,710 85,459
Karol D. Emmerich........................ 3,215,947 78,222
Luella G. Goldberg....................... 3,214,447 79,722
George Latimer........................... 3,202,249 91,920
</TABLE>

(3) The funds' shareholders ratified the selection by a majority
of the independent members of the funds' Boards of Directors
of KPMG Peat Marwick LLP as the independent public

- ---------------------------------------------------------------------

1996 Annual Report 29 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
accountants for the funds for the fiscal year ending December
31, 1996.The following votes were cast regarding this matter:

<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Minnesota Municipal
Term Trust............... 5,345,753 1,630 35,149 0
Minnesota Municipal
Term Trust II............ 3,248,224 8,885 37,061 0
</TABLE>

TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's 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 request
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 gains distributions,
may participate in the plan by informing IFTC at least 10 days
before each share's dividend and/or capital gains distribution.

- ---------------------------------------------------------------------

1996 Annual Report 30 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------

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 Exchange or elsewhere on the open market.

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
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 invested 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.
Shareholders, as required by the Internal Revenue Service, will
receive Form 1099 regarding the federal tax status of the prior
year's distributions.

- ---------------------------------------------------------------------

1996 Annual Report 31 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------

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 issued 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.

PLAN AMENDMENT/TERMINATION
The fund reserves the right to amend or terminate the plan.
Should the plan be amended or terminated, participants will be
notified in writing at least 90 days before the record date for
such 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 question 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.

- ---------------------------------------------------------------------

1996 Annual Report 32 Minnesota Municipal Term Trusts
<PAGE>
Directors and Officers
- ----------------------------------------

DIRECTORS
David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL PRODUCTS,
INC., KIEFER BUILT, INC., OF COUNSEL, GRAY, PLANT, MOOTY,
MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC., PIPER
CAPITAL MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR FINANCIAL
CORP., HORMEL FOODS CORP.
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 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

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402

- ---------------------------------------------------------------------

1996 Annual Report 33 Minnesota Municipal Term Trusts
<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- -------------------------------------------------------------------------------
1996 Annual Report 34 Minnesota Municipal Term Trusts

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- -------------------------------------------------------------------------------
1996 Annual Report 35 Minnesota Municipal Term Trusts

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- -------------------------------------------------------------------------------
1996 Annual Report 36 Minnesota Municipal Term Trusts

<PAGE>

Glossary of Terms ***
- ---------------------------------
BENCHMARK
An established basis of comparison for an investment's performance, a benchmark
may be an unmanaged index or a group of similar investments.

INTEREST RATE RISK
Interest rate risk is the risk that after an investor purchases a bond, interest
rates will rise and the price of the bond will go down.

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.

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 LISTEN TO MONTHLY FUND UPDATES
press 3, press 2, then press:

34 Minnesota Municipal
Term Trusts

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 fund's shareholder
reports. This householding process
should allow us to mail one report to
each address where one or more
registered shareholders with the
same last name reside. If you would
like to have additional reports
mailed to your address, please call
our Mutual Fund Services area at
1 800 866-7778, or mail a
request to us.

On-Line [GRAPHIC]

http://www.piperjaffray.com/
money_management/

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

37
<PAGE>

---------------
[LOGO] Bulk Rate
U.S. Postage
PAID
Permit No. 3008
Mpls., MN
---------------

PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804

[GRAPHIC] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.

#11300 2/1997 109-97

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