MINNESOTA MUNICIPAL TERM TRUST INC, N-30D, 1998-02-27

MINNESOTA MUNICIPAL TERM TRUST INC
N-30D, 1998-02-27

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<PAGE>

1997 Annual Report
PIPER CAPITAL
MANAGEMENT

Minnesota
Municipal Term
Trusts

MNA
MNB

Minnesota Municipal Term Trusts - 1997 Annual Report

<PAGE>

CONTENTS PIPER CAPITAL
MANAGEMENT
Portfolio Managers' Letter...... 2
MINNESOTA MUNICIPAL TERM TRUSTS
Financial Statements and Notes.. 7 ...............................

Investments in Securities PRIMARY INVESTMENTS
Investment-grade, tax-exempt Minnesota
MNA........................ 19 municipal obligations including municipal
MNB........................ 23 zero-coupon securities.

Independent Auditors Report..... 27 FUND OBJECTIVE
Minnesota Municipal Term Trust (MNA) and
Federal Tax Information......... 28 Minnesota Municipal Term Trust II (MNB)
are non-diversified, closed-end
Shareholder Update.............. 30 management investment companies. The
investment objectives of MNA and MNB are
Glossary........................ 36 to provide high current income exempt
from regular federal income tax and
Directors and Officers.......... 37 Minnesota personal income tax and to
return $10 per share to investors on or
before April 15, 2002; and April 15,
+ This report includes a glossary to 2003, respectively - although each fund's
help you understand financial terms termination may be extended up to five
used in the portfolio managers' years if necessary to assist the fund in
letter. When you see this symbol, it reaching its $10 per share objective.
indicates a word that is defined in The funds' income may be subject to
the glossary. federal and/or state of Minnesota
alternative minimum tax. Investors should
consult their tax advisors. As with
other investment companies, there can
be no assurance that each fund
will achieve its objective.

<PAGE>

Average Annualized Total Returns
- ------------------------------------------------------------------------------
Based on net asset value for the periods ended December 31, 1997
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
-------- --------- ---------------
<S> <C> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST
(MNA, inception 9/26/91) 7.15% 8.06% 8.84%

MINNESOTA MUNICIPAL TERM TRUST
II (MNB, inception 4/24/92) 8.34% 8.33% 8.58%
</TABLE>

All total returns are through December 31, 1997, and reflect the reinvestment
of distributions but not sales charges. NAV-based performance is used to
measure investment management results. As noted in earlier shareholder
reports, 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.

Average annualized total returns based on the change in market price for the
one-year, five-year and since inception periods ended December 31, 1997, were
12.48%, 7.53% and 7.67% for MNA and 10.78%, 6.66% and 7.04% for MNB. These
returns assume reinvestment of all distributions and reflect sales charges on
those distributions described in the funds' dividend reinvestment plan, but
not on initial purchases.

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.

- ------------------------------------------------------------------------------
1997 Annual Report 1 Minnesota Municipal Term Trusts

<PAGE>

Portfolio Managers' Letter
- ------------------------------------------------------------------------------
February 18, 1998
..............................................................................

DEAR SHAREHOLDERS:

[PHOTO] WE ARE PLEASED THAT THE MINNESOTA MUNICIPAL TERM TRUSTS
(MNA AND MNB) REMAINED ON TARGET TO MEET THEIR INVESTMENT
OBJECTIVES OF PROVIDING HIGH TAX-EXEMPT INCOME AND
RETURNING $10 PER SHARE TO INVESTORS ON OR SHORTLY BEFORE
THEIR TERMINATION DATES. For the year ended December 31,
1997, the funds continued to earn more than their monthly
DOUG WHITE, CFA, common and preferred stock+ dividends and add to their
shares dividend reserves. Since the funds' inceptions, the funds
responsibility have maintained monthly common stock distributions of
for the 5.09 cents and 4.92 cents per share, respectively. In
management addition, the funds' net asset values remain above the
of the Minnesota $10 per share objective. As of December 31, 1997, the net
Municipal Term asset values for MNA and MNB were $11.28 and $10.94,
Trusts. He has respectively.
14 years of
financial DURING THE FUNDS' FISCAL YEAR, MUNICIPAL BOND PRICES WERE
experience. VOLATILE; HOWEVER, NO EVENTS WERE EXTREME ENOUGH TO CAUSE
- ---------------- US TO CHANGE OUR STRATEGY FOR THESE TERM TRUSTS.
Economically speaking, the year had a strong start,
prompting the Federal Reserve Board to raise the federal
funds rate in March from 5.25% to 5.50%, which caused
bond yields to rise and prices to fall. By April, the
economy showed signs of slowing, sending interest rates
down and bond prices up, a trend that reversed again
in the third quarter. In the

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

DISTRIBUTION HISTORY SINCE INCEPTION
..............................................................................
<TABLE>
<CAPTION>
MNA MNB
Inception Inception
9/26/91 4/24/92
<S> <C> <C>
Total Monthly Income Distributions Through 12/31/97
..............................................................................
Common Shareholders $3.75 $3.29
..............................................................................
Preferred Shareholders (On a Common Share Basis) $0.94 $0.84
..............................................................................
Total Capital Gains Distributions to Common
Shareholders Through 12/31/97 $0.06 $0.07
..............................................................................
</TABLE>
- ------------------------------------------------------------------------------
1997 Annual Report 2 Minnesota Municipal Term Trusts

<PAGE>

Portfolio Managers' Letter (continued)
- ------------------------------------------------------------------------------

fourth quarter, the expectation of continued
[PHOTO] moderate economic growth, low inflation and a
flight-to-quality resulting from the Asian turmoil
fueled a U.S. bond market rally. Given the lack of
direct foreign demand for municipal issues,
municipal yields decreased more slowly than Treasury
yields. This, along with an increase in municipal
RON REUSS, ISFA, issues, caused the municipal market to underperform
shares its taxable counterpart during the last quarter of
responsibility the year. During 1997, the national supply of
for the municipal issues increased by 20%, compared to 1996,
management while the supply of Minnesota municipal issues was
of the Minnesota down, compared to 1996.
Municipal Term
Trusts. He has AS THE FUNDS NEAR THEIR TERMINATION DATES, WE
28 years of CONTINUE TO SELL LONGER MATURITY BONDS IN FAVOR OF
financial THOSE CLOSER TO THE FUNDS' TERMINATIONS. As shown in
experience. the chart below, the percentage of bonds with
- ---------------- maturity or refunded dates+ within a year of the
funds' termination dates continues to increase. We
made appropriate trades as opportunities arose. As
interest rates fell during the year and bond prices
increased, restructuring generated capital gains,
which were distributed. Also, restructuring proceeds
were reinvested at lower interest rates, decreasing
fund income. Advance refunding+ is responsible for a
portion of the increase in the percentages shown in
the chart.

WE EXPECT THAT THE FUNDS' NET ASSET VALUES WILL
DECLINE AS THE FUNDS NEAR THEIR TERMINATION DATES.
There are several events that could cause this to
occur. As the maturity and/or refunding dates of

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

BONDS MATURING WITHIN A YEAR OF TERMINATION
..............................................................................
The chart below illustrates the percentage of bonds in each fund with maturity
or refunded dates within a year of the funds' termination dates.
<TABLE>
<CAPTION>
MNA MNB
Inception Inception
9/26/91 4/24/92
<S> <C> <C>

At the Fund's Inception 0% 0%
..............................................................................
As of December 31, 1997 56% 49%
..............................................................................
</TABLE>
- ------------------------------------------------------------------------------
1997 Annual Report 3 Minnesota Municipal Term Trusts

<PAGE>

Portfolio Managers' Letter (continued)
- ------------------------------------------------------------------------------

these bonds approach, their market prices will
converge toward a price that is at or near their
maturity or refunding prices. In addition, as the
funds approach termination, we continue to sell
longer maturity bonds in favor of bonds with shorter
maturities and lower coupons+ that come due closer
to the funds' termination dates. Any gains realized
as a result of these sales will be distributed to
shareholders, reducing net asset value. If the
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. See the chart below for each fund's
current accumulated realized+ gains, unrealized+
appreciation and current dividend reserve.
Shareholders also should remember that the funds are
always subject to interest rate risk+ and credit
risk,+ which could have an impact on net asset
value.

WE ARE OPTIMISTIC ABOUT THE MUNICIPAL MARKET
DURING THE COMING MONTHS, AND AGAIN, WE DON'T
ANTICIPATE EVENTS THAT WOULD CAUSE US TO CHANGE THE
FUNDS' INVESTMENT STRATEGY AS THEY MOVE TOWARD
TERMINATION. However, we remain watchful for further
negative news about Asian economies or a significant
increase in the number of municipal bond refundings
due to lower interest rates

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

NET ASSET VALUE SUMMARY
..............................................................................
<TABLE>
<CAPTION>
Common Shares MNA MNB
Inception Inception
9/26/91 4/24/92
<S> <C> <C>
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 12/31/97 +$0.01 +$0.02
- ------------------------------------------------------------------------------
SUBTOTAL $9.35 $9.35
..............................................................................
Dividend Reserve
(Undistributed Net Investment Income) at 12/31/97 +$0.72 +$0.48
..............................................................................
Unrealized Appreciation on Investments at 12/31/97 +$1.21 +$1.11
- ------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ON 12/31/97 $11.28 $10.94
</TABLE>

- ------------------------------------------------------------------------------
1997 Annual Report 4 Minnesota Municipal Term Trusts

<PAGE>

Portfolio Managers' Letter (continued)
- ------------------------------------------------------------------------------

and will manage your funds accordingly.

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 investment goals.

Sincerely,

/s/ Douglas J. White /s/ Ronald R. Reuss

Douglas J. White Ronald R. Reuss
Portfolio Manager Portfolio Manager

- ------------------------------------------------------------------------------
1997 Annual Report 5 Minnesota Municipal Term Trusts
<PAGE>

Portfolio Managers' Letter (continued)
- ------------------------------------------------------------------------------
PORTFOLIO COMPOSITIONS
..............................................................................
As a percentage of total assets on December 31, 1997

Minnesota Municipal Term Trust (MNA)

Water/Sewer/Pollution Control Revenue 11%
Industrial Development Revenue 5%
Leasing Revenue 6%
Other Assets 2%
Sales/Excise Tax Revenue 5%
General Obligations 19%
Hospital Revenue 22%
Miscellaneous Revenue 1%
Electric Revenue 10%
Parking Revenue 1%
Housing Revenue 18%

Minnesota Municipal Term Trust (MNB)

General Obligations 18%
Nursing Home Revenue 1%
Education Revenue 6%
Parking Revenue 5%
Housing Revenue 16%
Hospital Revenue 12%
Water/Sewer/Pollution Control Revenue 9%
Other Assets 2%
Special Tax Revenue 4%
Industrial Development Revenue 9%
Electric Revenue 18%

- ------------------------------------------------------------------------------
1997 Annual Report 6 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1997
................................................................................

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $93,553,425 $56,320,925
Cash in bank on demand deposit ............................. 109,143 57,352
Accrued interest receivable ................................ 1,736,860 1,015,375
------------ ------------
Total assets ............................................. 95,399,428 57,393,652
------------ ------------

LIABILITIES:
Common stock dividends payable (note 2) .................... 291,795 170,232
Preferred stock dividends payable (note 3) ................. 2,564 9,412
Payable for investment securities purchased on a when-issued
basis (note 2) ........................................... 1,605,838 2,001,056
Accrued investment management fee .......................... 19,841 11,708
Accrued remarketing agent fee .............................. 14,600 6,392
Accrued administrative fee ................................. 11,905 7,025
------------ ------------
Total liabilities ........................................ 1,946,543 2,205,825
------------ ------------
Net assets applicable to outstanding capital stock ....... $93,452,885 $55,187,827
------------ ------------
------------ ------------

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 ........................ 4,141,302 1,646,840
Accumulated net realized gain on investments ............... 30,768 82,692
Unrealized appreciation of investments ..................... 6,944,088 3,821,920
------------ ------------

Total - representing net assets applicable to outstanding
capital stock .......................................... $93,452,885 $55,187,827
------------ ------------
------------ ------------

* Investments in securities at identified cost.............. $86,609,337 $52,499,005
------------ ------------
------------ ------------

NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $64,652,885 $37,837,827
Shares of common stock outstanding (authorized 200 million
shares for each fund of $0.01 par value) ................. 5,732,710 3,460,000
Net asset value ............................................ $ 11.28 $ 10.94
Market price ............................................... $ 11.13 $ 10.69

LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to preferred stock (note 3) .......... $28,800,000 $17,350,000
Shares of preferred stock outstanding (authorized 1 million
shares for each fund) .................................... 1,152 694
Liquidation preference per share ........................... $ 25,000 $ 25,000
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

1997 Annual Report 7 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Year Ended December 31, 1997
................................................................................

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ ------------
<S> <C> <C>
INCOME:
Interest ................................................... $ 5,641,751 $ 3,203,962
------------ ------------

EXPENSES (NOTE 5):
Investment management fee .................................. 232,454 136,726
Administrative fee ......................................... 139,472 82,036
Remarketing agent fee ...................................... 73, 200 44,101
Custodian and accounting fees .............................. 58,644 40,356
Transfer agent fees ........................................ 3,050 2,335
Reports to shareholders .................................... 21,566 18,685
Directors' fees ............................................ 15,055 15,055
Audit and legal fees ....................................... 45,289 45,219
Other expenses ............................................. 33,406 20,810
------------ ------------
Total expenses............................................ 622,136 405,323
Less expenses paid indirectly........................... (11,273) (9,065)
------------ ------------
Total net expenses........................................ 610,863 396,258
------------ ------------
Net investment income..................................... 5,030,888 2,807,704
------------ ------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 299,913 265,558
Net change in unrealized appreciation or depreciation of
investments .............................................. 127,174 523,753
------------ ------------

Net gain on investments .................................. 427,087 789,311
------------ ------------

Net increase in net assets resulting from operations ... $ 5,457,975 $ 3,597,015
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

1997 Annual Report 8 Minnesota Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

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

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST
----------------------------
Year Ended Year Ended
12/31/97 12/31/96
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 5,030,888 $ 5,017,621
Net realized gain on investments ........................... 299,913 71,877
Net change in unrealized appreciation or depreciation of
investments .............................................. 127,174 (1,492,454)
------------- ------------

Net increase in net assets resulting from operations ..... 5,457,975 3,597,044
------------- ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,501,539) (3,501,539)
Preferred stock dividends ................................ (941,311) (931,044)
From net realized gains:
Common stock dividends ................................... (209,817) (55,607)
Preferred stock dividends ................................ (59,328) (16,785)
------------- ------------
Total distributions ...................................... (4,711,995) (4,504,975)
------------- ------------
Total increase (decrease) in net assets ................ 745,980 (907,931)

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

Net assets at end of year .................................. $ 93,452,885 $ 92,706,905
------------- ------------
------------- ------------

Undistributed net investment income ........................ $ 4,141,302 $ 3,553,264
------------- ------------
------------- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

1997 Annual Report 9 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
12/31/97 12/31/96
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,807,704 $ 2,844,407
Net realized gain on investments ........................... 265,558 79,749
Net change in unrealized appreciation or depreciation of
investments .............................................. 523,753 (905,700)
------------- ------------

Net increase in net assets resulting from operations ..... 3,597,015 2,018,456
------------- ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (2,042,784) (2,042,784)
Preferred stock dividends ................................ (544,844) (550,376)
From net realized gains:
Common stock dividends ................................... (173,000) (34,254)
Preferred stock dividends ................................ (49,704) (10,687)
------------- ------------
Total distributions ...................................... (2,810,332) (2,638,101)
------------- ------------
Total increase (decrease) in net assets ................ 786,683 (619,645)

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

Net assets at end of year .................................. $ 55,187,827 $ 54,401,144
------------- ------------
------------- ------------

Undistributed net investment income ........................ $ 1,646,840 $ 1,426,764
------------- ------------
------------- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

1997 Annual Report 10 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------

(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 readily available, or if such
quotations or valuations are believed to be 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.

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

1997 Annual Report 11 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (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 December 31, 1997,
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II, had entered into outstanding when-issued or
forward commitments of $1,605,838, and $2,001,056, respectively.

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

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

1997 Annual Report 12 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 statements of assets and liabilities, as a result of
permanent book-to-tax differences, reclassification adjustments
have been made as follows:

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- --------------
<S> <C> <C>
Decrease undistributed net investment
income ............................... $2,085 $1,079
Increase accumulated net realized gain
on investments ....................... $2,085 $1,079
</TABLE>

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. Per share common stock distributions of $0.0509 and
$0.0492 for Minnesota Municipal Term Trust Inc. and Minnesota
Municipal Term Trust Inc. II, respectively, were declared in
December and are payable in January. 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

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

1997 Annual Report 13 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 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 December 31, 1997, Minnesota Municipal Term Trust and
Minnesota Term Trust II have dividend rates of 3.25% and 3.30%,
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, 1997, were as follows:

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
---------- --------------
<S> <C> <C>
Purchases .............................. $8,233,979 $5,177,777
Proceeds from sales .................... $6,786,619 $5,169,547
</TABLE>

(5) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the advisor and administrator):

The investment advisory agreement provides the advisor 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 advisor provides investment advice and, in general,
conducts the management and investment activity of the funds.

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

1997 Annual Report 14 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

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.

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.

(6) PENDING
ACQUISITION
................................
On December 15, 1997, Piper Jaffray Companies, Inc., the parent
company of the funds' investment advisor, announced that it had
entered into an agreement to be acquired by U.S. Bancorp. It is
anticipated that this acquisition will be completed in the second
quarter of 1998, subject to regulatory approval, the approval of
Piper Jaffray Companies shareholders and the satisfaction of
customary closing conditions.

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

1997 Annual Report 15 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

U.S. Bancorp is a multi-state bank holding company headquartered
in Minneapolis, Minnesota with a geographic service area spanning
17 states. As of December 31, 1997, U.S. Bancorp was the 15th
largest U.S. commercial bank holding company, with assets of
nearly $71.3 billion. U.S. Bank National Association ("U.S.
Bank"), a wholly owned subsidiary of U.S. Bancorp, currently acts
as the investment advisor to 32 mutual funds (the "First American
Funds"). As of December 31, 1997, U.S. Bank, acting through its
First American Asset Management group, managed more than $55
billion in assets, including approximately $20.5 billion in
assets of the First American Funds.

Under the Investment Company Act of 1940, as amended (the "1940
Act"), consummation of the acquisition of Piper Jaffray Companies
by U.S. Bancorp will result in the assignment and automatic
termination of the funds' investment advisory agreement with
Piper Capital Management Incorporated. The 1940 Act requires that
any new investment advisory agreement for the funds be approved
by the funds' boards of directors and shareholders.

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

1997 Annual Report 16 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

(7) 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>
Year Ended December 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------- ------
<S> <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
------ ------ ------ ------- ------
Operations:
Net investment income ................ 0.88 0.87 0.88 0.89 0.87
Net realized and unrealized gains
(losses) on investments ............ 0.07 (0.25) 1.17 (1.41) 1.04
------ ------ ------ ------- ------
Total from operations .............. 0.95 0.62 2.05 (0.52) 1.91
------ ------ ------ ------- ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.61) (0.61) (0.61) (0.61) (0.61)
Paid to preferred shareholders ..... (0.16) (0.16) (0.19) (0.14) (0.12)
From net realized gains
Paid to common shareholders ........ (0.04) (0.01) -- -- --
Paid to preferred shareholders ..... (0.01) -- -- -- --
------ ------ ------ ------- ------
Total distributions to
shareholders ..................... (0.82) (0.78) (0.80) (0.75) (0.73)
------ ------ ------ ------- ------
Net asset value, common stock, end of
period ............................... $11.28 $11.15 $11.31 $ 10.06 $11.33
------ ------ ------ ------- ------
------ ------ ------ ------- ------
Market value, common stock, end of
period ............................... $11.13 $10.50 $10.63 $ 9.25 $11.25
------ ------ ------ ------- ------
------ ------ ------ ------- ------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 7.15% 4.23% 18.86% (6.01%) 17.96%
Total return, common stock, market value
(b) .................................. 12.48% 4.86% 21.91% (12.73%) 14.50%
Net assets at end of period (in
millions) ............................ $ 93 $ 93 $ 94 $ 86 $ 94
Ratio of expenses to average weekly net
assets applicable to common stock
(e) .................................. 0.97% 0.99% 0.95% 0.92% 0.92%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............... 6.37% 6.40% 6.38% 7.06% 6.95%
Portfolio turnover rate (excluding
short-term securities) . 8% 2% 9% 2% 1%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage ratio (d) ............... 324% 322% 325% 300% 325%
</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) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.67%, 0.68%,
0.65%, 0.62% AND 0.63% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND 1993,
RESPECTIVELY. DIVIDENDS PAID TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED
AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.41%,
5.42%, 5.57%, 5.69% AND 5.49% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND
1993, RESPECTIVELY.

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

1997 Annual Report 17 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

(7) 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>
Year Ended December 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------- ------
<S> <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
------ ------ ------ ------- ------
Operations:
Net investment income ................ 0.81 0.82 0.83 0.83 0.82
Net realized and unrealized gains
(losses) on investments ............ 0.23 (0.24) 1.37 (1.54) 1.05
------ ------ ------ ------- ------
Total from operations .............. 1.04 0.58 2.20 (0.71) 1.87
------ ------ ------ ------- ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.59) (0.59) (0.59) (0.59) (0.59)
Paid to preferred shareholders ..... (0.16) (0.16) (0.19) (0.14) (0.12)
From net realized gains
Paid to common shareholders ........ (0.05) (0.01) (0.01) -- --
Paid to preferred shareholders ..... (0.01) -- -- -- --
------ ------ ------ ------- ------
Total distributions to
shareholders ..................... (0.81) (0.76) (0.79) (0.73) (0.71)
------ ------ ------ ------- ------
Net asset value, common stock, end of
period ............................... $10.94 $10.71 $10.89 $ 9.48 $10.92
------ ------ ------ ------- ------
------ ------ ------ ------- ------
Market value, common stock, end of
period ............................... $10.69 $10.25 $10.38 $ 8.63 $11.38
------ ------ ------ ------- ------
------ ------ ------ ------- ------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 8.34% 4.04% 21.57% (7.91%) 18.23%
Total return, common stock, market value
(b) .................................. 10.78% 4.88% 27.63% (19.55%) 15.65%
Net assets at end of period (in
millions) ............................ $ 55 $ 54 $ 55 $ 50 $ 55
Ratio of expenses to average weekly net
assets applicable to common stock
(e) .................................. 1.09% 1.07% 1.06% 1.03% 1.03%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............... 6.06% 6.20% 6.10% 6.78% 6.60%
Portfolio turnover rate (excluding
short-term securities) . 10% 4% 9% 4% 1%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage ratio (d) ............... 318% 314% 317% 289% 318%
</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) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.74%, 0.73%,
0.72%, 0.69% AND 0.70%, IN FISCAL YEARS 1997, 1996, 1995, 1994 AND 1993,
RESPECTIVELY. DIVIDENDS PAID TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED
AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.13%,
5.25%, 5.36%, 5.51% AND 5.25%, IN FISCAL YEARS 1997, 1996, 1995, 1994 AND
1993, RESPECTIVELY.

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

1997 Annual Report 18 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST December 31, 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 (97.7%):
ELECTRIC REVENUE (9.8%):
Northern Municipal Power (Callable 1/1/99 at 102),
7.25%, 1/1/16 ..................................... $ 4,850,000 $ 5,091,821
Northern Municipal Power Agency Electric System,
4.70%, 1/1/02 ..................................... 1,605,000(f) 1,620,296
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................ 3,340,000(b) 1,960,143
Western Municipal Power Agency (AMBAC), 4.80%,
1/1/02 ............................................ 465,000 477,243
------------
9,149,503
------------

GENERAL OBLIGATIONS (17.7%):
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................ 300,000(d) 327,006
Mankato School District (FSA) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 1,000,000(d) 1,079,470
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00), 6.75%, 9/1/08 ..... 2,990,000(d) 3,193,470
St. Paul Metropolitan Airport Commission (Callable
1/1/02 at 100), AMT, 6.60%, 1/1/09 ................ 3,150,000(e) 3,411,261
State General Obligation, 5.00%, 11/1/01 ............ 500,000 517,940
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ..................................... 5,000,000(d) 5,433,250
State General Obligation, Zero-Coupon, 5.95%,
8/1/01 ............................................ 3,000,000(b) 2,597,130
------------
16,559,527
------------

HOSPITAL REVENUE (22.1%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 4.90%-5.00%,
11/15/01-11/15/02 ................................. 1,635,000 1,686,192
Bemidji Hospital Facilities (Prerefunded to 9/1/01),
7.00%, 9/1/21 ..................................... 3,200,000(d) 3,566,112
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity to 5/1/12), 6.76%, 5/1/12 ................ 1,000,000(b) 453,290
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 .......... 2,000,000(d) 2,230,960
Minneapolis Health Facility, Fairview (MBIA)
(Callable 1/1/02 at 102), 6.50%, 1/1/11 ........... 250,000 271,535
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 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 Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 .... $ 2,000,000(d) $ 2,217,560
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................ 1,300,000(d) 1,422,135
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00), 7.25%, 7/1/15 ......................... 5,500,000(d) 6,016,065
St. Paul Housing and Redevelopment Authority,
4.50%-4.90%, 11/1/99-11/1/02 ...................... 2,755,000 2,771,814
------------
20,635,663
------------

HOUSING REVENUE (17.9%):
Burnsville Oak Leaf Apartments (GNMA) (Callable
7/1/01 at 103), 7.05%-7.15%, 1/1/12-1/1/25 ........ 3,785,000 4,028,196
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
AMT, 6.75%, 8/1/23 ................................ 1,980,000(e) 2,091,335
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................... 5,645,000 6,036,255
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%,
12/1/11-12/1/21 ................................... 451,000 476,132
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.95%, 2/1/14 ............................... 3,400,000 3,595,398
State Housing and Finance Agency (Callable 2/1/02 at
102), 6.90%, 8/1/12 ............................... 495,000 528,502
------------
16,755,818
------------

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) 4,423,326
------------

LEASING REVENUE (5.9%):
Hennepin County Certificates of Participation
(Callable 11/15/01 at 100), 6.70%-6.75%,
11/15/09-11/15/11 ................................. 4,085,000 4,453,346
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02), 7.00%, 2/1/12 ......................... 1,000,000(d) 1,107,500
------------
5,560,846
------------

NURSING HOME REVENUE (0.6%):
Maplewood Health Care Facilities Revenue (Callable
11/15/01 at 102), 5.70%, 11/15/02 ................. 500,000 523,510
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 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>
OTHER REVENUE (0.9%):
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.15%-7.35%, 12/1/03-12/1/09 ..... $ 835,000 $ 890,080
------------

PARKING REVENUE (1.2%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 1,000,000(d) 1,078,210
------------

SALES TAX REVENUE (5.2%):
Minneapolis Community Development Authority, Special
Tax, Zero-Coupon (MBIA), 6.71%-7.01%,
3/1/07-3/1/09 ..................................... 7,585,000(b) 4,821,952
------------

WATER/POLLUTION CONTROL REVENUE (11.7%):
State Public Facilities Authority (Prerefunded to
3/1/01), 6.65%-6.70%, 3/1/08-3/1/13 ............... 10,000,000(d) 10,954,990
------------

Total Municipal Long-Term Securities
(cost: $84,409,337) ............................ 91,353,425
------------

MUNICIPAL SHORT-TERM SECURITIES (2.4%):
Bloomington Port Authority, 4.20%, 2/1/09 ........... 100,000(c) 100,000
Bloomington Port Authority, 4.20%, 2/1/13 ........... 500,000(c) 500,000
Mankato, 4.15%, 2/1/18 .............................. 300,000(c) 300,000
Minneapolis Commercial Development
Revenue-International Centre, 4.15%, 9/1/13 ....... 300,000(c) 300,000
Richfield Independent School District, 4.35%,
2/1/12 ............................................ 1,000,000(c) 1,000,000
------------

Total Municipal Short-Term Securities
(cost: $2,200,000) ............................. 2,200,000
------------

Total Investments in Securities
(cost: $86,609,337) (g) ........................ $ 93,553,425
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 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, 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 DECEMBER 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$9,925,922, WHICH REPRESENTS 10.62% OF TOTAL NET ASSETS.
(f) ON DECEMBER 31, 1997, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $1,605,838.
(g) ON DECEMBER 31, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $86,582,193. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 6,971,232
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 6,971,232
------------
------------
</TABLE>

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

1997 Annual Report 22 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST II December 31, 1997
.......................................................................................

MUNICIPAL LONG-TERM SECURITIES (97.5%):
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 $ 2,169,155
Higher Education Facility-Macalester College
(Callable 3/1/02 at 100), 6.30%, 3/1/14 ........... 1,125,000 1,202,839
------------
3,371,994
------------

ELECTRIC REVENUE (19.1%):
Northern Municipal Power (AMBAC) (Callable 1/1/99 at
100), 6.00%, 1/1/19 ............................... 2,000,000 2,034,900
Northern Municipal Power (FSA), 4.75%, 1/1/03 ....... 2,000,000(g) 2,025,520
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................ 9,690,000(b) 5,461,726
Western Municipal Power Agency (AMBAC), 4.90%,
1/1/03 ............................................ 1,000,000 1,033,100
------------
10,555,246
------------

GENERAL OBLIGATIONS (18.8%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................ 350,000(d) 371,469
Hopkins Blake School Project Revenue (Callable 9/1/04
at 100), 6.45%, 9/1/13-9/1/14 ..................... 385,000 431,516
Mankato School District (FSA) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 2,300,000(d) 2,482,781
Metropolitan Council (Crossover refunded to 9/1/00),
6.75%, 9/1/10-9/1/11 .............................. 2,500,000(d) 2,670,125
Minneapolis and St. Paul Metropolitan Airport
Commission (Callable 1/1/02 at 100), AMT, 6.60%,
1/1/11 ............................................ 1,000,000(f) 1,081,030
St. Paul Independent School District (Prerefunded to
2/1/01), 6.45%-6.50%, 2/1/09-2/1/10 ............... 875,000(d) 935,404
State General Obligation, 5.00%, 8/1/03 ............. 1,800,000 1,874,574
Willmar Independent School District (AMBAC) (Callable
2/1/02 at 100), 6.25%, 2/1/15 ..................... 500,000 537,105
------------
10,384,004
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 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 (12.4%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 5.00%,
11/15/03 .......................................... $ 695,000 $ 721,438
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%,
2/15/20 ........................................... 2,000,000(d) 2,212,960
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10 ........... 300,000 326,148
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Callable 8/15/00 at 102), 6.75%,
8/15/14 ........................................... 2,500,000 2,692,975
Red Wing Health Care Facility (Callable 9/1/03 at
102), 6.40%, 9/1/12 ............................... 220,000 234,630
St. Paul Housing and Redevelopment Authority Hospital
Revenues, 5.00%, 11/1/03 .......................... 670,000 677,216
------------
6,865,367
------------

HOUSING REVENUE (16.4%):
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) 1,310,625
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... 1,000,000 1,046,510
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 9,000 9,287
State Housing and Finance Agency, 4.85%-5.05%,
7/1/02-7/1/04 ..................................... 1,570,000 1,616,150
State Housing and Finance Agency (Callable 1/1/03 at
102), AMT, 6.50%, 1/1/26 .......................... 375,000(f) 395,655
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,127,560
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) 1,565,474
------------
9,071,261
------------

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) 2,311,206
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ 1,300,000 1,416,051
------------
3,727,257
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 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>
NURSING HOME REVENUE (1.0%):
Maplewood Healthcare Facility (Callable 11/15/01 at
102), 5.80%, 11/15/03 ............................. $ 500,000 $ 527,405
------------

PARKING REVENUE (4.7%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 2,415,000(d) 2,603,877
------------

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 1,516,445
------------

WATER/POLLUTION CONTROL REVENUE (9.4%):
State Public Facilities Authority (Callable 3/1/02 at
102), 6.50%, 3/1/14 ............................... 4,695,000 5,198,069
------------

Total Municipal Long-Term Securities
(cost: $49,999,005) ............................ 53,820,925
------------

MUNICIPAL SHORT-TERM SECURITIES (4.6%):
Bloomington, MN, Port Authority, 4.20%, 2/1/13 ...... 700,000(e) 700,000
Hutchinson Industrial Development Revenue, 4.20%,
6/1/24 ............................................ 1,400,000(e) 1,400,000
Minneapolis Commercial Development Revenue,
International Centre, 4.15%, 9/1/13 ............... 300,000(e) 300,000
State Higher Education Facilities Authority, 4.20%,
3/1/24 ............................................ 100,000(e) 100,000
------------

Total Municipal Short-Term Securities
(cost: $2,500,000) ............................. 2,500,000
------------

Total Investments in Securities
(cost: $52,499,005) (h) ........................ $ 56,320,925
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1997 Annual Report 25 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) 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 AND ARE CONSIDERED TO BE ILLIQUID. ON DECEMBER 31, 1997, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $2,311,206 OR 4.19% OF TOTAL
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
DECEMBER 31, 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 DECEMBER 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$4,352,784, WHICH REPRESENTS 7.89% OF TOTAL NET ASSETS.
(g) ON DECEMBER 31, 1997, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $2,001,056.
(h) ON DECEMBER 31, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $52,485,305. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 3,835,620
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 3,835,620
------------
------------
</TABLE>

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

1997 Annual Report 26 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, 1997, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period ended
December 31, 1997, and the financial highlights for each of the years in the
five-year period ended December 31, 1997. 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. As to securities purchased but not received, we request confirmations
from brokers and, where replies are not received, we carry out other appropriate
auditing procedures.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, 1997, 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 6, 1998

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

1997 Annual Report 27 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 advisor on how to report these distributions at the state
and local levels.

COMMON STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.76% AND 99.77%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ---------------------------------------- ----------- --------------
<S> <C> <C>
January 10, 1997 ....................... $0.0509 $0.0492
February 26, 1997 ...................... 0.0509 0.0492
March 26, 1997 ......................... 0.0509 0.0492
April 23, 1997 ......................... 0.0509 0.0492
May 28, 1997 ........................... 0.0509 0.0492
June 25, 1997 .......................... 0.0509 0.0492
July 23, 1997 .......................... 0.0509 0.0492
August 27, 1997 ........................ 0.0509 0.0492
September 24, 1997 ..................... 0.0509 0.0492
October 29, 1997 ....................... 0.0509 0.0492
November 24, 1997 ...................... 0.0509 0.0492
December 17, 1997 ...................... 0.0509 0.0492
----------- --------------
Total .............................. $0.6108 $0.5904
----------- --------------
----------- --------------
</TABLE>

COMMON STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)

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

1997 Annual Report 28 Minnesota Municipal Term Trusts
<PAGE>
Federal Income Tax Information (continued)
- --------------------------------------------------------------------------------

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

PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.76% AND 99.77%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- --------------
<S> <C> <C>
Total .............................. $ 817.1100 $785.0800
----------- --------------
----------- --------------
</TABLE>

PREFERRED STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)

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

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

1997 Annual Report 29 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------

ANNUAL MEETING RESULTS
An annual meeting of the funds' shareholders was held on August
20, 1997. Each matter voted upon at that 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 SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST
David T. Bennett ....................... 810 1
William H. Ellis ....................... 810 1

MINNESOTA MUNICIPAL TERM TRUST II
David T. Bennett ....................... 472 0
William H. Ellis ....................... 472 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 ........................... 3,312,382 32,377
Karol D. Emmerich ...................... 3,314,090 30,669
Luella G. Goldberg ..................... 3,313,790 30,969
David A. Hughey ........................ 3,313,590 31,169
George Latimer ......................... 3,308,236 36,523

MINNESOTA MUNICIPAL TERM TRUST II
Jaye F. Dyer ........................... 2,074,161 21,628
Karol D. Emmerich ...................... 2,076,347 19,442
Luella G. Goldberg ..................... 2,076,347 19,442
David A. Hughey ........................ 2,076,347 19,442
George Latimer ......................... 2,069,461 26,328
</TABLE>

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

1997 Annual Report 30 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------

(3) The funds' preferred and common shareholders, voting as a
class, 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 accountants for
the funds for the fiscal year ending December 31, 1997. 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 ......... 3,316,953 4,731 23,075 0
Minnesota Municipal Term Trust II ...... 2,077,703 1,379 16,707 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.

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

1997 Annual Report 31 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
Stock Exchange (NYSE) 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 and will furnish written confirmation of all
transactions, including information you need for tax records.
Reinvested shares in your account will be held by IFTC in
noncertificated form in your name.

TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax, just as they would be if received in cash.
Shareholders, as required by the Internal Revenue Service, will
receive Form 1099 regarding the federal tax status of the prior
year's distributions.

PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate
your participation in the plan at any time by giving written
notice to

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

1997 Annual Report 32 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
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.

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

1997 Annual Report 33 Minnesota Municipal Term Trusts
<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- -------------------------------------------------------------------------------
1997 Annual Report 34 Minnesota Municipal Term Trusts

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- -------------------------------------------------------------------------------
1997 Annual Report 35 Minnesota Municipal Term Trusts
<PAGE>

GLOSSARY OF TERMS
- -------------------------------------------------------------------------------

ADVANCE REFUNDING
The sale of new bonds (a refunding issue) in
advance, usually by some years, of the first call
date of the old bonds (issue to be refunded). The
refunding issue would normally have a lower rate
than the issue to be refunded and the proceeds from
the sale of the refunding issue would be invested,
usually in government securities, until the
higher-rate bonds become callable.

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.

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.

PREFERRED STOCK
The preferred stock issued by MNA and MNB 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.

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 APPRECIATION
A bond is said to be trading at unrealized gains
when its current market price is higher than its
cost basis.

- -------------------------------------------------------------------------------
1997 Annual Report 36 Minnesota Municipal Term Trusts
<PAGE>

DIRECTORS FOR MORE INFORMATION
..................................
DAVID T. BENNETT, Chairman, By Phone
Highland Homes, Inc., USL
Products, Inc., Kiefer Built, 800 866-7778
Inc., of Counsel, Gray, Plant,
Mooty, Mooty & Bennett, P.A. FOR GENERAL INFORMATION

JAYE F. DYER, President, Dyer press 5, our Mutual Fund
Management Company Services representatives
are ready to answer your
WILLIAM H. ELLIS, Retired questions.
President, Piper Jaffray
Companies Inc., Piper Capital TO ORDER LITERATURE
Management Incorporated
press 5, ask a service
KAROL D. EMMERICH, President, representative to mail you
The Paraclete Group additional literature,
including a Quarterly
LUELLA G. GOLDBERG, Director, Update. You can also
TCF Financial, ReliaStar request to be put on a
Financial Corp., Hormel Foods mailing list to receive
Corp. this information
automatically each quarter.
DAVID A. HUGHEY, Retired
Executive Vice President and
Chief Administrative Officer of By Mail
Dean Witter InterCapital Inc.
and Dean Witter Trust Co. Piper Capital Management

GEORGE LATIMER, Chief Executive Attn: Mutual Fund Services
Officer, National Equity Funds 222 South Ninth Street
Minneapolis, MN 55402-3804
OFFICERS
.................................. In an effort to reduce
WILLIAM H. ELLIS, Chairman of costs to our shareholders,
the Board we have implemented a
process to reduce duplicate
PAUL A. DOW, President mailings of the funds'
shareholder reports. This
ROBERT H. NELSON, Vice President householding process should
and Treasurer allow us to mail one report
to each address where one
SUSAN SHARP MILEY, Secretary or more registered
shareholders with the same
INVESTMENT ADVISOR last name reside. If you
.................................. would like to have
PIPER CAPITAL MANAGEMENT additional reports mailed
INCORPORATED to your address, please
222 South Ninth Street, call our Mutual Fund
Minneapolis, MN 55402-3804 Services area at 800
866-7778, or mail a request
CUSTODIAN, ACCOUNTING AND TRANSFER to us.
AGENT
.................................. On-Line
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania, Kansas City, MO http://www.piperjaffray.com/
64105-1307

INDEPENDENT AUDITORS
..................................
KPMG PEAT MARWICK LLP
4200 Norwest Center,
Minneapolis, MN 55402

LEGAL COUNSEL
..................................
DORSEY & WHITNEY LLP
220 South Sixth Street,
Minneapolis, MN 55402

<PAGE>

PIPER CAPITAL
MANAGEMENT

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

P11300 2/1998 067-98