MINNESOTA MUNICIPAL TERM TRUST INC, N-30D, 1999-02-24

MINNESOTA MUNICIPAL TERM TRUST INC
N-30D, 1999-02-24

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<PAGE>

1998
ANNUAL REPORT

MINNESOTA MUNICIPAL
TERM TRUSTS
MNA
MNB

[LOGO] FIRST AMERICAN
ASSET MANAGEMENT
<PAGE>

[LOGO] FIRST AMERICAN
ASSET MANAGEMENT
- --------------------------------------------------------------------------------

CONTENTS

2 Fund Overview

7 Financial Statements and Notes

Investments in Securities

19 MNA

23 MNB

27 Independent Auditors' Report

28 Federal Income Tax Information

30 Shareholder Update

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 management investment 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. Each fund's income
may be subject to federal and/or state of Minnesota alternative minimum taxes.
Investors should consult their tax advisors. As with other investment companies,
there can be no assurance that either fund will achieve its objective.

- --------------------------------------------------------------------------------
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
- --------------------------------------------------------------------------------
<PAGE>

AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------

Based on net asset value for the periods ended December 31, 1998

[CHART]

<TABLE>
<S> <C> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST (MNA, inception 9/26/1991) 5.47% 5.67% 8.37%
MINNESOTA MUNICIPAL TERM TRUST II (MNB, inception 4/24/1992) 5.95% 5.99% 8.18%
</TABLE>

All total returns are through December 31,1998, and reflect the reinvestment of
distributions but not sales charges. Net asset value (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, 1998, were
10.04%, 6.67% and 7.99% for MNA and 12.56%, 6.06% and 7.85% for MNB. These
returns assume reinvestment of all distributions and reflect sales charges on
those distributions as 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.

1 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>

FUND
OVERVIEW
- --------------------------------------------------------------------------------

FUND MANAGEMENT

DOUG WHITE, CFA,
is primarily responsible for the management of the Minnesota Municipal Term
Trusts. He has 15 years of financial experience.

RON REUSS, ISFA,
assists with the management of the Minnesota Municipal Term Trusts. He has 29
years of financial experience.

FEBRUARY 15, 1999

WE ARE PLEASED THAT THE MINNESOTA MUNICIPAL TERM TRUSTS (MNA AND MNB) REMAIN 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, 1998, the funds continued to earn more
than their monthly common and preferred stock dividends and add to their
dividend reserves. The funds' net asset values remain above the $10 per share
objective. The net asset values for MNA and MNB as of December 31, 1998 were
$11.12 and $10.90, respectively.

AS OF DECEMBER 31, 1998, MNA'S DIVIDEND RESERVE HAS REACHED A LEVEL WHERE THE
FUND CANNOT CONTINUE TO ACCUMULATE ADDITIONAL AMOUNTS. As a result, if MNA
continues to earn more than its monthly common and preferred stock dividend, it
may be required to pay the excess out as additional dividends rather than adding
to its dividend reserve.

BOND PRICES WERE VOLATILE IN 1998, AND THE SUPPLY OF MUNICIPAL ISSUES INCREASED.
Mixed domestic economic signals and foreign economic problems caused turmoil in
the bond market, but for the year, growth continued to out-pace expectations
while inflation remained lower than anticipated. Refundings and new issues due
to lowered interest rates created an increased supply of municipal issues. This
resulted in the second highest year for municipal bond issuance,

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BONDS MATURING LESS THAN A YEAR BEYOND THE FUNDS' TERMINATION DATES
<TABLE>
<CAPTION>

MNA MNB
Inception Inception
9/26/1991 4/24/1992
<S> <C> <C>
At the Fund's Inception 0% 0%
- --------------------------------------------------------------------------------
As of December 31, 1998 74% 63%
- --------------------------------------------------------------------------------
</TABLE>

2 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>

FUND
OVERVIEW CONTINUED
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surpassed only by 1993. Ongoing economic expansion kept municipal credits strong
with credit rating upgrades surpassing downgrades.

THE INCREASED SUPPLY OF MUNICIPALS FACILITATED OUR ONGOING STRATEGY OF SELLING
LONGER MATURITY BONDS IN FAVOR OF THOSE CLOSER TO THE FUNDS' TERMINATION DATES.
As shown in the table on page 2, the percentage of bonds with maturity or refund
dates less than a year beyond the funds' termination dates continues to
increase. Advance refunding is responsible for a portion of this increase. In
addition, we made appropriate trades as interest rates fell and bond prices
increased. This restructuring generated capital gains, which were distributed to
shareholders. Also, restructuring proceeds were reinvested at lower interest
rates, decreasing fund income.

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. A
number of bonds currently have market values in excess of their maturity prices.
As the maturity and/or refunding dates of these bonds approach, their market
prices will converge toward prices that are at or near their maturity or
refunding prices.

IN ADDITION, AS THE FUNDS APPROACH TERMINATION, AND AS OPPORTUNITIES ARISE, WE
MAY CONTINUE TO SELL LONGER MATURITY BONDS IN FAVOR OF BONDS WITH

- --------------------------------------------------------------------------------
DISTRIBUTION HISTORY SINCE INCEPTION

<TABLE>
<CAPTION>
MNA MNB
Inception Inception
9/26/1991 4/24/1992
<S> <C> <C>
Total Monthly Income Distributions Through 12/31/1998
- -----------------------------------------------------------------------------------------------

Common Shareholders $4.41 $3.88
- -----------------------------------------------------------------------------------------------

Preferred Shareholders (On a Common Share Basis) $1.09 $0.99
- -----------------------------------------------------------------------------------------------

Total Capital Gains Distributions to Common
Shareholders Through 12/31/1998 $0.16 $0.15
- -----------------------------------------------------------------------------------------------
</TABLE>

3 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>

FUND
OVERVIEW CONTINUED
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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 supplement common and/or preferred dividends.
See the net asset value summary chart 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 CAN HAVE AN IMPACT ON NET ASSET VALUE. However,
we are optimistic about achieving the funds' objectives and do not anticipate
events that would cause us to change the funds' investment strategy as they move
toward termination.

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.

- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY OF COMMON SHARES

<TABLE>
<CAPTION>
MNA MNB
Inception Inception
9/26/1991 4/24/1992
<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 12/31/1998 $0.00 $0.00
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Subtotal $9.34 $9.33
- --------------------------------------------------------------------------------

Dividend Reserve
(Undistributed Net Investment Income) at 12/31/1998 + $0.77 + $0.53
- --------------------------------------------------------------------------------

Unrealized Appreciation on Investments at 12/31/1998 + $1.01 + $1.04
- --------------------------------------------------------------------------------

NET ASSET VALUE PER SHARE ON 12/31/1998 $11.12 $10.90
- --------------------------------------------------------------------------------
</TABLE>

4 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>

FUND
OVERVIEW CONTINUED
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PORTFOLIO COMPOSITION

As a percentage of total assets on December 31, 1998

[CHART]

MINNESOTA MUNICIPAL TERM TRUST

<TABLE>
<S> <C>
Water/Pollution Control Revenue 11%

Economic Development Revenue 1%

Leasing Revenue 6%

Other Assets 2%

General Obligations 14%

Solid Waste Disposal 2%

Short-Term Securities 5%

Hospital Revenue 23%

Parking Revenue 1%

Health Services/HMO 1%

Education Revenue 1%

Electric Revenue 13%

Housing Revenue 14%

Health Hospital Facilities Revenue 1%

Special Tax Assessment Revenue 5%
</TABLE>

[CHART]

MINNESOTA MUNICIPAL TERM TRUST II

<TABLE>
<S> <C>
Water/Pollution Control Revenue 9%

Other Assets 2%

IOR--Miscellaneous Projects 6%

General Obligations 16%

Leasing Revenue 2%

Short-Term Securities 6%

Hospital Revenue 13%

Parking Revenue 4%

Education Revenue 2%

Electric Revenue 27%

Housing Revenue 13%
</TABLE>

5 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>

FUND
OVERVIEW CONTINUED
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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.

6 1998 ANNUAL REPORT MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1998
................................................................................

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
-------------- --------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (including
repurchase agreements of $3,212,000 and $2,817,000,
respectively) (note 2) ................................... $ 94,819,113 $ 58,380,883
Cash in bank on demand deposit ............................. 25,996 25,719
Accrued interest receivable ................................ 1,603,878 962,258
-------------- --------------
Total assets ............................................. 96,448,987 59,368,860
-------------- --------------

LIABILITIES:
Common stock dividends payable (note 2) .................... 291,795 170,232
Preferred stock dividends payable (note 3) ................. 9,863 1,212
Payable for investment securities purchased on a when-issued
basis (note 2) ........................................... 3,525,000 4,100,000
Accrued investment management fee .......................... 19,707 11,717
Accrued remarketing agent fee .............................. 26,000 13,261
Accrued administrative fee ................................. 11,824 7,030
Other accrued expenses ..................................... 5,496 3,247
-------------- --------------
Total liabilities ........................................ 3,889,685 4,306,699
-------------- --------------
Net assets applicable to outstanding capital stock ....... $ 92,559,302 $ 55,062,161
-------------- --------------
-------------- --------------

COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ......................................... $ 82,335,219 $ 49,636,308
Undistributed net investment income ........................ 4,394,846 1,818,591
Accumulated net realized gain on investments ............... 19,453 4,213
Unrealized appreciation of investments ..................... 5,809,784 3,603,049
-------------- --------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $ 92,559,302 $ 55,062,161
-------------- --------------
-------------- --------------

* Investments in securities at identified cost.............. $ 89,009,329 $ 54,777,834
-------------- --------------
-------------- --------------

NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $ 63,759,302 $ 37,712,161
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 ............................................ $ 11.12 $ 10.90
Market price ............................................... $ 11.44 $ 11.31

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.

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1998 Annual Report 7 Minnesota Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Year Ended December 31, 1998
................................................................................

<TABLE>
<CAPTION>
MINNESOTA
MINNESOTA MUNICIPAL
MUNICIPAL TERM TRUST
TERM TRUST II
------------ -----------
<S> <C> <C>
INCOME:
Interest .................................................. $ 5,523,540 $3,147,160
------------ -----------

EXPENSES (NOTE 5):
Investment management fee .................................. 233,554 138,296
Administrative fee ......................................... 140,132 82,978
Remarketing agent fee ...................................... 73,000 43,979
Custodian and accounting fees .............................. 63,625 44,595
Transfer agent fees ........................................ 2,207 2,006
Reports to shareholders .................................... 25,693 19,585
Directors' fees ............................................ 9,339 9,339
Audit and legal fees ....................................... 41,549 42,350
Other expenses ............................................. 30,263 19,039
------------ -----------
Total expenses ........................................... 619,362 402,167
Less expenses paid indirectly .......................... (8,588) (8,887)
------------ -----------

Total net expenses ....................................... 610,774 393,280
------------ -----------

Net investment income .................................... 4,912,766 2,753,880
------------ -----------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 736,084 280,832
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,134,304) (218,871)
------------ -----------

Net gain (loss) on investments ........................... (398,220) 61,961
------------ -----------

Net increase in net assets resulting from operations ... $ 4,514,546 $2,815,841
------------ -----------
------------ -----------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1998 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
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,912,766 $ 5,030,888
Net realized gain on investments ........................... 736,084 299,913
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,134,304) 127,174
------------- -------------

Net increase in net assets resulting from operations ..... 4,514,546 5,457,975
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,771,550) (3,501,539)
Preferred stock dividends ................................ (875,579) (941,311)
From net realized gains:
Common stock dividends ................................... (600,788) (209,817)
Preferred stock dividends ................................ (160,212) (59,328)
------------- -------------
Total distributions ...................................... (5,408,129) (4,711,995)
------------- -------------
Total increase (decrease) in net assets ................ (893,583) 745,980

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

Net assets at end of year .................................. $ 92,559,302 $ 93,452,885
------------- -------------
------------- -------------

Undistributed net investment income ........................ $ 4,394,846 $ 4,141,302
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1998 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
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,753,880 $ 2,807,704
Net realized gain on investments ........................... 280,832 265,558
Net change in unrealized appreciation or depreciation of
investments .............................................. (218,871) 523,753
------------- -------------

Net increase in net assets resulting from operations ..... 2,815,841 3,597,015
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (2,052,472) (2,042,784)
Preferred stock dividends ................................ (526,361) (544,844)
From net realized gains:
Common stock dividends ................................... (287,872) (173,000)
Preferred stock dividends ................................ (74,802) (49,704)
------------- -------------
Total distributions ...................................... (2,941,507) (2,810,332)
------------- -------------
Total increase (decrease) in net assets ................ (125,666) 786,683

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

Net assets at end of year .................................. $ 55,062,161 $ 55,187,827
------------- -------------
------------- -------------

Undistributed net investment income ........................ $ 1,818,591 $ 1,646,840
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1998 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 investment
grade 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 fund might reasonably expect to receive for
the security or other asset upon its current sale.

The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an
independent pricing service but where an active market exists
are valued using market quotations obtained from one or more
dealers that make markets in the securities or from a
widely-used quotation system. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value.

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1998 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 values if the funds make such purchases while
remaining substantially fully invested. As of December 31, 1998,
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II, had entered into when-issued or forward
commitments of $3,525,000 and $4,100,000, 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. However, Minnesota
Municipal Term Trust Inc. and Minnesota Municipal Term Trust
Inc. II incurred federal excise taxes of $1,508 and $67,
respectively, during the 1997 excise tax year.

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1998 Annual Report 12 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization and the non-deductibility of excise
tax payments made. 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 or
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 ............................... $12,093 $3,296
Increase accumulated net realized gain
on investments ....................... $13,601 $3,363
Decrease additional paid-in-capital .... $ 1,508 $ 67
</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.

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

1998 Annual Report 13 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain broker-
dealers, the funds, along with other affiliated registered
investment companies, may transfer uninvested cash balances to a
joint trading account, the daily aggregate of which is invested
in repurchase agreements secured by U.S. government or agency
obligations. Securities pledged as collateral for all individual
and joint repurchase agreements are held by the funds' custodian
bank until maturity of the repurchase agreement. Provisions for
all agreements ensure that the daily market value of the
collateral is in excess of the repurchase amount, including
accrued interest, to protect the funds in the event of a
default.

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, 1998, 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.

RP is a registered trademark of Merrill Lynch & Company.

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

1998 Annual Report 14 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

(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, 1998, were as follows:

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- --------------
<S> <C> <C>
Purchases .............................. $ 9,960,275 $5,625,893
Proceeds from sales .................... $10,988,367 $4,744,896
</TABLE>

(5) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
On August 10, 1998, the funds entered into an investment
advisory agreement with U.S. Bank National Association (U.S.
Bank), acting through its division, First American Asset
Management. Prior thereto, Piper Capital Management
Incorporated, which was acquired by U.S. Bancorp on May 1, 1998,
had served as the funds' advisor. U.S. Bank also serves as the
funds' administrator under an administration agreement effective
May 1, 1998. Prior thereto, Piper Capital provided services
under an administration agreement through April 30, 1998.

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.

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.

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

1998 Annual Report 15 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

REMARKETING AGENT FEE
The funds have entered into a remarketing 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.

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

1998 Annual Report 16 Minnesota Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

(6) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:

MINNESOTA MUNICIPAL TERM TRUST

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998(g) 1997 1996 1995 1994
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.28 $ 11.15 $ 11.31 $ 10.06 $ 11.33
----------- -------- -------- -------- --------
Operations:
Net investment income ................ 0.86 0.88 0.87 0.88 0.89
Net realized and unrealized gains
(losses) on investments ............ (0.08) 0.07 (0.25) 1.17 (1.41)
----------- -------- -------- -------- --------
Total from operations .............. 0.78 0.95 0.62 2.05 (0.52)
----------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.66) (0.61) (0.61) (0.61) (0.61)
Paid to preferred shareholders ..... (0.15) (0.16) (0.16) (0.19) (0.14)
From net realized gains
Paid to common shareholders ........ (0.10) (0.04) (0.01) -- --
Paid to preferred shareholders ..... (0.03) (0.01) -- -- --
----------- -------- -------- -------- --------
Total distributions to
shareholders ..................... (0.94) (0.82) (0.78) (0.80) (0.75)
----------- -------- -------- -------- --------
Net asset value, common stock, end of
period ............................... $11.12 $ 11.28 $ 11.15 $ 11.31 $ 10.06
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
Market value, common stock, end of
period ............................... $11.44 $ 11.13 $ 10.50 $ 10.63 $ 9.25
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 5.47% 7.15% 4.23% 18.86% (6.01)%
Total return, common stock, market value
(b) .................................. 10.04% 12.48% 4.86% 21.91% (12.73)%
Net assets at end of period (in
millions) ............................ $ 93 $ 93 $ 93 $ 94 $ 86
Ratio of expenses to average weekly net
assets applicable to common stock
(e) .................................. 0.96% 0.97% 0.99% 0.95% 0.92%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............... 6.25% 6.37% 6.40% 6.38% 7.06%
Portfolio turnover rate (excluding
short-term securities) ............... 11% %8 %2 %9 %2
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage ratio (d) ............... 321% 324% 322% 325% 300%
</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 DIVIDEND 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 0.66%, 0.67%,
0.68%, 0.65% AND 0.62% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND 1994,
RESPECTIVELY. DIVIDENDS PAID TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED
AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.26%,
5.41%, 5.42%, 5.57% AND 5.69% IN FISCAL YEARS 1998, 1997, 1996, 1995, AND
1994, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.

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

1998 Annual Report 17 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

(6) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:

MINNESOTA MUNICIPAL TERM TRUST II

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998(g) 1997 1996 1995 1994
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $10.94 $ 10.71 $ 10.89 $ 9.48 $ 10.92
----------- -------- -------- -------- --------
Operations:
Net investment income ................ 0.80 0.81 0.82 0.83 0.83
Net realized and unrealized gains
(losses) on investments ............ -- 0.23 (0.24) 1.37 (1.54)
----------- -------- -------- -------- --------
Total from operations .............. 0.80 1.04 0.58 2.20 (0.71)
----------- -------- -------- -------- --------
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 ..... (0.15) (0.16) (0.16) (0.19) (0.14)
From net realized gains
Paid to common shareholders ........ (0.08) (0.05) (0.01) (0.01) --
Paid to preferred shareholders ..... (0.02) (0.01) -- -- --
----------- -------- -------- -------- --------
Total distributions to
shareholders ..................... (0.84) (0.81) (0.76) (0.79) (0.73)
----------- -------- -------- -------- --------
Net asset value, common stock, end of
period ............................... $10.90 $ 10.94 $ 10.71 $ 10.89 $ 9.48
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
Market value, common stock, end of
period ............................... $11.31 $ 10.69 $ 10.25 $ 10.38 $ 8.63
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 5.95% 8.34% 4.04% 21.57% (7.91)%
Total return, common stock, market value
(b) .................................. 12.56% 10.78% 4.88% 27.63% (19.55)%
Net assets at end of period (in
millions) ............................ $ 55 $ 55 $ 54 $ 55 $ 50
Ratio of expenses to average weekly net
assets applicable to common stock
(e) .................................. 1.06% 1.09% 1.07% 1.06% 1.03%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............... 5.87% 6.06% 6.20% 6.10% 6.78%
Portfolio turnover rate (excluding
short-term securities) ............... 9% 10% %4 %9 %4
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage ratio (d) ............... 317% 318% 314% 317% 289%
</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 DIVIDEND 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 0.73%, 0.74%,
0.73%, 0.72% AND 0.69% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND 1994,
RESPECTIVELY. DIVIDENDS PAID TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED
AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 4.98%,
5.13%, 5.25%, 5.36% AND 5.51% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND
1994, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.

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

1998 Annual Report 18 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST December 31, 1998
.......................................................................................

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 (97.1%):
ECONOMIC DEVELOPMENT REVENUE (1.0%):
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.15%-7.35%, 12/1/03-12/1/09 ..... $ 835,000 $ 899,335
------------

EDUCATION REVENUE (0.9%):
Higher Education Facility - College of St. Benedict,
4.50%, 3/1/00-3/1/02 .............................. 810,000 819,335
------------

ELECTRIC REVENUE (13.7%):
Anoka County Resource Recovery, 3.95%-4.05%,
12/1/00-12/1/01 ................................... 3,525,000(e) 3,511,870
Northern Municipal Power (Prerefunded to 1/1/99),
7.25%, 1/1/16 ..................................... 4,850,000(d) 4,947,000
Northern Municipal Power (FSA), 4.70%, 1/1/02 ....... 1,605,000 1,650,646
Northern Municipal Power, Zero-Coupon (AMBAC),
6.39%-6.94%, 1/1/06-1/1/10 ........................ 3,340,000(b) 2,123,919
Western Municipal Power Agency (AMBAC), 4.80%,
1/1/02 ............................................ 465,000 480,466
------------
12,713,901
------------

GENERAL OBLIGATIONS (14.2%):
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 7.25%, 2/1/11 ................ 300,000(d) 322,020
Mankato School District (FSA) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 1,000,000(d) 1,076,090
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00), 6.75%, 9/1/08 ..... 2,990,000(d) 3,150,922
State General Obligation, 5.00%, 11/1/01 ............ 500,000 519,905
State General Obligation (Prerefunded to 8/1/01),
6.70%, 8/1/10 ..................................... 5,000,000(d) 5,378,900
State General Obligation, Zero-Coupon, 5.95%,
8/1/01 ............................................ 3,000,000(b) 2,728,230
------------
13,176,067
------------

HEALTH SERVICE/HMO (1.2%):
Minneapolis and St. Paul Housing and Redevelopment
Authority Healthcare Systems (AMBAC), 4.25%,
11/15/99 .......................................... 1,100,000 1,111,143
------------

HEALTH/HOSPITAL FACILITIES REVENUE (1.5%):
Buffalo Covenant Retirement Communities, 4.30%-4.55%,
12/1/02-12/1/05 ................................... 1,350,000 1,364,696
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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>
HOSPITAL REVENUE (23.5%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 4.90%-5.00%,
11/15/01-11/15/02 ................................. $ 1,635,000 $ 1,694,405
Bemidji Hospital Facilities (Prerefunded to 9/1/01),
7.00%, 9/1/21 ..................................... 3,200,000(d) 3,522,784
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity to 5/1/12), 6.76%, 5/1/12 ................ 1,000,000(b) 485,710
Maplewood Health Care Facilities Revenue (Callable
11/15/01 at 102), 5.70%, 11/15/02 ................. 500,000 523,425
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00), 8.00%, 8/15/14 .......... 2,000,000(d) 2,182,600
Minneapolis Hospital Facilities-Children's Medical
Center (Prerefunded to 6/1/01), 7.00%, 12/1/20 .... 2,000,000(d) 2,191,820
Monticello-Big Lake Community Hospital District
(MBIA), 4.00%-4.60%, 12/1/99-12/1/02 .............. 525,000 526,910
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00), 7.25%, 7/1/15 ................ 1,300,000(d) 1,395,524
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00), 7.25%, 7/1/15 ......................... 5,500,000(d) 5,914,205
St. Paul Housing and Redevelopment Authority,
4.50%-4.90%, 11/1/99-11/1/02 ...................... 3,255,000 3,306,125
------------
21,743,508
------------

HOUSING REVENUE (14.9%):
Burnsville Oak Leaf Apartments (GNMA) (Callable
7/1/01 at 103), 7.05%-7.15%, 1/1/12-1/1/25 ........ 3,735,000 3,954,423
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
AMT, 6.75%, 8/1/23 ................................ 1,300,000(f) 1,371,214
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................... 3,645,000 3,926,175
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%,
12/1/11-12/1/21 ................................... 409,000 431,937
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.95%, 2/1/14 ............................... 3,400,000 3,632,730
State Housing and Finance Agency (Callable 2/1/02 at
102), 6.90%, 8/1/12 ............................... 495,000 529,600
------------
13,846,079
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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>
IDR - SOLID WASTE DISPOSAL (2.4%):
Anoka County Solid Waste Disposal Revenue (CFC)
(Callable 6/1/00 at 102), AMT, 6.95%, 12/1/08 ..... $ 2,100,000(f) $ 2,230,599
------------

LEASING REVENUE (6.0%):
Hennepin County Certificates of Participation
(Prerefunded to 11/15/01), 6.70%-6.75%,
11/15/09-11/15/11 ................................. 4,085,000(d) 4,426,541
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02), 7.00%, 2/1/12 ......................... 1,000,000(d) 1,096,290
------------
5,522,831
------------

PARKING REVENUE (1.1%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 1,000,000(d) 1,067,190
------------

SPECIAL TAX ASSESSMENT REVENUE (5.0%):
Minneapolis Community Development Authority,
Zero-Coupon (MBIA), 6.71%-7.01%, 3/1/07-3/1/09 .... 6,685,000(b) 4,601,449
------------

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) 10,830,980
------------

Total Municipal Long-Term Securities
(cost: $84,117,329) ............................ 89,927,113
------------

SHORT-TERM SECURITIES (5.3%):
Bloomington Multifamily Revenue, 3.55%, 12/1/25 ..... 1,100,000(c) 1,100,000
Minneapolis General Revenue, 3.85%, 4/1/14 .......... 580,000(c) 580,000
Repurchase agreement with Goldman Sachs, acquired on
12/31/98, interest of $1,695, 4.75%, 1/4/99 ....... 3,212,000(g) 3,212,000
------------

Total Short-Term Securities
(cost: $4,892,000) ............................. 4,892,000
------------

Total Investments in Securities
(cost: $89,009,329)(h) ......................... $ 94,819,113
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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, 1998. 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, 1998, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $3,525,000.
(f) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1998, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$3,601,813, WHICH REPRESENTS 3.9% OF NET ASSETS.
(g) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(h) ON DECEMBER 31, 1998, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $88,987,459. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 5,844,804
GROSS UNREALIZED DEPRECIATION ...... (13,150)
------------
NET UNREALIZED APPRECIATION ...... $ 5,831,654
------------
------------
</TABLE>

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

1998 Annual Report 22 Minnesota Municipal Term Trusts
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST II December 31, 1998
.......................................................................................

MUNICIPAL LONG-TERM SECURITIES (99.5%):
ECONOMIC DEVELOPMENT REVENUE (0.4%):
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.10%, 12/1/02 ................... $ 175,000 $ 185,808
------------

EDUCATION REVENUE (2.2%):
Higher Education Facility-Macalester College
(Callable 3/1/02 at 100), 6.30%, 3/1/14 ........... 1,125,000 1,211,130
------------

ELECTRIC REVENUE (29.3%):
Anoka County Resource Recovery, 4.15%-4.25%,
12/1/02-12/1/03 ................................... 4,100,000(f) 4,076,174
Northern Municipal Power (AMBAC) (Prerefunded to
1/1/99), 6.00%-7.40%, 1/1/18-1/1/19 ............... 3,000,000(d) 3,020,000
Northern Municipal Power (FSA), 4.75%, 1/1/03 ....... 2,000,000 2,071,400
Northern Municipal Power, Zero-Coupon (AMBAC),
6.50%-6.94%, 1/1/09-1/1/10 ........................ 9,690,000(b) 5,935,975
Western Municipal Power Agency (AMBAC), 4.90%,
1/1/03 ............................................ 1,000,000 1,042,730
------------
16,146,279
------------

GENERAL OBLIGATIONS (16.9%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01), 6.25%, 2/1/14 ................ 350,000(d) 368,725
Hopkins Blake School Project (Callable 9/1/04 at
100), 6.45%, 9/1/13-9/1/14 ........................ 385,000 433,352
Mankato School District (FSA) (Crossover refunded to
2/1/02), 6.35%, 2/1/13 ............................ 2,300,000(d) 2,475,007
Metropolitan Council (Crossover refunded to 9/1/00),
6.75%, 9/1/10-9/1/11 .............................. 2,500,000(d) 2,634,550
St. Paul Independent School District (Prerefunded to
2/1/01), 6.45%-6.50%, 2/1/09-2/1/10 ............... 875,000(d) 925,970
State General Obligation, 5.00%, 8/1/03 ............. 1,800,000 1,895,274
Willmar Independent School District (AMBAC) (Callable
2/1/02 at 100), 6.25%, 2/1/15 ..................... 500,000 536,600
------------
9,269,478
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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 (13.5%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA), 5.00%,
11/15/03 .......................................... $ 695,000 $ 727,116
Duluth Health Care Facilities, Benedictine-St. Mary's
Project (Prerefunded to 2/15/00), 8.38%,
2/15/20 ........................................... 2,000,000(d) 2,151,380
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10 ........... 300,000 326,583
Maplewood Healthcare Facility (Callable 11/15/01 at
102), 5.80%, 11/15/03 ............................. 500,000 525,905
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Callable 8/15/00 at 102), 6.75%,
8/15/14 ........................................... 2,500,000 2,660,350
Monticello-Big Lake Community Hospital District,
4.70%, 12/1/03 .................................... 125,000 125,917
Red Wing Health Care Facility (Callable 9/1/03 at
102), 6.40%, 9/1/12 220,000 235,204
St. Paul Housing and Redevelopment Authority Hospital
Revenue, 5.00%, 11/1/03 ........................... 670,000 687,025
------------
7,439,480
------------

HOUSING REVENUE (14.3%):
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(g) 1,302,116
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 8,000 8,173
State Housing and Finance Agency, 4.85%-5.05%,
7/1/02-7/1/04 ..................................... 1,440,000 1,486,332
State Housing and Finance Agency (Callable 1/1/03 at
102), AMT, 6.50%, 1/1/26 .......................... 370,000(g) 390,994
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,140,784
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(g) 1,560,192
------------
7,888,591
------------

IDR - MISCELLANEOUS PROJECTS (6.7%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 5/1/02 at 102), 6.80%, 5/1/12 ........... 2,090,000(e) 2,282,656
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ 1,300,000 1,404,039
------------
3,686,695
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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>
LEASING REVENUE (1.9%):
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... $ 1,000,000 $ 1,061,980
------------

OTHER REVENUE (0.2%):
Moorhead Gross Revenue, 5.00%, 12/1/02 .............. 125,000 126,903
------------

PARKING REVENUE (4.7%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00), 6.55%, 8/1/12 ......................... 2,415,000(d) 2,577,264
------------

WATER/POLLUTION CONTROL REVENUE (9.4%):
State Public Facilities Authority (Prerefunded to
3/1/02), 6.50%, 3/1/14 ............................ 4,695,000(d) 5,170,275
------------

Total Municipal Long-Term Securities
(cost: $51,160,834) ............................ 54,763,883
------------

SHORT-TERM SECURITIES (6.5%):
Bloomington Multifamily Revenue, 3.55%, 12/1/25 ..... 800,000(c) 800,000
Repurchase agreement with Goldman Sachs acquired on
12/31/98, interest of $1,487, 4.75%, 1/4/99 ....... 2,817,000(h) 2,817,000
------------

Total Short-Term Securities
(cost: $3,617,000) ............................. 3,617,000
------------

Total Investments in Securities
(cost: $54,777,834)(i) ......................... $ 58,380,883
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1998 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) 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, 1998. 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) 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, 1998, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $2,282,656 OR 4.1% OF TOTAL NET
ASSETS.
(f) ON DECEMBER 31, 1998, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $4,100,000.
(g) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1998, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$3,253,302, WHICH REPRESENTS 5.9.% OF NET ASSETS.
(h) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(i) ON DECEMBER 31, 1998, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $54,763,527. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 3,641,292
GROSS UNREALIZED DEPRECIATION ...... (23,936)
------------
NET UNREALIZED APPRECIATION ...... $ 3,617,356
------------
------------
</TABLE>

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

1998 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, 1998, 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, 1998 and the financial highlights for each of the years in the
five-year period ended December 31, 1998. 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, 1998, 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 12, 1999

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

1998 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, 99.36% AND 99.15%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ---------------------------------------- ----------- --------------
<S> <C> <C>
January 12, 1998 ....................... $0.0509 $0.0492
February 25, 1998 ...................... 0.0509 0.0492
March 25, 1998 ......................... 0.0509 0.0492
April 22, 1998 ......................... 0.0509 0.0492
May 27, 1998 ........................... 0.0509 0.0492
June 24, 1998 .......................... 0.0509 0.0492
July 29, 1998 .......................... 0.0509 0.0492
August 26, 1998 ........................ 0.0509 0.0492
September 23, 1998 ..................... 0.0509 0.0492
October 28, 1998 ....................... 0.0959 0.0513
November 24, 1998 ...................... 0.0509 0.0492
December 16, 1998 ...................... 0.0530 0.0499
----------- -------
Total .............................. $0.6579 $0.5932
----------- -------
----------- -------
</TABLE>

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

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

1998 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, 99.36% AND 99.15%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- --------------
<S> <C> <C>
Total .................................. $760.49 $758.44
----------- -------
----------- -------
</TABLE>

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

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

<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ---------------------------------------- ----------- --------------
<S> <C> <C>
October 28, 1998 ....................... $ 4.61 $ --
October 30, 1998 ....................... -- 25.42
December 2, 1998 ....................... 23.51 --
December 4, 1998 ....................... -- 26.49
December 9, 1998 ....................... 26.37 --
December 11, 1998 ...................... -- 26.37
December 16, 1998 ...................... 26.37 --
December 18, 1998 ...................... -- 29.51
December 23, 1998 ...................... 26.37 --
December 30, 1998 ...................... 29.97 --
----------- -------
Total .............................. $137.20 $107.79
----------- -------
----------- -------
</TABLE>

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

1998 Annual Report 29 Minnesota Municipal Term Trusts
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------

ANNUAL MEETING RESULTS
An annual meeting of the funds' shareholders was held on August
10, 1998. 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 ....................... 1,080 56
Leonard W. Kedrowski ................... 1,080 56

MINNESOTA MUNICIPAL TERM TRUST II
David T. Bennett ....................... 689 2
Leonard W. Kedrowski ................... 689 2
</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
Robert J. Dayton ....................... 5,414,598 151,887
Roger A. Gibson ........................ 5,418,973 147,512
Andrew M. Hunter III ................... 5,430,473 136,012
Robert L. Spies ........................ 5,427,849 138,636
Joseph D. Strauss ...................... 5,433,904 132,581
Virginia L. Stringer ................... 5,439,478 127,007

MINNESOTA MUNICIPAL TERM TRUST II
Robert J. Dayton ....................... 3,346,861 52,100
Roger A. Gibson ........................ 3,345,936 53,025
Andrew M. Hunter III ................... 3,346,232 52,729
Robert L. Spies ........................ 3,346,936 52,025
Joseph D. Strauss ...................... 3,346,936 52,025
Virginia L. Stringer ................... 3,346,936 52,025
</TABLE>

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

1998 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' Board of Directors of KPMG
Peat Marwick LLP as the independent public accountants for
the funds for the fiscal year ending December 31, 1998. 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 ......... 5,477,759 29,372 59,353 --
Minnesota Municipal Term Trust II ...... 3,342,151 19,106 37,703 --
</TABLE>

(4) The funds' preferred and common shareholders, voting as a
class, approved an interim advisory agreement between the
funds and Piper Capital Management Incorporated, and the
receipt of investment advisory fees by Piper Capital under
such agreement. 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 ......... 5,391,291 82,121 93,072 --
Minnesota Municipal Term Trust II ...... 3,310,567 42,985 45,408 --
</TABLE>

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

1998 Annual Report 31 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------

(5) The funds' preferred and common shareholders, voting as a
class, approved a new investment advisory agreement between
the funds and U.S. Bank. 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 ......... 5,368,504 98,499 99,481 --
Minnesota Municipal Term Trust II ...... 3,287,384 53,882 57,695 --
</TABLE>

CHANGE OF ACCOUNTANTS
On September 9, 1998, the funds' board of directors, upon the
recommendation of the audit committee, appointed Ernst & Young
LLP the independent accountants for the funds for the fiscal
year ending December 31, 1999, and dismissed KPMG Peat Marwick
LLP ("KPMG"). KPMG's reports on the funds' financial statements
for the past two years have not contained an adverse opinion or
a disclaimer of opinion, and have not been qualified as to
uncertainty, audit scope, or accounting principles. In addition,
there have not been any disagreements with KPMG during the
funds' two most recent fiscal years on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the
satisfaction of KPMG, would have caused it to make a reference
to the subject matter of the disagreement in connection with its
reports.

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.

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

1998 Annual Report 32 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------

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.

PLAN ADMINISTRATION
Beginning no more than five business days before the dividend
payment date, IFTC will buy shares of the funds primary 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

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

1998 Annual Report 33 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
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, to the same extent if received as 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 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.

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

1998 Annual Report 34 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------

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 questions about the plan should be directed to your
investment professional or to Investors Fiduciary Trust Company,
P.O. Box 419432, Kansas City, Missouri 64141,
1-800-543-1627.

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

1998 Annual Report 35 Minnesota Municipal Term Trusts
<PAGE>

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MINNESOTA MUNICIPAL TERM TRUSTS
1998 ANNUAL REPORT

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