<PAGE>
[GRAPHIC]
MINNESOTA MUNICIPAL
TERM TRUSTS
MNA
MNB
SEMIANNUAL REPORT
2000
[LOGO]FIRST AMERICAN-Registered Trademark-
Asset Management
<PAGE>
[LOGO]FIRST AMERICAN-Registered Trademark-
Asset Management
MINNESOTA MUNICIPAL
TERM TRUSTS
TABLE OF CONTENTS PRIMARY INVESTMENTS
2 Fund Overview Investment-grade, tax-exempt Minnesota municipal
obligations including municipal zero-coupon
7 Financial Statements securities.
and Notes
FUND OBJECTIVE
19 Investments in
Securities 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 June 30, 2000
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL MINNESOTA MUNICIPAL
TERM TRUST TERM TRUST II
(MNA, Inception 9/26/1991) (MNB, Inception 4/24/1992)
<S> <C>
One Year 2.49% 2.99%
Five Year 5.19% 5.57%
Since Inception 7.13% 6.85%
</TABLE>
All total returns are through June 30, 2000, 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 June 30, 2000, were
0.47%, 6.09%, and 6.07% for MNA and 2.54%, 6.70%, and 5.92% 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.
MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000 1)
<PAGE>
FUND OVERVIEW
AUGUST 15, 2000
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. Short-term interest rates rose during the period, and in some months, the
funds slightly underearned dividends and had to draw on dividend reserves. Since
their inceptions, MNA and MNB have maintained monthly common stock distributions
of 5.09 and 4.92 cents per share, respectively. In addition, the funds' net
asset values remain above the $10 per share objective. The net asset values for
MNA and MNB as of June 30, 2000, were $10.34 and $10.20, respectively.
MNA'S DIVIDEND RESERVES REACHED A LEVEL WHERE THE FUND COULD NOT CONTINUE TO
ACCUMULATE ADDITIONAL AMOUNTS. As a result, MNA paid out special dividends in
1999, and may again in 2000.
COMPARED WITH 1999, THE BOND MARKET HAS BEEN RELATIVELY BENIGN DURING THE FIRST
SIX MONTHS OF 2000. It appears that the Federal Reserve's raising of short-term
interest rates over the past 12 months is having some slowing effect on the
economy. Inflation fears have subsided, at least for the time being. As such,
interest rates on municipal bonds--as represented by the Bond Buyers 20
Index--have fluctuated in a relatively narrow band, ending the period about
0.25% below the beginning of the year.
--------------------------------------------------------------------------------
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 June 30, 2000 60% 48%
------------------------------------------------------------
</TABLE>
[sidebar]
FUND MANAGEMENT
DOUG WHITE, CFA, is primarily responsible for the management of the Minnesota
Municipal Term Trusts. He has 17 years of financial experience.
CATHERINE STIENSTRA assists with the management of the Minnesota Municipal Term
Trusts. She has 12 years of financial experience.
(2 MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000
<PAGE>
OVERALL, MUNICIPAL BOND ISSUANCE IN MINNESOTA WAS UP ABOUT 22% COMPARED TO THE
SAME PERIOD LAST YEAR, WHILE MUNICIPAL BOND ISSUANCE NATIONALLY WAS DOWN ABOUT
22%. Refunding issues nationally, however, were down almost 70%, as interest
rates have not fallen substantially below the highs of 1999.
OUR STRATEGY OF SELLING LONGER-MATURITY BONDS IN FAVOR OF BONDS CLOSER TO THE
FUNDS' TERMINATION DATES, WHEN APPROPRIATE, REMAINS IN PLACE. Occasionally,
income considerations will prompt us to reinvest cash from maturing issues into
intermediate maturities, which pay higher income. As shown in the table on the
previous page, the percentage of bonds with maturity or refund dates less than a
year beyond the funds' termination dates is substantial when compared to their
inception dates.
WE EXPECT THAT THE FUNDS' NET ASSET VALUES WILL CONTINUE TO DECLINE AS THE FUNDS
NEAR THEIR TERMINATION DATES. Several factors contribute to this decline. A
number of bonds currently have market values in excess of their maturity or
redemption values. 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 SHORTER AND
INTERMEDIATE 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
--------------------------------------------------------------------------------
DISTRIBUTION HISTORY SINCE INCEPTION
<TABLE>
<CAPTION>
MNA MNB
Inception Inception
9/26/1991 4/24/1992
<S> <C> <C>
Total Monthly Income Distributions Through 6/30/2000
--------------------------------------------------------------------------------
Common Shareholders $5.38 $4.73
--------------------------------------------------------------------------------
Preferred Shareholders (On a Common Share Basis) $1.36 $1.23
--------------------------------------------------------------------------------
Total Capital Gains Distributions to Common
Shareholders Through 6/30/2000 $0.16 $0.18
--------------------------------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000 3)
<PAGE>
FUND OVERVIEW CONTINUED
shareholders, reducing net asset value. If the shorter-maturity bonds pay
insufficient income to maintain the funds' 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 SHOULD ALSO REMEMBER THAT THE FUNDS ARE SUBJECT TO INTEREST RATE
RISK AND CREDIT RISK, WHICH CAN IMPACT 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 strategies 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 on 6/30/2000 -$0.06 -$0.05
--------------------------------------------------------------------------------
SUBTOTAL $9.28 $9.28
--------------------------------------------------------------------------------
Dividend Reserve
(Undistributed Net Investment Income) on 6/30/2000 +$0.72 +$0.57
--------------------------------------------------------------------------------
Unrealized Appreciation on Investments on 6/30/2000 +$0.34 +$0.35
--------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ON 6/30/2000 $10.34 $10.20
--------------------------------------------------------------------------------
</TABLE>
(4 MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000
<PAGE>
PORTFOLIO COMPOSITION
As a percentage of total assets on June 30, 2000
[CHART]
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST
<S> <C>
General Obligations 21%
Health Care Revenue 21%
Housing Revenue 21%
Utility Revenue 21%
Certificates of Participation 5%
Tax Revenue 5%
IDR Pollution Control Revenue 3%
Building Revenue 1%
Education Revenue 1%
Other Assets 1%
[CHART]
<CAPTION>
MINNESOTA MUNICIPAL TERM TRUST II
<S> <C>
General Obligations 26%
Utility Revenue 15%
Pollution Control Revenue 12%
Housing Revenue 11%
Education Revenue 10%
Health Care Revenue 9%
Building Revenue 7%
Economic Development Revenue 4%
Industrial Development Revenue 4%
Other Assets 1%
Short-Term 1%
</TABLE>
MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000 5)
<PAGE>
FUND OVERVIEW CONTINUED
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 MINNESOTA MUNICIPAL TERM TRUSTS SEMIANNUAL REPORT 2000
<PAGE>
FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES June 30, 2000
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
------------ -------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $87,586,637 $ 51,756,248
Accrued interest receivable ............................... 1,587,848 936,489
------------ -------------
Total assets ............................................ 89,174,485 52,692,737
------------ -------------
LIABILITIES:
Preferred stock dividends payable (note 3) ................ 11,362 1,901
Payable for investment securities purchased on a when-issued
basis (note 2) .......................................... 1,016,845 --
Accrued investment management fee ......................... 18,008 10,746
Bank overdraft ............................................ 1,999 --
Accrued administrative fee ................................ 21,215 13,381
Other accrued expenses .................................... 4,113 24,278
------------ -------------
Total liabilities ....................................... 1,073,542 50,306
------------ -------------
Net assets applicable to outstanding capital stock ...... $88,100,943 $ 52,642,431
============ =============
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ........................................ $82,328,906 $ 49,635,603
Undistributed net investment income ....................... 4,121,158 1,965,312
Accumulated net realized loss on investments .............. (280,647) (160,039)
Net unrealized appreciation of investments ................ 1,931,526 1,201,555
------------ -------------
Total - representing net assets applicable to outstanding
capital stock ......................................... $88,100,943 $ 52,642,431
------------ -------------
* Investments in securities at identified cost .......... $85,655,111 $ 50,554,693
============ =============
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ..................... $59,300,943 $ 35,292,431
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 ........................................... $ 10.34 $ 10.20
Market price .............................................. $ 9.94 $ 10.00
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.
--------------------------------------------------------------------------------
2000 Semiannual Report 7 Minnesota Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2000
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- -------------
<S> <C> <C>
INCOME:
Interest .................................................. $2,640,343 $ 1,556,900
----------- ------------
EXPENSES (NOTE 5):
Investment management fee ............................... 109,437 65,158
Administrative fee ...................................... 87,550 52,126
Remarketing agent fee ................................... 35,901 21,629
Custodian fees .......................................... 6,991 4,347
Transfer agent fees ..................................... 5,047 4,701
Reports to shareholders ................................. 11,567 11,567
Directors' fees ......................................... 1,496 1,496
Audit and legal fees .................................... 18,298 18,306
Other expenses .......................................... 23,365 14,169
----------- ------------
Total expenses .......................................... 299,652 193,499
----------- ------------
Net investment income ................................... 2,340,691 1,363,401
----------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain (loss) on investments (note 4) ........ 3,916 (160,031)
Net change in unrealized appreciation or depreciation of
investments ........................................... (495,689) 85,106
----------- ------------
Net loss on investments ................................. (491,773) (74,925)
----------- ------------
Net increase in net assets resulting from operations .... $1,848,918 $ 1,288,476
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
2000 Semiannual Report 8 Minnesota Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST
--------------------------
Six Months
Ended
6/30/00 Year Ended
(Unaudited) 12/31/99
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 2,340,691 $ 4,481,626
Net realized gain (loss) on investments ................... 3,916 (285,891)
Net change in unrealized appreciation or depreciation of
investments ............................................. (495,689) (3,382,569)
----------- ------------
Net increase in net assets resulting from operations .... 1,848,918 813,166
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends .................................. (1,458,975) (4,129,844)
Preferred stock dividends ............................... (602,301) (904,293)
From net realized gains:
Common stock dividends .................................. -- (20,064)
Preferred stock dividends ............................... -- (4,966)
----------- ------------
Total distributions ..................................... (2,061,276) (5,059,167)
----------- ------------
Total decrease in net assets .......................... (212,358) (4,246,001)
Net assets at beginning of period ......................... 88,313,301 92,559,302
----------- ------------
Net assets at end of period ............................... $88,100,943 $ 88,313,301
=========== ============
Undistributed net investment income ....................... $ 4,121,158 $ 3,841,743
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
2000 Semiannual Report 9 Minnesota Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL
TERM TRUST II
--------------------------
Six Months
Ended
6/30/00 Year Ended
(Unaudited) 12/31/99
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 1,363,401 $ 2,527,237
Net realized gain (loss) on investments ................... (160,031) 106,948
Net change in unrealized appreciation or depreciation of
investments ............................................. 85,106 (2,486,600)
----------- ------------
Net increase in net assets resulting from operations .... 1,288,476 147,585
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends .................................. (851,160) (2,060,776)
Preferred stock dividends ............................... (331,036) (501,518)
From net realized gains:
Common stock dividends .................................. -- (87,884)
Preferred stock dividends ............................... -- (23,417)
----------- ------------
Total distributions ..................................... (1,182,196) (2,673,595)
----------- ------------
Total increase (decrease) in net assets ............... 106,280 (2,526,010)
Net assets at beginning of period ......................... 52,536,151 55,062,161
----------- ------------
Net assets at end of period ............................... $52,642,431 $ 52,536,151
=========== ============
Undistributed net investment income ....................... $ 1,965,312 $ 1,784,107
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
2000 Semiannual Report 10 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
(1) ORGANIZATION
............................
Minnesota Municipal Term Trust Inc. (MNA) and Minnesota
Municipal Term Trust Inc. II (MNB) (the funds) are registered
under the Investment Company Act of 1940 (as amended) as
non-diversified, closed-end management investment companies. MNA
and MNB expect to terminate operations and distribute all of
their net assets to shareholders on or shortly before April 15,
2002, and April 15, 2003, respectively, although termination may
be extended to a date no later than April 15, 2007, and April
15, 2008, respectively. The funds invest primarily in 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.
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.
(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
--------------------------------------------------------------------------------
2000 Semiannual Report 11 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
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.
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.
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 June 30, 2000,
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II had entered into outstanding when-issued or
forward commitments of $1,016,845 and $0, respectively.
FEDERAL TAXES
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.
--------------------------------------------------------------------------------
2000 Semiannual Report 12 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
Net investment income and net realized gains and losses may
differ for financial statement and tax purposes primarily
because of market discount amortization. The character of
distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization
for federal income tax purposes. In addition, due to the timing
of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized
gains or losses were recorded by the funds.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders.
Common stock distributions are recorded as of the close of
business on the ex-dividend date and preferred stock dividends
are accrued daily. Net realized gains distributions, if any,
will be made at least annually. Distributions are payable in
cash or, for common shareholders pursuant to the funds' dividend
reinvestment plans, reinvested in additional shares of the
funds' common stock. Under the plans, common shares will be
purchased in the open market.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM SECURITIES
For repurchase agreements entered into with certain broker-
dealers, the funds, along with other affiliated registered
investment companies, may transfer uninvested cash balances into
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. In addition to repurchase agreements, the
funds may invest in money market funds advised by the funds'
advisor.
--------------------------------------------------------------------------------
2000 Semiannual Report 13 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) REMARKETED
PREFERRED
STOCK
............................
Minnesota Municipal Term Trust Inc. and Minnesota Municipal Term
Trust Inc. II have issued and, as of June 30, 2000, have
outstanding 1,152 shares and 694 shares, respectively, of
remarketed preferred stock (RP) with a liquidation preference of
$25,000 per share for each fund. The dividend rate on the RP is
adjusted every seven days as determined by the remarketing
agent. On June 30, 2000, Minnesota Municipal Term Trust Inc. and
Minnesota Term Trust Inc. II have dividend rates of 4.80% and
4.00%, respectively.
RP is a registered trademark of Merrill Lynch & Company (Merrill
Lynch).
(4) INVESTMENT
SECURITY
TRANSACTIONS
............................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the six
months ended June 30, 2000, were as follows:
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
---------- -------------
<S> <C> <C>
Purchases .............................. $2,686,159 $7,535,683
Proceeds from sales .................... $1,527,359 $7,562,173
</TABLE>
(5) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The funds have entered into the following agreements with U.S.
Bank National Association (U.S. Bank) acting through its
division, First American Asset Management (the advisor and
administrator):
The investment advisory agreement provides the advisor with a
monthly investment management fee in an amount equal to an
--------------------------------------------------------------------------------
2000 Semiannual Report 14 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
annualized percentage 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 percentage of
0.20% 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 provides regulatory reporting and record-keeping
services for the funds.
REMARKETING AGENT FEE
The funds have entered into a remarketing agreement with Merrill
Lynch (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 services; insurance; interest; taxes and other
miscellaneous expenses. During the six months ended June 30,
2000, Minnesota Municipal Term Trust Inc. and Minnesota
Municipal Term Trust Inc. II paid $6,615 and $3,937,
respectively, to U.S. Bank for custody services.
--------------------------------------------------------------------------------
2000 Semiannual Report 15 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
(6) CAPITAL LOSS
CARRYOVER
............................
For federal income tax purposes, Minnesota Municipal Term Trust
Inc. and Minnesota Municipal Term Trust Inc. II had capital loss
carryovers at December 31, 1999, of $284,563 and $0,
respectively, which, if not offset by subsequent capital gains,
will expire on December 31, 2007. It is unlikely the board of
directors will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have
been offset or expire.
--------------------------------------------------------------------------------
2000 Semiannual 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>
Six Months
Ended Year Ended December 31,
6/30/00 -----------------------------------------------
(Unaudited) 1999 1998(g) 1997 1996 1995
----------- -------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $10.38 $11.12 $11.28 $11.15 $11.31 $10.06
------ ------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.41 0.78 0.86 0.88 0.87 0.88
Net realized and unrealized gains
(losses) on investments (0.09) (0.64) (0.08) 0.07 (0.25) 1.17
------ ------ ------ ------ ------ ------
Total from operations .............. 0.32 0.14 0.78 0.95 0.62 2.05
------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.25) (0.72) (0.66) (0.61) (0.61) (0.61)
Paid to preferred shareholders ..... (0.11) (0.16) (0.15) (0.16) (0.16) (0.19)
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 .................. (0.36) (0.88) (0.94) (0.82) (0.78) (0.80)
------ ------ ------ ------ ------ ------
Net asset value, common stock, end
of period ........................ $10.34 $10.38 $11.12 $11.28 $11.15 $11.31
====== ====== ====== ====== ====== ======
Per-share market value, common
stock, end of period . $ 9.94 $ 9.81 $11.44 $11.13 $10.50 $10.63
====== ====== ====== ====== ====== ======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) .......................... 2.13% (0.16)% 5.47% 7.15% 4.23% 18.86%
Total return, common stock, market
value (b) .......................... 4.39% (8.15)% 10.04% 12.48% 4.86% 21.91%
Net assets at end of period
(in millions) ...................... $ 88 $ 88 $ 93 $ 93 $ 93 $ 94
Ratio of expenses to average weekly
net assets applicable to common
stock (e) .......................... 1.01%(h) 1.03% 0.96% 0.97% 0.99% 0.95%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............. 5.89%(h) 5.79% 6.25% 6.37% 6.40% 6.38%
Portfolio turnover rate (excluding
short-term securities) ............. 2% 19% 11% 8% 2% 9%
Remarketed preferred stock outstanding
end of period (in millions) ........ $ 29 $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage per share (in
thousands) (d) ..................... $ 76 $ 77 $ 80 $ 81 $ 80 $ 81
Liquidation preference and market
value per share (in thousands) ..... $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
</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 PREFERRED SHARES OUTSTANDING.
(e) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.68%, 0.70%,
0.66%, 0.67%, 0.68% AND 0.65% FOR THE SIX MONTHS ENDED JUNE 30, 2000, AND
FISCAL YEARS 1999, 1998, 1997, 1996, AND 1995, RESPECTIVELY. DIVIDENDS PAID
TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.33%,
4.94%, 5.26%, 5.41%, 5.42% AND 5.57% FOR THE SIX MONTHS ENDED JUNE 30,
2000, AND FISCAL YEARS 1999, 1998, 1997, 1996, AND 1995, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL TO U.S.
BANK.
(h) ANNUALIZED.
--------------------------------------------------------------------------------
2000 Semiannual 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>
Six Months
Ended Year Ended December 31,
6/30/00 ---------------------------------------------------
(Unaudited) 1999 1998(g) 1997 1996 1995
----------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $ 10.17 $ 10.90 $ 10.94 $ 10.71 $ 10.89 $ 9.48
--------- ------- --------- ------- ------- -------
Operations:
Net investment income ................ 0.39 0.73 0.80 0.81 0.82 0.83
Net realized and unrealized gains
(losses) on investments ............ (0.01) (0.68) -- 0.23 (0.24) 1.37
--------- ------- --------- ------- ------- -------
Total from operations .............. 0.38 0.05 0.80 1.04 0.58 2.20
--------- ------- --------- ------- ------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.25) (0.60) (0.59) (0.59) (0.59) (0.59)
Paid to preferred shareholders ..... (0.10) (0.14) (0.15) (0.16) (0.16) (0.19)
From net realized gains
Paid to common shareholders ........ -- (0.03) (0.08) (0.05) (0.01) (0.01)
Paid to preferred shareholders ..... -- (0.01) (0.02) (0.01) -- --
--------- ------- --------- ------- ------- -------
Total distributions to
shareholders ..................... (0.35) (0.78) (0.84) (0.81) (0.76) (0.79)
--------- ------- --------- ------- ------- -------
Net asset value, common stock, end
of period ........................ $ 10.20 $ 10.17 $ 10.90 $ 10.94 $ 10.71 $ 10.89
========= ======= ========= ======= ======= =======
Per-share market value, common
stock, end of period ............. $ 10.00 $ 9.56 $ 11.31 $ 10.69 $ 10.25 $ 10.38
========= ======= ========= ======= ======= =======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) .......................... 2.75% (1.03)% 5.95% 8.34% 4.04% 21.57%
Total return, common stock, market
value (b) .......................... 7.73% (10.33)% 12.56% 10.78% 4.88% 27.63%
Net assets at end of period
(in millions) ...................... $ 53 $ 53 $ 55 $ 55 $ 54 $ 55
Ratio of expenses to average weekly
net assets applicable to common
stock (e) .......................... 1.11%(h) 1.17% 1.06% 1.09% 1.07% 1.06%
Ratio of net investment income to
average weekly net assets applicable
to common stock (c)(f) ............. 5.90%(h) 5.53% 5.87% 6.06% 6.20% 6.10%
Portfolio turnover rate (excluding
short-term securities) ............. 15% 18% 9% 10% 4% 9%
Remarketed preferred stock outstanding
end of period (in millions) ........ $ 17 $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage per share (in
thousands) (d) ..................... $ 76 $ 76 $ 79 $ 80 $ 78 $ 79
Liquidation preference and market
value per share (in thousands) ..... $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
</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 PREFERRED SHARES OUTSTANDING.
(e) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.74%, 0.79%,
0.73%, 0.74%, 0.73% AND 0.72% FOR THE SIX MONTHS ENDED JUNE 30, 2000, AND
FISCAL YEARS 1999, 1998, 1997, 1996 AND 1995, RESPECTIVELY. DIVIDENDS PAID
TO PREFERRED SHAREHOLDERS ARE NOT CONSIDERED AN EXPENSE.
(f) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.22%,
4.68%, 4.98%, 5.13%, 5.25% AND 5.36% FOR THE SIX MONTHS ENDED JUNE 30,
2000, AND FISCAL YEARS 1999, 1998, 1997, 1996 AND 1995, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL TO U.S.
BANK.
(h) ANNUALIZED.
--------------------------------------------------------------------------------
2000 Semiannual Report 18 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
MINNESOTA MUNICIPAL TERM TRUST June 30, 2000
....................................................................................
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 (98.7%):
BUILDING REVENUE (1.2%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00 at 102), 6.55%, 8/1/12 ................ $1,000,000(d) $ 1,021,720
-----------
CERTIFICATES OF PARTICIPATION (4.8%):
Hennepin County Certificates of Participation
(Prerefunded to 11/15/01 at 101),
6.70%-6.75%, 11/15/09-11/15/11 .................. 4,085,000(d) 4,204,018
-----------
EDUCATION REVENUE (0.6%):
Higher Education Facility - College of St.
Benedict, 4.50%, 3/1/01-3/1/02 .................. 550,000 545,231
-----------
GENERAL OBLIGATIONS (20.9%):
Dakota County General Obligation,
4.50%, 2/1/02-2/1/03 ............................ 2,300,000 2,290,695
Delano Independent School District (AMBAC)
(Crossover refunded to 2/1/01 at 100),
7.25%, 2/1/11 ................................... 300,000(d) 304,983
Mankato School District (FSA) (Crossover refunded
to 2/1/02), 6.35%, 2/1/13 ....................... 1,000,000(d) 1,025,190
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00 at 100),
6.75%, 9/1/08 ................................... 2,990,000(d) 3,001,751
State General Obligation,
4.75%-5.00%, 11/1/01-11/1/08 .................... 2,780,000 2,793,632
State General Obligation (Prerefunded to 8/1/01 at
100), 6.70%, 8/1/10 ............................. 5,000,000(d) 5,121,100
State General Obligation, Zero-Coupon,
6.01%, 8/1/01 ................................... 3,000,000(b) 2,850,690
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02 at 100), 7.00%, 2/1/12 ................ 1,000,000(d) 1,035,480
-----------
18,423,521
-----------
HEALTH CARE REVENUE (20.8%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA),
4.90%-5.00%, 11/15/01-11/15/02 .................. 1,635,000 1,644,852
Apple Valley Nursing Home (GNMA) (Callable 8/31/00
at 101), 4.60%, 12/1/00 ......................... 185,000 184,765
Bemidji Hospital Facilities (Prerefunded to 9/1/01
at 102), 7.00%, 9/1/21 .......................... 3,200,000(d) 3,354,016
Buffalo Covenant Retirement Communities,
4.30%-4.55%, 12/1/02-12/1/05 .................... 1,350,000 1,278,617
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 19 Minnesota Municipal Term Trusts
<PAGE>
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
--------------------------------------------------------- ---------- -----------
<S> <C> <C>
Burnsville Hospital System, Zero-Coupon (Escrowed
to maturity to 5/1/12), 6.75%, 5/1/12 ........... 1,000,000(b) 473,600
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00 at 102),
8.00%, 8/15/14 .................................. $2,000,000(d) $ 2,048,560
Minneapolis Hospital Facilities - Children's
Medical Center (Prerefunded to 6/1/01 at 102),
7.00%, 12/1/20 .................................. 2,000,000(d) 2,085,240
Monticello - Big Lake Community Hospital District
(MBIA), 4.20%-4.60%, 12/1/00-12/1/02 ............ 375,000 370,060
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00 at 102), 7.25%, 7/1/15 ....... 1,300,000(d) 1,326,091
St. Louis Park Hospital Facility (AMBAC)
(Prerefunded to 7/1/00 at 102),
7.25%, 7/1/15 ................................... 5,500,000(d) 5,610,385
-----------
18,376,186
-----------
HOUSING REVENUE (20.7%):
Burnsville Oak Leaf Apartments (GNMA) (Callable
7/1/01 at 103), 7.05%-7.15%, 1/1/12-1/1/25 ...... 3,655,000 3,773,439
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
AMT, 6.75%, 8/1/23 .............................. 1,980,000(e) 2,021,402
Minneapolis Community Development Authority
(Callable 12/1/01 at 102),
7.15%-7.35%, 12/1/03-12/1/09 .................... 835,000 866,143
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................. 3,645,000 3,780,995
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102),
6.90%, 12/1/11-12/1/21 .......................... 280,000 285,808
State Housing and Finance Agency,
4.95%, 7/1/03 ................................... 400,000 399,624
State Housing and Finance Agency (Callable 2/1/01
at 102), 6.95%, 2/1/14 .......................... 3,400,000 3,500,674
State Housing and Finance Agency (Callable 2/1/02
at 102), 6.90%, 8/1/12 .......................... 495,000 512,300
State Housing and Finance Agency, AMT,
4.00%-4.40%, 7/1/02-7/1/05 ...................... 3,180,000(e) 3,074,686
-----------
18,215,071
-----------
TAX REVENUE (5.2%):
Minneapolis Community Development Authority,
Zero-Coupon (MBIA),
6.70%-7.01%, 3/1/07-3/1/09 ...................... 6,685,000(b) 4,584,652
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 20 Minnesota Municipal Term Trusts
<PAGE>
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
Shares/
Principal Market
Description of Security Amount Value (a)
--------------------------------------------------------- ---------- -----------
<S> <C> <C>
UTILITY REVENUE (21.6%):
Anoka County Resource Recovery,
3.95%-4.05%, 12/1/00-12/1/01 . $3,525,000 $ 3,498,936
Northern Municipal Power (FSA), 4.70%, 1/1/02 ..... 1,605,000 1,606,974
Northern Municipal Power, Zero-Coupon (AMBAC),
6.38%-6.50%, 1/1/06-1/1/10 ...................... 3,340,000(b) 2,090,635
State Public Facilities Authority (Prerefunded to
3/1/01 at 102), 6.65%-6.70%, 3/1/08-3/1/13 ...... 10,000,000(d) 10,350,710
Western Minnesota Municipal Power Agency (AMBAC)
(Callable 1/1/06 at 102), 5.40%, 1/1/09 ......... 1,000,000 1,022,890
Western Municipal Power Agency (AMBAC),
4.80%, 1/1/02 ................................... 465,000 466,270
-----------
19,036,415
-----------
WATER/POLLUTION CONTROL REVENUE (2.9%):
Anoka County Solid Waste Disposal Revenue (CFC)
(Callable 12/1/00 at 102), AMT,
6.95%, 12/1/08 .................................. 2,100,000(e) 2,159,850
State Public Facilities Authority,
4.30%, 3/1/08 ................................... 445,000 417,650
-----------
2,577,500
-----------
Total Municipal Long-Term Securities
(cost: $85,052,788) .......................... 86,984,314
-----------
MUNICIPAL SHORT-TERM SECURITIES (0.6%):
Hennepin County General Obligation,
4.60%, 12/1/10 .................................. 100,000(c) 100,000
Maple Grove Multifamily, 4.70%, 11/1/31 ........... 435,000(c) 435,000
-----------
Total Municipal Short-Term Securities
(cost: $535,000) ............................. 535,000
-----------
RELATED PARTY MONEY MARKET FUND (0.1%):
First American Tax Free Obligations Fund
(cost: $67,323) ................................. 67,323(f) 67,323
-----------
Total Investments in Securities
(cost: $85,655,111) (g) ...................... $87,586,637
===========
</TABLE>
--------------------------------------------------------------------------------
2000 Semiannual Report 21 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN
THE NOTES TO FINANCIAL STATEMENTS.
(b) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(c) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON JUNE
30, 2000. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH ALLOWS THE
RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT EXCEEDING
ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN REPRESENTS FINAL
MATURITY.
(d) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. CROSSOVER
REFUNDED ISSUES ARE BACKED BY THE CREDIT OF THE REFUNDING ISSUER. IN BOTH
CASES THE BONDS ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(e) AMT - ALTERNATIVE MINIMUM TAX. AS OF JUNE 30, 2000, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $7,255,938,
WHICH REPRESENTS 8.2% OF NET ASSETS.
(f) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANK WHICH ALSO SERVES AS ADVISOR
FOR THE FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(g) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $2,310,952
GROSS UNREALIZED DEPRECIATION ...... (379,426)
----------
NET UNREALIZED APPRECIATION ...... $1,931,526
==========
</TABLE>
--------------------------------------------------------------------------------
2000 Semiannual Report 22 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
MINNESOTA MUNICIPAL TERM TRUST II June 30, 2000
.....................................................................................
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%):
BUILDING REVENUE (6.6%):
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... $1,000,000 $ 1,018,740
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00 at 102), 6.55%, 8/1/12 .................. 2,415,000(d) 2,467,454
------------
3,486,194
------------
EDUCATION REVENUE (8.8%):
Higher Education Facility - College of Art and
Design, 5.25%-5.75%, 5/1/02-5/1/08 ................ 845,000 844,411
Higher Education Facility - Macalester College
(Prerefunded to 3/1/02 at 100), 6.30%, 3/1/14 ..... 1,125,000(d) 1,154,036
Higher Education Facility-Augsburg College,
4.30%-4.40%, 10/1/03-10/1/05 ...................... 1,150,000 1,096,815
Maplewood-Mounds Park Academy Project (Callable
9/1/03 at 102), 7.00%, 9/1/23 ..................... 1,500,000 1,532,295
------------
4,627,557
------------
GENERAL OBLIGATIONS (25.9%):
Anoka Independent School District, 5.38%, 2/1/13 .... 1,000,000 1,005,530
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01 at 100), 6.25%, 2/1/14 ......... 350,000(d) 353,811
Dakota County General Obligation, 4.50%, 2/1/04 ..... 1,350,000 1,335,879
Mankato School District (FSA) (Crossover refunded to
2/1/02 at 100), 6.35%, 2/1/13 ..................... 2,300,000(d) 2,357,937
Metropolitan Council (Crossover refunded to 9/1/00 at
100), 6.75%, 9/1/10-9/1/11 ........................ 2,500,000(d) 2,509,825
St. Paul Independent School District (Prerefunded to
2/1/01 at 100), 6.45%-6.50%, 2/1/09-2/1/10 ........ 875,000(d) 885,824
State General Obligation, 5.00%, 8/1/03-6/1/08 ...... 4,170,000 4,199,017
Waconia Housing Redevelopment Authority-Public
Project (Callable 1/1/03 at 100),
5.70%, 1/1/12 ..................................... 500,000 493,370
Willmar Independent School District (AMBAC)
(Crossover refunded to 2/1/02 at 100),
6.25%, 2/1/15 ..................................... 500,000(d) 511,840
------------
13,653,033
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 23 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
--------------------------------------------------------- ---------- ------------
<S> <C> <C>
HEALTH CARE REVENUE (13.3%):
Agricultural and Economic Development Board Health
Care System, 5.88%, 11/15/11 ...................... $2,135,000 $ 2,117,386
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA),
5.00%, 11/15/03 ................................... 695,000 699,677
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10 ........... 300,000 312,627
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Prerefunded to 8/15/00 at 100),
6.75%, 8/15/14 .................................... 2,500,000(d) 2,561,275
Red Wing Elderly Housing-River Region (Prerefunded to
9/1/05), 6.40%, 9/1/12 ............................ 1,000,000(d) 1,063,930
Red Wing Health Care Facility (Prerefunded to
9/1/03), 6.40%, 9/1/12 ............................ 220,000(d) 233,268
------------
6,988,163
------------
HOUSING REVENUE (11.4%):
Minneapolis Community Development (Callable 12/1/01
at 102), 7.10%, 12/1/02 ........................... 175,000 178,791
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 5,000 5,036
State Housing and Finance Agency,
4.85%-5.05%, 7/1/02-7/1/04 ........................ 1,040,000 1,037,896
State Housing and Finance Agency (Callable 1/1/03 at
102), AMT, 6.50%, 1/1/26 .......................... 355,000(f) 356,644
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,030,523
------------
6,031,152
------------
INDUSTRIAL DEVELOPMENT REVENUE (4.1%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 5/1/02 at 102), 6.80%, 5/1/12 ........... 2,090,000(e) 2,179,327
------------
SCHOOL DISTRICT REVENUE (0.8%):
Hopkins Blake School Project (Prerefunded to 9/1/04
at 100), 6.45%, 9/1/13-9/1/14 ..................... 385,000(d) 408,119
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 24 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
Shares/
Principal Market
Description of Security Amount Value (a)
--------------------------------------------------------- ---------- ------------
<S> <C> <C>
UTILITY REVENUE (14.9%):
Northern Municipal Power (FSA), 4.75%, 1/1/03 ....... $2,000,000 $ 2,000,940
Northern Municipal Power, Zero-Coupon (AMBAC),
6.49%-6.50%, 1/1/09-1/1/10 ........................ 9,690,000(b) 5,821,818
------------
7,822,758
------------
WATER/POLLUTION CONTROL REVENUE (11.9%):
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ 1,300,000 1,344,876
State Public Facilities Authority (Prerefunded to
3/1/02 at 102), 6.50%, 3/1/14 ..................... 4,695,000(d) 4,920,313
------------
6,265,189
------------
Total Municipal Long-Term Securities
(cost: $50,259,937) ............................ 51,461,492
------------
MUNICIPAL SHORT-TERM SECURITIES (0.4%):
Minneapolis General Revenue, 4.60%, 12/1/16
(cost: $200,000) .................................. 200,000(c) 200,000
------------
RELATED PARTY MONEY MARKET FUND (0.2%):
First American Tax Free Obligations Fund ............ 94,756(g) 94,756
------------
(cost: $94,756)
------------
Total Investments in Securities
(cost: $50,554,693) (h) ........................ $ 51,756,248
============
</TABLE>
--------------------------------------------------------------------------------
2000 Semiannual Report 25 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN
THE NOTES TO FINANCIAL STATEMENTS.
(b) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(c) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON JUNE
30, 2000. 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 JUNE 30, 2000, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $2,179,327 OR 4.1% OF TOTAL NET
ASSETS.
(f) AMT - ALTERNATIVE MINIMUM TAX. AS OF JUNE 30, 2000, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $1,778,906,
WHICH REPRESENTS 3.4% OF NET ASSETS.
(g) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANK WHICH ALSO SERVES AS ADVISOR
FOR THE FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(h) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 1,429,755
GROSS UNREALIZED DEPRECIATION ...... (228,200)
-----------
NET UNREALIZED APPRECIATION ...... $ 1,201,555
===========
</TABLE>
--------------------------------------------------------------------------------
2000 Semiannual Report 26 Minnesota Municipal Term Trusts
<PAGE>
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