<PAGE>
1999
ANNUAL REPORT
MINNESOTA MUNICIPAL
TERM TRUSTS
MNA
MNB
[LOGO] FIRST AMERICAN-Registered Trademark-
Asset Management
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
Asset Management
[Sidenote]
Contents
2 Fund Overview
7 Financial Statements and Notes
Investments in Securities
19 MNA
22 MNB
25 Independent Auditors' Report
26 Federal Income
Tax Information
28 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, 1999
<TABLE>
<CAPTION>
One Year Five Year Since Inception
<S> <C> <C> <C>
MINNESOTA MUNICIPAL TERM TRUST
(MNA, inception 9/26/1991) -0.16% 6.92% 7.30%
MINNESOTA MUNICIPAL TERM TRUST II
(MNB, inception 4/24/1992) -1.03% 7.51% 6.93%
</TABLE>
All total returns are through December 31,1999, 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, 1999, were
- -8.15%, 7.76%, and 5.90% for MNA and -10.33%, 8.39%, and 5.29% 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 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW
FEBRUARY 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. For the year ended December 31, 1999, the funds generally earned more
than their monthly common and preferred stock dividends and added 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, 1999, were
$10.38 and $10.17, respectively.
MNA'S DIVIDEND RESERVE REACHED A LEVEL WHERE THE FUND COULD NOT CONTINUE TO
ACCUMULATE ADDITIONAL AMOUNTS. As a result, MNA paid out special dividends in
1999.
1999 WAS ONE OF THE WORST YEARS ON RECORD FOR THE FIXED-INCOME MARKETS. Interest
rates rose sharply throughout the year, producing negative total returns in the
broad market indexes for the first time since 1994. The decline was triggered
largely by fear of accelerating inflation. The fact that broad measures of
inflation remain benign has done little to assuage the market.
AS A RESULT OF HIGHER INTEREST RATES, ISSUANCE OF MUNICIPAL REFUNDING BONDS
SLOWED SIGNIFICANTLY FROM 1998. This contributed to overall issuance being down
from 1998. The funds performed relatively well given
[Sidenote]
Fund Management
TEAM LEADER DOUG WHITE, CFA, is responsible for the management of the Minnesota
Municipal Term Trusts. He has 17 years of financial experience.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BONDS MATURING LESS THAN A YEAR BEYOND THE FUNDS' TERMINATION DATES
- --------------------------------------------------------------------------------
MNA MNB
Inception Inception
9/26/1991 4/24/1992
- --------------------------------------------------------------------------------
<S> <C> <C>
At the Fund's Inception 0% 0%
- --------------------------------------------------------------------------------
As of December 31, 1999 67% 61%
- --------------------------------------------------------------------------------
</TABLE>
2 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
their comparatively short durations, as evidenced by their net asset values
remaining above $10.
OUR STRATEGY REMAINS IN PLACE 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.
WE EXPECT THAT THE FUNDS' NET ASSET VALUES WILL 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
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
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DISTRIBUTION HISTORY SINCE INCEPTION
- --------------------------------------------------------------------------------
MNA MNB
Inception Inception
9/26/1991 4/24/1992
Total Monthly Income Distributions Through 12/31/1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Shareholders $5.13 $4.48
- --------------------------------------------------------------------------------
Preferred Shareholders (On a Common Share Basis) $1.25 $1.13
- --------------------------------------------------------------------------------
Total Capital Gains Distributions to Common
Shareholders Through 12/31/1999 $0.16 $0.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
3 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
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 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY OF COMMON SHARES
- --------------------------------------------------------------------------------
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 12/31/1999 $(0.05) $0.00
- --------------------------------------------------------------------------------
SUBTOTAL $9.29 $9.33
- --------------------------------------------------------------------------------
Dividend Reserve
(Undistributed Net Investment Income) at 12/31/1999 + $0.67 + $0.52
- --------------------------------------------------------------------------------
Unrealized Appreciation on Investments at 12/31/1999 + $0.42 + $0.32
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ON 12/31/1999 $10.38 $10.17
- --------------------------------------------------------------------------------
</TABLE>
4 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
PORTFOLIO COMPOSITION
As a percentage of total assets on December 31, 1998
MINNESOTA MUNICIPAL TERM TRUST
Utility Revenue 21%
Tax Revenue 5%
Building Revenue 1%
Health Care Revenue 21%
Other Assets 2%
Housing Revenue 19%
IDR Pollution Control Revenue 3%
Short-Term Securities 1%
Certificates of Participation 5%
Education Revenue 1%
General Obligations 21%
MINNESOTA MUNICIPAL TERM TRUST II
General Obligations 23%
Health Care Revenue 16%
Pollution Control Revenue 13%
Education Revenue 5%
Other Assets 2%
Housing Revenue 12%
Industrial Development Revenue 4%
Building Revenue 7%
Utility Revenue 18%
5 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
[Sidenote]
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
TRIBUTE TO DAVID T. BENNETT
As friends and colleagues, the Board of Directors of the First American Funds
wishes to recognize David T. Bennett for the significant and lasting
contributions he made as a Director of the First American Funds. His services
were cut short by his recent and untimely death following a 13 year battle with
cancer.
David was an attorney with the law firm of Gray, Plant, Mooty, Mooty & Bennett
since graduating from law school in 1967. David was also a successful
entrepreneur, owning controlling interests in Highland Manufacturing, Kiefer
Built, and USL Products. He also devoted countless hours to numerous civic and
charitable groups, including the Minneapolis Institute of Arts, the Guthrie
Theater, the Nature Conservancy, and Dunwoody Institute.
His association with the funds began in 1987, when he joined the Board of
Directors of the Piper Jaffray Funds. The First American Funds have been the
beneficiary of David's experience, wisdom, and insight during challenging
periods of change and growth. His knowledge of the industry and mutual fund
board experience were invaluable during the critical transition period
integrating the Piper and First American Fund Families. David's abilities were
particularly appreciated by the Audit, Pricing, and Board Development Committees
on which he served.
The Directors with whom he served value greatly their time spent together.
We gratefully and sincerely recognize David's contributions and extend our
sincere condolences to David's family and friends.
6 1999 Annual Report MINNESOTA MUNICIPAL TERM TRUSTS
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1999
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL TERM MUNICIPAL TERM
TRUST TRUST II
-------------- --------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $87,067,856 $51,801,670
Accrued interest receivable ................................ 1,594,592 960,738
----------- -----------
Total assets ............................................. 88,662,448 52,762,408
----------- -----------
LIABILITIES:
Common stock dividends payable (note 2) .................... 291,795 170,232
Preferred stock dividends payable (note 3) ................. 13,966 1,849
Accrued investment management fee .......................... 18,824 11,202
Bank overdraft ............................................. 850 12,886
Accrued remarketing agent fee .............................. 8,400 9,407
Accrued administrative fee ................................. 11,295 6,721
Other accrued expenses ..................................... 4,017 13,960
----------- -----------
Total liabilities ........................................ 349,147 226,257
----------- -----------
Net assets applicable to outstanding capital stock ....... $88,313,301 $52,536,151
=========== ===========
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 ........................ 3,841,743 1,784,107
Accumulated net realized loss on investments ............... (284,563) (8)
Net unrealized appreciation of investments ................. 2,427,215 1,116,449
----------- -----------
Total - representing net assets applicable to outstanding
capital stock .......................................... $88,313,301 $52,536,151
=========== ===========
* Investments in securities at identified cost ............ $84,640,641 $50,685,221
=========== ===========
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $59,513,301 $35,186,151
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 ............................................ $ 10.38 $ 10.17
Market price ............................................... $ 9.81 $ 9.56
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.
- --------------------------------------------------------------------------------
1999 Annual Report 7 Minnesota Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended December 31, 1999
................................................................................
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
------------ -------------
<S> <C> <C>
INCOME:
Interest .................................................. $ 5,113,356 $ 2,949,684
------------ ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 226,588 135,010
Administrative fee ......................................... 135,953 81,006
Remarketing agent fee ...................................... 72,000 43,377
Custodian and accounting fees .............................. 65,175 48,380
Transfer agent fees ........................................ 2,500 2,201
Reports to shareholders .................................... 22,900 22,900
Directors' fees ............................................ 3,000 3,000
Audit and legal fees ....................................... 56,943 56,943
Other expenses ............................................. 52,207 35,895
------------ ------------
Total expenses ........................................... 637,266 428,712
Less expenses paid indirectly .......................... (5,536) (6,265)
------------ ------------
Total net expenses ....................................... 631,730 422,447
------------ ------------
Net investment income .................................... 4,481,626 2,527,237
------------ ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain (loss) on investments (note 4) ........... (285,891) 106,948
Unrealized depreciation of investments ..................... (3,382,569) (2,486,600)
------------ ------------
Net loss on investments .................................. (3,668,460) (2,379,652)
------------ ------------
Net increase in net assets resulting
from operations ...................................... $ 813,166 $ 147,585
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 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
12/31/99 12/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,481,626 $ 4,912,766
Net realized gain (loss) on investments .................... (285,891) 736,084
Unrealized depreciation of investments ..................... (3,382,569) (1,134,304)
----------- -----------
Net increase in net assets resulting from operations ..... 813,166 4,514,546
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (4,129,844) (3,771,550)
Preferred stock dividends .............................. (904,293) (875,579)
From net realized gains:
Common stock dividends ................................. (20,064) (600,788)
Preferred stock dividends .............................. (4,966) (160,212)
----------- -----------
Total distributions ...................................... (5,059,167) (5,408,129)
----------- -----------
Total decrease in net assets ............................. (4,246,001) (893,583)
Net assets at beginning of year ............................ 92,559,302 93,452,885
----------- -----------
Net assets at end of year .................................. $88,313,301 $92,559,302
=========== ===========
Undistributed net investment income ........................ $ 3,841,743 $ 4,394,846
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 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
12/31/99 12/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,527,237 $ 2,753,880
Net realized gain on investments ........................... 106,948 280,832
Unrealized depreciation of investments ..................... (2,486,600) (218,871)
----------- -----------
Net increase in net assets resulting from operations ..... 147,585 2,815,841
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (2,060,776) (2,052,472)
Preferred stock dividends .............................. (501,518) (526,361)
From net realized gains:
Common stock dividends ................................. (87,884) (287,872)
Preferred stock dividends .............................. (23,417) (74,802)
----------- -----------
Total distributions ...................................... (2,673,595) (2,941,507)
----------- -----------
Total decrease in net assets ............................. (2,526,010) (125,666)
Net assets at beginning of year ............................ 55,062,161 55,187,827
----------- -----------
Net assets at end of year .................................. $52,536,151 $55,062,161
=========== ===========
Undistributed net investment income ........................ $ 1,784,107 $ 1,818,591
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 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.
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 pricing service but where an active market exists
are valued using market quotations obtained from one or more
dealers that
- --------------------------------------------------------------------------------
1999 Annual Report 11 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 December 31, 1999,
the funds had no outstanding when-issued or forward-
commitments.
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. However, Minnesota
Municipal Term Trust Inc. and Minnesota Municipal Term Trust
Inc. II incurred federal excise taxes of $736 and $573,
respectively, during the 1998 excise tax year.
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
- --------------------------------------------------------------------------------
1999 Annual Report 12 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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>
Increase (Decrease) undistributed net
investment income .................... $ (592) $573
Decrease accumulated net realized loss
on investments ....................... $ 6,905 $132
Decrease additional paid-in-capital .... $ 6,313 $705
</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.
- --------------------------------------------------------------------------------
1999 Annual Report 13 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 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.
In addition to repurchase agreements, the funds may invest in
money market funds advised by the funds' advisor.
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, 1999, have
outstanding 1,152 shares and 694 shares, respectively, of
remarketed preferred stock (RP) with a liquidation preference of
$25,000 per share for each fund. The dividend rate on the RP is
adjusted every seven days as determined by the remarketing
agent. On December 31, 1999, Minnesota Municipal Term Trust Inc.
and Minnesota Term Trust Inc. II have dividend rates of 5.90%
and 3.89%, respectively.
RP is a registered trademark of Merrill Lynch & Company (Merrill
Lynch).
- --------------------------------------------------------------------------------
1999 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, 1999 were as follows:
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
----------- -------------
<S> <C> <C>
Purchases .............................. $16,736,076 $ 9,781,569
Proceeds from sales .................... $16,677,442 $10,602,893
</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
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
provides regulatory reporting and recordkeeping 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
- --------------------------------------------------------------------------------
1999 Annual Report 15 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 investment management, administrative and
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. During the year ended
December 31, 1999, Minnesota Municipal Term Trust Inc. and
Minnesota Municipal Term Trust Inc. II paid $3,362 and $2,003,
respectively, for custody services to U.S. Bank.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
funds.
(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.
- --------------------------------------------------------------------------------
1999 Annual Report 16 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1999 1998 (g) 1997 1996 1995
------ -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.12 $11.28 $11.15 $11.31 $10.06
------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.78 0.86 0.88 0.87 0.88
Net realized and unrealized gains
(losses) on investments . (0.64) (0.08) 0.07 (0.25) 1.17
------ ------ ------ ------ ------
Total from operations .............. 0.14 0.78 0.95 0.62 2.05
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.72) (0.66) (0.61) (0.61) (0.61)
Paid to preferred shareholders ..... (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 ..................... (0.88) (0.94) (0.82) (0.78) (0.80)
------ ------ ------ ------ ------
Net asset value, common stock, end
of period ............................ $10.38 $11.12 $11.28 $11.15 $11.31
====== ====== ====== ====== ======
Market value, common stock, end
of period ............................ $ 9.81 $11.44 $11.13 $10.50 $10.63
====== ====== ====== ====== ======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ (0.16)% 5.47% 7.15% 4.23% 18.86%
Total return, common stock, market
value (b) ............................ (8.15)% 10.04% 12.48% 4.86% 21.91%
Net assets at end of period
(in millions) ........................ $ 88 $ 93 $ 93 $ 93 $ 94
Ratio of expenses to average weekly net
assets applicable to common
stock (e) ............................ 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) ............... 5.79% 6.25% 6.37% 6.40% 6.38%
Portfolio turnover rate (excluding
short-term securities) ............... 19% 11% 8% 2% 9%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 29 $ 29 $ 29 $ 29 $ 29
Asset coverage per share (in
thousands) (d) ....................... $ 77 $ 80 $ 81 $ 80 $ 81
Liquidation preference and market value
per share (in thousands) ............. $ 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 STOCK.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY PREFERRED STOCK OUTSTANDING.
(e) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.70%, 0.66%,
0.67%, 0.68% AND 0.65% IN 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 4.94%,
5.26%, 5.41%, 5.42% AND 5.57% IN FISCAL YEARS 1999, 1998, 1997, 1996, AND
1995, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT INCORPORATED TO U.S. BANK.
- --------------------------------------------------------------------------------
1999 Annual Report 17 Minnesota Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1999 1998(g) 1997 1996 1995
------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $ 10.90 $10.94 $10.71 $10.89 $ 9.48
------- ------ ------ ------ ------
Operations:
Net investment income ................ 0.73 0.80 0.81 0.82 0.83
Net realized and unrealized gains
(losses) on investments ............ (0.68) -- 0.23 (0.24) 1.37
------- ------ ------ ------ ------
Total from operations .............. 0.05 0.80 1.04 0.58 2.20
------- ------ ------ ------ ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ...... (0.60) (0.59) (0.59) (0.59) (0.59)
Paid to
preferred shareholders ......... (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 ................ (0.78) (0.84) (0.81) (0.76) (0.79)
------- ------ ------ ------ ------
Net asset value, common stock, end
of period .......................... $ 10.17 $10.90 $10.94 $10.71 $10.89
======= ====== ====== ====== ======
Market value, common stock, end
of period .......................... $ 9.56 $11.31 $10.69 $10.25 $10.38
======= ====== ====== ====== ======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) .......................... (1.03)% 5.95% 8.34% 4.04% 21.57%
Total return, common stock, market
value (b) .......................... (10.33)% 12.56% 10.78% 4.88% 27.63%
Net assets at end of period
(in millions) ...................... $ 53 $ 55 $ 55 $ 54 $ 55
Ratio of expenses to average weekly
net assets applicable to common
stock (e) .......................... 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) ............. 5.53% 5.87% 6.06% 6.20% 6.10%
Portfolio turnover rate (excluding
short-term securities) ............. 18% 9% 10% 4% 9%
Remarketed preferred stock outstanding
end of period (in millions) ........ $ 17 $ 17 $ 17 $ 17 $ 17
Asset coverage per share (in
thousands) (d) ..................... $ 76 $ 79 $ 80 $ 78 $ 79
Liquidation preference and market
value per share (in thousands) ..... $ 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 STOCK.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY PREFERRED STOCK OUTSTANDING.
(e) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.79%, 0.73%,
0.74%, 0.73% AND 0.72% IN 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 4.68%,
4.98%, 5.13%, 5.25% AND 5.36% IN FISCAL YEARS 1999, 1998, 1997, 1996 AND
1995, RESPECTIVELY.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT INCORPORATED TO U.S. BANK.
- --------------------------------------------------------------------------------
1999 Annual Report 18 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
MINNESOTA MUNICIPAL TERM TRUST December 31, 1999
....................................................................................
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 (1.2%):
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00 at 102), 6.55%, 8/1/12 .................. $1,000,000(d) $ 1,033,750
-----------
CERTIFICATES OF PARTICIPATION (4.8%):
Hennepin County Certificates of Participation
(Prerefunded to 11/15/01 at 100),
6.70%-6.75%, 11/15/09-11/15/11 .................... 4,085,000(d) 4,243,840
-----------
EDUCATION REVENUE (0.9%):
Higher Education Facility - College of St. Benedict,
4.50%, 3/1/00-3/1/02 .............................. 810,000 805,772
-----------
GENERAL OBLIGATIONS (20.9%):
Dakota County General Obligation,
4.50%, 2/1/02-2/1/03 .............................. 2,300,000 2,294,521
Delano Independent School District (AMBAC) (Crossover
refunded to 2/1/01 at 100), 7.25%, 2/1/11 ......... 300,000(d) 309,342
Mankato School District (FSA) (Crossover refunded to
2/1/02 at 100), 6.35%, 2/1/13 ..................... 1,000,000(d) 1,033,400
Minneapolis and St. Paul Metropolitan Council
(Crossover refunded to 9/1/00 at 100),
6.75%, 9/1/08 ..................................... 2,990,000(d) 3,042,504
State General Obligation,
4.75%-5.00%, 11/1/01-11/1/08 ...................... 2,780,000 2,790,915
State General Obligation (Prerefunded to 8/1/01 at
100), 6.70%, 8/1/10 ............................... 5,000,000(d) 5,166,800
State General Obligation, Zero-Coupon,
6.01%, 8/1/01 ..................................... 3,000,000(b) 2,793,210
Washington County Jail Facility (MBIA) (Prerefunded
to 2/1/02 at 100), 7.00%, 2/1/12 .................. 1,000,000(d) 1,046,760
-----------
18,477,452
-----------
HEALTH CARE REVENUE (21.0%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA),
4.90%-5.00%, 11/15/01-11/15/02 .................... 1,635,000 1,645,777
Apple Valley Nursing Home (GNMA) (Callable 2/28/00 at
101), 4.60%, 12/1/00 .............................. 185,000 184,550
Bemidji Hospital Facilities (Prerefunded to 9/1/01 at
102), 7.00%, 9/1/21 ............................... 3,200,000(d) 3,376,672
Buffalo Covenant Retirement Communities,
4.30%-4.55%, 12/1/02-12/1/05 ...................... 1,350,000 1,295,355
Burnsville Hospital System, Zero-Coupon (Escrowed to
maturity to 5/1/12), 6.75%, 5/1/12 ................ 1,000,000(b) 454,830
Minneapolis and St. Paul Health One Obligated Group
(Prerefunded to 8/15/00 at 102),
8.00%, 8/15/14 .................................... 2,000,000(d) 2,086,520
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Annual Report 19 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Minneapolis Hospital Facilities - Children's Medical
Center (Prerefunded to 6/1/01 at 102),
7.00%, 12/1/20 .................................... $2,000,000(d) $ 2,105,340
Monticello - Big Lake Community Hospital District
(MBIA), 4.20%-4.60%, 12/1/00-12/1/02 .............. 375,000 369,633
St. Louis Park Hospital Facility (AMBAC) (Crossover
refunded to 7/1/00 at 102), 7.25%, 7/1/15 ......... 1,300,000(d) 1,345,942
St. Louis Park Hospital Facility (AMBAC) (Prerefunded
to 7/1/00 at 102), 7.25%, 7/1/15 .................. 5,500,000(d) 5,694,645
-----------
18,559,264
-----------
HOUSING REVENUE (19.6%):
Burnsville Oak Leaf Apartments (GNMA) (Callable
7/1/01 at 103), 7.05%-7.15%, 1/1/12-1/1/25 ........ 3,685,000 3,772,897
City of Coon Rapids (FHA) (Callable 2/1/02 at 102),
AMT, 6.75%, 8/1/23 ................................ 1,300,000(e) 1,330,043
Minneapolis Community Development Authority (Callable
12/1/01 at 102), 7.15%-7.35%, 12/1/03-12/1/09 ..... 835,000 871,342
Minneapolis Housing-Churchill Apartments (Callable
10/1/01 at 102), 7.05%, 10/1/22 ................... 3,645,000 3,805,016
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102),
6.90%, 12/1/11-12/1/21 ............................ 335,000 342,894
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.95%, 2/1/14 ............................... 3,400,000 3,527,840
State Housing and Finance Agency (Callable 2/1/02 at
102), 6.90%, 8/1/12 ............................... 495,000 514,493
State Housing and Finance Agency, AMT,
4.00%-4.40%, 7/1/02-7/1/05 ........................ 3,180,000(e) 3,092,379
-----------
17,256,904
-----------
TAX REVENUE (5.0%):
Minneapolis Community Development Authority,
Zero-Coupon (MBIA), 6.70%-7.01%, 3/1/07-3/1/09 .... 6,685,000(b) 4,434,638
-----------
UTILITY REVENUE (21.4%):
Anoka County Resource Recovery,
3.95%-4.05%, 12/1/00-12/1/01 ...................... 3,525,000 3,499,583
Northern Municipal Power Agency Electric System
(FSA), 4.70%, 1/1/02 .............................. 1,605,000 1,610,104
Northern Municipal Power, Zero-Coupon (AMBAC),
6.38%-6.50%, 1/1/06-1/1/10 ........................ 3,340,000(b) 2,017,411
Southern Municipal Power Agency (AMBAC),
5.10%, 1/1/00 ..................................... 875,000 875,000
State Public Facilities Authority (Prerefunded to
3/1/01), 6.65%-6.70%, 3/1/08-3/1/13 ............... 10,000,000(d) 10,457,290
Western Municipal Power Agency (AMBAC),
4.80%, 1/1/02 ..................................... 465,000 467,465
-----------
18,926,853
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Annual Report 20 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
Shares/
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
WATER/POLLUTION CONTROL REVENUE (2.9%):
Anoka County Solid Waste Disposal Revenue (CFC)
(Callable 6/1/00 at 102), AMT, 6.95%, 12/1/08 ..... $2,100,000(e) $ 2,162,160
State Public Facilities Authority, 4.30%, 3/1/08 .... 445,000 416,654
-----------
2,578,814
-----------
Total Municipal Long-Term Securities
(cost: $83,890,072) ............................ 86,317,287
-----------
MUNICIPAL SHORT-TERM SECURITIES (0.8%):
Hennepin County, 5.40%, 12/1/10 ..................... 400,000(c) 400,000
Minneapolis General Revenue, 3.30%, 12/1/16 ......... 300,000(c) 300,000
-----------
Total Municipal Short-Term Securities
(cost: $700,000) ............................... 700,000
-----------
RELATED PARTY MONEY MARKET FUND (0.1%):
First American Tax Free Obligations Fund
(cost: $50,569) ................................... 50,569(f) 50,569
-----------
Total Investments in Securities
(cost: $84,640,641)(g) ......................... $87,067,856
===========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(c) 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, 1999. 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 MATURE AT THE DATE AND PRICE INDICATED.
(e) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1999, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$6,584,582, WHICH REPRESENTS 7.5% 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) ON DECEMBER 31, 1999, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $84,581,926. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ..... $ 2,851,126
GROSS UNREALIZED DEPRECIATION ..... (365,196)
-----------
NET UNREALIZED APPRECIATION ..... 2,485,930
===========
</TABLE>
- --------------------------------------------------------------------------------
1999 Annual Report 21 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
MINNESOTA MUNICIPAL TERM TRUST II December 31, 1999
....................................................................................
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 (98.1%):
BUILDING REVENUE (6.7%):
Olmsted County Housing Redevelopment Authority
(Callable 2/1/02 at 100), 6.10%, 2/1/13 ........... $1,000,000 $ 1,018,090
St. Paul Housing and Finance Authority (Prerefunded
to 8/1/00 at 102), 6.55%, 8/1/12 .................. 2,415,000(d) 2,496,506
-----------
3,514,596
-----------
EDUCATION REVENUE (4.3%):
Higher Education Facility-Augsburg College,
4.30%-4.40%, 10/1/03-10/1/05 ...................... 1,150,000 1,109,055
Higher Education Facility-Macalester College
(Prerefunded to 3/1/02 at 100), 6.30%, 3/1/14 ..... 1,125,000(d) 1,162,912
-----------
2,271,967
-----------
GENERAL OBLIGATIONS (23.3%):
Braham Independent School District (AMBAC) (Crossover
refunded to 2/1/01 at 100), 6.25%, 2/1/14 ......... 350,000(d) 357,234
Dakota County General Obligation, 4.50%, 2/1/04 ..... 1,350,000 1,336,716
Mankato School District (FSA) (Crossover refunded to
2/1/02 at 100), 6.35%, 2/1/13 ..................... 2,300,000(d) 2,376,820
Metropolitan Council (Crossover refunded to 9/1/00 at
100), 6.75%, 9/1/10-9/1/11 ........................ 2,500,000(d) 2,543,900
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) 895,368
State General Obligation, 5.00%, 8/1/03-6/1/08 ...... 4,170,000 4,193,685
Willmar Independent School District (AMBAC)
(Crossover refunded to 2/1/02 at 100),
6.25%, 2/1/15 ..................................... 500,000(d) 515,715
-----------
12,219,438
-----------
HEALTH CARE REVENUE (15.3%):
Agricultural and Economic Development Board Health
Care System, Fairview Hospital (MBIA),
5.00%, 11/15/03 ................................... 695,000 699,163
Duluth Health Care Facilities, Benedictine - St.
Mary's Project (Prerefunded to 2/15/00 at 102),
8.38%, 2/15/20 .................................... 2,000,000(d) 2,050,020
Duluth Hospital Facility, St. Lukes (Connie Lee)
(Callable 5/1/02 at 102), 6.40%, 5/1/10 ........... 300,000 314,442
Minneapolis and St. Paul Health Care Facilities
(MBIA) (Prerefunded to 8/15/00 at 102),
6.75%, 8/15/14 .................................... 2,500,000(d) 2,589,650
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Annual Report 22 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Monticello - Big Lake Community Hospital District
(MBIA), 4.70%, 12/1/03 ............................ $ 125,000 $ 121,420
New Hope Housing & Health Care-Masonic Home North
Ridge, 4.20%-4.80%, 3/1/00-3/1/03 ................. 2,105,000 2,063,266
Red Wing Health Care Facility (Callable 9/1/03 at
102), 6.40%, 9/1/12 ............................... 220,000 218,471
-----------
8,056,432
-----------
HOUSING REVENUE (12.3%):
Minneapolis Community Development (Callable 12/1/01
at 102), 7.10%, 12/1/02 ........................... 175,000 179,599
St. Paul Housing and Redevelopment Authority
(Callable 12/1/01 at 102), 6.90%, 12/1/11 ......... 5,000 5,041
State Housing and Finance Agency,
4.85%-5.05%, 7/1/02-7/1/04 ........................ 1,440,000 1,438,461
State Housing and Finance Agency (Callable 1/1/03 at
102), AMT, 6.50%, 1/1/26 .......................... 355,000(f) 356,800
State Housing and Finance Agency (Callable 2/1/01 at
102), 6.85%, 2/1/07 ............................... 2,945,000 3,052,669
State Housing and Finance Agency (Callable 7/1/02 at
102), AMT, 6.75%-6.85%, 7/1/12-1/1/24 ............. 1,410,000(f) 1,433,969
-----------
6,466,539
-----------
INDUSTRIAL DEVELOPMENT REVENUE (4.2%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 5/1/02 at 102), 6.80%, 5/1/12 ........... 2,090,000(e) 2,191,929
-----------
RECREATION AUTHORITY REVENUE (0.2%):
Moorhead Gross Revenue, 5.00%, 12/1/02 .............. 125,000 123,463
-----------
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) 410,087
-----------
UTILITY REVENUE (17.5%):
Northern Municipal Power (FSA), 4.75%, 1/1/03 ....... 2,000,000 2,007,760
Northern Municipal Power, Zero-Coupon (AMBAC),
6.49%-6.50%, 1/1/09-1/1/10 ........................ 9,690,000(b) 5,602,926
Southern Municipal Power Agency (AMBAC),
5.10%, 1/1/00 ..................................... 600,000 600,000
Western Municipal Power Agency (AMBAC),
4.90%, 1/1/03 ..................................... 1,000,000 1,008,320
-----------
9,219,006
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Annual Report 23 Minnesota Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
Shares/
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
WATER/POLLUTION CONTROL REVENUE (13.5%):
East Grand Forks, Pollution Control (Callable 4/1/01
at 102), 7.75%, 4/1/18 ............................ $1,300,000 $ 1,357,993
State Public Facilities Authority (Callable 3/2/09 at
100), 5.13%, 3/1/13 ............................... 800,000 770,064
State Public Facilities Authority (Prerefunded to
3/1/02 at 102), 6.50%, 3/1/14 ..................... 4,695,000(d) 4,961,393
-----------
7,089,450
-----------
Total Municipal Long-Term Securities
(cost: $50,446,458) ............................ 51,562,907
-----------
MUNICIPAL SHORT-TERM SECURITIES (0.2%):
State General Obligation, 3.80%, 12/1/07
(cost: $100,000) .................................. 100,000(c) 100,000
-----------
RELATED PARTY MONEY MARKET FUND (0.3%):
First American Tax Free Obligations Fund
(cost: $138,763) .................................. 138,763(g) 138,763
-----------
Total Investments in Securities
(cost: $50,685,221)(h) ......................... $51,801,670
===========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(c) 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, 1999. 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 MATURE AT THE DATE AND PRICE 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, 1999, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $2,191,929 OR 4.2% OF TOTAL NET
ASSETS.
(f) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1999, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$1,790,769, 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) ON DECEMBER 31, 1999, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $50,661,721. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 1,494,103
GROSS UNREALIZED DEPRECIATION ...... (354,154)
-----------
NET UNREALIZED APPRECIATION ...... $ 1,139,949
===========
</TABLE>
- --------------------------------------------------------------------------------
1999 Annual Report 24 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, 1999, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The statements of changes in net assets for the year ended
December 31, 1998 and the financial highlights for each of the four years in the
period ended December 31, 1998, were audited by other auditors whose report
dated February 12, 1999, expressed an unqualified opinion.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1999 financial statements and 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
at December 31, 1999, and the results of their operations, changes in their net
assets and financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
February 9, 2000
- --------------------------------------------------------------------------------
1999 Annual Report 25 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, 99.67% AND 99.48%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ------------ ---------- -------------
<S> <C> <C>
January 13,1999 ........................ $0.0509 $0.0492
February 24,1999 ....................... 0.0509 0.0492
March 24,1999 .......................... 0.0509 0.0492
April 28,1999 .......................... 0.0509 0.0492
May 26,1999 ............................ 0.1429 0.0492
June 23,1999 ........................... 0.0509 0.0492
July 28,1999 ........................... 0.0509 0.0492
August 25,1999 ......................... 0.0509 0.0492
September 22,1999 ...................... 0.0509 0.0492
October 27,1999 ........................ 0.0665 0.0544
November 23,1999 ....................... 0.0509 0.0492
December 15,1999 ....................... 0.0529 0.0492
------- -------
Total .................................. $0.7204 $0.5956
======= =======
</TABLE>
COMMON STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ------------ ---------- -------------
<S> <C> <C>
October 27,1999 ........................ $0.0027 $ --
======= =======
</TABLE>
- --------------------------------------------------------------------------------
1999 Annual Report 26 Minnesota Municipal Term Trusts
<PAGE>
FEDERAL INCOME TAX INFORMATION (continued)
- --------------------------------------------------------------------------------
COMMON 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 27,1999 ........................ $0.0008 $0.0013
December 15,1999 ....................... -- 0.0241
------- -------
Total ................................ $0.0008 $0.0254
======= =======
</TABLE>
PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.67% AND 99.48%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II
---------- -------------
<S> <C> <C>
Total ................................ $780.97 $721.72
======= =======
</TABLE>
PREFERRED STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
MINNESOTA MINNESOTA
MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II
- ------------ ---------- -------------
<S> <C> <C>
October 27, 1999 ....................... $2.49 $ --
===== =====
</TABLE>
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>
January 6, 1999 ........................ $1.57 $ --
October 27, 1999 ....................... 0.70 --
October 29, 1999 ....................... -- 1.24
December 17, 1999 ...................... -- 22.88
December 23, 1999 ...................... -- 9.63
----- ------
Total ................................ $2.27 $33.75
===== ======
</TABLE>
- --------------------------------------------------------------------------------
1999 Annual Report 27 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the funds' shareholders was held on
August 16, 1999. 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 ....................... 1,121 0
Leonard W. Kedrowski ................... 1,121 0
MINNESOTA MUNICIPAL TERM TRUST II
David T. Bennett ....................... 668 0
Leonard W. Kedrowski ................... 668 0
</TABLE>
David Bennett passed away in September, 1999. The funds'
preferred shareholders will be asked to elect a replacement
director at the next annual meeting.
- --------------------------------------------------------------------------------
1999 Annual Report 28 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
(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 ....................... 5,045,981 23,950
Roger A. Gibson ........................ 5,045,981 23,950
Andrew M. Hunter III ................... 5,045,981 23,950
Robert L. Spies ........................ 5,045,981 23,950
Joseph D. Strauss ...................... 5,045,981 23,950
Virginia L. Stringer ................... 5,045,981 23,950
MINNESOTA MUNICIPAL TERM TRUST II
Robert J. Dayton ....................... 3,057,788 0
Roger A. Gibson ........................ 3,057,788 0
Andrew M. Hunter III ................... 3,057,788 0
Robert L. Spies ........................ 3,057,788 0
Joseph D. Strauss ...................... 3,057,788 0
Virginia L. Stringer ................... 3,057,788 0
</TABLE>
(3) The funds' preferred and common shareholders, voting as a
class, ratified the selection by the funds' Board of
Directors of Ernst and Young LLP as the independent public
accountants for the funds for the fiscal year ending
December 31, 2000. The following votes were cast regarding
this matter:
<TABLE>
<CAPTION>
SHARES
VOTED SHARES BROKER
"FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Minnesota Municipal Term Trust 5,057,529 6,775 5,626 --
Minnesota Municipal Term
Trust II 3,057,988 9,300 0 --
</TABLE>
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's a convenient and economical way to buy
- --------------------------------------------------------------------------------
1999 Annual Report 29 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
additional shares of the fund by automatically reinvesting
dividends and capital gains. The plan is administered by
EquiServe, the plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions
will begin with the next distribution paid, provided your
request is received at least 10 days before the record date for
that distribution.
If your shares are in certificate form, you may join the plan
directly and have your distributions reinvested in additional
shares of the fund. To enroll in this plan, call EquiServe 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 EquiServe at least 10
days before the next dividend and/or capital gains distribution.
PLAN ADMINISTRATION
Beginning no more than five business days before the dividend
payment date, EquiServe will buy shares of the fund on the New
York Stock Exchange (NYSE) or elsewhere on the open market.
The fund will not issue any new shares in connection with the
plan. All reinvestments will be at a market price plus a pro
rata share of any brokerage commissions, which may be more or
less than the fund's net asset value per share. The number of
shares allocated to you is determined by dividing the amount of
the dividend or distribution by the applicable price per share.
There is no direct charge for reinvestment of dividends and
capital gains, since EquiServe fees are paid for by the fund.
However, each participant pays a pro rata portion of the
- --------------------------------------------------------------------------------
1999 Annual Report 30 Minnesota Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
brokerage commissions. Brokerage charges are expected to be
lower than those for individual transactions because shares are
purchased for all participants in blocks. As long as you
continue to participate in the plan, distributions paid on the
shares in your account will be reinvested.
EquiServe 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
EquiServe in noncertificated form in your name.
TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax, just as they would be if received in
cash. Shareholders, as required by the Internal Revenue Service,
will receive Form 1099 regarding the federal tax status of the
prior year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate
your participation in the plan at any time by giving written
notice to EquiServe. 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.
- --------------------------------------------------------------------------------
1999 Annual Report 31 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 EquiServe 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 EquiServe LP, P.O. Box 8218,
Boston, Massachusetts 02266, 1-800-543-1627.
- --------------------------------------------------------------------------------
1999 Annual Report 32 Minnesota Municipal Term Trusts
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
Asset Management
MINNESOTA MUNICIPAL TERM TRUSTS
1999 Annual Report
[ICON] This document is printed on paper made from 100% total
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