<PAGE>
[GRAPHIC] 2000
Annual Report
Minnesota Municipal
Income Portfolio
MXA
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
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CONTENTS
2 Fund Overview
5 Financial Statements and Notes
14 Investments in Securities
20 Independent Auditors' Report
21 Federal Income Tax Information
22 Shareholder Update
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MINNESOTA MUNICIPAL INCOME PORTFOLIO
FUND OBJECTIVE
High current income exempt from both regular federal income tax, and Minnesota
personal income tax, consistent with preservation of capital. The fund's income
may be subject to federal and/or state of Minnesota alternative minimum tax.
Investors should consult their tax advisors. As with other investment companies,
there can be no assurance this fund will achieve its objective.
PRIMARY INVESTMENTS
A wide range of Minnesota municipal securities rated investment-grade or of
comparable quality when purchased. These securities may include municipal
derivative securities, such as inverse floating-rate and inverse interest-only
municipal securities, which may be more volatile than traditional municipal
securities in certain market conditions.
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
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<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
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Based on net asset value for the periods ended January 31, 2000
[CHART]
<TABLE>
<CAPTION>
Since Inception
One Year Five Year 6/25/1993
<S> <C> <C> <C>
MINNESOTA MUNICIPAL INCOME PORTFOLIO -10.16% 7.48% 4.51%
Lipper general Municipal Bond Funds:
Leveraged Averages -9.94% 5.83% 4.24%
Lehman Brothers Municipal Long Bond Index -8.57% 6.26% 4.74%
</TABLE>
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Average annual total returns are through January 31, 2000, and are based on the
change in net asset value (NAV). They reflect the reinvestment of distributions
but do not reflect sales charges. NAV-based performance is used to measure
investment management results.
Average annual total returns based on the change in market price for the
one-year, five-year, and since-inception periods ended January 31, 2000, were
- -11.39%, 6.50%, and 2.69%, respectively. These returns assume reinvestment of
all distributions and reflect sales charges on those distributions described in
the fund's dividend-reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost. Closed-end funds, such as this fund, 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.
The Lipper General Municipal Bond Funds: Leveraged Average represents the
average total return, with distributions reinvested, of leveraged perpetual and
term-trust national annual closed-end municipal funds as characterized by Lipper
Inc. The Lehman Brothers Municipal Long Bond Index is comprised of municipal
bonds with more than 22 years to maturity and an average credit quality of AA.
The index is unmanaged and does not include any fees or expenses in its
total-return figures.
The since-inception numbers for the Lipper average and Lehman index are
calculated from the month end following the fund's inception through
January 31, 2000.
1 2000 ANNUAL REPORT Minnesota Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW
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FUND MANAGEMENT
TEAM LEADER
DOUG WHITE, CFA,
17 years of financial industry experience.
TEAM MEMBER
CATHERINE STIENSTRA
12 years of financial industry experience.
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March 15, 2000
MINNESOTA MUNICIPAL INCOME PORTFOLIO PROVIDED A NET ASSET VALUE TOTAL RETURN OF
- -10.16%* FOR THE YEAR ENDED JANUARY 31, 2000. The fund's market price return was
- -11.39% over the same period. This compares to a -8.57% total return for the
fund's benchmark, the Lehman Brothers Municipal Long Bond Index. Over the same
period, the Lipper General Municipal Bond Funds: Leveraged Average had a total
return of -9.94%.
INTEREST RATES HAVE RISEN ALMOST STEADILY THROUGHOUT THE YEAR, NEGATIVELY
IMPACTING OUR RETURN. Minnesota Municipal Income Portfolio emphasizes bonds with
longer maturities, and was positioned to benefit from stable or declining
intermediate- and long-term interest rates. While our longer maturity has hurt
our performance this
*All returns assume reinvestment of all distributions and do not reflect sales
charges, except the fund's total return based on market price, which does
reflect sales charges on those distributions described in the fund's dividend
reinvestment plan, but not on initial purchases. 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.
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PORTFOLIO COMPOSITION
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As a percentage of total assets on January 31, 2000
[CHART]
<TABLE>
<S> <C>
Housing Revenue 14%
Other Assets 2%
Short-Term Securities 1%
Water/Pollution Control Revenue 3%
Certificates of Participation 1%
General Obligations 29%
Health Care Revenue 28%
Education Revenue 12%
Building Revenue 1%
Authority Revenue 1%
Utility Revenue 8%
</TABLE>
2 2000 ANNUAL REPORT Minnesota Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW CONTINUED
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period, municipal bonds with longer maturities usually offer higher yields.
History tells us that a bond portfolio that takes an aggressive stance in bond
maturities ultimately benefits from that position, even though it may be more
volatile in the short term. What's more, in a low-inflation environment such as
we've enjoyed for a number of years, bond yields tend to move favorably.
AS INTEREST RATES HAVE RISEN, THE SUPPLY OF MUNICIPAL BONDS HAS FALLEN. The
total supply of Minnesota municipal bonds has gone down more than 28% from a
year ago, while the national municipal bond supply is down more than 21%. This
is due to the fact that many government entities slowed debt issuance either
because higher yields made refunding issues unattractive or because increasing
tax revenues decreased the need to take on new debt. The decreased supply is
exacerbated in Minnesota due to the smaller investable area, making portfolio
management challenging.
WE HAVE MAINTAINED AN EFFECTIVE DURATION LONGER THAN THE BENCHMARK IN ORDER TO
SUSTAIN THE FUND'S INCOME. Our longer duration has allowed the fund to maintain
its competitive yield and enabled us to add slightly to its dividend reserve.
The recent increase in interest rates provides opportunities to realize tax
losses, to help offset potential future capital gains and to purchase new bonds
at relatively higher yields. Therefore, we are not currently considering a shift
in the fund's strategy.
Thank you for your investment in Minnesota Municipal Income Portfolio. We remain
committed to providing you with quality service and look forward to helping you
achieve your investment goals.
3 2000 ANNUAL REPORT Minnesota Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW CONTINUED
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PREFERRED STOCK
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The preferred stock issued by MXA 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.
4 2000 ANNUAL REPORT Minnesota Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES January 31, 2000
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $83,530,411
Cash in bank on demand deposit ............................ 336
Accrued interest receivable ............................... 1,640,690
-----------
Total assets ............................................ 85,171,437
-----------
LIABILITIES:
Preferred stock dividends payable (note 3) ................ 17,361
Accrued investment management fee ......................... 25,351
Accrued remarketing agent fee ............................. 5,300
Accrued administrative fee ................................ 14,486
Other accrued expenses .................................... 11,357
-----------
Total liabilities ....................................... 73,855
-----------
Net assets applicable to outstanding capital stock ...... $85,097,582
===========
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ........................................ $89,145,629
Undistributed net investment income ....................... 945,412
Accumulated net realized loss on investments .............. (2,105,636)
Unrealized depreciation of investments .................... (2,887,823)
-----------
Total - representing net assets applicable to capital
stock ................................................. $85,097,582
===========
* Investments in securities at identified cost ............ $86,418,234
===========
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to outstanding common stock ......... $53,997,582
Shares of common stock outstanding (authorized 200 million
shares of $0.01 par value) .............................. 4,146,743
Net asset value ........................................... $ 13.02
Market price .............................................. $ 12.13
LIQUIDATION PREFERENCE OF PREFERRED STOCK (NOTE 3):
Net assets applicable to outstanding preferred stock ...... $31,100,000
Shares of preferred stock outstanding (authorized 1 million
shares) ................................................. 1,244
Liquidation preference per share .......................... $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Annual Report 5 Minnesota Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (continued)
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STATEMENT OF OPERATIONS For the Year Ended January 31, 2000
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest .................................................. $ 5,002,116
------------
EXPENSES (NOTE 5):
Investment management fee ................................. 315,208
Administrative fee ........................................ 138,711
Remarketing agent fee ..................................... 77,749
Custodian and accounting fees ............................. 61,397
Transfer agent fees ....................................... 21,999
Reports to shareholders ................................... 23,703
Directors' fees ........................................... 3,000
Audit and legal fees ...................................... 55,498
Other expenses ............................................ 38,818
------------
Total expenses .......................................... 736,083
Less expenses paid indirectly ......................... (5,570)
------------
Total net expenses ...................................... 730,513
------------
Net investment income ................................... 4,271,603
------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS:
Net realized loss on investments in
securities (note 4) ..................................... (68,721)
Net change in unrealized appreciation or depreciation of
investments ............................................. (9,516,828)
------------
Net loss on investments ................................. (9,585,549)
------------
Net decrease in net assets resulting from
operations .......................................... $ (5,313,946)
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Annual Report 6 Minnesota Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
1/31/00 1/31/99
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 4,271,603 $ 4,328,140
Net realized gain (loss) on investments ................... (68,721) 439,732
Net change in unrealized appreciation or depreciation of
investments ............................................. (9,516,828) 737,530
----------- -----------
Net increase (decrease) in net assets resulting from
operations ............................................ (5,313,946) 5,505,402
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends .................................... (3,297,387) (3,172,673)
Preferred stock dividends ................................. (971,641) (982,824)
----------- -----------
Total distributions ..................................... (4,269,028) (4,155,497)
----------- -----------
Total increase (decrease) in net assets ................. (9,582,974) 1,349,905
Net assets at beginning of year ........................... 94,680,556 93,330,651
----------- -----------
Net assets at end of year ................................. $85,097,582 $94,680,556
=========== ===========
Undistributed net investment income ....................... $ 945,412 $ 944,795
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Annual Report 7 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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(1) ORGANIZATION
............................
Minnesota Municipal Income Portfolio Inc. (the fund) is
registered under the Investment Company Act of 1940 (as amended)
as a non-diversified, closed-end management investment company.
The fund invests in a wide range of Minnesota municipal
securities rated investment grade or of comparable quality when
purchased. These securities may include municipal derivative
securities, such as inverse floating rate and inverse
interest-only municipal securities. Fund shares are listed on
the American Stock Exchange under the symbol MXA.
(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
fund's board of directors in good faith at "fair value", that
is, a price that the fund might reasonably expect to receive for
the security or other asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an
independent pricing service but where an active market exists
are valued using market quotations obtained from one or more
dealers that make markets in the securities or from a
widely-used quotation system. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value.
Securities transactions are accounted for on the date securities
are purchased or sold. Realized gains and losses are calculated
on the identified-cost basis. Interest income, including
amortization of bond discount and premium, is recorded on an
accrual basis.
The fund concentrates its investments in Minnesota and,
therefore, may have more credit risk related to the economic
conditions of Minnesota than a portfolio with a broader
geographical diversification.
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2000 Annual Report 8 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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INVERSE FLOATERS
As part of its investment strategy, the fund may invest in
certain securities for which the potential income return is
inversely related to changes in a floating interest rate
("inverse floaters"). In general, income on inverse floaters
will decrease when short-term interest rates increase and
increase when short-term interest rates decrease. Investments in
inverse floaters may be characterized as derivative securities
and may subject the fund to the risks of reduced or eliminated
interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment
leverage and, as a result, the market value of such securities
will generally be more volatile than that of fixed rate,
tax-exempt securities. To the extent the fund invests in inverse
floaters, the net asset value of the fund's shares may be more
volatile than if the fund did not invest in such securities. At
January 31, 2000, the fund had investments in inverse floaters
with a value of $2,503,018, which represent 3.0% of net assets.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the fund 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 fund segregates, with its custodian,
assets with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or
forward-commitment basis may increase the volatility of the
fund's net asset value if the fund makes such purchases while
remaining substantially fully invested. As of January 31, 2000,
the fund had no outstanding when-issued or forward commitments.
FEDERAL TAXES
The 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,
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2000 Annual Report 9 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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no income tax provision is required. The fund also intends to
distribute its taxable net investment income and realized gains,
if any, to avoid the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
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 fund.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, a reclassification adjustment
has been made to decrease undistributed net investment income by
$1,958, decrease accumulated net realized loss by $3,035 on
investments and decrease additional paid-in-capital by $1,077.
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 fund's dividend
reinvestment plan, reinvested in additional shares of the funds
common stock. Under the plan, common shares will be purchased in
the open market.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
in the financial statements. Actual results could differ from
these estimates.
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2000 Annual Report 10 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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(3) REMARKETED
PREFERRED
STOCK
............................
Minnesota Municipal Income Portfolio Inc. has issued and, as of
January 31, 2000, has outstanding 1,244 shares of remarketed
preferred stock (622 shares in class "M" and 622 shares in
class "W") (RP) with a liquidation preference of $25,000 per
share. The dividend rate on the RP is adjusted every seven days
(on Mondays for class "M" and on Wednesdays for class "W"), as
determined by the remarketing agent. On January 31, 2000, the
dividend rates were 3.25% and 3.60% for class "M" and "W,"
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 year
ended January 31, 2000, aggregated $14,380,705 and $13,222,234,
respectively.
(5) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The fund has 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 equal to an annual rate of
0.35% of the fund's average weekly net assets (computed by
subtracting liabilities, which exclude preferred stock, from the
value of the total assets of the fund). For its fee, the advisor
provides investment advice and conducts the management and
investment activities of the fund.
The administration agreement provides the administrator with a
monthly fee based on an annual rate of the fund's average weekly
net assets (computed by subtracting liabilities, which exclude
preferred stock, from the value of the total assets of the
fund). For its fee, the administrator provides reporting,
regulatory and record-keeping services for the fund. For the
fiscal period from February 1, 1999 through December 31, 1999,
the fund paid the administrator a monthly fee in an amount equal
to an annual rate of 0.15% of the fund's average weekly net
assets. Effective January 1, 2000, the administrator's
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2000 Annual Report 11 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
fee increased to an annual rate of 0.20% of the fund's average
weekly net assets. The new administrative fee includes 0.05% for
accounting expenses which were previously charged and paid
separately by the fund.
REMARKETING AGENT FEE
The fund has entered into a remarketing agent agreement with
Merrill Lynch (the remarketing agent). The remarketing agreement
provides the remarketing agent with a monthly fee in an amount
equal to an annual rate of 0.25% of the fund's average amount of
RP outstanding. For its fee, the remarketing agent will remarket
shares of RP tendered to it on behalf of shareholders 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
remarketing agent fees, the fund is 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 and
auditing services; insurance; interest; taxes and other
miscellaneous expenses. During the year ended January 31, 2000,
the fund paid $4,385 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
fund.
(6) CAPITAL LOSS
CARRYOVER
............................
For federal income tax purposes, the fund had capital loss
carryovers at January 31, 2000, which, if not offset by
subsequent capital gains, will expire on the fund's fiscal year-
ends as indicated below. 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.
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRATION
- ------------ ----------
<S> <C>
$1,624,891 2003
415,059 2004
34,143 2008
----------
$2,074,093
==========
</TABLE>
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2000 Annual Report 12 Minnesota Municipal Income Portfolio
<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 INCOME PORTFOLIO
<TABLE>
<CAPTION>
Year Ended January 31,
---------------------------------------
2000 1999(g) 1998 1997 1996
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $15.33 $15.01 $13.97 $14.32 $11.96
------ ------ ------ ------ ------
Operations:
Net investment income ................ 1.03 1.05 1.06 1.09 1.06
Net realized and unrealized gains
(losses) on investments ............ (2.31) 0.28 0.99 (0.44) 2.40
------ ------ ------ ------ ------
Total from operations .............. (1.28) 1.33 2.05 0.65 3.46
------ ------ ------ ------ ------
Distributions to shareholders from net
investment income:
Paid to common shareholders ........ (0.80) (0.77) (0.76) (0.76) (0.82)
Paid to preferred shareholders ..... (0.23) (0.24) (0.25) (0.24) (0.28)
------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (1.03) (1.01) (1.01) (1.00) (1.10)
------ ------ ------ ------ ------
Net asset value, common stock, end
of period ............................ $13.02 $15.33 $15.01 $13.97 $14.32
====== ====== ====== ====== ======
Market value, common stock, end
of period ............................ $12.13 $14.50 $14.13 $12.50 $12.88
====== ====== ====== ====== ======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ (10.16)% 7.44% 13.29% 3.09% 27.27%
Total return, common stock, market
value (b) ............................ (11.39)% 8.27% 19.60% 3.19% 15.74%
Net assets at end of period
(in millions) ........................ $ 85 $ 95 $ 93 $ 89 $ 90
Ratio of expenses to average weekly net
assets applicable to common
stock (c) ............................ 1.25% 1.17% 1.23% 1.26% 1.28%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d)(e) ............... 5.60% 5.37% 5.66% 6.25% 5.81%
Portfolio turnover rate (excluding
short-term securities) ............... 15% 16% 26% 25% 13%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 31 $ 31 $ 31 $ 31 $ 31
Asset coverage per share (in
thousands) (f) ....................... $ 68 $ 76 $ 75 $ 72 $ 73
Liquidation preference and market value
per share of preferred stock
(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 OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.82%, 0.78%,
0.80%, 0.82% AND 0.82% FOR THE FISCAL YEARS 2000, 1999, 1998, 1997 AND
1996, RESPECTIVELY. DIVIDEND PAYMENTS TO PREFERRED SHAREHOLDERS ARE NOT
CONSIDERED AN EXPENSE.
(d) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON STOCK.
(e) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 4.74%,
4.63%, 4.87%, 5.16% AND 5.06% FOR THE FISCAL YEARS 2000, 1999, 1998, 1997
AND 1996, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY PREFERRED STOCK OUTSTANDING.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR WAS CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.
- --------------------------------------------------------------------------------
2000 Annual Report 13 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
MINNESOTA MUNICIPAL INCOME PORTFOLIO January 31, 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 (97.1%):
MUNICIPAL LONG-TERM BONDS (94.1%)
AUTHORITY REVENUE (1.3%):
St. Paul Port Authority Hotel Facility (Callable
8/01/08 at 103), 7.38%, 8/1/29 .................... $1,200,000 $ 1,147,968
-----------
BUILDING REVENUE (1.1%):
Benton County Jail Facility (FSA) (Callable 2/1/05 at
100), 5.70%, 2/1/13-2/1/16 ........................ 900,000(b) 894,349
-----------
CERTIFICATES OF PARTICIPATION (0.6%):
Anoka County (Callable 6/1/03 at 102),
6.10%, 6/1/13 ..................................... 500,000 505,835
-----------
EDUCATION REVENUE (9.8%):
Higher Education Facility - Carleton College
(Callable 11/01/07 at 100),
5.30%-5.40%, 11/1/13-11/1/14 ...................... 2,500,000 2,403,715
Higher Education Facility - St. Benedict College
(Callable 3/1/04 at 100),
6.20%-6.38%, 3/1/14-3/1/20 ........................ 285,000 285,632
Higher Education Facility - St. Benedict College
(Prerefunded to 3/1/04 at 100),
6.20%-6.38%, 3/1/04 ............................... 765,000(e) 799,066
Higher Education Facility - St. John's University
(Callable 10/01/07 at 100), 5.35%, 10/1/17 ........ 500,000 452,725
Higher Education Facility-Carleton College (Callable
5/1/06 at 100), 5.75%, 11/1/12 .................... 2,000,000 2,011,260
Higher Education Facility-Macalester College
(Callable 3/1/05 at 100),
5.50%-5.55%, 3/1/12-3/1/16 ........................ 500,000 491,272
Higher Education Facility-St. Mary's College
(Callable 10/1/03 at 101), 6.10%, 10/1/16 ......... 500,000 490,730
Higher Education Facility-St. Thomas University
(Callable 4/1/07 at 100), 5.38%, 4/1/18 ........... 1,050,000 950,964
Higher Education Facility-St. Thomas University
(Callable 9/1/03 at 101),
5.50%-5.60%, 9/1/08-9/1/14 ........................ 430,000 417,902
-----------
8,303,266
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
2000 Annual Report 14 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
GENERAL OBLIGATIONS (27.9%):
Albany Independent School District (Callable 2/1/08
at 100), 5.00%, 2/1/16 ............................ $1,220,000 $ 1,092,156
Burnsville Independent School District (Callable
2/1/06 at 100), 4.88%, 2/1/13 ..................... 2,000,000 1,802,240
Chaska Independent School District (Crossover
refunded to 2/1/06 at 100), 6.00%, 2/1/15 ......... 2,725,000(e) 2,844,682
Hawley Independent School District (Crossover
refunded to 2/1/06 at 100), 5.75%, 2/1/17 ......... 1,000,000(e) 1,021,840
Itasca County Independent School District (MBIA)
(Callable 2/1/05 at 100), 5.25%, 2/1/11 ........... 1,710,000(b) 1,677,835
Lakeville Independent School District #194,
5.00%-5.13%, 2/1/17-2/1/22 ........................ 6,240,000 5,499,770
Minneapolis General Obligation (Callable 9/1/05 at
100), 5.20%, 3/1/13 ............................... 2,000,000 1,898,120
Minnesota State General Obligation,
5.20%, 10/1/24 .................................... 1,400,000 1,228,626
Osseo Independent School District, 8.43%, 2/1/13 .... 2,000,000(d) 1,982,740
Rosemount General Obligation (Callable 4/1/06 at
100), 5.75%, 4/1/13 ............................... 1,000,000 1,004,540
St. Michael General Obligation (Callable 2/01/09 at
100), 5.15%, 2/1/21 ............................... 1,000,000 866,970
St. Michael Independent School District (Callable
2/1/09 at 100), 4.88%, 2/1/17-2/1/18 .............. 3,295,000 2,833,886
-----------
23,753,405
-----------
HEALTH CARE REVENUE (25.9%):
Agriculture and Economic Development Board
(MBIA)(Callable 2/15/10 at 101),
5.00%, 2/15/19 .................................... 2,000,000(b) 1,709,980
Austin Housing and Redevelopment Authority (Callable
9/1/09 at 102), 6.63%, 9/1/29 ..................... 1,000,000 887,340
Bemidji Health Care Facility-North Country Health
System (Callable 9/1/06 at 102), 5.63%, 9/1/15 .... 1,760,000 1,603,976
Breckenridge Health Facility - Catholic Health
Corporation (MBIA)(Callable 11/15/03 at 102),
5.25%, 11/15/13 ................................... 4,120,000(b) 3,906,543
Cuyuna Range Health Care Facility (Callable 06/01/07
at 102), 6.00%, 6/1/29 ............................ 1,000,000 813,950
Duluth Clinic Health Care Facilities (AMBAC)
(Prerefunded to 11/1/02 at 102),
6.30%, 11/1/02 .................................... 360,000(b)(e) 380,387
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
2000 Annual Report 15 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Duluth Clinic Health Care Facilities (AMBAC)
(Prerefunded to 11/1/04 at 100),
6.30%, 11/1/04 .................................... $ 140,000(b)(e) $ 147,760
Duluth Health Facility-Benedictine Health System
(Callable 2/15/03 at 102), 6.00%, 2/15/12 ......... 1,800,000 1,817,820
Fergus Falls Health Care-Lake Region Hospital
(Callable 9/1/03 at 102), 6.50%, 9/1/18 ........... 1,000,000 944,420
Minneapolis and St. Paul, Housing and Redevelopment
Health Care System- Childrens Health Care (FSA)
(Callable 8/15/05 at 102), 5.70%, 8/15/16 ......... 500,000(b) 486,020
Minneapolis Health Care-Fairview Hospital (MBIA)
(Callable 11/15/03 at102), 5.25%, 11/15/13 ........ 500,000(b) 465,555
New Prague Hospital Revenue (Callable 12/1/06 at
100), 6.50%, 6/1/12 ............................... 500,000 470,595
Northfield Hospital Revenue (Callable 12/1/01 at
100), 7.00%, 12/1/05-12/1/08 ...................... 1,690,000 1,701,002
Red Wing Elderly Housing-River Region (Callable
9/1/03 at 102), 6.50%, 9/1/22 ..................... 1,500,000 1,393,005
Red Wing Health Care Facility-River Region (Callable
9/1/03 at 102), 6.50%, 9/1/22 ..................... 1,000,000 928,670
Rochester Health Care Facility (Callable 5/15/08 at
101), 5.50%, 11/15/27 ............................. 2,000,000 1,779,440
Waconia Housing Redevelopment Authority (Callable
6/4/03 at 102), 6.00%, 6/1/14 ..................... 1,500,000 1,414,590
Waconia Housing Redevelopment Authority-Public
Project (Callable 1/1/03 at 100),
5.70%-5.75%, 1/1/10-1/1/15 ........................ 1,240,000 1,158,385
-----------
22,009,438
-----------
HOUSING REVENUE (13.8%):
Burnsville, Summit Park Apartments (Callable 7/1/03
at 102), 5.75%, 7/1/11 ............................ 1,000,000 984,350
Coon Rapids, Multifamily Development-Woodland Apts.
(FHA) (Callable 12/1/03 at 100),
5.63%, 12/1/09 .................................... 2,765,000(b) 2,759,608
New Hope, Multifamily Housing Project (Callable
1/1/06 at 102), 6.05%, 1/1/17 ..................... 450,000 448,556
St. Louis Park, Multifamily Housing Project (Callable
12/1/04 at 102), 6.15%, 12/1/16 ................... 500,000 503,030
State Housing and Finance Agency (Callable 1/1/04 at
102), 6.30%, 7/1/25 ............................... 715,000 725,153
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
2000 Annual Report 16 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
State Housing and Finance Agency (Callable 7/1/03 at
102), 5.95%, 1/1/17 ............................... $2,810,000 $ 2,742,588
State Housing and Finance Agency (Callable 8/1/03 at
102), 5.70%-6.10%, 8/1/07-8/1/22 .................. 2,025,000 2,009,098
State Housing and Redevelopment Authority (Callable
1/01/10 at 100), 6.63%-6.75%, 1/1/24-1/1/31 ....... 665,000 629,409
Washington County Housing and Redevelopment Authority
(Callable 08/20/09 at 100), 5.60%, 8/20/34 ........ 1,000,000 899,310
-----------
11,701,102
-----------
INDUSTRIAL DEVELOPMENT REVENUE (0.3%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 12/1/03 at 102), 5.75%, 12/1/16 ......... 300,000(d) 290,859
-----------
PUBLIC UTILITY DISTRICT REVENUE (2.9%):
Owatonna Public Utility Revenue (AMBAC) (Callable
1/1/04 at 100), 5.45%, 1/1/16 ..................... 2,600,000(b) 2,459,626
-----------
SCHOOL DISTRICT REVENUE (2.1%):
St Paul Academy Housing and Redevelopment Authority
(Callable 10/01/09 at 100), 5.50%, 10/1/24 ........ 2,000,000 1,766,760
-----------
UTILITY REVENUE (5.2%):
Northern Minnesota Municipal Power Agency (Callable
1/1/09 at 102), 5.40%, 1/1/15 ..................... 1,000,000 955,570
Western Minnesota Municipal Power Agency (AMBAC)
(Callable 1/1/06 at 102),
5.40%-5.50%, 1/1/09-1/1/12 ........................ 3,500,000(b) 3,498,445
-----------
4,454,015
-----------
WATER/POLLUTION CONTROL REVENUE (3.2%):
Minnesota Public Facilities Authority Water Pollution
Control Revenue (Callable 3/1/06 at 100),
4.75%-5.35%, 3/1/10-3/1/12 2,900,000 2,762,603
-----------
Total Municipal Long-Term Bonds
(cost: $83,136,109) ............................ 80,049,226
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
2000 Annual Report 17 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
Shares/Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ---------- -----------
MUNICIPAL DERIVATIVE SECURITIES (3.0%):
<S> <C> <C>
INVERSE FLOATERS (3.0%):
Duluth Health Facility-Benedictine Health System,
Series E-2, 9.28%, 2/15/12 ........................ $ 925,000(b)(d) $ 948,125
Osseo Independent School District (FGIC),
8.28%, 2/1/14 ..................................... $ 775,000(b)(d) 738,118
Rochester Health Care, 9.01%, 11/15/10 .............. $ 740,000(b)(d) 816,775
-----------
Total Municipal Derivative Securities
(cost: $2,303,958) ............................. 2,503,018
-----------
Total Municipal Long-Term Securities
(cost: $85,440,067) ............................ 82,554,244
-----------
MUNICIPAL SHORT-TERM SECURITIES (1.1%):
Bloomington Multifamily Revenue, 3.35%, 12/1/25 ..... $ 450,000(c) 450,000
Maple Grove Multifamily, 3.20%, 11/1/31 ............. $ 400,000(c) 400,000
Minnesota State General Obligation,
3.10%, 12/1/07 .................................... $ 100,000(c) 100,000
-----------
Total Municipal Short-Term Securities
(cost: $950,000) ............................... 950,000
-----------
RELATED PARTY MONEY MARKET FUND (0.0%):
First American Tax Free Obligations Fund
(cost: $28,167) ................................... 28,167(f) 28,167
-----------
Total Investments in Securities
(cost: $86,418,234)(g) ......................... $83,530,411
===========
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
2000 Annual Report 18 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
AMBAC - AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC - FINANCIAL GUARANTY INSURANCE CORPORATION
FHA - FEDERAL HOUSING AUTHORITY
FSA - FINANCIAL SECURITY ASSURANCE
MBIA - MUNICIPAL BOND INSURANCE ASSOCIATION
INVERSE FLOATER - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) IN THE SAME MAGNITUDE AS, OR IN A MULTIPLE OF, A
DECREASE (INCREASE) IN THE MARKET RATE PAID ON A RELATED, FLOATING
RATE SECURITY. INTEREST RATES DISCLOSED ARE IN EFFECT ON JANUARY 31,
2000.
(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
JANUARY 31, 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) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT AND MAY NOT BE SOLD TO
THE PUBLIC. THESE SECURITIES ARE CONSIDERED ILLIQUID. THE FUND IS NOT
LIMITED IN ITS ABILITY TO INVEST IN THESE ILLIQUID SECURITIES. ON
JANUARY 31, 2000, THE AGGREGATE VALUE OF THESE INVESTMENTS WAS $4,776,617
OR 5.6% OF TOTAL NET ASSETS. INFORMATION REGARDING THESE SECURITIES IS AS
FOLLOWS:
<TABLE>
<CAPTION>
DATE
SECURITY PAR ACQUIRED COST BASIS
- -------------------------------------------------- --------- -------- ----------
<S> <C> <C> <C>
DULUTH SEAWAY PORT AUTHORITY, CARGILL INC. PROJECT $ 300,000 11/93 $ 300,000
DULUTH HEALTH FACILITY BENEDICTINE HEALTH SYSTEM 925,000 5/94 885,076
OSSEO INDEPENDENT SCHOOL DISTRICT 2,000,000 2/97 1,922,784
OSSEO INDEPENDENT SCHOOL DISTRICT 775,000 5/94 692,365
ROCHESTER HEALTH CARE 740,000 5/94 726,518
</TABLE>
(e) 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.
(f) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANK WHO ALSO SERVES AS ADVISOR
FOR THIS FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(g) ON JANUARY 31, 2000, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $86,209,215. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 1,137,104
GROSS UNREALIZED DEPRECIATION ...... (3,815,908)
-----------
NET UNREALIZED DEPRECIATION ...... $(2,678,804)
===========
</TABLE>
- --------------------------------------------------------------------------------
2000 Annual Report 19 Minnesota Municipal Income Portfolio
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
MINNESOTA MUNICIPAL INCOME PORTFOLIO INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Minnesota Municipal Income
Portfolio Inc. as of January 31, 2000, 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 fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended January 31, 1999 and the financial
highlights for each of the four years in the period ended January 31, 1999, were
audited by other auditors whose report dated March 12, 1999, expressed an
unqualified opinion.
We conducted our audit 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 January 31, 2000, 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 2000 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Minnesota Municipal Income Portfolio Inc. at January 31, 2000, and the results
of its operations, changes in its 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
March 3, 2000
- --------------------------------------------------------------------------------
2000 Annual Report 20 Minnesota Municipal Income Portfolio
<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, 99.66% QUALIFYING AS
EXEMPT-INTEREST DIVIDENDS)
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
- ------------ ---------
<S> <C>
February 24, 1999 ...................... $0.063125
March 24, 1999 ......................... 0.066250
April 28, 1999 ......................... 0.066250
May 26, 1999 ........................... 0.066250
June 23, 1999 .......................... 0.066250
July 28, 1999 .......................... 0.066250
August 25, 1999 ........................ 0.066250
September 22, 1999 ..................... 0.066250
October 27, 1999 ....................... 0.066250
November 23, 1999 ...................... 0.066250
December 15, 1999 ...................... 0.069550
January 12, 2000 ....................... 0.066250
---------
Total .............................. $0.795175
=========
</TABLE>
PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.66% QUALIFYING AS
EXEMPT-INTEREST DIVIDENDS)
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Total class "M" ........................ $ 760.08
=========
Total class "W" ........................ $ 790.18
=========
</TABLE>
- --------------------------------------------------------------------------------
2000 Annual Report 21 Minnesota Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's 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 fund's preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
David T. Bennett ....................... 1,238 0
Leonard W. Kedrowski ................... 1,238 0
</TABLE>
David Bennett passed away in September, 1999. The fund's
preferred shareholders will be asked to elect a replacement
director at the next annual meeting.
(2) The fund's 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>
Robert J. Dayton ....................... 3,983,643 3,796
Roger A. Gibson ........................ 3,983,643 3,796
Andrew M. Hunter III ................... 3,983,643 3,796
John M. Murphy ......................... 3,983,643 3,796
Robert L. Spies ........................ 3,983,643 3,796
Joseph D. Strauss ...................... 3,983,643 3,796
Virginia L. Stringer ................... 3,983,643 3,796
</TABLE>
(3) The fund's preferred and common shareholders, voting
as a class, ratified the selection by the funds Board of
Directors of Ernst & Young LLP as the independent public
- --------------------------------------------------------------------------------
2000 Annual Report 22 Minnesota Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
accountants for the fund for the fiscal year ending
January 31, 2000. The following votes were cast regarding
this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- ----------------- ----------- ---------
<S> <C> <C> <C>
3,980,395 533 6,517 --
</TABLE>
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's a convenient and economical way to buy
additional shares of the fund by automatically reinvesting
dividends and capital gains. The plan is administered by
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.
- --------------------------------------------------------------------------------
2000 Annual Report 23 Minnesota Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
PLAN ADMINISTRATION
Beginning no more than five business days before the dividend
payment date, EquiServe will buy shares of the fund on the
fund's primary exchange or elsewhere on the open market.
The fund will not issue any new shares in connection with the
plan. All reinvestments will be at a market price plus a pro
rata share of any brokerage commissions, which may be more or
less than the fund's net asset value per share. The number of
shares allocated to you is determined by dividing the amount of
the dividend or distribution by the applicable price per share.
There is no direct charge for reinvestment of dividends and
capital gains, since EquiServe fees are paid for by the fund.
However, each participant pays a pro rata portion of the
brokerage commissions. Brokerage charges are expected to be
lower than those for individual transactions because shares are
purchased for all participants in blocks. As long as you
continue to participate in the plan, distributions paid on the
shares in your account will be reinvested.
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 to the same extent 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
- --------------------------------------------------------------------------------
2000 Annual Report 24 Minnesota Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
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.
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.
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2000 Annual Report 25 Minnesota Municipal Income Portfolio
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
MINNESOTA MUNICIPAL INCOME PORTFOLIO
2000 ANNUAL REPORT
[GRAPHIC] This document is printed on paper
made from 100% total recovered fiber,
including 15% post-consumer waste.
3/2000 3016-00
