<PAGE>
[GRAPHIC]
MINNESOTA MUNICIPAL INCOME PORTFOLIO
MXA
SEMIANNUAL REPORT
2000
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
MINNESOTA MUNICIPAL
INCOME PORTFOLIO
TABLE OF CONTENTS
2 Fund Overview
6 Financial Statements
and Notes
16 Investments in
Securities
21 Shareholder Update
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
and capital gains 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.
------------------------------------------------------
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
------------------------------------------------------
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
Based on net asset value for the periods ended July 31, 2000
<TABLE>
<CAPTION>
One Year Five Year Since Inception
<S> <C> <C> <C>
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(MXA, inception 6/25/1993) 2.07% 6.64% 5.45%
Lipper General Municipal Bond Funds: Leveraged Average 2.17% 4.91% 4.56%
Lehman Brothers Municipal Long Bond Index 2.91% 6.50% 5.75%
</TABLE>
Average annual total returns are through July 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 July 31, 2000, were
-1.49%, 7.81%, and 4.18%, 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 NAV. Therefore, you may be unable to realize the full NAV of
your shares when you sell.
The Lipper General Municipal Bond Funds: Leveraged Average represents the
average annual total return, with distributions reinvested, of leveraged
perpetual and term-trust national 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
July 31, 2000.
Minnesota Municipal Income Portfolio SEMIANNUAL REPORT 2000 1)
<PAGE>
[GRAPHIC] FUND OVERVIEW
FUND MANAGEMENT
DOUG WHITE, CFA, is primarily responsible for the management of Minnesota
Municipal Income Portfolio. He has 17 years of financial experience.
CATHERINE STIENSTRA assists with the management of Minnesota Municipal Income
Portfolio. She has 12 years of financial experience.
SEPTEMBER 15, 2000
FOR THE SEMIANNUAL REPORTING PERIOD ENDING JULY 31, 2000, MINNESOTA MUNICIPAL
INCOME PORTFOLIO HAD A TOTAL RETURN OF 8.92%* BASED ON ITS NET ASSET VALUE
(NAV). This compares to the average return of 6.24% for a group of similar funds
in the Lipper General Municipal Bond Funds: Leveraged category. The Lehman
Brothers Municipal Long Bond Index, the fund's broad-based benchmark that
reflects no fees or expenses, returned 9.53% during the same period. The fund's
total return, based on its market price, was 12.24%* during the six months.
THE FUND OUTPERFORMED ITS PEERS OVER THE SIX-MONTH PERIOD AS MUNICIPAL BOND
YIELDS FELL. This came on the heels of the previous six-month period of rising
rates where the fund did not
*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.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
As a percentage of total assets on July 31, 2000
[CHART]
<TABLE>
<S> <C>
General Obligations 31%
Utility Revenue 4%
Certificates of Participation 1%
Transportation Revenue 6%
Health Care Revenue 23%
Authority Revenue 1%
Education Revenue 12%
Water/Pollution Control Revenue 5%
Housing Revenue 14%
Other Assets 2%
Building Revenue 1%
</TABLE>
(2 Minnesota Municipal Income Portfolio SEMIANNUAL REPORT 2000
<PAGE>
perform as well. Minnesota Municipal Income Portfolio typically does better in a
steady or falling-rate environment because it focuses on longer-duration
municipal bonds in order to generate attractive tax-free income. These
longer-duration bonds have higher yields but also exhibit more price volatility
in a fluctuating interest-rate environment.
AS THE U.S. ECONOMIC EXPANSION THAT WE'VE ENJOYED FOR THE PAST 10 YEARS
CONTINUES, THE FUND REMAINS DIVERSIFIED ACROSS MANY SECTORS IN MINNESOTA. (See
chart on page 2.) It maintains an emphasis on quality issues in the health care,
general obligation, education and housing sectors. The fund has recently
increased its focus on maximizing call protection--the time before issuers can
refinance and call their issues away from the portfolio.
SUPPLY REMAINS AN ISSUE FOR TAX-FREE BOND FUNDS AS MUNICIPALITIES ARE NOT
ISSUING AS MANY NEW BONDS IN THE MARKETPLACE. The ongoing economic expansion has
allowed many municipalities to fund projects with increased tax receipts,
reducing their needs to borrow in the municipal market. The overall supply of
Minnesota municipal bonds is up only slightly from a year ago. However, demand
for municipal bonds has recently picked up as well in the state. Therefore, we
are keeping the fund fully invested as it is difficult to find attractive new
bonds in this environment.
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CREDIT QUALITY BREAKDOWN
As of July 31, 2000, according to Standard & Poor's and Moody's Investors
Service
<TABLE>
<S> <C>
AAA/Aaa 45%
AA/Aa 34%
A 9%
BBB/Baa 5%
Nonrated 7%
-----------------------
100%
</TABLE>
Minnesota Municipal Income Portfolio SEMIANNUAL REPORT 2000 3)
<PAGE>
[GRAPHIC] FUND OVERVIEW CONTINUED
THE FUND CONTINUES TO EMPHASIZE HIGHER-QUALITY MUNICIPAL SECURITIES. As you can
see from the credit quality breakdown on page 3, 93% of the fund is considered
investment-grade quality. This means the quality of the bonds is in one of the
four highest categories according to industry rating services such as Standard &
Poor's or Moody's. An investment-grade rating means that there is a low risk
that the bond issuer will default in its timely payment of interest and
principal. We are also overweighted at the higher end of the investment-grade
spectrum--79% of the fund's holdings are rated AA or AAA--to balance out the 7%
position we have in nonrated bonds. Prior to purchase, we subject nonrated
holdings to much of the rigorous analysis that credit rating agencies perform on
bonds they rate. As portfolio holdings, these positions are also more closely
and frequently monitored by our research staff than most of the portfolio's
investment-grade holdings.
THANK YOU FOR YOUR INVESTMENT IN MINNESOTA MUNICIPAL INCOME PORTFOLIO AND THE
TRUST YOU HAVE PLACED IN US AS MANAGERS. We will continue to closely monitor the
quality of the municipal bonds in the portfolio and carefully assess new
opportunities in an effort to reach your goal of attractive monthly income that
is free from federal and state income taxes.
4) Minnesota Municipal Income Portfolio SEMIANNUAL REPORT 2000
<PAGE>
PREFERRED STOCK
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 NAV of the fund and the market value
of shares of common stock.
Minnesota Municipal Income Portfolio SEMIANNUAL REPORT 2000 5)
<PAGE>
FINANCIAL STATEMENTS (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES July 31, 2000
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $86,801,092
Accrued interest receivable ............................... 1,506,448
-----------
Total assets ............................................ 88,307,540
-----------
LIABILITIES:
Preferred stock dividends payable (note 3) ................ 20,172
Accrued investment management fee ......................... 26,027
Accrued administrative fee ................................ 21,518
Other accrued expenses .................................... 39,813
-----------
Total liabilities ....................................... 107,530
-----------
Net assets applicable to outstanding capital stock ...... $88,200,010
===========
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ........................................ $89,145,629
Undistributed net investment income ....................... 747,562
Accumulated net realized loss on investments .............. (1,725,065)
Unrealized appreciation of investments .................... 31,884
-----------
Total - representing net assets applicable to capital
stock ................................................. $88,200,010
===========
* Investments in securities at identified cost ............ $86,769,208
===========
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to outstanding common stock ......... $57,100,010
Shares of common stock outstanding (authorized 200 million
shares of $0.01 par value) .............................. 4,146,743
Net asset value ........................................... $ 13.77
Market price .............................................. $ 13.19
LIQUIDATION PREFERENCE OF PREFERRED STOCK (NOTE 3):
Net assets applicable to outstanding preferred stock ...... $31,100,000
Shares of preferred stock outstanding (authorized one
million shares) ......................................... 1,244
Liquidation preference per share .......................... $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Semiannual Report 6 Minnesota Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended July 31, 2000
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $2,457,071
EXPENSES (NOTE 5):
Investment management fee ................................. 149,407
Administrative fee ........................................ 86,192
Remarketing agent fee ..................................... 38,768
Custodian fees ............................................ 6,689
Transfer agent fees ....................................... 17,882
Reports to shareholders ................................... 14,250
Directors' fees ........................................... 1,550
Audit and legal fees ...................................... 19,874
Other expenses ............................................ 27,432
----------
Total expenses .......................................... 362,044
----------
Net investment income ................................... 2,095,027
----------
NET REALIZED AND UNREALIZED GAINS AND LOSSES ON INVESTMENTS:
Net realized gain on investments in securities
(note 4) ................................................ 380,571
Net change in unrealized appreciation or depreciation of
investments ............................................. 2,919,707
----------
Net gain on investments ................................. 3,300,278
----------
Net increase in net assets resulting from
operations .......................................... $5,395,305
==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Semiannual Report 7 Minnesota Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
7/31/00 YEAR ENDED
(UNAUDITED) 1/31/00
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 2,095,027 $ 4,271,603
Net realized gain (loss) on investments ................... 380,571 (68,721)
Net change in unrealized appreciation or depreciation of
investments ............................................. 2,919,707 (9,516,828)
----------- -----------
Net increase (decrease) in net assets resulting from
operations ............................................ 5,395,305 (5,313,946)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends .................................... (1,648,330) (3,297,387)
Preferred stock dividends ................................. (644,547) (971,641)
----------- -----------
Total distributions ..................................... (2,292,877) (4,269,028)
----------- -----------
Total increase (decrease) in net assets ................. 3,102,428 (9,582,974)
Net assets at beginning of period ......................... 85,097,582 94,680,556
----------- -----------
Net assets at end of period ............................... $88,200,010 $85,097,582
=========== ===========
Undistributed net investment income ....................... $ 747,562 $ 945,412
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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2000 Semiannual Report 8 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
(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
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2000 Semiannual Report 9 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
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.
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
July 31, 2000, the fund had no investments in inverse floaters.
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
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2000 Semiannual Report 10 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
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 July 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, 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.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders.
Common stock distributions are recorded as of the close of
business on the ex-dividend date and preferred stock dividends
are accrued daily. Net realized gains distributions, if any,
will be made at least annually. Distributions are payable in
cash or, for common shareholders pursuant to the funds dividend
reinvestment plan, reinvested in additional shares of the funds
common stock. Under the plan, common shares will be purchased in
the open market.
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2000 Semiannual Report 11 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) REMARKETED
PREFERRED
STOCK
............................
Minnesota Municipal Income Portfolio Inc. has issued and, as of
July 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 July 31, 2000, the
dividend rates were 3.80% and 4.15% 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 six
months ended July 31, 2000, aggregated $17,406,814 and
$16,754,213, 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 annualized
percentage rate of 0.35% of the fund's average weekly net assets
(computed by subtracting liabilities, which exclude preferred
--------------------------------------------------------------------------------
2000 Semiannual Report 12 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
stock, from the value of the total assets of the fund). For its
fee, the advisor provides investment advice and, in general,
conducts the management and investment activities of the fund.
The administration agreement provides the administrator with a
monthly fee in an amount equal to an annualized percentage of
0.20% 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 regulatory reporting and record-keeping
services for the fund.
REMARKETING AGENT FEE
The fund has 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 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 six months ended July 31,
2000, the fund paid $6,435 to U.S. Bank for custody services.
(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-
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2000 Semiannual Report 13 Minnesota Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
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 DATE
------------ ---------------
<S> <C> <C>
$1,624,891 2003
415,059 2004
34,143 2008
----------
$2,074,093
==========
</TABLE>
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2000 Semiannual Report 14 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:
<TABLE>
<CAPTION>
Six Months Ended Year Ended January 31,
July 31, 2000 -------------------------------------------------
(Unaudited) 2000 1999(g) 1998 1997 1996
---------------- ----------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $13.02 $ 15.33 $15.01 $13.97 $14.32 $11.96
------ ------- ------ ------ ------ ------
Operations:
Net investment income ................ 0.51 1.03 1.05 1.06 1.09 1.06
Net realized and unrealized gains
(losses) on investments ............ 0.80 (2.31) 0.28 0.99 (0.44) 2.40
------ ------- ------ ------ ------ ------
Total from operations .............. 1.31 (1.28) 1.33 2.05 0.65 3.46
------ ------- ------ ------ ------ ------
Distributions to shareholders from net
investment income:
Paid to common shareholders .......... (0.40) (0.80) (0.77) (0.76) (0.76) (0.82)
Paid to preferred shareholders ....... (0.16) (0.23) (0.24) (0.25) (0.24) (0.28)
------ ------- ------ ------ ------ ------
Total distributions to
shareholders ..................... (0.56) (1.03) (1.01) (1.01) (1.00) (1.10)
------ ------- ------ ------ ------ ------
Net asset value, common stock, end
of period ........................ $13.77 $ 13.02 $15.33 $15.01 $13.97 $14.32
====== ======= ====== ====== ====== ======
Market value, common stock, end of
period ........................... $13.19 $ 12.13 $14.50 $14.13 $12.50 $12.88
====== ======= ====== ====== ====== ======
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 8.92% (10.16)% 7.44% 13.29% 3.09% 27.27%
Total return, common stock, market
value (b) ............................ 12.24% (11.39)% 8.27% 19.60% 3.19% 15.74%
Net assets at end of period
(in millions) ........................ $ 88 $ 85 $ 95 $ 93 $ 89 $ 90
Ratio of expenses to average weekly net
assets applicable to common
stock (c) ............................ 1.31%(h) 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) ............... 5.25%(h) 5.60% 5.37% 5.66% 6.25% 5.81%
Portfolio turnover rate (excluding
short-term securities) ............... 20% 15% 16% 26% 25% 13%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 31 $ 31 $ 31 $ 31 $ 31 $ 31
Asset coverage per share (in
thousands) (f) . $ 71 $ 68 $ 76 $ 75 $ 72 $ 73
Liquidation preference and market value
per share of preferred stock
(in thousands) ....................... $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.84%, 0.82%,
0.78%, 0.80%, 0.82% AND 0.82% FOR THE SIX MONTHS ENDED JULY 31, 2000, AND
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 4.86%,
4.74%, 4.63%, 4.87%, 5.16% AND 5.06% FOR THE SIX MONTHS ENDED JULY 31,
2000, AND FISCAL YEARS 2000, 1999, 1998, 1997 AND 1996, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY PREFERRED SHARES OUTSTANDING.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR WAS CHANGED FROM PIPER CAPITAL TO
U.S. BANK.
(h) ANNUALIZED.
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2000 Semiannual Report 15 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL INCOME PORTFOLIO July 31, 2000
<S> <C> <C>
<CAPTION>
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%):
AUTHORITY REVENUE (1.3%):
St. Paul Port Authority Hotel Facility (Callable
8/1/08 at 103), 7.38%, 8/1/29 ..................... $1,200,000 $ 1,167,060
-----------
BUILDING REVENUE (1.0%):
Benton County Jail Facility (FSA) (Callable 2/1/05 at
100), 5.70%, 2/1/13-2/1/16 ........................ 900,000(b) 911,067
-----------
CERTIFICATES OF PARTICIPATION (0.6%):
Anoka County (Callable 6/1/03 at 102),
6.10%, 6/1/13 ..................................... 500,000 512,835
-----------
EDUCATION REVENUE (9.8%):
Higher Education Facility-Carleton College (Callable
11/1/07 at 100), 5.30%-5.40%, 11/1/13-11/1/14 ..... 2,500,000 2,510,210
Higher Education Facility-St. Benedict College
(Callable 3/1/04 at 100),
6.20%-6.38%, 3/1/14-3/1/20 ........................ 285,000 289,687
Higher Education Facility-St. Benedict College
(Prerefunded to 3/1/04 at 100),
6.20%-6.38%, 3/15/14-3/1/20 ....................... 765,000(e) 803,689
Higher Education Facility-St. John's University
(Callable 10/1/07 at 100), 5.35%, 10/1/17 ......... 500,000 480,745
Higher Education Facility-Carleton College (Callable
5/1/06 at 100), 5.75%, 11/1/12 .................... 2,000,000 2,062,900
Higher Education Facility-Macalester College
(Callable 3/1/05 at 100),
5.50%-5.55%, 3/1/12-3/1/16 ........................ 500,000 504,250
Higher Education Facility-St. Mary's College
(Callable 10/1/03 at 101), 6.10%, 10/1/16 ......... 500,000 504,570
Higher Education Facility-St. Thomas University
(Callable 4/1/08 at 100), 5.38%, 4/1/18 ........... 1,050,000 1,015,623
Higher Education Facility-St. Thomas University
(Callable 9/1/03 at 101),
5.50%-5.60%, 9/1/08-9/1/14 ........................ 430,000 434,152
-----------
8,605,826
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
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2000 Semiannual Report 16 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
----------------------- ----------- -----------
<S> <C> <C>
GENERAL OBLIGATIONS (30.6%):
Albany Independent School District (Callable 2/1/08
at 100), 5.00%, 2/1/16 ............................ $1,220,000 $ 1,163,038
Burnsville Independent School District (Callable
2/1/06 at 100), 4.88%, 2/1/13 ..................... 2,000,000 1,912,460
Chaska Independent School District (Crossover
refunded to 2/1/06 at 100), 6.00%, 2/1/15 ......... 2,725,000(e) 2,889,535
Delano Independent School District (FSA) (Callable
2/1/11 at 100), 5.88%, 2/1/25 ..................... 1,000,000(b) 1,024,800
Hawley Independent School District (Crossover
refunded to 2/1/06 at 100), 5.75%, 2/1/17 ......... 1,000,000(e) 1,048,400
Itasca County Independent School District (MBIA)
(Callable 2/1/05 at 100), 5.25%, 2/1/11 ........... 710,000(b) 717,072
Lakeville Independent School District #194 (Callable
2/1/08 at 100), 5.13%, 2/1/22 ..................... 2,600,000 2,437,786
Lakeville Independent School District #194 (Callable
2/1/09 at 100), 5.00%, 2/1/17 ..................... 3,640,000 3,440,492
Minneapolis General Obligation (Callable 9/1/05 at
100), 5.20%, 3/1/13 ............................... 1,000,000 1,003,940
Rosemount General Obligation (Callable 4/1/06 at
100), 5.75%, 4/1/13 ............................... 1,000,000 1,027,600
Sauk Rapids Independent School District (MBIA)
(Callable 2/1/11 at 100), 5.75%, 2/1/23 ........... 5,000,000(b) 5,043,150
St. Michael General Obligation (MBIA) (Callable
2/1/09 at 100), 5.15%, 2/1/21 ..................... 1,000,000(b) 932,170
St. Michael Independent School District (Callable
2/1/09 at 100), 4.88%, 2/1/17-2/1/18 .............. 3,295,000 3,014,718
State General Obligations (Callable 4/1/08 at 100),
5.20%, 10/1/24 1,400,000 1,326,206
-----------
26,981,367
-----------
HEALTH CARE REVENUE (23.7%):
Agriculture and Economic Development Board (MBIA)
(Callable 2/15/10 at 101), 5.00%, 2/15/19 ......... 2,000,000(b) 1,834,560
Austin Housing & Redevelopment Authority (Callable
9/1/09 at 102), 6.63%, 9/1/29 ..................... 1,000,000 894,270
Bemidji Health Care Facility-North Country Health
System (Callable 9/1/06 at 102), 5.63%, 9/1/15 .... 1,760,000 1,671,560
Breckenridge Health Facility-Catholic Health
Corporation (Callable 11/15/03 at 102),
5.25%, 11/15/13 ................................... 4,120,000 4,115,756
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 17 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
----------------------- ----------- -----------
<S> <C> <C>
Duluth Clinic Health Care Facilities (AMBAC)
(Prerefunded to 11/1/02 at 102),
6.30%, 11/1/22 .................................... $ 500,000(b)(e) $ 529,656
Duluth Health Facility-Benedictine Health System
(MBIA) (Callable 2/15/03 at 102),
6.00%, 2/15/12 .................................... 1,800,000(b) 1,870,758
Fergus Falls Health Care-Lake Region Hospital
(Callable 9/1/03 at 102), 6.50%, 9/1/18 ........... 1,000,000 955,970
Health Facilities Gross Revenue-Cuyuna Range Hospital
District (Callable 6/1/07 at 102),
6.00%, 6/1/29 ..................................... 1,000,000 825,830
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) 504,945
Minneapolis Health Care-Fairview Hospital (MBIA)
(Callable 11/15/03 at 102), 5.25%, 11/15/13 ....... 500,000(b) 495,715
New Hope Housing & Health Care-Masonic Home North
Ridge, 4.80%, 3/1/03 .............................. 515,000 499,267
Northfield Hospital Revenue (Callable 12/1/01 at
100), 7.00%, 12/1/05-12/1/08 ...................... 1,690,000 1,700,410
Red Wing Elderly Housing-River Region (Callable
9/1/03 at 102), 6.50%, 9/1/22 ..................... 1,500,000 1,411,380
Rochester Health Care Facility (Callable 5/15/08 at
101), 5.50%, 11/15/27 ............................. 1,500,000 1,450,725
Waconia Housing Redevelopment Authority (Callable
6/1/03 at 102), 6.00%, 6/1/14 ..................... 1,500,000 1,465,455
Waconia Housing Redevelopment Authority-Public
Project (Callable 1/1/03 at 100),
5.70%-5.75%, 1/1/10-1/1/15 ........................ 740,000 688,602
-----------
20,914,859
-----------
HOUSING REVENUE (13.4%):
Burnsville, Summit Park Apartments (FHA) (Callable
7/1/03 at 102), 5.75%, 7/1/11 ..................... 1,000,000(b) 1,006,310
Coon Rapids, Multifamily Development-Woodland Apts.
(FHA) (Callable 12/1/03 at 100),
5.63%, 12/1/09 .................................... 2,665,000(b) 2,677,206
New Hope, Multifamily Housing Project (FHA) (Callable
1/1/06 at 102), 6.05%, 1/1/17 ..................... 450,000(b) 453,982
St. Louis Park, Multifamily Housing Project (FHA)
(Callable 12/1/05 at 102), 6.15%, 12/1/16 ......... 500,000(b) 509,390
Southeastern Minnesota Multi-County Housing and
Redevelopment Authority (Callable 1/1/10 at 100),
6.63%-6.75%, 1/1/24-1/1/31 665,000 643,400
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 18 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
----------------------- ----------- -----------
<S> <C> <C>
State Housing and Finance Agency (Callable 1/1/04 at
102), 6.30%, 7/1/25 ............................... $ 715,000 $ 727,720
State Housing and Finance Agency (Callable 7/1/03 at
102), 5.95%, 1/1/17 ............................... 2,750,000 2,771,230
State Housing and Finance Agency (Callable 8/1/03 at
102), 5.70%-6.10%, 8/1/07-8/1/22 .................. 2,025,000 2,041,728
Washington County Housing and Redevelopment Authority
(Callable 8/20/09 at 100), 5.60%, 8/20/34 ......... 1,000,000 940,820
-----------
11,771,786
-----------
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) 302,559
-----------
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) 2,591,810
-----------
SCHOOL DISTRICT REVENUE (2.2%):
St. Paul Academy Housing and Redevelopment Authority
(Callable 10/1/09 at 100), 5.50%, 10/1/24 ......... 2,000,000 1,895,040
-----------
TRANSPORTATION REVENUE (5.7%):
Minneapolis and St. Paul Metropolitan Airport
Commission (FGIC) (Callable 1/1/10 at 101),
5.75%, 1/1/32 ..................................... 5,000,000(b) 5,030,850
-----------
UTILITY REVENUE (1.1%):
Northern Minnesota Municipal Power Agency (FSA)
(Callable 1/1/09 at 102), 5.40%, 1/1/15 ........... 1,000,000(b) 997,970
-----------
WATER/POLLUTION CONTROL REVENUE (5.5%):
Minnesota Public Facilities Authority Water Pollution
Control Revenue (Callable 3/1/06 at 100),
4.75%, 3/1/10 ..................................... 1,900,000 1,882,634
Minnesota Public Facilities Authority Water Pollution
Control Revenue (Callable 3/1/09 at 100),
5.38%, 3/1/19 ..................................... 3,000,000 2,939,460
-----------
4,822,094
-----------
Total Municipal Long-Term Securities
(cost: $86,473,239) ............................ 86,505,123
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
--------------------------------------------------------------------------------
2000 Semiannual Report 19 Minnesota Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
--------------------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount/Shares Value (a)
----------------------- ------------- -----------
<S> <C> <C>
MUNICIPAL SHORT-TERM SECURITIES (0.3%):
Maple Grove Multifamily, 4.25%, 11/1/31
(cost: $245,000) .................................. $ 245,000(c) $ 245,000
-----------
RELATED PARTY MONEY MARKET FUND (0.0%):
First American Tax Free Obligations Fund
(cost: $50,969) ................................... 50,969(f) 50,969
-----------
Total Investments in Securities
(cost: $86,769,208)(g) ......................... $86,801,092
===========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN
THE NOTES TO 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
(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
JULY 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) SECURITY PURCHASED AS PART OF A PRIVATE PLACEMENT AND MAY NOT BE SOLD TO
THE PUBLIC. THIS SECURITY IS CONSIDERED ILLIQUID. THE FUND IS NOT LIMITED
IN ITS ABILITY TO INVEST IN ILLIQUID SECURITIES. ON JULY 31, 2000, THE
VALUE OF THIS INVESTMENT WAS $302,559 OR 0.3% OF TOTAL NET ASSETS.
INFORMATION REGARDING THIS SECURITY 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
</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 WHICH ALSO SERVES AS ADVISOR
FOR THE FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(g) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 1,753,381
GROSS UNREALIZED DEPRECIATION ...... (1,721,497)
-----------
NET UNREALIZED APPRECIATION ...... $ 31,884
===========
</TABLE>
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2000 Semiannual Report 20 Minnesota Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE
--------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
3, 2000. 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 and common shareholders, voting as a
class, voted to decrease the size of the board of directors
from nine members to eight members. The following votes were
cast regarding this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- ----------------- ----------- ---------
<S> <C> <C> <C>
3,740,017 56,169 40,259 --
</TABLE>
(2) The fund's preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
Roger A. Gibson ........................ 886 1
Leonard W. Kedrowski ................... 886 1
</TABLE>
(3) 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 ....................... 3,774,738 61,707
Andrew M. Hunter III ................... 3,776,238 60,207
John M. Murphy, Jr. .................... 3,791,963 44,472
Robert L. Spies ........................ 3,791,306 45,139
Joseph D. Strauss ...................... 3,791,973 44,472
Virginia L. Stringer ................... 3,775,071 61,374
</TABLE>
(4) The fund's preferred and common shareholders, voting as a
class ratified the selection by the fund's board of
directors of Ernst & Young LLP as the independent public
accountants for the fund for the fiscal year ending
January 31, 2001. The following votes were cast regarding
this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- ----------------- ----------- ---------
<S> <C> <C> <C>
3,759,197 17,315 59,933 --
</TABLE>
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2000 Semiannual Report 21 Minnesota Municipal Income Portfolio
<PAGE>
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