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OMB APPROVAL
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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21193
---------------------------------------------
First American Minnesota Municipal Income Fund II, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
800 Nicollet Mall, Minneapolis, MN 55402
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Joseph M. Ulrey III 800 Nicollet Mall, Minneapolis, MN 55402
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-677-3863
----------------------------
Date of fiscal year end: January 31, 2004
--------------------------
Date of reporting period: January 31, 2004
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
Item 1. Report to Shareholders
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[FIRST AMERICAN(TM) LOGO]
[GRAPHIC]
MINNESOTA
MUNICIPAL
INCOME
FUND II
MXN
JANUARY 31, 2004
ANNUAL REPORT
<Page>
[FIRST AMERICAN(TM) LOGO]
MINNESOTA MUNICIPAL
INCOME FUND II
TABLE OF CONTENTS
<Table>
2 Fund Overview
9 Financial Statements
12 Notes to Financial Statements
22 Schedule of Investments
27 Independent Auditors' Report
28 Federal Income Tax Information
29 Shareholder Update
</Table>
PRIMARY INVESTMENTS
A wide range of Minnesota municipal securities that, at the time of purchase,
are rated investment-grade or are unrated and deemed to be of comparable quality
by U.S. Bancorp Asset Management, Inc.
FUND OBJECTIVE
First American Minnesota Municipal Income Fund II (the "Fund") is a
nondiversified, closed-end management investment company. The investment
objective of the Fund is to provide current income exempt from both regular
federal income tax and regular Minnesota personal income tax. The Fund's income
may be subject to federal and/or Minnesota alternative minimum tax.
Distributions of capital gains will be taxable to shareholders. Investors should
consult their tax advisors. As with other investment companies, there can be no
assurance the Fund will achieve its objective.
OUR IMAGE-GEORGE WASHINGTON
HIS RICH LEGACY AS PATRIOT AND LEADER IS WIDELY RECOGNIZED AS EMBODYING THE
SOUND JUDGMENT, RELIABILITY, AND STRATEGIC VISION THAT ARE CENTRAL TO OUR BRAND.
FASHIONED IN A STYLE REMINISCENT OF AN 18TH CENTURY ENGRAVING, THE ILLUSTRATION
CONVEYS THE SYMBOLIC STRENGTH AND VITALITY OF WASHINGTON, WHICH ARE ATTRIBUTES
THAT WE VALUE AT FIRST AMERICAN.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
<Page>
[CHART]
AVERAGE ANNUALIZED TOTAL RETURNS
Based on Net Asset Value ("NAV") for the period ended January 31, 2004
<Table>
<Caption>
MINNESOTA MUNICIPAL LIPPER GENERAL MUNICIPAL LEHMAN BROTHERS MUNICIPAL
INCOME FUND II BOND FUNDS: LEVERAGED AVERAGE LONG BOND INDEX
One Year 6.86% 10.33% 7.64%
Since Inception 10/31/2002 7.36% 12.55% 7.28%
</Table>
The average annualized total returns for the Fund are based on the change in its
NAV and assume reinvestment of distributions at NAV. NAV-based performance is
used to measure investment management results. - Average annualized total
returns based on the change in market price for the one-year and since-inception
periods ended January 31, 2004, were 4.36% and 2.73%, respectively. - Market
price returns assume that all distributions have been reinvested at actual
prices pursuant to the Fund's dividend reinvestment plan. Market price returns
reflect any broker commissions or sales charges on dividends reinvested at
market price. - 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 January 31,
2004.
1
<Page>
FUND OVERVIEW
FIRST AMERICAN MINNESOTA MUNICIPAL INCOME FUND II EARNED A TOTAL RETURN OF 6.86%
BASED ON ITS NAV FOR THE YEAR ENDED JANUARY 31, 2004. The Fund's market price
return was 4.36% during the same period. The Fund's competitive group, the
Lipper General Municipal Bond Funds: Leveraged Average, generated an average
return of 10.33% for the fiscal year. The Lehman Brothers Municipal Long Bond
Index, the benchmark comparison for the Fund, which reflects no fees or
expenses, returned 7.64%.
THE PAST FISCAL YEAR REPRESENTED THE FIRST FULL YEAR OF OPERATION FOR THE FUND.
Work continued on structuring the portfolio in order to generate a competitive
dividend yield. While a portion of the portfolio was invested as the fiscal year
began, the Fund was not fully invested until after the completion of the Fund's
preferred shares offering in March 2003. Therefore, shareholders were not able
to benefit fully from favorable market trends that occurred prior to that time,
accounting for some of the performance difference between the Fund and its
competitive benchmarks.
[CHART]
PORTFOLIO COMPOSITION
As a percentage of total assets on January 31, 2004
<Table>
Health Care Revenue 19%
Leasing Revenue 10%
Housing Revenue 15%
Utility Revenue 6%
Recreation Authority Revenue 2%
Transportation Revenue 10%
Economic Development Revenue 4%
General Obligations 23%
Other Assets 4%
Education Revenue 7%
</Table>
[SIDENOTE]
FUND MANAGEMENT
DOUG WHITE, CFA is primarily responsible for the management of the Fund. He has
21 years of financial experience.
CATHERINE STIENSTRA assists with the management of the Fund. She has 16 years of
financial experience.
2
<Page>
THE U.S. ECONOMY EXHIBITED FAIRLY CONSISTENT SIGNS OF RECOVERY THROUGHOUT THE
FISCAL YEAR. Interest rates on municipal bonds displayed considerable volatility
over the course of the year. A combination of tax cuts and the boom in mortgage
refinancing activity helped to spur consumer spending, resulting in stronger
economic growth. However, the impact of the recovery seemed to be uneven. Many
companies continued to hold off on major investments and the economy failed to
generate a new boom in jobs. This appeared to be due, in part, to global
economic forces that hurt the U.S. labor market.
THESE FACTORS, AMONG OTHERS, INITIALLY RESULTED IN DECLINING INTEREST RATES
DESPITE CLEAR INDICATIONS OF AN ECONOMIC REBOUND. In the middle of the fiscal
year interest rates jumped but trended back down toward the end of the 12
months. Long-term municipal bond rates, as measured by the Bond Buyer Long Bond
Index, fell to 4.73% at the end of the 12-month period, compared to a yield of
5.15% at the beginning of the fiscal year. The Federal Reserve reduced the
Federal Fund's rate by 0.25% to 1.00% in June, indicating that there was enough
stimulus in the economy to avoid a recession, but little threat that inflation
would become a crucial problem in the current environment. By the end of the
fiscal year most economic signs appeared to be positive at least for the near
term, although the question of when a significant increase in job creation would
occur remained unanswered.
CREDIT QUALITY BREAKDOWN
As a percentage of total assets on January 31, 2004, according to Standard &
Poor's and Moody's Investors Service
<Table>
AAA/Aaa 38%
AA/Aa 19%
A 18%
BBB/Baa 13%
Nonrated 12%
- -----------------------------------------------------------
100%
</Table>
3
<Page>
THE FUND ONLY BECAME FULLY INVESTED AFTER THE COMPLETION OF THE OFFERING OF
PREFERRED SHARES IN MARCH 2003. This coincided with a point when interest rates
on municipal securities were reaching historically low levels. Therefore, a
large percentage of the Fund's assets were invested in securities that paid
relatively low interest rates, consistent with what the market had to offer at
that time. In June and July, interest rates began to trend higher in fairly
short order. This had a negative impact on the Fund's return due to the position
taken in lower-yielding securities prior to that time. Another interest-rate
spike occurred in October, but the ensuing downward trend ended with interest
rates lower for the year. A significant position in securities issued by health
care providers and a focus on longer-term general obligation bonds worked to the
Fund's benefit during the year. However, some of those gains were given back due
to the weak performance of holdings in electric utility and housing issues.
THE FUND MAINTAINED ITS COMMON STOCK DIVIDEND AND BEGAN TO ACCUMULATE A DIVIDEND
RESERVE. The Fund's monthly common dividend remained at 6.625 cents per common
share through the fiscal year. We also began to pursue a dividend reserve
strategy, directing some of the Fund's income into a reserve that can be used to
help maintain a relatively stable dividend payout in the future, if needed. As
of January 31, 2004, the dividend reserve stood at 2.5 cents per share. Please
keep in mind that even with the Fund's dividend reserve strategy, the dividend
is subject to change.
THE IMPROVING STATE OF THE U.S. ECONOMY CREATED THE POTENTIAL FOR A MORE
CHALLENGING ENVIRONMENT THAN THE KIND BOND INVESTORS EXPERIENCED IN RECENT
YEARS. Bond rates moved lower for the first half of the year, continuing a trend
that boosted performance in recent times. However, investor anticipation of a
strong U.S. economic recovery led to a spike in interest rates in June and July
of 2003. That change in the interest-rate environment brought with it a leveling
off in the supply
4
<Page>
of new bond issues. For the fiscal year, new issue volume in Minnesota declined
by 13%. While municipal bond yields looked very attractive compared to those of
taxable Treasury securities in early 2003, the playing field leveled off as the
year progressed. Rates on Treasury bonds rose to a level that made municipal
bonds a bit less attractive to buyers compared to the situation that existed
earlier in the fiscal year.
WE CONTINUED TO EMPHASIZE A BROAD MIX OF SECURITIES, BOTH ACROSS THE QUALITY
SPECTRUM AND ACROSS SECTORS. As indicated by the chart on page 2, the Fund held
bonds across a wide variety of municipal sectors. Like many states, Minnesota's
state government found itself facing a fiscal crisis in 2003. One of the major
credit rating agencies downgraded the state's quality rating in June 2003, which
was a reflection of ongoing fiscal concerns. While the government managed to
significantly reduce the state's budget deficit, its fiscal problems persist.
This factor contributed to a decision to focus on higher-quality bonds in the
portfolio while reducing holdings in lower-rated or nonrated securities. The
credit quality breakdown of the Fund as of the fiscal year-end appears on page
3.
THROUGH A SOMEWHAT VOLATILE INTEREST-RATE ENVIRONMENT AND CHALLENGING FISCAL
ISSUES FACING MINNESOTA AND MUNICIPALITIES, THE FUND CONTINUES TO MAINTAIN A
STABLE DIVIDEND. It appears that the U.S. economy has turned a corner, with a
recovery well underway. Typically, interest rates can be expected to move higher
in such an environment. While that occurred to a limited extent in the past
year, concerns about the lack of business investment and job creation have
helped to keep both the threat of inflation and interest rates in check.
Nevertheless, it seems fair to assume that the next major move for interest
rates is likely to be upward. At the same time, improvement in the economy seems
to be gradually working in favor of state and local governments. Although
financial challenges remain, tax receipts should improve for
5
<Page>
the state and many municipalities in the months to come, helping to stabilize
their creditworthiness. As such, the portfolio will continue to emphasize
higher-quality securities and we will monitor the market for improving
situations. We once again wish to express our appreciation for your ongoing
investment in the Fund.
Sincerely,
/s/ Mark Jordahl
Mark Jordahl
Chief Investment Officer
U.S. Bancorp Asset Management, Inc.
/s/ Doug White
Doug White, CFA
Head of Tax Exempt Fixed Income
U.S. Bancorp Asset Management, Inc.
/s/ Catherine M. Stienstra
Catherine M. Stienstra
Senior Fixed-Income Portfolio Manager
U.S. Bancorp Asset Management, Inc.
6
<Page>
PREFERRED SHARES
The preferred shares issued by the Fund pay dividends at a specified rate and
have preference over common shares in the payments of dividends and the
liquidation of assets. Rates paid on preferred shares 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 (preferred shares
are rated AAA by Moody's and S&P) and high liquidity (preferred shares trade at
par and are remarketed every seven days). The proceeds from the sale of
preferred shares 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 shares, common shareholders benefit by
receiving higher dividends and/or an increase to the dividend reserve. However,
the risk of having preferred shares 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 shares 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 shares results in the leveraging of common
shares, which increases the volatility of both the NAV of the Fund and the
market value of common shares.
7
<Page>
(This page has been left blank intentionally.)
<Page>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES January 31, 2004
<Table>
ASSETS:
Investments in unaffiliated securities, at market value* (note 2) $ 34,135,097
Accrued interest receivable 537,326
Other assets 150
-------------
Total assets 34,672,573
-------------
LIABILITIES:
Payable for preferred share distributions (note 3) 1,389
Payable for investment management fees (note 5) 10,297
Payable for administrative fees (note 5) 5,884
Payable for auction agent fees (note 5) 284
Payable for other expenses 12,544
-------------
Total liabilities 30,398
-------------
Preferred shares, at liquidation value 13,000,000
-------------
Net assets applicable to outstanding common shares $ 21,642,175
=============
NET ASSETS APPLICABLE TO OUTSTANDING COMMON SHARES
CONSIST OF:
Common shares and additional paid-in capital $ 20,798,974
Undistributed net investment income 36,435
Unrealized appreciation of investments 806,766
-------------
Net assets applicable to outstanding common shares $ 21,642,175
=============
*Investments in unaffiliated securities, at cost $ 33,328,331
=============
NET ASSET VALUE AND MARKET PRICE OF COMMON SHARES:
Net assets applicable to outstanding common shares $ 21,642,175
Common shares outstanding (authorized 200 million shares
of $0.01 par value) 1,472,506
Net asset value per share $ 14.70
Market price per share $ 14.60
LIQUIDATION PREFERENCE OF PREFERRED SHARES (NOTE 3):
Preferred shares outstanding (authorized one million shares) 520
Liquidation preference per share $ 25,000
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<Page>
STATEMENT OF OPERATIONS For the Year Ended January 31, 2004
<Table>
INVESTMENT INCOME:
Interest from unaffiliated securities $ 1,581,045
Interest from affiliated money market fund 1,159
-------------
Total investment income 1,582,204
-------------
EXPENSES (NOTE 5):
Investment management fees 132,231
Administrative fees 66,093
Auction agent fees 29,449
Custodian fees 4,957
Transfer agent fees 30,368
Registration fees 16,136
Reports to shareholders 22,308
Directors' fees 1,633
Audit and legal fees 11,545
Organization costs 77,452
Other expenses 9,224
-------------
Total expenses 401,396
-------------
Less: waiver of expenses (16,568)
-------------
Total net expenses 384,828
-------------
Net investment income 1,197,376
-------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investments in securities (note 4) 35,001
Net change in unrealized appreciation or depreciation
on investments 556,117
-------------
Net gain on investments 591,118
-------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS (NOTE 2):
From net investment income (102,830)
From net realized gains (4,196)
-------------
Total distributions (107,026)
-------------
Net increase in net assets applicable to common
shares resulting from operations $ 1,681,468
=============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
PERIOD FROM
YEAR ENDED 10/31/02* TO
1/31/04 1/31/03
------------- -------------
OPERATIONS:
Net investment income $ 1,197,376 $ 210,154
Net realized gain on investments in securities 35,001 17,811
Net change in unrealized appreciation or depreciation of investments 556,117 250,649
Distributions to preferred shareholders (note 2):
From net investment income (102,830) --
From net realized gains (4,196) --
------------- -------------
Net increase in net assets applicable to common
shares resulting from operations 1,681,468 478,614
------------- -------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS (NOTE 2):
From net investment income (1,170,705) (97,554)
From net realized gains (48,622) --
------------- -------------
Total distributions (1,219,327) (97,554)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from initial public offering of 1,350,000 common shares -- 20,250,000
Proceeds from issuance of 115,839 common shares in connection
with exercising an overallotment option granted to underwriters
of the initial public offering -- 1,737,585
Underwriting discounts and offering expenses associated with the
issuance of preferred shares and common shares, respectively (255,000) (1,033,616)
------------- -------------
Increase (decrease) in net assets from capital share transactions (255,000) 20,953,969
------------- -------------
Total increase in net assets applicable to common shares 207,141 21,335,029
------------- -------------
Net assets applicable to common shares at beginning of period 21,435,034 100,005
------------- -------------
Net assets applicable to common shares at end of period $ 21,642,175 $ 21,435,034
============= =============
Undistributed net investment income $ 36,435 $ 112,600
============= =============
</Table>
* Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<Page>
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION First American Minnesota Municipal Income Fund II, 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 commenced operations on October
31, 2002. Prior to the commencement of operations, the Fund
had no operations other than the issuance of 6,667 common
shares for $100,005 to U.S. Bancorp Asset Management, Inc.
("USBAM"). The Fund invests in Minnesota municipal securities
that, at the time of purchase, are rated investment grade or
are unrated and deemed to be of comparable quality by USBAM.
The Fund's investments may include futures contracts, options
on futures contracts, options, and interest rate swaps, caps,
and floors. Although the Fund is authorized to invest in the
financial instruments mentioned in the preceding sentence,
and may do so in the future, the Fund did not make any such
investments during the year ended January 31, 2004. Fund
shares are listed on the American Stock Exchange under the
symbol MXN.
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.
SECURITY VALUATIONS
(2) SUMMARY OF Security valuations for the Fund's investments are furnished
SIGNIFICANT by one or more independent pricing services that have been
ACCOUNTING approved by the Fund's board of directors. Investments in
POLICIES equity securities that are traded on a national securities
exchange are stated at the last quoted sales price if readily
available for such securities on each business day. For
securities traded on the Nasdaq national market system,
12
<Page>
the Fund utilizes the Nasdaq Official Closing Price which
compares the last trade to the bid/ask price of a security.
If the last trade is within the bid/ask range, then that
price will be the closing price. If the last trade is outside
the bid/ask range, and falls above the ask, the ask price
will be the closing price. If the last trade is below the
bid, the bid will be the closing price. Other equity
securities traded in the over-the-counter market and listed
equity securities for which no sale was reported on that date
are stated at the last quoted bid price. Debt obligations
exceeding 60 days to maturity are valued by an independent
pricing service. The pricing service may employ methodologies
that utilize actual market transactions, broker-dealer
supplied valuations, or other formula-driven valuation
techniques. These techniques generally consider such factors
as yields or prices of bonds of comparable quality, type of
issue, coupon, maturity, ratings, and general market
conditions. 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. When market
quotations are not readily available, securities are valued
at fair value as determined in good faith by procedures
established and approved by the Fund's board of directors.
Some of the factors which may be considered by the board of
directors in determining fair value are fundamental
analytical data relating to the investment; the nature and
duration of any restrictions on disposition; trading in
similar securities of the same issuer or comparable
companies; information from broker-dealers; and an evaluation
of the forces that influence the market in which the
securities are purchased and sold. If events occur that
materially affect the value of securities between the close
of trading in those securities and the close of
13
<Page>
regular trading on the New York Stock Exchange, the
securities will be valued at fair value. As of January 31,
2004, the Fund had no fair-valued securities. Debt
obligations with 60 days or less remaining until maturity
may be valued at their amortized cost, which approximates
market value. Security valuations are performed once a week
and at the end of each month.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the date
securities are purchased or sold. Realized gains and losses
are calculated on the identified-cost basis. Dividend income
is recorded on the ex-dividend date. Interest income,
including accretion of bond discounts and amortization of
premiums, is recorded on an accrual basis.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from changes in the
market, the Fund may buy and sell interest rate futures
contracts. Risks of entering into futures contracts and
related options include the possibility there may be an
illiquid market and that a change in the value of the
contract or option may not correlate with changes in the
value of the underlying securities.
Upon entering into a futures contract, the Fund is required
to deposit, in segregated accounts with its custodian, either
cash or securities in an amount (initial margin) equal to a
certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund each day.
The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when
the contract is closed or expires. As of January 31, 2004,
the Fund had no outstanding futures contracts.
14
<Page>
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, 2004, the Fund had no outstanding
when-issued or forward-commitment securities.
TAXES
FEDERAL
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 and losses may
differ for financial statement and tax purposes primarily
because of market discount amortization. The character of
distributions made during the year from net investment income
or net realized gains may differ from its ultimate
characterization for federal income tax purposes. In
addition, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from
the year that the income or realized gains or losses were
recorded by the Fund.
15
<Page>
The tax character of common and preferred share distributions
paid during the year ended January 31, 2004 and the period
from October 31, 2002 (commencement of operations) to January
31, 2003 was as follows:
<Table>
<Caption>
1/31/04 1/31/03
------------ ----------
Distributions paid from:
Tax exempt income $ 1,272,026 $ 97,554
Ordinary income 52,938 --
------------ ----------
$ 1,324,964 $ 97,554
============ ==========
</Table>
At January 31, 2004, the components of accumulated
earnings on a tax basis were as follows:
<Table>
Undistributed tax exempt income $ 30,325
Unrealized appreciation 812,876
----------
Accumulated earnings $ 843,201
==========
</Table>
Due to permanent book-to-tax differences, the following
reclassifications have been made on the Statement of Assets
and Liabilities:
<Table>
<Caption>
UNDISTRIBUTED
ACCUMULATED NET NET INVESTMENT
REALIZED LOSS INCOME
--------------- --------------
$ 6 $ (6)
</Table>
STATE
Minnesota taxable net income is based generally on any
federal taxable income. The portion of any tax-exempt
dividends paid by the Fund that is derived from interest on
Minnesota municipal bonds will be excluded from Minnesota
taxable net income of individuals, estates, and trusts,
provided that the portion of the tax-exempt dividends paid
from these obligations represents 95% or more of the
exempt-interest dividends paid by the Fund. The remaining
portion of these dividends, and dividends
16
<Page>
that are not exempt-interest dividends or capital gains
distributions, will be included in the Minnesota taxable net
income of individuals, estates, and trusts, except for
dividends directly attributable to interest on obligations of
the U.S. government, its territories and possessions.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders.
Common share distributions are recorded as of the close of
business on the ex-dividend date and preferred share
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 common shares of the Fund. Under the dividend
reinvestment plan, common shares will be purchased in the
open market.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM SECURITIES
For repurchase agreements entered into with broker-dealers,
the Fund, along with other affiliated registered investment
companies, may transfer uninvested cash balances into a joint
trading account, the daily aggregate balance of which is
invested in repurchase agreements secured by U.S. government
or agency obligations. Securities pledged as collateral for
all individual and joint repurchase agreements are held by
the Fund's custodian bank until maturity of the repurchase
agreement. Provisions for all agreements ensure that the
daily market value of the collateral is in excess of the
repurchase amount, including accrued interest, to protect the
Fund in the event of a default. In addition to repurchase
agreements, the Fund may invest in money market funds advised
by USBAM.
17
<Page>
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.
OFFERING COSTS
USBAM agreed to pay all common share offering costs (other
than the sales load) in excess of $0.03 per common share. The
Fund's share of common share offering costs ($44,175) was
recorded as a reduction of the proceeds from the sale of
common shares. Costs incurred in connection with its offering
of preferred shares ($255,000) were recorded as a reduction
of paid-in-capital.
(3) PREFERRED On March 10, 2003, the Fund issued 520 preferred shares at
SHARES $25,000 per share for $13,000,000. The net proceeds to the
Fund after expenses incurred in connection with the offering
were $12,745,000. As of January 31, 2004, the Fund had 520
preferred shares outstanding with a liquidation preference of
$25,000 per share. The dividend rate on the preferred shares
is adjusted every seven days (on Fridays), at an auction
conducted by Bank of New York (the "Auction Agent"). On
January 31, 2004, the dividend rate was 0.65%.
(4) INVESTMENT Cost of purchases and proceeds from sales of securities,
SECURITY other than temporary investments in short-term securities,
TRANSACTIONS for the year ended January 31, 2004, aggregated $19,383,914
and $7,007,481, respectively.
(5) EXPENSES INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
Pursuant to an investment advisory agreement (the
"Agreement"), USBAM, a subsidiary of U.S. Bank
18
<Page>
National Association ("U.S. Bank"), manages the Fund's assets
and furnishes related office facilities, equipment, research,
and personnel. The Agreement provides USBAM with a monthly
investment management fee in an amount equal to an annualized
rate of 0.40% of the Fund's average weekly net assets
(computed by subtracting liabilities, which exclude preferred
shares, from the value of the total assets of the Fund).
USBAM has contractually agreed to limit its fee to an
annualized rate of 0.35% of average weekly net assets through
October 31, 2007. For its fee, USBAM provides investment
advice, and in general, conducts the management and
investment activities of the Fund.
Pursuant to an administration agreement (the "Administration
Agreement"), USBAM provides administrative services,
including legal and shareholder services to the Fund. Under
this agreement, USBAM receives a monthly administrative fee
in an amount equal to an annualized rate of 0.20% of the
Fund's average weekly net assets (computed by subtracting
liabilities, which exclude preferred shares, from the value
of the total assets of the Fund). For its fee, USBAM provides
numerous services to the Fund including, but not limited to,
handling the general business affairs, financial and
regulatory reporting, and various other services. Separate
from the Administration Agreement, USBAM (from its own
resources) has retained SEI Investments, Inc. as a
sub-administrator to perform, among other services, net asset
value calculations.
The Fund may invest in money market funds that are series of
First American Funds, Inc. ("FAF"), subject to certain
limitations. The terms of such investments are identical to
those of investments of non-related entities except that, to
avoid duplicative investment advisory fees,
19
<Page>
USBAM reimburses the Fund an amount equal to the investment
advisory fee paid by FAF to USBAM related to such
investments. For financial statement purposes, this
reimbursement is recorded as investment income.
AUCTION AGENT FEES
The Fund has entered into an auction agency agreement with
the Auction Agent. The auction agency agreement provides the
Auction Agent with a monthly fee in an amount equal to an
annual rate of 0.25% of the Fund's average amount of
preferred shares outstanding. For its fee, the Auction Agent
will act as agent of the Fund in conducting the auction of
preferred shares at which the applicable dividend rate for
each seven-day dividend period is determined.
CUSTODIAN FEES
U.S. Bank serves as the Fund's custodian pursuant to a
custodian agreement with the Fund. The fee for the Fund is
equal to an annual rate of 0.015% of average weekly net
assets. These fees are computed weekly and paid monthly.
OTHER FEES AND EXPENSES
In addition to the investment management, administrative,
auction agent, and custodian fees, the Fund is responsible
for paying most other operating expenses including: outside
directors' fees and expenses, registration fees, printing and
shareholder reports, transfer agent fees and expenses, legal,
auditing, and accounting services, insurance, interest,
taxes, and other miscellaneous expenses.
(6) COMMITMENTS The Fund enters into contracts that contain a variety of
AND indemnifications. The Fund's maximum exposure under these
CONTINGENCIES arrangements is unknown. However, the Fund has not had prior
claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
20
<Page>
(7) FINANCIAL Per-share data for an outstanding common share throughout
HIGHLIGHTS each period and selected information for each period are as
follows:
<Table>
<Caption>
YEAR PERIOD FROM
ENDED 10/31/02* TO
1/31/04 1/31/03
--------- ------------
PER-SHARE DATA
Net asset value, common shares, beginning of period $ 14.56 $ 14.33
--------- ------------
Operations:
Net investment income 0.82 0.14
Net realized and unrealized gains on investments 0.39 0.19
Distributions to preferred shareholders:
From net investment income (0.07) --
--------- ------------
Total from operations 1.14 0.33
--------- ------------
Distributions to common shareholders:
From net investment income (0.80) (0.07)
From net realized gains (0.03) --
--------- ------------
Total distributions (0.83) (0.07)
--------- ------------
Offering costs and underwriting discounts associated
with the issuance of preferred shares and
common shares, respectively $ (0.17) $ (0.03)
--------- ------------
Net asset value, common shares, end of period $ 14.70 $ 14.56
========= ============
Market value, common shares, end of period $ 14.60 $ 14.80
========= ============
SELECTED INFORMATION
Total return, common shares, net asset value (a) 6.86% 2.07%
Total return, common shares, market value (b) 4.36% (0.90)%
Net assets applicable to common shares
at end of period (in millions) $ 22 $ 21
Ratio of expenses to average weekly net assets
applicable to common shares before fee waivers (c) 1.99% 0.82%(e)
Ratio of expenses to average weekly net assets
applicable to common shares after fee waivers (c) 1.91% 0.77%(e)
Ratio of net investment income to average weekly net assets
applicable to common shares before fee waivers (c) 5.87% 3.95%(e)
Ratio of net investment income to average weekly net assets
applicable to common shares after fee waivers (c) 5.95% 4.00%(e)
Portfolio turnover rate (excluding short-term securities) 22% 20%(e)
Preferred shares outstanding, end of period (in millions) $ 13 $ --
Asset coverage per preferred share (in thousands) (d) $ 67 $ --
Liquidation preference and market value per
preferred share (in thousands) $ 25 $ --
</Table>
* COMMENCEMENT OF OPERATIONS.
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIOS DO NOT REFLECT THE EFFECT OF DIVIDEND PAYMENTS TO PREFERRED
SHAREHOLDERS; INCOME RATIOS REFLECT INCOME EARNED ON ASSETS ATTRIBUTABLE TO
PREFERRED SHARES, WHERE APPLICABLE.
(d) REPRESENTS NET ASSETS APPLICABLE TO COMMON SHARES PLUS PREFERRED SHARES AT
LIQUIDATION VALUE DIVIDED BY PREFERRED SHARES OUTSTANDING.
(e) ANNUALIZED.
21
<Page>
SCHEDULE OF INVESTMENTS
MINNESOTA MUNICIPAL INCOME FUND II JANUARY 31, 2004
<Table>
<Caption>
PRINCIPAL MARKET
DESCRIPTION OF SECURITY AMOUNT VALUE (a)
- ----------------------------------------------------------------- ------------- -------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO NET ASSETS
APPLICABLE TO OUTSTANDING COMMON SHARES)
MUNICIPAL LONG-TERM SECURITIES (157.4%):
AUTHORITY REVENUE (3.2%):
St. Paul Port Authority Hotel Facility,
Radisson City Center
(Callable 8/1/08 at 100),
4.25%, 8/1/16 $ 270,000 $ 270,108
St. Paul Port Authority Hotel Facility,
Radisson City Center
(Callable 8/1/08 at 100),
4.35%, 8/1/17 430,000 429,475
-------------
699,583
-------------
ECONOMIC DEVELOPMENT REVENUE (7.1%):
Agriculture and Economic Development Board,
AMT (Callable 8/1/10 at 100),
5.55%, 8/1/16 400,000(c) 407,816
Fairview Health Care (Callable 11/15/10 at 101),
6.38%, 11/15/29 700,000 761,481
Marshall Health Care Facility, Weiner Medical Center
(Callable 11/1/13 at 100),
5.35%, 11/1/17 350,000 363,996
-------------
1,533,293
-------------
EDUCATION REVENUE (11.2%):
Higher Education Facility, St. Catherine's College
(Callable 10/1/12 at 100),
5.38%, 10/1/32 1,000,000 1,030,300
Higher Education Facility, St. John's University
(Callable 10/1/11 at 100),
5.25%, 10/1/26 350,000 361,343
St. Paul Housing and Redevelopment Authority,
St. Paul Academy and Summit School
(Callable 10/1/09 at 100),
5.50%, 10/1/24 1,000,000 1,041,360
-------------
2,433,003
-------------
GENERAL OBLIGATIONS (36.8%):
Lakeville Independent School District (FGIC)
(Callable 2/1/13 at 100),
5.00%, 2/1/22 2,430,000(b) 2,546,616
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
22
<Page>
<Table>
<Caption>
PRINCIPAL MARKET
DESCRIPTION OF SECURITY AMOUNT VALUE (a)
- ----------------------------------------------------------------- ------------- -------------
Minneapolis Sports Arena Project
(Callable 4/1/08 at 100),
5.20%, 10/1/24 $ 400,000 $ 419,940
Mounds View Independent School District,
5.00%, 2/1/13 2,000,000 2,213,260
Ramsey County General Obligation
(Callable 1/1/12 at 100),
4.75%, 1/1/24 1,000,000 1,008,500
Robbinsdale Independent School District (FSA)
(Callable 2/1/12 at 100),
5.00%, 2/1/21 1,000,000(b) 1,048,350
St. Michael Independent School District
(Callable 2/1/09 at 100),
4.88%, 2/1/18 695,000 718,185
-------------
7,954,851
-------------
HEALTH CARE REVENUE (30.2%):
Bemidji Health Care Facilities (RAAI)
(Callable 9/1/12 at 100),
5.00%, 9/1/31 1,000,000(b) 1,009,690
Cuyuna Range Hospital District
(Callable 6/1/07 at 102),
6.00%, 6/1/29 350,000 330,890
Fergus Falls Health Care Facility, Lake Region Hospital
(Callable 12/1/05 at 102),
6.50%, 12/1/25 500,000 520,210
Fergus Falls Health Care Facility,
Lutheran Brethren Retirement Home
(Callable 11/1/04 at 102),
7.00%, 11/1/19 350,000 342,769
Glencoe Health Care Facilities
(Callable 4/1/11 at 101),
7.50%, 4/1/31 400,000 426,860
Golden Valley Health Care Facilities,
Covenant Retirement Communities
(Callable 12/1/09 at 101),
5.50%, 12/1/25 600,000 607,566
Minneapolis and St. Paul Housing and
Redevelopment Authority, Healthpartners Project
(Callable 12/1/13 at 100),
5.88%, 12/1/29 750,000 768,218
Minneapolis Health Care Facilities,
Allina Health Systems
(Callable 11/15/12 at 100),
5.75%, 11/15/32 300,000 314,952
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL MARKET
DESCRIPTION OF SECURITY AMOUNT VALUE (a)
- ----------------------------------------------------------------- ------------- -------------
Monticello, Big Lake Community Hospital District
(Callable 12/1/12 at 100),
6.20%, 12/1/22 $ 400,000 $ 412,744
New Hope Housing and Health Care Facility,
Masonic Home North Ridge
(Callable 3/1/09 at 102),
5.75%, 3/1/15 400,000 404,844
Sauk Rapids Health Care Facility,
Good Shepherd Lutheran Home
(Callable 1/1/12 at 101),
6.00%, 1/1/34 200,000 198,612
St. Louis Park Health Care Facilities,
Park Nicollet Health Systems
(Callable 7/1/14 at 100),
5.50%, 7/1/25 250,000 258,608
St. Louis Park Health Care Facilities,
Park Nicollet Health Systems
(Callable 7/1/14 at 100),
5.25%, 7/1/30 250,000 252,790
St. Paul Housing and Redevelopment Authority,
Regions Hospital
(Callable 5/15/09 at 100),
5.25%, 5/15/18 500,000 507,565
St. Paul Housing and Redevelopment Authority,
Regions Hospital
(Callable 5/15/09 at 100),
5.30%, 5/15/28 170,000 169,986
-------------
6,526,304
-------------
HOUSING REVENUE (24.2%):
Eden Prairie Multifamily Housing (GNMA)
(Callable 1/20/08 at 102),
5.60%, 7/20/28 500,000(b) 517,715
Hopkins Multifamily Housing Project
(Callable 4/1/07 at 102),
6.25%, 4/1/15 500,000 528,885
Minneapolis Multifamily Housing Project (GNMA)
(Callable 5/20/13 at 102),
5.00%, 5/20/36 1,190,000(b) 1,218,429
Southeastern Multi-County Housing and
Redevelopment Authority
(Callable 1/1/10 at 100),
6.75%, 1/1/31 320,000 302,954
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
24
<Page>
<Table>
<Caption>
PRINCIPAL MARKET
DESCRIPTION OF SECURITY AMOUNT VALUE (a)
- ----------------------------------------------------------------- ------------- -------------
St. Paul Multifamily Housing Project, AMT (GNMA)
(Callable 9/20/13 at 100),
5.50%, 9/20/44 $ 655,000(c) $ 670,949
Washington County Housing and
Redevelopment Authority
(Callable 10/1/12 at 100),
4.70%, 10/1/26 2,000,000 2,006,940
-------------
5,245,872
-------------
LEASING REVENUE (15.4%):
Hopkins Housing and Redevelopment Authority (MBIA)
(Callable 2/1/13 at 100),
5.00%, 2/1/23 1,000,000(b) 1,043,450
Otter Tail County Housing and Redevelopment Authority
(Callable 2/1/13 at 100),
5.00%, 2/1/19 825,000 833,943
St. Paul Port Authority Office Building Facility
(Callable 12/1/12 at 100),
5.25%, 12/1/27 1,000,000 1,056,060
Washington County Housing and
Redevelopment Authority
(Callable 2/1/13 at 100),
5.13%, 2/1/24 400,000 403,012
-------------
3,336,465
-------------
RECREATION AUTHORITY REVENUE (3.3%):
Moorhead Golf Course
(Callable 12/1/08 at 100),
5.88%, 12/1/21 400,000 407,108
St. Paul Port Authority Hotel Facility
(Callable 8/1/08 at 103),
7.38%, 8/1/29 300,000 305,988
-------------
713,096
-------------
TRANSPORTATION REVENUE (15.8%):
Minneapolis and St. Paul Metropolitan Airport
Commission (FGIC),
5.25%, 1/1/32 325,000(b) 337,643
Minneapolis and St. Paul Metropolitan Airport
Commission (FGIC)
(Callable 1/1/11 at 100),
5.25%, 1/1/32 2,000,000(b) 2,077,800
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT/ MARKET
DESCRIPTION OF SECURITY SHARES VALUE (a)
- ----------------------------------------------------------------- ------------- -------------
Puerto Rico Commonwealth Highway
Transportation Authority
(Callable 7/1/13 at 100),
5.00%, 7/1/35 $ 1,000,000 $ 1,013,460
-------------
3,428,903
-------------
UTILITY REVENUE (10.2%):
Chaska Electric Revenue
(Callable 10/1/10 at 100),
6.10%, 10/1/30 1,000,000 1,063,170
Southern Minnesota Municipal Power Agency (AMBAC),
5.25%, 1/1/15 1,000,000(b) 1,133,360
-------------
2,196,530
-------------
Total Municipal Long-Term Securities
(cost: $33,261,134) 34,067,900
-------------
MONEY MARKET FUND (0.3%):
Federated Minnesota Municipal Cash Trust
(cost: $67,197) 67,197 67,197
-------------
Total Investments in Securities (d) -- (157.7)%
(cost: $33,328,331) $ 34,135,097
=============
</Table>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN
NOTES TO FINANCIAL STATEMENTS.
(b) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
AMBAC-AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC-FINANCIAL GUARANTY INSURANCE CORPORATION
FSA-FINANCIAL SECURITY ASSURANCE
GNMA-GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MBIA-MUNICIPAL BOND INSURANCE ASSOCIATION
RAAI-RADIAN ASSET ASSURANCE INC.
(c) AMT-ALTERNATIVE MINIMUM TAX. AS OF JANUARY 31, 2004, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $1,078,765,
WHICH REPRESENTS 0.5% OF NET ASSETS APPLICABLE TO COMMON SHARES.
(d) ON JANUARY 31, 2004, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $33,322,221. THE DIFFERENCE BETWEEN FEDERAL TAX
COST AND BOOK COST IS DUE TO THE TAX DEFERRAL OF MARKET DISCOUNT ACCRETION.
THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
IN SECURITIES BASED ON THIS COST, WERE AS FOLLOWS:
<Table>
GROSS UNREALIZED APPRECIATION $ 835,162
GROSS UNREALIZED DEPRECIATION (22,286)
----------
NET UNREALIZED APPRECIATION $ 812,876
==========
</Table>
26
<Page>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
FIRST AMERICAN MINNESOTA MUNICIPAL INCOME FUND II, INC.
We have audited the accompanying statement of assets and liabilities of First
American Minnesota Municipal Income Fund II, Inc., including the schedule of
investments, as of January 31, 2004, and the related statement of operations for
the year then ended and the statement of changes in net assets and financial
highlights for the year ended January 31, 2004 and the period from October 31,
2002 (commencement of operations) to January 31, 2003. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of January 31, 2004, with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
American Minnesota Municipal Income Fund II, Inc. at January 31, 2004, the
results of its operations for the year then ended, and the changes in net assets
and the financial highlights for the year ended January 31, 2004 and for the
period from October 31, 2002 (commencement of operations) to January 31, 2003,
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
March 3, 2004
27
<Page>
FEDERAL INCOME TAX INFORMATION (Unaudited)
The following per-share information describes the federal tax treatment of the
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 SHARE INCOME DISTRIBUTIONS (INCOME FROM TAX-EXEMPT SECURITIES, 100.00%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS)
<Table>
<Caption>
PAYABLE DATE AMOUNT
- ------------ ------
February 26, 2003 $ 0.06625
March 26, 2003 0.06625
April 23, 2003 0.06625
May 28, 2003 0.06625
June 25, 2003 0.06625
July 23, 2003 0.06625
August 27, 2003 0.06625
September 24, 2003 0.06625
October 29, 2003 0.06625
November 19, 2003 0.06625
December 17, 2003 0.06625
January 9, 2004 0.06625
---------------
Total $ 0.7950
===============
</Table>
COMMON SHARE SHORT-TERM GAINS (TAXABLE AS ORDINARY DIVIDENDS)
<Table>
<Caption>
PAYABLE DATE AMOUNT
- ------------ ------
January 9, 2004 $ 0.03302
===============
</Table>
PREFERRED SHARE INCOME DISTRIBUTIONS (INCOME FROM TAX-EXEMPT SECURITIES, 100.00%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS)
<Table>
<Caption>
PAYABLE DATE AMOUNT
- ------------ ------
Total class "F" $ 197.72
===============
</Table>
PREFERRED SHARE SHORT-TERM GAINS (TAXABLE AS ORDINARY DIVIDENDS)
<Table>
<Caption>
PAYABLE DATE AMOUNT
- ------------ ------
December 29, 2003 $ 5.723
January 5, 2004 2.346
---------------
Total $ 8.069
===============
</Table>
28
<Page>
SHAREHOLDER UPDATE (Unaudited)
ANNUAL MEETING RESULTS
An annual meeting of the Fund's shareholders was held on September 8, 2003. 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
----------- ------------------
Roger A. Gibson 520 --
Leonard W. Kedrowski 520 --
</Table>
(2) The Fund's preferred and common shareholders, voting as a single class,
elected the following directors:
<Table>
<Caption>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
----------- ------------------
Benjamin R. Field III 1,437,061 22,263
Mickey P. Foret 1,438,061 21,263
Victoria J. Herget 1,439,061 20,263
Richard K. Riederer 1,439,061 20,263
Joseph D. Strauss 1,435,053 24,271
Virginia L. Stringer 1,437,061 22,263
James M. Wade 1,439,061 20,263
</Table>
(3) The Fund's preferred and common shareholders, voting as a single 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, 2004. The following votes were cast regarding this
matter:
<Table>
<Caption>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
----------- --------------- ----------- ---------
1,446,888 3,808 8,628 --
</Table>
29
<Page>
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you will be automatically enrolled in the Fund's Dividend
Reinvestment Plan (the "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 administrator.
Shareholders may elect not to participate in the Plan and to receive all
dividends in cash by sending written instructions to EquiServe at the address
set forth below. Participation in the Plan may be terminated or resumed at any
time without penalty by contacting EquiServe before the dividend record date;
otherwise, the termination or resumption will be effective with respect to any
subsequently declared dividend or other distribution.
ELIGIBILITY/PARTICIPATION
In the event you opt out of the Plan, you may resume participation in 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 re-join the Plan directly and
have your distributions reinvested in additional shares of the Fund. To
re-enroll in this Plan, call EquiServe at 800.426.5523. If your shares are
registered in your brokerage firm's name or another name, ask the holder of your
shares how you may resume participation.
Banks, brokers, or nominees, on behalf of their beneficial owners who wish to
reinvest dividend and capital gains distributions, may resume participation in
the Plan by informing EquiServe at least 10 days before the next dividend and/or
capital gains distribution.
30
<Page>
PLAN ADMINISTRATION
Whenever the Fund declares a dividend or other captial gain distribution payable
in cash, non-participants in the Plan will receive cash and participants in the
Plan will receive the equivalent in common shares. EquiServe will buy shares of
the Fund on the American Stock Exchange or elsewhere on the open market
("open-market purchases"), beginning on the payment date.
The Fund will not issue any new shares in connection with the Plan. All
reinvestments will be at a weighted average price per share of all shares
purchased in an open-market to fill the combined purchase order. Each
participant will pay a pro rata share of brokerage commissions incurred in
connection with the open-market purchases. 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.
31
<Page>
TAX INFORMATION
Distributions invested in additional shares of the Fund are subject to income
tax, to the same extent as if received in cash. Shareholders, as required by the
Internal Revenue Service, will receive Form 1099 regarding the federal tax
status of the prior year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate your
participation in the Plan at any time by giving written notice to EquiServe. If
your shares are registered in your brokerage firm's name, you may terminate your
participation via verbal or written instructions to your investment
professional. Written instructions should include your name and address as they
appear on the certificate or account.
If notice is received at least 10 days before the record date, all future
distributions will be paid directly to the shareholder of record.
If your shares are issued in certificate form and you discontinue your
participation in the Plan, you (or your nominee) will receive an additional
certificate for all full shares and a check for any fractional shares in your
account.
PLAN AMENDMENT/TERMINATION
The Fund reserves the right to amend or terminate the Plan. The Fund will give
you at least 30 days advance written notice if it makes a material amendment to
or terminates the Plan.
Any questions about the Plan should be directed to your investment professional
or to EquiServe LP, P.O. Box 43010, Providence, RI, 02940-3010, 800.426.5523.
32
<Page>
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without charge
upon request by calling 800.677.FUND; (2) at firstamericanfunds.com; and (3) on
the U.S. Securities and Exchange Commission's website at sec.gov.
33
<Page>
SHAREHOLDER UPDATE (Unaudited)
DIRECTORS AND OFFICERS OF THE FUND
DIRECTORS
<Table>
<Caption>
POSITION(S)
HELD WITH
NAME, ADDRESS, AND YEAR OF BIRTH FUND TERM OF OFFICE AND LENGTH OF TIME SERVED
- ---------------------------------------------------------------------------------------------------
Benjamin R. Field III, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since September
(1938) 2003.
Mickey P. Foret, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since September
(1945) 2003.
Roger A. Gibson, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since October
(1946) 2002.
Victoria J. Herget, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since September
(1952) 2003.
Leonard W. Kedrowski, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since October
(1941) 2002.
Richard K. Riederer, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since October
(1944) 2002.
Joseph D. Strauss, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since October
(1940) 2002.
</Table>
34
<Page>
<Table>
<Caption>
OTHER
NUMBER OF PORTFOLIOS IN DIRECTORSHIPS
PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY
NAME, ADDRESS, AND YEAR OF BIRTH DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR*
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin R. Field III, Senior Financial Advisor, Bemis Company, Inc. First American Funds None
800 Nicollet Mall, since 2002; Senior Vice President, Chief Financial Complex: twelve
Minneapolis, MN 55402 Officer and Treasurer, Bemis, through 2002. registered investment
(1938) companies, including
sixty one portfolios
Mickey P. Foret, Consultant to Northwest Airlines, Inc. since 2002; First American Funds ADC
800 Nicollet Mall, Executive Vice President and Chief Financial Complex: twelve Telecom-
Minneapolis, MN 55402 Officer, Northwest Airlines, through 2002. registered investment munications,
(1945) companies, including Inc.,
sixty one portfolios URS
Corporation,
Champion
Airlines, Inc.
Roger A. Gibson, Vice President, Cargo, United Airlines, since July First American Funds None
800 Nicollet Mall, 2001; Vice President, North America-Mountain Complex: twelve
Minneapolis, MN 55402 Region, United Airlines, prior to July 2001. registered investment
(1946) companies, including
sixty one portfolios
Victoria J. Herget, Investment consultant and non-profit board member First American Funds None
800 Nicollet Mall, since 2001; Managing Director of Zurich Scudder Complex: twelve
Minneapolis, MN 55402 Investments through 2001. registered investment
(1952) companies, including
sixty one portfolios
Leonard W. Kedrowski, Owner, Executive and Management Consulting, Inc., First American Funds None
800 Nicollet Mall, a management consulting firm; Board member, GC Complex: twelve
Minneapolis, MN 55402 McGuiggan Corporation (dba Smyth Companies), a registered investment
(1941) label printer; former Chief Executive Officer, companies, including
Creative Promotions International, LLC, a sixty one portfolios
promotional award programs and products company,
through October 2003; Advisory Board member,
Designer Doors, manufacturer of designer doors,
through 2002.
Richard K. Riederer, Retired; Director, President and Chief Executive First American Funds None
800 Nicollet Mall, Officer, Weirton Steel through 2001. Complex: twelve
Minneapolis, MN 55402 registered investment
(1944) companies, including
sixty one portfolios
Joseph D. Strauss, Owner and President, Excensus TM LLC, a consulting First American Funds None
800 Nicollet Mall, firm, since 2001; Owner and President, Strauss Complex: twelve
Minneapolis, MN 55402 Management Company, a Minnesota holding company registered investment
(1940) for various organizational management business companies, including
ventures; Owner, Chairman and Chief Executive sixty one portfolios
Officer, Community Resource Partnerships, Inc., a
strategic planning, operations management,
government relations, transportation planning and
public relations organization; attorney at law.
</Table>
35
<Page>
<Table>
<Caption>
POSITION(S)
HELD WITH
NAME, ADDRESS, AND YEAR OF BIRTH FUND TERM OF OFFICE AND LENGTH OF TIME SERVED
- ---------------------------------------------------------------------------------------------------
Virginia L. Stringer, Chair; Directors serve for a one-year term that
800 Nicollet Mall, Director expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Chair term three years, assuming
(1944) reelection as a director. Chair of MXN's board
since 2002; current term expires September
2006. Director of MXN since October 2002.
James M. Wade, Director Directors serve for a one-year term that
800 Nicollet Mall, expires at the next annual meeting of
Minneapolis, MN 55402 shareholders. Director of MXN since October
(1943) 2002.
</Table>
OFFICERS
<Table>
<Caption>
POSITION(S)
HELD WITH
NAME, ADDRESS, AND YEAR OF BIRTH FUND TERM OF OFFICE AND LENGTH OF TIME SERVED
- ---------------------------------------------------------------------------------------------------
Thomas S. Schreier, Jr., President Re-elected by the Board annually; President of
U.S. Bancorp Asset Management, Inc., MXN since October 2002.
800 Nicollet Mall,
Minneapolis, MN 55402
(1962)**
Mark S. Jordahl, Vice Re-elected by the Board annually; Vice
U.S. Bancorp Asset Management, Inc. President- President-Investments of MXN since October
800 Nicollet Mall, Investments 2002.
Minneapolis, MN 55402
(1960)**
Jeffery M. Wilson, Vice Re-elected by the Board annually; Vice
U.S. Bancorp Asset Management, Inc. President- President-Administration of MXN since October
800 Nicollet Mall, Administra- 2002.
Minneapolis, MN 55402 tion
(1956)**
Joseph M. Ulrey III, Treasurer Re-elected by the Board annually; Treasurer of
U.S. Bancorp Asset Management, Inc. MXN since December 2003.
800 Nicollet Mall,
Minneapolis, MN 55402
(1958)**
James D. Alt, Secretary Re-elected by the Board annually; Secretary of
50 South Sixth Street, Suite 1500, MXN since October 2002.
Minneapolis, MN 55402
(1951)
Michael J. Radmer, Assistant Re-elected by the Board annually; Assistant
50 South Sixth Street, Suite 1500, Secretary Secretary of MXN since October 2002.
Minneapolis, MN 55402
(1945)
</Table>
36
<Page>
<Table>
<Caption>
OTHER
NUMBER OF PORTFOLIOS IN DIRECTORSHIPS
PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY
NAME, ADDRESS, AND YEAR OF BIRTH DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR*
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia L. Stringer, Owner and President, Strategic Management First American Funds None
800 Nicollet Mall, Resources, Inc., a management consulting firm; Complex: twelve
Minneapolis, MN 55402 Executive Consultant for State Farm Insurance registered investment
(1944) Company. companies, including
sixty one portfolios
James M. Wade, Owner and President, Jim Wade Homes, a First American Funds None
800 Nicollet Mall, homebuilding company, since 1999. Complex: twelve
Minneapolis, MN 55402 registered investment
(1943) companies, including
sixty one portfolios
</Table>
<Table>
<Caption>
NAME, ADDRESS, AND YEAR OF BIRTH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas S. Schreier, Jr., Chief Executive Officer of U.S. Bancorp Asset Management, Inc. since May 2001; Chief
U.S. Bancorp Asset Management, Inc., Executive Officer of First American Asset Management from December 2000 through May 2001 and
800 Nicollet Mall, of Firstar Investment & Research Management Company from February 2001 through May 2001;
Minneapolis, MN 55402 Senior Managing Director and Head of Equity Research of U.S. Bancorp Piper Jaffray from
(1962)** October 1998 through December 2000; prior to October 1998, Senior Airline Equity Analyst and
a Director in the Equity Research Department, Credit Suisse First Boston.
Mark S. Jordahl, Chief Investment Officer of U.S. Bancorp Asset Management, Inc. since September 2001;
U.S. Bancorp Asset Management, Inc. President and Chief Investment Officer, ING Investment Management-Americas, September 2000 to
800 Nicollet Mall, June 2001; Senior Vice President and Chief Investment Officer, ReliaStar Financial Corp.,
Minneapolis, MN 55402 January 1998 to September 2000.
(1960)**
Jeffery M. Wilson, Senior Vice President of U.S. Bancorp Asset Management since May 2001; prior thereto, Senior
U.S. Bancorp Asset Management, Inc. Vice President of First American Asset Management.
800 Nicollet Mall,
Minneapolis, MN 55402
(1956)**
Joseph M. Ulrey III, Senior Managing Director, Fund Treasury, since December 2003, and Senior Managing Director,
U.S. Bancorp Asset Management, Inc. Risk Management and Quantitative Products, since May 2001, U.S. Bancorp Asset Management,
800 Nicollet Mall, Inc.; from May 2001 through December 2001, Senior Managing Director, Securities Lending and
Minneapolis, MN 55402 Money Market Funds, U.S. Bancorp Asset Management, Inc.; prior thereto, Senior Managing
(1958)** Director, Securities Lending and Money Market Funds, First American Asset Management.
James D. Alt, Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm
50 South Sixth Street, Suite 1500,
Minneapolis, MN 55402
(1951)
Michael J. Radmer, Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm
50 South Sixth Street, Suite 1500,
Minneapolis, MN 55402
(1945)
</Table>
37
<Page>
<Table>
<Caption>
POSITION(S)
HELD WITH
NAME, ADDRESS, AND YEAR OF BIRTH FUND TERM OF OFFICE AND LENGTH OF TIME SERVED
- ---------------------------------------------------------------------------------------------------
Kathleen L. Prudhomme, Assistant Re-elected by the Board annually; Assistant
50 South Sixth Street, Suite 1500, Secretary Secretary of MXN since October 2002.
Minneapolis, MN 55402
(1953)
Richard J. Ertel, Assistant Re-elected by the Board annually; Assistant
U.S. Bancorp Asset Management, Inc. Secretary Secretary of MXN since June 2003.
800 Nicollet Mall,
Minneapolis, MN 55402
(1967)**
</Table>
* Includes only directorships in a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act or subject
to the requirements of Section 15(d) of the Securities Exchange Act, or any
company registered as an investment company under the Investment Company
Act.
** Messrs. Schreier, Jordahl, Wilson, Ulrey, and Ertel are each officers of
U.S. Bancorp Asset Management, Inc., which serves as investment advisor for
the Fund.
38
<Page>
<Table>
<Caption>
NAME, ADDRESS, AND YEAR OF BIRTH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen L. Prudhomme, Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm
50 South Sixth Street, Suite 1500,
Minneapolis, MN 55402
(1953)
Richard J. Ertel, Disclosure Counsel, U.S. Bancorp Asset Management, Inc. since May 2003; Associate Counsel,
U.S. Bancorp Asset Management, Inc. Hartford Life and Accident Insurance Company from April 2001 through May 2003; Attorney and
800 Nicollet Mall, Law Clerk, Fortis Financial Group, through March 2001.
Minneapolis, MN 55402
(1967)**
</Table>
39
<Page>
(This page has been left blank intentionally.)
<Page>
BOARD OF DIRECTORS
VIRGINIA STRINGER
Chairperson of Minnesota Municipal Income Fund II
Owner and President of Strategic Management Resources, Inc.
BENJAMIN FIELD III
Director of Minnesota Municipal Income Fund II
Senior Financial Advisor to and formerly Senior Vice President, Chief Financial
Officer, and Treasurer of Bemis Company, Inc.
MICKEY FORET
Director of Minnesota Municipal Income Fund II
Consultant to and formerly Executive Vice President and Chief Financial Officer
of Northwest Airlines, Inc.
ROGER GIBSON
Director of Minnesota Municipal Income Fund II
Vice President of Cargo-United Airlines
VICTORIA HERGET
Director of Minnesota Municipal Income Fund II
Investment Consultant; former Managing Director of Zurich Scudder Investments
LEONARD KEDROWSKI
Director of Minnesota Municipal Income Fund II
Owner and President of Executive and Management Consulting, Inc.
RICHARD RIEDERER
Director of Minnesota Municipal Income Fund II
Retired; former President and Chief Executive Officer of Weirton Steel
JOSEPH STRAUSS
Director of Minnesota Municipal Income Fund II
Owner and President of Strauss Management Company
JAMES WADE
Director of Minnesota Municipal Income Fund II
Owner and President of Jim Wade Homes
MINNESOTA MUNICIPAL INCOME FUND II'S BOARD OF DIRECTORS IS COMPRISED ENTIRELY OF
INDEPENDENT DIRECTORS.
<Page>
[FIRST AMERICAN(TM) LOGO]
MINNESOTA MUNICIPAL INCOME FUND II
2004 ANNUAL REPORT
U.S. Bancorp Asset Management, Inc., is a wholly owned subsidiary of U.S. Bank
National Association, which is a wholly owned subsidiary of U.S. Bancorp.
[RECYCLED SYMBOL]
This document is printed on paper containing 10% postconsumer waste.
3/2004 0057-04 MXN-AR
<Page>
ITEM 2--CODE OF ETHICS - Did registrant adopt a code of ethics, as of the end of
the period covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party? If not, why not?
Briefly describe any amendments or waivers that occurred during the period.
State here if code of ethics/amendments/waivers are on website and give website
address. State here if fund will send code of ethics to shareholders without
charge upon request.
RESPONSE: The registrant has adopted a code of ethics (designated as the "Code
of Ethical Conduct") that applies to its principal executive officer and
principal financial officer. The registrant undertakes to furnish a copy of such
Code of Ethical Conduct to any person upon request, without charge, by calling
1-800-677-3863.
ITEM 3--AUDIT COMMITTEE FINANCIAL EXPERT - Did the registrant's board of
directors determine that the registrant either: (i) has at least one audit
committee financial expert serving on its audit committee; or (ii) does not have
an audit committee financial expert serving on its audit committee? If yes,
disclose name of financial expert and whether he/she is "independent," (fund
may, but is not required, to disclose name/independence of more than one
financial expert) If no, explain why not.
RESPONSE: The registrant's Board of Directors has determined that Leonard
Kedrowski, Benjamin Field, and Mickey Foret, members of the registrant's Audit
Committee, are each an "audit committee financial expert" and are "independent,"
as these terms are defined in this Item. This designation will not increase the
designees' duties, obligations or liability as compared to their duties,
obligations and liability as members of the Audit Committee and of the Board of
Directors.
ITEM 4--PRINCIPAL ACCOUNTANT FEES AND SERVICES - Only disclosed annually.
(a) Audit Fees - Disclose aggregate fees billed for each of the last two fiscal
years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years.
RESPONSE: Ernst & Young LLP ("E&Y") billed the registrant audit fees
totaling $28,957 and $1,424 in the fiscal years ended January 31, 2004 and
2003, respectively, including fees associated with the annual audit, SEC
Rule 17f-2 security count filings and filings of the registrant's Form
N-SAR.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant
that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a)
of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
<Page>
RESPONSE: E&Y billed the registrant fees of $2,328 and $187 in the
fiscal years ended January 31, 2004 and 2003, respectively, for
audit-related services which primarily related to rating agency
agreed-upon procedures.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant for
tax compliance, tax advice, and tax planning. Registrants shall describe
the nature of the services comprising the fees disclosed under this
category.
RESPONSE: E&Y billed the registrant fees of $4,053 and $269 in the fiscal
years ended January 31, 2004 and 2003, respectively, for tax services,
including tax compliance, tax advice and tax planning. Tax compliance, tax
advice and tax planning services include preparation of original and
amended tax returns, claims for refund and tax payment-planning services,
assistance with tax audits and appeals, tax advice related to mergers and
acquisitions and requests for rulings or technical advice from taxing
authorities.
(d) All Other Fees - Disclose aggregate fees billed in each of the last two
fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through (c)
of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
RESPONSE: There were no fees billed by E&Y for other services to the
registrant during the fiscal years ended January 31, 2004 and 2003.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X.
RESPONSE: Set forth below are the audit committee's pre-approval policies
and procedures pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X:
AUDIT COMMITTEE POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE
INDEPENDENT AUDITOR
The Audit Committee of the First American Funds has responsibility for
ensuring that all services performed by the independent audit firm for the
funds do not impair the firm's independence. This review is intended to
provide reasonable oversight without removing management from its
responsibility for day-to-day operations. In this regard, the Audit
Committee should:
- Understand the nature of the professional services expected to be
provided and their impact on auditor independence and audit quality
- Examine and evaluate the safeguards put into place by the Company
and the auditor to safeguard independence
<Page>
- Meet quarterly with the partner of the independent audit firm
- Consider approving categories of service that are not deemed to
impair independence for a one-year period
It is important that a qualitative rather than a mere quantitative
evaluation be performed by the Committee in discharging its
responsibilities.
POLICY FOR AUDIT AND NON-AUDIT SERVICES PROVIDED TO THE FUNDS
On an annual basis, the Audit Committee of the First American Funds
("Committee") will review and consider whether to pre-approve the financial
plan for audit fees as well as categories of audit-related and non-audit
services that may be performed by the Fund's independent audit firm
directly for the Funds. At least annually the Committee will receive a
report from the independent audit firm of all audit and non-audit services,
which were approved during the year.
The engagement of the independent audit firm for any non-audit service
requires the written pre-approval of the Treasurer of the Funds and all
non-audit services performed by the independent audit firm will be
disclosed in the required SEC periodic filings.
In connection with the Audit Committee review and pre-approval
responsibilities, the review by the Audit Committee will consist of the
following:
AUDIT SERVICES
The categories of audit services and related fees to be reviewed and
considered for pre-approval annually by the Committee or its delegate
include the following:
- Annual Fund financial statement audits
- Seed audits (related to new product filings, as required)
- SEC and regulatory filings and consents
AUDIT-RELATED SERVICES
In addition, the following categories of audit-related services are deemed
to be consistent with the role of the independent firm and, as such, will
be considered for pre-approval by the Committee or its delegate, on an
annual basis.
- Accounting consultations
- Fund merger support services
- Other accounting related matters
<Page>
- Agreed Upon Procedure Reports
- Attestation Reports
- Other Internal Control Reports
Notwithstanding any annual pre-approval of these categories of services,
individual projects with an estimated fee in excess of $25,000 are subject
to pre-approval by the Audit Committee Chair or its delegate on a
case-by-case basis. Individual projects with an estimated fee in excess of
$50,000 are subject to pre-approval by the Audit Committee or its delegate
on a case-by-case basis.
TAX SERVICES
The following categories of tax services are deemed to be consistent with
the role of the independent audit firm and, as such, will be considered for
pre-approval by the Committee or its delegate, on an annual basis.
- Tax compliance services related to the filing or amendment of the
following:
- Federal, state and local income tax compliance, and
- Sales and use tax compliance
- Timely RIC qualification reviews
- Tax distribution analysis and planning
- Tax authority examination services
- Tax appeals support services
- Accounting methods studies
- Fund merger support services
- Tax consulting services and related projects
Notwithstanding any annual pre-approval of these categories of services,
individual projects with an estimated fee in excess of $25,000 are subject
to pre-approval by the Audit Committee Chair or its delegate on a
case-by-case basis. Individual projects with an estimated fee in excess of
$50,000 are subject to pre-approval by the Audit Committee or its delegate
on a case-by-case basis.
OTHER NON-AUDIT SERVICES
<Page>
The SEC auditor independence rules adopted in response to the
Sarbanes-Oxley Act specifically allow certain non-audit services. Because
of the nature of these services, none of these services may be commenced by
the independent firm without the prior approval of the Audit Committee. The
Committee may delegate this responsibility to one or more of the Committee
members, with the decisions presented to the full Committee at the next
scheduled meeting.
PROSCRIBED SERVICES
In accordance with SEC rules on independence, the independent audit firm is
prohibited from performing services in the following categories of
non-audit services:
- Management functions
- Accounting and bookkeeping services
- Internal audit services
- Financial information systems design and implementation
- Valuation services supporting the financial statements
- Actuarial services supporting the financial statements
- Executive recruitment
- Expert services (e.g., litigation support)
- Investment banking
POLICY FOR PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES
WITHIN THE INVESTMENT COMPANY COMPLEX
The Audit Committee of the First American Funds is also responsible for
pre-approving certain non-audit services provided to U.S. Bancorp Asset
Management, U.S. Bank N.A., Quasar Distributors, U.S. Bancorp Fund
Services, LLC and any other entity under common control with U.S. Bancorp
Asset Management that provides ongoing services to the Funds. The only
non-audit services provided to these entities which require pre-approval
are those services that relate directly to the operations and financial
reporting of the Funds.
Although the Audit Committee is not required to pre-approve all services
provided to U.S. Bancorp Asset Management and affiliated service providers,
the Audit Committee will annually receive a report from the independent
audit firm on the aggregate fees for all services provided to U.S. Bancorp
and affiliates.
<Page>
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
RESPONSE: All of the services described in paragraphs (b) through (d) of
Item 4 that were provided to the registrant on or after May 6, 2003, the
effective date of SEC rules relating to the pre-approval of non-audit
services, were pre-approved by the audit committee.
(f) If greater than 50%, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time,
permanent employees.
RESPONSE: All services performed on the engagement to audit the
registrant's financial statements for the most recent fiscal year end were
performed by the principal accountant's full-time, permanent employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant.
RESPONSE: The aggregate non-audit fees billed by E&Y to the registrant, the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant, totaled $93,311 and $118,788 for the fiscal years ended
January 31, 2004 and 2003, respectively, including services provided prior
to May 6, 2003, the effective date of SEC rules relating to the
pre-approval of non-audit services. Non-audit fees billed to the
registrant's investment advisor primarily related to services provided
in connection with fund mergers for other registrants in the First
American Funds complex.
(h) Disclose whether the registrant's audit committee has considered whether
the provision of non-audit services that were rendered to the registrant's
investment adviser (not including any Subadvisor whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining
the principal accountant's independence.
<Page>
(i) RESPONSE: The registrant's audit committee has determined that the
provision of non-audit services to the registrant's investment adviser, and
any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant, that
were not pre-approved and that were rendered on or after May 6, 2003 (the
effective date of SEC rules relating to the pre-approval of non-audit
services), is compatible with maintaining E&Y's independence.
ITEM 5--AUDIT COMMITTEE OF LISTED REGISTRANTS
RESPONSE: Not applicable.
ITEM 6 - Reserved.
ITEM 7--DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES - For closed-end funds that contain voting
securities in their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio securities.
<Page>
RESPONSE:
GENERAL PRINCIPLES
U.S. Bancorp Asset Management, Inc. ("USBAM") is the investment manager
for the First American family of mutual funds and for other separately managed
accounts. As such, USBAM has been delegated the authority to vote proxies with
respect to the investments held in client accounts, unless the client has
specifically retained such authority in writing. It is USBAM's duty to vote
proxies in the best interests of clients in a timely and responsive manner. In
voting proxies, USBAM also seeks to maximize total investment return for
clients.
USBAM's Investment Policy Committee, comprised of the firm's most senior
investment professionals, is charged with oversight of the proxy voting policies
and procedures. The Investment Policy Committee is responsible for (1) approving
the proxy voting policies and procedures, (2) for overseeing the proxy voting
process, and (3) for reviewing the proxy voting record on a regular basis.
POLICIES AND PROCEDURES
POLICIES. The Investment Policy Committee, after reviewing and
concluding that such policies are reasonably designed to vote proxies in the
best interests of clients, has approved and adopted the proxy voting policies of
ISS, a leading national provider of proxy voting administrative and research
services. As a result, such policies set forth USBAM's positions on recurring
proxy issues and criteria for addressing non-recurring issues. A summary of
these policies is attached. These policies are reviewed periodically and
therefore are subject to change. Even though it has adopted ISS's policies,
USBAM maintains the fiduciary responsibility for all proxy voting decisions. In
extraordinary situations, the Investment Policy Committee may decide to override
a standard policy position for a particular vote, depending on the specific
factual circumstances.
PROCEDURES. Responsibility for certain administrative aspects of proxy
voting rests with USBAM's Proxy Voting Administration Committee, which reports
to the Investment Policy Committee. The Proxy Voting Administration Committee
also supervises the relationship with two outside firms that assist with the
process, ISS and ADP Financial Services. These firms apprise USBAM of
shareholder meeting dates, forward proxy voting materials, provide USBAM with
research on proxy proposals and voting recommendations and cast the actual proxy
votes. ISS also serves as USBAM's proxy voting record keeper and generates
reports on how proxies were voted.
CONFLICTS OF INTEREST. As an affiliate of U.S. Bancorp, currently the
eighth largest financial services holding company in the United States, USBAM
recognizes that there are numerous situations wherein it may have a theoretical
or real conflict of interest in voting the proxies of issuers or proxy
proponents (e.g., a special interest group) who are clients or potential clients
of some part of the U.S. Bancorp enterprise. Directors and officers of such
companies also may have personal or familial relationships with the U.S. Bancorp
enterprise and its employees that could give rise to conflicts of interest.
Although USBAM strongly believes that, regardless of such real or
theoretical conflicts of interest, it would always vote proxies in its clients'
best interests, by adopting ISS's policies and generally deferring to ISS's
recommendations, USBAM believes the risk related to conflicts will be minimized.
To further minimize this risk, the Investment Policy Committee has also
reviewed ISS's conflict avoidance policy and has concluded that it adequately
addresses both the theoretical and actual conflicts of interest the proxy voting
service may face.
In the event an extraordinary situation arises in which (1) the
Investment Policy Committee determines it is necessary in clients' best
interests to override a standard policy or (2) it is determined that ISS faces a
material conflict of interest with respect to a specific vote, the Investment
Policy Committee
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will direct ISS how to vote. Before doing so, however, the Proxy Voting
Administration Committee will confirm that USBAM and the Investment Policy
Committee face no material conflicts of the nature discussed above.
If the Proxy Voting Administration Committee concludes a material
conflict does exist, it will recommend a course of action designed to address
the conflict to the Investment Policy Committee. Such actions could include, but
are not limited to:
- - Obtaining instructions from the affected clients on how to vote the proxy;
- - Disclosing the conflict to the affected clients and seeking their consent
to permit USBAM to vote the proxy;
- - Voting in proportion to the other shareholders;
- - Recusing an Investment Policy Committee member from all discussion or
consideration of the matter, if the material conflict is due to such
person's actual or potential conflict of interest; or
- - Following the recommendation of a different independent third party.
In addition to all of the above, members of the Investment Policy
Committee and the Proxy Voting Administration Committee must notify USBAM's
Chief Compliance Officer of any direct, indirect or perceived improper influence
made by any employee, officer or director within the U.S. Bancorp enterprise or
First American Fund complex with regard to how USBAM should vote proxies. The
Chief Compliance Officer will investigate the allegations and will report the
findings to the USBAM Chief Executive Officer and the General Counsel. If it is
determined that improper influence was attempted, appropriate action shall be
taken. Such appropriate action may include disciplinary action, notification of
the appropriate senior managers within the U.S. Bancorp enterprise, or
notification of the appropriate regulatory authorities. In all cases, the
Investment Policy Committee shall not consider any improper influence in
determining how to vote proxies and will vote in the best interests of clients.
REVIEW AND REPORTS
On a calendar quarterly basis, the Proxy Voting Administration Committee
will review the proxy voting record to assess a number of matters, including the
following:
- - Whether proxy statements were timely forwarded to ISS;
- - Whether proxy votes were cast on a timely basis;
- - Whether proxy votes were cast consistent with the policies; and
- - Where the guidelines were overridden, whether such vote was communicated to
ISS in a timely manner and voted consistent with the communication.
The Proxy Voting Administration Committee will prepare a report on this
review for submission to the Investment Policy Committee. Such report will also
review all identified conflicts and how they were addressed during the quarter.
The Investment Policy Committee, on a calendar quarterly basis, will
review the report of the Proxy Voting Administration Committee, as well as ISS's
proxy voting policies and conflict of interest policies. The purpose of this
review is to ensure USBAM is voting proxies in a timely and responsive manner in
the best interests of clients. With respect to the review of votes cast on
behalf of investments by the First American family of mutual funds, such review
will also be reported to the independent Board of Directors of the First
American Funds.
The actual proxy voting records of the First American Funds will be
filed with the U.S. Securities Exchange Commission and will be available to
shareholders after June 30, 2004. Such records will be available on the First
American Funds' website at www.firstamericanfunds.com and on the SEC's website
at www.sec.gov.
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USBAM's separately managed account clients should contact their
relationship manager for more information on USBAM's policies and the proxy
voting record for their account.
ISS PROXY VOTING GUIDELINES SUMMARY
The following is a concise summary of ISS's proxy voting policy guidelines.
1. AUDITORS
Vote FOR proposals to ratify auditors, unless any of the following apply:
- - An auditor has a financial interest in or association with the company, and
is therefore not independent
- - Fees for non-audit services are excessive, or
- - There is reason to believe that the independent auditor has rendered an
opinion which is neither accurate nor indicative of the company's financial
position.
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes on director nominees should be made on a CASE-BY-CASE basis, examining the
following factors: independence of the board and key board committees,
attendance at board meetings, corporate governance provisions and takeover
activity, long-term company performance, responsiveness to shareholder
proposals, any egregious board actions, and any excessive non-audit fees or
other potential auditor conflicts.
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors
annually.
INDEPENDENT CHAIRMAN (SEPARATE CHAIRMAN/CEO)
Vote on a CASE-BY-CASE basis shareholder proposals requiring that the positions
of chairman and CEO be held separately. Because some companies have governance
structures in place that counterbalance a combined position, certain factors
should be taken into account in determining whether the proposal warrants
support. These factors include the presence of a lead director, board and
committee independence, governance guidelines, company performance, and annual
review by outside directors of CEO pay.
MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES
Vote FOR shareholder proposals asking that a majority or more of directors be
independent unless the board composition already meets the proposed threshold by
ISS's definition of independence.
Vote FOR shareholder proposals asking that board audit, compensation, and/or
nominating committees be composed exclusively of independent directors if they
currently do not meet that standard.
3. SHAREHOLDER RIGHTS
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take
action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written
consent.
SHAREHOLDER ABILITY TO CALL SPECIAL MEETINGS
Vote AGAINST proposals to restrict or prohibit shareholder ability to call
special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act
independently of management.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote.
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Vote FOR proposals to lower supermajority vote requirements.
CUMULATIVE VOTING
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis
relative to the company's other governance provisions.
CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential
voting, use independent vote tabulators and use independent inspectors of
election, as long as the proposal includes a provision for proxy contests as
follows: In the case of a contested election, management should be permitted to
request that the dissident group honor its confidential voting policy. If the
dissidents agree, the policy remains in place. If the dissidents will not agree,
the confidential voting policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE
basis, considering the factors that include the long-term financial performance,
management's track record, qualifications of director nominees (both slates),
and an evaluation of what each side is offering shareholders.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also
recommend voting for reimbursing proxy solicitation expenses.
5. POISON PILLS
Vote FOR shareholder proposals that ask a company to submit its poison pill for
shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals
to redeem a company's poison pill and management proposals to ratify a poison
pill.
6. MERGERS AND CORPORATE RESTRUCTURINGS
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features
as the fairness opinion, pricing, strategic rationale, and the negotiating
process.
7. REINCORPORATION PROPOSALS
Proposals to change a company's state of incorporation should be evaluated on a
CASE-BY-CASE basis, giving consideration to both financial and corporate
governance concerns, including the reasons for reincorporating, a comparison of
the governance provisions, and a comparison of the jurisdictional laws. Vote FOR
reincorporation when the economic factors outweigh any neutral or negative
governance changes.
8. CAPITAL STRUCTURE
COMMON STOCK AUTHORIZATION
Votes on proposals to increase the number of shares of common stock authorized
for issuance are determined on a CASE-BY-CASE basis using a model developed by
ISS.
Vote AGAINST proposals at companies with dual-class capital structures to
increase the number of authorized shares of the class of stock that has superior
voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a
company's shares are in danger of being delisted or if a company's ability to
continue to operate as a going concern is uncertain.
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DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior
voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock
if:
- - It is intended for financing purposes with minimal or no dilution to
current shareholders
- - It is not designed to preserve the voting power of an insider or
significant shareholder
9. EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to compensation plans should be determined on a CASE-BY-CASE
basis. Our methodology for reviewing compensation plans primarily focuses on the
transfer of shareholder wealth (the dollar cost of pay plans to shareholders
instead of simply focusing on voting power dilution). Using the expanded
compensation data disclosed under the SEC's rules, ISS will value every award
type. ISS will include in its analyses an estimated dollar cost for the proposed
plan and all continuing plans. This cost, dilution to shareholders' equity, will
also be expressed as a percentage figure for the transfer of shareholder wealth,
and will be considered long with dilution to voting power. Once ISS determines
the estimated cost of the plan, we compare it to a company-specific dilution
cap.
Vote AGAINST equity plans that explicitly permit repricing or where the company
has a history of repricing without shareholder approval.
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS
Votes on management proposals seeking approval to reprice options are evaluated
on a CASE-BY-CASE basis giving consideration to the following:
- - Historic trading patterns
- - Rationale for the repricing
- - Value-for-value exchange
- - Option vesting
- - Term of the option
- - Exercise price
- - Participation
EMPLOYEE STOCK PURCHASE PLANS
Votes on employee stock purchase plans should be determined on a CASE-BY-CASE
basis.
Vote FOR employee stock purchase plans where all of the following apply:
- - Purchase price is at least 85 percent of fair market value
- - Offering period is 27 months or less, and
- - Potential voting power dilution (VPD) is ten percent or less.
Vote AGAINST employee stock purchase plans where any of the opposite conditions
obtain.
SHAREHOLDER PROPOSALS ON COMPENSATION
Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding
executive and director pay, taking into account company performance, pay level
versus peers, pay level versus industry, and long term corporate outlook.
10. SOCIAL AND ENVIRONMENTAL ISSUES
These issues cover a wide range of topics, including consumer and public safety,
environment and energy, general corporate issues, labor standards and human
rights, military business, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each
analysis, the overall principal guiding all vote recommendations focuses on how
the proposal will enhance the economic value of the company.
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ITEM 8 - Reserved.
ITEM 9--CONTROLS AND PROCEDURES
(a) Disclose the conclusions of the registrant's principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, about the effectiveness of the registrant's disclosure
controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR
270.30a-3(c))) based on their evaluation of these controls and procedures
as of a date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph.
RESPONSE: The registrant's Principal Executive Officer and Principal
Financial Officer have evaluated the registrant's disclosure controls and
procedures within 90 days of the date of this filing and have concluded
that the registrant's disclosure controls and procedures were effective, as
of that date, in ensuring that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized and
reported timely. Notwithstanding this conclusion, the registrant's
Principal Executive Officer and Principal Financial Officer seek continuous
improvements to the registrant's disclosure controls and procedures.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)))
that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
RESPONSE: There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10 - EXHIBITS
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request without
charge.
RESPONSE: Attached hereto.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
PEO/PFO).
RESPONSE: Attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
First American Minnesota Municipal Income Fund II, Inc.
By: /s/ Thomas S. Schreier, Jr.
----------------------------
Thomas S. Schreier, Jr.
President
Date: April 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Thomas S. Schreier, Jr.
----------------------------
Thomas S. Schreier, Jr.
President
Date: April 8, 2004
By: /s/ Joseph M. Ulrey III
----------------------------
Joseph M. Ulrey III
Treasurer
Date: April 8, 2004