<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 11-K
(Mark One)
/x/ Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 1994
or
/ / Transition Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______ to _______
Commission File No. 1-3548
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
(Full Title of the Plan)
----------------------------
Minnesota Power & Light Company
30 West Superior Street
Duluth, Minnesota 55802
(Name of issuer of securities
held pursuant to the Plan and
the address of its principal
executive office)
----------------------------
<PAGE>
Report of Independent Accountants
To the Participants and Administrator
of the Minnesota Power and Affiliated
Companies Supplemental Retirement Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Minnesota Power and Affiliated Companies Supplemental
Retirement Plan at December 31, 1994, and 1993, and the changes in net assets
available for plan benefits for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The additional information included in Schedules I
and II is presented for purposes of additional analysis and is not a required
part of the basic financial statements but is additional information required
by the Employees Retirement Income Security Act of 1974. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Price Waterhouse LLP
Minneapolis, Minnesota
June 16, 1995
1
<PAGE>
<TABLE>
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
Statement of Net Assets Available for Plan Benefits
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
Assets, at fair/contract value
Guaranteed investment contracts
(cost of $16,264,983 and
$19,414,300, respectively) $16,264,983 $19,414,300
Minnesota Power & Light Company
common stock (346,749 and
309,050 shares at cost of
$9,951,459 and $9,188,932,
respectively) 8,755,412 10,121,481
Mutual fund securities (cost of
$15,786,820 and $10,101,162,
respectively) 15,732,870 11,234,289
Money market securities 2,565,949 856,731
Loans receivable from participants 1,410,017 1,395,792
----------- -----------
Net assets available for plan benefits $44,729,231 $43,022,593
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
<TABLE>
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
Statement of Changes in Net Assets Available for Plan Benefits
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
Sources of net assets
Contributions $ 4,142,821 $ 4,586,208
Interest income 1,458,391 1,520,295
Dividend income 1,202,029 1,325,533
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities (2,991,910) 180,068
Participants' loan interest income 105,272 89,115
Net realized gain (loss) on sale
of securities (223,184) 67,064
------------ -----------
3,693,419 7,768,283
Application of net assets
Transfers to retirement plan (717,205) (384,468)
Benefit distributions (1,269,576) (808,163)
------------ ------------
Increase in net assets 1,706,638 6,575,652
Net assets available for plan benefits
Beginning of year 43,022,593 36,446,941
----------- -----------
End of year $44,729,231 $43,022,593
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
Notes to Financial Statements
Note 1 - Description of the Plan
The Minnesota Power and Affiliated Companies Supplemental Retirement Plan
(the SRP) provides benefits for eligible employees of Minnesota Power & Light
Company (Minnesota Power); Superior Water, Light and Power Company; and Topeka
Group Incorporated (collectively, the Companies). The SRP is a defined
contribution plan that is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Contributions
Contributions to the SRP consist of the following:
1. A flexible dollar contribution for the non-union participants up to 3% of
each participant's compensation, up to a maximum compensation of $150,000 in
1994, which has been elected by each participant to be contributed to the SRP.
2. A before-tax contribution for the union and non-union participants up to
12%, not to exceed $9,240 in 1994, of each participant's compensation as
permitted under Section 401(k) of the Internal Revenue Code of 1986 (Code). The
contribution is equal to an amount by which the participant has elected to
reduce his or her compensation pursuant to a salary reduction agreement.
3. Each participant is also allowed to make voluntary after-tax contributions
to the SRP through payroll deductions or lump-sum contributions. Total
voluntary contributions made by a participant for all fiscal years since July
1, 1980, shall not exceed 8.5% of the aggregate compensation received for all
years since becoming a participant less the amount of voluntary contributions
made to either the Minnesota Power and Affiliated Companies Retirement Plan A
or Plan B.
4. Contributions by participants may also be made through rollovers from
other qualified plans.
5. Core contributions were made to the SRP prior to January 1, 1989, and were
based on each participant's compensation. Core contribuions have not been
made to the SRP since December 31,1988.
Vesting
Flexible dollar, before-tax, voluntary after-tax, core and rollover
contributions are fully vested and nonforfeitable.
Loan Program
The SRP was amended during 1992 to allow participants to borrow money from
their SRP accounts. A participant may borrow up to $50,000 or 50% of their
total vested account
4
<PAGE>
balances, whichever is less, for up to 5 years for a general purpose loan and
10 years for the acquisition of a primary residence. A fixed interest rate of
the prime rate plus 1%, but not less than the Minnesota Power Employees Credit
Union share secured rate, is charged until the loan is repaid. As loans are
repaid, principal and interest amounts are redeposited into the participant's
SRP accounts.
Participant Accounts
Each participant's account is credited with the participant's contribution
and their share of the Companies' contributions. Income from the SRP's
investment funds is allocated to each participant's account based upon their
ownership interest in each fund.
Every December each non-union SRP participant is required to make an
election as to the flexible dollar, before-tax and after-tax contributions to
the SRP. Each December union participants are required to make an election for
before-tax and after-tax contributions. Flexible dollar, before-tax and after-
tax contributions may be invested in the Minnesota Power Common Stock Fund,
Fidelity Magellan Fund, Vanguard Index 500 Fund, Vanguard Short Term Federal
Portfolio, IAI Emerging Growth Fund, IAI International Developed Market Fund,
Templeton International Emerging Market Fund, Fidelity Balanced Fund and the
Fixed Income Fund. Contributions to the Fixed Income Fund are invested in
guaranteed investment contracts (GICs) with insurance companies. Flexible
dollar, before-tax and after-tax contributions may be transferred between funds
once a month with at least 10 days written notice to the Employee Benefit Plans
Committee (the Committee).
While participants are active employees, they may withdraw money as a loan
from their core, flexible dollar or before-tax accounts. After age
59 1/2, participants may withdraw the full amount of their flexible dollar,
before-tax account, and the vested amount from their core account. After-tax
accounts may be withdrawn at specified times during the year by participants of
any age. When participants terminate employment, become disabled or die, they
or their beneficiaries may elect to receive the vested amount of all their SRP
accounts. Upon retirement participants may elect to transfer the vested amount
of their SRP account balances to the Minnesota Power and Affiliated Companies
Retirement Plan A or Plan B.
Minnesota Power maintains the participants' records and issues a quarterly
report to each participant showing the status of individual accounts. At
December 31, 1994, there were 1,672 participants in the SRP.
Administration
The SRP is administered by the Committee. The address of the Committee is
30 West Superior Street, Duluth, Minnesota 55802. The responsibility of the
Committee includes the determination of compliance with the SRP's eligibility
requirements as well as the administration and payment of benefits all in a
manner consistent with the terms of the SRP and applicable law. The Committee
has the authority to designate persons to carry out fiduciary responsibilities
(other than trustee responsibilities) under the SRP. The Committee has the
power to appoint an investment manager or managers. Administration fees and
expenses of agents, outside experts, consultants, and managers shall be paid by
the Companies. The Committee may from time to time establish, modify and repeal
rules for the administration of the SRP as may be necessary to carry out the
purpose of the SRP. Members of the Committee receive no compensation for their
services with respect to the SRP.
5
<PAGE>
As of June 1, 1995, the members of the Committee, all employees of
Minnesota Power, and their respective titles are as follows:
Name Title
---- -----
Robert D. Edwards Executive Vice President and President -
Minnesota Power - Electric (1)
David G. Gartzke Senior Vice President - Finance and Chief
Financial Officer
Roger P. Engle Vice President - Customer Operations
Eugene G. McGillis Vice President; President of Superior Water,
Light and Power Company
Stephen D. Sherner Vice President - Power Marketing and Delivery
Geraldine R. VanTassel Vice President - Corporate Resource Planning
Mark A. Schober Corporate Controller
Philip R. Halverson General Counsel and Corporate Secretary
Dennis L. Hollingsworth Assistant Vice President - Corporate Development
Lori A. Collard Director - Marketing
Donald J. Shippar Director - Human Resources
Jeweleon W. Tuominen Supervisor - Benefits Accounting and
Administration
- --------------------
(1) Committee Chairman
North Shore Bank of Commerce is retained as Trustee (Trustee) for the SRP.
The Trustee's main office is located at 131 West Superior Street, Duluth,
Minnesota 55802. The Trustee carries blanket bond insurance in the amount of
$2,000,000.
Plan Termination
The Companies reserve the right to reduce, suspend, or discontinue their
contributions at any time or to terminate the SRP subject to the provisions of
ERISA and the Code. In the event of SRP termination, all of the account
balances of the participants will be fully vested and nonforfeitable, and
distribution will be made in accordance with the terms of the SRP.
Note 2 - Summary of Accounting Policies
The SRP uses the accrual basis of accounting and accordingly reflects
income in the year earned and expenses when incurred.
Mutual funds, money market securities and Minnesota Power common stock are
reported at fair value based on quoted market prices. GIC amounts are reported
at contract value which represent the purchase price of the contract plus
accrued interest. Participants' loans are reported at fair value which is the
principal balance outstanding.
Note 3 - Federal Income Tax Status
A favorable determination letter was obtained from the Internal Revenue
Service stating that the SRP, as amended and restated effective January 1,
1985, qualifies as a profit sharing plan under Section 401(a) of the Code. As
required by the Internal Revenue Service, the Committee filed an application
for a determination letter from the Internal Revenue Service for changes made
to the SRP in subsequent years on March 31, 1995.
6
<PAGE>
Note 4 - Changes in SRP Assets for Participant Directed Accounts
<TABLE>
The table below is a breakdown of the changes in SRP assets for each
investment fund for the year ended December 31, 1994.
<CAPTION
Fixed
Income
Fund Mutual Fund Securities
------ --------------------------------------------------------
Vanguard
Short Term
Fidelity Vanguard Federal
GICs Evergreen Magellan Index 500 Portfolio
<S> <C> <C> <C> <C> <C>
Sources of net assets
Contributions $627,625 $849,815 $382,195 $143,023
Interest income 1,456,823
Dividend income 297,024 59,269 27,929
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities $23,154 (428,363) (36,726) (30,112)
Participants' loan interest
income 285,539 69,060 23,585 9,623
Net gain (loss) on sale of
securities (22,888) (1,279) (2,327)
--------- ------- --------- --------- ---------
2,369,987 23,154 764,648 427,044 148,136
Application of net assets
Transfers to retirement
plans (717,205)
Benefit distributions (734,299) (60,152) (137,225) (39,095) (5,661)
Loans to participants (632,287)
------------ ----------- ----------- ----------- ---------
Increase (decrease) in net
assets 286,196 (36,998) 627,423 387,949 142,475
Net transfers (3,232,918) (2,539,869) 530,887 345,492 19,530
Net assets available for
plan benefits
Beginning of year <F1> 19,960,350 2,576,867 6,822,351 1,393,838 441,376
----------- ---------- ---------- ---------- --------
End of year <F2> $17,013,628 $ 0 $7,980,661 $2,127,279 $603,381
=========== ========== ========== ========== ========
7
<PAGE>
<CAPTION>
Mutual Fund Securities (Continued)
-----------------------------------------------------
IAI IAI Int'l. Templeton
Emerging Developed Fidelity International
Growth Market Balanced Emerging
Fund Fund Fund Market Fund
<S> <C> <C> <C> <C>
Sources of net assets
Contributions $511,052 $292,180 $634,199 $376,726
Interest income
Dividend income 43,448 47,244 37,551 39,030
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities 8,944 (63,861) (103,712) (130,329)
Participants' loan interest income 23,333 14,331 18,193 21,212
Net gain (loss) on sale of
securities (2,753) (2,819) (4,482) (1,683)
----------- --------- ----------- -----------
584,024 287,075 581,749 304,956
Application of net assets
Transfers to retirement plans
Benefit distributions (845) (33,395) (10,618) (7,201)
Loans to participants
----------- --------- ----------- -----------
Increase (decrease) in net
assets 583,179 253,680 571,131 297,755
Net transfers 763,968 650,936 1,107,050 793,935
Net assets available for plan benefits
Beginning of year <F1> 0 0 0 0
---------- -------- ---------- ----------
End of year <F2> $1,347,147 $904,616 $1,678,181 $1,091,690
========== ======== ========== ==========
<CAPTION>
Minnesota Loans
Power Receivable
Common from Total
Stock Participants Changes
<S> <C> <C> <C>
Sources of net assets
Contributions $326,006 $4,142,821
Interest income 1,568 1,458,391
Dividend income 650,534 1,202,029
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities (2,230,905) (2,991,910)
Participants' loan interest income 220,808 $(580,412) 105,272
Net gain (loss) on sale of securities (184,953) (223,184)
------------ ---------- ------------
(1,216,942) (580,412) 3,693,419
Application of net assets
Transfers to retirement plans (717,205)
Benefit distributions (203,435) (37,650) (1,269,576)
Loans to participants 632,287 0
------------ ---------- ------------
Increase (decrease) in net assets (1,420,377) 14,225 1,706,638
Net transfers 1,560,989 0
Net assets available for plan benefits
Beginning of year <F1> 10,432,019 1,395,792 43,022,593
------------ ---------- -----------
End of year <F2> $10,572,631 $1,410,017 $44,729,231
=========== ========== ===========
<FN>
<F1> These beginning of year balances include $856,731 of short term money
market securities of which $776,891 was being held to be reinvested into
other SRP funds and the balance for participant distributions.
<F2> These end of year balances include $2,565,949 of short term money market
securities of which $1,811,767 was being held to be reinvested into other SRP
funds and the balance for participant distributions.
</FN>
</TABLE>
8
<PAGE>
Note 4 - Changes in SRP Assets for Participant Directed Accounts (Continued)
<TABLE>
The table below is a breakdown of the changes in SRP assets for each
investment fund for the year ended December 31, 1993.
<CAPTION>
Fixed
Income
Fund Mutual Fund Securities
------ --------------------------------------------------------
Vanguard
Short Term
Fidelity Vanguard Federal
GICs Evergreen Magellan Index 500 Portfolio
<S> <C> <C> <C> <C> <C>
Sources of net assets
Contributions $ 1,377,951 $ 282,971 $ 978,088 $ 658,578 $217,868
Interest income 1,518,919
Dividend income 117,287 603,356 28,116 19,323
Net unrealized
appreciation
(depreciation) in
aggregate fair value
of securities 26,743 555,434 52,309 (1,330)
Participants' loan
interest income 217,005 11,150 33,210 33,140 6,522
Net gain (loss) on sale
of securities 9,049 57,586 3,724 373
----------- ---------- ---------- ---------- --------
3,113,875 447,200 2,227,674 775,867 242,756
Application of net assets
Transfers to
retirement plans (384,468)
Benefit distributions (566,101) (50,753) (34,068) (3,301) (2,391)
Loans to participants (895,384)
------------ ----------- ----------- ----------- ---------
Increase (decrease) in
net assets 1,267,922 396,447 2,193,606 772,566 240,365
Net transfers 291,089 (454,914) (34,627) 67,803 29,092
Net assets available
for plan benefits
Beginning of year <F1> 18,401,339 2,635,334 4,663,372 553,469 171,919
----------- ---------- ---------- ---------- --------
End of year <F2> $19,960,350 $2,576,867 $6,822,351 $1,393,838 $441,376
=========== ========== ========== ========== ========
<CAPTION> Minnesota Loans
Power Receivable
Common from Total
Stock Participants Changes
<S> <C> <C> <C>
Sources of net assets
Contributions $ 1,070,752 $ 4,586,208
Interest income 1,376 1,520,295
Dividend income 557,451 1,325,533
Net unrealized
appreciation
(depreciation) in
aggregate fair value
of securities (453,088) 180,068
Participants' loan
interest income 188,465 $ (400,377) 89,115
Net gain (loss) on sale
of securities (3,668) 67,064
------------ ----------- -----------
1,361,288 (400,377) 7,768,283
Application of net assets
Transfers to
retirement plans (384,468)
Benefit distributions (151,549) (808,163)
Loans to participants 895,384 0
------------ ---------- -----------
Increase (decrease) in
net assets 1,209,739 495,007 6,575,652
Net transfers 101,557 0
Net assets available
for plan benefits
Beginning of year <F1> 9,120,723 900,785 36,446,941
----------- ---------- -----------
End of year <F2> $10,432,019 $1,395,792 $43,022,593
=========== ========== ===========
<FN>
<F1> These beginning of year balances include $2,821,576 of short term money
market securities of which $2,784,606 was being held to be reinvested into
other SRP funds and the balance for participant distributions.
<F2> These end of year balances include $856,731 of short term money market
securities of which $776,891 was being held to be reinvested into other SRP
funds and the balance for participant distributions.
</FN>
</TABLE>
9
<PAGE>
Schedule I
<TABLE>
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
Schedule of Investments Held
December 31, 1994
<CAPTION>
Fair/Contract
Description Cost Value
<S> <C> <C>
Guaranteed Investment Contracts
Metropolitan Life Insurance Company
8.65% due 1995 and 1997 $4,096,990 $4,096,990
Provident Life and Accident Insurance
Company
7.6% due 1998 2,526,323 2,526,323
Sun Life Insurance Company of America
8.73% due 1995 2,194,179 2,194,179
Aetna Life Insurance Company
6.06% due 1999 2,117,699 2,117,699
Allstate Life Insurance Company
7.14% due 1998 2,010,199 2,010,199
John Hancock Mutual Life Insurance
Company
7.22% due 1996 1,943,170 1,943,170
Protective Life Insurance Company
6.99% due 1997 1,376,423 1,376,423
----------- -----------
Total guaranteed investment
contracts 16,264,983 16,264,983
----------- -----------
Minnesota Power & Light Company Common
Stock<F1> (346,749 shares) 9,951,459 8,755,412
----------- -----------
Mutual Fund Securities
Fidelity Magellan Fund
(119,470 shares) 7,735,437 7,980,576
Vanguard Index 500 (49,506 shares) 2,106,013 2,127,279
Vanguard Short Term Federal
Portfolio (62,268 shares) 634,778 603,381
IAI Emerging Growth Fund
(90,413 shares) 1,338,203 1,347,147
IAI International Developed
Market Fund (70,728 shares) 968,477 904,616
Templeton International Emerging
Market Fund (97,385 shares) 1,222,019 1,091,690
Fidelity Balanced Fund
(136,549 shares) 1,781,893 1,678,181
----------- -----------
Total mutual funds 15,786,820 15,732,870
----------- -----------
Money Market Securities
Dreyfus Institutional Government
Securities Fund, floating
interest rate with no
maturity date 2,565,949 2,565,949
----------- -----------
Loans Receivable from Participants -
7% to 10% 1,410,017 1,410,017
----------- -----------
Total Investments $45,979,228 $44,729,231
=========== ===========
- ------------------
<FN>
<F1>Party-in-interest
</FN>
</TABLE>
10
<PAGE>
Schedule II
<TABLE>
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
Schedule of Transactions in Excess of
5% of Fair Value of Plan Assets
For the Year Ended December 31, 1994
<CAPTION>
Purchases
-------------------
Aggregate Purchase
Price and Fair
Value on Number of
Description Transaction Dates Transactions
<S> <C> <C>
Dreyfus Institutional Government Series $7,222,120 145
Aetna Life Insurance Company $2,843,678 13
Fidelity Magellan Fund $2,132,799 47
Minnesota Power & Light Company
Common Stock $1,606,255 39
Evergreen Fund $3,937 3
</TABLE>
<TABLE>
<CAPTION>
Sales
-----------------
Aggregate
--------------------------------------
Net
Cost of Gain/ Number of
Description Asset Sale Price (Loss) Transactions
<S> <C> <C> <C> <C>
Dreyfus Institutional Government
Series $5,132,967 $5,132,967 0 93
Evergreen Fund $2,580,742 $2,603,895 $23,153 17
Aetna Life Insurance Company $2,888,000 $2,888,000 0 11
New York Life Insurance Company $2,676,224 $2,676,224 0 1
Minnesota Power & Light Company
Common Stock $1,126,373 $ 941,420 $(184,953) 31
Fidelity Magellan Fund $ 843,151 $ 820,263 $ (22,888) 30
</TABLE>
11
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefit Plans Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
Minnesota Power and Affiliated Companies
Supplemental Retirement Plan
----------------------------------------
(Name of Plan)
June 23, 1995 By R.D. Edwards
--------------------------
R.D. Edwards
Chairman,
Employee Benefit Plans Committee
12
<PAGE>
Index to Exhibits
Exhibit Page
a - Consent of Independent Accountants
13
<PAGE>
Exhibit a
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-32033) of the Minnesota Power and Affiliated
Companies Supplemental Retirement Plan of our report dated June 16, 1995,
appearing on page 1 of this Annual Report of the Minnesota Power and Affiliated
Companies Supplemental Retirement Plan on Form 11-K for the year ended December
31, 1994.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
June 22, 1995
14
