<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, 1997
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, Inc.
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>
INDEX
Page
Report of Independent Accountants 1
Statement of Net Assets Available for Plan Benefits 2
Statement of Changes in Net Assets Available for Plan Benefits 3
Notes to Financial Statements 4
Supplemental Schedules
Schedule I: Investments Held 13
Schedule II: Transactions in Excess of 5% of Fair Value of Plan Assets 14
Signatures 15
<PAGE>
Price Waterhouse LLP 3100 Multifoods Tower Telephone 612-332-7000
33 South Sixth Street Facsimile 612-332-6711
Minneapolis, MN 55402-3795
Price Waterhouse [LOGO]
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, 1997 and 1996, 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 Employee 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
Price Waterhouse LLP
Minneapolis, Minnesota
June 5, 1998
1
<PAGE>
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
Thousands
DECEMBER 31,
1997 1996
- --------------------------------------------------------------------------------
ASSETS
INVESTMENTS, AT FAIR/CONTRACT VALUE
Guaranteed investment contracts $ 18,405 $ 17,287
Minnesota Power, Inc. common stock 17,929 11,248
Mutual fund securities 39,590 30,497
Money market securities 54 110
Loans receivable from participants 1,882 1,548
-------- --------
Total investments 77,860 60,690
CASH 11 -
-------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 77,871 $ 60,690
======== ========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
2
<PAGE>
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Thousands
YEAR ENDED
DECEMBER 31,
1997 1996
- --------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Participant contributions $ 5,594 $ 5,454
Interest income 1,167 1,132
Dividend income 3,431 3,829
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities 9,470 (65)
Participants' loan interest income 150 127
Net realized gain (loss) on sale of securities 374 (95)
-------- -------
20,186 10,382
APPLICATION OF NET ASSETS
Transfers to retirement plans (624) (184)
Benefit distributions (2,372) (2,485)
Administrative expenses (9) (9)
-------- -------
INCREASE IN NET ASSETS 17,181 7,704
NET ASSETS AVAILABLE FOR PLAN BENEFITS
Beginning of year 60,690 52,986
-------- -------
End of year $ 77,871 $60,690
======== =======
- --------------------------------------------------------------------------------
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, Inc.
(Minnesota Power), formerly Minnesota Power & Light Company; Superior Water,
Light and Power Company; and MP Water Resources Group, Inc. (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:
- Flexible Dollars Contributions. Flexible dollar contributions for
the non-union participants are up to 3 percent of each participant's
compensation (0.2 percent for union participants), up to a maximum
compensation of $160,000 in 1997. The contribution is equal to an
amount the participant has elected to contribute to the SRP.
- Salary Reduction Contributions (Before-Tax Contributions).
Before-tax contributions for the union and non-union participants
are up to 12 percent of each participant's compensation, not to
exceed $9,500 in 1997, as permitted under Section 401(k) of the
Internal Revenue Code of 1986 (Code). The contribution is equal to
an amount the participant has elected to reduce his or her
compensation pursuant to a salary reduction agreement.
- Results Sharing Contributions. Results sharing contributions are
equal to the portion (up to 100 percent) of the Results Sharing
Award the Participant irrevocably agrees to forgo and that, pursuant
to the Minnesota Power Results Sharing Program, would otherwise be
paid to the Participant. Results sharing contributions are included
in the Participant's before-tax account, thus subject to limitations
under Section 401(k) of the Code.
- Voluntary Contributions (After-Tax Contributions). 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 percent 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.
- Rollovers. Contributions by participants may also be made through
rollovers from other qualified plans.
- Core Contributions. Core contributions were made to the SRP prior
to January 1, 1989 and were based on each participant's
compensation. Core contributions have not been made to the SRP since
December 31, 1988.
VESTING
All contributions plus actual earnings are fully vested and
nonforfeitable.
4
<PAGE>
LOAN PROGRAM
The SRP allows participants to borrow money from their SRP accounts. A
participant may borrow up to $50,000 or 50 percent of their total account
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 percent, 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 participants are required to make an election as to
contributions to the SRP for the subsequent year. Funds may be transferred
between investment options once a month with at least 10 days written notice to
the Employee Benefit Plans Committee (the Committee). A brief description of the
Plan's investment options follows. For a detailed description of the investment
options and respective risk profiles refer to the fund prospectus.
- Minnesota Power Common Stock Fund seeks capital appreciation and
current income by investing in the common stock of Minnesota Power.
- Heartland Value Fund seeks long-term capital appreciation by
investing primarily in equity securities of small companies with
market capitalization of less than $500 million selected on a value
basis.
- Fidelity Magellan Fund seeks capital appreciation by investing in
securities of domestic, foreign and multinational issuers.
- Vanguard Institutional Index Fund seeks to match, as closely as
possible, the performance of the Standard & Poor's 500 Composite
Stock Price Index, which invests in stocks of large U.S. companies.
- Vanguard Short Term Federal Portfolio invests primarily in U.S.
Government agency securities, which are debt obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government.
This fund may also invest in U.S. Treasury securities, as well as in
repurchase agreements collateralized by the United States.
- BlackRock Funds Small Cap Growth Equity Portfolio seeks small cap
stocks considered to have favorable and above-average earnings
growth prospects versus the fund's benchmark, the Russell 2000
Growth Index. This fund replaced IAI Emerging Growth Fund in 1997.
- Templeton Institutional Funds, Inc. Foreign Equity Series seeks
long-term capital growth through a flexible policy investing in
equity securities and debt obligations of companies and governments
outside the United States. This fund replaced IAI International
Developed Market Fund in 1997.
- Templeton Institutional Funds, Inc. Emerging Market Series seeks
long-term capital growth by investing primarily in equity securities
of issuers in countries having emerging markets.
- Janus Balanced Fund seeks long-term capital growth consistent with
preservation of capital and balanced by current income. This fund
invests in securities selected primarily for their growth or income
potential. This fund replaced the Fidelity Balanced Fund in 1997.
- Fixed Income Fund is a conservative fund consisting entirely of
guaranteed investment contracts (GICs) with insurance companies.
Each GIC is guaranteed by the issuing insurance company and
supported by the insurance industry, and not guaranteed by the
federal government.
5
<PAGE>
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 account,
before-tax account and 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, 1997 there were 1,701 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 investment managers are paid by the
Companies or the SRP. 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.
As of June 1, 1998 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
President - Minnesota Power Electric (1)
David G. Gartzke Senior Vice President - Finance
Chief Financial Officer
Roger P. Engle Vice President - Minnesota Power Electric
President - Superior Water, Light and Power Company
Philip R. Halverson Vice President, General Counsel and Secretary
Donald J. Shippar Senior Vice President - Minnesota Power Electric
Claudia S. Welty Vice President - Minnesota Power Electric
Mark A. Schober Controller
Lori A. Collard President - Electric Outlet, Inc.
Brenda J. Flayton Director - Minnesota Power Electric - Human Resources
Alan R. Hodnik Manager - Laskin Energy Center
Jeweleon W. Tuominen Manager - Executive Compensation and Employee
Benefits
- ----------------------
(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
million.
6
<PAGE>
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 represents the purchase price of the contract
plus accrued interest. Participants' loans are reported at cost which
approximates fair value.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to (i) make estimates and
assumptions that affect the reported amounts of assets and liabilities, (ii)
disclose contingent liabilities at the date of the financial statements and
(iii) report amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
NOTE 3 - FEDERAL INCOME TAX STATUS
A favorable determination letter dated December 12, 1995 was obtained
from the Internal Revenue Service stating that the SRP, as amended and restated
effective January 1, 1992, qualifies as a profit sharing plan under Section
401(a) of the Code.
7
<PAGE>
NOTE 4 - GUARANTEED INVESTMENT CONTRACTS
Crediting Fair/Contract
Interest Value
Rate 1997 1996
- --------------------------------------------------------------------------------
Metropolitan Life Insurance Company
due 1997 8.65% $ - $ 2,419
Protective Life Insurance Company
due 1997 6.99% - 1,576
Provident Life and Accident Insurance Company
due 1998 7.06% 3,100 2,896
Allstate Life Insurance Company
due 1998 7.14% 2,472 2,307
Aetna Life Insurance Company
due 1999 6.06% 2,537 2,389
Provident Mutual Insurance Company
due 1999 5.80% 2,014 1,903
SunAmerica Life Insurance Company
due 2000 6.00% 2,028 1,913
Jackson National Life Insurance Company
due 2000 6.30% 3,169 -
Commonwealth Life Insurance Company
due 2001 6.67% 1,883 1,884
Protective Life Insurance Company
due 2001 6.17% 1,202 -
------- -------
$18,405 $17,287
======= =======
Average yield 6.47% 6.87%
8
<PAGE>
NOTE 5 - CHANGES IN SRP ASSETS FOR PARTICIPANT DIRECTED ACCOUNTS
Thousands
<TABLE>
The table below summarizes the changes in SRP assets for each
investment fund for the year ended December 31, 1997.
<CAPTION>
Fixed
Income
Fund Mutual Fund Securities
-------- -----------------------------------------------------------
Vanguard Vanguard IAI
Heartland Fidelity Institutional Short Term Emerging
Value Magellan Index Federal Growth
GIC Fund Fund Fund Portfolio Fund
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets
Participant contributions $ 709 $ 742 $ 591 $ 931 $ 125 $ 534
Interest income 1,166
Dividend income 573 808 191 61 50
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities 117 1,704 1,665 2
Participants' loan repayments,
including interest 289 32 82 64 6 42
Net gain (loss) on sale of securities 53 208 127 (1) (360)
------- ------ ------- ------- ------ ------
2,164 1,517 3,393 2,978 193 266
Application of net assets
Transfers to retirement plans (624)
Benefit distributions (861) (101) (300) (165) (58) (33)
Loans to participants (1,098)
Administrative expenses (9)
------- ------ ------- ------- ------ ------
Increase (decrease) in net assets (428) 1,416 3,093 2,813 135 233
Net transfers 1,527 397 (1,626) 236 (63) (4,443)
Net assets available for plan benefits
Beginning of year <F1> 17,317 2,793 10,799 5,600 983 4,210
------- ------ ------- ------- ------ ------
End of year <F2> $18,416 $4,606 $12,266 $ 8,649 $1,055 $ 0
======= ====== ======= ======= ====== ======
9
<PAGE>
<CAPTION>
Mutual Fund Securities (Continued)
---------------------------------------------------------------------------------
BlackRock IAI Int'l. Templeton Templeton
Small Cap Developed Institutional Fidelity Janus Institutional
Growth Equity Market Fund Foreign Balanced Balanced Fund Emerging
Fund Fund Equity Series Fund Fund Market Series
<C> <C> <C> <C> <C> <C>
<S>
Sources of net assets
Participant contributions $ 401 $ 119 $ 99 $ 743 $ 335
Interest income
Dividend income 235 39 76 438 128
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities (11) (133) 148 (460)
Participants' loan repayments,
including interest 24 10 8 32 30
Net gain (loss) on sale of securities (5) 111 (1) $ 70 31
------ ------ ------- ------ ------ ------
644 279 49 70 1,361 64
Application of net assets
Transfers to retirement plans
Benefit distributions (33) (33) (24) (10) (160) (69)
Loans to participants
Administrative expenses
------ ------ ------- ------ ----- ------
Increase (decrease) in net assets 611 246 25 60 1,201 (5)
Net transfers 4,119 (1,781) 1,751 (2,576) 3,079 172
Net assets available for plan benefits
Beginning of year <F1> 0 1,535 0 2,516 0 2,061
------ ------ ------- ------ ------ ------
End of year <F2> $4,730 $ 0 $ 1,776 $ 0 $4,280 $2,228
====== ====== ======= ====== ====== ======
<CAPTION>
Minnesota Loans
Power Receivable
Common from Total
Stock Participants Changes
<S> <C> <C> <C>
Sources of net assets
Participant contributions $ 265 $ 5,594
Interest income 1 1,167
Dividend income 832 3,431
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities 6,438 9,470
Participants' loan repayments,
including interest 218 $ (687) 150
Net gain (loss) on sale of securities 141 374
------- ------ -------
7,895 (687) 20,186
Application of net assets
Transfers to retirement plans (624)
Benefit distributions (448) (77) (2,372)
Loans to participants 1,098 0
Administrative expenses (9)
------- ------ -------
Increase (decrease) in net assets 7,447 334 17,181
Net transfers (792) 0
Net assets available for plan benefits
Beginning of year <F1> 11,328 1,548 60,690
------- ------ -------
End of year <F2> $17,983 $1,882 $77,871
======= ====== =======
- -------------------------
<FN>
<F1> Balances include $110 of short-term money market securities of which $80
was being held to be invested in Minnesota Power Common Stock and the
balance for participant distributions.
<F2> Balances include $54 of short-term money market securities of which $43 was
being held to be invested in Minnesota Power Common Stock and the balance
for participant distributions. Balances also include $11 in cash.
</FN>
</TABLE>
10
<PAGE>
NOTE 5 - CHANGES IN SRP ASSETS FOR PARTICIPANT DIRECTED ACCOUNTS
Thousands
<TABLE>
The table below summarizes the changes in SRP assets for each
investment fund for the year ended December 31, 1996.
<CAPTION>
Fixed
Income
Fund Mutual Fund Securities
-------- ----------------------------------------------------
Vanguard Vanguard
Heartland Fidelity Institutional Short Term
Value Magellan Index Federal
GICs Fund Fund Fund Portfolio
<S> <C> <C> <C> <C> <C>
Sources of net assets
Participant contributions $ 886 $ 653 $ 884 $ 665 $ 191
Interest income 1,131
Dividend income 166 1,697 171 51
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities 159 (361) 647 (8)
Participants' loan repayments,
including interest 272 18 90 49 17
Net gain (loss) on sale of securities 14 (175) 86 (2)
-------- ------- ------- ------- -----
2,289 1,010 2,135 1,618 249
Application of net assets
Transfers to retirement plans (184)
Benefit distributions (1,228) (42) (318) (93) (9)
Loans to participants (742)
Administrative expenses (9)
-------- ------- ------- ------- -----
Increase (decrease) in net assets 126 968 1,817 1,525 240
Net transfers 235 858 (1,335) 629 (40)
Net assets available for plan benefits
Beginning of year <F1> 16,956 967 10,317 3,446 783
-------- ------- ------- ------- -----
End of year <F2> $ 17,317 $ 2,793 $10,799 $ 5,600 $ 983
======== ======= ======= ======= =====
11
<PAGE>
<CAPTION>
Mutual Fund Securities (Continued)
------------------------------------------------------------
IAI IAI Int'l. Templeton Minnesota Loans
Emerging Developed Fidelity Institutional Power Receivable
Growth Market Balanced Fund Emerging Common from Total
Fund Fund Fund Market Series Stock Participants Changes
<S> <C> <C> <C> <C> <C> <C> <C>
Sources of net assets
Participant contributions $ 706 $ 287 $ 451 $ 315 $ 416 $ 5,454
Interest income 1 1,132
Dividend income 583 157 108 49 847 3,829
Net unrealized appreciation
(depreciation) in aggregate
fair value of securities (433) (57) 99 206 (317) (65)
Participants' loan repayments,
including interest 42 15 26 23 212 $ (637) 127
Net gain (loss) on sale of
securities 7 8 (3) 19 (49) (95)
------- ------ ------ ------- ------- ------- -------
905 410 681 612 1,110 (637) 10,382
Application of net assets
Transfers to retirement plans (184)
Benefit distributions (100) (65) (27) (76) (457) (70) (2,485)
Loans to participants 742 0
Administrative expenses (9)
------- ------ ------ ------- ------- ------- -------
Increase (decrease) in net assets 805 345 654 536 653 35 7,704
Net transfers 727 25 (184) 198 (1,113) 0
Net assets available for plan
benefits
Beginning of year <F1> 2,678 1,165 2,046 1,327 11,788 1,513 52,986
------- ------ ------ ------- ------- ------- -------
End of year <F2> $ 4,210 $1,535 $2,516 $ 2,061 $11,328 $ 1,548 $60,690
======= ====== ====== ======= ======= ======= =======
- ---------------------
<FN>
<F1> Balances include $1,642 of short-term money market securities of which
$1,000 was being held to be invested in a new GIC on January 3, 1996 and
the balance for participant distributions.
<F2> Balances include $110 of short-term money market securities of which $80
was being held to be invested in Minnesota Power Common Stock and the
balance for participant distributions.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
Schedule I
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
SCHEDULE OF INVESTMENTS HELD
DECEMBER 31, 1997
Thousands
<CAPTION>
Fair/
Number of Contract
Description Shares Cost Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guaranteed Investment Contracts
Provident Life and Accident Insurance Company
7.06% due 1998 $ 3,100 $ 3,100
Allstate Life Insurance Company
7.14% due 1998 2,472 2,472
Aetna Life Insurance Company
6.06% due 1999 2,537 2,537
Provident Mutual Insurance Company
5.80% due 1999 2,014 2,014
SunAmerica Life Insurance Company
6.00% due 2000 2,028 2,028
Jackson National Life Insurance Company
6.30% due 2000 3,169 3,169
Commonwealth Life Insurance Company
6.67% due 2001 1,883 1,883
Protective Life Insurance Company
6.17% due 2001 1,202 1,202
--------- --------
Total guaranteed investment contracts 18,405 18,405
--------- --------
Minnesota Power, Inc. Common Stock * 413 11,020 17,929
--------- --------
Mutual Fund Securities
Heartland Value Fund 136 4,249 4,606
Fidelity Magellan Fund 129 9,304 12,266
Vanguard Institutional Index Fund 97 6,245 8,649
Vanguard Short Term Federal Portfolio 104 1,051 1,055
BlackRock Small Cap Growth Equity Portfolio 231 4,740 4,730
Templeton Institutional Fund Foreign Equity Series 102 1,910 1,776
Janus Balanced Fund 215 4,139 4,280
Templeton Institutional Fund Emerging Market Series 279 2,598 2,228
--------- --------
Total mutual funds 34,236 39,590
--------- --------
Money Market Securities
Dreyfus Institutional Government Securities Fund,
floating interest rate with no maturity date 54 54
--------- --------
Loans Receivable from Participants * - 7% to 10% - 1,882
--------- --------
Total Investments $ 63,715 $77,860
========= =======
- -----------------------
* Party-in-interest
The above data was prepared from information certified as complete and accurate
by North Shore Bank of Commerce, the plan Trustee.
</TABLE>
13
<PAGE>
Schedule II
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, 1997
Dollars in Thousands
Purchases
- --------------------------------------------------------------------------------
Aggregate Purchase
Price and Fair
Value on Number of
Description Transaction Dates Transactions
----------- ------------------ ------------
Dreyfus Institutional Government Series $7,232 246
BlackRock Small Cap Growth Equity Portfolio $4,788 14
BlackRock Small Cap Growth Equity Portfolio $4,105 1
Jackson National Life Insurance Company $4,177 12
Janus Balanced Fund $4,102 33
Vanguard Institutional Index Fund $2,060 37
Commonwealth Life Insurance Company $1,716 16
IAI Emerging Growth Fund $ 785 19
Sales
- --------------------------------------------------------------------------------
Aggregate
--------------------------------
Net
Cost of Sale Gain/ Number of
Description Asset Price (Loss) Transactions
----------- ------- -------- -------- ------------
Dreyfus Institutional
Government Series $7,260 $7,260 0 162
IAI Emerging Growth Fund $4,830 $4,685 $(145) 26
IAI Emerging Growth Fund $4,108 $4,105 $ (3) 1
Commonwealth Life Insurance
Company $1,844 $1,844 0 14
Jackson National Life
Insurance Company $1,077 $1,077 0 11
Vanguard Institutional
Index Fund $ 998 $1,000 $ 2 39
Janus Balanced Fund $ 408 $ 408 0 29
BlackRock Small Cap Growth
Equity Portfolio $ 286 $ 281 $ (5) 12
- ------------------
The above data was prepared from information certified as complete and accurate
by North Shore Bank of Commerce, the plan Trustee.
14
<PAGE>
SIGNATURES
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 24, 1998 By R.D. Edwards
----------------------------------------
R.D. Edwards
Chairman,
Employee Benefit Plans Committee
15
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
a - Consent of Independent Accountants
<PAGE>
Exhibit a
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-26755) of the Minnesota Power and Affiliated
Companies Supplemental Retirement Plan of our report dated June 5, 1998
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, 1997.
PRICE WATERHOUSE LLP
Price Waterhouse LLP
Minneapolis, Minnesota
June 24, 1998
