<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, 1998
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 55802-2093
(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 12
Schedule II: Transactions in Excess of 5% of Fair
Value of Plan Assets 13
Signatures 14
<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, 1998 and 1997, 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.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 9, 1999
1
<PAGE>
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
Thousands
DECEMBER 31,
1998 1997
- --------------------------------------------------------------------------------
ASSETS
INVESTMENTS, AT FAIR/CONTRACT VALUE
Guaranteed Investment Contracts $ 16,465 $ 18,405
Pooled Investment Contracts 2,464 -
Minnesota Power, Inc.
Common Stock 18,584 17,929
Mutual Fund Securities 52,050 39,590
Money Market Securities 16 54
Loans Receivable from
Participants 2,068 1,882
-------- --------
Total Investments 91,647 77,860
CASH 98 11
-------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 91,745 $ 77,871
======== ========
- --------------------------------------------------------------------------------
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,
1998 1997
- --------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Participant Contributions $ 6,137 $ 5,546
Employer Contributions 117 48
Interest Income 1,146 1,167
Dividend Income 2,376 3,431
Net Unrealized Appreciation in Aggregate
Fair Value of Securities 6,643 9,470
Participants' Loan Interest Income 182 150
Net Realized Gain on Sale of Securities 49 374
-------- --------
16,650 20,186
APPLICATION OF NET ASSETS
Transfers to Retirement Plans (479) (624)
Benefit Distributions (2,287) (2,372)
Administrative Expenses (10) (9)
-------- --------
INCREASE IN NET ASSETS 13,874 17,181
NET ASSETS AVAILABLE FOR PLAN BENEFITS
Beginning of Year 77,871 60,690
-------- --------
End of Year $ 91,745 $ 77,871
======== ========
- --------------------------------------------------------------------------------
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 (SRP) provides benefits for eligible employees of Minnesota Power, Inc.
(Minnesota Power); Superior Water, Light and Power Company; and MP Affiliated
Resources, 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
- Participant contributions to the SRP consist of the following:
- Flexible Dollar Contributions. Flexible dollar contributions for
the non-union participants are up to 3 percent of each
participant's compensation, up to a maximum compensation of
$160,000 in 1998. The contribution is equal to an amount the
participant has elected to contribute to the SRP and included in
the participant's before-tax account.
- Salary Reduction Contributions (Before-Tax Contributions).
Before-tax contributions are equal to an amount the participant
has elected to reduce his or her compensation pursuant to a
salary reduction agreement. Before-tax contributions may not
exceed $10,000 in 1998, as permitted under Section 401(k) of the
Internal Revenue Code of 1986 (Code).
- 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 and 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.
- Employer contributions to the SRP consist of non-elective
contributions equal to 0.5 percent of each union participant's
compensation, up to a maximum compensation of $160,000 in 1998.
Employer contributions are included in the participant's before-tax
account.
VESTING
All contributions plus actual earnings are fully vested and
nonforfeitable.
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.
4
<PAGE>
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
Minnesota Power's Benefits Accounting and Administration. 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 of guaranteed
investment contracts (GICs) with insurance companies and pooled
investment contracts (PICs) managed by American Express Trust
Company.
- GICs are guaranteed by the issuing insurance company and supported
by the insurance industry, and not guaranteed by the federal
government.
- American Express Trust Income Fund I is an actively managed,
diversified pool of stable value contracts of varying maturity,
size and yield. This fund seeks to preserve principal and income
while maximizing current income by investing in pooled insurance
investment contracts, bank investment contracts and stable value
contracts regulated by the Securities and Exchange Commission and
federal and state bank regulators.
5
<PAGE>
While participants are active employees, they may withdraw money as a
loan from their before-tax account. After age 59 1/2, participants may withdraw
the full amount of their before-tax 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, 1998 there were 1,669 participants in the SRP.
ADMINISTRATION
The SRP is administered by the Employee Benefit Plans Committee
(Committee). The address of the Committee is 30 West Superior Street, Duluth,
Minnesota 55802-2093. 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, 1999 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 - Minnesota Power Electric and
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 - Information Technology
Mark A. Schober Controller
Lori A. Collard President - Electric Outlet, Inc.
Brenda J. Flayton Vice President - 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.
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.
6
<PAGE>
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 and PIC 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.
NOTE 4 - GUARANTEED INVESTMENT CONTRACTS
Thousands
Contract Value
Crediting December 31,
Interest Rate 1998 1997
- --------------------------------------------------------------------------------
Provident Life and Accident Insurance Company
Due 1998 7.06% $ 3,100
Allstate Life Insurance Company
Due 1998 7.14% 2,472
Aetna Life Insurance Company
Due 1999 6.06% $ 2,695 2,537
Provident Mutual Insurance Company
Due 1999 5.80% 2,130 2,014
SunAmerica Life Insurance Company
Due 2000 6.00% 2,150 2,028
Jackson National Life Insurance Company
Due 2000 6.30% 3,368 3,169
Commonwealth Life Insurance Company
Due 2001 6.67% 2,008 1,883
Protective Life Insurance Company
Due 2001 6.17% 2,089 1,202
Continental Assurance Company
Due 2001 5.88% 2,025 -
------- -------
$16,465 $18,405
======= =======
Average Yield 6.51% 6.47%
7
<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, 1998.
<CAPTION>
Fixed
Income
Fund Mutual Fund Securities
-------- ---------------------------------------------------
Vanguard Vanguard
Heartland Fidelity Institutional Short Term
GICs and Value Magellan Index Federal
PICs Fund Fund Fund Portfolio
<S> <C> <C> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 700 $ 860 $ 655 $ 1,294 $ 147
Employer Contributions 55 9 8 13 1
Interest Income 1,146
Dividend Income 102 761 250 73
Net Unrealized Appreciation
(Depreciation) in Aggregate
Fair Value of Securities (620) 3,281 2,393 16
Participants' Loan Repayments,
Including Interest 311 50 124 104 10
Net Gain (Loss) on Sale of Securities (41) 97 78 1
--------- -------- --------- -------- -------
2,212 360 4,926 4,132 248
Application of Net Assets
Transfers to Retirement Plans (479)
Benefit Distributions (1,435) (80) (211) (116) (14)
Loans to Participants (1,066)
Administrative Expenses (10)
--------- -------- --------- -------- -------
Increase (Decrease) in Net Assets (778) 280 4,715 4,016 234
Net Transfers 1,304 (344) (368) 448 260
Net Assets Available for Plan Benefits
Beginning of Year <F1> 18,416 4,606 12,266 8,649 1,055
--------- -------- --------- -------- -------
End of Year <F2> $ 18,942 $ 4,542 $ 16,613 $ 13,113 $ 1,549
========= ======== ========= ======== =======
8
<PAGE>
<CAPTION>
Mutual Fund Securities (Continued)
-------------------------------------------------------------------
BlackRock Templeton Templeton
Funds Small Institutional Institutional
Cap Growth Funds, Inc. Janus Funds, Inc.
Equity Foreign Balanced Emerging
Portfolio Equity Series Fund Market Series
<S> <C> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 782 $ 246 $ 849 $ 297
Employer Contributions 8 2 7 3
Interest Income
Dividend Income 150 147 43
Net Unrealized Appreciation
(Depreciation) in Aggregate
Fair Value of Securities 377 22 1,281 (374)
Participants' Loan Repayments,
Including Interest 60 26 40 26
Net Gain (Loss) on Sale of Securities (21) 8 56 (74)
------- ------- -------- -------
1,206 454 2,380 (79)
Application of Net Assets
Transfers to Retirement Plans
Benefit Distributions (35) (10) (31) (23)
Loans to Participants
Administrative Expenses
------- ------- -------- -------
Increase (Decrease) in Net Assets 1,171 444 2,349 (102)
Net Transfers (584) 12 171 (240)
Net Assets Available for Plan Benefits
Beginning of Year <F1> 4,730 1,776 4,280 2,228
------- ------- -------- -------
End of Year <F2> $ 5,317 $ 2,232 $ 6,800 $ 1,886
======= ======= ======== =======
<PAGE>
<CAPTION>
Minnesota Loans
Power Receivable
Common from Total
Stock Participants Changes
<S> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 307 $ 6,137
Employer Contributions 11 117
Interest Income 1,146
Dividend Income 850 2,376
Net Unrealized Appreciation
(Depreciation) in Aggregate
Fair Value of Securities 267 6,643
Participants' Loan Repayments,
Including Interest 275 $ (844) 182
Net Gain (Loss) on Sale of Securities (55) 49
-------- -------- ---------
1,655 (844) 16,650
Application of Net Assets
Transfers to Retirement Plans (479)
Benefit Distributions (296) (36) (2,287)
Loans to Participants 1,066 0
Administrative Expenses (10)
-------- -------- ---------
Increase (Decrease) in Net Assets 1,359 186 13,874
Net Transfers (659) 0
Net Assets Available for Plan Benefits
Beginning of Year <F1> 17,983 1,882 77,871
-------- -------- ---------
End of Year <F2> $ 18,683 $ 2,068 $ 91,745
======== ======== =========
- --------------
<FN>
<F1> 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.
<F2> Balances include $16 of short-term money market securities which were being held for participant
distributions and $98 in cash which was being held to be invested in Minnesota Power Common Stock.
</FN>
</TABLE>
9
<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
GICs Fund Fund Fund Portfolio Fund
<S> <C> <C> <C> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 684 $ 740 $ 588 $ 924 $ 125 $ 534
Employer Contributions 25 2 3 7
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
======== ======= ======== ======= ======= =======
10
<PAGE>
<CAPTION>
Mutual Fund Securities (Continued)
---------------------------------------------------------------------------------
BlackRock IAI Templeton Templeton
Funds Small International Institutional Institutional
Cap Growth Developed Funds, Inc. Fidelity Janus Funds, Inc.
Equity Market Foreign Balanced Balanced Emerging
Portfolio Fund Equity Series Fund Fund Market Series
<S> <C> <C> <C> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 398 $ 119 $ 98 $ 742 $ 333
Employer Contributions 3 1 1 2
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
======= ======= ====== ====== ======= =======
<PAGE>
<CAPTION>
Minnesota Loans
Power Receivable
Common From Total
Stock Participants Changes
<S> <C> <C> <C>
Sources of Net Assets
Participant Contributions $ 261 $ 5,546
Employer Contributions 4 48
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>
11
<PAGE>
<TABLE>
Schedule I
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
SCHEDULE OF INVESTMENTS HELD
DECEMBER 31, 1998
Thousands
<CAPTION>
Fair/
Number of Contract
Description Shares Cost Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guaranteed Investment Contracts
Aetna Life Insurance Company
6.06% due 1999 $ 2,695 $ 2,695
Provident Mutual Insurance Company
5.80% due 1999 2,130 2,130
SunAmerica Life Insurance Company
6.00% due 2000 2,150 2,150
Jackson National Life Insurance Company
6.30% due 2000 3,368 3,368
Commonwealth Life Insurance Company
6.67% due 2001 2,008 2,008
Protective Life Insurance Company
6.17% due 2001 2,089 2,089
Continental Assurance Company
5.88% due 2002 2,025 2,025
--------- --------
Total Guaranteed Investment Contracts 16,465 16,465
--------- --------
Pooled Investment Contracts
American Express Trust Income Fund I 51 2,464 2,464
--------- --------
Minnesota Power, Inc. Common Stock * 425 ** 11,783 18,584
--------- --------
Mutual Fund Securities
Heartland Value Fund 155 4,844 4,542
Fidelity Magellan Fund 137 10,558 16,611
Vanguard Institutional Index Fund 116 8,445 13,113
Vanguard Short Term Federal Portfolio 151 1,529 1,549
BlackRock Small Cap Growth Equity Portfolio 242 4,932 5,317
Templeton Institutional Fund Foreign Equity Series 126 2,327 2,232
Janus Balanced Fund 347 5,383 6,800
Templeton Institutional Fund Emerging Market Series 227 2,567 1,886
--------- --------
Total Mutual Funds 40,585 52,050
--------- --------
Money Market Securities
Dreyfus Institutional Government Securities Fund,
Floating Interest Rate with No Maturity Date 16 16
--------- --------
Loans Receivable from Participants * - 7% to 10% - 2,068
--------- --------
Total Investments $ 71,313 $91,647
========= =======
- ----------------------
* Party-in-interest
** Does not reflect Minnesota Power's two-for-one Common Stock split effective March 2, 1999.
The above data was prepared from information certified as complete and accurate by North Shore Bank of Commerce,
the plan Trustee.
</TABLE>
12
<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, 1998
Dollars in Thousands
Purchases
- -------------------------------------------------------------------------------
Aggregate Purchase
Price and Fair
Value on Number of
Description Transaction Dates Transactions
----------- ------------------ ------------
Dreyfus Institutional Government Series $7,100 201
Protective Life Insurance Company $2,853 21
Continental Assurance Company $3,200 17
Sales
- -------------------------------------------------------------------------------
Aggregate
----------------------------
Net
Cost of Sale Gain/ Number of
Description Asset Price (Loss) Transactions
----------- ---------------------------- ------------
Dreyfus Institutional
Government Series $7,161 $7,161 0 148
Protective Life Insurance
Company $2,028 $2,028 0 15
Continental Assurance Company $1,217 $1,217 0 15
- --------------
The above data was prepared from information certified as complete and accurate
by North Shore Bank of Commerce, the plan Trustee.
13
<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 14, 1999 By R.D. Edwards
----------------------------------------
R.D. Edwards
Chairman,
Employee Benefit Plans Committee
14
<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 9, 1999
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, 1998.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 11, 1999
