<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.
Commission file Number: 0-22334
LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN AND TRUST
(Title of the Plan)
LODGENET ENTERTAINMENT CORPORATION
(Name of Issuer of the Securities Held Pursuant to the Plan)
DELAWARE 46-0371161
(State of Incorporation) (IRS Employer Identification Number)
3900 WEST INNOVATION STREET, SIOUX FALLS, SOUTH DAKOTA 57107
(Address of Principal Executive Offices)
(605) 988-1000
(Registrant's Telephone Number, including Area Code)
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Form 11-K cover page for the LodgeNet Entertainment Corporation
401(k) Plan and Trust............................................................ Cover
Index.............................................................................. 2
Signature.......................................................................... 3
FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the LodgeNet Entertainment Corporation
401(k) Plan and Trust for the time periods specified below are submitted
herewith together with the independent auditor's report thereon:
Independent Auditor's Report....................................................... F-1
Statement of Net Assets Available for Plan Benefits
at December 31, 1998 and 1997.................................................... F-2
Statements of Changes in Net Assets Available for Plan Benefits for the
year ended December 31, 1998..................................................... F-6
Notes to Financial Statements...................................................... F-8
Supplementary Schedules.
Schedule of assets held for investment purposes.................................. F-12
Schedule of reportable transactions.............................................. F-13
Consent of Independent Auditors.................................................... F-14
</TABLE>
All other schedules are omitted since the required information is not
present, or is not present in the amounts sufficient to require submission of
a schedule; or because the information is included in the financial
statements and notes thereto.
2
<PAGE>
LODGENET ENTERTAINMENT CORPORATION
401(k) PLAN AND TRUST
(Name of Plan)
Date: June 28, 1999 /s/ Scott C. Petersen
-----------------------------------
Scott C. Petersen
President, Chief Executive Officer,
and Plan Trustee
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
LodgeNet Entertainment Corporation 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of LodgeNet Entertainment Corporation 401(k) Plan as of December 31, 1998 and
1997, and the related statement of changes in net assets available for benefits
for the year ended December 31, 1998. 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 in accordance with generally accepted auditing
standards. Those standards 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. 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 referred to above present fairly, in
all material respects, the net assets available for benefits of LodgeNet
Entertainment Corporation 401(k) Plan as of December 31, 1998 and 1997, and the
changes in net assets available for benefits for the year ended December 31,
1998, in conformity with generally accepted accounting principles.
The schedules of assets held for investment purposes and reportable transactions
that accompany the Plan's financial statements do not disclose the historical
cost basis of one investment held and for reportable transactions of all
investments purchased and sold. Disclosure of this information is required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of LodgeNet
Entertainment Corporation 401(k) are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, except for the omission of the information discussed in the
preceding paragraph, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Minneapolis, Minnesota,
May 14, 1999
F-1
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1998
<TABLE>
<CAPTION>
Neuberger/
Dreyfus Fidelity Berman
S&P 500 Asset Limited Oppenheimer American
Index Manager Bond Global Century Ultra
------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $1,740,323 $ - $ - $ - $ -
Balanced fund - 736,684 - - -
Bond funds - - 116,172 - -
International funds - - - 473,639 -
Aggressive growth funds - - - - 1,807,626
Stable value funds - - - - -
Stock fund - - - - -
Participant loans - - - - -
------------ ----------- ----------- ------------ -------------
Total investments 1,740,323 736,684 116,172 473,639 1,807,626
CONTRIBUTIONS RECEIVABLE:
Participant 10,151 4,219 1,096 2,576 11,552
Employer 11,640 5,763 1,004 4,928 10,410
------------ ----------- ----------- ------------ -------------
Total contributions
receivable 21,791 9,982 2,100 7,504 21,962
------------ ----------- ----------- ------------ -------------
Net assets available
for benefits $1,762,114 $746,666 $118,272 $481,143 $1,829,588
------------ ----------- ----------- ------------ -------------
------------ ----------- ----------- ------------ -------------
<CAPTION>
Nationwide
Nationwide Dreyfus A Money
Virtuoso II Bond Market
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $ - $ - $ -
Balanced fund - - -
Bond funds - 142,016 -
International funds - - -
Aggressive growth funds - - -
Stable value funds 164,562 - 78,355
Stock fund - - -
Participant loans - - -
------------ ----------- -----------
Total investments 164,562 142,016 78,355
CONTRIBUTIONS RECEIVABLE:
Participant 1,208 1,182 597
Employer 1,786 1,737 1,106
------------ ----------- -----------
Total contributions
receivable 2,994 2,919 1,703
------------ ----------- -----------
Net assets available
for benefits $167,556 $144,935 $80,058
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
F-2
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1998
(Continued)
<TABLE>
<CAPTION>
Warburg Fidelity American
Pincus Advisor Century LodgeNet
Emerging Janus Janus Growth Income & Common Loan
Growth Worldwide Twenty Opportunity Growth Stock Fund Total
--------- ---------- --------- ----------- -------- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $ - $ - $ - $108,252 $344,204 $ - $ - $2,192,779
Balanced fund - - - - - - - 736,684
Bond funds - - - - - - - 258,188
International funds - 314,588 - - - - - 788,227
Aggressive growth funds 56,450 - 171,575 - - - - 2,035,651
Stable value funds - - - - - - - 242,917
Stock fund - - - - - 131,075 - 131,075
Participant loans - - - - - - 418,752 418,752
------- -------- -------- -------- -------- ------- ------- ----------
Total investments 56,450 314,588 171,575 108,252 344,204 131,075 418,752 6,804,273
CONTRIBUTIONS RECEIVABLE:
Participant 761 3,389 1,267 1,899 3,300 1,543 - 44,740
Employer 1,070 4,454 2,239 2,314 4,399 2,698 - 55,548
------- -------- -------- -------- -------- ------- ------- ----------
Total contributions
receivable 1,831 7,843 3,506 4,213 7,699 4,241 - 100,288
------- -------- -------- -------- -------- ------- ------- ----------
Net assets available
for benefits $58,281 $322,431 $175,081 $112,465 $351,903 $135,316 $418,752 $6,904,561
------- -------- -------- -------- -------- ------- ------- ----------
------- -------- -------- -------- -------- ------- ------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1997
<TABLE>
<CAPTION>
Neuberger/
Dreyfus Fidelity Berman
S&P 500 Asset Limited Oppenheimer American
Index Manager Bond Global Century Ultra
------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $1,042,517 $ - $ - $ - $ -
Balanced fund - 593,533 - - -
Bond funds - - 92,163 - -
International funds - - - 82,590 -
Aggressive growth funds - - - - 1,185,753
Stable value funds - - - - -
Stock fund - - - - -
Participant loans - - - - -
------------ ----------- ----------- ------------ -------------
Total investments 1,042,517 593,533 92,163 482,590 1,185,753
CONTRIBUTIONS RECEIVABLE:
Participant 917 440 - - 1,183
Employer 110 65 - - 130
------------ ----------- ----------- ------------ -------------
Total contributions receivable 1,027 505 - - 1,313
------------ ----------- ----------- ------------ -------------
Net assets available for benefits $1,043,544 $594,038 $92,163 $482,590 $1,187,066
------------ ----------- ----------- ------------ -------------
------------ ----------- ----------- ------------ -------------
<CAPTION>
Nationwide
Nationwide Dreyfus A Money
Virtuoso II Bond Market
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $ - $ - $ -
Balanced fund - - -
Bond funds - 81,850 -
International funds - - -
Aggressive growth funds - - -
Stable value funds 137,852 - 29,290
Stock fund - - -
Participant loans - - -
------------ ----------- -----------
Total investments 137,852 81,850 29,290
CONTRIBUTIONS RECEIVABLE:
Participant - - -
Employer - - -
------------ ----------- -----------
Total contributions receivable - - -
------------ ----------- -----------
Net assets available for benefits $137,852 $81,850 $29,290
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
F-4
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Warburg Fidelity American
Pincus Advisor Century LodgeNet
Emerging Janus Growth Income & Common Loan
Growth Worldwide Opportunity Growth Stock Fund Total
--------- ---------- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENTS, at market value:
Growth funds $ - $ - $27,148 $45,174 $ - $ - $1,114,839
Balanced fund - - - - - - 593,533
Bond funds - - - - - - 174,013
International funds - 84,212 - - - - 566,802
Aggressive growth funds 8,146 - - - - - 1,193,899
Stable value funds - - - - - - 167,142
Stock fund - - - - 99,045 - 99,045
Participant loans - - - - - 217,055 217,055
------ ------- ------- ------- ------- -------- ---------
Total investments 8,146 84,212 27,148 45,174 99,045 217,055 4,126,328
CONTRIBUTIONS RECEIVABLE:
Participant 324 162 324 - - - 3,350
Employer 22 11 22 - - - 360
------ ------- ------- ------- ------- -------- ---------
Total contributions
receivable 346 173 346 - - - 3,710
------ ------- ------- ------- ------- -------- ---------
Net assets available
for benefits $8,492 $84,385 $27,494 $45,174 $99,045 $217,055 $4,130,038
------ ------- ------- ------- ------- -------- ----------
------ ------- ------- ------- ------- -------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Neuberger/
Dreyfus Fidelity Berman
S&P 500 Asset Limited Oppenheimer American
Index Manager Bond Global Century Ultra
------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1997 $1,043,544 $594,038 $ 92,163 $ 482,590 $1,187,066
---------- -------- -------- --------- ----------
INCREASE (DECREASE) DURING THE YEAR:
Contributions-
Participant 317,393 150,572 30,612 116,267 367,669
Employer 122,050 60,180 12,564 45,805 136,827
Rollover 34,358 19,466 4,250 6,622 35,077
---------- -------- -------- --------- ----------
Total contributions 473,801 230,218 47,426 168,694 539,573
Interest income - - - - -
Net unrealized/realized gain (loss) 326,190 89,737 3,062 52,508 423,074
Distributions to participants (68,365) (48,793) (7,227) (32,797) (117,656)
Net loan activity (81,201) (13,374) (5,520) (8,238) (55,861)
Fund transfers, net 70,233 (104,289) (11,404) (180,577) (143,458)
Forfeitures, net (2,088) (871) (228) (1,037) (3,150)
---------- -------- -------- --------- ----------
Net increase (decrease)
during the year 718,570 152,628 26,109 (1,447) 642,522
---------- -------- -------- --------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1998 $1,762,114 $746,666 $118,272 $481,143 $1,829,588
---------- -------- -------- --------- ----------
---------- -------- -------- --------- ----------
<CAPTION>
Nationwide
Nationwide Dreyfus A Money
Virtuoso II Bond Market
------------ ----------- -----------
<S> <C> <C> <C>
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1997 $137,852 $ 81,850 $ 29,290
-------- -------- --------
INCREASE (DECREASE) DURING THE YEAR:
Contributions-
Participant 44,568 35,343 22,340
Employer 18,865 14,834 10,170
Rollover 4,688 9,113 23,709
-------- -------- --------
Total contributions 68,121 59,290 56,219
Interest income 6,495 - -
Net unrealized/realized gain (loss) - (127) 3,594
Distributions to participants (40,954) (3,609) (1,215)
Net loan activity (2,926) (9,501) (7,435)
Fund transfers, net (492) 17,264 (11,462)
Forfeitures, net (540) (232) 11,067
-------- -------- --------
Net increase (decrease)
during the year 29,704 63,085 50,768
-------- -------- --------
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1998 $167,556 $144,935 $80,058
-------- -------- --------
-------- -------- --------
</TABLE>
F-6
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1998
(Continued)
<TABLE>
<CAPTION>
Warburg Fidelity American
Pincus Advisor Century LodgeNet
Emerging Janus Janus Growth Income & Common Loan
Growth Worldwide Twenty Opportunity Growth Stock Fund Total
--------- ---------- -------- ----------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1997 $ 8,492 $ 84,385 $ - $ 27,494 $ 45,174 $ 99,045 $217,055 $4,130,038
------- -------- -------- -------- -------- -------- -------- ----------
INCREASE (DECREASE) DURING
THE YEAR:
Contributions-
Participant 22,513 98,687 3,418 44,606 76,761 57,981 - 1,388,730
Employer 8,912 38,812 2,913 18,470 30,835 22,881 - 544,118
Rollover 8,894 28,052 3,164 13,856 42,989 - - 234,238
------- -------- -------- -------- -------- -------- -------- ----------
Total contributions 40,319 165,551 9,495 76,932 150,585 80,862 - 2,167,086
Interest income - - - - - - 23,172 29,667
Net unrealized/realized
gain (loss) 2,660 35,736 19,449 15,601 48,327 (44,591) - 975,220
Distributions to participants (2,140) (50,413) - (19,866) (4,354) - - (397,389)
Net loan activity 651 2,912 (197) 224 1,880 - 178,525 (61)
Fund transfers, net 8,438 85,651 146,334 12,869 110,893 - - -
Forfeitures, net (139) (1,391) - (789) (602) - - -
------- -------- -------- -------- -------- -------- -------- ----------
Net increase (decrease)
during the year 49,789 238,046 175,081 84,971 306,729 36,271 201,697 2,774,523
------- -------- -------- -------- -------- -------- -------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1998 $58,281 $322,431 $175,081 $112,465 $351,903 $135,316 $418,752 $6,904,561
------- -------- -------- -------- -------- -------- -------- ----------
------- -------- -------- -------- -------- -------- -------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
1. DESCRIPTION OF THE PLAN:
The following is not a comprehensive description of the plan and, therefore,
does not include all situations and limitations covered by the plan.
Participants should refer to the plan agreement for a more complete description
of the plan's provisions.
GENERAL
The LodgeNet Entertainment Corporation 401(k) Plan (the Plan) is a defined
contribution plan covering all full-time employees of LodgeNet Entertainment
Corporation (the Company) who have completed 90 days of service and are age 18
or older. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA), as amended.
PLAN OPERATIONS
The Company functions as the plan administrator. The plan administrator utilizes
Fringe Benefits Design, Inc. and Nationwide Life Insurance Company to provide
record-keeping and reporting services. Nationwide Life Insurance Company and
Charles Schwab Retirement Plan Services are the asset custodians of the Plan.
Administrative expenses of the Plan are paid by the Company and were $34,822 in
1998.
CONTRIBUTIONS
The Plan includes 401(k) basic and supplemental cash deferred arrangements.
Participants in the Plan may make a basic voluntary contribution by salary
deferral in amounts ranging from 1% to 15% of their compensation, as defined.
The Company matches participant contributions in an amount equal to 50% of the
first 6% of each participant's eligible contribution for the plan year, not to
exceed 3% of their compensation, as defined.
The Company may make discretionary contributions to the Plan. In a year in which
the Company chooses to make discretionary contributions, the contributions will
be allocated based upon a participant's proportionate share of total
compensation for all participants. There were no discretionary contributions in
1998.
F-8
<PAGE>
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's matching contribution portion of participant
accounts plus actual earnings thereon is based on years of continuous service. A
participant is 100% vested after five years of credited service based on the
following percentages:
<TABLE>
<S> <C>
Less than one year of service 0% vested
One year but less than two 20% vested
Two years but less than three 40% vested
Three years but less than four 60% vested
Four years but less than five 80% vested
Five years or more 100% vested
</TABLE>
If a participant dies or becomes disabled while still employed by the Company,
his or her entire plan interest becomes 100% vested. Forfeitures of the
nonvested employer contributions, resulting from participants who withdraw from
the Plan, are used to reduce future employer contributions.
PARTICIPANT LOANS
Participants may borrow funds from the Plan up to 50% of their vested balance.
Loans will not be granted in amounts less than $1,000 or greater than $50,000.
Loans are evidenced by a promissory note and have a repayment period of up to
five years, unless the loan qualifies as a home loan. The plan administrator
will determine the appropriate interest rate by obtaining at least one quote
from a financial institution, as chosen by the plan administrator, that is in
the business of lending money.
DISTRIBUTION OF BENEFITS
Upon retirement, death, disability or attainment of age 62, a participant or a
participant's beneficiary, in the case of death, may receive the vested portion
of the amount credited to the participant's account by a lump-sum payment or, if
the invested portion exceeds $3,500, the participant may elect to receive
periodic installment payments.
AMENDMENTS
Effective July 1, 1997, the Plan was amended to reduce the time requirement to
become eligible to participate in the Plan from 6 months of service to 90 days
of service following the employee's employment commencement date.
Also, effective January 1, 1998, the matching contribution of the Company was
increased from 25% to 50% of the first 6% of each participant's eligible
contributions for the Plan year, up to a maximum match of 3% of compensation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis of accounting.
F-9
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of net assets available for benefits at the
date of the financial statements and the reported amounts of changes in net
assets available for benefits during the reporting period. Ultimate results
could differ from those estimates.
INVESTMENTS
Participants have the opportunity to direct all money allocated to their
accounts. With the addition of the Janus Twenty fund, participants have fourteen
investments from which to choose. A description of each investment is as
follows:
DREYFUS S&P 500 INDEX--Seeks investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. Considered to be a relatively volatile mutual fund option.
FIDELITY ASSET MANAGER--Seeks capital appreciation. Considered to be a
moderately volatile investment option.
NEUBERGER/BERMAN LIMITED BOND--Seeks income, consistent with low risk to
principal and liquidity. Considered to be a slightly volatile fund.
OPPENHEIMER GLOBAL--Seeks capital appreciation; current income is not an
objective. Considered to be the most volatile investment option.
AMERICAN CENTURY ULTRA--Seeks capital growth. This fund is viewed as next
to the most volatile mutual fund option.
NATIONWIDE VIRTUOSO II--Seeks the guarantee of principal and interest
through an unallocated insurance contract. A new interest rate is declared
annually. Considered to be the least volatile fund.
DREYFUS A BOND--Seeks current income consistent with preservation of
capital and maintenance of liquidity. Considered to be a slightly volatile
fund.
NATIONWIDE MONEY MARKET--Seeks to provide a high level of current income
while preserving capital and maintaining liquidity. Considered to be a
slightly volatile fund.
WARBURG PINCUS EMERGING GROWTH--Seeks maximum capital appreciation.
Considered to be a volatile investment option.
JANUS WORLDWIDE--Seeks long-term growth of capital. This fund is considered
to be moderately volatile.
JANUS TWENTY--Seeks stocks with strong current financial positions and the
potential for future growth. It may invest without limit in foreign
securities. This fund is nondiversified.
FIDELITY ADVISOR GROWTH Opportunity--Seeks to provide capital growth.
Considered to be a moderately volatile investment option.
F-10
<PAGE>
AMERICAN CENTURY INCOME & GROWTH--Seeks long-term growth of capital as well
as current income. Considered to be a relatively volatile investment
option.
LODGENET COMMON STOCK--Invests in LodgeNet Entertainment Corporation
common stock. Limited to 10% of contributions made.
All of the investments described above, except for Nationwide Virtuoso II and
LodgeNet common stock, are part of an unallocated insurance contract pooled
separate account with Nationwide Life Insurance Company.
Net unrealized gains represent the increase in the market value of an investment
from the end of the prior year or from the date of purchase, if purchased during
the year, to the end of the current year.
3. TAX STATUS:
The Internal Revenue Service has determined and informed the Company by a letter
dated February 14, 1995, that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code (IRC). The Plan has been amended since
receiving the determination letter. However, the plan administrator and the
Plan's tax counsel believe that the Plan continues to operate in compliance with
the applicable requirements of the IRC and remains tax-exempt.
4. PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of the Plan's termination,
participants will become 100% vested in their accounts.
F-11
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
(EMPLOYER IDENTIFICATION NUMBER: 46-0371161) (PLAN NUMBER: 001)
Item 27a--Schedule of Assets Held for Investment Purposes
As of December 31, 1998
<TABLE>
<CAPTION>
Number of
Units or Market
Shares Description Cost Value
- ----------- ------------------------------------------------------- --------- ----------
<S> <C> <C> <C>
133,872 Nationwide Virtuoso II unallocated
insurance contract** $ 147,957 $ 164,562
Nationwide Arranger pooled separate accounts**:
516,301 Dreyfus S&P 500 Index 1,081,870 1,740,323
406,582 Fidelity Asset Manager 489,028 736,684
96,243 Neuberger/Berman Limited Bond 105,861 116,172
209,591 Oppenheimer Global 306,007 473,639
551,926 American Century Ultra 1,053,552 1,807,626
118,607 Dreyfus A Bond 135,141 142,016
42,695 Nationwide Money Market 74,042 78,355
38,496 Warburg Pincus Emerging Growth 53,629 56,450
205,344 Janus Worldwide 280,472 314,588
80,895 Janus Twenty 152,126 171,575
56,398 Fidelity Advisor Growth Opportunity 91,081 108,252
188,950 American Century Income & Growth 294,124 344,204
19,066 LodgeNet common stock** * 131,075
Loans to participants, with interest ranging from
8.25% to 9.75% 418,752 418,752
---------- ----------
Total investments $4,683,642 $6,804,273
---------- ----------
---------- ----------
</TABLE>
*Information is not available from the asset custodians of the Plan.
**Denotes party in interest.
F-12
<PAGE>
LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
(EMPLOYER IDENTIFICATION NUMBER: 46-0371161) (PLAN NUMBER: 001)
Item 27d--Schedule of Reportable Transactions
For the Year Ended December 31, 1998
<TABLE>
<CAPTION> Total
Number of Proceeds Cost of Net
Number of Sales/ Total Cost of From Sales/ Investments Gain
Description Purchases Maturities Purchases Maturities Sold/ Matured (Loss)
- ----------- -------- ---------- ------------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus S&P 500 Index 229 165 $669,993 $298,377 * *
Fidelity Asset Manager 161 180 253,171 199,757 * *
Neuberger/Berman Limited Bond 150 69 163,767 142,820 * *
Oppenheimer Global 150 181 175,156 236,615 * *
American Century Ultra 215 198 708,365 509,565 * *
Dreyfus A Bond 141 74 141,996 81,702 * *
Nationwide Money Market 160 49 185,149 139,679 * *
Janus Worldwide 231 66 282,339 87,699 * *
American Century Income & Growth 213 67 343,167 92,463 * *
</TABLE>
*Information is not available from the asset custodians of the Plan.
F-13
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 11-K into the Company's previously filed
Registration Statement (Form S-8 No. 33-75906).
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
June 23, 1999
F-14
