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) ------------------------------ 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 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 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 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 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 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 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 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 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 NOTE 5 - CHANGES IN SRP ASSETS FOR PARTICIPANT DIRECTED ACCOUNTS Thousands The table below summarizes the changes in SRP assets for each investment fund for the year ended December 31, 1997.
10Fixed 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 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 17,317 2,793 10,799 5,600 983 4,210 ------- ------ ------- ------- ------ ------ End of year $18,416 $4,606 $12,266 $ 8,649 $1,055 $ 0 ======= ====== ======= ======= ====== ====== 9 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 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 year0 1,535 0 2,516 0 2,061 ------ ------ ------- ------ ------ ------ End of year $4,730 $ 0 $ 1,776 $ 0 $4,280 $2,228 ====== ====== ======= ====== ====== ====== Minnesota Loans Power Receivable Common from Total Stock Participants Changes 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 11,328 1,548 60,690 ------- ------ ------- End of year $17,983 $1,882 $77,871 ======= ====== ======= - ------------------------- 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. 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. NOTE 5 - CHANGES IN SRP ASSETS FOR PARTICIPANT DIRECTED ACCOUNTS Thousands The table below summarizes the changes in SRP assets for each investment fund for the year ended December 31, 1996.
12Fixed Income Fund Mutual Fund Securities -------- ---------------------------------------------------- Vanguard Vanguard Heartland Fidelity Institutional Short Term Value Magellan Index Federal GICs Fund Fund Fund Portfolio 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 16,956 967 10,317 3,446 783 -------- ------- ------- ------- ----- End of year $ 17,317 $ 2,793 $10,799 $ 5,600 $ 983 ======== ======= ======= ======= ===== 11 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 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 2,678 1,165 2,046 1,327 11,788 1,513 52,986 ------- ------ ------ ------- ------- ------- ------- End of year $ 4,210 $1,535 $2,516 $ 2,061 $11,328 $ 1,548 $60,690 ======= ====== ====== ======= ======= ======= ======= - --------------------- 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. 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. Schedule I MINNESOTA POWER AND AFFILIATED COMPANIES SUPPLEMENTAL RETIREMENT PLAN SCHEDULE OF INVESTMENTS HELD DECEMBER 31, 1997 Thousands
13Fair/ Number of Contract Description Shares Cost Value - --------------------------------------------------------------------------------------------------------------------------- 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. 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 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 INDEX TO EXHIBITS Exhibit - ------- a - Consent of Independent Accountants 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