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, 2001
or
/ / Transition Report Pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File No. 1-3548
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
(Full Title of the Plan)
-------------------
ALLETE, 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)
-------------------
INDEX
PAGE
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits -
December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Benefits -
Year Ended December 31, 2001 and 2000 3
Notes to Financial Statements 4
Supplemental Schedule
Schedule I: Schedule of Assets (Held at End of Year) -
December 31, 2001 9
Signatures 10
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 benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Minnesota Power and Affiliated Companies Supplemental Retirement Plan
(the "Plan") at December 31, 2001 and 2000, and the changes in net assets
available for benefits for the years then ended in conformity with accounting
principles generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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 our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) - December 31, 2001 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits 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
May 31, 2002
ALLETE 2001 SRP Form 11-K 1
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
Thousands
DECEMBER 31,
2001 2000
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ASSETS
Investments $ 109,330 $ 113,960
Participant Contributions Receivable 274 236
Cash 2,511 84
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112,115 114,280
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LIABILITIES
Accounts Payable - 84
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NET ASSETS AVAILABLE FOR BENEFITS $ 112,115 $ 114,196
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The accompanying notes are an integral part of these statements.
2 ALLETE 2001 SRP Form 11-K
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Thousands
YEAR ENDED
DECEMBER 31,
2001 2000
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ADDITIONS
INVESTMENT INCOME
Interest Income $ 1,493 $ 1,430
Dividend Income 1,800 6,549
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3,293 7,979
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CONTRIBUTIONS
Participant Contributions 7,965 7,303
Employer Contributions 48 186
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8,013 7,489
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Total Additions 11,306 15,468
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DEDUCTIONS
Transfers to Retirement Plans 833 478
Benefit Distributions 3,932 3,633
Net Depreciation in Fair Value of Investments 8,578 4,794
Administrative Expenses 44 24
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Total Deductions 13,387 8,929
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Net (Decrease) Increase (2,081) 6,539
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 114,196 107,657
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End of Year $ 112,115 $ 114,196
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The accompanying notes are an integral part of these statements.
ALLETE 2001 SRP Form 11-K 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 (SRP) provides benefits for eligible employees of participating affiliated
companies. The SRP is a contributory defined contribution plan that is subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Participating affiliated companies (collectively, the
Companies) include:
- ALLETE, Inc. (ALLETE)
- Minnesota Power (an operating division of ALLETE)
- Superior Water, Light and Power Company
- Minnesota Power Telecom, Inc. (now Enventis Telecom, Inc.)
- Electric Outlet, Inc. which was doing business as Electric Odyssey
- MP Affiliate Resources, Inc.
CONTRIBUTIONS
- PARTICIPANT CONTRIBUTIONS to the SRP consist of the following:
- FLEXIBLE DOLLAR CONTRIBUTIONS. Non-union participants may make
flexible dollar contributions of up to 3 percent of their
compensation, subject to a maximum compensation of $170,000 in
2001. The contribution is included in the participant's
before-tax account.
- BEFORE-TAX CONTRIBUTIONS. Before-tax contributions consist of
salary reduction contributions and results sharing
contributions. Total before-tax contributions may not exceed
$10,500 in 2001, as permitted under Section 401(k) of the
Internal Revenue Code of 1986 (Code).
- SALARY REDUCTION CONTRIBUTIONS. Salary reduction
contributions are 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 ALLETE Results
Sharing Program, would otherwise be paid to the participant.
- 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 0.75 percent of each union participant's
compensation, up to a maximum compensation of $170,000 in 2001.
Effective April 1, 2001 the 0.75 percent contribution made to the
SRP was discontinued and replaced by contributions to the Minnesota
Power and Affiliated Companies Employee Stock Ownership Plan and
Trust. Employer contributions prior to April 1, 2001 are included in
the participant's before-tax account.
VESTING
All contributions plus actual earnings thereon are fully vested and
nonforfeitable.
4 ALLETE 2001 SRP Form 11-K
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 the participant's total
before-tax account balances, whichever is less, for terms up to five years for a
general purpose loan and ten years for the acquisition of a primary residence. A
fixed interest rate of the prime rate plus 1 percent at the time of loan
origination, but not less than the Minnesota Power Employees Credit Union share
secured rate, is charged until the loan is repaid. As loans are repaid,
generally through payroll deductions, 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
various SRP 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 the
level of contributions to the SRP for the subsequent year. In 2001 funds were
transferred between investment options on a weekly basis with at least ten days
written notice to Minnesota Power's Benefits Accounting and Administration. A
brief description of the Plan's 2001 investment options follows. Detailed
descriptions of the investment options and respective risk profiles are
available in the fund prospectus.
- ALLETE COMMON STOCK FUND seeks capital appreciation and current
income by investing in the common stock of ALLETE.
- THE MERIDIAN VALUE FUND seeks long-term growth of capital by
investing primarily in a diversified portfolio of publicly traded
common stocks of U.S. companies.
- FIDELITY MAGELLAN FUND seeks capital appreciation by investing in
common stocks of domestic and foreign companies.
- VANGUARD INSTITUTIONAL INDEX FUND seeks to match the performance of
the Standard & Poor's 500 Composite Stock Price Index, which invests
in stocks of large U.S. companies.
- VANGUARD MID-CAP INDEX FUND seeks to match the performance of the
Standard & Poor's MidCap 400 Index which is made up of a group of
medium-size U.S. companies.
- THE ARTISAN INTERNATIONAL FUND seeks maximum long-term capital growth
by investing in a portfolio of international growth stocks,
concentrating on industries or investment themes that present
accelerating growth prospects and companies that capitalize on that
growth.
- BLACKROCK FUNDS SMALL CAP GROWTH EQUITY PORTFOLIO seeks long-term
capital appreciation by investing in U.S. small capitalization growth
companies (market capitalization under $2.5 billion) which are
considered to have earnings growth potential of 20 percent or higher.
- THE NICHOLAS-APPLEGATE EMERGING COUNTRIES INSTITUTIONAL FUND seeks
maximum long-term capital appreciation by investing primarily in
stocks of companies located in countries with emerging securities
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.
- FIXED INCOME FUND consists of guaranteed investment contracts (GICs)
with insurance companies and pooled investment contracts (PICs)
managed by American Express Trust Company. Each participant's account
value is determined on a participation-unit basis.
- 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 PICs, bank
investment contracts and stable value contracts.
ALLETE 2001 SRP Form 11-K 5
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 all their SRP accounts. Upon retirement, participants may elect
to transfer their SRP account balances to the Minnesota Power and Affiliated
Companies Retirement Plan A or Plan B, if the participant is receiving a benefit
from one of these retirement plans. The amount of transfers to these retirement
plans totaled $833,000 for 2001 ($478,000 for 2000).
For 2001 Minnesota Power maintained the participants' records and
issued a quarterly report to each participant showing the status of individual
accounts. At December 31, 2001 there were 1,679 participants in the SRP.
ADMINISTRATION
The SRP is administered for the Companies 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, 2002 the members of the Committee, all employees of
ALLETE and/or Minnesota Power, and their respective titles are as follows:
Name Title
--------------------------------------------------------------------------------
Robert D. Edwards * Executive Vice President - ALLETE and
Chief Executive Officer - Minnesota Power
Roger P. Engle Vice President - Minnesota Power and
President and Chief Operating Officer - Superior
Water, Light and Power Company
Brenda J. Flayton Vice President - Human Resources
Philip R. Halverson Vice President, General Counsel and Secretary
Alan R. Hodnik General Manager - Thermal Generation Operations -
Minnesota Power
David J. McMillan Senior Vice President -
Strategic Accounts and Government Relations -
Minnesota Power
Patrick K. Mullen Vice President - Minnesota Power
Mark A. Schober Vice President and Controller
Claudia R. Scott Welty Vice President - Information Technology
Donald J. Shippar President and Chief Operating Officer - Minnesota Power
Jeweleon W. Tuominen Manager - Executive Compensation and Employee Benefits
James K. Vizanko Vice President, Chief Financial Officer and Treasurer
--------------------------------------------------------------------------------
* Committee Chairman
For 2001 North Shore Bank of Commerce acted as Trustee (Trustee) for
the SRP. The Trustee's main office is located at 131 West Superior Street,
Duluth, Minnesota 55802. The Trustee carried blanket bond insurance in the
amount of $2 million.
6 ALLETE 2001 SRP Form 11-K
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 distributed 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 ALLETE 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 estimated fair value
which represents outstanding principal and any related accrued interest.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to:
- make estimates and assumptions that affect the reported amounts of
assets and liabilities;
- disclose contingent liabilities at the date of the financial
statements; and
- report amounts of revenue and expense during the reporting period.
Actual results could differ from those estimates.
The Plan presents in the statement of changes in assets available for
benefits the net appreciation (depreciation) in the fair value of its investment
which consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments.
NOTE 3 - INVESTMENTS
DECEMBER 31,
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2001 2000
INVESTMENTS REPRESENTING --------------------- ---------------------
5 PERCENT OR MORE OF ASSETS SHARES FAIR VALUE SHARES FAIR VALUE
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Thousands
ALLETE Common Stock * 963 $24,262 943 $23,404
American Express Trust Income Fund I 303 17,577 245 13,364
Fidelity Magellan Fund 166 17,259 165 19,647
Vanguard Institutional Index Fund 138 14,442 135 16,297
Janus Balanced Fund 577 11,321 545 11,571
Meridian Value 199 6,461 173 5,041
BlackRock Small Cap Growth Equity Portfolio 467 6,173 453 9,133
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* Party in Interest
The Plan's assets include guaranteed investment contracts with
crediting interest rates ranging from 5.88 percent to 6.67 percent. These
contracts had an aggregate contract value of $2,404,000 at December 31, 2001
($6,910,000 at December 31, 2000) and an average yield of 7.84 percent in 2001
(6.66 percent in 2000). There are no reserves against the contract value for
credit risk of the contract issuer or otherwise. The crediting interest rate is
agreed upon with the issuer upon initiation of the contract.
ALLETE 2001 SRP Form 11-K 7
NOTE 4 - 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. As required by the Internal Revenue Service, on February 28,
2002 the Committee filed an application for a determination letter from the
Internal Revenue Service to be effective January 1, 2001 for the changes made to
the SRP in subsequent years. Management believes that the SRP is in compliance
with the Code, therefore no provision for income taxes has been included in the
SRP's financial statements.
NOTE 5 - SUBSEQUENT EVENT
Effective January 1, 2002 the SRP and the Minnesota Power and
Affiliated Companies Employee Stock Ownership Plan and Trust (ESOP) were merged
into one plan called the Minnesota Power and Affiliated Companies Retirement
Savings and Stock Ownership Plan (RSOP). Under the RSOP, participants have the
same benefits as provided under the SRP and the ESOP. The RSOP provides
participating employees an opportunity to save for retirement by electing to
make before-tax and after-tax contributions through payroll deduction. It also
provides an opportunity to participate directly in ALLETE's financial results
through ownership of ALLETE common stock. Effective with the merging of the two
plans American Express Retirement Services, a service group of American Express
Financial Advisors Inc., and American Express Trust Company became the new
service provider for the RSOP. American Express Trust Company, which is located
at 994 AXP Financial Center, Minneapolis, Minnesota, 55474-0507, acts as the
trustee for the RSOP.
8 ALLETE 2001 SRP Form 11-K
SCHEDULE I
MINNESOTA POWER AND AFFILIATED COMPANIES
SUPPLEMENTAL RETIREMENT PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2001
Thousands
(a) (b) (c) (d) (e)
FAIR/
DESCRIPTION OF CONTRACT
IDENTITY OF ISSUER INVESTMENT COST VALUE
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GUARANTEED INVESTMENT CONTRACTS
Continental Assurance Company GIC - 5.88% due 2002 $ 2,404
----------------------------------------------------------------------------------------------------------------------
POOLED INVESTMENT CONTRACTS
American Express Trust Income Fund I PIC - 303 Shares 17,577
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* ALLETE, INC. Common Stock - 963 Shares 24,262
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MUTUAL FUND SECURITIES
Meridian Value Fund Mutual Fund - 199 Shares 6,461
Fidelity Magellan Fund Mutual Fund - 166 Shares 17,259
Vanguard Institutional Index Fund Mutual Fund - 138 Shares 14,442
Vanguard Mid-Cap Index Fund Mutual Fund - 235 Shares 2,774
BlackRock Small Cap Growth Equity Portfolio Mutual Fund - 467 Shares 6,173
Artisan International Fund Mutual Fund - 152 Shares 2,785
Janus Balanced Fund Mutual Fund - 577 Shares 11,321
Nicholas-Applegate Emerging Countries
Institutional Fund Mutual Fund - 153 Shares 1,681
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Total Mutual Funds 62,896
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* ALLETE, INC. Loans Receivable from
Participants - 6.5% to 10.5% 2,191
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TOTAL INVESTMENTS $ 109,330
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* Party-in-interest
----------------
Not required.
ALLETE 2001 SRP Form 11-K 9
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
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(Name of Plan)
June 4, 2002 By R.D. Edwards
----------------------------------------------
R.D. Edwards
Chairman,
Employee Benefit Plans Committee
10 ALLETE 2001 SRP Form 11-K
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 ALLETE, Inc. of our report dated May
31, 2002 relating to the financial statements of the Minnesota Power and
Affiliated Companies Supplemental Retirement Plan, which appears in this Form
11-K.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 4, 2002