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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 1999
Commission File Number 1-7978
BLACK HILLS CORPORATION
401K RETIREMENT SAVINGS PLAN
BLACK HILLS CORPORATION
625 NINTH STREET
PO BOX 1400
RAPID CITY, SOUTH DAKOTA 57709
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Black Hills Corporation Retirement Savings Plan
Financial Statements as of
December 31, 1998 and 1997
Together With Report of
Independent Public Accountants
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
Index to Financial Statements and Supplemental Schedules
Page
Report of Independent Public Accountants 1
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Statements of Net Assets Available for Benefits 2
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Statement of Changes in Net Assets Available for Benefits 4
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Notes to Financial Statements 5
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Item 27a--Schedule of Assets Held for Investment Purposes 10
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Item 27d--Schedule of Reportable Transactions 12
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Item 27f--Schedule of Nonexempt Transactions 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
Black Hills Corporation Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Black Hills Corporation Retirement Savings 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 and
the schedules referred to below are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements and
supplemental schedules 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 the Black Hills
Corporation Retirement Savings 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.
Minneapolis, Minnesota,
August 6, 1999
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1998
Guaranteed Fixed Foreign & Growth Stock
Investment Income Balanced Mutual Equity Global Mutual Mutual Funds
Contract Trust Mutual Funds Fund Collective Trust Funds
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INVESTMENTS, at market value (Note 2):
Collective trusts $2,729,500 $ - $ - $3,631,468 $ - $ -
Mutual funds - 823,962 1,197,186 - 2,694,519 2,957,797
Common stocks - - - - - -
Self-directed accounts - - - - - -
PARTICIPANT LOANS - - - - - -
CONTRIBUTIONS RECEIVABLE:
Participant contributions receivable - - - - - -
Participant contributions--loan payments
in-transit - - - - - -
NET ASSETS AVAILABLE FOR BENEFITS $2,729,500 $823,962 $1,197,186 $3,631,468 $2,694,519 $2,957,797
Other Black Hills
Specialized Corporation Self-Directed
Mutual Funds Common Stock Accounts Participant Contributions
Loans Receivable Total
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INVESTMENTS, at market value (Note 2):
Collective trusts $ - $ - $ - $ - $ - $ 6,360,968
Mutual funds 155,655 - - - - 7,829,119
Common stocks - 7,210,038 - - - 7,210,038
Self-directed accounts - - 92,234 - - 92,234
PARTICIPANT LOANS - - - 820,244 - 820,244
CONTRIBUTIONS RECEIVABLE:
Participant contributions receivable - - - - 5,446 5,446
Participant contributions--loan payments
in-transit - - - - 66,258 66,258
NET ASSETS AVAILABLE FOR BENEFITS $155,655 $7,210,038 $92,234 $820,244 $71,704 $22,384,307
The accompanying notes are an integral part of this statement.
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
Statement of Net Assets Available for Benefits
As of December 31, 1997
American Investment
Express Income Company of New American
Fund AMCAP Fund America Fund Perspective Balanced Fund
Fund
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INVESTMENTS, at market value:
Mutual funds $2,575,405 $3,233,585 $2,958,270 $2,435,361 $1,242,120
Common stock - - - - -
PARTICIPANT LOANS - - - - -
RECEIVABLES:
Contributions from participants 8,126 14,629 19,234 15,732 8,131
Loan payments from participants 8,290 5,755 5,185 4,380 2,161
NET ASSETS AVAILABLE FOR BENEFITS $2,591,821 $3,253,969 $2,982,689 $2,455,473 $1,252,412
Black Hills Participant
Corporation Contribution/Loan
Common Stock Participant Payment Receivable
Loans Total
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INVESTMENTS, at market value:
Mutual funds $ - $ - $ - $12,444,741
Common stock 6,254,700 - - 6,254,700
PARTICIPANT LOANS - 819,813 - 819,813
RECEIVABLES:
Contributions from participants - - 12,802 78,654
Loan payments from participants - - 7,133 32,904
NET ASSETS AVAILABLE FOR BENEFITS $6,254,700 $819,813 $19,935 $19,630,812
The accompanying notes are an integral part of this statement.
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1998
Other
Guaranteed Fixed Income Equity Foreign & Growth Stock Specialized
Investment Mutual Funds Balanced Collective Global Mutual Mutual Funds Mutual Funds
Contract Trust Mutual Fund Trust Funds
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NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year
$ - $ - $ - $ - $ - $ - $ -
INCREASES (DECREASES) DURING THE YEAR:
Participant contributions
154,219 71,368 89,020 244,107 177,881 269,043 21,056
Investment interest and dividends
172,652 58,513 75,565 10,066 182,491 68,605 3,316
Net appreciation (depreciation) in market value of investments
(8,528) (13,425) (7,391) 761,318 104,157 (602,127) 12,295
Net realized gain (loss) on sale of investments
- 2,182 12,521 82,491 69,445 (41,322) (1,212)
Interfund transfers 2,569,532 760,845 1,030,329 2,617,449 2,184,209 3,416,954 121,105
Administrative expenses (714) (48) (165) (445) (249) (618) (23)
Total increases (decrease)
2,887,161 879,435 1,199,879 3,714,986 2,717,934 3,110,535 156,537
DISTRIBUTIONS TO PARTICIPANTS
(157,661) (55,473) (2,693) (83,518) (23,415) (152,738) (882)
NET INCREASE (DECREASE) IN NET ASSETS
2,729,500 823,962 1,197,186 3,631,468 2,694,519 2,957,797 155,655
NET ASSETS AVAILABLE FOR BENEFITS, end of year
$2,729,500 $823,962 $1,197,186 $3,631,468 $2,694,519 $2,957,797 $155,655
Black Hills Contributions American American Funds
Corporation Self-Directed Participant Receivable Express Income Mutual Funds Total
Common Stock Accounts Loans Fund
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NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year
$6,254,700 $ - $819,813 $19,935 $2,591,821 $9,944,543 $19,630,812
INCREASES (DECREASES) DURING THE YEAR:
Participant contributions 196,841 - - 71,704 - - 1,295,239
Investment interest and dividends
280,940 592 - - - - 852,740
Net appreciation (depreciation) in market value of investments
755,130 - - - - - 1,001,429
Net realized gain (loss) on sale of investments
4,214 - - - 8,528 44,332 181,179
Interfund transfers (191,342) 91,642 8,436 (19,935) (2,600,349) (9,988,875) -
Administrative expenses (988) - - - - - (3,250)
Total increases (decreases)
1,044,795 92,234 8,436 51,769 (2,591,821) (9,944,543) 3,327,337
DISTRIBUTIONS TO PARTICIPANTS
(89,457) - (8,005) - - - (573,842)
NET INCREASE (DECREASE) IN NET ASSETS
955,338 92,234 431 51,769 (2,591,821) (9,944,543) 2,753,495
NET ASSETS AVAILABLE FOR BENEFITS, end of year
$7,210,038 $92,234 $820,244 $71,704 $ - $ - $22,384,307
The accompanying notes are an integral part of this statement.
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
1. Description of the Plan:
General
The Black Hills Corporation Retirement Savings Plan (the Plan) is a defined
contribution plan for eligible employees of Black Hills Power and Light Company,
the assumed business name of the electric utility of Black Hills Corporation
(the Company); Wyodak Resources Development Corp. (WRDC), a wholly owned
subsidiary of the Company; Black Hills Exploration and Production, a wholly
owned subsidiary of WRDC; and Black Hills Energy Resources, Inc., Varifuel,
Inc., Black Hills FiberCom, Inc., Daksoft, Inc. and Black Hills Coal Network,
Inc. (all wholly owned subsidiaries of Black Hills Capital Group, Inc., a wholly
owned subsidiary of WRDC). The eligible employees may have a percentage of their
compensation withheld and contributed to the Plan, subject to limitations, as
defined. The Plan is designed to comply with the provisions of Section 401(k) of
the Internal Revenue Code (the Code).
Effective January 1, 1998, the board of directors of the Company adopted the
Merrill Lynch special prototype defined contribution plan and appointed Merrill
Lynch as the asset custodian and recordkeeper. The Black Hills Corporation
Benefits Committee (the Committee) was appointed the trustee of the Plan,
replacing the risk manager of the Company as trustee. Also effective January 1,
1998, the risk manager was appointed administrator of the Plan, replacing the
Committee as administrator. Administrative fees of $10,500 were paid by the
Company in 1998.
In January 1998, in connection with the adoption of the prototype plan, funds of
the Plan (other than Black Hills Corporation common stock) were liquidated and
invested in other mutual funds having similar investment objectives.
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 more complete information.
Eligibility
Employees are eligible to participate in the Plan on the first day of
employment.
Contributions
The maximum percentage of compensation an employee may contribute to the Plan is
20%, with an annual maximum contribution of $10,000 in 1998 and $9,500 in 1997,
as provided by the Code. There is no limit to the number of times participants
may change their contribution percentages. Amounts contributed are invested at
the discretion of plan participants in any one of the 22 investment options
described in Note 2.
All contributions made and any earnings therefrom are fully vested to the
participant at all times. The Company does not contribute to the Plan.
The Plan received $101,239 in rollover transfers from other qualified plans in
1998, which are included in participant contributions on the statement of
changes in net assets available for benefits.
Distributions
Upon termination of employment, a participant may elect to have an account
distributed. A terminated participant whose account balance is $5,000 or less
will receive a nonelective lump-sum distribution of their account. No
distribution of a participant's account shall be made while the participant is
an active employee of the Company unless a financial hardship, as defined by the
Code and demonstrated to the plan administrator, exists.
The normal form of distributions of account balances is a lump sum. Participants
may elect, at the time of distribution, the option of having payments made in
installments over a period not to exceed the expected future lifetime of the
participant (or the joint expected future lifetime of the participant and the
participant's spouse).
Participant Loans
The Plan contains a loan provision which allows participants to borrow up to a
maximum equal to the lesser of $50,000 or 50% of their account balances at an
interest rate of 1% over the prime interest rate and to repay the loan through
payroll deductions, with a maximum repayment period of five years. During 1998,
interest rates on participant loans ranged from 8.75% to 9.5%. Loans are
prohibited for terminated employees.
Amendments and Termination
The Company reserves the right to amend or terminate the Plan at any time. Upon
termination of the Plan, all assets will be distributed among the participants
in accordance with plan provisions.
2. Summary of Significant Accounting Policies:
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis
of accounting.
Investments
The investment options of the Plan at December 31, 1998 consist of deposits in
collective trusts of Merrill Lynch, mutual funds, common stock of the Company
and self-directed accounts. Units (shares) of the various investment funds are
valued daily at net asset value (which equals market value).
The investment options are participant-directed. Participants may change their
investment elections daily.
The investment options are grouped as follows:
Guaranteed Investment Contract Trust
Merrill Lynch Retirement Preservation Trust--This trust seeks to provide
preservation of capital liquidity and current income at levels that are
typically higher than money market funds. The trust is a collective trust
which invests primarily in guaranteed investment contracts (the investments
are neither insured nor guaranteed by the U.S. government).
Fixed Income Mutual Funds
PIMCO Total Return Fund--This fund seeks to provide maximum total return,
consistent with preservation of capital and prudent investment management,
and invests primarily in an intermediate-term portfolio of investment-grade
bonds.
Federated International Income Fund--This fund seeks to provide current
income; capital growth is a secondary objective. The fund invests at least
65% of assets in high-quality foreign currency-denominated debt securities.
Van Kampen Worldwide High Income Fund (formerly the Morgan Stanley
Worldwide High Income Fund)--This fund seeks to provide high current income
consistent with relative stability of principal and potential for capital
appreciation, and invests primarily in higher-yielding emerging market
fixed-income securities of issues through the world.
Oppenheimer U.S. Government Fund--This fund seeks current income and
preservation of capital and normally invests at least 80% of assets in U.S.
government securities and related repurchase agreements.
Balanced Mutual Fund
Merrill Lynch Capital Fund--This fund seeks the highest total investment
return consistent with product risk, primarily through a fully managed
investment policy that permits management of the fund to vary investment in
equity, debt and convertible securities based on its evaluation of changes
in economic and market trends. The fund may invest up to 25% of its assets
in foreign securities.
Equity Collective Trust
Merrill Lynch Equity Index Trust--This trust seeks to provide investment
results that, before expenses, replicate the total return of the Standard &
Poor's 500 Composite Stock Price Index. The fund is a collective trust in
which most of the assets will be comprised of all, or nearly all, of the
500 stocks in the index in weightings closely aligned with those of the
index.
Foreign & Global Mutual Funds
Managers International Equity Fund--This fund seeks to achieve long-term
capital appreciation through a diversified portfolio of equity securities
of non-U.S. companies. The fund generally invests in companies having
medium and large capitalizations.
Oppenheimer Global Fund--This fund seeks capital appreciation by investing
primarily in common stocks and convertible securities issued by U.S. and
foreign companies.
Growth Stock Mutual Funds
Davis New York Venture Fund--This fund seeks growth of capital by investing
primarily in common stock of U.S. companies with market capitalizations of
at least $5 billion.
Merrill Lynch Growth Fund--This fund seeks growth of capital and,
secondarily, income by investing in common stock, preferred stock and
convertible securities.
Alliance Quasar Fund--This fund seeks growth of capital by investing in
equity securities that offer the possibility of above-average earnings
growth and currently emphasizes investment in companies having small levels
of capitalization.
Other Specialized Mutual Funds
Davis Convertible Securities Fund--This fund seeks growth and income by
investing in common and convertible stocks of U.S. companies.
Van Kampen Real Estate Securities Fund--This fund seeks long-term growth of
capital, with current income as a secondary objective, and invests
primarily in securities of the real estate industry, including common
stocks and real estate investment trusts.
Merrill Lynch Pacific Fund--This fund seeks long-term capital appreciation
and normally invests at least 80% of assets in equities issued by companies
domiciled in far-eastern or western Pacific countries.
Munder Framlington Healthcare Fund--This fund seeks long-term capital
appreciation by investing primarily in equity securities of issuers for
whom at least 50% of sales, profits or net assets arise from health
services or medical technology activities.
Oppenheimer Gold and Special Minerals Fund--This fund seeks capital
appreciation by normally investing between 80% and 100% of assets in mining
securities and metals investments.
State Street Research Global Resources Fund--This fund seeks to provide
long-term growth of capital by normally investing at least 65% of total
assets in securities of energy and natural resources companies, as well as
utilities. The fund invests primarily in stocks, including foreign stocks.
Pioneer Europe Fund--This fund seeks long-term growth of capital by
investing primarily in equity securities of European issuers.
Seligman Communications and Information Fund--This fund seeks capital
appreciation by normally investing at least 80% of assets in common stocks
issued by companies that operate in the communication, information and
related industries.
Black Hills Corporation Common Stock
The Company's common stock is valued daily based upon the closing price on
the New York Stock Exchange.
Self-Directed Accounts
Participants may elect to invest a portion or all of their account in a
self-directed brokerage account with Merrill Lynch. The self-directed
account allows participants to purchase and hold investments that are not
part of the Plan's regular investment menu. Investment options are subject
to qualified plan restrictions as specified by the Code.
In January 1998, funds at the American Funds Group invested in the AMCAP Fund,
the Investment Company of America Fund, the New Perspective Fund and the
American Balanced Fund were liquidated and invested in other mutual funds having
similar investment objectives.
3. Tax Status:
The Plan obtained its latest determination letter on June 19, 1991, in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Code. The Plan has been
amended since receiving the determination letter; however, the plan
administrator and the Plan's legal counsel believe that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the Code. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
(Employer Identification Number: 46-0111677) (Plan Number: 003)
Item 27a--Schedule of Assets Held for Investment Purposes
As of December 31, 1998
Number of
Shares of Units Description Cost Market Value
GUARANTEED INVESTMENT CONTRACT TRUST:
2,719,480 Merrill Lynch Retirement Preservation Trust $ 2,729,500 $ 2,729,500
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FIXED INCOME MUTUAL FUNDS:
71,191 PIMCO Total Return Fund 763,960 750,353
53 Federated International Income Fund 569 601
173 Van Kampen Worldwide High Income Fund 1,838 1,687
7,368 Oppenheimer U.S. Government Fund 71,019 71,321
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Total fixed income mutual funds 837,386 823,962
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BALANCED MUTUAL FUND:
34,842 Merrill Lynch Capital Fund 1,199,031 1,197,186
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EQUITY COLLECTIVE TRUST:
43,272 Merrill Lynch Equity Index Trust 2,854,442 3,631,468
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FOREIGN & GLOBAL MUTUAL FUNDS:
54,294 Managers International Equity Fund 2,521,069 2,652,256
992 Oppenheimer Global Fund 44,148 42,263
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Total foreign & global mutual funds 2,565,217 2,694,519
GROWTH STOCK MUTUAL FUNDS:
18,662 Davis New York Venture Fund 446,712 466,720
115,330 Merrill Lynch Growth Fund 3,098,356 2,474,980
644 Alliance Quasar Fund 16,921 16,097
Total growth stock mutual funds 3,561,989 2,957,797
OTHER SPECIALIZED MUTUAL FUNDS:
1,000 Davis Convertible Securities Fund 24,023 23,765
83 Van Kampen Real Estate Securities Fund 1,011 965
35 Merrill Lynch Pacific Fund 584 617
569 Munder Framlington Healthcare Fund 6,827 6,624
146 Oppenheimer Gold and Special Minerals Fund 1,319 1,350
101 State Street Research Global Resources Fund 1,395 1,004
949 Pioneer Europe Fund 31,922 29,786
2,979 Seligman Communications and Information Fund 76,277 91,544
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Total other specialized mutual funds 143,358 155,655
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273,366 BLACK HILLS CORPORATION COMMON STOCK* $ 6,454,907 $ 7,210,038
SELF-DIRECTED ACCOUNTS 92,234 92,234
PARTICIPANT LOANS 820,244 820,244
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Total investments $21,258,308 $22,312,603
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*Denotes party in interest.
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
(Employer Identification Number: 46-0111677) (Plan Number: 003)
Item 27d--Schedule of Reportable Transactions
For the Year Ended December 31, 1998
Number of Number of Total Cost of
Purchases Sales Purchases
Description
American Funds Group:
AMCAP Fund - 1 $ -
Investment Company of America Fund - 1 -
New Perspective Fund - 1 -
American Balanced Fund - 1 -
American Express Income Fund - 2 -
Black Hills Corporation common stock 110 150 660,974
Merrill Lynch Equity Index Trust 146 133 3,523,863
Merrill Lynch Retirement Preservation Trust 313 140 3,500,805
Managers International Equity Fund 166 143 3,095,735
Merrill Lynch Capital Fund 67 64 1,447,927
Merrill Lynch Growth Fund 170 162 3,863,402
PIMCO Total Return Fund 158 46 914,516
Total Net Gain
Total Sale Cost of Sales (Loss) on
Description Proceeds Sales
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American Funds Group:
AMCAP Fund $3,231,519 $3,233,585 $(2,066)
Investment Company of America Fund 2,973,976 2,958,270 15,706
New Perspective Fund 2,460,508 2,435,361 25,147
American Balanced Fund 1,247,665 1,242,120 5,545
American Express Income Fund 2,583,932 2,575,405 8,527
Black Hills Corporation common stock 409,523 405,309 4,214
Merrill Lynch Equity Index Trust 751,912 669,420 82,492
Merrill Lynch Retirement Preservation Trust 781,325 781,325 -
Managers International Equity Fund 644,219 574,666 69,553
Merrill Lynch Capital Fund 261,416 248,895 12,521
Merrill Lynch Growth Fund 730,688 765,046 (34,358)
PIMCO Total Return Fund 152,873 150,691 2,182
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
(Employer Identification Number: 46-0111677) (Plan Number: 003)
Item 27f--Schedule of Nonexempt Transactions
For the Period Ended December 31, 1998
Relationship to Description of Transactions, Including
Plan, Employer or Maturity Date, Rate of Interest, Interest
Identity of Other Collateral, and Par or Maturity Value Amount Incurred
Party Involved Party-in-Interest Loaned on Loan
-------------- ----------------- ---------------------------------------- ------ --------
Black Hills Sponsor Lending of moneys from the Plan to the $6,419 $1,496
Corporation employer (contributions not timely
remitted to the Plan), as follows:
Deemed loan dated March 15, 1998,
maturity September 30, 1999, deemed
interest on the loan, 14.6%
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated August 6, 1999 included in this Form 11-K, into the Company's
previously filed Registration Statement (Form S-8 No. 333-61969).
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
November 12, 1999