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September 1, 2005
The ALLETE Investor

Direct Registration System streamlines stock ownership, makes the transfer of shares easier and more efficient

Later this month, ALLETE will complete its first year of using DRS, a service in which shares of ALLETE stock are owned, recorded and transferred electronically without the issuance of a physical stock certificate.

DRS is the abbreviation for Direct Registration System, and it was begun at ALLETE in conjunction with the reverse stock split in September of 2004. Because of the reverse split, investors were asked to exchange their old ALLETE stock certificates for those held in paperless DRS form.

Since then, stock certificates representing millions of shares have been exchanged for DRS shares. There are still more than 900,000 shares of ALLETE in certificate form that must be exchanged, according to Kathy Douglas, supervisor of ALLETE’s Shareholder Services.

Direct Registration System
Marge Contardo, right, of Green Valley, Ariz., turns in old stock certifi cates to allete shareholder representative Laurel Udenberg. A native of Duluth, Contardo has owned stock in allete for more than 30 years.
 


“Using the DRS service gives shareholders a level of safety they don’t have with stock certificates,” Douglas said. “It’s safer, and it’s a much more efficient process, both for shareholders and for us at ALLETE.” Although physical stock certificates will be issued to shareholders when requested, there are many advantages to moving beyond paper certificates to a book-entry DRS system

For one thing, physical stock certificates tend to disappear. In an average year, approximately 1.7 million stock certificates are reported lost, stolen or counterfeited, according to the Depository Trust & Clearing Corporation.

In 1994, the Securities Exchange Commission (SEC) requested that the securities industry explore the means for providing investors with an additional approach to holding securities in certificate-less form. With this objective in mind, a joint industry working committee was formed, with industry members that included the New York Stock Exchange, the Securities Industry Association, The Depository Trust Company and the SEC.

Eventually the committee developed a system that gave investors three options for securities ownership:

  • Street Name Registration: Securities are registered in the street name of the investor’s broker-dealer. While no physical certificates are issued to the investor, the broker-dealer issues, at least quarterly, account statements of the investor’s holdings. Th e broker-dealer pays dividends or interest to the investor, and provides the investor with mailing material from the issuer or transfer agent.
  • Direct Registration: This option allows the investor to be registered directly on the books of the transfer agent without the need of a physical certificate as evidence of security ownership. While the investor will not receive a physical certificate, he or she will receive a statement of ownership and periodic account statements. Dividend or interest payments, proxy materials, annual reports and other information will be mailed from the issuer or its transfer agent.
  • Physical Certificates: Certificates are registered and issued in the investor’s name. The investor will receive all mailings directly from the issuer or its transfer agent, including dividend or interest payments, annual reports, and proxies.

DRS enables participants and qualifying transfer agents to electronically move an investor’s security positions between streetname ownership and direct registration book-entry position. To support the industry’s move to direct registration, the NYSE modified its listing criteria to permit listed companies to issue book-entry statements in lieu of certificates for corporate action distributions such as spin-off s and stock splits.

ALLETE investors still have the option of holding their shares in certificate form. But those whose shares pre-date the reverse stock split of Sept. 21, 2004 must exchange their old certificates in order to receive dividends beyond that date. If you have questions or need more information about direct registration, call ALLETE shareholder services at 800–535–3056.

Dear Shareholder

Summer is a time for reunions, a period when we recognize important moments from the past. This is true for people, and for corporations, too. We passed a five year anniversary last month—the Aug. 8, 2000, announcement that the company’s name would change from Minnesota Power, Inc. to ALLETE.

It seems longer than that, because so much has happened since our ticker symbol changed from MPL to ALE. A major event in our history occurred one year ago this month—ALLETE’s spin-off of its automotive businesses into ADESA, Inc. In the coming months, we’ll share with you details about another major milestone on our horizon.

We’re working hard to execute the critical elements of ALLETE’s “Transforming Our Future” strategy. So far this year, strong performance from our core real estate and energy businesses has kept us on track to achieve 45 to 50 percent earnings-per-share growth from continuing operations, excluding the $1.84 per-share charge in the second quarter for the Kendall County power purchase assignment.

It goes without saying that we couldn’t have accomplished anything at ALLETE without supportive shareholders. Th anks for your investment.

Sincerely,


Don Shippar
Chief Executive Officer
 

 

Experienced Florida real estate executives join allete Properties leadership team

Smith and McCurdy
Clinton Smith
Christopher McCurdy

Two Floridians with extensive backgrounds in the development and acquisition of real estate have joined the leadership team of ALLETE Properties.

Clinton F. Smith III of Palm Coast was named vice president of development. Smith, 50, served from 1987 to 1995 as engineering manager for ITT Community Development Corporation, the company that originally developed Palm Coast. Smith most recently worked as entitlement manager for the north Florida division of Centex Homes.

A graduate of the University of Florida with a degree in civil engineering, Smith will be based at ALLETE Properties’ northeast Florida office in Palm Coast. Christopher McCurdy, 37, has joined allete Properties to lead the company’s acquisition program. McCurdy comes to allete from DiVosta Homes, where he was land acquisition manager in a territory that included the Florida counties of Brevard, Volusia, Flagler and St. Johns.

McCurdy previously worked for US Home/Lennar Corp. in land acquisition, sales and development. He was educated at Edison College in Fort Myers, Jacksonville Community College and Ohio University.
 

Minnesota Power signs agreement to provide electricity to
U.S. Steel Mesabi Iron Range taconite operations through October 2013

Minnesota Power signed an agreement with its largest customer, United States Steel Corp., to provide electric service to its Minntac and Keewatin Taconite facilities through October 2013.

The two facilities, located 25 miles apart on Minnesota’s Mesabi Iron Range, use a combined 275 megawatts of electricity. Minnesota Power’s largest energy customer, u.s. Steel represents about 12 percent of ALLETE ’s annual revenue and

approximately 17 percent of Minnesota Power’s electric load.

“Extending our electric supply contract is an important achievement for both u.s. Steel and Minnesota Power,” said Don Shippar, CEO of ALLETE, Inc. “Electric power is a key component in the production of taconite and the taconite industry consumes a sizable portion of the electricity we produce. This agreement helps to provide planning certainty for both companies.”

In 2004, Minntac and Keewatin Taconite produced a combined 19.6 million tons of taconite pellets, a primary feedstock for steelmaking. That tonnage represents about half of the annual taconite pellet production in Minnesota.

U.S. Steel purchased the National Steel Pellet Co. in May 2003 and renamed the facility Keewatin Taconite. Th e agreement, announced July 6, is subject to regulatory approval by the Minnesota Public Utilities Commission.

The statements contained in this newsletter and statements that ALLETE may make orally in connection with this newsletter that are not historical facts, are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties and investors are directed to the risks discussed in documents filed by ALLETE with the Securities and Exchange Commission.
Shareholder Services ALLETE • 30 West Superior Street • Duluth, MN 55802-2093 • 218-723-3974 or 1-800-535-3056
E-mail: shareholder@ALLETE.com