FORM 10-K

90

MDU RESOURCES G ROUP, INC.

PART II

NOTE 12 -- PREFERRED STOCKS

Preferred stocks at December 31 were as follows:

2007

2006

(Dollars in thousands)

Authorized:

Preferred --

500,000 shares, cumulative, par value $100, issuable in series

Preferred stock A --

1,000,000 shares, cumulative, without par value, issuable in series

(none outstanding)

Preference --

500,000 shares, cumulative, without par value, issuable in series

(none outstanding)

Outstanding:

4.50% Series -- 100,000 shares

$10,000

$10,000

4.70% Series -- 50,000 shares

5,000

5,000

Total preferred stocks

$15,000

$15,000

The 4.50% Series and 4.70% Series preferred stocks outstanding are subject to redemption, in whole or in part, at the option of the

Company with certain limitations on 30 days notice on any quarterly dividend date at a redemption price, plus accrued dividends, of

$105 per share and $102 per share, respectively.

In the event of a voluntary or involuntary liquidation, all preferred stock series holders are entitled to $100 per share, plus

accrued dividends.

The affirmative vote of two-thirds of a series of the Company's outstanding preferred stock is necessary for amendments to the Company's

charter or bylaws that adversely affect that series; creation of or increase in the amount of authorized stock ranking senior to that series (or

an affirmative majority vote where the authorization relates to a new class of stock that ranks on parity with such series); a voluntary

liquidation or sale of substantially all of the Company's assets; a merger or consolidation, with certain exceptions; or the partial retirement

of that series of preferred stock when all dividends on that series of preferred stock have not been paid. The consent of the holders of a

particular series is not required for such corporate actions if the equivalent vote of all outstanding series of preferred stock voting together

has consented to the given action and no particular series is affected differently than any other series.

Subject to the foregoing, the holders of common stock exclusively possess all voting power. However, if cumulative dividends on preferred

stock are in arrears, in whole or in part, for one year, the holders of preferred stock would obtain the right to one vote per share until all

dividends in arrears have been paid and current dividends have been declared and set aside.

NOTE 13 -- COMMON STOCK

On May 11, 2006, the Company's Board of Directors approved a three-for-two common stock split to be effected in the form of a 50

percent common stock dividend. The additional shares of common stock were distributed on July 26, 2006, to common stockholders of

record on July 12, 2006. Certain common stock information appearing in the accompanying consolidated financial statements has been

restated in accordance with accounting principles generally accepted in the United States of America to give retroactive effect to the stock

split. Additionally, preference share purchase rights have been appropriately adjusted to reflect the effects of the split.

In 1998, the Company's Board of Directors declared, pursuant to a stockholders' rights plan, a dividend of one preference share purchase

right (right) for each outstanding share of the Company's common stock. Each right becomes exercisable, upon the occurrence of certain

events, for four-ninths of one one-thousandth of a share of Series B Preference Stock of the Company, without par value, at an exercise

price of $125, subject to certain adjustments. The rights are currently not exercisable and will be exercisable only if a person or group

(acquiring person) either acquires ownership of 15 percent or more of the Company's common stock or commences a tender or exchange

offer that would result in ownership of 15 percent or more. In the event the Company is acquired in a merger or other business combination

transaction or 50 percent or more of its consolidated assets or earnings power are sold, each right entitles the holder to receive, upon the

exercise thereof at the then current exercise price of the right multiplied by the number of four-ninths of one one-thousandth of a share of

Series B Preference Stock for which a right is then exercisable, in accordance with the terms of the rights agreement, such number of

shares of common stock of the acquiring person having a market value of twice the then current exercise price of the right. The rights,

which expire on December 31, 2008, are redeemable in whole, but not in part, for a price of $.00444 per right, at the Company's option at

any time until any acquiring person has acquired 15 percent or more of the Company's common stock.

The Stock Purchase Plan provides interested investors the opportunity to make optional cash investments and to reinvest all or a

percentage of their cash dividends in shares of the Company's common stock. The K-Plan is partially funded with the Company's common

stock. From July 2006 through March 2007, the Stock Purchase Plan and K-Plan, with respect to Company stock, were funded with shares

of authorized but unissued common stock. From January 2005 through June 2006, and April 2007 through December 2007, purchases of

shares of common stock on the open market were used to fund the Stock Purchase Plan and K-Plan. At December 31, 2007, there were

20.6 million shares of common stock reserved for original issuance under the Stock Purchase Plan and K-Plan.