UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10- K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________________ to ____________________
Commission File Number 1-6075
UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Utah 13-2626465
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1717 Main Street, Suite 5900 75201
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code(214) 743-5600
- ---____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock (Par Value $2.50 per share) New York Stock Exchange, Inc.
_______________________________________________________________
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes __X___ No _________
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X].
________________________________________________________________
As of February 28, 1998 the aggregate market value of
the registrant's Common Stock held by non-affiliates (using
the New York Stock Exchange closing price) was approximately
$12,644,079,279.
The number of shares outstanding of the registrant's
Common Stock as of February 28, 1998 was 247,292,769.
Portions of the following documents are incorporated by
reference into this Report: (1) registrant's Annual Report
to Stockholders for the year ended December 31, 1997 (Parts
I, II and IV); and (2) registrant's definitive Proxy
Statement for the annual meeting of stockholders to be held
on April 7, 1998 (Part III).
<PAGE> 2
The undersigned Registrant hereby amends it Annual
Report on Form 10-K for the fiscal year ended December 31,
1997 to include the following exhibits:
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Exhibit Number Exhibit
(23) Independent Auditors' Consents
(99) (a) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Corporation Thrift
Plan.
(99) (b) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Fruit Express
Company Agreement Employee 401(k) Retirement
Thrift Plan.
(99) (c) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Agreement Employee
401(k) Retirement Thrift Plan.
(99) (d) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Chicago and North Western
Railway Company Profit Sharing and Retirement
Savings Program.
(99) (e) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Southern Pacific Rail
Corporation Thrift Plan.
(99) (f) Financial Statements for the Fiscal Year ended
December 31, 1997 required 11-K for the Skyway
Retirement Savings Plan.
<PAGE> 3
UNION PACIFIC CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
Date: June 29, 1998
UNION PACIFIC CORPORATION
(Registrant)
/s/ Joseph E. O'Connor, Jr.
----------------------------------
Joseph E. O'Connor, Jr.,
Vice President and Controller
(Chief Accounting Officer
and Duly Authorized Officer)
<PAGE> 4
EXHIBIT INDEX
Exhibit Number Exhibit
(23) Independent Auditors' Consents
(99) (a) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Corporation Thrift
Plan.
(99) (b) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Fruit Express
Company Agreement Employee 401(k) Retirement
Thrift Plan.
(99) (c) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Union Pacific Agreement Employee
401(k) Retirement Thrift Plan.
(99) (d) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Chicago and North Western
Railway Company Profit Sharing and Retirement
Savings Program.
(99) (e) Financial Statements for the Fiscal Year
ended December 31, 1997 required by Form
11-K for the Southern Pacific Rail
Corporation Thrift Plan.
(99) (f) Financial Statements for the Fiscal Year
ended December 31, 1997 required 11-K for the
Skyway Retirement Savings Plan.
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-
Effective Amendment No. 1 to Registration Statement No. 33-
12513 and in Registration Statement No. 33-49849 of Union
Pacific Corporation on Forms S-8 of our report dated June 3,
1998 appearing in Exhibit 99(a) of Amendment No. 1 to the
Annual Report on Form 10-K of Union Pacific Corporation for
the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 26, 1998
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-49785 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(b) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 26, 1998
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-53968 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(d) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 26, 1998
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 333-10797 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(e) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 26, 1998
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 333-13115 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(f) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 26, 1998
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Union Pacific Corporation:
We consent to the incorporation by reference in Registration
Statements No. 33-76930 and No. 33-83390 on Form S-8 of Union
Pacific Corporation of our report dated June 20, 1997, except
as to note 9 which is as of October 10, 1997, relating to the
statement of net assets available for benefits (modified cash
basis) of Southern Pacific Rail Corporation Thrift Plan as of
December 31, 1996, and the related statement of changes in net
assets available for benefits (modified cash basis) for the
year then ended, which report appears in the December 31, 1997
annual report on Form 11-K of Southern Pacific Rail Corporation
Thrift Plan. Our report notes those financial statements were
prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
June 26, 1998
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-51735 of Union Pacific Corporation on
Form S-8 of our report dated June 25, 1998 on the financial
statements of Skyway Savings Plan, appearing in
Exhibit 99(c) of Amendment No. 1 to the Annual Report on
Form 10-K of Union Pacific Corporation for the fiscal year
ended December 31, 1997.
Deloitte & Touche LLP
San Jose, California
June 25, 1998
<PAGE> COVER
EXHIBIT 99(A)
UNION PACIFIC CORPORATION
THRIFT PLAN
Financial Statements as of and for the
Years Ended December 31, 1997 and 1996
and Independent Auditors' Report
UNION PACIFIC CORPORATION THRIFT PLAN
<PAGE> INDEX
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-10
Supplemental schedules required by the Employee Retirement
Income Security Act of 1974
are disclosed separately in Master Trust reports filed with
the Department of Labor.
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
Union Pacific Corporation Thrift Plan
We have audited the accompanying statements of net assets
available for benefits of the Union Pacific Corporation
Thrift Plan (the "Plan") as of December 31, 1997 and 1996,
and the related statements of changes in net assets
available for benefits for the years then ended. 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 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, such financial statements present fairly, in
all material respects, the net assets available for benefits
of the Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 3, 1998
<PAGE> 2
UNION PACIFIC CORPORATION THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS
Investments at fair value (Notes 2, 3 and 8) $543,971,178 $476,177,320
Net assets available for benefits $543,971,178 $476,177,320
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
UNION PACIFIC CORPORATION THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 8):
Net appreciation in fair value
of investments (Note 3) $ 35,614,899 $ 64,672,659
Interest 7,646,150 7,138,329
Dividends 13,524,500 11,286,224
------------ ------------
56,785,549 83,097,212
------------ ------------
Contributions by (Note 8):
Employee 23,914,435 23,593,530
Company 7,984,945 7,699,682
------------ ------------
31,899,380 31,293,212
------------ ------------
Total additions 88,684,929 114,390,424
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Distributions to participants (Note 8) 20,891,071 20,841,033
------------ ------------
NET INCREASE 67,793,858 93,549,391
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 476,177,320 382,627,929
------------ ------------
End of year $543,971,178 $476,177,320
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
UNION PACIFIC CORPORATION THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF PLAN
The following description of the Union Pacific
Corporation Thrift Plan (the "Plan") provides only
general information. Participants should refer to the
Plan document for a more complete description of the
Plan's provisions.
General - The Plan was adopted in October 1973 by the
Board of Directors of Union Pacific Corporation (the
"Company") and approved by its stockholders in May 1974.
Under the terms of the Plan, effective October 1, 1997,
non-agreement employees become eligible to make employee
contributions to the Plan immediately and generally
become eligible to participate in the employer match on
the first anniversary of their dates of hire. It is
subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended.
Contributions - The Company contributes to the Plan on
behalf of each participant an amount equal to 50% of the
participant's contribution with such Company
contribution limited to 3% of the participant's base
salary. The Plan (i) meets the requirements of Section
401(k) of the Internal Revenue Code, which permits
certain employee contributions to be withheld on a
"salary deferral" basis, so that amounts deducted will
not be included in the employee's income for Federal
income tax purposes, (ii) allows employees to contribute
up to 16% of their salary to the Plan, (iii) provided
for payroll based employee stock ownership plan
contributions ("PAYSOP") prior to 1987, and (iv) makes
various other changes intended to give participants
greater control and flexibility with respect to Plan
investments.
Spin-Off - In September 1996, the Company's Board of
Directors declared a special dividend consisting of the
shares of Union Pacific Resources Group, Inc.
("Resources"), common stock owned by the Company (the
"Spin-Off"). As a result of the Spin-Off, each of the
Company's stockholders received 0.846946 of a share of
Resources common stock for each share of Company common
stock held by such stockholders at the September 26,
1996 record date for the distribution. Therefore, each
Plan participant's account received 0.846946 of a share
of Resources common stock for each share of Company
common stock held in the account. The shares received
have been placed in the Resources Stock Fund ("Resources
Stock"). Future contributions to Resources Stock are
not permitted.
Loans to Participants - In June 1985, the loan
provisions of the Plan were approved by the Internal
Revenue Service and became effective. The amount of a
loan is limited to one-half of the vested value of a
participant's accounts, excluding PAYSOP and subject to
a minimum and maximum loan amount. As the loan is
repaid, all principal and interest payments will be
credited to the participant's accounts, excluding
PAYSOP, in the same proportions as the contributions
then being made on behalf of the participant. If no
contributions are then being made, the loan repayments
will be invested in accordance with the participant's
most recent investment election, unless he or she
directs otherwise to the extent permitted by the Plan.
Participants' loans, which are secured by the
participant's individual account balances, bear a fixed
rate of interest set by the Plan Administrator based on
interest rates then being charged on similar loans, and
are repayable over periods not exceeding five years,
except loans relating to a principal residence, in which
case the term of the loan shall not exceed fifteen
years. The loans bear interest ranging from 5.5% to
10.5%. The number of loans outstanding at December 31,
1997 and 1996, was 1,669 and 1,725, respectively.
<PAGE> 5
Participant Accounts - Each participant account is
credited with the participant's contributions and an
allocation of the Plan's earnings. Allocations are
based on participant account balances and the funds in
which the participant has elected to invest his/her
accounts.
Vesting - Participants at all times have a 100% vested
interest in their voluntary contributions plus actual
earnings thereon and their PAYSOP account. Effective
October 1, 1997, participants are 100% vested in their
employer matching contributions regardless of years of
service (see Note 5).
Investment Options - Upon enrollment in the Plan, a
participant may direct employee contributions in any of
eight funds in multiples of 5%.
Union Pacific Common Stock Fund - Funds are primarily
invested in common stock of Union Pacific Corporation.
Union Pacific Equity Index Fund - Funds are primarily
invested in shares of a registered investment company
that invests in common stocks in a manner designed to
closely track the investment performance of the
Standard and Poor's 500 Composite Stock Index.
Union Pacific Fixed Income Fund - Funds are primarily
invested in guaranteed investment contracts held with
insurance companies rated at least A-1 by Standard and
Poors. Funds are also invested in a registered
investment company that invests in guaranteed
investment contracts.
Vanguard/Wellington Fund - Funds are invested in shares
of a registered investment company that invests in
common stocks and fixed income securities.
Vanguard Money Market Reserves Prime Portfolio (VMMR
Prime Portfolio) - Funds are invested in shares of a
registered investment company that invests and
reinvests in high quality certificates of deposit,
bankers' acceptances, commercial paper, U.S. Government
Securities, and other short-term obligations with the
objective of preserving principal while providing
income.
Vanguard U.S. Growth Fund - Funds are invested in
shares of a registered investment company that invests
in the common stock of established U.S. growth
companies.
Vanguard International Growth Portfolio Fund - Funds
are invested in shares of a registered investment
company that invests in foreign common stocks with high
growth potential.
Vanguard Bond Index Fund - Funds are invested in shares
of a registered investment company that invests in
fixed income securities in a manner which is designed
to closely track the investment performance of the
Lehman Brothers Aggregate Bond Index.
Payments of Benefits - A participant may elect to
receive a final distribution under the Plan as either a
cash lump sum distribution, or in monthly or annual
amounts over a specified period of time not to exceed
the lesser of ten calendar years or the life expectancy
of the participant or the joint life expectancy of the
participant and his/her beneficiary as prescribed in the
Treasury Regulations. Prior to October 1, 1997, final
distributions of PAYSOP accounts had to be lump sum
distributions. For benefit payments equal to or less
than $3,500 ($5,000, effective 1/1/98), the Plan
Administrator directs the Trustee to make a lump sum
payment to the participant or beneficiary. A
participant who elects payment in a lump sum has the
option to receive the value of his/her PAYSOP account
and the portion of his/her account invested in the
Company Common Stock Fund in cash or in shares of such
Company stock; in-kind distributions will be lump sum
and any fractional shares will be distributed in cash.
<PAGE> 6
A withdrawal may be made by a participant from his/her
account in accordance with the Plan's provisions.
Forfeitures - When certain terminations of participation
in the Plan occur, the nonvested portion of a
participant's account, as defined by the Plan,
represents a potential forfeiture. Such potential
forfeitures reduce subsequent Company contributions to
the Plan. However, if upon reemployment the former
participant fulfills certain requirements as defined in
the Plan, the previously forfeited nonvested portion of
the participant's account may be restored through
Company contributions. Effective October 1, 1997, the
Plan should no longer have forfeiture balances (Note 5).
Amounts summarized below represent Company contributions
forfeited for the years ended December 31, 1997 and
1996:
1997 1996
Company contributions forfeited $29,489 $24,278
Applied against current year contributions 20,150 18,170
------- -------
Applied to reduce subsequent year contributions $ 9,339 $ 6,108
======= =======
Plan Administration - The Plan is administered by the
Senior Vice President, Human Resources of the Company.
All administrative expenses of the Plan with the
exception of investment advisory fees are paid by the
Company. Investment advisory fees for portfolio
management are paid directly from fund earnings.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accounts of the Plan have been
prepared in accordance with generally accepted
accounting principles. The financial statements were
prepared in accordance with the financial reporting
requirements of ERISA as permitted by the Securities and
Exchange Commission's amendments to Form 11-K adopted
during 1990.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investment Valuation and Income Recognition -
Investments in the Union Pacific Company Stock Fund,
PAYSOP Resources Stock Fund, Vanguard Wellington Fund,
Union Pacific Equity Index Fund, Vanguard U.S. Growth
Fund, Vanguard International Growth Portfolio Fund, and
the Vanguard Total Bond Market Fund are valued at fair
value as determined by quoted market prices.
Investments in the Union Pacific Fixed Income Fund and
the Vanguard Money Market Reserves - Prime Portfolio are
valued at fair value as determined by Vanguard Fiduciary
Trust Company. Participant loans are valued at their
carrying value which approximates fair value. Dividend
income is recorded as of the ex-dividend date. Security
transactions are recorded as of the trade date.
Payments of Benefits - Benefits are recorded when paid.
<PAGE> 7
3. INVESTMENTS
The following table presents the fair value of
investments:
December 31,
1997 1996
Investments at Fair Value as Determined
by Quoted Market Price:
Master Trust $427,018,286 $365,826,317
Investments at Estimated Fair Value:
Master Trust 116,952,892 110,351,003
------------ ------------
$543,971,178 $476,177,320
============ ============
During 1997 and 1996, the Plan's investments (including
investments bought, sold, and held during the year)
appreciated (depreciated) in value by $35,614,899 and
$64,672,659, respectively, as follows:
Year Ended December 31,
Net Change in Fair Value 1997 1996
Investments at Fair Value as
Determined by
Quoted Market Price:
Master Trust $35,412,643 $64,736,156
Investments at Estimated Fair Value:
Master Trust
202,256 (63,497)
----------- -----------
Net change in fair value $35,614,899 $64,672,659
=========== ===========
<PAGE> 8
4. MASTER TRUST
The assets comprising the Master Trust are presented in
the following table:
1997 1996
Common Stock $180,366,490 $189,870,983
Mutual Funds 449,880,397 276,457,039
Guaranteed Investment Contracts 201,246,115 93,697,351
Participant Loans 18,826,627 17,565,878
------------ ------------
$850,319,629 $577,591,251
============ ============
Total interest and dividends of the Master Trust were
$42,436,033 and $24,861,387 for the years ended December
31, 1997 and 1996, respectively. During 1997 and 1996,
the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated in
value by $51,517,049 and $96,600,069, respectively, as
follows:
December 31,
Net appreciation (depreciation) 1997 1996
Common Stocks $(2,627,738) $58,743,085
Mutual Funds 54,009,125 37,932,780
Guaranteed Investment Contracts 135,662 (75,796)
----------- -----------
Net change in fair value $51,517,049 $96,600,069
=========== ===========
At December 31, 1997 and 1996, the Plan held percentage
interests in the Master Trust of 64.0% and 82.4%,
respectively. Assets, liabilities, investment income,
and security gains and losses are allocated monthly to
the Plan based on its equity in the investments of the
Master Trust.
5. PLAN AMENDMENTS
Effective April 1, 1997, the Plan was amended to provide
that any Participant (1) who had a Separation from
Service in 1997 as an Employee of Union Pacific
Corporation in Bethlehem, PA, or Broomfield, CO, (2)
receives severance pay from the Company as a result of
such Separation from Service, and (3) has W-2
compensation in 1996 from the Company and all Affiliated
Companies of less than $80,000, shall be 100% vested in
his or her account as of the date of his Separation from
Service.
<PAGE> 9
Effective June 30, 1997, the Plan was amended to provide
that each person who was employed by Southern Pacific
Rail Corporation or any of its subsidiaries or
affiliates on the day such companies became Affiliated
Companies and who becomes a covered employee under a
collective bargaining agreement or as a result of a
decertification election shall be credited with hours of
service and years of service under the Plan for
employment with Southern Pacific prior to such date.
Effective October 1, 1997, the plan was amended to
provide that covered employees are immediately eligible
to make employee contributions to provide that employer
matching contributions are 100% vested regardless of
years of service and are allocable on or after the first
anniversary of the covered employee's date of hire, a
participant may defer payment until age 70-1/2, to
permit non-hardship withdrawals twice in a calendar
year, to allow rollover amounts to be withdrawn in a non-
hardship withdrawal, to eliminate the limit on the
frequency of hardship withdrawals, to eliminate the 12-
month suspension following a hardship withdrawal and to
permit a non-hardship withdrawal when a participant has
a loan. Effective January 1, 1998, the Plan was amended
to provide that any individual eligible to participate
in the Southern Pacific Rail Corporation Thrift Plan
between September 11, 1996, and December 31, 1997, who
was a Covered Employee would not become an Eligible
Employee prior to January 1, 1998, and each person
employed by the Southern Pacific Rail Corporation or any
of its subsidiaries or affiliates on the day such
companies became Affiliated Companies shall be credited
with hours of service and years of service under the
Plan for employment with Southern Pacific prior to such
date.
6. FEDERAL INCOME TAXES
The Company has received a letter of determination from
the Internal Revenue Service dated April 18, 1995, and
the Plan Administrator and the Plan's tax counsel
believe that the Plan, as subsequently amended, is
currently designed and being operated in compliance with
Section 401(a) of the Internal Revenue Code of 1986, as
amended. With respect to the operation of the Plan,
Plan management is aware of certain operational defects
which could adversely affect tax-exempt status of the
Plan. These operational defects will be corrected
through the use of the Voluntary Compliance Resolution
(VCR) program. Submissions to the VCR program were made
on August 2, 1996 and June 11, 1997 and supplemented on
August 8, 1997, November 12, 1997 and May 1, 1998.
Therefore, no provision for income taxes has been
included in the Plan's financial statements.
Inasmuch as it is the opinion of Management that the
Plan is qualified, employees participating in the Plan
are not taxed on Company contributions made on their
behalf, on employee contributions made on a pre-tax
basis, on earnings on such Company contributions or pre-
tax employee contributions, or on earnings on after-tax
employee contributions, until any such amounts are
distributed.
<PAGE> 10
7. PLAN TERMINATION
Although the Plan is intended to be continued by the
Company, the Company reserves the right to amend or
terminate the Plan. In the event of a Plan termination
or partial termination, or the Company permanently
ceases to make contributions, all invested amounts shall
immediately vest and be nonforfeitable. All funds shall
continue to be held for distribution as provided in the
Plan.
8. FUND INFORMATION
Investments at fair value, investment income,
contributions, and distributions to participants by fund
are as follows as of and for the years ended December
31, 1997 and 1996:
1997 1996
Investments at fair value:
Union Pacific Common Stock Fund* $128,656,477 $127,266,375
Union Pacific Equity Index Fund* 131,314,520 91,508,657
Union Pacific Fixed Income Fund* 96,389,389 92,215,165
Common Stock/PAYSOP 10,656,764 10,378,499
Resources Stock Fund* 35,830,871 51,360,520
Vanguard/Wellington Fund* 42,043,138 30,566,181
VMMR Prime Portfolio 3,492,575 1,984,161
Vanguard U.S. Growth Fund* 43,820,474 26,813,999
Vanguard International Growth Portfolio Fund* 27,712,992 24,514,297
Vanguard Bond Index Fund 6,983,050 3,417,789
Loan Fund 17,070,928 16,151,677
------------ ------------
$543,971,178 $476,177,320
============ ============
Investment Income:
Union Pacific Common Stock Fund* $ 9,264,845 $ 25,406,609
Union Pacific Equity Index Fund* 31,180,397 17,420,616
Union Pacific Fixed Income Fund* 6,130,541 5,494,978
Common Stock/PAYSOP 678,780 2,507,552
Resources Stock Fund* (7,968,006) 18,858,691
Vanguard/Wellington Fund* 7,315,343 4,233,058
VMMR Prime Portfolio 108,375 54,700
Vanguard U.S. Growth Fund* 7,475,898 4,800,095
Vanguard International Growth Portfolio Fund* 861,077 2,971,594
Vanguard Bond Index Fund 409,489 93,817
Loan Fund 1,328,810 1,255,502
------------ -----------
$ 56,785,549 $ 83,097,212
============ ============
* Represents more than 5% of the net assets available
for benefits
<PAGE> 11
1997 1996
Contributions:
Union Pacific Common Stock Fund $ 9,407,739 $ 8,736,619
Union Pacific Equity Index Fund 6,430,945 6,599,982
Union Pacific Fixed Income Fund 4,654,539 5,699,884
Company Stock/PAYSOP 556 5,741
Resources Stock Fund - 3,160
Vanguard/Wellington Fund 4,113,748 4,023,577
VMMR Prime Portfolio 196,243 163,231
Vanguard U.S. Growth Fund 3,971,560 2,834,554
Vanguard International Growth Portfolio Fund 2,566,488 2,663,227
Vanguard Bond Index Fund 557,861 563,237
Loan Fund 299 -
----------- -----------
$31,899,380 $31,293,212
Distributions to Participants:
Union Pacific Common Stock Fund $ 4,987,529 $ 5,148,631
Union Pacific Equity Index Fund 4,107,006 4,485,174
Union Pacific Fixed Income Fund 5,151,165 5,926,598
Company Stock/PAYSOP 401,071 413,842
Resources Stock Fund 1,592,926 324,621
Vanguard/Wellington Fund 1,412,963 1,575,834
VMMR Prime Portfolio 157,009 713,289
Vanguard U.S. Growth Fund 1,959,187 810,357
Vanguard International Growth Portfolio Fund 650,038 934,304
Vanguard Bond Index Fund 53,352 100,045
Loan Fund 418,825 408,338
----------- -----------
$20,891,071 $20,841,033
=========== ===========
9. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Common Stock
Fund which is invested primarily in the common stock of
Union Pacific Corporation. Union Pacific Corporation is
the holding company of the Plan sponsor and, therefore,
these transactions qualify as party-in-interest
transactions.
The Plan also invests in various funds managed by
Vanguard Fiduciary Trust Company. Vanguard Fiduciary
Trust Company is the Trustee as defined by the Plan and,
therefore, the related transactions qualify as party-in-
interest transactions.
<PAGE> COVER
EXHIBIT 99(B)
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Financial Statements as of and for the
Years Ended December 31, 1997 and 1996,
Supplemental Schedules as of and for the
Year Ended December 31, 1997
and Independent Auditors' Report
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
<PAGE> INDEX
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND
FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997 AND FOR THE
YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 9
Item 27d - Schedule of Reportable Transactions 10
Schedules not filed herewith are omitted because of the
absence of the conditions under which they are required.
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
Union Pacific Fruit Express Company Agreement
Employee 401(k) Retirement Thrift Plan
We have audited the accompanying statements of net assets
available for benefits of the Union Pacific Fruit Express
Company Agreement Employee 401(k) Retirement Thrift Plan
(the Plan) as of December 31, 1997 and 1996, and the related
statements of changes in net assets available for benefits
for the years then ended. 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 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, such financial statements present fairly, in
all material respects, the net assets available for benefits
of the Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules listed in the Table of Contents
are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but
are 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.
These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the
auditing procedures applied in the audit of the basic 1997
financial statements and, in our opinion, are fairly stated
in all material respects when considered in relation to the
basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 3, 1998
<PAGE> 2
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS:
Investments at fair value (Note 3) $481,248 $301,787
-------- --------
Net assets available for benefits $481,248 $301,787
-------- --------
The accompanying notes are an integral
part of these financial statements.
<PAGE> 3
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 7):
Net appreciation in fair value of $ 54,742 $ 35,133
investments (Note 3)
Interest 284 171
Dividends 19,124 12,049
-------- --------
74,150 47,353
Employee contributions (Note 7) 107,175 83,291
-------- --------
Total Additions 181,325 130,644
-------- --------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (Note 7) 1,864 4,500
-------- --------
NET INCREASE 179,461 126,144
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 301,787 175,643
-------- --------
End of Year $481,248 $301,787
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF PLAN
The following description of the Union Pacific Fruit
Express Company Agreement Employee 401(k) Retirement
Thrift Plan (the Plan) provides only general
information. Participants should refer to the Plan
document for a more complete description of the Plan's
provisions.
General - The Plan is a defined contribution plan
covering employees of the Union Pacific Fruit Express
Company (the Company) who are governed by a collective
bargaining agreement entered into between the Company
and a Union to which eligibility to participate in the
Plan has been extended, and have completed one year of
service or were employees as of the effective date of
the Plan, August 1, 1993. It is subject to the
provisions of the Employee Retirement Income Security
Act of 1974 (ERISA), as amended.
Contributions - Participants may contribute 2% to 8%
(20% effective 1/1/98) of their compensation on a salary
deferral basis subject to limitations specified in the
Internal Revenue Code. Participants may also
contribute, effective May 1997, 1% to 20% of their
compensation on an after-tax basis. Combined after-tax
and pre-tax contributions may not exceed 20% of
compensation. The Company does not contribute to the
Plan.
Participant Accounts - Each participant account is
credited with the participant's contributions and an
allocation of the Plan's earnings. Allocations are
based on participant account balances and the funds in
which the participant has elected to invest his/her
accounts.
Vesting - Participants are at all times 100% vested in
the value of their account.
Payment of Benefits - Distribution of benefits shall be
in a lump sum as soon as possible following the
participant's termination of employment, subject to
certain consent requirements for participants whose
accounts exceed a statutory cash-out threshold. If a
participant, whose account exceeds the threshold does
not consent to payment at termination, the account will
be paid on the earliest of the participant's request for
payment, the participant's death, or the participant's
reaching age 70-1/2. Pay-out is mandatory for a
participant who has reached age 70-1/2 but has not
terminated employment.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accounts of the Plan have been
prepared in accordance with generally accepted
accounting principles. The financial statements were
prepared in accordance with the financial reporting
requirements of ERISA as permitted by the Securities and
Exchange Commission's amendments to Form 11-K adopted
during 1990.
Investment Valuation and Income Recognition -
Investments in the Union Pacific Common Stock Fund,
Resources Stock Fund, Vanguard/Wellington Fund, Vanguard
Index Trust-500 Portfolio Fund, Vanguard Money Market
Reserves - Prime Portfolio, Vanguard U.S. Growth Fund,
Vanguard International Growth Portfolio Fund, and the
Vanguard Bond Index Fund are valued at fair value as
determined by quoted market prices. The investments in
the Vanguard Retirement Savings Trust (formerly Vanguard
Investment Contract Trust Fund) are valued at fair value
as determined by Vanguard Fiduciary Trust Company.
Dividend income is recorded as of the ex-dividend date.
Security transactions are recorded as of the trade date.
<PAGE> 5
Payment of Benefits - Benefits are recorded when paid.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVESTMENTS
Plan participants may direct their contributions in
various proportions to any of the eight available
investment funds identified below:
Union Pacific Common Stock Fund - This fund is
administered as a separate account by Vanguard Fiduciary
Trust Company and invests primarily in the stock of
Union Pacific Corporation. It also maintains a small
cash position invested in Vanguard Money Market
Reserves, to facilitate transactions. The Company stock
fund is divided into fund shares, rather than shares of
company stock.
Vanguard/Wellington Fund - This fund consists of
investment in the Vanguard Wellington Mutual Fund which
is comprised of common stocks and fixed income
securities.
Vanguard Index Trust-500 Portfolio Fund - This fund
consists of investment in the Vanguard Index Trust-500
Portfolio Mutual Fund, a diversified open-end investment
company, or mutual fund, and comprises the 500, Growth,
Value, Extended Market, Small Capitalization Stock and
Total Retirement Savings Trust Stock Market Portfolios.
Vanguard Retirement Savings Trust (formerly Vanguard
Investment Contract Trust Fund) - This fund consists of
investment in the Vanguard Retirement Savings Trust, a
collective investment of assets of tax-qualified pension
and profit sharing plan trusts primarily in a pool of
investment contracts that are issued by insurance
companies and commercial banks.
Vanguard U.S. Growth Fund - This fund consists of
investment in the Vanguard US Growth Mutual Fund which
is comprised of established U.S. growth stocks.
Vanguard International Growth Portfolio Fund - This fund
consists of investment in the Vanguard International
Growth Portfolio Mutual Fund which is comprised of
foreign common stocks with high growth potential.
Vanguard Bond Index Fund - This fund consists of
investment in the Vanguard Total Bond Market Mutual Fund
which is designed to closely track the investment
performance of the Lehman Brothers Aggregate Bond Index
Vanguard Money Market Reserves - Prime Portfolio - This
fund consists of investment in the Vanguard Money Market
Reserves - Prime Portfolio which is a diversified money
market investment fund invested and reinvested in high
quality certificates of deposit, bankers' acceptances,
commercial paper, U.S. Government Securities and other
short-term obligations with the objective of preserving
principal while providing income.
<PAGE> 6
In September 1996, the Company's Board of Directors
declared a special dividend consisting of the shares of
Union Pacific Resources Group Inc. ("Resources") common
stock owned by the Company ("the Spin-Off"). As a
result of the Spin-Off, each of the Company's
stockholders received 0.846946 of a share of Resources
common stock for each share of Company common stock held
by such stockholders at the September 26, 1996 record
date for the distribution. Therefore, each Plan
participant's account received 0.846946 of a share of
Resources common stock for each share of Company common
stock held in the account. The shares received were
placed in the Resources Stock Fund ("Resources Stock").
Future contributions to Resources Stock are not
permitted.
The following table presents the fair value of
investments. Investments that represent 5% or more of
the Plan's net assets are separately identified.
December 31, 1997 December 31, 1996
Number Fair Number Fair
of Units Value of Units Value
Investments at Fair Value
as Determined
by Quoted Market Price:
Union Pacific Common
Stock Fund 7,413.493 $ 75,914 4,682,749 $ 46,172
Resources Stock Fund 1,308.756 11,386 1,630.503 17,104
Vanguard/Wellington 3,644.406 95,301
Fund 4,801.054 141,391 1,696,993 117,364
Vanguard Index Trust -
500 Portfolio Fund 2,203.328 198,454
Vanguard U.S. Growth
Fund 994.313 28,537 701.654 16,657
Other - 20,231 - 5,805
20,231
-------- --------
475,913 298,403
Investments at Estimated
Fair Value:
Vanguard Retirement Savings
Trust Fund 5,335.320 5,335 3,383.690 3,384
-------- --------
Total Investments at Fair $481,248 $301,787
======== ========
<PAGE) 7
During 1997 and 1996, the Plan's investments (including
investments bought, sold, and held during the year),
appreciated in value by $54,742 and $35,133,
respectively, as follows:
Years Ended
December 31,
Net Change in Fair Value 1997 1996
Investments at Fair Value as Determined by
Quoted Market Price:
Union Pacific Common Stock Fund $ 1,145 $ 9,327
Resources Stock Fund (2,690) 3,081
Mutual Funds 56,287 22,725
------- -------
Net change in fair value $54,742 $35,133
======= =======
4. PLAN ADMINISTRATION
The Plan is administered by the Senior Vice President,
Human Resources of the Union Pacific Corporation. All
expenses incurred in the administration of the Plan are
paid by the Company.
5. TAX STATUS
The Plan obtained a tax determination letter dated July
27, 1995, in which the Internal Revenue Service stated
that the Plan, as then designed, was in compliance with
the applicable requirements of the Internal Revenue Code
(the Code). The Plan has been amended since receiving
the determination letter. However, Plan management
believes that the Plan currently is being operated in
compliance with the applicable requirements of the
Internal Revenue Code. Therefore, no provision for
income taxes has been included in the Plan's financial
statements.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the
Company has the right under the Plan at any time, to
terminate the Plan subject to the provisions of ERISA.
Regardless of such actions, the principal and income of
the Plan remains for the exclusive benefit of the Plan's
participants and beneficiaries. The Company may direct
the Trustee either to distribute the Plan's assets to
the participants, or to continue the Trust and
distribute benefits as though the Plan had not been
terminated.
7. FUND INFORMATION
Investment income, contributions and distributions to
participants by fund are as follows for the years ended
December 31, 1997 and 1996:
<PAGE> 8
Year Ended December 31,
1997 1996
Investment Income:
Union Pacific Common Stock Fund $ 2,936 $10,446
Resources Stock Fund (2,610) 3,081
Vanguard/Wellington Fund 24,989 12,061
Vanguard Index Trust - 500 Portfolio Fund 43,172 19,350
Vanguard Retirement Savings Trust Fund
(formerly Vanguard
Investment Contract Trust Fund) 284 171
Vanguard U.S. Growth Fund 4,985 1,686
Vanguard International Growth Portfolio Fund 132 490
Vanguard Bond Index Fund 148 68
Vanguard Money Market Reserves - Prime
Portfolio 114 -
-------- -------
$ 74,150 $47,353
======== =======
Contributions:
Union Pacific Common Stock Fund $ 28,377 $21,351
Resources Stock Fund - -
Vanguard/Wellington Fund 31,660 24,300
Vanguard Index Trust - 500 Portfolio Fund 34,622 28,665
Vanguard Retirement Savings Trust Fund
(formerly Vanguard
Investment Contract Trust Fund) 1,590 732
Vanguard U.S. Growth Fund 6,894 5,308
Vanguard International Growth Portfolio Fund 2,729 2,562
Vanguard Bond Index Fund 1,303 373
Vanguard Money Market Reserves - Prime
Portfolio - -
-------- -------
$107,175 $83,291
======== =======
Distributions to participants:
Union Pacific Common Stock Fund $ 350 $ 4,500
Resources Stock Fund 86 -
Vanguard/Wellington Fund 1,428 -
Vanguard Index Trust - 500 Portfolio Fund - -
Vanguard Retirement Savings Trust Fund
(formerly Vanguard
Investment Contract Trust Fund) - -
Vanguard U.S. Growth Fund - -
Vanguard International Growth Portfolio Fund - -
Vanguard Bond Index Fund - -
Vanguard Money Market Reserves - Prime
Portfolio - -
-------- -------
$ 1,864 $ 4,500
======== =======
<PAGE> 9
8. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Company Stock
Fund which is invested primarily in common stock of
Union Pacific Corporation. Union Pacific Corporation is
the holding company of the Plan sponsor and, therefore,
these transactions qualify as party-in-interest
transactions.
The Plan also invests in various funds managed by
Vanguard Fiduciary Trust Company. Vanguard Fiduciary
Trust Company is the trustee as defined by the Plan and,
therefore, the related transactions qualify as party-in-
interest transactions.
<PAGE> 10
UNION PACIFIC FRUIT EXPRESS COMPANY
AGREEMENT
EMPLOYEE 401(k)
RETIREMENT THRIFT PLAN
Item 27a - SCHEDULE OF
ASSETS HELD FOR
INVESTMENT PURPOSES
DECEMBER 31, 1997
Column B Column C Column D Column E
Description of
Investment,
Including Collateral,
Rate of
Identity of Issue, Interest, Maturity Current
Borrower, Date,
Lessor or Similar Party Par or Maturity Value Cost Value
Union Pacific Common
Stock
Fund * 7,413.493 units $ 62,550 $ 75,914
Resources Stock Fund 1,308.756 units 11,263 11,386
Vanguard Wellington Fund * 4,801.054 units 118,172 141,391
Vanguard Index Trust -
500 Portfolio Fund * 2,203.328 units 129,751 198,454
Vanguard U.S. Growth Fund * 994.313 units 24,059 28,537
Vanguard International
Growth Portfolio Fund * 480.868 units 7,843 7,882
Vanguard Retirement
Savings Trust
(formerly Vanguard
Investment
Contract Trust Fund) * 5,335.320 units 5,335 5,335
Vanguard Bond Index Fund 221.518 units 2,173 2,235
*
Vanguard Money Market
Reserves -
Prime Portfolio * 10,114.310 units 10,114 10,114
--------
$371,260 $481,248
========
* Represents a party-in-interest
<PAGE> 11
UNION PACIFIC FRUIT EXPRESS COMPANY
AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
Series of Transactions, When Aggregated, Involving an
Amount in Excess of 5% of the Current Value of Plan Assets:
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Total Total
Dollar Dollar
Number Number Value of Value of Net Gain
of
Identity of Description of Purchases of Sales Purchases Sales or (Loss)
Party Involved Asset
<S> <C> <C> <C> <C> <C>
Vanguard Union Pacific Common
Fiduciary Trust Stock Fund 30 3 $32,180 $ 3,582 $ 744
Company *
Vanguard Vanguard Wellington
Fiduciary Trust Fund 29 2 $44,267 $11,428 $2,794
Company *
Vanguard Vanguard Index Trust
Fiduciary Trust 500 Portfolio 29 - $41,802 $- $-
Company *
* Represents a party-in-interest
</TABLE>
<PAGE> COVER
EXHIBIT 99(C)
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Financial Statements as of and for the
Years Ended December 31, 1997 and 1996,
Supplemental Schedules as of and for the
Year Ended December 31, 1997
and Independent Auditors' Report
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
<PAGE> INDEX
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for
Benefits 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997
AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 9
Item 27d - Schedule of Reportable Transactions 10
Schedules not filed herewith are omitted because of the
absence of the conditions under which they are required.
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
Union Pacific Agreement Employee 401(k)
Retirement Thrift Plan
We have audited the accompanying statements of net assets
available for benefits of the Union Pacific Agreement
Employee 401(k) Retirement Thrift Plan (the Plan) as of
December 31, 1997 and 1996, and the related statements of
changes in net assets available for benefits for the years
then ended. 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 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, such financial statements present fairly, in
all material respects, the net assets available for benefits
of the Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules listed in the Table of Contents
are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but
are 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.
These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the
auditing procedures applied in the audit of the basic 1997
financial statements and, in our opinion, are fairly stated
in all material respects when considered in relation to the
basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 3, 1998
<PAGE> 2
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS:
Investments at fair value (Note 3) $143,012,513 $92,719,672
------------ -----------
Net assets available for benefits $143,012,513 $92,719,672
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 7):
Net appreciation in fair value of
investments (Note 3) $ 15,163,982 $10,564,969
Interest 485,016 330,166
Dividends 5,149,480 3,212,755
------------ -----------
20,798,478 14,107,890
Employee contributions (Note 7) 32,360,426 24,829,233
------------ -----------
Total Additions 53,158,904 38,937,123
------------ -----------
DEDUCTION FROM NET ASSETS ATTRIBUTED TO:
Distribution to participants (Note 7) 2,866,063 1,357,442
------------ -----------
NET INCREASE 50,292,841 37,579,681
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 92,719,672 55,139,991
------------ -----------
End of Year $143,012,513 $92,719,672
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF PLAN
The following description of the Union Pacific Agreement
Employee 401(k) Retirement Thrift Plan (the Plan)
provides only general information. Participants should
refer to the Plan document for a more complete
description of the Plan's provisions.
General - The Plan is a defined contribution plan
covering employees of the Union Pacific Railroad Company
and its Railroad affiliates (the Company) who are
represented for the purposes of collective bargaining by
a rail union, to which eligibility to participate in the
Plan has been extended. The Plan covers employees who
have completed one year of service or were employees as
of the effective date of the Plan, July 1, 1990. It is
subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA), as amended.
Contributions - Participants may contribute 2% to 8%
(20% effective 1/1/98) of their compensation on a salary
deferral basis subject to limitations specified in the
Internal Revenue Code. Participants may also
contribute, effective May 1997, 1% to 20% of their
compensation on an after-tax basis. Combined after-tax
and pre-tax contributions may not exceed 20% of
compensation. The Company does not contribute to the
Plan.
Participant Accounts - Each participant account is
credited with the participant's contributions and an
allocation of the Plan's earnings. Allocations are
based on participant account balances and the funds in
which the participant has elected to invest his/her
accounts.
Vesting - Participants are at all times 100% vested in
the value of their account.
Payment of Benefits - Distribution of benefits shall be
in a lump sum as soon as possible following the
participant's termination of employment, subject to
certain consent requirements for participants whose
accounts exceed a statutory cash-out threshold. If a
participant, whose account exceeds the threshold does
not consent to payment at termination, the account will
be paid on the earliest of the participant's request for
payment, the participant's death, or the participant's
reaching age 70-1/2. Pay-out is mandatory for a
participant who has reached age 70-1/2 but has not
terminated employment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accounts of the Plan have been
prepared in accordance with generally accepted
accounting principles. The financial statements were
prepared in accordance with the financial reporting
requirements of ERISA as permitted by the Securities and
Exchange Commission's amendments to Form 11-K adopted
during 1990.
Investment Valuation and Income Recognition -
Investments in the Union Pacific Common Stock Fund,
Resources Stock Fund, Vanguard/Wellington Fund, Vanguard
Index Trust-500 Portfolio Fund, Vanguard Money Market
Reserves - Prime Portfolio, Vanguard U.S. Growth Fund,
Vanguard International Growth Portfolio Fund, and the
Vanguard Bond Index Fund are valued at fair value as
determined by quoted market prices. The investments in
the Vanguard Retirement Savings Trust (formerly Vanguard
Investment Contract Trust Fund) are valued at fair value
as determined by Vanguard Fiduciary Trust Company.
Dividend income is recorded as of the ex-dividend date.
Security transactions are recorded as of the trade date.
<PAGE> 5
Payment of Benefits - Benefits are recorded when paid.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVESTMENTS
Plan participants may direct their contributions in
various proportions to any of the eight available
investment funds identified below:
Union Pacific Common Stock Fund - This fund is
administered as a separate account by Vanguard Fiduciary
Trust Company and invests primarily in the stock of
Union Pacific Corporation. It also maintains a small
cash position invested in Vanguard Money Market
Reserves, to facilitate transactions. The Company stock
fund is divided into fund shares, rather than shares of
company stock.
Vanguard/Wellington Fund - This fund consists of
investment in the Vanguard Wellington Mutual Fund which
is comprised of common stocks and fixed income
securities.
Vanguard Index Trust-500 Portfolio Fund - This fund
consists of investment in the Vanguard Index Trust-500
Portfolio Mutual Fund, a diversified open-end investment
company, or mutual fund, and comprises the 500, Growth,
Value, Extended Market, Small Capitalization Stock and
Total Stock Market Portfolios.
Vanguard Retirement Savings Trust (formerly Vanguard
Investment Contract Trust Fund) - This fund consists of
investment in the Vanguard Retirement Savings Trust, a
collective investment of assets of tax-qualified pension
and profit sharing plan trusts primarily in a pool of
investment contracts that are issued by insurance
companies and commercial banks.
Vanguard U.S. Growth Fund - This fund consists of
investment in the Vanguard US Growth Mutual Fund which
is comprised of established U.S. growth stocks.
Vanguard International Growth Portfolio Fund - This fund
consists of investment in the Vanguard International
Growth Portfolio Mutual Fund which is comprised of
foreign common stocks with high growth potential.
Vanguard Bond Index Fund - This fund consists of
investment in the Vanguard Total Bond Market Mutual Fund
which is designed to closely track the investment
performance of the Lehman Brothers Aggregate Bond Index
Vanguard Money Market Reserves - Prime Portfolio - This
fund consists of investment in the Vanguard Money Market
Reserves - Prime Portfolio which is a diversified money
market investment fund invested and reinvested in high
quality certificates of deposit, bankers' acceptances,
commercial paper, U.S. Government Securities and other
short-term obligations with the objective of preserving
principal while providing income.
In September 1996, the Company's Board of Directors
declared a special dividend consisting of the shares of
Union Pacific Resources Group Inc. ("Resources") common
stock owned by the Company ("the Spin-Off"). As a
<PAGE> 6
result of the Spin-Off, each of the Company's
stockholders received 0.846946 of a share of Resources
common stock for each share of Company common stock held
by such stockholders at the September 26, 1996 record
date for the distribution. Therefore, each Plan
participant's account received 0.846946 of a share of
Resources common stock for each share of Company common
stock held in the account. The shares received were
placed in the Resources Stock Fund ("Resources Stock").
Future contributions to Resources Stock are not
permitted.
The following table presents the fair value of
investments. Investments that represent 5% or more of
the Plan's net assets are separately identified.
December 31, 1997 December 31, 1996
Number Fair Number Fair
of Units Value of Units Value
Investments at Fair Value as
Determined by Quoted
Market Price:
Union Pacific Common
Stock Fund 1,829,943 $ 18,738,611 1,455,658.553 $14,352,794
Resources Stock Fund 421,515 3,667,175 493,540.126 5,177,236
Vanguard/Wellington Fund 1,161,554 34,207,780 845,091.198 22,099,135
Vanguard Index Trust -
500 Portfolio Fund 656,404 59,122,300 499,790.113 34,565,484
Vanguard U.S. Growth 354,210 10,165,824 202,362.143 4,804,077
Fund
Vanguard International
Growth Portfolio Fund 362,128 5,935,286 248,062.367 4,083,107
Other - 2,153,645 63,324.862 623,116
------------ -----------
133,990,621 85,704,949
------------ -----------
Investments at Estimated
Fair Value:
Vanguard Retirement
Savings Trust Fund 9,021,892 9,021,892 7,014,723.420 7,014,723
------------ -----------
$143,012,513 $92,719,672
============ ===========
During 1997 and 1996, the Plan's investments (including
investments bought, sold, and held during the year)
appreciated (depreciated) in value by $15,163,982 and
$10,564,969, respectively, as follows:
Year Ended
December 31,
Net Change in Fair Value 1997 1996
Investments at Fair Value as
Determined
by Quoted Market Price:
Union Pacific Common Stock Fund $ 472,292 $ 2,927,426
Resources Stock Fund (834,278) 979,849
Mutual Funds 15,525,968 6,657,694
----------- -----------
Net change in fair value $15,163,982 $10,564,969
=========== ===========
<PAGE> 7
4. PLAN ADMINISTRATION
The Plan is administered by the Senior Vice President,
Human Resources of the Union Pacific Corporation. All
expenses incurred in the administration of the Plan are
paid by the Company.
5. TAX STATUS
The Plan obtained a tax determination letter dated July
27, 1995, in which the Internal Revenue Service stated
that the Plan, as then designed, was in compliance with
the applicable requirements of the Internal Revenue Code
(the Code). The Plan has been amended since receiving
the determination letter. However, Plan management
believes that the Plan currently is being operated in
compliance with the applicable requirements of the
Internal Revenue Code. With respect to the operation of
the Plan, Plan management is aware of certain
operational defects which could adversely affect the tax-
exempt status of the Plan. These operational defects
will be corrected through the use of the Voluntary
Compliance Resolution (VCR) program. Submission to the
VCR program was made on April 2, 1998. Therefore, no
provision for income taxes has been included in the
Plan's financial statements.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the
Company has the right under the Plan at any time, to
terminate the Plan subject to the provisions of ERISA.
Regardless of such actions, the principal and income of
the Plan remains for the exclusive benefit of the Plan's
participants and beneficiaries. The Company may direct
the Trustee either to distribute the Plan's assets to
the participants, or to continue the Trust and
distribute benefits as though the Plan had not been
terminated.
7. FUND INFORMATION
Investment income, contributions and distributions to
participants by fund are as follows for the years ended
December 31, 1997 and 1996:
Year Ended December 31,
1997 1996
Investment Income:
Union Pacific Common Stock Fund $ 953,676 $ 3,271,547
Resources Stock Fund (809,327) 979,849
Vanguard/Wellington Fund 5,724,612 2,821,356
Vanguard Index Trust - 500 Portfolio Fund 12,685,750 5,730,512
Vanguard Retirement Savings Trust (formerly
Vanguard Investment Contract Trust Fund) 485,016 330,166
Vanguard U.S. Growth Fund 1,580,094 553,670
Vanguard International Growth Portfolio Fund 85,261 400,405
Vanguard Bond Index Fund 81,767 20,385
Vanguard Money Market Reserves - Prime
Portfolio 11,629 -
----------- -----------
$20,798,478 $14,107,890
=========== ===========
<PAGE> 8
Contributions:
Union Pacific Common Stock Fund $ 5,760,739 $ 4,741,092
Resources Stock Fund - -
Vanguard/Wellington Fund 7,080,611 5,981,467
Vanguard Index Trust - 500 Portfolio Fund 10,984,728 8,406,639
Vanguard Retirement Savings Trust (formerly
Vanguard Investment Contract Trust Fund) 2,027,165 1,847,997
Vanguard U.S. Growth Fund 3,584,223 1,752,820
Vanguard International Growth Portfolio Fund 2,328,546 1,736,846
Vanguard Bond Index Fund 523,020 362,372
Vanguard Money Market Reserves - Prime
Portfolio 71,394 -
----------- -----------
$32,360,426 $24,829,233
=========== ===========
Distributions to participants:
Union Pacific Common Stock Fund $ 488,636 $ 274,615
Resources Stock Fund 112,200 15,538
Vanguard/Wellington Fund 712,206 396,073
Vanguard Index Trust - 500 Portfolio Fund 943,177 461,026
Vanguard Retirement Savings Trust (formerly
Vanguard Investment Contract Trust Fund) 327,250 152,800
Vanguard U.S. Growth Fund 143,216 12,101
Vanguard International Growth Portfolio Fund 108,825 42,826
Vanguard Bond Index Fund 10,805 2,463
Vanguard Money Market Reserves - Prime
Portfolio 19,748 -
----------- -----------
$ 2,866,063 $ 1,357,442
=========== ===========
<PAGE> 9
8. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Company Stock
Fund which is invested primarily in the common stock of
Union Pacific Corporation. Union Pacific Corporation is
the holding company of the Plan sponsor and, therefore,
these transactions qualify as party-in-interest
transactions.
The Plan also invests in various funds managed by
Vanguard Fiduciary Trust Company. Vanguard Fiduciary
Trust Company is the trustee as defined by the Plan and,
therefore, the related transactions qualify as party-in-
interest transactions.
<PAGE> 10
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
Column B Column C Column D Column E
Description of
Investment,
Including Collateral,
Identity of Issue, Rate of Interest,
Borrower, Lessor Maturity Date, Par Current
or Similar Party or Maturity Value Cost Value
Union Pacific Company
Stock Fund* 1,829,943 units $ 15,121,620 $ 18,738,611
Resources Stock Fund 421,515 units 3,605,095 3,667,175
Vanguard/Wellington 1,161,554 units 28,676,363 34,207,780
Fund*
Vanguard Index Trust -
500 Portfolio Fund* 656,404 units 39,775,280 59,122,300
Vanguard Retirement
Savings Trust
(formerly Vanguard
Investment Contract
Trust Fund)* 9,021,892 units 9,021,892 9,021,892
Vanguard U.S. Growth
Fund* 354,210 units 8,889,259 10,165,824
Vanguard International
Growth Portfolio Fund* 362,128 units 5,933,951 5,935,286
Vanguard Bond Index 139,110 units 1,374,228 1,403,619
Fund*
Vanguard Money Market
Reserve - Prime
Portfolio* 750,026 units 750,026 750,026
------------ ------------
$113,147,714 $143,012,513
============ ============
* Represents a party-in-interest
<PAGE> 11
<TABLE>
<CAPTION>
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
Single Transactions Involving an Amount in Excess
of 5% of the Current value of Plan Assets:
Column A Column B Column C Column D Column G Column H Column I
Current
Value of
Asset on
Identity of Purchase Selling Cost of Transaction Net Gain
Party Involved Description of Asset Price Price Asset Date or (Loss)
<S> <C> <C> <C> <C> <C> <C>
Vanguard Fiduciary Union Pacific Common
Trust Company* Stock Fund $ 8,845,212 $ - $ - $ 8,845,212 $ -
Vanguard Fiduciary Union Pacific Common
Trust Company* Stock Fund $ - $ 4,931,685 $ 4,119,849 $ 4,931,685 $ 811,836
Vanguard Fiduciary
Trust Company* Vanguard Wellington Fund $11,645,691 $ - $ - $11,645,691 $ -
Vanguard Fiduciary Vanguard Index Trust -
500
Trust Company* Porftolio Fund $17,422,445 $ - $ - $17,422,445 $ -
Vanguard Fiduciary Vanguard Retirement
Trust Company* Savings Trust (formerly
Vanguard Investment
Contract Trust Fund) $ 5,947,342 $ - $ - $ 5,947,342 $ -
Vanguard Fiduciary
Trust Company * Vanguard U.S. Growth Fund $ 6,128,644 $ - $ - $ 6,128,644 $ -
Series of Transactions, When Aggregated, Involving an
Amount in Excess of 5% of the Current Value of Plan Assets:
</TABLE>
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Total Total
Dollar Dollar
Identity of Number of Number Value of Value of Net Gain
Party Involved Description of Asset Purchases of Sales Purchases Sales or (Loss)
<S> <C> <C> <C> <C> <C> <C>
Vanguard Fiduciary Union Pacific Common
Trust Company* Stock Fund 201 210 $ 8,926,045 $ 5,012,519 $ 837,458
Vanguard Fiduciary
Trust Company* Vanguard/Wellington Fund 179 215 $11,771,097 $ 2,587,890 $ 384,656
Vanguard Fiduciary Vanguard Index Trust -
500
Trust Company* Portfolio Fund 238 221 $17,570,311 $ 4,552,860 $1,049,855
Vanguard Fiduciary Vanguard Retirement
Savings
Trust Company* Trust (formerly
Vanguard
Investment Contract
Trust Fund) 250 242 $ 5,984,915 $ 3,977,747 $ -
Vanguard Fiduciary
Trust Company* Vanguard U.S. Growth Fund 214 191 $ 6,147,633 $ 1,984,172 $ 199,019
* Represents a party-in-interest
</TABLE>
<PAGE> COVER
EXHIBIT 99(D)
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT
SAVINGS PROGRAM
Financial Statements as of and for the
Years Ended December 31, 1997 and 1996,
Supplemental Schedules as of and for
the Year Ended December 31, 1997
and Independent Auditors' Report
<PAGE> INDEX
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-9
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997 AND FOR THE
YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 10
Item 27d - Schedule of Reportable Transactions 11
Additional supplemental schedules required by the Employee
Retirement Income Security Act of 1974 are
disclosed separately in Master Trust reports filed with the
Department of Labor or are omitted because
of the absence of the conditions under which they are
required.
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
Chicago and North Western Railway Company
Profit Sharing and Retirement Savings Program Committee
We have audited the accompanying statements of net assets
available for benefits of the Chicago and North Western
Railway Company Profit Sharing and Retirement Savings
Program (the Program) as of December 31, 1997 and 1996, and
the related statements of changes in net assets available
for benefits for the years then ended. These financial
statements are the responsibility of the Program's
management. Our responsibility is to express an opinion on
these financial statements 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, such financial statements present fairly, in
all material respects, the net assets available for benefits
of the Program as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules listed in the Table of Contents
are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but
are 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.
These schedules are the responsibility of the Program's
management. Such schedules have been subjected to the
auditing procedures applied in the audit of the basic 1997
financial statements and, in our opinion, are fairly stated
in all material respects when considered in relation to the
basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 3, 1998
<PAGE> 2
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS
INVESTMENTS, at fair value (Notes 3, 5 and 10) $124,517,334 $101,413,931
INVESTMENTS, at contract value (Notes 3, 6
and 10):
Investment contract with insurance company 32,803,511 37,737,581
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $157,320,845 $139,151,512
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO:
Investment income (Note 10):
Net appreciation in fair value of investments
(Note 5) $ 10,609,206 $ 12,828,800
Interest and dividends 15,912,788 10,287,291
------------ ------------
Total Additions 26,521,994 23,116,091
------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO:
Distributions to participants (Note 10) 8,352,661 27,923,207
------------ ------------
TRANSFERS TO SUPPLEMENTAL PENSION PLAN - 22,264
------------ ------------
NET INCREASE (DECREASE) 18,169,333 (4,829,380)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 139,151,512 143,980,892
------------ ------------
End of Year $157,320,845 $139,151,512
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF PROGRAM
The following description of the Chicago and North
Western Railway Company Profit Sharing and Retirement
Savings Program (the Program), prior to the adoption of
amendments as described in Note 2, provides only general
information. Participants should refer to the Program
document for a more complete description of the
Program's provisions.
General - The Program was initially established to
provide retirement benefits to eligible employees of
Chicago and North Western Railway Company (the Company)
and other common control employers who adopt the
Program. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA),
as amended.
Participant Accounts - Each participant account is
credited with the participant's contributions and an
allocation of the Program's earnings. Allocations are
based on participant account balances and the funds in
which the participant has elected to invest his/her
accounts.
Vesting - Effective January 1, 1995, participants were
fully vested in amounts credited to their account.
Investment Options - Upon enrollment in the Program, a
participant may have directed employee contributions in
any of ten funds (Note 2).
Union Pacific Common Stock Fund - Funds are primarily
invested in common stock of Union Pacific.
Union Pacific Equity Fund - Funds are primarily
invested in shares of a registered investment company
that invests in common stocks in a manner designed to
closely track the investment performance of the
Standard and Poor's 500 Composite Stock Index.
Union Pacific Fixed Income Fund - Funds are primarily
invested in guaranteed investment contracts held with
insurance companies rated at least A-1 by Standard and
Poors. Funds are also invested in a registered
investment company that invests in guaranteed
investment contracts.
Vanguard/Windsor Fund - Funds are invested in shares of
a registered investment company that invests in common
stocks.
Vanguard/Wellington Fund - Funds are invested in shares
of a registered investment company that invests in
common stocks and fixed income securities.
Vanguard Money Market Reserves Prime Portfolio(VMMR
Prime Portfolio) - Funds are invested in shares of a
registered investment company that invests in high
quality certificates of deposit, bankers' acceptances,
commercial paper, U.S. Government Securities, and other
short-term obligations with the objective of preserving
principal while providing income.
<PAGE> 5
Vanguard U.S. Growth Fund - Funds are invested in
shares of a registered investment company that invests
in the common stock of established U.S. growth
companies.
Vanguard International Growth Portfolio Fund - Funds
are invested in shares of a registered investment
company that invests in foreign common stocks with high
growth potential.
Vanguard Bond Index Fund - Total Bond Market Portfolio
- Funds are invested in shares of a registered
investment company that invests in fixed income
securities in a manner which is designed to closely
track the investment performance of the Lehman Brothers
Aggregate Bond Index.
Northwestern National Life Insurance Company (NWNL)
Guaranteed Investment Contract (GIC) - Fund is invested
in an investment contract with NWNL.
Payment of Benefits - Under the terms of the Program,
benefits are to be paid in the form of a joint and
survivor annuity. Assets of a participant's account
may, as determined by the participant (with spousal
consent when required), be paid to him/her in a lump sum
or in installments. In order to provide a joint and
survivor annuity (or single life annuity where spousal
consent is obtained or there is no spouse) assets of the
participant's account are transferred to the Chicago and
North Western Railway Company Supplemental Pension Plan
for payment of the annuity. The annuity may, at the
option of the Program administrator, be purchased from
a third party institution or paid from the assets of the
Supplemental Pension Plan.
2. PROGRAM AMENDMENTS
Effective October 24, 1995, the Program was amended such
that, the Program was frozen effective December 31,
1995. No new participants were allowed in the Program
after December 31, 1995. Except for contributions made
in 1996 with respect to 1995 in the customary manner of
the Prior Program as in effect during 1995, there will
be no contributions made to the Program after December
31, 1995.
Effective July 15, 1996, the Program was amended and
restated. Program investment options were increased
from four to ten. The ten available options are the
Union Pacific Common Stock Fund (Company Stock), the
Union Pacific Equity Fund (Equity Index), the Union
Pacific Fixed Income Fund (Fixed Income), the Vanguard
Bond Index Fund - Total Bond Market Portfolio (Bond
Index), the Vanguard Market Reserves - Prime Portfolio
Fund (VMMR Prime Portfolio), the Vanguard/Wellington
Fund (Wellington), the Vanguard U.S. Growth Fund (U.S.
Growth), the Vanguard International Growth Portfolio
Fund (International Growth), the Vanguard/Windsor Fund
(Windsor) and the NWNL Guaranteed Investment Contract
Fund (NWNL GIC). In conjunction with the amendment and
restatement, Program assets, except for the investment
contract with an insurance company, were transferred to
Vanguard Fiduciary Trust Company under a Master Trust
Agreement.
Loans to Participants - Effective September 1, 1996,
participants may borrow from their fund accounts a
minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50% of their account balance. Loan
transactions are treated as a transfer to (from) the
investment fund from (to) the Loan Fund. Loan terms
range from 1-5 years or up to 15 years for the purchase
of a principal residence. The loans are secured by the
balance in the participant's account and bear interest
at a rate commensurate with local prevailing rates as
determined quarterly by the Program administrator.
Interest rates on loans currently outstanding range from
8.25% to 8.50%. Principal and interest is paid ratably,
generally through monthly payroll deductions.
<PAGE> 6
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the
Program have been prepared under the accrual method of
accounting. The financial statements were prepared in
accordance with the financial reporting requirements of
ERISA as permitted by the Securities and Exchange
Commission's amendments to Form 11-K adopted during
1990.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investment Valuation and Income Recognition - The
Program's investments are stated at fair value except
for its investment contract with an insurance company
which is valued at contract value (Note 7). If
available, quoted market prices are used to value
investments. The amounts shown in Note 5 for securities
that have no quoted market price represent estimated
fair value as determined by Vanguard Fiduciary Trust
Company. Purchases and sales of securities are recorded
on the trade-date basis. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-
dividend basis.
Payment of Benefits - Benefits are recorded when paid.
Administrative Expenses - The Program is administered by
the Senior Vice President, Human Resources, of the Union
Pacific Corporation. All administrative expenses of the
Program with the exception of investment management fees
are paid by the Company. Investment management fees are
paid by the Program.
Reclassifications - Certain 1996 amounts have been
reclassified to conform to the 1997 financial statement
presentation.
4. RESOURCES STOCK FUND
In September 1996, the Company's Board of Directors
declared a special dividend consisting of the shares of
Union Pacific Resources Group Inc. ("Resources") common
stock owned by the Company ("the Spin-Off"). As a
result of the Spin-Off, each of the Company's
stockholders received 0.846946 of a share of Resources
common stock for each share of Company common stock held
by such stockholders at the September 26, 1996 record
date for the distribution. Therefore, each Program
participant's account received 0.846946 of a share of
Resources common stock for each share of Company common
stock held in the account. The shares received have
been placed in the Resources Stock Fund ("Resources
Stock"). Future contributions to Resources Stock are
not permitted.
<PAGE> 7
5. INVESTMENTS
The following table presents the fair value of
investments:
December 31,
1997 1996
Investments at Fair Value as Determined
by Quoted Market Price:
Master Trust $119,455,791 $ 98,213,504
Investments at Estimated Fair Value:
Master Trust 5,061,543 3,200,427
NWNL GIC 32,803,511 37,737,581
------------ ------------
$157,320,845 $139,151,512
============ ============
<PAGE> 8
During 1997 and 1996, the Program's investments
(including investments bought, sold, and held during the
year) appreciated (depreciated) in value by $10,609,206
and $12,828,800, respectively, as follows:
Year Ended December 31,
Net Change in Fair Value 1997 1996
Investments at Fair Value as Determined by
Quoted Market Price:
Master Trust $10,601,756 $12,847,585
Investments at Estimated Fair Value:
Master Trust 7,450 (12,299)
NWNL GIC - (6,486)
----------- -----------
Net Change in Fair Value $10,609,206 $12,828,800
=========== ===========
6. MASTER TRUST
The assets comprising the Master Trust are presented in
the following table:
December 31,
1997 1996
Common Stock $180,366,490 $189,870,983
Mutual Funds 449,880,397 276,457,039
Guaranteed Investment Contracts 201,246,115 93,697,351
Participant Loans 18,826,627 17,565,878
------------ ------------
$850,319,629 $577,591,251
============ ============
Total interest and dividends of the Master Trust were
$42,436,033 and $24,861,387 for the years ended December
31, 1997 and 1996, respectively. During 1997 and 1996,
the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated in
value by $51,517,049 and $96,600,069, respectively, as
follows:
December 31,
Net appreciation (depreciation) 1997 1996
Common Stocks $(2,627,738) $58,743,085
Mutual Funds 54,009,125 37,932,780
Guaranteed Investment Contracts 135,662 (75,796)
----------- -----------
$51,517,049 $96,600,069
=========== ===========
At December 31, 1997 and 1996, the Program held
percentage interests in the Master Trust of 14.6% and
17.6%, respectively. Assets, liabilities, investment
income, and security gains and losses are allocated
monthly to the Program based on its equity in the
investments of the Master Trust.
<PAGE> 9
7. INVESTMENT CONTRACT WITH INSURANCE COMPANY
The Program has entered into a benefit responsive
investment contract with Northwestern National Life
Insurance Company (Northwestern National). This
contract is included in the financial statements at
contract value, which approximates fair value. Contract
value represents contributions made under the contract,
plus earnings, less Program withdrawals and
administrative expenses. Northwestern National
maintains the contributions in a pooled account. The
crediting interest rate under this contract at December
31, 1997 and 1996, and for the years then ended was 6.5%
and 7.0%, respectively. Under this contract a penalty
may be incurred for early withdrawal from the contract
by the Program sponsor, Program termination and various
other employer initiated events.
8. TAX STATUS
The Program obtained a tax determination letter dated
April 16, 1996, in which the Internal Revenue Service
stated that the Program, as amended through October 24,
1995, was in compliance with the applicable requirements
of the Internal Revenue Code (the Code). The Program
has been amended since receiving the determination
letter. However, Program management believes that the
program currently is being operated in compliance with
the applicable requirements of the Internal Revenue
Code. With respect to the operation of the Program,
Program management is aware of certain operational
defects which could adversely affect the tax exempt
status of the Program. These operational defects will
be corrected through the use of the Voluntary Compliance
Resolution (VCR) program. Submissions to the VCR
program were made on September 23, 1996, February 26,
1997 and February 11, 1998. Compliance statements were
received on February 5, 1997, October 30, 1997 and June
11, 1998, respectively. Therefore, no provision for
income taxes has been included in the Program's
financial statements.
9. PROGRAM TERMINATION
Although it has not expressed any intent to do so, the
Company has the right under the Program at any time, to
terminate the Program subject to the provisions of
ERISA. Regardless of such actions, the principal and
income of the Program remains for the exclusive benefit
of the Program's participants and beneficiaries. The
Company may direct the Trustee either to distribute the
Program's assets to the participants, or to continue the
Trust and distribute benefits as though the Program had
not been terminated.
10.FUND INFORMATION
Net assets available for benefits, participant
contributions, withdrawals and investment income by fund
are as follows as of and for the years ended December
31, 1997 and 1996:
1997 1996
Net assets available for benefits:
Union Pacific Common Stock Fund $ 1,036,046 $ 653,871
Union Pacific Equity Fund 35,098,131 27,110,164
Union Pacific Fixed Income Fund 2,681,004 1,482,186
Vanguard Bond Index Fund - Total Bond Market
Portfolio 238,257 169
Vanguard Money Market Reserves Prime 624,840 304,040
Portfolio
Vanguard/Wellington Fund 3,243,208 777,296
Vanguard U.S. Growth Fund 2,004,614 1,436,948
Vanguard International Growth Portfolio Fund 985,909 371,142
Vanguard/Windsor Fund 76,732,277 67,652,196
NWNL GIC 32,803,511 37,737,581
Resources stock 117,349 211,718
Loan Fund 1,755,699 1,414,201
------------ ------------
Total $157,320,845 $139,151,512
============ ============
<PAGE> 10
1997 1996
Distributions to participants
Union Pacific Common Stock Fund $ 548 $ -
Union Pacific Equity Fund 1,293,010 277,582
Union Pacific Fixed Income Fund 4,466 -
Vanguard Bond Index Fund - Total Bond Market
Portfolio 175 -
Vanguard Money Market Reserves Prime 12,199 17,424
Portfolio
Vanguard/Wellington Fund 1,780 -
Vanguard U.S. Growth Fund 253 -
Vanguard International Growth Portfolio Fund 1,409 -
Vanguard/Windsor Fund 3,125,987 714,074
NWNL GIC 3,816,693 1,259,788
Resources stock - -
Loan Fund 96,141 -
Fund B - 13,724,297
Fund C - 11,844,618
Fund D and E - 85,424
----------- -----------
Total $ 8,352,661 $27,923,207
=========== ===========
Investment income:
Union Pacific Common Stock Fund $ 88,452 $ 116,708
Union Pacific Equity Fund 8,848,307 4,083,412
Union Pacific Fixed Income Fund 177,428 13,144
Vanguard Bond Index Fund - Total Bond
Market Portfolio 11,837 181
Vanguard Money Market Reserves Prime
Portfolio 26,264 7,941
Vanguard/Wellington Fund 368,986 38,184
Vanguard U.S. Growth Fund 368,771 55,671
Vanguard International Growth Portfolio Fund 14,189 14,216
Vanguard/Windsor Fund 14,393,833 10,918,491
NWNL GIC 2,121,962 993,921
Resources stock (31,818) 3,873
Loan Fund 133,783 22,975
Fund B - 4,885,681
Fund C - 1,905,907
Fund D and E - 55,786
----------- -----------
Total $26,521,994 $23,116,091
=========== ===========
11.RELATED PARTY TRANSACTIONS
Program investments include the Union Pacific Common
Stock Fund which is invested primarily in the common
stock of Union Pacific Corporation. Union Pacific
Corporation is the holding company of the Program
sponsor and, therefore, these transactions qualify as
party-in-interest transactions.
The Program also invests in various funds managed by
Vanguard Fiduciary Trust Company and LaSalle National
Trust. Vanguard Fiduciary Trust Company is the Trustee
as defined by the Program and LaSalle National Trust was
the Program Trustee prior to the appointment of Vanguard
Fiduciary Trust Company and, therefore, the related
transactions qualify as party-in-interest transactions.
<PAGE> 11
<TABLE>
<CAPTION>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
Column B Column C Column D Column E
Description of Investment,
Including Collateral, Rate
of
Identity of Issue, Borrower, Interest, Maturity Date Current
Lessor or Similar Party or Maturity Value Cost Value
<S> <C> <C> <C>
Northwestern National Life
Insurance Company Contract No. Group annuity contract fund
GA-135969-1-001 32,803,511 shares $32,803,511 $32,803,511
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
Single Transactions Involving
an Amount in
Excess of 5% of the Current
Value of Program Assets:
Column A Column B Column C Column D Column G Column H Column I
Current
Value
of Asset on
Identity of Purchase Selling Cost of Transaction Net Gain
Party Involved Description of Asset Price Price Asset Date or
(Loss)
<S> <C> <C> <C> <C> <C> <C>
Northwestern National Life
Insurance Company, Contract Group annuity contract
#GA-13569-1-001 fund $2,122,698 $ - $ - $2,122,698 $ -
Northwestern National Life
Insurance Company, Contract Group annuity contract
#GA-13569-1-001 fund $ - $7,056,768 $7,056,768 $7,056,768 $ -
</TABLE>
<PAGE> COVER
SOUTHERN PACIFIC RAIL
CORPORATION THRIFT PLAN
Financial Statements (Modified Cash Basis) as of and
for the Years Ended December 31, 1997 and 1996,
Supplementary Schedule (Modified Cash Basis)
for the Year Ended December 31, 1997
and Independent Auditors' Report
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
<PAGE> INDEX
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORTS 1-2
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits
(Modified Cash Basis) 3
Statements of Changes in Net Assets Available for Benefits
(Modified Cash Basis) 4
Notes to Financial Statements (Modified Cash Basis) 5-12
SUPPLEMENTAL SCHEDULE - (MODIFIED CASH BASIS) FOR THE YEAR
ENDED DECEMBER 31, 1997:
Item 27d - Schedule of Reportable Transactions
(Modified Cash Basis) 13
Additional Supplemental Schedules required by the Employee
Retirement Income Security Act of 1974 are disclosed
separately in Master Trust reports filed with the Department
of Labor or are omitted because of the absence of the
conditions under which they are required.
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Thrift Plan Committee
Southern Pacific Rail Corporation Thrift Plan
We have audited the accompanying statement of net assets
available for benefits (modified cash basis) of Southern
Pacific Rail Corporation Thrift Plan (the Plan) as of
December 31, 1997, and the related statement of changes in
net assets available for benefits (modified cash basis) for
the year then ended. 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 audit. The Plan's financial statements as of and for
the year ended December 31, 1996, were audited by other
auditors whose report, dated June 20, 1997, except as to
Note 9, dated October 10, 1997, expressed an unqualified
opinion on those statements and included an explanatory
paragraph that described the modified cash basis of
accounting discussed in Note 2 to the financial statements.
We conducted our audit 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 audit provides
a reasonable basis for our opinion.
As discussed in Note 2 to the financial statements, these
financial statements and supplemental schedule were prepared
on a modified cash basis, which is a comprehensive basis of
accounting other than generally accepted accounting
principles.
In our opinion, the 1997 financial statements present
fairly, in all material respects, the net assets available
for benefits of Southern Pacific Rail Corporation Thrift
Plan as of December 31, 1997, and changes in net assets
available for benefits for the year then ended, on the basis
of accounting described in Note 2.
Our audit was performed for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedule (modified cash basis) listed in
the Table of Contents 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 schedule is the
responsibility of the Plan's management. Such schedule has
been subjected to the auditing procedures applied in the
audit of the basic 1997 financial statements and, in our
opinion, is fairly stated in all material respects in
relation to the basic 1997 financial statements taken as a
whole.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 17, 1998
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Thrift Plan Committee
Southern Pacific Rail Corporation Thrift Plan:
We have audited the accompanying statement of net assets
available for benefits (modified cash basis) of Southern
Pacific Rail Corporation Thrift Plan (the Plan) as of
December 31, 1996, and the related statement of changes in
net assets available for benefits (modified cash basis) for
the year then ended. 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 audit.
We conducted our audit 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 audit provides
a reasonable basis for our opinion.
As described in Note 2, these financial statements were
prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than generally
accepted accounting principles.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of Southern Pacific Rail Corporation
Thrift Plan as of December 31, 1996, and changes in net
assets available for benefits for the year then ended, on
the basis of accounting described in Note 2.
/s/KPMG Peat Marwick LLP
San Francisco, California
June 20, 1997, except as to Note 9,
which is as of October 10, 1997
<PAGE> 3
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR
BENEFITS (MODIFIED CASH BASIS)
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS
Investments at fair value (Notes 2, 3 and 10) $181,831,117 $ 69,696,833
Investments at contract value (Note 3) - 118,576,813
Receivable from broker - 19,417
Investment income receivable - 695,265
------------ ------------
Total assets 181,831,117 188,988,328
LIABILITIES
Unsettled stock sale - 1,412
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $181,831,117 $188,986,916
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(MODIFIED CASH BASIS)
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 10):
Interest $ 7,580,201 $ 8,325,983
Dividends 3,191,940 14,673
Net appreciation in fair value of
investments (Note 3) 12,656,999 9,741,416
------------ ------------
Total investment income 23,429,140 18,082,072
Contributions (Note 10):
Employee 4,943,311 6,507,155
Employer 2,184,349 2,816,930
------------ ------------
Total contributions 7,127,660 9,324,085
------------ ------------
Total additions 30,556,800 27,406,157
============ ============
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distribution to participants (Note 10) 37,541,145 14,963,502
Investment and administrative expenses 171,454 423,657
------------ ------------
Total deductions 37,712,599 15,387,159
------------ ------------
INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR BENEFITS (7,155,799) 12,018,998
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 188,986,916 176,967,918
------------ ------------
End of year $181,831,117 $188,986,916
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS)
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF PLAN
The following description of the Southern Pacific Rail
Corporation Thrift Plan (the Plan) is provided for
general information purposes only. Participants should
refer to the Plan document for a more complete
description of the Plan's provisions.
General - The Plan is a defined contribution plan which
was established by Rio Grande Holding, Inc. (RGH) on
January 1, 1982 as an individual account savings and
investment plan for employees of RGH and its
subsidiaries (the RGH participants). RGH is a wholly
owned subsidiary of Southern Pacific Rail Corporation
(SPRC). SPRC adopted the Plan and became its sponsor.
SPRC and its subsidiaries that are participating in the
Thrift Plan are collectively referred to as the Company.
The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Employees of participating employers not subject to a
collective bargaining agreement and not paid on an
hourly basis are immediately eligible to participate in
the Plan. In addition, certain employees which are
currently covered under collective bargaining agreements
who were previously not covered have been allowed to
continue participation in the Plan.
Contributions - Plan participants may elect to make
employee contributions in an amount not less than 1% nor
more than 16% of their salary. These contributions may
be made on either an after-tax or a before-tax basis, or
a combination of the two, provided the total
contribution does not exceed the lesser of 16% of salary
or the applicable Internal Revenue Code annual
limitation of $9,500. The employer matches the first 3%
of employee contributions (whether before-tax or after-
tax) on a dollar-for-dollar basis. All contributions
are subject to limitations imposed by the Internal
Revenue Code such as those under Sections 401(a)(17),
401(k), 401(m), 402(g) and 415. Effective January 1,
1998, the Plan was amended to disallow any participant
contributions after December 31,1997.
Participant's Accounts - Each participant's account is
credited with his or her own contributions, employer
contributions and an allocation of the Plan's earnings
(or losses) based on the type of investments selected
and their performance. The allocation of earnings (or
losses) is based on each participant's account balance
by investment type.
Vesting - Participant and employer contributions are
fully vested when made.
Investment Options - For 1997, upon enrollment in the
plan, a participant may direct contributions in 5%
increments in any of eight investment options:
Union Pacific Common Stock Fund - Funds are primarily
invested in common stock of Union Pacific Corporation.
Union Pacific Equity Index Fund - Funds are primarily
invested in shares of a registered investment company
that invests in common stocks in a manner designed to
closely track the investment performance of the
Standard and Poor's 500 Composite Stock Index.
<PAGE> 6
Union Pacific Fixed Income Fund - Funds are primarily
invested in guaranteed investment contracts held with
insurance companies rated at least A-1 by Standard and
Poors. Funds are also invested in a registered
investment company that invests in guaranteed
investment contracts.
Vanguard/Wellington Fund - Funds are invested in shares
of a registered investment company that invests in
common stocks and fixed income securities.
Vanguard Money Market Reserves Prime Portfolio (VMMR
Prime Portfolio) - Funds are invested in shares of a
registered investment company that invests in high
quality certificates of deposit, bankers' acceptances,
commercial paper, U.S. Government Securities, and other
short-term obligations with the objective of preserving
principal while providing income.
Vanguard U.S. Growth Fund - Funds are invested in
shares of a registered investment company that invests
in the common stock of established U.S. growth
companies.
Vanguard International Growth Portfolio Fund - Funds
are invested in shares of a registered investment
company that invests in foreign common stocks with high
growth potential.
Vanguard Bond Index Fund - Funds are invested in shares
of a registered investment company that invests in
fixed income securities in a manner which is designed
to closely track the investment performance of the
Lehman Brothers Aggregate Bond Index.
For 1996, upon enrollment in the plan, a participant may
direct contributions in 1% increments in any of six
investment options:
Fixed Investment Fund - Funds are invested in high
quality investment contracts with a diversified group
of insurance companies, banks and other financial
institutions.
Value Equity Fund - Funds are invested in shares of the
Invesco Retirement Trust Equity Fund (a trust company
commingled fund). The fund primarily invests in common
stocks and securities convertible into common stock.
Balanced Fund - Funds are invested in shares of the
Invesco Retirement Trust Flex Fund (a trust company
commingled fund). The fund contains a mix of stocks
and high quality bonds.
International Equity Fund - Funds are invested in the
Capital Guardian International (Non-U.S.) Equity Fund
(a trust company commingled fund). The fund invests in
a portfolio comprised primarily of securities of non-
U.S. issuers and securities whose principal markets are
outside of the United States.
Stock Fund - Funds are invested in common stock of
Union Pacific Corporation.
Growth Equity Fund - Funds are invested in shares of
the Invesco Trust Company Common Stock Fund (a trust
company commingled fund). The funds consist primarily
of small and large capitalization stocks with strong
earnings growth.
Resources Stock Fund - In September 1996, the Union
Pacific Corporation (UPC) Board of Directors declared a
special dividend consisting of the shares of Union
Pacific Resources Group ("Resources") common stock owned
by UPC ("the Spin-Off"). As a result of the Spin-Off,
each of the UPC's stockholders received 0.846946 of a
share of Resources common stock for each share of UPC
common stock held by such stockholders at the September
26, 1996 record date for the distribution. The shares
were transferred at market value from the UPC Stock Fund
to the Resources Stock Fund. Therefore, each Plan
participant's account received 0.846946 of a share of
Resources common stock for each share of UPC common
stock held in the account. The shares received have
been placed in the Resources Stock Fund ("Resources
Stock"). Future contributions to Resources Stock are
not permitted.
<PAGE> 7
Loans to Participants - Effective January 1, 1998,
participants are eligible to make a loan from their
accounts. The amount of a loan is limited to one-half
of the vested value of a participant's accounts and
subject to a minimum and maximum loan amount. As the
loan is repaid, all principal and interest payments will
be credited to the participant's account according to an
investment election made by the participant at the time
of the loan application. Participants' loans, which are
secured by the participant's individual account
balances, bear a fixed rate of interest set by the Plan
Administrator based on interest rates then being charged
on similar loans, and are repayable over periods not
exceeding five years, except loans relating to a
principal residence, in which case the term of the loan
shall not exceed fifteen years.
Payment of Benefits - Benefits are payable to a
participant upon retirement, disability, death or
termination of employment. Subject to certain hardship
rules and limits, a participant may also withdraw
employer and employee contributions under other
circumstances. The benefit to which a participant is
entitled is the benefit that can be provided from that
participant's account net of any withholding for federal
income taxes. Benefits are recorded when paid.
Plan Administration - The Plan is administered by the
Senior Vice President, Human Resources of the Union
Pacific Corporation. In 1997 and 1996, respectively,
the Plan paid investment management fees of $163,617 and
$418,047. Administration expenses paid totaled $7,837
and $5,610 for 1997 and 1996, respectively. The
majority of administrative expenses in both 1997 and
1996 were paid by the Company. Investment management
fees at Vanguard are paid directly from fund earnings.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accounts of the Plan are
maintained, and the accompanying financial statements
and information have been prepared, on the modified cash
basis to carry investments at fair value, and to reflect
the accrual of investment income and brokerage
transactions. Consequently, revenues and related assets
are recognized when received rather than when earned
except for investment carrying value, investment income
and brokerage transactions and expenses are recognized
when paid rather than when the obligation is incurred.
Accordingly, the financial statements are not intended
to present net assets available for benefits and changes
in net assets available for benefits in accordance with
generally accepted accounting principles.
Use of Estimates - The preparation of financial
statements requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
Investment Valuation and Income Recognition -
Investments in the Union Pacific Common Stock Fund,
Resources Stock Fund, Vanguard Wellington Fund, Union
Pacific Equity Index Fund, Vanguard U.S. Growth Fund,
Vanguard International Growth Portfolio Fund, and the
Vanguard Bond Index Fund are valued at fair value as
determined by quoted market prices. Investments in the
Fixed Income Fund and the Vanguard Money Market Reserves
- Prime Portfolio are valued at fair value as determined
by Vanguard Fiduciary Trust Company. Dividend income is
recorded as of the ex-dividend date. Security
transactions are recorded as of the trade date.
<PAGE> 8
3. INVESTMENTS
The following table presents the fair value of
investments:
December 31,
1997 1996
Investments at Fair Value as Determined by
Quoted Market Price:
Master trust $ 79,300,412 $ -
Common stock - 2,707,119
Commingled funds - 62,546,639
------------ ------------
79,300,412 65,253,758
------------ ------------
Investments at Estimated Fair Value:
Master trust 102,530,705 -
Short-term investments - 4,443,075
------------ ------------
102,530,705 4,443,075
------------ ------------
Investments at Contract Value:
Fixed income annuity contracts - 118,576,813
------------ ------------
$181,831,117 $188,273,646
============ ============
During 1997 and 1996, the Plan's investments (including
bought, sold and held during the year) appreciated
(depreciated) in value by $12,656,999 and $9,741,416,
respectively, as follows:
Year Ended December 31,
Net Change in Fair Value 1997 1996
Investments at Fair Value as Determined by
Quoted Market Price:
Master trust $ 5,345,207 $ -
Commingled funds 6,964,859 9,045,927
Common stock 420,977 695,489
----------- ----------
12,731,043 9,741,416
----------- ----------
Investments at Estimated Fair Value:
Master trust (74,044) -
----------- ----------
Net change in fair value $12,656,999 $9,741,416
=========== ==========
<PAGE> 9
4. MASTER TRUST
The assets comprising the Master Trust are presented in
the following table:
December 31,
1997
Common Stock $180,366,490
Mutual Funds 449,880,397
Guaranteed Investment Contracts 201,246,115
Participant Loans 18,826,627
------------
$850,319,629
============
Total interest and dividends of the Master Trust was
$42,436,033 for the year ended December 31, 1997.
During 1997, the Master Trust's investments (including
investments bought, sold, and held during the year)
appreciated in value by $51,517,049 as follows:
December 31,
Net appreciation (depreciation) 1997
Common Stocks $(2,627,738)
Mutual Funds 54,009,125
Guaranteed Investment Contracts 135,662
-----------
Net change in fair value $51,517,049
===========
At December 31, 1997, the Plan held a percentage
interest in the Master Trust of 21.4%. The Plan held no
interest during 1996. Assets, liabilities, investment
income, and security gains and losses are allocated
monthly to the Plan based on its equity in the
investments of the Master Trust.
5. PLAN AMENDMENTS
On August 15, 1997, the Plan was amended to expand and
clarify specific aspects of the plan document. This
amendment did not significantly alter the underlying
policies of the Plan. The amendment allows participants
with account balances as of December 31, 1989 to make
monthly, quarterly, or annual installment distributions
(which need not be equal in amount) over a period of not
more than 25 years. All other participants are allowed
to receive equal monthly or annual installment
distributions over the lesser of ten years or their life
expectancy or the life expectancy of the participant and
his/her beneficiary.
The August 15, 1997 amendments also included an
amendment effective March 31, 1997, permitting employees
who continued to work with Pacific Motor Transport
Company after its sale, to take distribution in a lump
sum on or before December 31, 1999.
Effective January 1, 1998, the Plan was amended to
disallow any participant contributions after December
31, 1997. Also effective January 1, 1998, the Plan was
amended to allow participants to make loans from their
accounts in an amount not to exceed the lesser of 50% of
their balance or $50,000.
<PAGE> 10
6. TAX STATUS
The Plan received a favorable determination letter from
the Internal Revenue Service on February 8, 1996 which
stated that the Plan is qualified under the provisions
of Sections 401(a) of the Internal Revenue Code, as
amended, and exempt from federal income taxes under
Section 501(a). The Plan has been amended since
receiving the determination letter. However, Plan
management believes that the Plan is being operated in
compliance with the applicable requirements of the
Internal Revenue Code. With respect to the operation of
the Plan, Plan management is aware of certain
operational defects which could adversely affect the tax-
exempt status of the Plan. These operational defects
will be corrected through the use of the Voluntary
Compliance Resolution (VCR) program. Submission of the
VCR program was made on December 16, 1996. Therefore,
no provision for income taxes has been included in the
Plan's financial statements.
7. MERGER WITH UNION PACIFIC
On September 11, 1996, a subsidiary of Union Pacific
Corporation (UPC) completed its acquisition of SPRC
through an exchange of cash and UPC stock for all of the
outstanding shares of SPRC not already owned by UPC. As
a result, SPRC shares owned by the Plan were exchanged
for a combination of cash and UPC stock. The 90,162
shares owned by the Plan were converted into 25,601
shares of UPC stock and $679,525 of cash was transferred
to the Fixed Investment Fund. Also, the Plan was
amended to permit Plan participants to invest in UPC
stock to replace the previous option to invest in SPRC
stock.
8. PLAN TERMINATION
Although the Plan is intended to be continued by the
Southern Pacific Rail Corporation (the Corporation), the
Corporation reserves the right to amend or terminate the
Plan. All funds shall continue to be held for
distribution as provided in the Plan.
9. NONEXEMPT TRANSACTION
Subsequent to December 31, 1996, the Plan sponsor
discovered that during 1996 it had failed to transmit
one participant's contribution as soon as reasonably
segregable. As of October 10, 1997, the participant's
contribution in the amount of $48 has been restored, and
the Plan sponsor has made an additional contribution to
the Plan for earnings on the delayed contribution.
<PAGE> 11
10.FUND INFORMATION
Investments, investment income, contributions and
distributions to participants by fund are as follows for
the years ended December 31, 1997 and 1996:
1997 1996
Investments:
Fixed Investment Fund $ - $123,019,888
Value Equity Fund - 34,779,427
Balanced Fund - 16,683,492
International Equity Fund - 3,588,080
Growth Equity Fund - 7,495,640
Union Pacific Common Stock Fund 3,649,129 2,078,775
Union Pacific Equity Index Fund 39,246,723 -
Union Pacific Fixed Income Fund 102,175,722 -
Resources Stock Fund 419,853 628,344
Vanguard/Wellington Fund 21,254,363 -
VMMR Prime Portfolio 354,983 -
Vanguard U.S. Growth Fund 11,225,160 -
Vanguard International Growth Portfolio Fund 3,451,628 -
Vanguard Bond Index Fund 53,556 -
------------ ------------
$181,831,117 $188,273,646
============ ============
Investment income:
Fixed Investment Fund $ 3,278,325 $ 8,325,983
Value Equity Fund 4,335,308 5,705,655
Balanced Fund 1,574,122 2,011,292
International Equity Fund 476,979 385,150
Growth Equity Fund 578,511 943,830
Union Pacific Common Stock Fund 244,840 701,234
Union Pacific Equity Index Fund 5,548,473 -
Union Pacific Fixed Income Fund 4,321,507 -
Resources Stock Fund (92,375) 8,928
Vanguard/Wellington Fund 2,409,685 -
VMMR Prime Portfolio 9,310 -
Vanguard U.S. Growth Fund 976,303 -
Vanguard International Growth Portfolio Fund (232,310) -
Vanguard Bond Index Fund 462 -
------------ ------------
$ 23,429,140 $ 18,082,072
============ ============
<PAGE> 12
1997 1996
Contributions:
Fixed Investment Fund $ 1,605,842 $ 5,148,402
Value Equity Fund 698,345 2,105,276
Balanced Fund 378,395 1,083,166
International Equity Fund 99,409 307,963
Growth Equity Fund 230,976 545,057
Union Pacific Common Stock Fund 205,142 134,221
Union Pacific Equity Index Fund 919,990 -
Union Pacific Fixed Income Fund 1,886,218 -
Resources Stock Fund - -
Vanguard/Wellington Fund 581,213 -
VMMR Prime Portfolio 692 -
Vanguard U.S. Growth Fund 377,133 -
Vanguard International Growth Portfolio Fund 138,173 -
Vanguard Bond Index Fund 6,132 -
----------- -----------
$ 7,127,660 $ 9,324,085
=========== ===========
Distributions to participants:
Fixed Investment Fund $10,147,734 $12,255,829
Value Equity Fund 1,831,273 1,731,128
Balanced Fund 1,211,753 644,223
International Equity Fund 277,421 67,148
Growth Equity Fund 293,790 212,473
Union Pacific Common Stock Fund 2,760,222 52,701
Union Pacific Equity Index Fund 3,211,686 -
Union Pacific Fixed Income Fund 13,261,296 -
Resources Stock Fund 108,886 -
Vanguard/Wellington Fund 2,038,630 -
VMMR Prime Portfolio 357,698 -
Vanguard U.S. Growth Fund 1,590,503 -
Vanguard International Growth Portfolio Fund 450,253 -
Vanguard Bond Index Fund - -
----------- -----------
$37,541,145 $14,963,502
=========== ===========
RELATED PARTY TRANSACTION
As of May 30, 1997, the Plan invests in various funds
managed by Vanguard Fiduciary Trust Company. Vanguard
Fiduciary Trust Company is the trustee as defined by the
Plan and, therefore, the related transactions qualify as
party-in-interest. Prior to May 30, 1997, certain Plan
investments were shares of temporary investment funds
managed by Chase Manhattan Bank. Chase Manhattan Bank
was the trustee as defined by the Plan, and qualifies as
<PAGE> 13
a party-in-interest. Investment and administrative
expenses paid to Chase Manhattan Bank by the Plan
amounted to $-0- and $4,500 for the year ended December
31, 1997 and 1996, respectively. In addition, as of
September 11, 1996 (the merger date) the Plan held stock
issued by Union Pacific Corporation. Prior to the
merger, the Plan held stock issued by the Plan sponsor,
Southern Pacific Rail Corporation (Note 7).
<PAGE> 14
<TABLE>
<CAPTION>
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
Item 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
(MODIFIED CASH BASIS)
YEAR ENDED DECEMBER 31, 1997
Single Transactions Involving an Amount in
Excess of 5% of the Current Value of Program Assets:
None
Series of Transactions, When Aggregated, Involving an
Amount in Excess of 5% of the Current Value of Plan Assets:
Column A Column B Column C Column D Column E Column F Column G
Total Total
Dollar Dollar
Number of Number Value of Value of Net Gain
Identity of Party Involved Description of Asset Purchases of Sales Purchases Sales or (Loss)
<S> <C> <C> <C> <C> <C> <C>
Chase Bank* Domestic Liquity Fund 72 60 $26,790,548 $31,240,457 $ -
Invesco Institutional Service Trust
Equity Fund 11 22 813,930 39,947,693 15,666,131
Invesco Institutional Service Trust
Flex Fund 11 19 904,253 19,161,851 5,472,798
Invesco Common Stock Fund 13 19 1,359,262 9,433,763 1,883,802
* Represents a party-in-interest.
</TABLE>
<PAGE> COVER
SKYWAY RETIREMENT SAVINGS PLAN
Financial Statements for the Years Ended December 31,
1997 and 1996, Supplemental Schedules as of and for
the Year Ended December 31, 1997
and Independent Auditors' Report
<PAGE> INDEX
SKYWAY RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements for the Years Ended December 31, 1997 and 1996:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
Supplemental Schedules as of and for the Year Ended December 31, 1997:
Item 27a - Assets Held for Investment Purposes 8
Item 27d - Reportable Plan Transactions 9
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Administrative Committee of the
Skyway Retirement Savings Plan:
We have audited the accompanying statements of net assets
available for benefits of the Skyway Retirement Savings Plan
(the Plan) as of December 31, 1997 and 1996, and the related
statements of changes in net assets available for benefits
for the years then ended. 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 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, such financial statements present fairly, in
all material respects, the net assets available for benefits
of the Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The accompanying supplemental schedules of assets held for
investment as of December 31, 1997 and reportable Plan
transactions for the year ended December 31, 1997 are
presented for the purpose of additional analysis and are not
a required part of the basic financial statements, but are
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.
These schedules are the responsibility of the Plan's
management. Such supplemental schedules have been subjected
to the auditing procedures applied in our audit of the basic
1997 financial statements and, in our opinion, are fairly
stated in all material respects when considered in relation
to the basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
San Jose, California
June 25, 1998
<PAGE> 2
SKYWAY RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
INVESTMENTS:
Vanguard Windsor II - at fair value $ 3,199,466 $2,103,245
Vanguard Investment Contract Trust - at
contract value 1,292,825 1,136,733
Vanguard Index Trust 500 Portfolio - at
fair value 2,371,655 1,447,980
Vanguard International Growth Portfolio - at
fair value 1,288,154 1,144,940
Union Pacific Company Stock Fund - at fair 986,225 848,248
value
Union Pacific Resource Group Stock Fund - at
fair value 216,834 320,474
Vanguard Total Bond Market Fund - at fair 770,236 644,483
value
Participant loans - at fair value 560,754 410,528
----------- ----------
Total investments 10,686,149 8,056,631
CONTRIBUTIONS RECEIVABLE 90,246 71,519
----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $10,776,395 $8,128,150
=========== ==========
See notes to financial statements.
<PAGE> 3
SKYWAY RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
CONTRIBUTIONS:
Employee $ 1,528,914 $1,509,826
Employer matching 405,251 326,023
Less forfeited employer matching (71,713) (65,194)
funds ----------- ----------
Total contributions 1,862,452 1,770,655
----------- ----------
INVESTMENT INCOME:
Interest and dividends 573,506 383,480
Net appreciation in fair value of
investments 889,659 765,142
----------- ----------
Total investment income 1,463,165 1,148,622
----------- ----------
BENEFIT PAYMENTS (677,372) (944,403)
----------- ----------
NET INCREASE IN NET ASSETS
AVAILABLE FOR
BENEFITS 2,648,245 1,974,874
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 8,128,150 6,153,276
----------- ----------
End of year $10,776,395 $8,128,150
=========== ==========
See notes to financial statements.
<PAGE> 4
SKYWAY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF THE PLAN
The following description of the Skyway Retirement
Savings Plan (the Plan) provides only general
information. Participants should refer to the Plan
agreement and amendments for a more complete description
of the Plan's provisions.
General - The Plan, established January 1983 by Skyway
Freight Systems, Inc. (the Company), is a defined
contribution plan covering all full-time employees who
have completed one year and 1,000 hours of service. The
Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Vanguard Fiduciary Trust Company (Vanguard) serves as
trustee of the Plan.
Contributions - Participants may elect to make tax
deferred contributions of up to 10% of their
compensation (subject to certain Internal Revenue Code
limitations). Rollover contributions from a
participant's former qualified plan or individual
retirement account are also allowed.
Employer contributions are determined at the discretion
of the Company's Board of Directors. For the years
ended December 31, 1997 and 1996, the Company
contributed an amount equal to 25% of each participant's
contributions, limited to 10% of the individual
participant's annual compensation. Forfeited matching
contributions revert to the Company and may be used in
the following year to reduce the amount the Company must
contribute for the matching contribution.
Participant Accounts - Each participant's account is
credited with the participant's contributions and an
allocation of (a) the Company's contributions and
(b) Plan earnings.
Vesting - Participants are immediately vested as to
participant contributions and earnings thereon. Vesting
in the remainder of their accounts is based on years of
continuous employment. Participants are fully vested
after seven years of employment, attainment of age 65,
or if employment is terminated by disability or death,
regardless of years of service. Upon employee
termination, all nonvested amounts will be forfeited
upon the earlier of (i) the date the employee takes
payment of his entire vested account balance or (ii) the
date the employee incurs his fifth consecutive break in
service.
Spin-Off - During 1996, the Union Pacific Corporation
spun off Union Pacific Resource Group. Each Plan
participant's account received 0.846946 shares of Union
Pacific Resource Group common stock for each share of
Union Pacific common stock held in the account.
Participants are not allowed to make additional
purchases of Union Pacific Resource Group common stock.
<PAGE> 5
Investment Options - Participants may direct the
investment of their accounts in any of the following
seven investment options:
Vanguard Windsor II - Funds are invested with a
growth and income objective in common stocks.
Vanguard Investment Contract Trust - Funds are
invested in contracts issued by insurance companies
and banks, and in similar types of fixed income
investments.
Vanguard Index Trust 500 Portfolio - Funds are
invested in all of the stocks included in the
Standard & Poor's 500 Index.
Vanguard International Growth Portfolio - Funds are
invested in potential growth companies based outside
of the United States.
Union Pacific Company Stock Fund - Funds are invested
in common stock of Union Pacific Corporation.
Vanguard Total Bond Market Fund - Funds are invested
in corporate bonds.
Investment decisions may be changed on a daily basis.
Payment of Benefits - On termination of employment a
participant may elect to receive the benefit in one of
the following forms: (1) a lump-sum amount equal to the
value of the vested portion of the participant's
account; (2) installments, payable at least annually
over a period of years not to exceed the life expectancy
of the participant and his beneficiary; (3) a
nontransferable annuity contract providing for a monthly
guaranteed income for a specified number of years; or
(4) a combination of the above.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the
Plan are prepared under the accrual method of
accounting.
Payment of Benefits - Benefits are recorded when paid.
Investments are stated at fair value as determined by
quoted market prices except for the Vanguard Investment
Contract Trust, which is stated at contract value, and
participant loans, which are stated at fair value.
Administrative expenses of the Plan are paid by the
Company.
3. PARTICIPANT LOANS
The Plan permits participants to borrow against the
lesser of 50% of the vested portion of their account
balance, or 100% of their before-tax contribution and
rollover amounts, to a maximum of $50,000. The loans
bear interest at prime rate (8.5% at December 31, 1997)
plus 1% and are payable over a maximum five-year period.
Loan repayment generally is made through payroll
deductions.
<PAGE> 6
4. PLAN TERMINATION
Although it has not expressed any intent to do so, the
Company has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of
Plan termination, participants immediately become fully
vested.
5. ASSETS OF TERMINATED EMPLOYEES
At December 31, 1997 and 1996, approximately $25,000 and
$24,000, respectively, of vested Plan assets were
payable to terminated employees who have withdrawn from
participation in the Plan.
6. INCOME TAX STATUS
A favorable determination letter has been received from
the Internal Revenue Service as to the qualified status
of the Plan as amended through December 15, 1994.
Therefore, management believes the Plan was qualified
and tax-exempt as of and for the years ended
December 31, 1997 and 1996. Accordingly, no provision
for federal or state income taxes has been made.
7. INVESTMENT CONTRACT ACCOUNTS
The Plan maintains contract accounts with Vanguard
Group, Incorporated in its Investment Contract Account.
The Plan's investment contract accounts are fully
benefit responsive and therefore have been presented in
the financial statements at contract value. The fair
value of the Plan's investment contract accounts
approximate the contract value at December 31, 1997.
The average yield on investment contract accounts for
the year ended December 31, 1997 and 1996 was 6.17% and
6.07%, respectively. The average crediting interest
rates for the respective years were 6.08% and 6.00%.
8. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by
fund for the years ended December 31, 1997 and 1996 are
as follows:
1997 1996
Contributions:
Employee contributions:
Vanguard Windsor II $ 416,624 $ 351,478
Vanguard Investment Contract Trust 164,261 212,402
Vanguard Index Trust 500 Portfolio 354,527 318,753
Vanguard International Growth Portfolio 241,529 251,915
Union Pacific Company Stock Fund 223,660 233,849
Union Pacific Resource Group Stock Fund - -
Vanguard Total Bond Market Fund 128,313 141,429
---------- ----------
$1,528,914 $1,509,826
========== ==========
<PAGE> 7
Employer matching contributions (net of
forfeitures):
Vanguard Windsor II $ 88,860 $ 82,560
Vanguard Investment Contract Trust 35,041 (43,293)
Vanguard Index Trust 500 Portfolio 76,191 71,051
Vanguard International Growth Portfolio 50,687 61,064
Union Pacific Company Stock Fund 48,846 54,851
Union Pacific Resource Group Stock Fund - -
Vanguard Total Bond Market Fund 33,913 34,596
---------- ----------
$ 333,538 $ 260,829
========== ==========
1997 1996
Benefit payments:
Vanguard Windsor II $164,045 $171,898
Vanguard Investment Contract Trust 101,144 204,618
Vanguard Index Trust 500 Portfolio 98,429 166,416
Vanguard International Growth Portfolio 117,718 146,338
Union Pacific Company Stock Fund 67,365 132,546
Union Pacific Resource Group Stock Fund 18,317 10,528
Vanguard Total Bond Market Fund 38,191 62,011
Participant loans 72,163 50,048
-------- --------
$677,372 $944,403
======== ========
Investment income:
Vanguard Windsor II $ 730,620 $ 371,776
Vanguard Investment Contract Trust 74,656 71,316
Vanguard Index Trust 500 Portfolio 517,321 243,011
Vanguard International Growth
Portfolio 35,364 136,962
Union Pacific Company Stock Fund 59,430 194,511
Union Pacific Resource Group
Stock Fund (51,691) 82,864
Vanguard Total Bond Market Fund 64,180 23,098
Participant loans 33,285 25,084
---------- ----------
$1,463,165 $1,148,622
========== ==========
* * * * *
<PAGE> 9
SKYWAY RETIREMENT SAVINGS PLAN
ITEM 27a - SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT
PURPOSES
DECEMBER 31, 1997
Number Fair
of Units Cost Value
Vanguard Windsor II 111,791 $2,500,143 $ 3,199,466
Vanguard Investment
Contract Trust 1,292,825 1,292,825 1,292,825
Vanguard Index Trust 500
Portfolio 26,331 1,632,667 2,371,655
Vanguard International
Growth Portfolio 78,594 1,217,581 1,288,154
Union Pacific Company
Stock Fund 1 96,311 763,247 986,225
Union Pacific Resource
Group Stock Fund 1 24,923 210,353 216,834
Vanguard Total Bond
Market
Fund 76,337 744,609 770,236
Participant loans 2 - 560,754 560,754
---------- -----------
$8,922,179 $10,686,149
========== ===========
1 Represents a party-in-interest.
2 Consists of 149 individual loans with interest at prime
plus 1% and terms ranging from one to five years.
<PAGE> 10
SKYWAY RETIREMENT SAVINGS PLAN
ITEM 27d - SUPPLEMENTAL SCHEDULE OF REPORTABLE PLAN TRANSACTIONS*
YEAR ENDED DECEMBER 31, 1997
Description of Investment Cost Proceeds Gain
SERIES OF TRANSACTIONS
ACQUISITIONS:
Vanguard Windsor II (72 transactions) $1,072,198
Vanguard Investment Contract Trust
(110 transactions) 597,037
Vanguard Index Trust 500 Portfolio
(84 transactions) 711,511
Vanguard International Growth Portfolio
(64 transactions) 468,911
DISPOSITIONS:
Vanguard Investment Contract Trust
(110 transactions) $ 440,945 $440,939 $ 6
Vanguard Windsor II (82 transactions) 322,682 415,317 92,635
* Reportable Plan transactions are defined as transactions
that exceed 5% of the fair market value of Plan assets at
the beginning of the year.
