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, 1998
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:
Name of each exchange on
Title of each class 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 26, 1999 the aggregate market value of the registrant's
Common Stock held by non-affiliates (using the New York Stock Exchange closing
price) was approximately $10,973,121,951.
The number of shares outstanding of the registrant's Common Stock as of
February 26, 1999 was 247,579,048.
<PAGE> 2
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, 1998 (Parts I, II and IV); and (2) registrant's definitive Proxy
Statement for the annual meeting of stockholders to be held on April 16, 1999
(Part III).
The undersigned Registrant hereby amends its Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 to include the following exhibits:
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibit Number Exhibit
- -------------- -------
(23) (a) Independent Auditors' Consent
(23) (b) Independent Auditors' Consent
(23) (c) Independent Auditors' Consent
(23) (d) Independent Auditors' Consent
(23) (e) Independent Auditors' Consent
(99) (a) Financial Statements for the Fiscal Year ended December 31,
1998 required by Form 11-K for the Union Pacific Corporation
Thrift Plan.
(99) (b) Financial Statements for the Fiscal Year ended December 31,
1998 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,
1998 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,
1998 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,
1998 required by Form 11-K for the Southern Pacific Rail
Corporation Thrift 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 25, 1999
UNION PACIFIC CORPORATION
(Registrant)
/s/ James R. Young
------------------
James R. Young
Senior Vice President - Finance
and Controller
<PAGE> 4
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
(23) (a) Independent Auditors' Consent
(23) (b) Independent Auditors' Consent
(23) (c) Independent Auditors' Consent
(23) (d) Independent Auditors' Consent
(23) (e) Independent Auditors' Consent
(99) (a) Financial Statements for the Fiscal Year ended December 31,
1998 required by Form 11-K for the Union Pacific Corporation
Thrift Plan.
(99) (b) Financial Statements for the Fiscal Year ended December 31,
1998 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,
1998 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,
1998 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,
1998 required by Form 11-K for the Southern Pacific Rail
Corporation Thrift Plan.
Exhibit 23 (a)
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 May 17,
1999 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, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 24, 1999
Exhibit 23 (b)
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 May 17,
1999, 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, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 24, 1999
Exhibit 23 (c)
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 May 17,
1999, 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, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 24, 1999
Exhibit 23 (d)
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 May 17,
1999, 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, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 24, 1999
Exhibit 23 (e)
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 May 17,
1999, 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, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 24, 1999
<PAGE> COVER
Exhibit 99 (a)
UNION PACIFIC CORPORATION
THRIFT PLAN
Financial Statements as of and for the
Years Ended December 31, 1998 and 1997
and Independent Auditors' Report
<PAGE> INDEX
UNION PACIFIC CORPORATION THRIFT PLAN
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31,1998 AND 1997
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 or are omitted because of the absence of the conditions
under which they are required.
<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, 1998
and 1997, 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,
1998 and 1997, 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
May 17, 1999
<PAGE> 2
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ASSETS
<S> <C> <C>
Investments at fair value (Notes 2, 3, 4 and 8) $580,390,234 $543,971,178
Contributions receivable 1,653,698 -
------------ ------------
Net assets available for benefits $582,043,932 $543,971,178
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
<S> <C> <C>
Investment income (Notes 4 and 8):
Net appreciation (depreciation) in fair
value of investments (Note 3) $ (6,666,601) $ 35,614,899
Interest 8,000,055 7,646,150
Dividends 15,183,981 13,524,500
------------ ------------
Total investment income 16,517,435 56,785,549
------------ ------------
Contributions (Note 8):
Employee 33,646,017 23,914,435
Employer 10,381,157 7,984,945
------------ -----------
Total contributions 44,027,174 31,899,380
------------ ------------
Total additions 60,544,609 88,684,929
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (Note 8) 22,471,855 20,891,071
------------ ------------
NET INCREASE IN NET ASSETS AVAILABLE FOR
BENEFITS 38,072,754 67,793,858
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 543,971,178 476,177,320
------------ ------------
End of year $582,043,932 $543,971,178
============ ============
</TABLE>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
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.
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 Union Pacific Corporate's Res (Excl Divs) (formerly Resources
Stock Fund).
Future contributions to Resources Stock are not permitted.
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.
Loans to Participants - In June 1985, the loan provisions of the Plan were
approved by the Internal Revenue Service (IRS) 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, 1998 and 1997, was 1,643 and 1,669, respectively.
<PAGE> 5
Participant Accounts - Each participant account is credited with the
participant's contributions, employer contributions, where applicable, and
an allocation of the Plan's earnings (or losses) based upon the type of
investments selected and their performance. Allocations are based on each
participant's account balance by investment type.
Vesting - Participants at all times have a 100% vested interest in their
voluntary contributions plus actual earnings thereon and their PAYSOP
account. Participants who are employees on or after October 1, 1997, 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
contributions in any of eight funds in multiples of 1% effective August 1,
1998 (see Note 5).
Union Pacific Common Stock Fund - Funds are invested in common stock of
Union Pacific Corporation.
Union Pacific Equity Fund - Funds are 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 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 Prime Money Market Fund - 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 Fund - Funds are invested in shares of a
registered investment company that invests in foreign common stocks with
high growth potential.
Vanguard Total Bond Market Index Fund - Funds are invested in shares of
a registered investment company that invests in fixed income securities
in a manner that 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 $5,000 effective January 1, 1998,
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.
A withdrawal may be made by a participant from his/her account in
accordance with the Plan's provisions.
<PAGE> 6
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.
Plan Administration - The Plan is administered by the Senior Vice
President, Human Resources of the Company. Administrative expenses of the
Plan, with the exception of investment management fees, are paid by the
Company. Investment management fees are paid by the Plan directly from
fund earnings.
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.
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 Common Stock Fund, Common PAYSOP Stock Fund, Union Pacific
Corporate's Res Fund (Excl Divs) (formerly Resources Stock Fund), Vanguard
Wellington Fund, Union Pacific Equity Fund, Vanguard U.S. Growth Fund,
Vanguard International Growth Fund, and the Vanguard Total Bond Market
Index Fund are valued at fair value as determined by quoted market prices.
Investments in the Union Pacific Fixed Income Fund and the Vanguard Prime
Money Market Fund 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.
Reclassifications - Certain 1997 amounts have been reclassified to conform
to the 1998 financial statement presentation.
3. INVESTMENTS
<TABLE>
<CAPTION>
The following table presents the fair value of investments:
December 31,
-----------------------------------------
1998 1997
<S> <C> <C>
Investments at Fair Value as Determined
by Quoted Market Price:
Master Trust $469,369,086 $427,018,286
Investments at Estimated Fair Value:
Master Trust 111,021,148 116,952,892
------------ ------------
Total Investments at Fair Value $580,390,234 $543,971,178
============ ============
</TABLE>
<PAGE> 7
During 1998 and 1997, the Plan's investments (including investments
bought, sold, and held during the year) appreciated (depreciated) in value
by $(6,666,601) and $35,614,899, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
Net Change in Fair Value 1998 1997
<S> <C> <C>
Investments at Fair Value as Determined by
Quoted Market Price:
Master Trust $(6,596,076) $35,412,643
Investments at Estimated Fair Value:
Master Trust (70,525) 202,256
--------- -----------
Net change in fair value $(6,666,601) $35,614,899
=========== ===========
</TABLE>
4. MASTER TRUST
The assets comprising the Master Trust are presented in the following
table:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
<S> <C> <C>
Investments at Fair Value as Determined by
Quoted Market Price:
Common Stock $180,799,876 $180,366,490
Mutual Funds 502,653,251 445,408,000
------------ ------------
683,453,127 625,774,490
Investments at Estimated Fair Value:
Mutual Funds 4,705,410 4,472,397
Guaranteed Investment Contracts 186,741,644 201,246,115
Participant Loans 20,156,166 18,826,627
------------ ------------
211,603,220 224,545,139
------------ ------------
$895,056,347 $850,319,629
============ ============
</TABLE>
Total interest and dividends of the Master Trust were $38,830,582 and
$42,436,033 for the years ended December 31, 1998 and 1997, respectively.
During 1998 and 1997, the Master Trust's investments (including
investments bought, sold, and held during the year) appreciated in value
by $45,660,314 and $51,517,049, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
Net appreciation (depreciation) in fair value 1998 1997
<S> <C> <C>
Common Stocks $(24,017,989) $(2,627,738)
Mutual Funds 69,817,674 54,009,125
Guaranteed Investment Contracts (139,371) 135,662
------------ -----------
Net change in fair value $ 45,660,314 $51,517,049
============ ===========
</TABLE>
At December 31, 1998 and 1997, the Plan held percentage interests in the
Master Trust of 65% and 64%, 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.
<PAGE> 8
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.
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 for persons employed on or
after October 1, 1997, 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.
Effective August 1, 1998, the Plan was amended to provide that any
participant may direct employee contributions in any of the eight funds in
multiples of 1%.
6. TAX STATUS
The Plan has received a favorable letter of determination from the IRS
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, and exempt from Federal income
taxes under Section 501(a). The Plan has been amended since receiving the
determination letter. 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. A compliance letter dated August 18, 1998 was received from
the IRS with respect to the filings described in the preceding sentence
and corrections have been substantially completed. An additional
submission to the VCR program was made on April 12, 1999.
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. Additionally, no provision for income
taxes has been included in the Plan's financial statements.
<PAGE> 9
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 full
or partial Plan 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.
<PAGE> 9
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, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Investments at Fair Value:
Union Pacific Common Stock Fund* $144,071,218 $128,656,477
Union Pacific Equity Fund* 159,314,102 131,314,520
Union Pacific Fixed Income Fund* 91,063,544 96,389,389
Common Stock/PAYSOP 7,604,325 10,656,764
Union Pacific Corporate's Res (Excl Divs) 11,523,775 35,830,871
Vanguard Wellington Fund* 47,927,459 42,043,138
Vanguard Prime Money Market Fund 3,389,454 3,492,575
Vanguard U.S. Growth Fund* 65,066,468 43,820,474
Vanguard International Growth Fund 26,292,017 27,712,992
Vanguard Total Bond Market Index Fund 7,569,722 6,983,050
Loan Fund 16,568,150 17,070,928
------------ ------------
$580,390,234 $543,971,178
============ ============
Investment Income:
Union Pacific Common Stock Fund $(32,161,197) $ 9,264,845
Union Pacific Equity Fund 36,457,014 31,180,397
Union Pacific Fixed Income Fund 5,905,432 6,130,541
Common Stock/PAYSOP (2,768,396) 678,780
Union Pacific Corporate's Res (Excl Divs) (19,953,401) (7,968,006)
Vanguard Wellington Fund 5,041,112 7,315,343
Vanguard Prime Money Market Fund 162,139 108,375
Vanguard U.S. Growth Fund 17,804,497 7,475,898
Vanguard International Growth Fund 4,049,367 861,077
Vanguard Total Bond Market Index Fund 585,404 409,489
Loan Fund 1,395,464 1,328,810
------------ ------------
$ 16,517,435 $ 56,785,549
============ ============
</TABLE>
* Represents more than 5% of the net assets available for benefits at
December 31, 1998.
<PAGE> 10
8. FUND INFORMATION (continued)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Contributions:
Union Pacific Common Stock Fund $12,592,533 $9,407,739
Union Pacific Equity Fund 8,864,595 6,430,945
Union Pacific Fixed Income Fund 5,730,877 4,654,539
Common Stock/PAYSOP (13,290) 556
Union Pacific Corporate's Res (Excl Divs) 35 -
Vanguard Wellington Fund 5,902,334 4,113,748
Vanguard Prime Money Market Fund 507,186 196,243
Vanguard U.S. Growth Fund 6,812,057 3,971,560
Vanguard International Growth Fund 2,639,994 2,566,488
Vanguard Total Bond Market Index Fund 984,723 557,861
Loan Fund 6,130 (299)
----------- ----------
$44,027,174 $31,899,380
=========== ===========
Distributions to Participants:
Union Pacific Common Stock Fund $ 3,433,143 $ 4,987,529
Union Pacific Equity Fund 4,757,240 4,107,006
Union Pacific Fixed Income Fund 5,282,564 5,151,165
Common Stock/PAYSOP 270,754 401,071
Union Pacific Corporate's Res (Excl Divs) 828,191 1,592,926
Vanguard Wellington Fund 1,743,280 1,412,963
Vanguard Prime Money Market Fund 366,308 157,009
Vanguard U.S. Growth Fund 2,224,195 1,959,187
Vanguard International Growth Fund 1,769,815 650,038
Vanguard Total Bond Market Index Fund 1,473,475 53,352
Loan Fund 322,890 418,825
----------- -----------
$22,471,855 $20,891,071
=========== ===========
</TABLE>
* Represents more than 5% of the net assets available for benefits.
9. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Common Stock Fund which is
invested 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, 1998 and 1997,
Supplemental Schedules as of and for the
Year Ended December 31, 1998
and Independent Auditors' Report
<PAGE> INDEX
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
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, 1998 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 by the Employee Retirement Income
Security Act of 1974.
<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, 1998 and 1997, 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,
1998 and 1997, 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 1998 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
May 17, 1999
<PAGE> 2
<TABLE>
<CAPTION>
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ASSETS:
<S> <C> <C>
Investments at fair value (Note 3) $ 685,414 $ 481,248
--------- ---------
Net assets available for benefits $ 685,414 $ 481,248
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 6):
<S> <C> <C>
Net appreciation in fair value of
investments (Note 3) $ 41,769 $ 54,742
Interest 357 284
Dividends 31,234 19,124
-------- --------
Total investment income 73,360 74,150
Employee contributions (Note 6) 144,578 107,175
-------- --------
Total additions 217,938 181,325
-------- --------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (Note 6) 13,772 1,864
-------- --------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 204,166 179,461
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 481,248 301,787
-------- --------
End of Year $685,414 $481,248
======== ========
</TABLE>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
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.
Spin-Off - In September 1996, Union Pacific Corporation's (the
Corporation) Board of Directors declared a special dividend consisting of
the shares of Union Pacific Resources Group Inc. (Resources) common stock
owned by the Corporation (the Spin-Off). As a result of the Spin-Off, each
of the Corporation's stockholders received 0.846946 of a share of
Resources common stock for each share of Corporation 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 Corporation common
stock held in the account. The shares received were placed in the Union
Pacific Railroad's Res (Excl Divs) (formerly Resources Stock Fund). Future
contributions to Union Pacific Railroad's Res (Excl Divs) are not
permitted.
Contributions - Participants may contribute 2% to 20% of their
compensation on a salary deferral basis subject to limitations specified
in the Internal Revenue Code. Participants may also contribute 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.
Investment Options - Plan participants may direct their contributions in
various proportions to any of the eight available investment funds
identified below:
Union Pacific Railroad 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 stock fund is divided into fund shares,
rather than shares of Corporation 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.
<PAGE> 5
Vanguard 500 Index 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 - 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 U.S. Growth Mutual Fund which is comprised of established U.S.
growth stocks.
Vanguard International Growth 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 Total Bond Market 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 Prime Money Market Fund - 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.
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. Payout is mandatory for a participant who has reached age 70-1/2
but has not terminated employment.
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.
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.
<PAGE> 6
Investment Valuation and Income Recognition - Investments in the Union
Pacific Railroad Stock Fund, Union Pacific Railroad's Res (Excl Divs)
(formerly Resources Stock Fund), Vanguard Wellington Fund, Vanguard 500
Index Fund, Vanguard Prime Money Market Fund, Vanguard U.S. Growth Fund,
Vanguard International Growth Fund, and the Vanguard Total Bond Market
Index Fund are valued at fair value as determined by quoted market prices.
The investments in the Vanguard Retirement Savings Trust 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.
Payment of Benefits - Benefits are recorded when paid.
Reclassifications - Certain 1997 amounts have been reclassified to conform
to 1998 financial statement presentation.
3. INVESTMENTS
The following table presents the fair value of investments. Investments
that represent 5% or more of the Plan's net assets at December 31, 1998
are separately identified.
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- ------------------
Number Fair Number Fair
of Units Value of Units Value
<S> <C> <C> <C> <C>
Investments at Fair Value as Determined
by Quoted Market Price:
Union Pacific Railroad Stock Fund 11,689.248 $ 86,384 7,413.493 $ 75,914
Vanguard Wellington Fund 6,671.355 195,804 4,801.054 141,391
Vanguard 500 Index Fund 2,774.992 316,210 2,203.328 198,454
Vanguard U.S. Growth Fund 1,415.365 53,062 994.313 28,537
Other - 27,210 - 31,617
-------- --------
678,670 475,913
Investments at Estimated Fair Value:
Vanguard Retirement Savings
Trust 6,744.120 6,744 5,335.320 5,335
-------- --------
Total Investments at Fair Value $685,414 $481,248
======== ========
</TABLE>
During 1998 and 1997, the Plan's investments (including investments
bought, sold, and held during the year), appreciated in value by $41,769
and $54,742, respectively, as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------
Net Change in Fair Value 1998 1997
<S> <C> <C>
Investments at Fair Value as Determined by
Quoted Market Price:
Union Pacific Railroad Stock Fund $21,608) $ 1,145
Union Pacific Railroad's Res (Excl Divs) (6,104) (2,690)
Mutual Funds 69,481 56,287
------- ------
Net change in fair value $41,769 $54,742
======= =======
</TABLE>
<PAGE> 7
4. 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.
5. 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.
6. FUND INFORMATION
Investment income, contributions and distributions to participants by fund
are as follows for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1998 1997
<S> <C> <C>
Investment Income:
Union Pacific Railroad Stock Fund $ (20,432) $ 2,936
Union Pacific Railroad's Res (Excl Divs) (6,021) (2,610)
Vanguard Wellington Fund 18,970 24,989
Vanguard 500 Index Fund 64,573 43,172
Vanguard Retirement Savings Trust Fund 357 284
Vanguard U.S. Growth Fund 13,602 4,985
Vanguard International Growth Fund 1,600 132
Vanguard Total Bond Market Index Fund 251 148
Vanguard Prime Money Market Fund 460 114
-------- --------
$ 73,360 $ 74,150
======== ========
Contributions:
Union Pacific Railroad Stock Fund $ 32,060 $ 28,377
Vanguard Wellington Fund 38,968 31,660
Vanguard 500 Index Fund 52,185 34,622
Vanguard Retirement Savings Trust Fund 1,989 1,590
Vanguard U.S. Growth Fund 12,679 6,894
Vanguard International Growth Fund 4,327 2,729
Vanguard Total Bond Market Index Fund 1,824 1,303
Vanguard Prime Money Market Fund 546 -
-------- --------
$144,578 $107,175
======== ========
</TABLE>
<PAGE> 8
6. FUND INFORMATION (continued)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1998 1997
<S> <C> <C>
Distributions to participants:
Union Pacific Common Stock Fund $ 2,354 $ 350
Resources Stock Fund 606 86
Vanguard/Wellington Fund 3,526 1,428
Vanguard Index Trust - 500 Portfolio Fund 4,924 -
Vanguard Retirement Savings Trust Fund 7 -
Vanguard U.S. Growth Fund 1,756 -
Vanguard International Growth Portfolio Fund 369 -
Vanguard Bond Index Fund 230 -
Vanguard Money Market Reserves - Prime Portfolio - -
------- ------
$13,772 $1,864
======= ======
</TABLE>
7. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Railroad 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> 9
<TABLE>
<CAPTION>
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
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 Par or Maturity Value Cost Value
<S> <C> <C> <C>
Union Pacific Railroad Stock
Fund * 11,689.248 units $ 94,923 $ 86,384
Union Pacific Railroad's Res
(Excl Divs) * 1,098.777 units 9,393 3,571
Vanguard Wellington Fund * 6,671.355 units 175,382 195,804
Vanguard 500 Index Fund * 2,774.992 units 189,730 316,210
Vanguard Retirement Savings Trust * 6,744.120 units 6,744 6,744
Vanguard U.S. Growth Fund * 1,415.365 units 38,662 53,062
Vanguard International Growth Fund * 715.979 units 12,105 13,439
Vanguard Total Bond Market
Index Fund * 397.312 units 3,974 4,080
Vanguard Prime Money Market Fund * 6,120.250 units 6,120 6,120
-------- --------
$537,033 $685,414
======== ========
</TABLE>
* Represents a party-in-interest
<PAGE> 10
<TABLE>
<CAPTION>
UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT
EMPLOYEE 401(k) RETIREMENT THRIFT PLAN
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
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
Purchase Selling Cost of Transaction Net Gain
Identity of Party Involved Description of Asset Price Price Asset Date or (Loss)
<S> <C> <C> <C> <C> <C> <C>
Vanguard Fiduciary Trust Company* Union Pacific Railroad
Stock Fund $ 39,236 $ - $ - $ 39,236 $ -
Vanguard Fiduciary Trust Company* Vanguard Wellington Fund $ 60,114 $ - $ - $ 60,114 $ -
Vanguard Fiduciary Trust Company* Vanguard 500 Index Fund $ 62,663 $ - $ - $ 62,663 $ -
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)
Vanguard Fiduciary Trust Company* Union Pacific Railroad
Stock Fund 30 4 $ 39,237 $ 7,314 $ 249
Vanguard Fiduciary Trust Company* Vanguard Wellington Fund 30 3 $ 60,978 $ 4,389 $ 621
Vanguard Fiduciary Trust Company* Vanguard 500 Index Fund 29 2 $ 62,663 $ 4,924 $2,241
</TABLE>
* Represents a party-in-interest
<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, 1998 and 1997,
Supplemental Schedules as of and for the
Year Ended December 31, 1998
and Independent Auditors' Report
<PAGE> INDEX
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
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, 1998 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 by the Employee Retirement Income
Security Act of 1974.
<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, 1998 and 1997, 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,
1998 and 1997, 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 1998 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
May 17, 1999
<PAGE> 2
<TABLE>
<CAPTION>
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ASSETS:
<S> <C> <C>
Investments at fair value (Note 3) $325,391,442 $143,012,513
Contributions receivable 2,671,590 -
------------ ------------
Net assets available for benefits $328,063,032 $143,012,513
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (Note 7):
<S> <C> <C>
Net appreciation in fair value of
investments (Note 3) $ 27,018,608 $ 15,163,982
Interest 637,025 485,016
Dividends 13,973,813 5,149,480
------------ ------------
Total investment income 41,629,446 20,798,478
------------ ------------
Employee contributions (Note 7) 67,803,914 32,360,426
------------ ------------
Total additions 109,433,360 53,158,904
------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (Note 7) 9,816,435 2,866,063
------------ ------------
NET INCREASE IN NET ASSETS AVAILABLE
FOR BENEFITS 99,616,925 50,292,841
PLAN MERGER (Note 9) 85,433,594 -
------------ ------------
NET INCREASE IN NET ASSETS AVAILABLE FOR
BENEFITS 185,050,519 50,292,841
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 143,012,513 92,719,672
------------ ------------
End of Year $328,063,032 $143,012,513
============ ============
</TABLE>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
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.
Spin-Off - In September 1996, Union Pacific Corporation's (the
Corporation) Board of Directors declared a special dividend consisting of
the shares of Union Pacific Resources Group Inc. (Resources) common stock
owned by the Corporation (the Spin-Off). As a result of the Spin-Off, each
of the Corporation's stockholders received 0.846946 of a share of
Resources common stock for each share of Corporation 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 Corporation common
stock held in the account. The shares received were placed in the Union
Pacific Railroad's Res (Excl Divs) (formerly Resources Stock Fund). Future
contributions to Union Pacific Railroad's Res (Excl Divs) are not
permitted.
Contributions - Participants may contribute 2% to 20% effective January 1,
1998 of their compensation on a salary deferral basis subject to
limitations specified in the Internal Revenue Code. Participants may also
contribute 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.
Investment Options - Plan participants may direct their contributions in
various proportions to any of the eight available investment funds
identified below:
Union Pacific Railroad Stock Fund - This fund is administered as a
separate account by Vanguard Fiduciary Trust Company and invests
primarily in the common stock of Union Pacific Corporation. It also
maintains a small cash position invested in Vanguard Money Market
Reserves, to facilitate transactions. The stock fund is divided into
fund shares, rather than shares of Corporation common 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.
<PAGE> 5
Vanguard 500 Index Fund - This fund consists of investment in the
Vanguard 500 Index 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 - 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 U.S. Growth Mutual Fund which is comprised of established U.S.
growth stocks.
Vanguard International Growth 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 Total Bond Market 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 Prime Money Market Fund - 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.
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.
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.
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.
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 Railroad Stock Fund, Union Pacific Railroad's Res (Excl Divs)
(formerly Resources Stock Fund), Vanguard Wellington Fund, Vanguard 500
Index Fund, Vanguard Prime Money Market Fund, Vanguard U.S. Growth Fund,
Vanguard International Growth Fund, and the Vanguard Total Bond Market
<PAGE> 6
Index Fund are valued at fair value as determined by quoted market prices.
The investments in the Vanguard Retirement Savings Trust 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.
Payment of Benefits - Benefits are recorded when paid.
Reclassifications - Certain 1997 amounts have been reclassified to conform
to the 1998 financial statement presentation.
3. INVESTMENTS
The following table presents the fair value of investments. Investments
that represent 5% or more of the Plan's net assets at December 31, 1998
are separately identified.
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------ ----------------------
Number Fair Number Fair
of Units Value of Units Value
Investments at Fair Value as
Determined by Quoted Market
Price:
<S> <C> <C> <C> <C>
Union Pacific Railroad
Stock Fund 4,376,670 $ 32,343,591 1,829,943 $ 18,738,611
Vanguard Wellington Fund 1,896,159 55,652,276 1,161,554 34,207,780
Vanguard 500 Index Fund 976,843 111,311,286 656,404 59,122,300
Vanguard U.S. Growth Fund 1,799,920 67,479,020 354,210 10,165,824
Vanguard Prime Money
Market Fund 21,767,120 21,767,120 750,026 750,026
Other - 23,170,580 - 11,006,080
------------ ------------
311,723,873 133,990,621
------------ ------------
Investments at Estimated Fair Value:
Vanguard Retirement
Savings Trust 13,667,569 13,667,569 9,021,892 9,021,892
------------ ------------
Total Investments at Fair Value $325,391,442 $143,012,513
============ ============
</TABLE>
During 1998 and 1997, the Plan's investments (including investments
bought, sold, and held during the year) appreciated in value by
$27,018,608 and $15,163,982, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
Net Change in Fair Value 1998 1997
Investments at Fair Value as Determined by
<S> <C> <C>
Quoted Market Price:
Union Pacific Railroad Stock Fund $(5,472,307) $ 472,292
Union Pacific Railroad's Res (Excl Divs) (2,101,340) (834,278)
Mutual Funds 34,592,255 15,525,968
----------- -----------
Net change in fair value $27,018,608 $15,163,982
=========== ===========
</TABLE>
4. PLAN AMENDMENTS
Effective January 1, 1998, the Plan was amended to merge the Southern
Pacific Savings Plan for the Brotherhood of Locomotive Engineers, United
Transportation Union and American Train Dispatchers Department (BLE) into
the Plan. (See Note 9)
<PAGE> 7
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 and a compliance statement was received on September 15, 1998. An
additional VCR submission was made for the Plan on October 2, 1998. The
latter submission is still pending. 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, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997
Investment Income:
<S> <C> <C>
Union Pacific Railroad Stock Fund $(5,062,141) $ 953,676
Union Pacific Railroad's Res (Excl Divs) (2,072,801) (809,327)
Vanguard Wellington Fund 5,416,290 5,724,612
Vanguard 500 Index Fund 22,848,014 12,685,750
Vanguard Retirement Savings Trust 637,025 485,016
Vanguard U.S. Growth Fund 16,649,054 1,580,094
Vanguard International Growth Fund 1,668,012 85,261
Vanguard Total Bond Market Index Fund 481,989 81,767
Vanguard Prime Money Market Fund 1,064,004 11,629
----------- -----------
$41,629,446 $20,798,478
=========== ===========
Contributions:
Union Pacific Railroad Stock Fund $ 9,059,655 $ 5,760,739
Vanguard Wellington Fund 12,701,892 7,080,611
Vanguard 500 Index Fund 21,891,411 10,984,728
Vanguard Retirement Savings Trust 3,579,202 2,027,165
Vanguard U.S. Growth Fund 11,874,516 3,584,223
Vanguard International Growth Fund 3,972,815 2,328,546
Vanguard Total Bond Market Index Fund 1,768,448 523,020
Vanguard Prime Money Market Fund 2,955,975 71,394
----------- -----------
$67,803,914 $32,360,426
=========== ===========
</TABLE>
<PAGE> 8
7. FUND INFORMATION (continued)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1998 1997
Distributions to participants:
<S> <C> <C>
Union Pacific Railroad Stock Fund $ 804,843 $ 488,636
Union Pacific Railroad's Res (Excl Divs) 83,683 112,200
Vanguard Wellington Fund 1,569,293 712,206
Vanguard 500 Index Fund 2,619,502 943,177
Vanguard Retirement Savings Trust 437,012 327,250
Vanguard U.S. Growth Fund 1,663,102 143,216
Vanguard International Growth Fund 299,711 108,825
Vanguard Total Bond Market Index Fund 452,131 10,805
Vanguard Prime Money Market Fund 1,887,158 19,748
---------- ----------
$9,816,435 $2,866,063
========== ==========
</TABLE>
8. RELATED PARTY TRANSACTIONS
Plan investments include the Union Pacific Railroad 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.
9. PLAN MERGER
Effective December 31, 1997, the Southern Pacific Savings Plan for the
Brotherhood of Locomotive Engineers, United Transportation Union, and
American Train Dispatchers Department (BLE) was terminated and merged into
the Plan. As a result of this merger, effective January 1, 1998, the
trustee of BLE was changed from American Express to Vanguard Fiduciary
Trust Company (Vanguard). The assets and obligations at American Express
were transferred to Vanguard at the end of January 1998. Through a formal
trust agreement between American Express and Vanguard, for the month of
January 1998 American Express was a subtrustee of Vanguard as it relates
to the BLE. The name of the Plans, as merged, is Union Pacific Agreement
Employee 401(k) Retirement Thrift Plan.
<PAGE> 9
<TABLE>
<CAPTION>
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
Column B Column C Column D Column E
Description of Investment,
Identity of Issue, Including Collateral, Rate
Borrower, Lessor of Interest, Maturity Date, Current
or Similar Party Par or Maturity Value Cost Value
<S> <C> <C> <C>
Union Pacific Railroad Stock
Fund * 4,376,670 units $ 34,235,078 $ 32,343,591
Union Pacific Railroad's
Res (Excl Divs) * 370,261 units 3,171,592 1,203,349
Vanguard Wellington Fund * 1,896,159 units 51,691,044 55,652,276
Vanguard 500 Index Fund * 976,843 units 74,088,754 111,311,286
Vanguard Retirement Savings
Trust * 13,667,569 units 13,667,569 13,667,569
Vanguard U.S. Growth Fund * 1,799,920 units 54,674,808 67,479,020
Vanguard International Growth
Fund * 731,588 units 12,481,587 13,731,914
Vanguard Total Bond Market
Index Fund * 801,881 units 8,146,075 8,235,317
Vanguard Prime Money
Market Fund * 21,767,120 units 21,767,120 21,767,120
------------ ------------
$273,923,627 $325,391,442
============ ============
</TABLE>
* Represents a party-in-interest
<PAGE> 10
<TABLE>
<CAPTION>
UNION PACIFIC AGREEMENT EMPLOYEE
401(k) RETIREMENT THRIFT PLAN
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------
Single Transactions Involving an Amount in Excess
of 5% of the Current Value of Plan Assets:
Column A Column B Column C Column D Column E Column F Column G
Current
Value of
Asset on
Identity of Purchase Selling Cost of Transaction Net Gain
Party Involved Description of Asset Price Price Asset Date or (Loss)
<S> <C> <C> <C> <C> <C> <C>
Vanguard Fiduciary
Trust Company * Union Pacific Railroad Stock Fund$ 24,790,547 $ - $ - $ 24,790,547 $ -
Vanguard Fiduciary
Trust Company * Vanguard Wellington Fund $ 30,914,196 $ - $ - $ 30,914,196 $ -
Vanguard Fiduciary
Trust Company * Vanguard Wellington Fund $ - $ 8,864,749 $ 7,938,234 $ 8,864,749 $ 926,515
Vanguard Fiduciary
Trust Company * Vanguard 500 Index Fund $ 46,806,858 $ - $ - $ 46,806,858 $ -
Vanguard Fiduciary
Trust Company * Vanguard 500 Index Fund $ - $15,858,772 $12,646,589 $ 15,858,772 $ 3,212,183
Vanguard Fiduciary
Trust Company * Vanguard Retirement Savings Trust$ 10,263,183 $ - $ - $ 10,263,183 $ -
Vanguard Fiduciary
Trust Company * Vanguard U.S. Growth Fund $ 55,633,912 $ - $ - $ 55,633,912 $ -
Vanguard Fiduciary
Trust Company * Vanguard U.S. Growth Fund $ - $10,809,063 $ 9,875,054 $ 10,809,063 $ 934,009
Vanguard Fiduciary
Trust Company * Vanguard Total Bond Market Index $ 10,998,862 $ - $ - $ 10,998,862 $ -
Vanguard Fiduciary
Trust Company * Vanguard Prime Money Market $ 34,855,545 $ - $ - $ 34,855,545 $ -
Vanguard Fiduciary
Trust Company * Vanguard Prime Money Market $ - $13,839,977 $13,839,977 $ 13,839,977 $ -
</TABLE>
<TABLE>
<CAPTION>
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
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
Trust Company * Union Pacific Railroad Stock Fund 248 242 $ 24,827,491 $ 5,749,063 $ 34,403
Vanguard Fiduciary
Trust Company * Vanguard Wellington Fund 210 248 $ 31,039,473 $ 8,990,025 $ 958,211
Vanguard Fiduciary
Trust Company * Vanguard 500 Index Fund 242 250 $ 47,020,419 $16,072,334 $3,301,966
Vanguard Fiduciary
Trust Company * Vanguard Retirement Savings Trust 251 239 $ 10,285,509 $ 5,639,836 $ -
Vanguard Fiduciary
Trust Company * Vanguard U.S. Growth Fund 247 247 $ 55,685,493 $10,860,643 $ 948,968
Vanguard Fiduciary
Trust Company * Vanguard International Growth Fund 178 246 $ 9,912,309 $ 3,515,414 $ 147,928
Vanguard Fiduciary
Trust Company * Vanguard Prime Money Market 240 227 $ 34,891,713 $13,876,145 $ -
Vanguard Fiduciary
Trust Company * Vanguard Total Bond Market 237 217 $ 11,025,677 $ 4,261,325 $ 7,412
</TABLE>
* Represents a party-in-interest
<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, 1998 and 1997,
Supplemental Schedules as of and for the Year Ended December 31, 1998 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, 1998 AND 1997
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, 1998 AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 10
Item 27d - Schedule of Reportable Conditions 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, 1998 and 1997, 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, 1998 and 1997, 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 1998 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
May 17, 1999
<PAGE> 2
<TABLE>
<CAPTION>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ASSETS
<S> <C> <C>
Investments at fair value (Notes 3, 4, 5 and 9) $130,885,937 $124,517,334
Investments at contract value
(Notes 3, 4, 5, 6 and 9):Investment contract
with insurance company 26,916,859 32,803,511
------------ ------------
Net assets available for benefits $157,802,796 $157,320,845
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
<S> <C> <C>
Investment income (Notes 5 and 9):
Net appreciation in fair value of
investments (Note 4) $ 5,410,423 $ 10,609,206
Interest and dividends 9,114,931 15,912,788
------------ ------------
Total additions 14,525,354 26,521,994
------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (Note 9) 14,043,403 8,352,661
------------ ------------
NET INCREASE IN NET ASSETS AVAILABLE FOR
BENEFITS 481,951 18,169,333
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 157,320,845 139,151,512
------------ ------------
End of Year $157,802,796 $157,320,845
============ ============
</TABLE>
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, 1998 AND 1997
- -------------------------------------------------------------------------------
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 3, 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.
Spin-Off - In September 1996, Union Pacific Corporation's (the
Corporation) Board of Directors declared a special dividend consisting of
the shares of Union Pacific Resources Group Inc. (Resources) common stock
owned by the Corporation (the Spin-Off). As a result of the Spin-Off, each
of the Corporation's stockholders received 0.846946 of a share of
Resources common stock for each share of Corporation 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
Corporation common stock held in the account. The shares received have
been placed in the Union Pacific Corporate's Res (Excl Divs) (formerly the
Resources Stock Fund). Future contributions to Union Pacific Corporate's
Res (Excl Divs) are not permitted.
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 3).
Union Pacific Common Stock Fund - Funds are invested in common stock of
Union Pacific Corporation.
Union Pacific Equity Fund - Funds are 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 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.
<PAGE> 5
Vanguard Wellington Fund - Funds are invested in shares of a registered
investment company that invests in common stocks and fixed income
securities.
Vanguard Prime Money Market Fund - 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 Fund - Funds are invested in shares of a
registered investment company that invests in foreign common stocks with
high growth potential.
Vanguard Total Bond Market Index Fund - Funds are invested in shares of
a registered investment company that invests in fixed income securities
in a manner that 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 - 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.
Plan Administration - The Program is administered by the Senior Vice
President, Human Resources, of the Corporation. All administrative
expenses of the Program, with the exception of investment management fees,
are paid by the Corporation. Investment management fees are paid by the
Program.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Program have been
prepared in conformity 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 - 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 6). If
available, quoted market prices are used to value investments. The amounts
shown in Note 4 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.
<PAGE> 6
Reclassifications - Certain 1997 amounts have been reclassified to conform
to the 1998 financial statement presentation.
3. 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, the Union Pacific Equity
Fund, the Union Pacific Fixed Income Fund, the Vanguard Windsor Fund, the
Vanguard Wellington Fund, the Vanguard Prime Money Market Fund, the
Vanguard U.S. Growth Fund, the Vanguard International Growth Fund, the
Vanguard Total Bond Market Index Fund, and the Northwestern National Life
Insurance Company (NWNL) Guaranteed Investment Contract (GIC) Fund. 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.
4. INVESTMENTS
The following table presents the fair value of investments:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
Investments at Fair Value as Determined by
<S> <C> <C>
Quoted Market Price:
Master Trust $122,980,020 $119,455,791
Investments at Estimated Fair Value:
Master Trust 7,905,917 5,061,543
NWNL GIC 26,916,859 32,803,511
------------ ------------
Total Investments at Fair Value $157,802,796 $157,320,845
============ ============
</TABLE>
<PAGE> 7
During 1998 and 1997, the Program's investments (including investments
bought, sold, and held during the year) appreciated (depreciated) in value
by $5,410,423 and $10,609,206, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
Net Change in Fair Value 1998 1997
<S> <C> <C>
Investments at Fair Value as Determined
by Quoted Market Price:
Master Trust $5,436,369 $10,601,756
Investments at Estimated Fair Value:
Master Trust (25,946) 7,450
---------- -----------
Net Change in Fair Value $5,410,423 $10,609,206
========== ===========
</TABLE>
5. MASTER TRUST
The assets comprising the Master Trust are presented in the following
table:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1998 1997
Investments at Fair Value as Determined by Quoted
<S> <C> <C>
Market Price:
Common Stock $180,799,876 $180,366,490
Mutual Funds 502,653,251 445,408,000
------------ ------------
683,453,127 625,774,490
------------ ------------
Investments at Estimated Fair Value:
Mutual Funds 4,705,410 4,472,397
Guaranteed Investment Contracts 186,741,644 201,246,115
Participant Loans 20,156,166 18,826,627
------------ ------------
211,603,220 224,545,139
------------ ------------
$895,056,347 $850,319,629
============ ============
</TABLE>
Total interest and dividends of the Master Trust were $38,830,582 and
$42,436,033 for the years ended December 31, 1998 and 1997, respectively.
During 1998 and 1997, the Master Trust's investments (including
investments bought, sold, and held during the year) appreciated in value
by $45,660,314 and $51,517,049, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
Net appreciation (depreciation) in fair value 1998 1997
<S> <C> <C>
Common Stocks $(24,017,989) $(2,627,738)
Mutual Funds 69,817,674 54,009,125
Guaranteed Investment Contracts (139,371) 135,662
------------ -----------
$ 45,660,314 $51,517,049
============ ===========
</TABLE>
At December 31, 1998 and 1997, the Program held percentage interests in
the Master Trust of 14.6% and 14.6%, 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> 8
6. INVESTMENT CONTRACT WITH INSURANCE COMPANY
The Program has entered into a benefit responsive investment contract with
Northwestern National Life Insurance Company (NWNL). 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. NWNL maintains the contributions in a pooled account. The
average yield under this contract was 5.76% and 6.51% at December 31, 1998
and 1997, respectively. The crediting interest rate under this contract at
December 31, 1998 and 1997, and for the years then ended was 5.5% and
6.5%, 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.
7. TAX STATUS
The Program obtained a favorable 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 are being 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, February 11, 1998, and July 7, 1998. Compliance statements were
received on February 5, 1997, October 30, 1997, June 11, 1998, and March
9, 1999, respectively. Therefore, no provision for income taxes has been
included in the Program's financial statements.
8. PROGRAM TERMINATION
Although the Corporation has not expressed any intent to do so, they have
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 Corporation 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.
9. FUND INFORMATION
Net assets available for benefits, withdrawals and investment income by
fund are as follows as of and for the years ended December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
Net assets available for benefits:
<S> <C> <C>
Union Pacific Common Stock Fund $ 5,875,712 $ 1,036,046
Union Pacific Equity Fund * 41,894,920 35,098,131
Union Pacific Fixed Income Fund 5,151,877 2,681,004
Vanguard Total Bond Market Index Fund 1,749,045 238,257
Vanguard Prime Money Market Fund 1,192,026 624,840
Vanguard Wellington Fund 3,992,510 3,243,208
Vanguard U.S. Growth Fund * 9,369,814 2,004,614
Vanguard International Growth Fund 1,613,097 985,909
Vanguard Windsor Fund * 58,467,953 76,732,277
NWNL GIC Fund * 26,916,859 32,803,511
Union Pacific Corporate's Res (Excl Divs) 16,969 117,349
Loan Fund 1,562,014 1,755,699
----------- ------------
Total $157,802,796 $157,320,845
============ ============
</TABLE>
<PAGE> 9
9. FUND INFORMATION (continued)
<TABLE>
<CAPTION>
1998 1997
Distributions to participants:
<S> <C> <C>
Union Pacific Common Stock Fund $ 112,790 $ 548
Union Pacific Equity Fund 2,744,161 1,293,010
Union Pacific Fixed Income Fund 307,017 4,466
Vanguard Total Bond Market Index Fund 21,239 175
Vanguard Prime Money Market Fund 328,729 12,199
Vanguard Wellington Fund 222,068 1,780
Vanguard U.S. Growth Fund 420,028 253
Vanguard International Growth Fund 273,998 1,409
Vanguard Windsor Fund 5,007,998 3,125,987
NWNL GIC Fund 4,566,716 3,816,693
Union Pacific Corporate's Res (Excl Divs) - -
Loan Fund 38,659 96,141
----------- ------
Total $14,043,403 $ 8,352,661
=========== ===========
Investment income:
Union Pacific Common Stock Fund $ (146,572) $ 87,522
Union Pacific Equity Fund 9,795,046 8,848,307
Union Pacific Fixed Income Fund 262,871 177,428
Vanguard Total Bond Market Index Fund 90,435 11,837
Vanguard Prime Money Market Fund 50,283 26,264
Vanguard Wellington Fund 369,438 368,986
Vanguard U.S. Growth Fund 1,794,796 368,771
Vanguard International Growth Fund 163,379 14,189
Vanguard Windsor Fund 505,207 14,393,833
NWNL GIC Fund 1,528,196 2,121,962
Union Pacific Corporate's Res (Excl Divs) (28,874) (30,888)
Loan Fund 141,149 133,783
----------- -----------
Total $14,525,354 $26,521,994
=========== ===========
</TABLE>
* Represents more than 5% of the net assets available for benefits.
10. 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. Vanguard Fiduciary Trust Company is the Trustee as defined
by the Program and, therefore, the related transactions qualify as
party-in-interest transactions.
<PAGE> 10
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
<TABLE>
<CAPTION>
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------
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
Northwestern National Life
<S> <C> <C> <C>
Insurance Company Contract No. Group annuity contract fund
GA-135969-1-001 32,803,511 shares $26,916,859 $26,916,859
</TABLE>
<PAGE> 11
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
<TABLE>
<CAPTION>
Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
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 Net
Identity of Description Purchase Selling Cost of Transaction Gain
Party Involved of Asset Price Price Asset Date or (Loss)
Northwestern National Life
<S> <C> <C> <C> <C> <C> <C>
Insurance Company Contract Group annuity
#GA-135969-1-001 contract fund $1,530,856 $ - $ - $1,530,856 $ -
Northwestern National Life
Insurance Company Contract Group annuity
#GA-135969-1-001 contract fund $ - $7,417,507 $7,417,507 $7,417,507 $ -
</TABLE>
<TABLE>
<CAPTION>
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 Net
Identity of Description Number of Number Value of Value of Gain
Party Involved of Asset Purchases of Sales Purchases Sales or (Loss)
Northwestern National Life
<S> <C> <C> <C> <C> <C> <C>
Insurance Company Contract Group annuity
#GA-135969-1-001 contract fund 57 98 $ 1,629,910 $ 7,516,562 $ -
</TABLE>
<PAGE> COVER
Exhibit 99 (e)
SOUTHERN PACIFIC RAIL
CORPORATION THRIFT PLAN
Financial Statements as of and for the
Years Ended December 31, 1998 and 1997
and Independent Auditors' Reports
<PAGE> INDEX
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORTS 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
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 4-11
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 statements of net assets available for benefits
of the Southern Pacific Rail Corporation Thrift Plan (the Plan) as of December
31, 1998 and 1997, 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,
1998 and 1997, and changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, in 1998 the Plan changed its
method of accounting from a modified cash basis, which is a comprehensive basis
of accounting other than generally accepted accounting principles, to an accrual
basis to conform with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
May 17, 1999
<PAGE> 2
<TABLE>
<CAPTION>
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ASSETS
<S> <C> <C>
Investments at fair value (Notes 2, 3, 4 and 8) $182,126,479 $181,831,117
------------ ------------
Net assets available for benefits $182,126,479 $181,831,117
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
<S> <C> <C>
Investment income (Notes 4 and 8):
Net appreciation in fair value of
investments (Note 3) $ 12,124,244 $ 12,656,999
Interest 6,190,191 7,580,201
Dividends 4,060,559 3,191,940
------------ ------------
Total investment income 22,374,994 23,429,140
------------ ------------
Contributions (Note 8):
Employee 6,177 4,943,311
Employer 643 2,184,349
------------ ------------
Total contributions 6,820 7,127,660
------------ ------------
Total additions 22,381,814 30,556,800
------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distribution to participants (Note 8) 22,023,786 37,541,145
Investment and administrative expenses 62,666 171,454
------------ ------------
Total deductions 22,086,452 37,712,599
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR BENEFITS 295,362 (7,155,799)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 181,831,117 188,986,916
------------ -----------
End of year $182,126,479 $181,831,117
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Southern Pacific Rail Corporation Thrift
Plan (the Plan), prior to the adoption of amendments as described in Note
5, 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 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.
Plan Merger - 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.
Spin-Off - In September 1996, UPC's 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
Union Pacific Corporate's Res Fund (Excl Divs) (formerly Resources Stock
Fund). Future contributions to the Resources Stock are not permitted.
Contributions - Prior to 1998, participants could elect to make employee
contributions in an amount not less than 1% nor more than 16% of their
salary. These contributions could 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 matched
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
<PAGE> 5
Plan was amended to disallow any participant contributions after December
31,1997. (See Note 5)
Loans to Participants - Effective January 1, 1998, participants are
eligible to make a loan from their accounts (see Note 5). 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. The
loans bear interest ranging from 7.75% to 8.5%. The number of loans
outstanding at December 31, 1998, was 179.
Participant's Accounts - Each participant's account is credited with the
participant's contributions, employer contributions and an allocation of
the Plan's earnings (or losses) based on the type of investments selected
and their performance. The allocations are based on each participant's
account balance by investment type.
Vesting - Participant and employer contributions are fully vested when
made.
Investment Options - For 1998, a participant may direct investment
allocations 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 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 Prime Money Market Fund - 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 Fund - Funds are invested in shares of a
registered investment company that invests in foreign common stocks with
high growth potential.
Vanguard Total Bond Market Index Fund - Funds are invested in shares of
a registered investment company that invests in fixed income securities
in a manner that is designed to closely track the investment performance
of the Lehman Brothers Aggregate Bond Index.
Through May 30, 1997, participants could direct contributions in 1%
increments in any of the following six investment options:
<PAGE> 6
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.
Union Pacific Common Stock Fund - Funds are primarily 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.
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 UPC. Administration expenses of the Plan,
with the exception of investment management fees, are paid by UPC.
Investment management fees are paid by the Plan directly from fund
earnings.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - In 1998, the Plan changed its method of accounting
from a modified cash basis, which is a comprehensive basis of accounting
other than generally accepted accounting principles, to an accrual basis
of accounting. The change did not have a material effect on the Plan's
financial statements. 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 Common Stock Fund, Union Pacific Corporate's Res Fund (Excl Divs)
(formerly Resources Stock Fund), Vanguard Wellington Fund, Union Pacific
Index Fund, Vanguard U.S. Growth Fund, Vanguard International Growth Fund,
and the Vanguard Total Bond Market Index Fund are valued at fair value as
determined by quoted market prices. Investments in the Fixed Income Fund
and the Vanguard Prime Money Market Fund are valued at fair value as
<PAGE> 7
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.
Payment of Benefits - Benefits are recorded when paid.
3. INVESTMENTS
The following table presents the fair value of investments:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1997
Investments at Fair Value as Determined by
<S> <C> <C>
Quoted Market Price:
Master Trust $ 89,450,324 $ 79,300,412
Investments at Estimated Fair Value:
Master Trust 92,676,155 102,530,705
------------ ------------
$182,126,479 $181,831,117
============ ============
</TABLE>
During 1998 and 1997, the Plan's investments (including bought, sold and
held during the year) appreciated (depreciated) in value by $12,124,244
and $12,656,999, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
Net Change in Fair Value 1998 1997
Investments at Fair Value as Determined by
<S> <C> <C>
Quoted Market Price:
Master Trust $12,167,145 $ 5,345,207
Commingled Funds - 6,964,859
Common Stock - 420,977
----------- -----------
12,167,145 12,731,043
----------- -----------
Investments at Estimated Fair Value:
Master Trust (42,901) (74,044)
----------- -----------
Net change in fair value $12,124,244 $12,656,999
=========== ===========
</TABLE>
<PAGE> 8
4. MASTER TRUST
The assets comprising the Master Trust are presented in the following
table:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
Investments at Fair Value as Determined by
Quoted Market Price:
<S> <C> <C>
Common Stock $180,799,876 $180,366,490
Mutual Funds 502,653,251 445,408,000
------------ ------------
683,453,127 625,774,490
------------ ------------
Investments at Estimated Fair Value:
Mutual Funds 4,705,410 4,472,397
Guaranteed Investment Contracts 186,741,644 201,246,115
Participant Loans 20,156,166 18,826,627
------------ ------------
211,603,220 224,545,139
------------ ------------
Total Investments at Fair Value $895,056,347 $850,319,629
============ ============
</TABLE>
Total interest and dividends of the Master Trust was $38,830,582 and
$42,436,033 for the years ended December 31, 1998 and 1997, respectively.
During 1998 and 1997, the Master Trust's investments (including
investments bought, sold, and held during the year) appreciated in value
by $45,660,314 and $51,517,049, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
Net appreciation (depreciation) in fair value 1998 1997
<S> <C> <C>
Common Stocks $(24,017,989) $(2,627,738)
Mutual Funds 69,817,674 54,009,125
Guaranteed Investment Contracts (139,371) 135,662
------------ -----------
Net change in fair value $ 45,660,314 $51,517,049
============ ===========
</TABLE>
At December 31, 1998 and 1997, the Plan held percentage interests in the
Master Trust of 20.4% and 21.4%, 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
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.
<PAGE> 9
Effective January 1, 1998, the Plan was amended to disallow any
participant contributions after December 31, 1997. No new participants
were allowed in the Plan 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.
6. TAX STATUS
The Plan has received a favorable letter of determination from the
Internal Revenue Service dated February 8, 1996 which stated that the Plan
is qualified under the provisions of Sections 401(a) of the Internal
Revenue Code of 1986, as amended, and exempt from Federal income taxes
under Section 501(a). The Plan has been amended since receiving the
determination letter. 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. Submissions to the VCR program were made on December 16, 1996,
July 8, 1998 and February 19, 1999. Compliance letters were received on
the first two filings on June 24, 1998 and February 1, 1999, respectively.
The February 19, 1999 filing is still pending. Therefore, no provision for
income taxes has been included in the Plan's financial statements.
7. PLAN TERMINATION
Although the Plan is intended to be continued by UPC, UPC reserves the
right to amend or terminate the Plan. In the event of a full or partial
Plan termination, or UPC permanently ceases to make contributions, all
invested amounts shall immediately vest and be non-forfeitable. All funds
shall continue to be held for distribution as provided in the Plan. (See
Note 1)
<PAGE> 10
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, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
Investments:
<S> <C> <C>
Union Pacific Common Stock Fund * $ 9,951,464 $ 3,649,129
Union Pacific Equity Fund * 41,337,063 39,246,723
Union Pacific Fixed Income Fund * 90,526,223 102,175,722
Union Pacific Corporate's
Res Fund (Excl Divs) 102,716 419,853
Vanguard Wellington Fund * 18,710,085 21,254,363
Vanguard Prime Money Market Fund 123,930 354,983
Vanguard U.S. Growth Fund * 15,567,217 11,225,160
Vanguard International Growth Fund 3,317,184 3,451,628
Vanguard Total Bond Market Index Fund 464,595 53,556
Loan Fund 2,026,002 -
------------ ------------
$182,126,479 $181,831,117
============ ============
Investment Income:
Fixed Investment Fund $ - $ 3,278,325
Value Equity Fund - 4,335,308
Balanced Fund - 1,574,122
International Equity Fund - 476,979
Growth Equity Fund - 578,511
Union Pacific Common Stock Fund (765,726) 244,840
Union Pacific Equity Fund 10,062,380 5,548,473
Union Pacific Fixed Income Fund 5,998,305 4,321,507
Union Pacific Corporate's
Res Fund (Excl Divs) (189,718) (92,375)
Vanguard Wellington Fund 2,340,399 2,409,685
Vanguard Prime Money Market Fund 19,385 9,310
Vanguard U.S. Growth Fund 4,288,594 976,303
Vanguard International Growth Fund 486,442 (232,310)
Vanguard Total Bond Market Index Fund 26,582 462
Loan Fund 108,351 -
------------ ------------
$ 22,374,994 $ 23,429,140
============ ============
</TABLE>
<PAGE> 11
8. FUND INFORMATION (continued)
<TABLE>
<CAPTION>
1998 1997
Contributions:
<S> <C> <C>
Fixed Investment Fund $ - $ 1,605,842
Value Equity Fund - 698,345
Balanced Fund - 378,395
International Equity Fund - 99,409
Growth Equity Fund - 230,976
Union Pacific Common Stock Fund - 205,142
Union Pacific Equity Fund 181 919,990
Union Pacific Fixed Income Fund 6,326 1,886,218
Union Pacific Corporate's
Res Fund (Exc Divs) - -
Vanguard Wellington Fund 199 581,213
Vanguard Prime Money Market Fund - 692
Vanguard U.S. Growth Fund 96 377,133
Vanguard International Growth Fund 18 138,173
Vanguard Total Bond Market Index F - 6,132
Loan Fund - -
----------- -----------
$ 6,820 $ 7,127,660
=========== ===========
Distributions to participants:
Fixed Investment Fund $ - $10,147,734
Value Equity Fund - 1,831,273
Balanced Fund - 1,211,753
International Equity Fund - 277,421
Growth Equity Fund - 293,790
Union Pacific Common Stock Fund 416,918 2,760,222
Union Pacific Equity Fund 5,141,444 3,211,686
Union Pacific Fixed Income Fund 11,774,028 13,261,296
Union Pacific Corporate's
Res Fund (Excl Divs) 26,817 108,886
Vanguard Wellington Fund 2,634,612 2,038,630
Vanguard Prime Money Market Fund 10,325 357,698
Vanguard U.S. Growth Fund 1,285,319 1,590,503
Vanguard International Growth Fund 547,969 450,253
Vanguard Total Bond Market Index Fund 150,890 -
Loan Fund 35,464 -
----------- -----------
$22,023,786 $37,541,145
=========== ===========
</TABLE>
* Represents more than 5% of the net assets available for benefits.
9. 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 a party-in-interest. In addition, as of September 11, 1996 (the merger
date), the Plan held stock issued by Union Pacific Corporation. Union
Pacific Corporation is the holding company of the Plan sponsor, therefore,
these transactions qualify as party-in-interest transactions. Prior to the
merger, the Plan held stock issued by the Plan sponsor, Southern Pacific
Rail Corporation (Note 1).
