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Exhibit 99.3
FRED MEYER, INC. 401(k) SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
AS OF MARCH 31, 2000 AND FOR THE YEAR ENDED
MARCH 31, 2000
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FRED MEYER, INC. 401(k) SAVINGS PLAN
TABLE OF CONTENTS
PAGE
Report of Independent Accountants.............................................1
Financial Statements:
Statement of Net Assets Available for Benefits
March 31, 2000.......................................................2
Statement of Changes in Net Assets Available for Benefits
For the Year Ended March 31, 2000....................................3
Notes to Financial Statements ...........................................4
Supplemental Schedules: *
Schedule H Part IV Line i
Schedule of Assets Held for Investment Purposes at End of Year
March 31, 2000.......................................................9
Schedule H Part IV Line j
Schedule of Reportable Transactions - Single
For the Year Ended March 31, 2000....................................10
Schedule H Part IV Line j
Schedule of Reportable Transactions - Series
For the Year Ended March 31, 2000....................................11
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations of Reporting and Disclosure under ERISA have
been omitted because they are not applicable.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
Fred Meyer, Inc. 401(k) Savings Plan
We have audited the accompanying statement of net assets available for benefits
(modified cash basis) of the Fred Meyer, Inc. 401(k) Savings Plan (the Plan) as
of March 31, 2000, and the related statement of changes in net assets available
for benefits (modified cash basis) for the year ended March 31, 2000. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As described in Note 2, these financial statements and supplemental schedules
were prepared on a modified cash basis of accounting, which is a comprehensive
basis of accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
March 31, 2000, and the changes in net assets available for benefits for the
year ended March 31, 2000, on the basis of accounting described in Note 2.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules (modified cash
basis) of Assets Held for Investment Purposes at End of Year and of Reportable
Transactions 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. The supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements, and in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
September 22, 2000
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FRED MEYER, INC. 401(k) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
MARCH 31, 2000
ASSETS
Investments at fair value (Note 6) $553,133,672
Participant loans 12,633,431
Cash 10,091
------------
Net assets available for benefits $565,777,194
============
The accompanying notes are an integral part of the financial statements.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED MARCH 31, 2000
Additions:
Assets transferred from predecessor benefit plans:
Transferred assets $472,841,219
Transferred loans 2,808,255
------------
Total transfers 475,649,474
------------
Investment income:
Net appreciation in fair value of investments (Note 6) 53,722,859
Interest and dividends 19,048,368
------------
Net investment income 72,771,227
------------
Contributions:
Employee contributions 36,919,147
Employer contributions 18,184,839
------------
Total contributions 55,103,986
------------
Total additions 603,524,687
Deductions:
Benefit payments to participants 37,648,576
Administrative expenses (Note 3) 98,917
------------
Total deductions 37,747,493
Net increase in net assets available for benefits 565,777,194
Net assets available for benefits, beginning of year --
------------
Net assets available for benefits, end of year $565,777,194
============
The accompanying notes are an integral part of the financial statements.
3
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FRED MEYER, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following description of the Fred Meyer, Inc. 401(k) Savings Plan (the
Plan) provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions.
GENERAL
The Plan is sponsored by Fred Meyer, Inc. a Delaware corporation, and its
wholly-owned subsidiaries (collectively, the Company). The Plan is a
defined contribution plan covering all employees of Fred Meyer, Inc. and
its subsidiaries. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). All employees who are 21
years of age and older and have completed one year of service are eligible
to participate in the Plan, unless their employment is subject to a
collective bargaining agreement, are non-resident aliens or leased
employees.
On April 1, 1999 the following Fred Meyer and subsidiary plans were merged
together to form the Fred Meyer, Inc. 401(k) Savings Plan:
o Fred Meyer Profit Sharing Plan
o Smith's Food & Drug, Inc. 401(k) Savings Plan
o Ralphs Grocery Company Savings Plan Plus - Primary
o Ralphs Grocery Company Savings Plan Plus - Basic
o Hughes Markets, Inc. Employee's Profit Sharing Plan
o Keith Uddenberg, Inc. 401(k) Profit Sharing Plan and Trust
o Quality Food Centers Defined Contribution Plan
o Quality Food Centers 401(k) Retirement Plan
CONTRIBUTIONS
Each year participants may contribute up to 18% of pretax annual
compensation, as defined by the Plan. Participants direct the investment of
their contributions into various investment options offered by the Plan.
The Plan currently offers nine mutual funds and a direct investment into
Kroger Company Stock to all eligible participants.
The Company contributes 100% of the first 3% of salary deferrals plus 50%
of the next 2% of deferrals. The matching contributions are invested as the
participants have designated for their salary contributions.
Employees may also rollover funds of qualified distributions from
tax-qualified retirement plans of prior employers.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's matching contribution and (b) Plan
earnings and losses. Allocations are based on participant earnings/losses
or account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's vested
account.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN (CONTINUED)
VESTING
Participants are vested immediately in their contributions plus actual
earning thereon, rollover contributions and earnings thereon, predecessor
plan contributions and earnings thereon, and company matching contributions
and earnings thereon.
PARTICIPANT LOANS
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 vested account
balance, whichever is less. The loans are secured by the balance in the
participant's account and bear interest at rates that range from 8% to 10%,
which are commensurate with local prevailing interest rates for similar
borrowing as determined monthly by the Plan Committee. Principle and
interest are paid ratably through weekly payroll deductions.
INVESTMENT OPTIONS
The Plan's investment options are comprised of The Kroger Co. common stock
and nine T. Rowe Price mutual and trust funds - Blue Chip Growth Fund,
Equity Income Fund, Blended Summit Cash Reserve Fund, Balanced Fund, Small
Cap Stock Fund, Mid Cap Growth Fund, Bond Indexed Trust, International
Stock Fund and Equity Index Trust. The investment strategies of these funds
are as follows:
Blue Chip Growth Fund (BCG) - The fund's investment objective is to provide
long-term capital growth. Income is a secondary objective.
Equity Income Fund (EIF) - The fund's investment objective is to provide
substantial dividend income as well as long-term capital appreciation
through investments in common stocks of established companies.
Blended Summit Cash Reserve Fund (BSCR) - The fund's investment objective
is the preservation of capital and liquidity and, consistent with these,
the highest possible current income.
Balanced Fund (BAL) - The fund's investment objective is to provide capital
appreciation, current income and preservation of capital through a
portfolio of stocks and fixed income securities.
Small Cap Stock Fund (SCS) - The fund's investment objective is to provide
long-term capital growth by investing primarily in stocks of small
companies.
Mid Cap Growth Fund (MCG) - The fund's investment objective is to provide
long-term capital appreciation by investing in mid cap stocks offering the
potential for above average earnings growth.
Bond Indexed Trust (BIT) - The investment objective of the trust is to
track returns associated with government bonds.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS (CONTINUED)
International Stock Fund (ISF) - The fund's investment objective is
long-term growth of capital through investments primarily in common stocks
of established, non-U.S. companies.
Equity Index Trust (EIT) - The fund's investment objective is to match the
performance of the Standard & Poor's 500 Stock Index (S&P 500). The S&P 500
is made up of primarily large capitalization companies that represent a
broad spectrum of the U.S. economy and about 70% of the U.S. stock market's
total capitalization.
Rollovers - The Administrative Committee determined that rollovers from
other plans would be allowed and invested as the participant directs.
PAYMENT OF BENEFITS
On termination of service due to death, disability, or retirement, a
participant may elect to receive either a lump-sum amount equal to the
value of the participant's vested interest in his or her account, or annual
installments up to a maximum of 20 years, or the participant's life
expectancy. For termination of service for other reasons, a participant may
receive the value of the vested interest in his or her account as a
lump-sum distribution. Hardship and financial need withdrawals are provided
to the extent of the participant's need, grossed up for taxes and
penalties, and matching contributions are not available for hardship
withdrawal.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements and supplemental schedules of the Plan were
prepared using the modified cash basis of accounting, which is the
equivalent of the accrual basis except that certain income receivable,
contribution receivable and plan accruals balances are not recorded. This
practice is not in accordance with generally accepted accounting
principles, but is permitted under ERISA.
USE OF ESTIMATES
The preparation of financial statements in conformity with the modified
cash basis of accounting requires management to make estimates and
assumptions the affect the reported amounts of assets and liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Quoted market prices are
used to value investments. Shares of mutual funds are valued at the net
asset value of shares held by the Plan at year-end. Purchases and sales of
securities are recorded on a trade-date basis. Interest income and dividend
income are recorded on the date received by the Plan. Investment advisors
under the supervision of the Plan's Administrative Committee manage these
investments.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PAYMENT OF BENEFITS
Benefits are recorded when paid.
FEES AND EXPENSES
The Plan provides that the Company will pay the administrative costs and
expense of the Plan including the trustee and management fees. Such costs
not paid by the Company are paid from the Plan assets.
3. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price. T. Rowe Price is the trustee and recordkeeper as defined by the Plan
and, therefore, these transactions qualify as party-in-interest
transactions. Fees paid by the Plan for the investment management and
recordkeeping services amounted to $98,917 for the year ended March 31,
2000.
4. PLAN TERMINATION
Although the Company presently has no plans to terminate the Plan, it may
do so at its sole discretion. In no event shall any part of the Plan's
assets be used for any purpose other than for the exclusive benefit of the
participants or their beneficiaries.
5. TAX STATUS
A tax determination letter request from the Internal Revenue Services has
not been completed as of March 31, 2000. However, the Plan administrator
and the Plan's tax counsel believe the Plan is designed and is currently
being operated in compliance with the applicable requirements of the
Internal Revenue Code.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. INVESTMENTS
The Plan's assets held for investment purposes at March 31, are presented
in the following table:
<TABLE>
<CAPTION>
<S> <C>
The Kroger Co. common stock; 844,082 shares $ 14,824,188
T. Rowe Price Blue Chip Growth Fund; 5,959,918 shares 230,231,620 *
T. Rowe Price Equity Income Fund; 603,096 shares 14,015,951
T. Rowe Price Blended Summit Cash Reserve Fund; 40,558,003 shares 40,558,003 *
T. Rowe Price Balanced Fund; 8,650,574 shares 173,270,995 *
T. Rowe Price Small Cap Stock Fund; 247,624 shares 6,173,256
T. Rowe Price Mid Cap Growth Fund; 417,984 shares 18,445,619
T. Rowe Price Bond Indexed Trust; 1,061,211 shares 16,512,439
T. Rowe Price International Stock Fund; 567,072 shares 10,842,426
T. Rowe Price Equity Index Trust; 717,056 shares 28,259,175
Participant loans 12,633,431
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Total assets held for investment purposes $565,767,103
============
</TABLE>
* Represents greater than 5% of net assets available for benefits.
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
in value by $53,722,859 as follows:
<TABLE>
<CAPTION>
<S> <C>
Common stock $ 1,047,276
Mutual funds 52,675,583
------------
$ 53,722,859
============
</TABLE>
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SUPPLEMENTAL SCHEDULES
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FRED MEYER, INC. 401(k) SAVINGS PLAN
SCHEDULE H PART IV LINE i
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
MARCH 31, 2000
<TABLE>
<CAPTION>
(c)
DESCRIPTION OF INVESTMENT
(b) INCLUDING MATURITY DATE, RATE (e)
IDENTITY OF ISSUE, OF INTEREST, COLLATERAL, PAR, OR (d) CURRENT
(a) BORROWER, LESSOR, OR SIMILAR PARTY MATURITY VALUE COST** VALUE
--- ---------------------------------------------- ------------------------------------ ------ ------------
<S> <C> <C> <C> <C>
* The Kroger Co. common stock Company Stock $ -- $ 14,824,188
* T. Rowe Price Blue Chip Growth Fund Mutual Fund -- 230,231,620
* T. Rowe Price Equity Income Fund Mutual Fund -- 14,015,951
* T. Rowe Price Blended Summit Cash Reserve Fund Custom Fund -- 40,558,003
* T. Rowe Price Balanced Fund Mutual Fund -- 173,270,995
* T. Rowe Price Small Cap Stock Fund Mutual Fund -- 6,173,256
* T. Rowe Price Mid Cap Growth Fund Mutual Fund -- 18,445,619
* T. Rowe Price Bond Indexed Trust Common Trust -- 16,512,439
* T. Rowe Price International Stock Fund Mutual Fund -- 10,842,426
* T. Rowe Price Equity Index Trust Common Trust -- 28,259,175
* Participant loans Interest rates from 8.00% to 10.00%,
due from January 2000 to May 2025 -- 12,633,431
</TABLE>
* Represents party-in-interest.
** Historical cost has not been presented as all investments are participant
directed.
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FRED MEYER, INC. 401(k) SAVINGS PLAN
SCHEDULE H PART IV LINE j
SCHEDULE OF REPORTABLE TRANSACTIONS - SINGLE
FOR THE YEAR ENDED MARCH 31, 2000
Transactions or series of transactions in excess of 5% of the current value of
the Plan's assets as of March 31, 2000, reportable under the provisions of the
Employee Retirement Income Security Act of 1974, were as follows for
non-participant directed investments for the period ended March 31, 2000.
<TABLE>
<CAPTION>
(b) (c) (d)
(a) DESCRIPTION PURCHASE SELLING
IDENTITY OF PARTY INVOLVED OF ASSET PRICE PRICE
----------------------------------- ----------- ------------ --------
<S> <C> <C> <C>
T. Rowe Price Balanced Fund Mutual fund $184,225,364 $ --
T. Rowe Price Blue Chip Growth Fund Mutual fund 171,645,610 --
</TABLE>
<TABLE>
<CAPTION>
(h)
(f) CURRENT
EXPENSE VALUE OF
(e) INCURRED (g) ASSET ON (i)
(a) LEASE WITH COST OF TRANSACTION NET GAIN
IDENTITY OF PARTY INVOLVED RENTAL TRANSACTION ASSET DATE OR (LOSS)
------------------------------------ -------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
T. Rowe Price Balanced Fund $ -- $ -- $184,225,364 $184,225,364 $ --
T. Rowe Price Blue Chip Growth Fund -- -- 171,645,610 171,645,610 --
</TABLE>
10
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FRED MEYER, INC. 401(k) SAVINGS PLAN
SCHEDULE H PART IV LINE j
SCHEDULE OF REPORTABLE TRANSACTIONS - SERIES
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
(b) (c) (d)
(a) DESCRIPTION PURCHASE SELLING
IDENTITY OF PARTY INVOLVED OF ASSET PRICE PRICE
----------------------------------- ----------- ------------ --------
<S> <C> <C> <C>
T. Rowe Price Balanced Fund Mutual fund $187,493,857 $ --
T. Rowe Price Blended Summit Cash
Reserve Fund Custom fund 34,900,175 --
T. Rowe Price Blue Chip Growth Fund Mutual fund 184,325,095 --
</TABLE>
<TABLE>
<CAPTION>
(h)
(f) CURRENT
EXPENSE VALUE OF
(e) INCURRED (g) ASSET ON (i)
(a) LEASE WITH COST OF TRANSACTION NET GAIN
IDENTITY OF PARTY INVOLVED RENTAL TRANSACTION ASSET DATE OR (LOSS)
----------------------------------- -------- ----------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
T. Rowe Price Balanced Fund $ -- $ -- $187,493,857 $187,493,857 $ --
T. Rowe Price Blended Summit Cash
Reserve Fund -- -- 34,900,175 34,900,175 --
T. Rowe Price Blue Chip Growth Fund -- -- 184,325,095 184,325,095 --
</TABLE>
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