BURLINGTON NORTHERN SANTA FE CORP, 10-K/A, 1999-04-13

BURLINGTON NORTHERN SANTA FE CORP
10-K/A, 1999-04-13
RAILROADS, LINE-HAUL OPERATING

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------

Form 10-K/A

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
__________ __________

Commission File Number: 1-11535

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Burlington Northern Santa Fe Corporation
(Exact name of registrant as specified in its charter)

Delaware 41-1804964
(State of Incorporation) (I.R.S. Employer Identification No.)

2650 Lou Menk Drive
Second Floor
Fort Worth, Texas 76131-2830
(Address of principal executive offices, including zip code)

817/333-2000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
New York Stock Exchange
Common Stock, $0.01 par value Chicago Stock Exchange
Pacific Exchange
</TABLE>

----------------

Securities registered pursuant to Section 12(g) of the Act: None

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 requirement 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. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $15.7 billion on February 26, 1999. For
purposes of this calculation only, the registrant has excluded stock
beneficially owned by directors and officers. By doing so, the registrant does
not admit that such persons are affiliates within the meaning of Rule 405
under the Securities Act of 1933 or for any other purpose.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

Common Stock, $0.01 par value, 470,373,788 shares outstanding as of
February 26, 1999.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the documents from which parts thereof have been
incorporated by reference and the part of the Form 10-K into which such
information is incorporated:

<TABLE>
<S> <C>
Annual Report to Shareholders for the fiscal year ended
December 31, 1998.......................................................... PARTS I, II, AND IV
Proxy Statement dated March 8, 1999.......................................... PART III
</TABLE>

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
PART I

<S> <C>
Items 1 and 2. Business and Properties.................................... 1

Item 3. Legal Proceedings................................................. 9

Item 4. Submission of Matters to a Vote of Security Holders............... 13

EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 13

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 14

Item 6. Selected Financial Data........................................... 14

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 14

Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 14

Item 8. Financial Statements and Supplementary Data....................... 17

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 17

PART III

Item 10. Directors and Executive Officers of the Registrant............... 18

Item 11. Executive Compensation........................................... 18

Item 12. Security Ownership of Certain Beneficial Owners and Management... 18

Item 13. Certain Relationships and Related Transactions................... 18

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 18

SIGNATURES................................................................ S-1

REPORT OF INDEPENDENT ACCOUNTANTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE................................................................. F-1

EXHIBITS.................................................................. E-1
</TABLE>

i
<PAGE>

PART I

ITEMS 1 and 2. Business and Properties

Burlington Northern Santa Fe Corporation ("BNSF") was incorporated in the
State of Delaware on December 16, 1994. On September 22, 1995, the
stockholders of Burlington Northern Inc. ("BNI") and Santa Fe Pacific
Corporation ("SFP") became the stockholders of BNSF pursuant to a business
combination of the two companies. To effect the combination, BNSF was formed
to act as the parent holding company of BNI and SFP. BNI and SFP each owned a
large, Class I railroad: Burlington Northern Railroad Company ("BNRR") and The
Atchison, Topeka and Santa Fe Railway Company ("ATSF"), respectively.

On December 30, 1996, BNI merged with and into SFP. On December 31, 1996,
ATSF merged with and into BNRR, and BNRR changed its name to The Burlington
Northern and Santa Fe Railway Company ("BNSF Railway"). On January 2, 1998,
SFP merged with and into BNSF Railway.

Through March 6, 1998, BNSF also had an equity interest in Santa Fe Pacific
Pipeline Partners, L.P. and its operating subsidiary, which operated a 3,300-
mile refined petroleum products pipeline system in six western and
southwestern states, substantially all of which interest has now been sold.
See the discussion in Note 2 to the Consolidated Financial Statements on pages
30-31 of BNSF's 1998 Annual Report to Shareholders, which information is
hereby incorporated by reference.

Through its subsidiaries, BNSF is engaged primarily in the rail
transportation business. At December 31, 1998, BNSF and its subsidiaries had
approximately 42,900 employees. The rail operations of BNSF Railway, BNSF's
principal operating subsidiary, comprise one of the largest railroad systems
in the United States. BNSF Railway's business and operations are described
below.

TRACK CONFIGURATION

BNSF Railway operates over a railroad system consisting of, at December 31,
1998, approximately 34,000 route miles of track (excluding, among other
things, second main track), approximately 25,000 miles of which are owned
route miles, including easements, through 28 states and two Canadian
provinces. Approximately 7,700 route miles of BNSF Railway's system consist of
trackage rights which permit BNSF Railway to operate its trains with its crews
over another railroad's tracks. BNSF Railway operates over other trackage
through lease or contractual arrangements.

As of December 31, 1998, the total BNSF Railway system--including first,
second, third and fourth main tracks, yard tracks, and sidings--consisted of
approximately 51,000 operated miles of track, all of which were owned by or
held under easement by BNSF Railway except for approximately 8,500 miles
operated under trackage rights agreements with other parties. At December 31,
1998, approximately 27,000 miles of BNSF Railway's track consisted of 112-
pound per yard or heavier rail, including approximately 18,800 track miles of
131-pound per yard or heavier rail.
<PAGE>

Equipment Configuration

BNSF Railway owned or had under non-cancelable leases exceeding one year
the following units of railroad rolling stock as of the dates shown below:
<TABLE>
<CAPTION>
At December 31,
--------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Diesel Locomotives................................... 4,992 4,697 4,434
====== ====== ======
Freight Cars:
Box--general purpose............................... 948 1,042 1,082
Box--specially equipped............................ 10,295 10,533 10,719
Open Hopper........................................ 10,772 10,617 10,430
Covered Hopper..................................... 44,643 43,145 44,112
Gondola............................................ 12,427 11,845 11,714
Refrigerator....................................... 6,476 6,606 6,817
Autorack........................................... 3,304 3,588 3,597
Flat............................................... 6,289 5,454 5,508
Tank............................................... 489 491 493
Caboose............................................ 351 389 451
Other.............................................. 729 732 732
------ ------ ------
Total Freight Cars................................. 96,723 94,442 95,655
====== ====== ======
Domestic Containers.................................. 9,849 15,513 15,595
Trailers............................................. 2,410 721 821
Domestic Chassis..................................... 9,409 5,152 5,273
Company Service Cars................................. 4,685 5,196 6,140
Commuter Passenger Cars.............................. 141 141 141
</TABLE>

In addition to the containers, trailers, and chassis shown above, BNSF
Railway had under short-term leases 12,269 containers, 3,101 trailers, and
15,623 chassis at December 31, 1998. In addition to the owned and leased
locomotives identified above, BNSF Railway operated 99 freight locomotives
under power-purchase agreements as of December 31, 1998. The average age from
date of manufacture of the locomotive fleet at December 31, 1998 was 10.63
years; the average age from date of manufacture or remanufacture of the
freight car fleet at December 31, 1998 was 20.78 years. These averages are not
weighted to reflect the greater capacities of the newer equipment.

Capital Expenditures and Maintenance

BNSF Railway capital expenditures for the periods indicated were as
follows:

<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1998 1997 1996
------ ------ ------
(in millions)
<S> <C> <C> <C>
Maintenance of Way
Rail.............................................. $ 238 $ 286 $ 188
Ties.............................................. 220 230 191
Surfacing......................................... 136 124 130
Other............................................. 323 334 345
------ ------ ------
Total Maintenance of Way........................ 917 974 854
Equipment........................................... 583 572 544
Terminal and Line Expansion......................... 488 428 439
Other............................................... 159 208 445
------ ------ ------
Total Capital Expenditures.......................... 2,147 2,182 2,282
Less Non-Cash Capital Expenditures(1)............... -- -- 48
------ ------ ------
Net Cash Capital Expenditures....................... $2,147 $2,182 $2,234
====== ====== ======
</TABLE>
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(1) Consists primarily of directly financed equipment acquisitions.

2
<PAGE>

The above table does not include expenditures for equipment financed
through operating leases (principally, locomotives and rolling stock). BNSF's
planned 1999 cash capital expenditures approximate $2.1 billion, although up
to $200 million primarily related to expansion projects may be deferred beyond
1999. Approximately $1.3 billion of total expenditures will be for maintenance
of business activities, primarily consisting of expenditures to maintain
BNSF's track, signals, bridges and tunnels, and to overhaul locomotives and
freight cars. The remainder will be spent on terminal and line expansions and
other projects, and on approximately $335 million of new locomotive
acquisitions. In addition to the capital expenditures on new locomotives, BNSF
Railway expects to acquire approximately $400 million of new locomotives
through long-term operating leases in 1999.

As of December 31, 1998, General Electric Company, the Electro-Motive
Division of General Motors Corporation, and Boise Locomotive Corporation
performed locomotive maintenance and overhauls for BNSF Railway under various
maintenance agreements that covered approximately 2,300 locomotives. These
agreements require the work to be done at BNSF Railway's facilities using BNSF
Railway employees.

The majority of maintenance of way expenditures for track have been for
rail and tie refurbishment and track resurfacing. The extent of the BNSF
Railway track maintenance program is depicted in the following table:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Track miles of rail laid (1)......................... 1,029 1,035 1,139
Cross ties inserted (thousands)(1)................... 2,440 2,941 3,768
Track resurfaced (miles)............................. 12,383 12,430 12,033
</TABLE>
- --------
(1) Includes expenditures for both maintenance of existing route system and
expansion projects. These expenditures are primarily capitalized.

BNSF Railway's planned 1999 track maintenance of way program, together with
expansion projects, calls for the installation of approximately 800 track
miles of rail, the replacement of about 2.4 million ties and the resurfacing
of approximately 12,500 miles of track.

PROPERTY AND FACILITIES

BNSF Railway operates facilities and equipment to maintain its track,
locomotives and freight cars. It also owns or leases other equipment to
support rail operations, such as highway trailers, containers and vehicles.
Support facilities for rail operations include yards and terminals throughout
its rail network, system locomotive shops to perform locomotive servicing and
maintenance, a centralized network operations center for train dispatching and
network operations monitoring and management in Fort Worth, Texas, computers,
telecommunications equipment, signal systems, and other support systems.
Transfer facilities are maintained for rail-to-rail as well as intermodal
transfer of containers, trailers and other freight traffic. These facilities
include 38 major intermodal hubs located across the system and 11 intermodal
hub centers off-line used in connection with haulage agreements with other
railroads. BNSF Railway's largest intermodal facilities in terms of 1998
volume are:

<TABLE>
<CAPTION>
INTERMODAL FACILITIES UNITS
--------------------- -------
<S> <C>
Hobart Yard (Los Angeles)......................................... 937,000
Corwith Yard (Chicago)............................................ 728,000
Willow Springs.................................................... 637,000
Chicago Hub Center................................................ 426,000
Alliance.......................................................... 377,000
San Bernardino.................................................... 302,000
Seattle International Gateway (SIG)............................... 292,000
</TABLE>

3
<PAGE>

BNSF Railway owns 27 automotive distribution facilities where automobiles
are loaded or unloaded from multi-level rail cars and serves eight port
facilities in the United States and Canada.

BNSF Railway's largest freight car classification yards based on the
average daily number of cars processed (excluding cars that do not change
trains at the terminal and intermodal and coal cars) are shown below:

<TABLE>
<CAPTION>
DAILY AVERAGE
CLASSIFICATION YARD CARS PROCESSED
------------------- --------------
<S> <C>
Argentine (Kansas)......................................... 1,690
Galesburg (Illinois)....................................... 1,450
Northtown (Minnesota)...................................... 1,400
Memphis (Tennessee)........................................ 1,200
Barstow (California)....................................... 1,170
Pasco (Washington)......................................... 1,080
</TABLE>

Certain BNSF Railway properties and other assets are subject to liens
securing, as of December 31, 1998, $498 million of mortgage debt. Certain
locomotives and rolling stock of BNSF Railway are subject to equipment
obligations, as referred to in Note 8 to the Consolidated Financial Statements
on pages 32-33 of BNSF's 1998 Annual Report to Shareholders, which information
is hereby incorporated by reference.

EMPLOYEES AND LABOR RELATIONS

Productivity as measured by revenue ton miles per employee has risen
steadily in the last three years, while compensation and benefits expense per
revenue ton mile decreased from 1997 to 1998, and increased from 1996 to 1997,
as shown in the table below.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Thousand revenue ton-miles divided by average number of
employees.................................................. 10,576 9,769 9,398
Compensation and benefits expense per thousand revenue ton-
miles...................................................... $6.00 $6.30 $6.23
</TABLE>

Approximately 88 percent of BNSF Railway employees are union-represented.
They work under collective bargaining agreements with 13 different labor
organizations. The collective bargaining agreements reached in 1996 and 1997
as a result of industry-wide and certain local labor contract negotiations
will remain in effect through at least December 31, 1999 and until new
agreements are reached or the Railway Labor Act's procedures (which include
mediation, cooling-off periods, and the possibility of Presidential
intervention) are exhausted.

Railroad industry personnel are covered by the Railroad Retirement System
instead of Social Security. BNSF Railway's contributions under the Railroad
Retirement System are approximately triple those in industries covered by
Social Security.

Railroad industry personnel are also covered by the Federal Employers'
Liability Act ("FELA") rather than by state workers' compensation systems.
FELA is a fault-based system, with compensation for injuries settled by
negotiation and litigation, not subject to specific statutory limitations on
the amount of recovery. By contrast, most other industries are covered under
state-administered no-fault plans with standard compensation schedules. BNSF
Railway believes it has adequate recorded liabilities for its FELA claims.
However, the ultimate costs of these FELA claims are uncertain and the actual
costs could be significantly higher than anticipated.

Business Mix

In serving the Midwest, Pacific Northwest and the Western, Southwestern,
and Southeastern regions and ports of the country, BNSF Railway transports,
through one operating transportation services segment, a range of commodities
derived from manufacturing, agricultural, and natural resource industries.
Accordingly, its financial performance is influenced by, among other things,
general and industry economic conditions at the international, national, and
regional levels.

4
<PAGE>

Major markets served directly by BNSF Railway include Albuquerque,
Amarillo, Billings, Birmingham, Cheyenne, Chicago, Corpus Christi, Dallas,
Denver, Des Moines, Duluth/Superior, El Paso, Fargo/Moorhead, Fort Worth,
Galveston, Houston, Kansas City, Lincoln, Little Rock, Los Angeles, Memphis,
Mobile, New Orleans, Oklahoma City, Omaha, Phoenix, Portland, Reno, Salt Lake
City, San Antonio, the San Francisco Bay area, St. Louis, St.
Paul/Minneapolis, Seattle, Spokane, Springfield (Missouri), Tacoma, Tulsa,
Wichita, Vancouver (British Columbia), and Winnipeg (Manitoba). Other major
cities are served through Intermodal Market Extension terminals located at
various off-line points. Major ports served include Galveston, Houston, Long
Beach, Los Angeles, New Orleans, Mobile, Portland, Richmond (Oakland), San
Diego, Seattle, Duluth/Superior, Tacoma and Vancouver (British Columbia).
Canadian traffic is accessed through border crossings in Minnesota, North
Dakota, Montana, and Washington. BNSF Railway also accesses the Mexican market
through the United States/Mexico crossings at Brownsville, Eagle Pass and El
Paso, Texas and San Diego, California and, through an agreement with the Texas
Mexican Railway Company, reaches Laredo, Texas, a major border crossing point.

In 1998, approximately 28 percent of revenues were derived from Intermodal
traffic and approximately 25 percent were derived from the transportation of
Coal. About 12 percent of 1998 revenues reflected the transportation of
Agricultural Commodities, with the balance largely accounted for by the
Chemicals, Metals and Minerals, Forest Products, Consumer Goods, and
Automotive business groups.

Intermodal. The Intermodal freight business consists of the hauling of
freight containers or truck trailers by combinations of water, rail, or motor
carriers. The intermodal business is highly service-driven, and in many cases
motor carriers and railroads work jointly to provide intermodal service.

Intermodal 1998 results include revenue from four types of business:

. Direct Marketing. Direct marketing efforts resulted in approximately 33
percent of total intermodal revenue. These center around traffic
contracted from United Parcel Service and the United States Postal
Service, and service for nationwide LTL (Less-Than-Truckload) carriers
including Yellow Freight, Roadway Express, and Consolidated Freightways.

. International. International business consists primarily of traffic from
steamship companies and accounted for approximately 29 percent of
intermodal revenues.

. Intermodal Marketing Companies. Approximately 22 percent of total
intermodal revenue was generated through intermodal marketing companies,
primarily shipper agents and consolidators.

. Truckload. Truckload traffic represented approximately 16 percent of
total intermodal revenue. The joint service arrangement with J.B. Hunt,
referred to as Quantum, represented the largest truckload component,
while Schneider National was the next largest.

Coal. Based on carloadings and tons hauled, BNSF Railway is the largest
transporter of western low-sulfur coal in the United States. Approximately 90
percent of BNSF Railway's coal traffic originated in the Powder River Basin of
Wyoming and Montana during the three years ended December 31, 1998. These coal
shipments were destined for coal-fired electric generating stations located
primarily in the North Central, South Central and Mountain regions of the
United States.

BNSF Railway also transports increasing amounts of low-sulfur coal from the
Powder River Basin for delivery to markets in the eastern and southeastern
portions of the United States. The low-sulfur coal from the Powder River Basin
is abundant, inexpensive to mine, clean-burning, and has a low delivered-cost
to power plants. Because the Clean Air Act of 1990 requires power plants to
reduce emissions either by burning coal with a lower sulfur content or by
installing expensive scrubbing units by the year 2000, there are opportunities
for increased shipments of this low-sulfur coal. Also, deregulation in the
electric utility industry is expected to cause utilities to seek lower cost
fuel sources and boost demand for Powder River Basin coal.

Other coal shipments originate principally in Colorado, Illinois, New
Mexico, and North Dakota and are moved to electrical generating stations and
industrial plants in the Mountain and North Central regions.

5
<PAGE>

Agricultural Commodities. Agricultural Commodities include barley, corn,
wheat, soybeans, oils, feeds, flour and mill products, specialty grains,
malts, and milo. The BNSF Railway system is strategically located to serve the
grain-producing regions of the Midwest and Great Plains where BNSF Railway
serves most major terminal, storage, feeding and food-processing locations.
Additionally, BNSF Railway has access to major export markets in the Pacific
Northwest, western Great Lakes, and Texas Gulf regions, and in Mexico.

Chemicals. The Chemicals business is comprised of fertilizer, petroleum and
chemical commodities. Chemicals and plastics resins are transported for
industrial and agricultural use. Industrial chemicals and plastics resins are
used by the automotive, housing, and packaging industries, as well as for
feedstocks to produce other chemical and plastic products. Access to
significant additional chemicals producers along the Louisiana and Texas Gulf
Coasts, and in the Central Corridor area in Utah and Nevada, was gained as a
result of the agreement and conditions resulting from the merger of the Union
Pacific and Southern Pacific railroads. Agricultural minerals include sulphur
that generally moves to the Gulf Coast and from there via vessels to Florida
and overseas markets for use in making phosphatic fertilizers. Potash is
transported to domestic markets and to export points for markets in Canada,
Mexico, and overseas.

Metals and Minerals. The Metals and Minerals business serves virtually all
of the commodities included in or resulting from the production of steel.
Taconite, an iron ore derivative produced in northern Minnesota, scrap steel,
and coal coke are BNSF Railway's primary input products, while finished steel
products range from structural beams and steel coils to wire and nails. BNSF
Railway also hauls both ferrous and non-ferrous products including recyclable
metals. BNSF Railway links the integrated steel mills in the East with
fabricators in the West and Southwest. Service is also provided to various
mini-mills in the Southwest that produce rebar, beams, and coiled rod to the
construction industry. Various non-ferrous products such as copper, lead, and
aluminum are transported for the beverage, automotive, and telecommunications
industries. Commodities in the Metals and Minerals group also include clays,
sands, cements, aggregates, sodium compounds and other industrial minerals.
Both the oil and the construction industries are served. Industrial minerals
include various mined and processed commodities such as cement and aggregates
(construction sand, gravel and crushed stone) that generally move to domestic
markets for use in general construction and public work projects, including
highways. Borates and clays move to domestic points as well as to export
markets primarily through West Coast ports. Sodium compounds, primarily soda
ash, is moved to domestic markets for use in the manufacturing of glass and
other industrial products. Sand is utilized in the manufacturing of glass and
for use in foundry and oil drilling applications.

Forest Products. The primary commodities in Forest Products are lumber,
plywood, oriented strand board, paper products, pulpmill feedstock, and wood
pulp. Based on carloadings and tonnage hauled, BNSF Railway is the largest
rail transporter of forest products in the United States. Commodity origins
are primarily from the Pacific Northwest, upper Midwest, and the Southeast for
shipment mainly into domestic markets. Industries served include construction,
furniture, photography, publishing, newspaper, and industrial packaging.

Consumer Goods. Beverages, canned goods, and perishables are the principal
food commodities moved by BNSF Railway. Other consumer goods handled include
sugars and sweeteners, cotton, salt, rubber and tires, machinery, aircraft
parts, military and miscellaneous boxcar shipments. Shipments of waste,
ranging from municipal waste to contaminated soil, are transported to
landfills and reclamation centers across the country.

Automotive. The Automotive group is responsible for both assembled motor
vehicles and shipments of vehicle parts to numerous destinations throughout
the Midwest, Southwest, West and Pacific Northwest.

Freight Statistics. The following tables set forth certain freight
statistics relating to rail operations for the periods indicated. Certain
amounts have been reclassified to reflect changes in the business groups for
years prior to 1998 and to conform to current year presentation.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Revenue ton-miles (millions)...................... 469,045 424,588 411,059
Freight revenue per thousand revenue ton-miles.... $19.02 $19.71 $19.63
Average haul per ton (miles)...................... 970 935 875
</TABLE>

6
<PAGE>

REVENUES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1998 1997 1996
------ ------ ------
(in millions)
<S> <C> <C> <C>
Intermodal........................................... $2,469 $2,282 $2,039
Coal................................................. 2,239 1,972 1,973
Agricultural Commodities............................. 1,077 1,087 1,171
Chemicals............................................ 841 812 782
Metals and Minerals.................................. 757 731 693
Forest Products...................................... 598 564 548
Consumer Goods....................................... 553 497 468
Automotive........................................... 388 422 396
------ ------ ------
Total Freight Revenue................................ 8,922 8,367 8,070
Other Revenue........................................ 19 3 39
------ ------ ------
Total Revenues................................... $8,941 $8,370 $8,109
====== ====== ======
</TABLE>

CARS/UNITS

<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------
1998 1997 1996
----- ----- -----
(in thousands)
<S> <C> <C> <C>
Intermodal.............................................. 3,126 2,854 2,570
Coal.................................................... 2,078 1,862 1,854
Agricultural Commodities................................ 581 577 587
Chemicals............................................... 504 482 460
Metals and Minerals..................................... 660 622 628
Forest Products......................................... 344 335 334
Consumer Goods.......................................... 365 349 308
Automotive.............................................. 226 264 251
----- ----- -----
Total Cars/Units.................................... 7,884 7,345 6,992
===== ===== =====
</TABLE>

AVERAGE REVENUE PER CAR/UNIT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Intermodal....................................... $ 790 $ 800 $ 793
Coal............................................. 1,077 1,059 1,064
Agricultural Commodities......................... 1,854 1,884 1,995
Chemicals........................................ 1,669 1,685 1,700
Metals and Minerals.............................. 1,147 1,175 1,104
Forest Products.................................. 1,738 1,684 1,641
Consumer Goods................................... 1,515 1,424 1,519
Automotive....................................... 1,717 1,598 1,578
Average Revenue Per Car/Unit................. 1,132 1,139 1,154
</TABLE>

GOVERNMENT REGULATION AND LEGISLATION

Rail operations are subject to the regulatory jurisdiction of the Surface
Transportation Board ("STB") of the United States Department of Transportation
("DOT"), the Federal Railroad Administration of DOT, the Occupational Safety
and Health Administration ("OSHA"), and state regulatory agencies. The STB,
which is

7
<PAGE>

the successor to the Interstate Commerce Commission ("ICC"), has jurisdiction
over certain rates, routes, and services, the extension, sale, or abandonment
of rail lines, and consolidation or merger with, or acquisition of control of,
rail common carriers. DOT and OSHA have jurisdiction under several federal
statutes over a number of safety and health aspects of rail operations. State
agencies regulate some aspects of rail operations with respect to health and
safety in areas not otherwise preempted by federal law.

BNSF Railway's rail operations, as well as those of its competitors, are
subject to extensive federal, state and local environmental regulation. These
laws cover discharges to waters, air emissions, toxic substances, and the
generation, handling, storage, transportation, and disposal of waste and
hazardous materials. This regulation has the effect of increasing the cost and
liabilities associated with rail operations. Environmental risks are also
inherent in rail operations which frequently involve transporting chemicals
and other hazardous materials.

The railroad industry, including BNSF Railway, is subject to future
requirements regulating air emissions from diesel locomotives. Final
regulations applicable to new and rebuilt locomotives were promulgated by the
United States Environmental Protection Agency ("EPA") and became effective
June 15, 1998. The new standards will be phased in between 2000 and 2005. BNSF
Railway has evaluated compliance requirements and associated costs and
believes the costs will not be material in any given year. BNSF Railway has
also entered into agreements with the California State Air Resources Board and
the EPA regarding a program to reduce emissions in Southern California through
accelerated deployment of locomotives which comply with the federal standards.

Many of BNSF Railway's land holdings are and have been used for industrial
or transportation-related purposes or leased to commercial or industrial
companies whose activities may have resulted in discharges onto the property.
As a result, BNSF Railway is now subject and will from time to time continue
to be subject to environmental cleanup and enforcement actions. In particular,
the federal Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), also known as the "Superfund" law, generally imposes joint and
several liability for cleanup and enforcement costs, without regard to fault
or the legality of the original conduct, on current and former owners and
operators of a site. Accordingly, BNSF Railway may be responsible under CERCLA
and other federal and state statutes for all or part of the costs to clean up
sites at which certain substances may have been released by BNSF Railway, its
current lessees, former owners or lessees of properties, or other third
parties. For further discussion, reference is made to Note 12 to the
Consolidated Financial Statements on pages 35-36 of BNSF's 1998 Annual Report
to Shareholders, which information is hereby incorporated by reference.

COMPETITION

The business environment in which BNSF Railway operates remains highly
competitive. Depending on the specific market, deregulated motor carriers,
other railroads and river barges exert pressure on various price and service
levels. The presence of advanced, high service truck lines with expedited
delivery, subsidized infrastructure and minimal empty mileage continues to
affect the market for non-bulk, time sensitive freight. The potential
expansion of longer combination vehicles could further encroach upon markets
traditionally served by railroads. In order to remain competitive, BNSF
Railway and other railroads continue to develop and implement operating
efficiencies to improve productivity.

As railroads streamline, rationalize and otherwise enhance their
franchises, competition among rail carriers intensifies. BNSF Railway's
primary rail competitor in the western region of the United States is Union
Pacific Railroad Company ("UP"). Other Class I railroads and numerous regional
railroads and motor carriers also operate in parts of the same territories
served by BNSF Railway. Coal, one of BNSF Railway's primary commodities,
continues to be subject to various types of competitive pressures.

In 1998, BNSF Railway and UP entered into an agreement to exchange half
interests in the two pieces of the former Southern Pacific Transportation
Company ("SP") rail line between Houston and New Orleans which are separately
owned by the two railroads. Both railroads now have access to all customers,
including chemical,

8
<PAGE>

steel, gas and other companies, along the entire line, including on former SP
branch lines. The two railroads set up a joint regional dispatching center at
Spring, Texas in March 1998 for much of their Gulf Coast train operations to
better coordinate train flows in and through Houston. In February 1999, BNSF
Railway and UP agreed to coordinate dispatching operations covering Southern
California, the Kansas City area, and the Powder River Basin of Wyoming.

The STB has approved the acquisition of Consolidated Rail Corporation
("Conrail") by CSX Corporation and Norfolk Southern Corporation which is
expected to be implemented in 1999. Conrail, CSX and Norfolk Southern operate
the three largest rail systems in the eastern United States. In March 1999,
the STB also approved the acquisition of Illinois Central Corporation ("IC")
by Canadian National Railway Company ("CN"). CN is Canada's largest railroad
and reaches the U.S. cities of Detroit and Chicago, while IC has operations
extending from Chicago to the Gulf of Mexico, and west through Iowa. The
acquisitions of Conrail and IC are not expected to have a material adverse
competitive impact on BNSF Railway.

ITEM 3. LEGAL PROCEEDINGS

Set forth below is a description of certain legal proceedings involving
BNSF and its subsidiaries.

WHEAT AND BARLEY TRANSPORTATION RATES

In September 1980, a class action lawsuit was filed against BNSF Railway in
United States District Court for the District of Montana ("Montana District
Court") challenging the reasonableness of BNSF Railway's export wheat and
barley rates. The class consisted of Montana grain producers and elevators.
The plaintiffs sought a finding that BNSF Railway single car export wheat and
barley rates for shipments moving from Montana to the Pacific Northwest were
unreasonably high and requested damages in the amount of $64 million. In March
1981, the Montana District Court referred the rate reasonableness issue to the
ICC. Subsequently, the State of Montana filed a complaint at the ICC
challenging BNSF Railway's multiple car rates for Montana wheat and barley
movements occurring after October 1, 1980.

The ICC issued a series of decisions in this case from 1988 to 1991. Under
these decisions, the ICC applied a revenue to variable cost test to the rates
and determined that BNSF Railway owed $9,685,918 in reparations plus interest.
In its last decision, dated November 26, 1991, the ICC found BNSF Railway's
total reparations exposure to be $16,559,012 through July 1, 1991. The ICC
also found that BNSF Railway's current rates were below a reasonable maximum
and vacated its earlier rate prescription order.

BNSF Railway appealed to the United States Court of Appeals for the
District of Columbia Circuit ("D.C. Circuit") those portions of the ICC's
decisions concerning the post-October 1, 1980 rate levels. BNSF Railway's
primary contention on appeal was that the ICC erred in using the revenue to
variable cost rate standard to judge the rates instead of Constrained Market
Pricing/Stand Alone Cost principles. The limited portions of decisions that
cover pre-October 1, 1980 rates were appealed to the Montana District Court.

On March 24, 1992, the Montana District Court dismissed plaintiffs' case as
to all aspects other than those relating to pre-October 1, 1980 rates. On
February 9, 1993, the D.C. Circuit served its decision regarding the appeal of
the several ICC decisions in this case. The court held that the ICC did not
adequately justify its use of the revenue to variable cost standard as BNSF
Railway had argued and remanded the case to the ICC for further administrative
proceedings.

On July 22, 1993, the ICC served an order in response to the D.C. Circuit's
February 9, 1993 decision. In its order, the ICC stated it would use the
Constrained Market Pricing/Stand-Alone Cost principles in assessing the
reasonableness of BNSF Railway wheat and barley rates moving from Montana to
Pacific Coast ports from 1978 forward. The ICC assigned the case to the Office
of Hearings to develop a procedural schedule. On October 28, 1994, plaintiffs
filed their opening evidence arguing that the revenue received by BNSF Railway
exceeded

9
<PAGE>

the stand alone costs of transporting that traffic and that BNSF Railway rates
were unreasonably high. BNSF Railway filed its evidence March 29, 1995,
showing that the stand alone costs of transporting the traffic exceeded the
revenue derived by BNSF Railway on that traffic and that consequently, its
rates were not unreasonably high. The parties filed briefs simultaneously on
August 16, 1995. In a decision served August 14, 1997, in McCarty Farms, Inc.
et al. v. Burlington Northern Inc., No. 37808, the STB, successor to the ICC,
ruled that the plaintiffs had failed to demonstrate that BNSF Railway rates
charged to transport export wheat and barley from Montana to West Coast ports
were unreasonable. The STB dismissed the proceeding in its entirety.

The plaintiffs filed petitions to review the STB's decision before the D.C.
Circuit and the Montana District Court. In an October 20, 1998 decision,
McCarty Farms, Inc. et al. v. Surface Transportation Board (No. 97-1632), the
D.C. Circuit affirmed the STB's decision in all respects for those claims as
to which it had jurisdiction (i.e., all claims except those relating to
single-car wheat shipments moving before September 12, 1980). The plaintiffs'
appeal of the STB decision as to single-car wheat shipments moving before
September 12, 1980 was dismissed by the Montana District Court on November 23,
1998. This matter is now considered terminated.

ENVIRONMENTAL PROCEEDINGS

BNSF Railway had been advised that it was a target of a Grand Jury
investigation in the United States District Court for the Eastern District of
Missouri with respect to former railcar cleaning activities conducted by
independent contractors hired by BNSF Railway's predecessors at a rail siding
near Cherryville, Missouri. The proceeding related to alleged violations of
federal environmental protection statutes with respect to lead contamination
at several sites in the Cherryville area. In addition, BNSF Railway had
received personal injury claims from certain individuals formerly residing at
or near some of these sites. The Missouri Department of Natural Resources
("DNR") also was investigating the matter with respect to possible violations
of state environmental protection laws and BNSF Railway has been implementing
remediation plans developed in conjunction with DNR.

On December 4, 1998, BNSF Railway entered a plea in federal district court
to one felony count under CERCLA for failure to immediately report to the
federal government a release of a reportable quantity of lead sulfide and one
misdemeanor count under the Clean Water Act for a negligent discharge of a
pollutant into a waterway. BNSF Railway agreed in the settlement to pay a fine
of $7 million and to make restitution payments to the State of Missouri of $3
million, and committed to spend $9 million, which includes amounts previously
paid, in remediation costs in connection with its ongoing remediation efforts.
In the plea agreement, the parties agreed that BNSF Railway had taken remedial
safety and procedural actions in an effort to reduce the likelihood of
recurrence of such matters.

In addition, BNSF Railway has negotiated a settlement with the State of
Missouri that requires a payment of $900,000 in penalties and $500,000 in
natural resource damage. With the public comment period having ended January
26, 1999, BNSF Railway is executing the settlement agreement for entry by the
court as a consent decree. Implementation costs of the investigation and
remediation activities pursuant to the consent decree are not considered
material. The Company considers the federal Grand Jury matter to be
terminated, and all pending related matters, including personal injury claims
received from certain individuals residing at or near the area, are not
considered material.

On December 18, 1995, the State of Illinois filed a Complaint captioned
People of the State of Illinois v. Burlington Northern Railroad Company,
Beazer East, Inc. and Koppers Industries, Inc. (PCB No. 96-132) before the
Illinois Pollution Control Board against BNSF Railway, Beazer East, Inc. and
Koppers Industries, Inc. alleging violations of the Illinois Environmental
Protection Act with respect to a facility in Galesburg, Illinois. This
facility is not operated by BNSF Railway. The proceeding may result in
monetary sanctions in excess of $100,000. BNSF Railway and Beazer East, Inc.
have made an offer to the State of Illinois to settle this matter.

MERGER-RELATED LITIGATION

Numerous complaints were filed arising out of the Agreement and Plan of
Merger dated June 29, 1994, as amended, between BNI and SFP. On June 30, 1994,
shortly after announcement of the proposed BNI-SFP merger

10
<PAGE>

("Merger"), two purported stockholder class action suits were filed in the
Court of Chancery of the State of Delaware (Miller v. Santa Fe Pacific
Corporation, C.A. No. 13587; Cosentino v. Santa Fe Pacific Corporation, C.A.
No. 13588). On July 1, 1994, two additional purported stockholder class action
suits were filed in the Court of Chancery of the State of Delaware (Fielding
v. Santa Fe Pacific Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific
Corporation, C.A. No. 13597).

The actions named as defendants SFP, the individual members of the SFP
Board of Directors, and BNI. In general, the actions variously alleged that
SFP's directors breached their fiduciary duties to the stockholders by
agreeing to the proposed merger for allegedly "grossly inadequate"
consideration in light of recent operating results of SFP, recent trading
prices of SFP's common stock and other alleged factors, by allegedly failing
to take all necessary steps to ensure that stockholders will receive the
maximum value realizable for their shares (including allegedly failing to
actively pursue the acquisition of SFP by other companies or conducting an
adequate "market check"), and by allegedly failing to disclose to stockholders
the full extent of the future earnings potential of SFP, as well as the
current value of its assets. The Miller and Fielding cases further alleged
that the proposed Merger was unfairly timed and structured and, if
consummated, would allegedly unfairly deprive the stockholders of standing to
pursue certain pending stockholder derivative litigation. Plaintiffs also
alleged that BNI was responsible for aiding and abetting the alleged breach of
fiduciary duty committed by the SFP Board. The actions sought certification of
a class action on behalf of SFP's stockholders. In addition, the actions
sought injunctive relief against consummation of the Merger and, in the event
that the Merger was consummated, the rescission of the Merger, an award of
compensatory or rescissory damages and other damages, including court costs
and attorneys' fees, an accounting by defendants of all profits realized by
them as a result of the Merger, and various other forms of relief.

On October 6, 1994, shortly after Union Pacific Corporation ("UPC") issued
a press release in which it announced a proposal for UPC to acquire SFP (the
"UPC Proposal"), plaintiffs in the four lawsuits described above filed in the
Court of Chancery of the State of Delaware a Consolidated Amended Complaint
(Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In their
Consolidated Amended Complaint, plaintiffs repeated the allegations contained
in their earlier lawsuits and further alleged that, in light of the UPC
Proposal, SFP's directors had breached their fiduciary duties by failing to
fully inform themselves about and to adequately explore available alternatives
to the merger with BNI, including the alternative of a merger transaction with
UPC, and by failing to fully inform themselves about the value of SFP. The
Consolidated Amended Complaint sought the same relief sought in plaintiffs'
earlier lawsuits and, in addition, requested that SFP's directors be ordered
to explore alternative transactions and to negotiate in good faith with all
interested persons, including UPC.

Also, on October 6, 1994, five additional purported stockholder class
action suits relating to SFP's proposed participation in the Merger with BNI
were filed in the Court of Chancery of the State of Delaware (Weiss v. Santa
Fe Pacific Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No. 13780;
Stein v. Santa Fe Pacific Corporation, Lewis v. Santa Fe Pacific Corporation,
C.A. No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7, 1994, three
more purported stockholder class action suits relating to SFP's proposed
participation in the Merger with BNI were filed in the Court of Chancery of
the State of Delaware (Graulich v. Santa Fe Pacific Corporation, C.A. No.
13786; Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green v.
Santa Fe Pacific Corporation, C.A. No. 13788). All of these lawsuits named as
defendants SFP and the individual members of the SFP Board of Directors; the
Lifshitz case further named BNI as a defendant. In general, these actions
variously alleged that, in light of SFP's recent operating results and the UPC
Proposal, SFP's directors breached their fiduciary duties to stockholders by
purportedly not taking the necessary steps to ensure that SFP's stockholders
would receive "maximum value" for their shares of SFP stock, including
purportedly refusing to negotiate with UPC or to "seriously consider" the UPC
Proposal and failing to announce any active auction or open bidding
procedures. The actions generally sought relief that is materially identical
to the relief sought in the Miller case, and in addition sought entry of an
order requiring SFP's directors to immediately undertake an evaluation of
SFP's worth as a merger/acquisition candidate and to establish a process
designed to obtain the highest possible price for SFP, including taking steps
to "effectively expose" SFP to the marketplace in an effort to create an
"active auction" in SFP. The Weiss case further sought entry of an order
enjoining SFP's directors from implementing any poison pill or other device
designed to thwart the UPC Proposal or any other person's proposal to acquire
SFP.

11
<PAGE>

The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the
Chancery Court entered an order consolidating the remaining 11 purported
stockholder class action suits under the heading In Re Santa Fe Pacific
Corporation Shareholder Litigation, C.A. No. 13587 (the "Shareholder
Litigation").

On October 26, 1994, BNI filed a Motion to Dismiss the Consolidated and
Amended Complaint.

On March 6, 1995, plaintiffs in the Shareholder Litigation filed a Revised
Second Consolidated and Amended Complaint, which superseded their previously
filed complaints. The Revised Second Consolidated and Amended Complaint
generally repeated many of the same allegations, and requested relief similar
to that requested in plaintiffs' earlier complaints. In addition, the Revised
Second Consolidated and Amended Complaint alleged that SFP's directors
breached their fiduciary duties: by proceeding with and completing the joint
SFP-BNI Tender Offer; by approving and implementing the Shareholder Rights
Plan, which purportedly resulted in a "premature ending" of the "bidding
process" by allegedly deterring and defeating UPC's acquisition overtures,
exempting BNI from its provisions, and "coercing" SFP stockholders to vote in
favor of the Merger; by approving the termination fee and expense
reimbursement provisions of the Merger Agreement by authorizing the stock
repurchase provisions of the Merger Agreement, which allegedly were designed
to "lock-up" the Merger by providing stockholders with an "illusory promise"
that the Merger Agreement exchange ratio would increase, while reserving SFP's
right not to repurchase such stock; and by purportedly failing to disclose all
material facts necessary for SFP's stockholders to evaluate in an informed
manner and vote on the Merger, including purportedly failing to fully disclose
the risks that the ICC would not approve the Merger and purportedly failing to
fully disclose SFP's intentions with respect to the repurchase of SFP stock,
as permitted by the Merger Agreement, as well as whether there will be a fair
opportunity for all SFP stockholders to "participate" in any SFP stock
repurchases, and on what basis. As additional relief to that requested in the
earlier complaints, plaintiffs requested injunctive and other relief:
enjoining consummation of the Merger; ordering SFP, SFP's directors, and BNI
to make unspecified supplemental disclosures to stockholders; requiring SFP to
conduct a new vote on the Merger subsequent to such disclosures; enjoining SFP
from improperly or discriminatorily implementing the Shareholder Rights Plan
or any other "defensive" tactic; ordering SFP's directors to take all
appropriate steps to enhance SFP's value and attractiveness as a merger or
acquisition candidate, including "effectively exposing" SFP to the marketplace
by means of an active auction on a "level playing field"; and declaring the
termination fee and expense reimbursement provisions of the Merger Agreement
invalid and unenforceable.

On March 13, 1995, SFP and SFP's directors filed a motion to dismiss the
Shareholder Litigation on the grounds that the Plaintiffs failed to state a
cause of action upon which relief may be granted. BNI also filed a motion to
dismiss the Revised Second Consolidated and Amended Complaint. On May 31,
1995, the Delaware Chancery Court rendered its decision granting the motion to
dismiss that was filed by SFP and SFP's directors on March 13, 1995 and the
motion to dismiss filed by BNI. The plaintiffs appealed the dismissal to the
Delaware Supreme Court.

On November 22, 1995, the Delaware Supreme Court issued an opinion that
affirmed in part and reversed in part the May 31, 1995 decision of the
Delaware Chancery Court. The Delaware Supreme Court reversed the Chancery
Court's dismissal of plaintiffs' claims that, in taking the alleged
"defensive" actions identified in the Revised Second Consolidated and Amended
Complaint, including approval and implementation of the Shareholder Rights
Plan, SFP's directors violated their fiduciary duties to stockholders. The
Delaware Supreme Court affirmed the Chancery Court's dismissal of all other
claims asserted by plaintiffs in the litigation, including all claims against
BNI.

On December 11, 1995, the SFP defendants filed with the Delaware Chancery
Court a motion for summary judgment against plaintiffs' remaining claims in
the Shareholder Litigation, which motion is pending. On December 29, 1995, the
SFP defendants filed their Answer to plaintiffs' Revised Second Consolidated
and Amended Complaint.

BNSF believes this lawsuit is meritless and continues to oppose it
vigorously.

12
<PAGE>

OTHER CLAIMS

BNSF and its subsidiaries also are parties to a number of other legal
actions and claims, various governmental proceedings and private civil suits
arising in the ordinary course of business, including those related to
environmental matters and personal injury claims. While the final outcome of
these and other legal actions referred to under Item 3 of this Report on Form
10-K cannot be predicted with certainty, considering among other things the
meritorious legal defenses available, it is the opinion of BNSF management that
none of these items, when finally resolved, will have a material adverse effect
on the annual results of operations, financial position or liquidity of BNSF,
although an adverse resolution of a number of these items could have a material
adverse effect on the results of operations in a particular quarter or fiscal
year.

Reference is made to Note 4 to the consolidated financial statements on page
31 of BNSF's 1998 Annual Report to Shareholders for information concerning
certain pending administrative appeals with the Internal Revenue Service, which
information is hereby incorporated by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted by BNSF to a vote of its securities holders during
the fourth quarter of 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are the names, ages, and positions of all executive officers of
BNSF (excluding Robert D. Krebs, an executive officer who is also a director of
BNSF, information as to whom is included in BNSF's Proxy Statement dated March
8, 1999) and their business experience during the past five years. Executive
officers hold office until their successors are elected or appointed, or until
their earlier death, resignation, or removal.

DOUGLAS J. BABB, 46

Senior Vice President-Merchandise Business Unit since August 1997. Prior to
that, Senior Vice President and Chief of Staff from September 1995 to August
1997, and Vice President and General Counsel of BNRR from December 1986 to
September 1995.

THOMAS N. HUND, 45

Vice President and Controller since September 1995. Prior to that, Vice
President and Controller of SFP from July 1990 to January 1998.

JEFFREY R. MORELAND, 54

Senior Vice President-Law and Chief of Staff since February 1998. Prior to
that, Senior Vice President-Law and General Counsel from September 1995, and
Vice President-Law and General Counsel of SFP from October 1994 to January
1998, and Vice President-Law and General Counsel of ATSF from June 1989 to
December 1996.

MATTHEW K. ROSE, 39

Senior Vice President and Chief Operations Officer since August 1997. Prior
to that, Senior Vice President-Merchandise Business Unit from May 1996, Vice
President-Chemicals and Plastics of ATSF and BNRR from January 1996, Vice
President, South Region Field Marketing of BNRR from January 1995, Vice
President, Automotive of BNRR from June 1994, and General Manager, Automotive
Facilities and Technology of BNRR from January 1993. Prior to that, Vice
President-Transportation of Triple Crown Services, a subsidiary of Norfolk
Southern Corporation.

CHARLES L. SCHULTZ, 51

Senior Vice President-Intermodal and Automotive Business Unit since February
1996. Prior to that, Vice President-Intermodal of ATSF and BNRR from September
1995, Vice President-Intermodal of ATSF from January 1994, Vice President-
Management Services of ATSF from June 1991, and Vice President-Information
Services of ATSF from July 1989.

13
<PAGE>

DENIS E. SPRINGER, 53

Senior Vice President and Chief Financial Officer since September 1995.
Prior to that, Senior Vice President and Chief Financial Officer of SFP from
October 1993 to January 1998, and Senior Vice President, Treasurer and Chief
Financial Officer of SFP from January 1991.

GREGORY T. SWIENTON, 49

Senior Vice President-Coal and Agricultural Commodities Business Unit since
May 1996. Prior to that, Senior Vice President-Consumer and Industrial
Business Unit from February 1996, Senior Vice President-Industrial Business
Unit from September 1995, Executive Vice President, Intermodal Business of
BNRR from June 1994, and Executive Director-Europe and Africa (Brussels) of
DHL Worldwide Express (international freight company) from January 1991.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

BNSF's common stock is listed on the New York Stock Exchange under the
symbol "BNI." The common stock is also listed on the Chicago Stock Exchange
and Pacific Exchange. Information as to the high and low sales prices of such
stock for the two years ending December 31, 1998 and the frequency and amount
of dividends declared on such stock during such period, is set forth in Note
16 to the Consolidated Financial Statements on page 40 of BNSF's 1998 Annual
Report to Shareholders and such information is hereby incorporated by
reference. The approximate number of record holders of the common stock at
January 31, 1999 was 56,000.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data of BNSF for each of the last five fiscal years, and
data with respect to the following topics disclosed on page 1 of BNSF's 1998
Annual Report to Shareholders are hereby incorporated by reference: Revenues;
Operating income; Income before extraordinary item and cumulative effect of
change in accounting method; Accounting change/Extraordinary item; Net income;
Basic earnings per share; Diluted earnings per share; Dividends declared per
common share; Total assets; and Long-term debt and commercial paper, including
current portion.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing on pages 15 through 24 of BNSF's 1998 Annual Report to
Shareholders is hereby incorporated by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, BNSF utilizes various financial
instruments which inherently have some degree of market risk. The quantitative
information presented below and the additional qualitative information
presented in the Management's Discussion and Analysis of Financial Condition
and Results of Operations section and Notes 8, 10, 11, and 15 of the
Consolidated Financial Statements contained in the 1998 Annual Report to
Shareholders describe significant aspects of BNSF's financial instrument
programs which have a material market risk.

Interest Rate Sensitivity

The tables below provide information about BNSF's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including interest rate swaps and debt obligations as of
December 31, 1998 and 1997. For debt obligations, the tables present principal
cash flows and related weighted average interest rates by contractual maturity
dates. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates are based on
implied forward rates in the yield curve at the reporting date.

14
<PAGE>

Long-term Debt

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------
MATURITY DATE
---------------------------- FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt (in
millions).............. $268 $146 $222 $248 $130 $3,946 $4,960 $5,216
Average Interest Rate... 7.41% 6.45% 7.75% 7.10% 7.22% 7.13% 7.10% --
Variable Rate Debt (in
millions).............. -- -- -- $496 -- -- $ 496 $ 496
Average Interest Rate... -- -- -- 5.43% -- -- 5.43% --
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------
MATURITY DATE
---------------------------- FAIR
1998 1999 2000 2001 2002 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt (in
millions).............. $108 $256 $138 $204 $258 $3,587 $4,551 $4,734
Average Interest Rate... 7.78% 7.46% 6.47% 7.96% 7.16% 7.31% 7.33% --
Variable Rate Debt (in
millions).............. -- -- -- -- $738 -- $ 738 $ 738
Average Interest Rate... -- -- -- -- 5.84% -- 5.84% --
</TABLE>

BNSF has included $471 million and $668 million of commercial paper
borrowings in 2002 maturities in the 1998 and 1997 tables, respectively. The
commercial paper program is supported by BNSF's $1.5 billion, five-year
revolving credit agreement which is scheduled to expire on November 12, 2002.
BNSF classified commercial paper borrowings as long-term debt in the
consolidated balance sheet at December 31, 1998 and 1997. In addition,
maturities in 2000 included in the 1998 and 1997 tables exclude $100 million
of 6.1 percent notes due 2027, which may be redeemed in 2000 at the option of
the holder.

In addition, the maturities in the 1998 table exclude $200 million of 6.29
percent debentures due 2029 and $100 million of 6.05 percent notes due 2031,
which will either be remarketed by the holder of a call option on the debt and
mature in 2029 and 2031, respectively; or will otherwise be repurchased by
BNSF in 1999 and 2001, respectively. Maturities in 2003 exclude $175 million
of 6.53 percent notes due 2037, which may be redeemed in 2003 at the option of
the holder.

On March 5, 1999, BNSF issued $200 million of 6.125 percent notes due 2009
and $200 million of 6.75 percent debentures due 2029. At the time of the 10-
year debt issuance, BNSF closed out a $100 million treasury lock transaction
scheduled to expire in 1999 at a gain of approximately $8 million which will
be deferred and amortized to interest expense over the life of the debt.

Interest Rate Swaps

From time to time, BNSF enters into various interest rate hedging
transactions for purposes of managing exposure to fluctuations in interest
rates. At December 31, 1998 and 1997, BNSF had entered into swap transactions
reflected in the tables below, which fixed the interest rate on a portion of
its commercial paper debt.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------
MATURITY DATE
-------------
1999 FAIR VALUE (1)
------------- --------------
<S> <C> <C>
Variable to Fixed Swaps (in millions)........ $ 125 $ (2)
Average Pay Rate............................. 6.14% --
Average Receive Rate......................... 4.95% --
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
MATURITY
DATE
------------
1998 1999 TOTAL FAIR VALUE (1)
----- ----- ----- -------------
<S> <C> <C> <C> <C>
Variable to Fixed Swaps (in millions)....... $ 250 $ 125 $ 375 $ (2)
Average Pay Rate............................ 6.04% 6.14% 6.07% --
Average Receive Rate........................ 5.67% 5.73% 5.69% --
</TABLE>
- --------
(1) Represents unrecognized losses in millions.

15
<PAGE>

Treasury Locks

In anticipation of future debt issuances, BNSF had entered into treasury
lock transactions, based on the 10-year and 30-year U.S. treasury rates as of
December 31, 1998 and based on the 30-year U.S. treasury rate as of December
31, 1997, which are summarized in the tables below. Additionally, as discussed
above, at the time of a March 1999 debt issuance, BNSF closed out the $100
million treasury lock transaction scheduled to expire in 1999 at a gain of
approximately $8 million.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------
MATURITY DATE
-------------------
1999 2000 2001 TOTAL FAIR VALUE (1)
----- ----- ----- ----- --------------
<S> <C> <C> <C> <C> <C>
Fixed Rate Treasury Locks (in
millions).......................... $ 100 $ 200 $ 200 $ 500 $ 19
Average Pay Rate.................... 4.37% 4.80% 4.84% 4.73% --
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------
MATURITY DATE
-------------
1998 FAIR VALUE (1)
------------- --------------
<S> <C> <C>
Fixed Rate Treasury Locks (in millions)............ $ 200 $ 0
Average Pay Rate................................... 5.88% --
</TABLE>
- --------
(1) Represents unrecognized gains in millions.

Commodity Price Sensitivity

During 1998 and 1997, fuel expenses approximated 11 percent of total
operating expenses. Due to the significance of diesel fuel expenses to the
operations of the railroad and the historical volatility of fuel prices, BNSF
has established a program to hedge against fluctuations in the price of its
diesel fuel purchases. The intent of the program is to protect BNSF's
operating margins and overall profitability from adverse fuel price changes.
However, to the extent BNSF hedges portions of its fuel purchases, it will not
realize the impact of decreases in fuel prices. The fuel-hedging program in
1998 and 1997 includes the use of commodity swap transactions that are
accounted for as hedges. Additionally, the 1997 fuel-hedging program also
includes forward purchases for delivery at fueling facilities. Any gains or
losses associated with changes in the market value of these hedging
instruments are deferred and recognized as a component of fuel expense in the
period in which the fuel is purchased and used.

Swap transactions are typically based on the price of pipeline delivery of
Gulf Coast #2 heating oil and require BNSF to purchase a defined quantity at a
defined price. Swap transactions are generally settled in cash with the
counterparty. Based on historical information, BNSF believes there is a
significant correlation between the market prices of diesel fuel and Gulf
Coast #2 heating oil.

The tables below provide information about BNSF's diesel fuel hedging
instruments that are sensitive to changes in commodity prices. The tables
present notional amounts in gallons and the weighted average contract price by
contractual maturity date. The prices included in the tables do not include
taxes, transportation costs, certain other fuel handling costs and, except for
forward contracts, any differences which may occur from time to time between
the prices of commodities hedged and the purchase price of BNSF's diesel fuel.

<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------
Maturity Date
----------------------- Fair
1999 2000 2001 2002 Total Value (1)
----- ----- ----- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Diesel Fuel Swaps:
Gallons (in millions)................ 907 491 277 101 1,776 $(174)
Weighted average price per gallon.... $0.48 $0.50 $0.49 $0.50 $ 0.49 --
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
MATURITY DATE
------------------ FAIR
1998 1999 2000 TOTAL VALUE (1)
----- ----- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Diesel Fuel Swaps:
Gallons (in millions).................... 479 302 189 970 $(24)
Weighted average price per gallon........ $0.54 $0.52 $ 0.52 $ 0.53 --

Diesel Fuel Forward Purchase Contracts:
Gallons (in millions).................... 144 -- -- 144 $ 2
Weighted average price per gallon........ $0.48 -- -- $ 0.48 --
</TABLE>
- --------
(1) Represents unrecognized gains (losses) (in millions) based on the price of
Gulf Coast #2 heating oil.

Additionally, at December 31, 1998 and 1997, BNSF maintained fuel
inventories for use in normal operations which were not material to BNSF's
overall financial position and therefore represent no significant market
exposure.

Equity Price Sensitivity

During the second and third quarter of 1998, BNSF sold equity put options
for 3 million shares of BNSF's common stock to an independent third party and
received cash proceeds of $2 million. The option contracts had exercise prices
ranging from $29.00 to $30.00 per share with expiration dates ranging from
November 1998 to February 1999. In November 1997, BNSF sold equity put options
for 1.5 million shares of BNSF's common stock to an independent third party
and received cash proceeds of approximately $1 million. The option contracts
had an exercise price of $29.33 and an expiration date of May 5, 1998. All of
the option contracts discussed above permitted a net-share or net-cash
settlement method at BNSF's election and expired unexercised.

The tables below present the notional amounts in shares of BNSF common
stock and the contract price by contractual maturity date of equity put
options outstanding at December 31, 1998 and 1997.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------
MATURITY DATE
------------- FAIR
1999 VALUE
------------- -----
<S> <C> <C>
Contract Number of Shares............................. 1,200,000 $ 0
Option Strike Price................................... $29.67 to $30 --

<CAPTION>
DECEMBER 31, 1997
-------------------
MATURITY DATE
------------- FAIR
1998 VALUE
------------- -----
<S> <C> <C>
Contract Number of Shares............................. 1,500,000 $ 0
Option Strike Price................................... $29.33 --
</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of BNSF and subsidiary companies,
together with the reports thereon, appearing in Part IV of this Report on Form
10-K and on pages 25 through 40 of BNSF's 1998 Annual Report to Shareholders,
are hereby incorporated by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

17
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning the directors of BNSF is provided on pages 11-12
under the heading "NOMINEES FOR DIRECTORS" of BNSF's proxy statement dated
March 8, 1999, and the information under that heading is hereby incorporated
by reference.

Information concerning the executive officers of BNSF (excluding one
executive officer who is also a director of BNSF) is included in Part I of
this Report.

Information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 is provided on page 4 under the heading "Section 16(a)
Beneficial Ownership Reporting Reporting Compliance" in BNSF's Proxy Statement
dated March 8, 1999, and the information under that heading is hereby
incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning the compensation of directors and executive officers
of BNSF is provided on page 6 under the heading "Directors' Compensation" and
pages 24 through 30 under the headings "Summary Compensation Table," "Stock
Option Grants in 1998," "Option Exercises and Holdings," "Pension Plans,"
"Employment Contracts and Change in Control Arrangements" and "Trust
Agreements," in BNSF's proxy statement dated March 8, 1999, and the
information under those headings is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning the ownership of BNSF equity securities by certain
beneficial owners and by management is provided on pages 8 through 10 under
the heading "STOCK OWNERSHIP IN THE COMPANY" in BNSF's proxy statement dated
March 8, 1999, and is the information under that heading hereby incorporated
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions is
provided on page 8 under the heading "Certain Relationships" of BNSF's proxy
statement dated March 8, 1999, and the information under that heading is
hereby incorporated by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this report:

<TABLE>
<CAPTION>
Page
--------
<S> <C>
1. Consolidated Financial Statements:

Report of PricewaterhouseCoopers LLP................................. [25*]

Consolidated Statement of Income for the three years ended December
31, 1998............................................................ [26*]

Consolidated Balance Sheet at December 31, 1998 and 1997............. [27*]

Consolidated Statement of Cash Flows for the three years ended
December 31, 1998................................................... [28*]

Consolidated Statement of Changes In Stockholders' Equity for the
three years ended December 31, 1998................................. [29*]
Notes to Consolidated Financial Statements........................... [30-40*]
</TABLE>
- --------
(*Incorporated by reference from the indicated pages of BNSF's 1998 Annual
Report to Shareholders.)

18
<PAGE>

<TABLE>
<S> <C>
2. Consolidated Financial Statement Schedules for the three years ended
December 31, 1998:

Report of PricewaterhouseCoopers LLP...................................... F-1

Schedule II--Valuation and Qualifying Accounts............................ F-2
</TABLE>

Schedules other than that listed above are omitted because they are not
required or applicable, or the required information is included in the
consolidated financial statements or related notes.

3. Exhibits:

See Index to Exhibits on pages E-1--E-4 for a description of the exhibits
filed as a part of this Report.

(b) Reports on Form 8-K

BNSF filed the following Current Reports on Form 8-K during the quarter
ended December 31, 1998, or subsequently:

Current Report on Form 8-K (Date of earliest event reported: February 8,
1999), as amended, which referenced under Item 5, Other Events, and filed as
an exhibit under Item 7, Financial Statements, Pro Forma Financial Information
and Exhibits, the following material from the registrant's 1998 Annual Report
to Shareholders: Consolidated Financial Highlights; Management's Discussion
and Analysis of Financial Condition and Results of Operations; and
Consolidated Financial Statements and Footnotes and Report of Management and
Report of Independent Accountants thereon, dated February 8, 1999, and two
other exhibits.

Current Report on Form 8-K (Date of earliest event reported: December 4,
1998) which referenced under Item 5, Other Events, and filed as an exhibit
under Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits the registrant's fourth quarter 1998 and annual earnings press
release, and also disclosed under Item 5 the resolution of claims by federal
and State of Missouri authorities as to environmental contamination near
Cherryville, Missouri stemming from former railcar cleaning activities
conducted by independent contractors of BNSF Railway's predecessors.

Current Report on Form 8-K (Date of earliest event reported: October 20,
1998) which referenced under Item 5, Other Events, and filed as an exhibit
under Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits the following: the registrant's third quarter 1998 earnings press
release; a table with selected financial data for the five years ended
December 31, 1997, with earnings per share restated to reflect to registrant's
three-for-one stock split, effected in the form of a stock dividend payable
September 1, 1998, for each share of common stock outstanding or held in the
registrant's treasury as of the close of business on August 17, 1998; and a
statement regarding computation of ratio of earnings to fixed charges (as of
September 30, 1998).

19
<PAGE>

SIGNATURES

Burlington Northern Santa Fe Corporation, pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Burlington Northern Santa Fe
Corporation

/s/ Thomas N. Hund
By: _________________________________

Thomas N. Hund

Vice President and Controller

Dated: April 9, 1999

S-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
Burlington Northern Santa Fe Corporation and Subsidiaries

Our audits of the consolidated financial statements referred to in our
report dated February 8, 1999 appearing on page 25 of the 1998 Annual Report
to Shareholders of Burlington Northern Santa Fe Corporation (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14(a)2. of this Form 10-K. In our opinion, the
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

PricewaterhouseCoopers LLP

Fort Worth, Texas
February 8, 1999

F-1
<PAGE>

SCHEDULE II

BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 1998, 1997 and 1996
(In Millions)

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- --------- --------- ---------- --------
Balance
Balance Additions at End
at Charged of
Beginning to Deductions Period
Description of Period Income (1) (2)
----------- --------- --------- ---------- --------
<S> <C> <C> <C> <C>
December 31, 1998
Personal injury and environmental
liabilities......................... $711 $177 $253 $635
==== ==== ==== ====
December 31, 1997
Personal injury and environmental
liabilities......................... $810 $165 $264 $711
==== ==== ==== ====
December 31, 1996
Personal injury and environmental
liabilities......................... $916 $188 $294 $810
==== ==== ==== ====
</TABLE>
- --------
(1) Principally represents cash payments
(2) Classified in the consolidated balance sheet as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Accounts payable and other current liabilities............ $246 $263 $267
Casualty and environmental liabilities.................... 389 448 543
---- ---- ----
$635 $711 $810
==== ==== ====
</TABLE>

F-2
<PAGE>

BURLINGTON NORTHERN SANTA FE CORPORATION

INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of BNSF (amended as
of April 21, 1998). Incorporated by reference to Exhibit 3.1 to BNSF's
Report on Form 10-Q for the quarter ended June 30, 1998.
3.2 By-Laws of BNSF (amended as of September 18, 1997). Incorporated by
reference to Exhibit 3.1 to BNSF's Report on Form 10-Q for the quarter
ended September 30, 1997.
4.1 Indenture, dated as of December 1, 1995, between BNSF and The First
National Bank of Chicago, as Trustee. Incorporated by reference to
Exhibit 4 to BNSF's Registration Statement on Form S-3 (No. 333-
72013).
4.2 Form of BNSF's 6 1/8% Note Due March 15, 2009.
4.3 Form of BNSF's 6 3/4% Debenture Due March 15, 2029.

4.4 Form of BNSF's 6.70% Debenture Due August 1, 2028.
4.5 Certain instruments evidencing long-term indebtedness of BNSF are not
being filed as exhibits to this Report because the total amount of
securities authorized under any single such instrument does not exceed
10% of BNSF's total assets. BNSF will furnish copies of any material
instruments upon request of the Securities and Exchange Commission.
10.1* Burlington Northern Santa Fe Non-Employee Directors' Stock Plan.
Incorporated by reference to Appendix A to BNSF's Proxy Statement
dated March 5, 1996. Amendment to Burlington Northern Santa Fe Non-
Employee Directors' Stock Plan dated January 16, 1997 is incorporated
by reference to Exhibit 10.1 to BNSF's Report on Form 10-K for the
fiscal year ended December 31, 1996.
10.2* Burlington Northern Santa Fe Corporation 1987 Stock Option Incentive
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62833).
10.3* Burlington Northern Santa Fe Corporation Incentive Compensation Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-62833).
10.4* Burlington Northern Inc. Senior Executive Survivor Benefit Plan as of
April 1, 1986. Incorporated by reference to Amendment No. 1 to BNI's
Report on Form 10-K for the fiscal year ended December 31, 1987.
10.5* Burlington Northern Santa Fe Corporation Deferred Compensation Plan,
as amended and restated effective September 17, 1998. Incorporated by
reference to Exhibit 10.1 to BNSF's Report on Form 10-Q for the
quarter ended September 30, 1998 (formerly, Burlington Northern Inc.
Deferred Compensation Plan).
10.6* Burlington Northern Santa Fe Corporation Senior Management Stock
Deferral Plan. Incorporated by reference to Exhibit 10.37 to BNFS's
Report on Form 10-K for the fiscal year ended December 31, 1997.
10.7* Burlington Northern Inc. 1987 Performance Share Unit Plan as of
January 1, 1988. Incorporated by reference to Amendment No. 1 to BNI's
Report on Form 10-K for the fiscal year ended December 31, 1987.
10.8* Burlington Northern Inc. Supplemental Benefits Plan (as amended and
restated effective September 21, 1995). Incorporated by reference to
Exhibit 10.8 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1995.
10.9* 1989 Burlington Northern Inc. Restricted Stock Incentive Plan.
Incorporated by reference to BNI's Report on Form 10-K for the fiscal
year ended December 31, 1990.
</TABLE>

- --------
* Management contract or compensatory plan or arrangement.

E-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
10.10* Burlington Northern Santa Fe Corporation 1990 Directors Stock Option
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62825).
10.11* Burlington Northern Santa Fe Incentive Bonus Stock Program.
Incorporated by reference to Exhibit 10.11 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995. Amendment of
Burlington Northern Santa Fe Incentive Bonus Stock Program dated
January 14, 1998 is incorporated by reference to Exhibit 10.11 to
BNSF's Report on Form 10-K for the fiscal year ended December 31,
1997.
10.12* Burlington Northern Santa Fe Corporation 1992 Stock Option Incentive
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62839).
10.13* Burlington Northern Santa Fe 1996 Stock Incentive Plan. Incorporated
by reference to Appendix B to BNSF's Proxy Statement dated March 5,
1996. Amendment of Burlington Northern Santa Fe 1996 Stock Incentive
Plan dated January 15, 1998 is incorporated by reference to Exhibit
10.13 to BNSF's Report on Form 10-K for the fiscal year ended December
31, 1997.
10.14* Burlington Northern Santa Fe Supplemental Retirement Plan.
Incorporated by reference to Exhibit 10.1 to BNSF's Report on Form 10-
Q for the quarter ended September 30, 1996.
10.15* Burlington Northern Santa Fe Estate Enhancement Program, as amended
and restated effective October 1, 1996. Incorporated by reference to
Exhibit 10.15 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1996.
10.16* Agreement between BNSF and Robert D. Krabs dated as of January 30,
1997. Incorporated by reference to Exhibit 10.16 to BNSF's Report on
Form 10-K for the fiscal year ended December 31, 1996.
10.17* Form of BNSF Change-in-Control Agreement (applicable to Messrs. Babb,
Moreland, Schultz, Springer, and Hund). Incorporated by reference to
Exhibit 10.17 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1996.
10.18* Employment Agreement by and between Burlington Northern Inc. and
Gregory T. Swienton. Incorporated by reference to Exhibit 10.23 to
BNI's Report on Form 10-K for the fiscal year ended December 31, 1994.
10.19* Burlington Northern Santa Fe Deferred Compensation Plan for Directors
as amended January 16, 1997. Incorporated by reference to Exhibit
10.19 to BNSF's Report on Form 10-K for the fiscal year ended December
31, 1996.
10.20* Burlington Northern Inc. Nonqualified 401(k) Restoration Plan.
Incorporated by reference to Exhibit 10.20 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.21* Burlington Northern Inc. Form of Severance Agreement and amendments
through September 18, 1995, (applicable to Messrs. Rose and Swienton
as of March 13, 1998). Incorporated by reference to Exhibit 10.21 to
BNSF's Report on Form 10-K for the fiscal year ended December 31,
1995. Amendment to Form of Severance Agreement dated December 3, 1997
is incorporated by reference to Exhibit 10.21 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1997.
10.22* Burlington Northern Inc. Director's Charitable Award Program.
Incorporated by reference to Exhibit 10.22 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995.
</TABLE>

- --------
* Management contract or compensatory plan or arrangement.

E-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
10.23* Burlington Northern Santa Fe Salary Exchange Option Program.
Incorporated by reference to Exhibit 10.23 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995. Amendment to
Burlington Northern Santa Fe Salary Exchange Option Program dated
January 15, 1997 is incorporated by reference to Exhibit 10.23 to
BNSF's Report on Form 10-K for the fiscal year ended December 31,
1996. 10.24* Santa Fe Pacific Corporation Supplemental Retirement Plan
("Supplemental Plan"). Incorporated by reference to Exhibit 10(d) to
SFP's Report on Form 10-K for the fiscal year ended December 31, 1984.
Supplemental Plan as amended October 1, 1989, and Amendment to
Supplemental Plan dated February 27, 1990, are incorporated by
reference to Exhibit 10(d) to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1969. Amendment to Supplemental Plan dated
March 22, 1994, and effective January 1, 1994, is incorporated by
reference to Exhibit 10.24 to BNSF's Report on Form 10-K for the
fiscal year ended December 31, 1995.
10.25* Burlington Northern Santa Fe Incentive Stock Compensation Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-63253).
10.26* SFP Form of Severance Agreement dated November 2, 1987 (applicable to
Mr. Springer as of March 13, 1998), as adopted in May 1987 and amended
in October 1987. Incorporated by reference to Exhibit 10(j) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1987.
Amendment to Form of Severance Agreement dated July 24, 1990 is
incorporated by reference to SFP's Report on Form 10-Q for the quarter
ended June 30, 1990. Amendment to Form of Severance Agreement adopted
January 25, 1994 is incorporated by reference to Exhibit 10.1 to SFP's
Report on Form 10-Q for the quarter ended June 30, 1994. Amendment to
Form of Severance Agreement dated March 28, 1995 is incorporated by
reference to Exhibit 10.5 to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1994. Amendment to Form of Severance Agreement
dated December 3, 1997. Amendment to Form of Severance Agreement dated
December 3, 1997. Amendment to Form of Severance Agreement dated
February 6, 1998 (Mr. Hund) is incorporated by reference to Exhibit
10.26 to BNSF's Report on Form 10-K for the fiscal year ended December
31, 1997.
10.27* Burlington Northern Santa Fe Directors' Retirement Plan. Incorporated
by reference to Exhibit 10.29 to BNSF's Report on Form 10-K for the
fiscal year ended December 31, 1995.
10.28* Benefits Protection Trust Agreement dated as of January 22, 1996 by
and between BNSF and Bankers Trust Company. Incorporated by reference
to Exhibit 10.28 to BNSF's Report on Form 10-K for the fiscal year
ended December 31, 1996.
10.29* Retirement Benefit Agreement dated February 26, 1992 between SFP and
R. D. Krebs. Incorporated by reference to Exhibit 10(1) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1991.
10.30* Amended and Restated Trust Agreement dated as of April 1, 1994 by and
between SFP and The Bank of New York. Incorporated by reference to
Exhibit 10.31 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1995.
10.31* Trust Agreement dated as of July 26, 1994 by and between SFP and The
Bank of New York. Incorporated by reference to Exhibit 10.33 to BNSF's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.32* The Atchison, Topeka and Santa Fe Railway Company Incentive
Compensation plan. Incorporated by reference to Exhibit 10(n) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1991.
10.33* Burlington Northern Santa Fe Long Term Incentive Stock Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-63247).
10.34* Santa Fe Pacific Corporation Supplemental Retirement and Savings Plan.
Incorporated by reference to Exhibit 10(s) to SFP's Report on Form 10-
K for the fiscal year ended December 31, 1993.
</TABLE>

- --------
* Management contract or compensatory plan or arrangement.

E-3
<PAGE>

INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
------- --------------------------------------
<C> <S>
23 Consent of PricewaterhouseCoopers LLP.
</TABLE>

E-1

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in (i) the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 333-25627;
333-48227; 333-72013) and (ii) the Registration Statements on Form S-8 (Nos.
33-62823; 33-62825; 33-62827; 33-62829; 33-62831; 33-62833; 33-62835; 33-62837;
33-62839; 33-62841; 33-62943; 33-63247; 33-63249; 33-63253; 33-63255; 333-03275;
333-03277; 333-19241) of Burlington Northern Santa Fe Corporation of our report
dated February 8, 1999 appearing on page 25 of the Annual Report to Shareholders
which is incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page F-1 of this Form 10-K.

PRICEWATERHOUSECOOPERS LLP

Fort Worth, Texas

April 12, 1999