Union Pacific Railroad Company: SEC Filing :

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10- K/A-1 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ ] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ___________________ to ____________________ Commission File Number 1-6075 UNION PACIFIC CORPORATION (Exact name of registrant as specified in its charter) Utah 13-2626465 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1717 Main Street, Suite 5900 75201 Dallas, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code(214) 743-5600 - ---____________________________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock (Par Value $2.50 per share) New York Stock Exchange, Inc. _______________________________________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X___ No _________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]. ________________________________________________________________ As of February 28, 1998 the aggregate market value of the registrant's Common Stock held by non-affiliates (using the New York Stock Exchange closing price) was approximately $12,644,079,279. The number of shares outstanding of the registrant's Common Stock as of February 28, 1998 was 247,292,769. Portions of the following documents are incorporated by reference into this Report: (1) registrant's Annual Report to Stockholders for the year ended December 31, 1997 (Parts I, II and IV); and (2) registrant's definitive Proxy Statement for the annual meeting of stockholders to be held on April 7, 1998 (Part III).

2 The undersigned Registrant hereby amends it Annual Report on Form 10-K for the fiscal year ended December 31, 1997 to include the following exhibits: Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Exhibit Number Exhibit (23) Independent Auditors' Consents (99) (a) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Corporation Thrift Plan. (99) (b) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Fruit Express Company Agreement Employee 401(k) Retirement Thrift Plan. (99) (c) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan. (99) (d) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Chicago and North Western Railway Company Profit Sharing and Retirement Savings Program. (99) (e) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Southern Pacific Rail Corporation Thrift Plan. (99) (f) Financial Statements for the Fiscal Year ended December 31, 1997 required 11-K for the Skyway Retirement Savings Plan.

3 UNION PACIFIC CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: June 29, 1998 UNION PACIFIC CORPORATION (Registrant) /s/ Joseph E. O'Connor, Jr. ---------------------------------- Joseph E. O'Connor, Jr., Vice President and Controller (Chief Accounting Officer and Duly Authorized Officer)

4 EXHIBIT INDEX Exhibit Number Exhibit (23) Independent Auditors' Consents (99) (a) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Corporation Thrift Plan. (99) (b) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Fruit Express Company Agreement Employee 401(k) Retirement Thrift Plan. (99) (c) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan. (99) (d) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Chicago and North Western Railway Company Profit Sharing and Retirement Savings Program. (99) (e) Financial Statements for the Fiscal Year ended December 31, 1997 required by Form 11-K for the Southern Pacific Rail Corporation Thrift Plan. (99) (f) Financial Statements for the Fiscal Year ended December 31, 1997 required 11-K for the Skyway Retirement Savings Plan.




                                                  Exhibit 23

      

INDEPENDENT AUDITORS' CONSENT
 
 
We consent to the incorporation by reference in Post-
Effective Amendment No. 1 to Registration Statement No. 33-
12513 and in Registration Statement No. 33-49849 of Union
Pacific Corporation on Forms S-8 of our report dated June 3,
1998 appearing in Exhibit 99(a) of Amendment No. 1 to the
Annual Report on Form 10-K of Union Pacific Corporation for
the year ended December 31, 1997.




DELOITTE & TOUCHE LLP

Omaha, Nebraska
June 26, 1998



      
                                                 Exhibit 23
 
 
      
INDEPENDENT AUDITORS' CONSENT
 
 
 
 
We consent to the incorporation by reference in Registration
Statement No. 33-49785 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(b) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.





DELOITTE & TOUCHE LLP

Omaha, Nebraska
June 26, 1998

     

                                                 Exhibit 23
 
 
 
 
INDEPENDENT AUDITORS' CONSENT
 
 
 
 
We consent to the incorporation by reference in Registration
Statement No. 33-53968 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(d) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.





DELOITTE & TOUCHE LLP

Omaha, Nebraska
June 26, 1998

     


                                                 Exhibit 23
 
 
 
 
INDEPENDENT AUDITORS' CONSENT
 
 
 
 
We consent to the incorporation by reference in Registration
Statement No. 333-10797 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(e) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.





DELOITTE & TOUCHE LLP

Omaha, Nebraska
June 26, 1998



                                                 Exhibit 23
 
 
 
 
INDEPENDENT AUDITORS' CONSENT
 
 
 
 
We consent to the incorporation by reference in Registration
Statement No. 333-13115 of Union Pacific Corporation on Form
S-8 of our report dated June 3, 1998, appearing in Exhibit
99(f) of Amendment No. 1 to the Annual Report on Form 10-K
of Union Pacific Corporation for the fiscal year ended
December 31, 1997.


DELOITTE & TOUCHE LLP

Omaha, Nebraska
June 26, 1998


                                                 Exhibit 23



CONSENT OF INDEPENDENT AUDITORS
 
 
The Board of Directors
  Union Pacific Corporation:


We consent to the incorporation by reference in Registration
Statements No. 33-76930 and No. 33-83390 on Form S-8 of Union
Pacific Corporation of our report dated June 20, 1997, except
as to note 9 which is as of October 10, 1997, relating to the
statement of net assets available for benefits (modified cash
basis) of Southern Pacific Rail Corporation Thrift Plan as of
December 31, 1996, and the related statement of changes in net
assets available for benefits (modified cash basis) for the
year then ended, which report appears in the December 31, 1997
annual report on Form 11-K of Southern Pacific Rail Corporation
Thrift Plan.  Our report notes those financial statements were
prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than generally accepted
accounting principles.




KPMG Peat Marwick LLP

San Francisco, California
June 26, 1998



                                                     Exhibit 23
                                                               

      
INDEPENDENT AUDITORS' CONSENT
 
 
We consent to the incorporation by reference in Registration
Statement No. 33-51735 of Union Pacific Corporation on
Form S-8 of our report dated June 25, 1998 on the financial
statements of Skyway Savings Plan, appearing in
Exhibit 99(c) of Amendment No. 1 to the Annual Report on
Form 10-K of Union Pacific Corporation for the fiscal year
ended December 31, 1997.




Deloitte & Touche LLP

San Jose, California
June 25, 1998

COVER EXHIBIT 99(A) UNION PACIFIC CORPORATION THRIFT PLAN Financial Statements as of and for the Years Ended December 31, 1997 and 1996 and Independent Auditors' Report UNION PACIFIC CORPORATION THRIFT PLAN

INDEX TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND FOR THE YEARS THEN ENDED: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-10 Supplemental schedules required by the Employee Retirement Income Security Act of 1974 are disclosed separately in Master Trust reports filed with the Department of Labor.

1 INDEPENDENT AUDITORS' REPORT Union Pacific Corporation Thrift Plan We have audited the accompanying statements of net assets available for benefits of the Union Pacific Corporation Thrift Plan (the "Plan") as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Omaha, Nebraska June 3, 1998

2 UNION PACIFIC CORPORATION THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS Investments at fair value (Notes 2, 3 and 8) $543,971,178 $476,177,320 Net assets available for benefits $543,971,178 $476,177,320 The accompanying notes are an integral part of these financial statements.

3 UNION PACIFIC CORPORATION THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment income (Note 8): Net appreciation in fair value of investments (Note 3) $ 35,614,899 $ 64,672,659 Interest 7,646,150 7,138,329 Dividends 13,524,500 11,286,224 ------------ ------------ 56,785,549 83,097,212 ------------ ------------ Contributions by (Note 8): Employee 23,914,435 23,593,530 Company 7,984,945 7,699,682 ------------ ------------ 31,899,380 31,293,212 ------------ ------------ Total additions 88,684,929 114,390,424 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions to participants (Note 8) 20,891,071 20,841,033 ------------ ------------ NET INCREASE 67,793,858 93,549,391 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 476,177,320 382,627,929 ------------ ------------ End of year $543,971,178 $476,177,320 ============ ============ The accompanying notes are an integral part of these financial statements.

4 UNION PACIFIC CORPORATION THRIFT PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF PLAN The following description of the Union Pacific Corporation Thrift Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General - The Plan was adopted in October 1973 by the Board of Directors of Union Pacific Corporation (the "Company") and approved by its stockholders in May 1974. Under the terms of the Plan, effective October 1, 1997, non-agreement employees become eligible to make employee contributions to the Plan immediately and generally become eligible to participate in the employer match on the first anniversary of their dates of hire. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Contributions - The Company contributes to the Plan on behalf of each participant an amount equal to 50% of the participant's contribution with such Company contribution limited to 3% of the participant's base salary. The Plan (i) meets the requirements of Section 401(k) of the Internal Revenue Code, which permits certain employee contributions to be withheld on a "salary deferral" basis, so that amounts deducted will not be included in the employee's income for Federal income tax purposes, (ii) allows employees to contribute up to 16% of their salary to the Plan, (iii) provided for payroll based employee stock ownership plan contributions ("PAYSOP") prior to 1987, and (iv) makes various other changes intended to give participants greater control and flexibility with respect to Plan investments. Spin-Off - In September 1996, the Company's Board of Directors declared a special dividend consisting of the shares of Union Pacific Resources Group, Inc. ("Resources"), common stock owned by the Company (the "Spin-Off"). As a result of the Spin-Off, each of the Company's stockholders received 0.846946 of a share of Resources common stock for each share of Company common stock held by such stockholders at the September 26, 1996 record date for the distribution. Therefore, each Plan participant's account received 0.846946 of a share of Resources common stock for each share of Company common stock held in the account. The shares received have been placed in the Resources Stock Fund ("Resources Stock"). Future contributions to Resources Stock are not permitted. Loans to Participants - In June 1985, the loan provisions of the Plan were approved by the Internal Revenue Service and became effective. The amount of a loan is limited to one-half of the vested value of a participant's accounts, excluding PAYSOP and subject to a minimum and maximum loan amount. As the loan is repaid, all principal and interest payments will be credited to the participant's accounts, excluding PAYSOP, in the same proportions as the contributions then being made on behalf of the participant. If no contributions are then being made, the loan repayments will be invested in accordance with the participant's most recent investment election, unless he or she directs otherwise to the extent permitted by the Plan. Participants' loans, which are secured by the participant's individual account balances, bear a fixed rate of interest set by the Plan Administrator based on interest rates then being charged on similar loans, and are repayable over periods not exceeding five years, except loans relating to a principal residence, in which case the term of the loan shall not exceed fifteen years. The loans bear interest ranging from 5.5% to 10.5%. The number of loans outstanding at December 31, 1997 and 1996, was 1,669 and 1,725, respectively.

5 Participant Accounts - Each participant account is credited with the participant's contributions and an allocation of the Plan's earnings. Allocations are based on participant account balances and the funds in which the participant has elected to invest his/her accounts. Vesting - Participants at all times have a 100% vested interest in their voluntary contributions plus actual earnings thereon and their PAYSOP account. Effective October 1, 1997, participants are 100% vested in their employer matching contributions regardless of years of service (see Note 5). Investment Options - Upon enrollment in the Plan, a participant may direct employee contributions in any of eight funds in multiples of 5%. Union Pacific Common Stock Fund - Funds are primarily invested in common stock of Union Pacific Corporation. Union Pacific Equity Index Fund - Funds are primarily invested in shares of a registered investment company that invests in common stocks in a manner designed to closely track the investment performance of the Standard and Poor's 500 Composite Stock Index. Union Pacific Fixed Income Fund - Funds are primarily invested in guaranteed investment contracts held with insurance companies rated at least A-1 by Standard and Poors. Funds are also invested in a registered investment company that invests in guaranteed investment contracts. Vanguard/Wellington Fund - Funds are invested in shares of a registered investment company that invests in common stocks and fixed income securities. Vanguard Money Market Reserves Prime Portfolio (VMMR Prime Portfolio) - Funds are invested in shares of a registered investment company that invests and reinvests in high quality certificates of deposit, bankers' acceptances, commercial paper, U.S. Government Securities, and other short-term obligations with the objective of preserving principal while providing income. Vanguard U.S. Growth Fund - Funds are invested in shares of a registered investment company that invests in the common stock of established U.S. growth companies. Vanguard International Growth Portfolio Fund - Funds are invested in shares of a registered investment company that invests in foreign common stocks with high growth potential. Vanguard Bond Index Fund - Funds are invested in shares of a registered investment company that invests in fixed income securities in a manner which is designed to closely track the investment performance of the Lehman Brothers Aggregate Bond Index. Payments of Benefits - A participant may elect to receive a final distribution under the Plan as either a cash lump sum distribution, or in monthly or annual amounts over a specified period of time not to exceed the lesser of ten calendar years or the life expectancy of the participant or the joint life expectancy of the participant and his/her beneficiary as prescribed in the Treasury Regulations. Prior to October 1, 1997, final distributions of PAYSOP accounts had to be lump sum distributions. For benefit payments equal to or less than $3,500 ($5,000, effective 1/1/98), the Plan Administrator directs the Trustee to make a lump sum payment to the participant or beneficiary. A participant who elects payment in a lump sum has the option to receive the value of his/her PAYSOP account and the portion of his/her account invested in the Company Common Stock Fund in cash or in shares of such Company stock; in-kind distributions will be lump sum and any fractional shares will be distributed in cash.

6 A withdrawal may be made by a participant from his/her account in accordance with the Plan's provisions. Forfeitures - When certain terminations of participation in the Plan occur, the nonvested portion of a participant's account, as defined by the Plan, represents a potential forfeiture. Such potential forfeitures reduce subsequent Company contributions to the Plan. However, if upon reemployment the former participant fulfills certain requirements as defined in the Plan, the previously forfeited nonvested portion of the participant's account may be restored through Company contributions. Effective October 1, 1997, the Plan should no longer have forfeiture balances (Note 5). Amounts summarized below represent Company contributions forfeited for the years ended December 31, 1997 and 1996: 1997 1996 Company contributions forfeited $29,489 $24,278 Applied against current year contributions 20,150 18,170 ------- ------- Applied to reduce subsequent year contributions $ 9,339 $ 6,108 ======= ======= Plan Administration - The Plan is administered by the Senior Vice President, Human Resources of the Company. All administrative expenses of the Plan with the exception of investment advisory fees are paid by the Company. Investment advisory fees for portfolio management are paid directly from fund earnings. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accounts of the Plan have been prepared in accordance with generally accepted accounting principles. The financial statements were prepared in accordance with the financial reporting requirements of ERISA as permitted by the Securities and Exchange Commission's amendments to Form 11-K adopted during 1990. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment Valuation and Income Recognition - Investments in the Union Pacific Company Stock Fund, PAYSOP Resources Stock Fund, Vanguard Wellington Fund, Union Pacific Equity Index Fund, Vanguard U.S. Growth Fund, Vanguard International Growth Portfolio Fund, and the Vanguard Total Bond Market Fund are valued at fair value as determined by quoted market prices. Investments in the Union Pacific Fixed Income Fund and the Vanguard Money Market Reserves - Prime Portfolio are valued at fair value as determined by Vanguard Fiduciary Trust Company. Participant loans are valued at their carrying value which approximates fair value. Dividend income is recorded as of the ex-dividend date. Security transactions are recorded as of the trade date. Payments of Benefits - Benefits are recorded when paid.

7 3. INVESTMENTS The following table presents the fair value of investments: December 31, 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master Trust $427,018,286 $365,826,317 Investments at Estimated Fair Value: Master Trust 116,952,892 110,351,003 ------------ ------------ $543,971,178 $476,177,320 ============ ============ During 1997 and 1996, the Plan's investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value by $35,614,899 and $64,672,659, respectively, as follows: Year Ended December 31, Net Change in Fair Value 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master Trust $35,412,643 $64,736,156 Investments at Estimated Fair Value: Master Trust 202,256 (63,497) ----------- ----------- Net change in fair value $35,614,899 $64,672,659 =========== ===========

8 4. MASTER TRUST The assets comprising the Master Trust are presented in the following table: 1997 1996 Common Stock $180,366,490 $189,870,983 Mutual Funds 449,880,397 276,457,039 Guaranteed Investment Contracts 201,246,115 93,697,351 Participant Loans 18,826,627 17,565,878 ------------ ------------ $850,319,629 $577,591,251 ============ ============ Total interest and dividends of the Master Trust were $42,436,033 and $24,861,387 for the years ended December 31, 1997 and 1996, respectively. During 1997 and 1996, the Master Trust's investments (including investments bought, sold, and held during the year) appreciated in value by $51,517,049 and $96,600,069, respectively, as follows: December 31, Net appreciation (depreciation) 1997 1996 Common Stocks $(2,627,738) $58,743,085 Mutual Funds 54,009,125 37,932,780 Guaranteed Investment Contracts 135,662 (75,796) ----------- ----------- Net change in fair value $51,517,049 $96,600,069 =========== =========== At December 31, 1997 and 1996, the Plan held percentage interests in the Master Trust of 64.0% and 82.4%, respectively. Assets, liabilities, investment income, and security gains and losses are allocated monthly to the Plan based on its equity in the investments of the Master Trust. 5. PLAN AMENDMENTS Effective April 1, 1997, the Plan was amended to provide that any Participant (1) who had a Separation from Service in 1997 as an Employee of Union Pacific Corporation in Bethlehem, PA, or Broomfield, CO, (2) receives severance pay from the Company as a result of such Separation from Service, and (3) has W-2 compensation in 1996 from the Company and all Affiliated Companies of less than $80,000, shall be 100% vested in his or her account as of the date of his Separation from Service.

9 Effective June 30, 1997, the Plan was amended to provide that each person who was employed by Southern Pacific Rail Corporation or any of its subsidiaries or affiliates on the day such companies became Affiliated Companies and who becomes a covered employee under a collective bargaining agreement or as a result of a decertification election shall be credited with hours of service and years of service under the Plan for employment with Southern Pacific prior to such date. Effective October 1, 1997, the plan was amended to provide that covered employees are immediately eligible to make employee contributions to provide that employer matching contributions are 100% vested regardless of years of service and are allocable on or after the first anniversary of the covered employee's date of hire, a participant may defer payment until age 70-1/2, to permit non-hardship withdrawals twice in a calendar year, to allow rollover amounts to be withdrawn in a non- hardship withdrawal, to eliminate the limit on the frequency of hardship withdrawals, to eliminate the 12- month suspension following a hardship withdrawal and to permit a non-hardship withdrawal when a participant has a loan. Effective January 1, 1998, the Plan was amended to provide that any individual eligible to participate in the Southern Pacific Rail Corporation Thrift Plan between September 11, 1996, and December 31, 1997, who was a Covered Employee would not become an Eligible Employee prior to January 1, 1998, and each person employed by the Southern Pacific Rail Corporation or any of its subsidiaries or affiliates on the day such companies became Affiliated Companies shall be credited with hours of service and years of service under the Plan for employment with Southern Pacific prior to such date. 6. FEDERAL INCOME TAXES The Company has received a letter of determination from the Internal Revenue Service dated April 18, 1995, and the Plan Administrator and the Plan's tax counsel believe that the Plan, as subsequently amended, is currently designed and being operated in compliance with Section 401(a) of the Internal Revenue Code of 1986, as amended. With respect to the operation of the Plan, Plan management is aware of certain operational defects which could adversely affect tax-exempt status of the Plan. These operational defects will be corrected through the use of the Voluntary Compliance Resolution (VCR) program. Submissions to the VCR program were made on August 2, 1996 and June 11, 1997 and supplemented on August 8, 1997, November 12, 1997 and May 1, 1998. Therefore, no provision for income taxes has been included in the Plan's financial statements. Inasmuch as it is the opinion of Management that the Plan is qualified, employees participating in the Plan are not taxed on Company contributions made on their behalf, on employee contributions made on a pre-tax basis, on earnings on such Company contributions or pre- tax employee contributions, or on earnings on after-tax employee contributions, until any such amounts are distributed.

10 7. PLAN TERMINATION Although the Plan is intended to be continued by the Company, the Company reserves the right to amend or terminate the Plan. In the event of a Plan termination or partial termination, or the Company permanently ceases to make contributions, all invested amounts shall immediately vest and be nonforfeitable. All funds shall continue to be held for distribution as provided in the Plan. 8. FUND INFORMATION Investments at fair value, investment income, contributions, and distributions to participants by fund are as follows as of and for the years ended December 31, 1997 and 1996: 1997 1996 Investments at fair value: Union Pacific Common Stock Fund* $128,656,477 $127,266,375 Union Pacific Equity Index Fund* 131,314,520 91,508,657 Union Pacific Fixed Income Fund* 96,389,389 92,215,165 Common Stock/PAYSOP 10,656,764 10,378,499 Resources Stock Fund* 35,830,871 51,360,520 Vanguard/Wellington Fund* 42,043,138 30,566,181 VMMR Prime Portfolio 3,492,575 1,984,161 Vanguard U.S. Growth Fund* 43,820,474 26,813,999 Vanguard International Growth Portfolio Fund* 27,712,992 24,514,297 Vanguard Bond Index Fund 6,983,050 3,417,789 Loan Fund 17,070,928 16,151,677 ------------ ------------ $543,971,178 $476,177,320 ============ ============ Investment Income: Union Pacific Common Stock Fund* $ 9,264,845 $ 25,406,609 Union Pacific Equity Index Fund* 31,180,397 17,420,616 Union Pacific Fixed Income Fund* 6,130,541 5,494,978 Common Stock/PAYSOP 678,780 2,507,552 Resources Stock Fund* (7,968,006) 18,858,691 Vanguard/Wellington Fund* 7,315,343 4,233,058 VMMR Prime Portfolio 108,375 54,700 Vanguard U.S. Growth Fund* 7,475,898 4,800,095 Vanguard International Growth Portfolio Fund* 861,077 2,971,594 Vanguard Bond Index Fund 409,489 93,817 Loan Fund 1,328,810 1,255,502 ------------ ----------- $ 56,785,549 $ 83,097,212 ============ ============ * Represents more than 5% of the net assets available for benefits

11 1997 1996 Contributions: Union Pacific Common Stock Fund $ 9,407,739 $ 8,736,619 Union Pacific Equity Index Fund 6,430,945 6,599,982 Union Pacific Fixed Income Fund 4,654,539 5,699,884 Company Stock/PAYSOP 556 5,741 Resources Stock Fund - 3,160 Vanguard/Wellington Fund 4,113,748 4,023,577 VMMR Prime Portfolio 196,243 163,231 Vanguard U.S. Growth Fund 3,971,560 2,834,554 Vanguard International Growth Portfolio Fund 2,566,488 2,663,227 Vanguard Bond Index Fund 557,861 563,237 Loan Fund 299 - ----------- ----------- $31,899,380 $31,293,212 Distributions to Participants: Union Pacific Common Stock Fund $ 4,987,529 $ 5,148,631 Union Pacific Equity Index Fund 4,107,006 4,485,174 Union Pacific Fixed Income Fund 5,151,165 5,926,598 Company Stock/PAYSOP 401,071 413,842 Resources Stock Fund 1,592,926 324,621 Vanguard/Wellington Fund 1,412,963 1,575,834 VMMR Prime Portfolio 157,009 713,289 Vanguard U.S. Growth Fund 1,959,187 810,357 Vanguard International Growth Portfolio Fund 650,038 934,304 Vanguard Bond Index Fund 53,352 100,045 Loan Fund 418,825 408,338 ----------- ----------- $20,891,071 $20,841,033 =========== =========== 9. RELATED PARTY TRANSACTIONS Plan investments include the Union Pacific Common Stock Fund which is invested primarily in the common stock of Union Pacific Corporation. Union Pacific Corporation is the holding company of the Plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. The Plan also invests in various funds managed by Vanguard Fiduciary Trust Company. Vanguard Fiduciary Trust Company is the Trustee as defined by the Plan and, therefore, the related transactions qualify as party-in- interest transactions.

COVER EXHIBIT 99(B) UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Financial Statements as of and for the Years Ended December 31, 1997 and 1996, Supplemental Schedules as of and for the Year Ended December 31, 1997 and Independent Auditors' Report UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN

INDEX TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND FOR THE YEARS THEN ENDED: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-8 SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997 AND FOR THE YEAR THEN ENDED: Item 27a - Schedule of Assets Held for Investment Purposes 9 Item 27d - Schedule of Reportable Transactions 10 Schedules not filed herewith are omitted because of the absence of the conditions under which they are required.

1 INDEPENDENT AUDITORS' REPORT Union Pacific Fruit Express Company Agreement Employee 401(k) Retirement Thrift Plan We have audited the accompanying statements of net assets available for benefits of the Union Pacific Fruit Express Company Agreement Employee 401(k) Retirement Thrift Plan (the Plan) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan's management. Such schedules have been subjected to the auditing procedures applied in the audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP Omaha, Nebraska June 3, 1998

2 UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS: Investments at fair value (Note 3) $481,248 $301,787 -------- -------- Net assets available for benefits $481,248 $301,787 -------- -------- The accompanying notes are an integral part of these financial statements.

3 UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment income (Note 7): Net appreciation in fair value of $ 54,742 $ 35,133 investments (Note 3) Interest 284 171 Dividends 19,124 12,049 -------- -------- 74,150 47,353 Employee contributions (Note 7) 107,175 83,291 -------- -------- Total Additions 181,325 130,644 -------- -------- DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions to participants (Note 7) 1,864 4,500 -------- -------- NET INCREASE 179,461 126,144 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of Year 301,787 175,643 -------- -------- End of Year $481,248 $301,787 ======== ======== The accompanying notes are an integral part of these financial statements.

4 UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF PLAN The following description of the Union Pacific Fruit Express Company Agreement Employee 401(k) Retirement Thrift Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General - The Plan is a defined contribution plan covering employees of the Union Pacific Fruit Express Company (the Company) who are governed by a collective bargaining agreement entered into between the Company and a Union to which eligibility to participate in the Plan has been extended, and have completed one year of service or were employees as of the effective date of the Plan, August 1, 1993. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Contributions - Participants may contribute 2% to 8% (20% effective 1/1/98) of their compensation on a salary deferral basis subject to limitations specified in the Internal Revenue Code. Participants may also contribute, effective May 1997, 1% to 20% of their compensation on an after-tax basis. Combined after-tax and pre-tax contributions may not exceed 20% of compensation. The Company does not contribute to the Plan. Participant Accounts - Each participant account is credited with the participant's contributions and an allocation of the Plan's earnings. Allocations are based on participant account balances and the funds in which the participant has elected to invest his/her accounts. Vesting - Participants are at all times 100% vested in the value of their account. Payment of Benefits - Distribution of benefits shall be in a lump sum as soon as possible following the participant's termination of employment, subject to certain consent requirements for participants whose accounts exceed a statutory cash-out threshold. If a participant, whose account exceeds the threshold does not consent to payment at termination, the account will be paid on the earliest of the participant's request for payment, the participant's death, or the participant's reaching age 70-1/2. Pay-out is mandatory for a participant who has reached age 70-1/2 but has not terminated employment. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accounts of the Plan have been prepared in accordance with generally accepted accounting principles. The financial statements were prepared in accordance with the financial reporting requirements of ERISA as permitted by the Securities and Exchange Commission's amendments to Form 11-K adopted during 1990. Investment Valuation and Income Recognition - Investments in the Union Pacific Common Stock Fund, Resources Stock Fund, Vanguard/Wellington Fund, Vanguard Index Trust-500 Portfolio Fund, Vanguard Money Market Reserves - Prime Portfolio, Vanguard U.S. Growth Fund, Vanguard International Growth Portfolio Fund, and the Vanguard Bond Index Fund are valued at fair value as determined by quoted market prices. The investments in the Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) are valued at fair value as determined by Vanguard Fiduciary Trust Company. Dividend income is recorded as of the ex-dividend date. Security transactions are recorded as of the trade date.

5 Payment of Benefits - Benefits are recorded when paid. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. INVESTMENTS Plan participants may direct their contributions in various proportions to any of the eight available investment funds identified below: Union Pacific Common Stock Fund - This fund is administered as a separate account by Vanguard Fiduciary Trust Company and invests primarily in the stock of Union Pacific Corporation. It also maintains a small cash position invested in Vanguard Money Market Reserves, to facilitate transactions. The Company stock fund is divided into fund shares, rather than shares of company stock. Vanguard/Wellington Fund - This fund consists of investment in the Vanguard Wellington Mutual Fund which is comprised of common stocks and fixed income securities. Vanguard Index Trust-500 Portfolio Fund - This fund consists of investment in the Vanguard Index Trust-500 Portfolio Mutual Fund, a diversified open-end investment company, or mutual fund, and comprises the 500, Growth, Value, Extended Market, Small Capitalization Stock and Total Retirement Savings Trust Stock Market Portfolios. Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) - This fund consists of investment in the Vanguard Retirement Savings Trust, a collective investment of assets of tax-qualified pension and profit sharing plan trusts primarily in a pool of investment contracts that are issued by insurance companies and commercial banks. Vanguard U.S. Growth Fund - This fund consists of investment in the Vanguard US Growth Mutual Fund which is comprised of established U.S. growth stocks. Vanguard International Growth Portfolio Fund - This fund consists of investment in the Vanguard International Growth Portfolio Mutual Fund which is comprised of foreign common stocks with high growth potential. Vanguard Bond Index Fund - This fund consists of investment in the Vanguard Total Bond Market Mutual Fund which is designed to closely track the investment performance of the Lehman Brothers Aggregate Bond Index Vanguard Money Market Reserves - Prime Portfolio - This fund consists of investment in the Vanguard Money Market Reserves - Prime Portfolio which is a diversified money market investment fund invested and reinvested in high quality certificates of deposit, bankers' acceptances, commercial paper, U.S. Government Securities and other short-term obligations with the objective of preserving principal while providing income.

6 In September 1996, the Company's Board of Directors declared a special dividend consisting of the shares of Union Pacific Resources Group Inc. ("Resources") common stock owned by the Company ("the Spin-Off"). As a result of the Spin-Off, each of the Company's stockholders received 0.846946 of a share of Resources common stock for each share of Company common stock held by such stockholders at the September 26, 1996 record date for the distribution. Therefore, each Plan participant's account received 0.846946 of a share of Resources common stock for each share of Company common stock held in the account. The shares received were placed in the Resources Stock Fund ("Resources Stock"). Future contributions to Resources Stock are not permitted. The following table presents the fair value of investments. Investments that represent 5% or more of the Plan's net assets are separately identified. December 31, 1997 December 31, 1996 Number Fair Number Fair of Units Value of Units Value Investments at Fair Value as Determined by Quoted Market Price: Union Pacific Common Stock Fund 7,413.493 $ 75,914 4,682,749 $ 46,172 Resources Stock Fund 1,308.756 11,386 1,630.503 17,104 Vanguard/Wellington 3,644.406 95,301 Fund 4,801.054 141,391 1,696,993 117,364 Vanguard Index Trust - 500 Portfolio Fund 2,203.328 198,454 Vanguard U.S. Growth Fund 994.313 28,537 701.654 16,657 Other - 20,231 - 5,805 20,231 -------- -------- 475,913 298,403 Investments at Estimated Fair Value: Vanguard Retirement Savings Trust Fund 5,335.320 5,335 3,383.690 3,384 -------- -------- Total Investments at Fair $481,248 $301,787 ======== ======== 8 Year Ended December 31, 1997 1996 Investment Income: Union Pacific Common Stock Fund $ 2,936 $10,446 Resources Stock Fund (2,610) 3,081 Vanguard/Wellington Fund 24,989 12,061 Vanguard Index Trust - 500 Portfolio Fund 43,172 19,350 Vanguard Retirement Savings Trust Fund (formerly Vanguard Investment Contract Trust Fund) 284 171 Vanguard U.S. Growth Fund 4,985 1,686 Vanguard International Growth Portfolio Fund 132 490 Vanguard Bond Index Fund 148 68 Vanguard Money Market Reserves - Prime Portfolio 114 - -------- ------- $ 74,150 $47,353 ======== ======= Contributions: Union Pacific Common Stock Fund $ 28,377 $21,351 Resources Stock Fund - - Vanguard/Wellington Fund 31,660 24,300 Vanguard Index Trust - 500 Portfolio Fund 34,622 28,665 Vanguard Retirement Savings Trust Fund (formerly Vanguard Investment Contract Trust Fund) 1,590 732 Vanguard U.S. Growth Fund 6,894 5,308 Vanguard International Growth Portfolio Fund 2,729 2,562 Vanguard Bond Index Fund 1,303 373 Vanguard Money Market Reserves - Prime Portfolio - - -------- ------- $107,175 $83,291 ======== ======= Distributions to participants: Union Pacific Common Stock Fund $ 350 $ 4,500 Resources Stock Fund 86 - Vanguard/Wellington Fund 1,428 - Vanguard Index Trust - 500 Portfolio Fund - - Vanguard Retirement Savings Trust Fund (formerly Vanguard Investment Contract Trust Fund) - - Vanguard U.S. Growth Fund - - Vanguard International Growth Portfolio Fund - - Vanguard Bond Index Fund - - Vanguard Money Market Reserves - Prime Portfolio - - -------- ------- $ 1,864 $ 4,500 ======== =======

9 8. RELATED PARTY TRANSACTIONS Plan investments include the Union Pacific Company Stock Fund which is invested primarily in common stock of Union Pacific Corporation. Union Pacific Corporation is the holding company of the Plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. The Plan also invests in various funds managed by Vanguard Fiduciary Trust Company. Vanguard Fiduciary Trust Company is the trustee as defined by the Plan and, therefore, the related transactions qualify as party-in- interest transactions.

10 UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1997 Column B Column C Column D Column E Description of Investment, Including Collateral, Rate of Identity of Issue, Interest, Maturity Current Borrower, Date, Lessor or Similar Party Par or Maturity Value Cost Value Union Pacific Common Stock Fund * 7,413.493 units $ 62,550 $ 75,914 Resources Stock Fund 1,308.756 units 11,263 11,386 Vanguard Wellington Fund * 4,801.054 units 118,172 141,391 Vanguard Index Trust - 500 Portfolio Fund * 2,203.328 units 129,751 198,454 Vanguard U.S. Growth Fund * 994.313 units 24,059 28,537 Vanguard International Growth Portfolio Fund * 480.868 units 7,843 7,882 Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) * 5,335.320 units 5,335 5,335 Vanguard Bond Index Fund 221.518 units 2,173 2,235 * Vanguard Money Market Reserves - Prime Portfolio * 10,114.310 units 10,114 10,114 -------- $371,260 $481,248 ======== * Represents a party-in-interest

11 UNION PACIFIC FRUIT EXPRESS COMPANY AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 Series of Transactions, When Aggregated, Involving an Amount in Excess of 5% of the Current Value of Plan Assets: Column A Column B Column C Column D Column E Column F Column G Total Total Dollar Dollar Number Number Value of Value of Net Gain of Identity of Description of Purchases of Sales Purchases Sales or (Loss) Party Involved Asset Vanguard Union Pacific Common Fiduciary Trust Stock Fund 30 3 $32,180 $ 3,582 $ 744 Company * Vanguard Vanguard Wellington Fiduciary Trust Fund 29 2 $44,267 $11,428 $2,794 Company * Vanguard Vanguard Index Trust Fiduciary Trust 500 Portfolio 29 - $41,802 $- $- Company * * Represents a party-in-interest

COVER EXHIBIT 99(C) UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Financial Statements as of and for the Years Ended December 31, 1997 and 1996, Supplemental Schedules as of and for the Year Ended December 31, 1997 and Independent Auditors' Report UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN

INDEX TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND FOR THE YEARS THEN ENDED: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-8 SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997 AND FOR THE YEAR THEN ENDED: Item 27a - Schedule of Assets Held for Investment Purposes 9 Item 27d - Schedule of Reportable Transactions 10 Schedules not filed herewith are omitted because of the absence of the conditions under which they are required.

1 INDEPENDENT AUDITORS' REPORT Union Pacific Agreement Employee 401(k) Retirement Thrift Plan We have audited the accompanying statements of net assets available for benefits of the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan (the Plan) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan's management. Such schedules have been subjected to the auditing procedures applied in the audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP Omaha, Nebraska June 3, 1998

2 UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS: Investments at fair value (Note 3) $143,012,513 $92,719,672 ------------ ----------- Net assets available for benefits $143,012,513 $92,719,672 ============ =========== The accompanying notes are an integral part of these financial statements.

3 UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment income (Note 7): Net appreciation in fair value of investments (Note 3) $ 15,163,982 $10,564,969 Interest 485,016 330,166 Dividends 5,149,480 3,212,755 ------------ ----------- 20,798,478 14,107,890 Employee contributions (Note 7) 32,360,426 24,829,233 ------------ ----------- Total Additions 53,158,904 38,937,123 ------------ ----------- DEDUCTION FROM NET ASSETS ATTRIBUTED TO: Distribution to participants (Note 7) 2,866,063 1,357,442 ------------ ----------- NET INCREASE 50,292,841 37,579,681 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of Year 92,719,672 55,139,991 ------------ ----------- End of Year $143,012,513 $92,719,672 ============ =========== The accompanying notes are an integral part of these financial statements.

4 UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF PLAN The following description of the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General - The Plan is a defined contribution plan covering employees of the Union Pacific Railroad Company and its Railroad affiliates (the Company) who are represented for the purposes of collective bargaining by a rail union, to which eligibility to participate in the Plan has been extended. The Plan covers employees who have completed one year of service or were employees as of the effective date of the Plan, July 1, 1990. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Contributions - Participants may contribute 2% to 8% (20% effective 1/1/98) of their compensation on a salary deferral basis subject to limitations specified in the Internal Revenue Code. Participants may also contribute, effective May 1997, 1% to 20% of their compensation on an after-tax basis. Combined after-tax and pre-tax contributions may not exceed 20% of compensation. The Company does not contribute to the Plan. Participant Accounts - Each participant account is credited with the participant's contributions and an allocation of the Plan's earnings. Allocations are based on participant account balances and the funds in which the participant has elected to invest his/her accounts. Vesting - Participants are at all times 100% vested in the value of their account. Payment of Benefits - Distribution of benefits shall be in a lump sum as soon as possible following the participant's termination of employment, subject to certain consent requirements for participants whose accounts exceed a statutory cash-out threshold. If a participant, whose account exceeds the threshold does not consent to payment at termination, the account will be paid on the earliest of the participant's request for payment, the participant's death, or the participant's reaching age 70-1/2. Pay-out is mandatory for a participant who has reached age 70-1/2 but has not terminated employment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accounts of the Plan have been prepared in accordance with generally accepted accounting principles. The financial statements were prepared in accordance with the financial reporting requirements of ERISA as permitted by the Securities and Exchange Commission's amendments to Form 11-K adopted during 1990. Investment Valuation and Income Recognition - Investments in the Union Pacific Common Stock Fund, Resources Stock Fund, Vanguard/Wellington Fund, Vanguard Index Trust-500 Portfolio Fund, Vanguard Money Market Reserves - Prime Portfolio, Vanguard U.S. Growth Fund, Vanguard International Growth Portfolio Fund, and the Vanguard Bond Index Fund are valued at fair value as determined by quoted market prices. The investments in the Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) are valued at fair value as determined by Vanguard Fiduciary Trust Company. Dividend income is recorded as of the ex-dividend date. Security transactions are recorded as of the trade date.

5 Payment of Benefits - Benefits are recorded when paid. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. INVESTMENTS Plan participants may direct their contributions in various proportions to any of the eight available investment funds identified below: Union Pacific Common Stock Fund - This fund is administered as a separate account by Vanguard Fiduciary Trust Company and invests primarily in the stock of Union Pacific Corporation. It also maintains a small cash position invested in Vanguard Money Market Reserves, to facilitate transactions. The Company stock fund is divided into fund shares, rather than shares of company stock. Vanguard/Wellington Fund - This fund consists of investment in the Vanguard Wellington Mutual Fund which is comprised of common stocks and fixed income securities. Vanguard Index Trust-500 Portfolio Fund - This fund consists of investment in the Vanguard Index Trust-500 Portfolio Mutual Fund, a diversified open-end investment company, or mutual fund, and comprises the 500, Growth, Value, Extended Market, Small Capitalization Stock and Total Stock Market Portfolios. Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) - This fund consists of investment in the Vanguard Retirement Savings Trust, a collective investment of assets of tax-qualified pension and profit sharing plan trusts primarily in a pool of investment contracts that are issued by insurance companies and commercial banks. Vanguard U.S. Growth Fund - This fund consists of investment in the Vanguard US Growth Mutual Fund which is comprised of established U.S. growth stocks. Vanguard International Growth Portfolio Fund - This fund consists of investment in the Vanguard International Growth Portfolio Mutual Fund which is comprised of foreign common stocks with high growth potential. Vanguard Bond Index Fund - This fund consists of investment in the Vanguard Total Bond Market Mutual Fund which is designed to closely track the investment performance of the Lehman Brothers Aggregate Bond Index Vanguard Money Market Reserves - Prime Portfolio - This fund consists of investment in the Vanguard Money Market Reserves - Prime Portfolio which is a diversified money market investment fund invested and reinvested in high quality certificates of deposit, bankers' acceptances, commercial paper, U.S. Government Securities and other short-term obligations with the objective of preserving principal while providing income. In September 1996, the Company's Board of Directors declared a special dividend consisting of the shares of Union Pacific Resources Group Inc. ("Resources") common stock owned by the Company ("the Spin-Off"). As a

6 result of the Spin-Off, each of the Company's stockholders received 0.846946 of a share of Resources common stock for each share of Company common stock held by such stockholders at the September 26, 1996 record date for the distribution. Therefore, each Plan participant's account received 0.846946 of a share of Resources common stock for each share of Company common stock held in the account. The shares received were placed in the Resources Stock Fund ("Resources Stock"). Future contributions to Resources Stock are not permitted. The following table presents the fair value of investments. Investments that represent 5% or more of the Plan's net assets are separately identified. December 31, 1997 December 31, 1996 Number Fair Number Fair of Units Value of Units Value Investments at Fair Value as Determined by Quoted Market Price: Union Pacific Common Stock Fund 1,829,943 $ 18,738,611 1,455,658.553 $14,352,794 Resources Stock Fund 421,515 3,667,175 493,540.126 5,177,236 Vanguard/Wellington Fund 1,161,554 34,207,780 845,091.198 22,099,135 Vanguard Index Trust - 500 Portfolio Fund 656,404 59,122,300 499,790.113 34,565,484 Vanguard U.S. Growth 354,210 10,165,824 202,362.143 4,804,077 Fund Vanguard International Growth Portfolio Fund 362,128 5,935,286 248,062.367 4,083,107 Other - 2,153,645 63,324.862 623,116 ------------ ----------- 133,990,621 85,704,949 ------------ ----------- Investments at Estimated Fair Value: Vanguard Retirement Savings Trust Fund 9,021,892 9,021,892 7,014,723.420 7,014,723 ------------ ----------- $143,012,513 $92,719,672 ============ =========== During 1997 and 1996, the Plan's investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value by $15,163,982 and $10,564,969, respectively, as follows: Year Ended December 31, Net Change in Fair Value 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Union Pacific Common Stock Fund $ 472,292 $ 2,927,426 Resources Stock Fund (834,278) 979,849 Mutual Funds 15,525,968 6,657,694 ----------- ----------- Net change in fair value $15,163,982 $10,564,969 =========== ===========

7 4. PLAN ADMINISTRATION The Plan is administered by the Senior Vice President, Human Resources of the Union Pacific Corporation. All expenses incurred in the administration of the Plan are paid by the Company. 5. TAX STATUS The Plan obtained a tax determination letter dated July 27, 1995, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code (the Code). The Plan has been amended since receiving the determination letter. However, Plan management believes that the Plan currently is being operated in compliance with the applicable requirements of the Internal Revenue Code. With respect to the operation of the Plan, Plan management is aware of certain operational defects which could adversely affect the tax- exempt status of the Plan. These operational defects will be corrected through the use of the Voluntary Compliance Resolution (VCR) program. Submission to the VCR program was made on April 2, 1998. Therefore, no provision for income taxes has been included in the Plan's financial statements. 6. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan at any time, to terminate the Plan subject to the provisions of ERISA. Regardless of such actions, the principal and income of the Plan remains for the exclusive benefit of the Plan's participants and beneficiaries. The Company may direct the Trustee either to distribute the Plan's assets to the participants, or to continue the Trust and distribute benefits as though the Plan had not been terminated. 7. FUND INFORMATION Investment income, contributions and distributions to participants by fund are as follows for the years ended December 31, 1997 and 1996: Year Ended December 31, 1997 1996 Investment Income: Union Pacific Common Stock Fund $ 953,676 $ 3,271,547 Resources Stock Fund (809,327) 979,849 Vanguard/Wellington Fund 5,724,612 2,821,356 Vanguard Index Trust - 500 Portfolio Fund 12,685,750 5,730,512 Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) 485,016 330,166 Vanguard U.S. Growth Fund 1,580,094 553,670 Vanguard International Growth Portfolio Fund 85,261 400,405 Vanguard Bond Index Fund 81,767 20,385 Vanguard Money Market Reserves - Prime Portfolio 11,629 - ----------- ----------- $20,798,478 $14,107,890 =========== ===========

8 Contributions: Union Pacific Common Stock Fund $ 5,760,739 $ 4,741,092 Resources Stock Fund - - Vanguard/Wellington Fund 7,080,611 5,981,467 Vanguard Index Trust - 500 Portfolio Fund 10,984,728 8,406,639 Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) 2,027,165 1,847,997 Vanguard U.S. Growth Fund 3,584,223 1,752,820 Vanguard International Growth Portfolio Fund 2,328,546 1,736,846 Vanguard Bond Index Fund 523,020 362,372 Vanguard Money Market Reserves - Prime Portfolio 71,394 - ----------- ----------- $32,360,426 $24,829,233 =========== =========== Distributions to participants: Union Pacific Common Stock Fund $ 488,636 $ 274,615 Resources Stock Fund 112,200 15,538 Vanguard/Wellington Fund 712,206 396,073 Vanguard Index Trust - 500 Portfolio Fund 943,177 461,026 Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund) 327,250 152,800 Vanguard U.S. Growth Fund 143,216 12,101 Vanguard International Growth Portfolio Fund 108,825 42,826 Vanguard Bond Index Fund 10,805 2,463 Vanguard Money Market Reserves - Prime Portfolio 19,748 - ----------- ----------- $ 2,866,063 $ 1,357,442 =========== ===========

9 8. RELATED PARTY TRANSACTIONS Plan investments include the Union Pacific Company Stock Fund which is invested primarily in the common stock of Union Pacific Corporation. Union Pacific Corporation is the holding company of the Plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. The Plan also invests in various funds managed by Vanguard Fiduciary Trust Company. Vanguard Fiduciary Trust Company is the trustee as defined by the Plan and, therefore, the related transactions qualify as party-in- interest transactions.

10 UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1997 Column B Column C Column D Column E Description of Investment, Including Collateral, Identity of Issue, Rate of Interest, Borrower, Lessor Maturity Date, Par Current or Similar Party or Maturity Value Cost Value Union Pacific Company Stock Fund* 1,829,943 units $ 15,121,620 $ 18,738,611 Resources Stock Fund 421,515 units 3,605,095 3,667,175 Vanguard/Wellington 1,161,554 units 28,676,363 34,207,780 Fund* Vanguard Index Trust - 500 Portfolio Fund* 656,404 units 39,775,280 59,122,300 Vanguard Retirement Savings Trust (formerly Vanguard Investment Contract Trust Fund)* 9,021,892 units 9,021,892 9,021,892 Vanguard U.S. Growth Fund* 354,210 units 8,889,259 10,165,824 Vanguard International Growth Portfolio Fund* 362,128 units 5,933,951 5,935,286 Vanguard Bond Index 139,110 units 1,374,228 1,403,619 Fund* Vanguard Money Market Reserve - Prime Portfolio* 750,026 units 750,026 750,026 ------------ ------------ $113,147,714 $143,012,513 ============ ============ * Represents a party-in-interest

11 UNION PACIFIC AGREEMENT EMPLOYEE 401(k) RETIREMENT THRIFT PLAN Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 Single Transactions Involving an Amount in Excess of 5% of the Current value of Plan Assets: Column A Column B Column C Column D Column G Column H Column I Current Value of Asset on Identity of Purchase Selling Cost of Transaction Net Gain Party Involved Description of Asset Price Price Asset Date or (Loss) Vanguard Fiduciary Union Pacific Common Trust Company* Stock Fund $ 8,845,212 $ - $ - $ 8,845,212 $ - Vanguard Fiduciary Union Pacific Common Trust Company* Stock Fund $ - $ 4,931,685 $ 4,119,849 $ 4,931,685 $ 811,836 Vanguard Fiduciary Trust Company* Vanguard Wellington Fund $11,645,691 $ - $ - $11,645,691 $ - Vanguard Fiduciary Vanguard Index Trust - 500 Trust Company* Porftolio Fund $17,422,445 $ - $ - $17,422,445 $ - Vanguard Fiduciary Vanguard Retirement Trust Company* Savings Trust (formerly Vanguard Investment Contract Trust Fund) $ 5,947,342 $ - $ - $ 5,947,342 $ - Vanguard Fiduciary Trust Company * Vanguard U.S. Growth Fund $ 6,128,644 $ - $ - $ 6,128,644 $ - Series of Transactions, When Aggregated, Involving an Amount in Excess of 5% of the Current Value of Plan Assets: Column A Column B Column C Column D Column E Column F Column G Total Total Dollar Dollar Identity of Number of Number Value of Value of Net Gain Party Involved Description of Asset Purchases of Sales Purchases Sales or (Loss) Vanguard Fiduciary Union Pacific Common Trust Company* Stock Fund 201 210 $ 8,926,045 $ 5,012,519 $ 837,458 Vanguard Fiduciary Trust Company* Vanguard/Wellington Fund 179 215 $11,771,097 $ 2,587,890 $ 384,656 Vanguard Fiduciary Vanguard Index Trust - 500 Trust Company* Portfolio Fund 238 221 $17,570,311 $ 4,552,860 $1,049,855 Vanguard Fiduciary Vanguard Retirement Savings Trust Company* Trust (formerly Vanguard Investment Contract Trust Fund) 250 242 $ 5,984,915 $ 3,977,747 $ - Vanguard Fiduciary Trust Company* Vanguard U.S. Growth Fund 214 191 $ 6,147,633 $ 1,984,172 $ 199,019 * Represents a party-in-interest

COVER EXHIBIT 99(D) CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM Financial Statements as of and for the Years Ended December 31, 1997 and 1996, Supplemental Schedules as of and for the Year Ended December 31, 1997 and Independent Auditors' Report

INDEX CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND FOR THE YEARS THEN ENDED: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-9 SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997 AND FOR THE YEAR THEN ENDED: Item 27a - Schedule of Assets Held for Investment Purposes 10 Item 27d - Schedule of Reportable Transactions 11 Additional supplemental schedules required by the Employee Retirement Income Security Act of 1974 are disclosed separately in Master Trust reports filed with the Department of Labor or are omitted because of the absence of the conditions under which they are required.

1 INDEPENDENT AUDITORS' REPORT Chicago and North Western Railway Company Profit Sharing and Retirement Savings Program Committee We have audited the accompanying statements of net assets available for benefits of the Chicago and North Western Railway Company Profit Sharing and Retirement Savings Program (the Program) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Program's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Program as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Program's management. Such schedules have been subjected to the auditing procedures applied in the audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP Omaha, Nebraska June 3, 1998

2 CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS INVESTMENTS, at fair value (Notes 3, 5 and 10) $124,517,334 $101,413,931 INVESTMENTS, at contract value (Notes 3, 6 and 10): Investment contract with insurance company 32,803,511 37,737,581 ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $157,320,845 $139,151,512 ============ ============ The accompanying notes are an integral part of these financial statements.

3 CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ADDITIONS TO NET ASSETS ATTRIBUTABLE TO: Investment income (Note 10): Net appreciation in fair value of investments (Note 5) $ 10,609,206 $ 12,828,800 Interest and dividends 15,912,788 10,287,291 ------------ ------------ Total Additions 26,521,994 23,116,091 ------------ ------------ DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO: Distributions to participants (Note 10) 8,352,661 27,923,207 ------------ ------------ TRANSFERS TO SUPPLEMENTAL PENSION PLAN - 22,264 ------------ ------------ NET INCREASE (DECREASE) 18,169,333 (4,829,380) NET ASSETS AVAILABLE FOR BENEFITS: Beginning of Year 139,151,512 143,980,892 ------------ ------------ End of Year $157,320,845 $139,151,512 ============ ============ The accompanying notes are an integral part of these financial statements.

4 CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF PROGRAM The following description of the Chicago and North Western Railway Company Profit Sharing and Retirement Savings Program (the Program), prior to the adoption of amendments as described in Note 2, provides only general information. Participants should refer to the Program document for a more complete description of the Program's provisions. General - The Program was initially established to provide retirement benefits to eligible employees of Chicago and North Western Railway Company (the Company) and other common control employers who adopt the Program. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Participant Accounts - Each participant account is credited with the participant's contributions and an allocation of the Program's earnings. Allocations are based on participant account balances and the funds in which the participant has elected to invest his/her accounts. Vesting - Effective January 1, 1995, participants were fully vested in amounts credited to their account. Investment Options - Upon enrollment in the Program, a participant may have directed employee contributions in any of ten funds (Note 2). Union Pacific Common Stock Fund - Funds are primarily invested in common stock of Union Pacific. Union Pacific Equity Fund - Funds are primarily invested in shares of a registered investment company that invests in common stocks in a manner designed to closely track the investment performance of the Standard and Poor's 500 Composite Stock Index. Union Pacific Fixed Income Fund - Funds are primarily invested in guaranteed investment contracts held with insurance companies rated at least A-1 by Standard and Poors. Funds are also invested in a registered investment company that invests in guaranteed investment contracts. Vanguard/Windsor Fund - Funds are invested in shares of a registered investment company that invests in common stocks. Vanguard/Wellington Fund - Funds are invested in shares of a registered investment company that invests in common stocks and fixed income securities. Vanguard Money Market Reserves Prime Portfolio(VMMR Prime Portfolio) - Funds are invested in shares of a registered investment company that invests in high quality certificates of deposit, bankers' acceptances, commercial paper, U.S. Government Securities, and other short-term obligations with the objective of preserving principal while providing income.

5 Vanguard U.S. Growth Fund - Funds are invested in shares of a registered investment company that invests in the common stock of established U.S. growth companies. Vanguard International Growth Portfolio Fund - Funds are invested in shares of a registered investment company that invests in foreign common stocks with high growth potential. Vanguard Bond Index Fund - Total Bond Market Portfolio - Funds are invested in shares of a registered investment company that invests in fixed income securities in a manner which is designed to closely track the investment performance of the Lehman Brothers Aggregate Bond Index. Northwestern National Life Insurance Company (NWNL) Guaranteed Investment Contract (GIC) - Fund is invested in an investment contract with NWNL. Payment of Benefits - Under the terms of the Program, benefits are to be paid in the form of a joint and survivor annuity. Assets of a participant's account may, as determined by the participant (with spousal consent when required), be paid to him/her in a lump sum or in installments. In order to provide a joint and survivor annuity (or single life annuity where spousal consent is obtained or there is no spouse) assets of the participant's account are transferred to the Chicago and North Western Railway Company Supplemental Pension Plan for payment of the annuity. The annuity may, at the option of the Program administrator, be purchased from a third party institution or paid from the assets of the Supplemental Pension Plan. 2. PROGRAM AMENDMENTS Effective October 24, 1995, the Program was amended such that, the Program was frozen effective December 31, 1995. No new participants were allowed in the Program after December 31, 1995. Except for contributions made in 1996 with respect to 1995 in the customary manner of the Prior Program as in effect during 1995, there will be no contributions made to the Program after December 31, 1995. Effective July 15, 1996, the Program was amended and restated. Program investment options were increased from four to ten. The ten available options are the Union Pacific Common Stock Fund (Company Stock), the Union Pacific Equity Fund (Equity Index), the Union Pacific Fixed Income Fund (Fixed Income), the Vanguard Bond Index Fund - Total Bond Market Portfolio (Bond Index), the Vanguard Market Reserves - Prime Portfolio Fund (VMMR Prime Portfolio), the Vanguard/Wellington Fund (Wellington), the Vanguard U.S. Growth Fund (U.S. Growth), the Vanguard International Growth Portfolio Fund (International Growth), the Vanguard/Windsor Fund (Windsor) and the NWNL Guaranteed Investment Contract Fund (NWNL GIC). In conjunction with the amendment and restatement, Program assets, except for the investment contract with an insurance company, were transferred to Vanguard Fiduciary Trust Company under a Master Trust Agreement. Loans to Participants - Effective September 1, 1996, participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Loan transactions are treated as a transfer to (from) the investment fund from (to) the Loan Fund. Loan terms range from 1-5 years or up to 15 years for the purchase of a principal residence. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates as determined quarterly by the Program administrator. Interest rates on loans currently outstanding range from 8.25% to 8.50%. Principal and interest is paid ratably, generally through monthly payroll deductions.

6 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The financial statements of the Program have been prepared under the accrual method of accounting. The financial statements were prepared in accordance with the financial reporting requirements of ERISA as permitted by the Securities and Exchange Commission's amendments to Form 11-K adopted during 1990. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment Valuation and Income Recognition - The Program's investments are stated at fair value except for its investment contract with an insurance company which is valued at contract value (Note 7). If available, quoted market prices are used to value investments. The amounts shown in Note 5 for securities that have no quoted market price represent estimated fair value as determined by Vanguard Fiduciary Trust Company. Purchases and sales of securities are recorded on the trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex- dividend basis. Payment of Benefits - Benefits are recorded when paid. Administrative Expenses - The Program is administered by the Senior Vice President, Human Resources, of the Union Pacific Corporation. All administrative expenses of the Program with the exception of investment management fees are paid by the Company. Investment management fees are paid by the Program. Reclassifications - Certain 1996 amounts have been reclassified to conform to the 1997 financial statement presentation. 4. RESOURCES STOCK FUND In September 1996, the Company's Board of Directors declared a special dividend consisting of the shares of Union Pacific Resources Group Inc. ("Resources") common stock owned by the Company ("the Spin-Off"). As a result of the Spin-Off, each of the Company's stockholders received 0.846946 of a share of Resources common stock for each share of Company common stock held by such stockholders at the September 26, 1996 record date for the distribution. Therefore, each Program participant's account received 0.846946 of a share of Resources common stock for each share of Company common stock held in the account. The shares received have been placed in the Resources Stock Fund ("Resources Stock"). Future contributions to Resources Stock are not permitted.

7 5. INVESTMENTS The following table presents the fair value of investments: December 31, 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master Trust $119,455,791 $ 98,213,504 Investments at Estimated Fair Value: Master Trust 5,061,543 3,200,427 NWNL GIC 32,803,511 37,737,581 ------------ ------------ $157,320,845 $139,151,512 ============ ============

8 During 1997 and 1996, the Program's investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value by $10,609,206 and $12,828,800, respectively, as follows: Year Ended December 31, Net Change in Fair Value 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master Trust $10,601,756 $12,847,585 Investments at Estimated Fair Value: Master Trust 7,450 (12,299) NWNL GIC - (6,486) ----------- ----------- Net Change in Fair Value $10,609,206 $12,828,800 =========== =========== 6. MASTER TRUST The assets comprising the Master Trust are presented in the following table: December 31, 1997 1996 Common Stock $180,366,490 $189,870,983 Mutual Funds 449,880,397 276,457,039 Guaranteed Investment Contracts 201,246,115 93,697,351 Participant Loans 18,826,627 17,565,878 ------------ ------------ $850,319,629 $577,591,251 ============ ============ Total interest and dividends of the Master Trust were $42,436,033 and $24,861,387 for the years ended December 31, 1997 and 1996, respectively. During 1997 and 1996, the Master Trust's investments (including investments bought, sold, and held during the year) appreciated in value by $51,517,049 and $96,600,069, respectively, as follows: December 31, Net appreciation (depreciation) 1997 1996 Common Stocks $(2,627,738) $58,743,085 Mutual Funds 54,009,125 37,932,780 Guaranteed Investment Contracts 135,662 (75,796) ----------- ----------- $51,517,049 $96,600,069 =========== =========== At December 31, 1997 and 1996, the Program held percentage interests in the Master Trust of 14.6% and 17.6%, respectively. Assets, liabilities, investment income, and security gains and losses are allocated monthly to the Program based on its equity in the investments of the Master Trust.

9 7. INVESTMENT CONTRACT WITH INSURANCE COMPANY The Program has entered into a benefit responsive investment contract with Northwestern National Life Insurance Company (Northwestern National). This contract is included in the financial statements at contract value, which approximates fair value. Contract value represents contributions made under the contract, plus earnings, less Program withdrawals and administrative expenses. Northwestern National maintains the contributions in a pooled account. The crediting interest rate under this contract at December 31, 1997 and 1996, and for the years then ended was 6.5% and 7.0%, respectively. Under this contract a penalty may be incurred for early withdrawal from the contract by the Program sponsor, Program termination and various other employer initiated events. 8. TAX STATUS The Program obtained a tax determination letter dated April 16, 1996, in which the Internal Revenue Service stated that the Program, as amended through October 24, 1995, was in compliance with the applicable requirements of the Internal Revenue Code (the Code). The Program has been amended since receiving the determination letter. However, Program management believes that the program currently is being operated in compliance with the applicable requirements of the Internal Revenue Code. With respect to the operation of the Program, Program management is aware of certain operational defects which could adversely affect the tax exempt status of the Program. These operational defects will be corrected through the use of the Voluntary Compliance Resolution (VCR) program. Submissions to the VCR program were made on September 23, 1996, February 26, 1997 and February 11, 1998. Compliance statements were received on February 5, 1997, October 30, 1997 and June 11, 1998, respectively. Therefore, no provision for income taxes has been included in the Program's financial statements. 9. PROGRAM TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Program at any time, to terminate the Program subject to the provisions of ERISA. Regardless of such actions, the principal and income of the Program remains for the exclusive benefit of the Program's participants and beneficiaries. The Company may direct the Trustee either to distribute the Program's assets to the participants, or to continue the Trust and distribute benefits as though the Program had not been terminated. 10.FUND INFORMATION Net assets available for benefits, participant contributions, withdrawals and investment income by fund are as follows as of and for the years ended December 31, 1997 and 1996: 1997 1996 Net assets available for benefits: Union Pacific Common Stock Fund $ 1,036,046 $ 653,871 Union Pacific Equity Fund 35,098,131 27,110,164 Union Pacific Fixed Income Fund 2,681,004 1,482,186 Vanguard Bond Index Fund - Total Bond Market Portfolio 238,257 169 Vanguard Money Market Reserves Prime 624,840 304,040 Portfolio Vanguard/Wellington Fund 3,243,208 777,296 Vanguard U.S. Growth Fund 2,004,614 1,436,948 Vanguard International Growth Portfolio Fund 985,909 371,142 Vanguard/Windsor Fund 76,732,277 67,652,196 NWNL GIC 32,803,511 37,737,581 Resources stock 117,349 211,718 Loan Fund 1,755,699 1,414,201 ------------ ------------ Total $157,320,845 $139,151,512 ============ ============

10 1997 1996 Distributions to participants Union Pacific Common Stock Fund $ 548 $ - Union Pacific Equity Fund 1,293,010 277,582 Union Pacific Fixed Income Fund 4,466 - Vanguard Bond Index Fund - Total Bond Market Portfolio 175 - Vanguard Money Market Reserves Prime 12,199 17,424 Portfolio Vanguard/Wellington Fund 1,780 - Vanguard U.S. Growth Fund 253 - Vanguard International Growth Portfolio Fund 1,409 - Vanguard/Windsor Fund 3,125,987 714,074 NWNL GIC 3,816,693 1,259,788 Resources stock - - Loan Fund 96,141 - Fund B - 13,724,297 Fund C - 11,844,618 Fund D and E - 85,424 ----------- ----------- Total $ 8,352,661 $27,923,207 =========== =========== Investment income: Union Pacific Common Stock Fund $ 88,452 $ 116,708 Union Pacific Equity Fund 8,848,307 4,083,412 Union Pacific Fixed Income Fund 177,428 13,144 Vanguard Bond Index Fund - Total Bond Market Portfolio 11,837 181 Vanguard Money Market Reserves Prime Portfolio 26,264 7,941 Vanguard/Wellington Fund 368,986 38,184 Vanguard U.S. Growth Fund 368,771 55,671 Vanguard International Growth Portfolio Fund 14,189 14,216 Vanguard/Windsor Fund 14,393,833 10,918,491 NWNL GIC 2,121,962 993,921 Resources stock (31,818) 3,873 Loan Fund 133,783 22,975 Fund B - 4,885,681 Fund C - 1,905,907 Fund D and E - 55,786 ----------- ----------- Total $26,521,994 $23,116,091 =========== =========== 11.RELATED PARTY TRANSACTIONS Program investments include the Union Pacific Common Stock Fund which is invested primarily in the common stock of Union Pacific Corporation. Union Pacific Corporation is the holding company of the Program sponsor and, therefore, these transactions qualify as party-in-interest transactions. The Program also invests in various funds managed by Vanguard Fiduciary Trust Company and LaSalle National Trust. Vanguard Fiduciary Trust Company is the Trustee as defined by the Program and LaSalle National Trust was the Program Trustee prior to the appointment of Vanguard Fiduciary Trust Company and, therefore, the related transactions qualify as party-in-interest transactions.

11 CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1997 Column B Column C Column D Column E Description of Investment, Including Collateral, Rate of Identity of Issue, Borrower, Interest, Maturity Date Current Lessor or Similar Party or Maturity Value Cost Value Northwestern National Life Insurance Company Contract No. Group annuity contract fund GA-135969-1-001 32,803,511 shares $32,803,511 $32,803,511

12 CHICAGO AND NORTH WESTERN RAILWAY COMPANY PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM Item 27d - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 Single Transactions Involving an Amount in Excess of 5% of the Current Value of Program Assets: Column A Column B Column C Column D Column G Column H Column I Current Value of Asset on Identity of Purchase Selling Cost of Transaction Net Gain Party Involved Description of Asset Price Price Asset Date or (Loss) Northwestern National Life Insurance Company, Contract Group annuity contract #GA-13569-1-001 fund $2,122,698 $ - $ - $2,122,698 $ - Northwestern National Life Insurance Company, Contract Group annuity contract #GA-13569-1-001 fund $ - $7,056,768 $7,056,768 $7,056,768 $ -

COVER SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN Financial Statements (Modified Cash Basis) as of and for the Years Ended December 31, 1997 and 1996, Supplementary Schedule (Modified Cash Basis) for the Year Ended December 31, 1997 and Independent Auditors' Report SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN

INDEX TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORTS 1-2 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 AND FOR THE YEARS THEN ENDED: Statements of Net Assets Available for Benefits (Modified Cash Basis) 3 Statements of Changes in Net Assets Available for Benefits (Modified Cash Basis) 4 Notes to Financial Statements (Modified Cash Basis) 5-12 SUPPLEMENTAL SCHEDULE - (MODIFIED CASH BASIS) FOR THE YEAR ENDED DECEMBER 31, 1997: Item 27d - Schedule of Reportable Transactions (Modified Cash Basis) 13 Additional Supplemental Schedules required by the Employee Retirement Income Security Act of 1974 are disclosed separately in Master Trust reports filed with the Department of Labor or are omitted because of the absence of the conditions under which they are required.

1 INDEPENDENT AUDITORS' REPORT The Thrift Plan Committee Southern Pacific Rail Corporation Thrift Plan We have audited the accompanying statement of net assets available for benefits (modified cash basis) of Southern Pacific Rail Corporation Thrift Plan (the Plan) as of December 31, 1997, and the related statement of changes in net assets available for benefits (modified cash basis) for the year then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. The Plan's financial statements as of and for the year ended December 31, 1996, were audited by other auditors whose report, dated June 20, 1997, except as to Note 9, dated October 10, 1997, expressed an unqualified opinion on those statements and included an explanatory paragraph that described the modified cash basis of accounting discussed in Note 2 to the financial statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 2 to the financial statements, these financial statements and supplemental schedule were prepared on a modified cash basis, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the 1997 financial statements present fairly, in all material respects, the net assets available for benefits of Southern Pacific Rail Corporation Thrift Plan as of December 31, 1997, and changes in net assets available for benefits for the year then ended, on the basis of accounting described in Note 2. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule (modified cash basis) listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plan's management. Such schedule has been subjected to the auditing procedures applied in the audit of the basic 1997 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 1997 financial statements taken as a whole. DELOITTE & TOUCHE LLP Omaha, Nebraska June 17, 1998

2 INDEPENDENT AUDITORS' REPORT The Thrift Plan Committee Southern Pacific Rail Corporation Thrift Plan: We have audited the accompanying statement of net assets available for benefits (modified cash basis) of Southern Pacific Rail Corporation Thrift Plan (the Plan) as of December 31, 1996, and the related statement of changes in net assets available for benefits (modified cash basis) for the year then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 2, these financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Southern Pacific Rail Corporation Thrift Plan as of December 31, 1996, and changes in net assets available for benefits for the year then ended, on the basis of accounting described in Note 2. /s/KPMG Peat Marwick LLP San Francisco, California June 20, 1997, except as to Note 9, which is as of October 10, 1997

3 SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (MODIFIED CASH BASIS) DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS Investments at fair value (Notes 2, 3 and 10) $181,831,117 $ 69,696,833 Investments at contract value (Note 3) - 118,576,813 Receivable from broker - 19,417 Investment income receivable - 695,265 ------------ ------------ Total assets 181,831,117 188,988,328 LIABILITIES Unsettled stock sale - 1,412 ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $181,831,117 $188,986,916 ============ ============ The accompanying notes are an integral part of these financial statements.

4 SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (MODIFIED CASH BASIS) YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment income (Note 10): Interest $ 7,580,201 $ 8,325,983 Dividends 3,191,940 14,673 Net appreciation in fair value of investments (Note 3) 12,656,999 9,741,416 ------------ ------------ Total investment income 23,429,140 18,082,072 Contributions (Note 10): Employee 4,943,311 6,507,155 Employer 2,184,349 2,816,930 ------------ ------------ Total contributions 7,127,660 9,324,085 ------------ ------------ Total additions 30,556,800 27,406,157 ============ ============ DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distribution to participants (Note 10) 37,541,145 14,963,502 Investment and administrative expenses 171,454 423,657 ------------ ------------ Total deductions 37,712,599 15,387,159 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS AVAILABLE FOR BENEFITS (7,155,799) 12,018,998 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 188,986,916 176,967,918 ------------ ------------ End of year $181,831,117 $188,986,916 ============ ============ The accompanying notes are an integral part of these financial statements.

5 SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF PLAN The following description of the Southern Pacific Rail Corporation Thrift Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General - The Plan is a defined contribution plan which was established by Rio Grande Holding, Inc. (RGH) on January 1, 1982 as an individual account savings and investment plan for employees of RGH and its subsidiaries (the RGH participants). RGH is a wholly owned subsidiary of Southern Pacific Rail Corporation (SPRC). SPRC adopted the Plan and became its sponsor. SPRC and its subsidiaries that are participating in the Thrift Plan are collectively referred to as the Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Employees of participating employers not subject to a collective bargaining agreement and not paid on an hourly basis are immediately eligible to participate in the Plan. In addition, certain employees which are currently covered under collective bargaining agreements who were previously not covered have been allowed to continue participation in the Plan. Contributions - Plan participants may elect to make employee contributions in an amount not less than 1% nor more than 16% of their salary. These contributions may be made on either an after-tax or a before-tax basis, or a combination of the two, provided the total contribution does not exceed the lesser of 16% of salary or the applicable Internal Revenue Code annual limitation of $9,500. The employer matches the first 3% of employee contributions (whether before-tax or after- tax) on a dollar-for-dollar basis. All contributions are subject to limitations imposed by the Internal Revenue Code such as those under Sections 401(a)(17), 401(k), 401(m), 402(g) and 415. Effective January 1, 1998, the Plan was amended to disallow any participant contributions after December 31,1997. Participant's Accounts - Each participant's account is credited with his or her own contributions, employer contributions and an allocation of the Plan's earnings (or losses) based on the type of investments selected and their performance. The allocation of earnings (or losses) is based on each participant's account balance by investment type. Vesting - Participant and employer contributions are fully vested when made. Investment Options - For 1997, upon enrollment in the plan, a participant may direct contributions in 5% increments in any of eight investment options: Union Pacific Common Stock Fund - Funds are primarily invested in common stock of Union Pacific Corporation. Union Pacific Equity Index Fund - Funds are primarily invested in shares of a registered investment company that invests in common stocks in a manner designed to closely track the investment performance of the Standard and Poor's 500 Composite Stock Index.

6 Union Pacific Fixed Income Fund - Funds are primarily invested in guaranteed investment contracts held with insurance companies rated at least A-1 by Standard and Poors. Funds are also invested in a registered investment company that invests in guaranteed investment contracts. Vanguard/Wellington Fund - Funds are invested in shares of a registered investment company that invests in common stocks and fixed income securities. Vanguard Money Market Reserves Prime Portfolio (VMMR Prime Portfolio) - Funds are invested in shares of a registered investment company that invests in high quality certificates of deposit, bankers' acceptances, commercial paper, U.S. Government Securities, and other short-term obligations with the objective of preserving principal while providing income. Vanguard U.S. Growth Fund - Funds are invested in shares of a registered investment company that invests in the common stock of established U.S. growth companies. Vanguard International Growth Portfolio Fund - Funds are invested in shares of a registered investment company that invests in foreign common stocks with high growth potential. Vanguard Bond Index Fund - Funds are invested in shares of a registered investment company that invests in fixed income securities in a manner which is designed to closely track the investment performance of the Lehman Brothers Aggregate Bond Index. For 1996, upon enrollment in the plan, a participant may direct contributions in 1% increments in any of six investment options: Fixed Investment Fund - Funds are invested in high quality investment contracts with a diversified group of insurance companies, banks and other financial institutions. Value Equity Fund - Funds are invested in shares of the Invesco Retirement Trust Equity Fund (a trust company commingled fund). The fund primarily invests in common stocks and securities convertible into common stock. Balanced Fund - Funds are invested in shares of the Invesco Retirement Trust Flex Fund (a trust company commingled fund). The fund contains a mix of stocks and high quality bonds. International Equity Fund - Funds are invested in the Capital Guardian International (Non-U.S.) Equity Fund (a trust company commingled fund). The fund invests in a portfolio comprised primarily of securities of non- U.S. issuers and securities whose principal markets are outside of the United States. Stock Fund - Funds are invested in common stock of Union Pacific Corporation. Growth Equity Fund - Funds are invested in shares of the Invesco Trust Company Common Stock Fund (a trust company commingled fund). The funds consist primarily of small and large capitalization stocks with strong earnings growth. Resources Stock Fund - In September 1996, the Union Pacific Corporation (UPC) Board of Directors declared a special dividend consisting of the shares of Union Pacific Resources Group ("Resources") common stock owned by UPC ("the Spin-Off"). As a result of the Spin-Off, each of the UPC's stockholders received 0.846946 of a share of Resources common stock for each share of UPC common stock held by such stockholders at the September 26, 1996 record date for the distribution. The shares were transferred at market value from the UPC Stock Fund to the Resources Stock Fund. Therefore, each Plan participant's account received 0.846946 of a share of Resources common stock for each share of UPC common stock held in the account. The shares received have been placed in the Resources Stock Fund ("Resources Stock"). Future contributions to Resources Stock are not permitted.

7 Loans to Participants - Effective January 1, 1998, participants are eligible to make a loan from their accounts. The amount of a loan is limited to one-half of the vested value of a participant's accounts and subject to a minimum and maximum loan amount. As the loan is repaid, all principal and interest payments will be credited to the participant's account according to an investment election made by the participant at the time of the loan application. Participants' loans, which are secured by the participant's individual account balances, bear a fixed rate of interest set by the Plan Administrator based on interest rates then being charged on similar loans, and are repayable over periods not exceeding five years, except loans relating to a principal residence, in which case the term of the loan shall not exceed fifteen years. Payment of Benefits - Benefits are payable to a participant upon retirement, disability, death or termination of employment. Subject to certain hardship rules and limits, a participant may also withdraw employer and employee contributions under other circumstances. The benefit to which a participant is entitled is the benefit that can be provided from that participant's account net of any withholding for federal income taxes. Benefits are recorded when paid. Plan Administration - The Plan is administered by the Senior Vice President, Human Resources of the Union Pacific Corporation. In 1997 and 1996, respectively, the Plan paid investment management fees of $163,617 and $418,047. Administration expenses paid totaled $7,837 and $5,610 for 1997 and 1996, respectively. The majority of administrative expenses in both 1997 and 1996 were paid by the Company. Investment management fees at Vanguard are paid directly from fund earnings. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accounts of the Plan are maintained, and the accompanying financial statements and information have been prepared, on the modified cash basis to carry investments at fair value, and to reflect the accrual of investment income and brokerage transactions. Consequently, revenues and related assets are recognized when received rather than when earned except for investment carrying value, investment income and brokerage transactions and expenses are recognized when paid rather than when the obligation is incurred. Accordingly, the financial statements are not intended to present net assets available for benefits and changes in net assets available for benefits in accordance with generally accepted accounting principles. Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment Valuation and Income Recognition - Investments in the Union Pacific Common Stock Fund, Resources Stock Fund, Vanguard Wellington Fund, Union Pacific Equity Index Fund, Vanguard U.S. Growth Fund, Vanguard International Growth Portfolio Fund, and the Vanguard Bond Index Fund are valued at fair value as determined by quoted market prices. Investments in the Fixed Income Fund and the Vanguard Money Market Reserves - Prime Portfolio are valued at fair value as determined by Vanguard Fiduciary Trust Company. Dividend income is recorded as of the ex-dividend date. Security transactions are recorded as of the trade date.

8 3. INVESTMENTS The following table presents the fair value of investments: December 31, 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master trust $ 79,300,412 $ - Common stock - 2,707,119 Commingled funds - 62,546,639 ------------ ------------ 79,300,412 65,253,758 ------------ ------------ Investments at Estimated Fair Value: Master trust 102,530,705 - Short-term investments - 4,443,075 ------------ ------------ 102,530,705 4,443,075 ------------ ------------ Investments at Contract Value: Fixed income annuity contracts - 118,576,813 ------------ ------------ $181,831,117 $188,273,646 ============ ============ During 1997 and 1996, the Plan's investments (including bought, sold and held during the year) appreciated (depreciated) in value by $12,656,999 and $9,741,416, respectively, as follows: Year Ended December 31, Net Change in Fair Value 1997 1996 Investments at Fair Value as Determined by Quoted Market Price: Master trust $ 5,345,207 $ - Commingled funds 6,964,859 9,045,927 Common stock 420,977 695,489 ----------- ---------- 12,731,043 9,741,416 ----------- ---------- Investments at Estimated Fair Value: Master trust (74,044) - ----------- ---------- Net change in fair value $12,656,999 $9,741,416 =========== ==========

9 4. MASTER TRUST The assets comprising the Master Trust are presented in the following table: December 31, 1997 Common Stock $180,366,490 Mutual Funds 449,880,397 Guaranteed Investment Contracts 201,246,115 Participant Loans 18,826,627 ------------ $850,319,629 ============ Total interest and dividends of the Master Trust was $42,436,033 for the year ended December 31, 1997. During 1997, the Master Trust's investments (including investments bought, sold, and held during the year) appreciated in value by $51,517,049 as follows: December 31, Net appreciation (depreciation) 1997 Common Stocks $(2,627,738) Mutual Funds 54,009,125 Guaranteed Investment Contracts 135,662 ----------- Net change in fair value $51,517,049 =========== At December 31, 1997, the Plan held a percentage interest in the Master Trust of 21.4%. The Plan held no interest during 1996. Assets, liabilities, investment income, and security gains and losses are allocated monthly to the Plan based on its equity in the investments of the Master Trust. 5. PLAN AMENDMENTS On August 15, 1997, the Plan was amended to expand and clarify specific aspects of the plan document. This amendment did not significantly alter the underlying policies of the Plan. The amendment allows participants with account balances as of December 31, 1989 to make monthly, quarterly, or annual installment distributions (which need not be equal in amount) over a period of not more than 25 years. All other participants are allowed to receive equal monthly or annual installment distributions over the lesser of ten years or their life expectancy or the life expectancy of the participant and his/her beneficiary. The August 15, 1997 amendments also included an amendment effective March 31, 1997, permitting employees who continued to work with Pacific Motor Transport Company after its sale, to take distribution in a lump sum on or before December 31, 1999. Effective January 1, 1998, the Plan was amended to disallow any participant contributions after December 31, 1997. Also effective January 1, 1998, the Plan was amended to allow participants to make loans from their accounts in an amount not to exceed the lesser of 50% of their balance or $50,000.

10 6. TAX STATUS The Plan received a favorable determination letter from the Internal Revenue Service on February 8, 1996 which stated that the Plan is qualified under the provisions of Sections 401(a) of the Internal Revenue Code, as amended, and exempt from federal income taxes under Section 501(a). The Plan has been amended since receiving the determination letter. However, Plan management believes that the Plan is being operated in compliance with the applicable requirements of the Internal Revenue Code. With respect to the operation of the Plan, Plan management is aware of certain operational defects which could adversely affect the tax- exempt status of the Plan. These operational defects will be corrected through the use of the Voluntary Compliance Resolution (VCR) program. Submission of the VCR program was made on December 16, 1996. Therefore, no provision for income taxes has been included in the Plan's financial statements. 7. MERGER WITH UNION PACIFIC On September 11, 1996, a subsidiary of Union Pacific Corporation (UPC) completed its acquisition of SPRC through an exchange of cash and UPC stock for all of the outstanding shares of SPRC not already owned by UPC. As a result, SPRC shares owned by the Plan were exchanged for a combination of cash and UPC stock. The 90,162 shares owned by the Plan were converted into 25,601 shares of UPC stock and $679,525 of cash was transferred to the Fixed Investment Fund. Also, the Plan was amended to permit Plan participants to invest in UPC stock to replace the previous option to invest in SPRC stock. 8. PLAN TERMINATION Although the Plan is intended to be continued by the Southern Pacific Rail Corporation (the Corporation), the Corporation reserves the right to amend or terminate the Plan. All funds shall continue to be held for distribution as provided in the Plan. 9. NONEXEMPT TRANSACTION Subsequent to December 31, 1996, the Plan sponsor discovered that during 1996 it had failed to transmit one participant's contribution as soon as reasonably segregable. As of October 10, 1997, the participant's contribution in the amount of $48 has been restored, and the Plan sponsor has made an additional contribution to the Plan for earnings on the delayed contribution.

11 10.FUND INFORMATION Investments, investment income, contributions and distributions to participants by fund are as follows for the years ended December 31, 1997 and 1996: 1997 1996 Investments: Fixed Investment Fund $ - $123,019,888 Value Equity Fund - 34,779,427 Balanced Fund - 16,683,492 International Equity Fund - 3,588,080 Growth Equity Fund - 7,495,640 Union Pacific Common Stock Fund 3,649,129 2,078,775 Union Pacific Equity Index Fund 39,246,723 - Union Pacific Fixed Income Fund 102,175,722 - Resources Stock Fund 419,853 628,344 Vanguard/Wellington Fund 21,254,363 - VMMR Prime Portfolio 354,983 - Vanguard U.S. Growth Fund 11,225,160 - Vanguard International Growth Portfolio Fund 3,451,628 - Vanguard Bond Index Fund 53,556 - ------------ ------------ $181,831,117 $188,273,646 ============ ============ Investment income: Fixed Investment Fund $ 3,278,325 $ 8,325,983 Value Equity Fund 4,335,308 5,705,655 Balanced Fund 1,574,122 2,011,292 International Equity Fund 476,979 385,150 Growth Equity Fund 578,511 943,830 Union Pacific Common Stock Fund 244,840 701,234 Union Pacific Equity Index Fund 5,548,473 - Union Pacific Fixed Income Fund 4,321,507 - Resources Stock Fund (92,375) 8,928 Vanguard/Wellington Fund 2,409,685 - VMMR Prime Portfolio 9,310 - Vanguard U.S. Growth Fund 976,303 - Vanguard International Growth Portfolio Fund (232,310) - Vanguard Bond Index Fund 462 - ------------ ------------ $ 23,429,140 $ 18,082,072 ============ ============

12 1997 1996 Contributions: Fixed Investment Fund $ 1,605,842 $ 5,148,402 Value Equity Fund 698,345 2,105,276 Balanced Fund 378,395 1,083,166 International Equity Fund 99,409 307,963 Growth Equity Fund 230,976 545,057 Union Pacific Common Stock Fund 205,142 134,221 Union Pacific Equity Index Fund 919,990 - Union Pacific Fixed Income Fund 1,886,218 - Resources Stock Fund - - Vanguard/Wellington Fund 581,213 - VMMR Prime Portfolio 692 - Vanguard U.S. Growth Fund 377,133 - Vanguard International Growth Portfolio Fund 138,173 - Vanguard Bond Index Fund 6,132 - ----------- ----------- $ 7,127,660 $ 9,324,085 =========== =========== Distributions to participants: Fixed Investment Fund $10,147,734 $12,255,829 Value Equity Fund 1,831,273 1,731,128 Balanced Fund 1,211,753 644,223 International Equity Fund 277,421 67,148 Growth Equity Fund 293,790 212,473 Union Pacific Common Stock Fund 2,760,222 52,701 Union Pacific Equity Index Fund 3,211,686 - Union Pacific Fixed Income Fund 13,261,296 - Resources Stock Fund 108,886 - Vanguard/Wellington Fund 2,038,630 - VMMR Prime Portfolio 357,698 - Vanguard U.S. Growth Fund 1,590,503 - Vanguard International Growth Portfolio Fund 450,253 - Vanguard Bond Index Fund - - ----------- ----------- $37,541,145 $14,963,502 =========== =========== RELATED PARTY TRANSACTION As of May 30, 1997, the Plan invests in various funds managed by Vanguard Fiduciary Trust Company. Vanguard Fiduciary Trust Company is the trustee as defined by the Plan and, therefore, the related transactions qualify as party-in-interest. Prior to May 30, 1997, certain Plan investments were shares of temporary investment funds managed by Chase Manhattan Bank. Chase Manhattan Bank was the trustee as defined by the Plan, and qualifies as

13 a party-in-interest. Investment and administrative expenses paid to Chase Manhattan Bank by the Plan amounted to $-0- and $4,500 for the year ended December 31, 1997 and 1996, respectively. In addition, as of September 11, 1996 (the merger date) the Plan held stock issued by Union Pacific Corporation. Prior to the merger, the Plan held stock issued by the Plan sponsor, Southern Pacific Rail Corporation (Note 7).

14 SOUTHERN PACIFIC RAIL CORPORATION THRIFT PLAN Item 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS (MODIFIED CASH BASIS) YEAR ENDED DECEMBER 31, 1997 Single Transactions Involving an Amount in Excess of 5% of the Current Value of Program Assets: None Series of Transactions, When Aggregated, Involving an Amount in Excess of 5% of the Current Value of Plan Assets: Column A Column B Column C Column D Column E Column F Column G Total Total Dollar Dollar Number of Number Value of Value of Net Gain Identity of Party Involved Description of Asset Purchases of Sales Purchases Sales or (Loss) Chase Bank* Domestic Liquity Fund 72 60 $26,790,548 $31,240,457 $ - Invesco Institutional Service Trust Equity Fund 11 22 813,930 39,947,693 15,666,131 Invesco Institutional Service Trust Flex Fund 11 19 904,253 19,161,851 5,472,798 Invesco Common Stock Fund 13 19 1,359,262 9,433,763 1,883,802 * Represents a party-in-interest.

COVER SKYWAY RETIREMENT SAVINGS PLAN Financial Statements for the Years Ended December 31, 1997 and 1996, Supplemental Schedules as of and for the Year Ended December 31, 1997 and Independent Auditors' Report

INDEX SKYWAY RETIREMENT SAVINGS PLAN TABLE OF CONTENTS Page Independent Auditors' Report 1 Financial Statements for the Years Ended December 31, 1997 and 1996: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-7 Supplemental Schedules as of and for the Year Ended December 31, 1997: Item 27a - Assets Held for Investment Purposes 8 Item 27d - Reportable Plan Transactions 9

1 INDEPENDENT AUDITORS' REPORT The Administrative Committee of the Skyway Retirement Savings Plan: We have audited the accompanying statements of net assets available for benefits of the Skyway Retirement Savings Plan (the Plan) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment as of December 31, 1997 and reportable Plan transactions for the year ended December 31, 1997 are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan's management. Such supplemental schedules have been subjected to the auditing procedures applied in our audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP San Jose, California June 25, 1998

2 SKYWAY RETIREMENT SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 ASSETS 1997 1996 INVESTMENTS: Vanguard Windsor II - at fair value $ 3,199,466 $2,103,245 Vanguard Investment Contract Trust - at contract value 1,292,825 1,136,733 Vanguard Index Trust 500 Portfolio - at fair value 2,371,655 1,447,980 Vanguard International Growth Portfolio - at fair value 1,288,154 1,144,940 Union Pacific Company Stock Fund - at fair 986,225 848,248 value Union Pacific Resource Group Stock Fund - at fair value 216,834 320,474 Vanguard Total Bond Market Fund - at fair 770,236 644,483 value Participant loans - at fair value 560,754 410,528 ----------- ---------- Total investments 10,686,149 8,056,631 CONTRIBUTIONS RECEIVABLE 90,246 71,519 ----------- ---------- NET ASSETS AVAILABLE FOR BENEFITS $10,776,395 $8,128,150 =========== ========== See notes to financial statements.

3 SKYWAY RETIREMENT SAVINGS PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 CONTRIBUTIONS: Employee $ 1,528,914 $1,509,826 Employer matching 405,251 326,023 Less forfeited employer matching (71,713) (65,194) funds ----------- ---------- Total contributions 1,862,452 1,770,655 ----------- ---------- INVESTMENT INCOME: Interest and dividends 573,506 383,480 Net appreciation in fair value of investments 889,659 765,142 ----------- ---------- Total investment income 1,463,165 1,148,622 ----------- ---------- BENEFIT PAYMENTS (677,372) (944,403) ----------- ---------- NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 2,648,245 1,974,874 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 8,128,150 6,153,276 ----------- ---------- End of year $10,776,395 $8,128,150 =========== ========== See notes to financial statements.

4 SKYWAY RETIREMENT SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 1. DESCRIPTION OF THE PLAN The following description of the Skyway Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the Plan agreement and amendments for a more complete description of the Plan's provisions. General - The Plan, established January 1983 by Skyway Freight Systems, Inc. (the Company), is a defined contribution plan covering all full-time employees who have completed one year and 1,000 hours of service. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Vanguard Fiduciary Trust Company (Vanguard) serves as trustee of the Plan. Contributions - Participants may elect to make tax deferred contributions of up to 10% of their compensation (subject to certain Internal Revenue Code limitations). Rollover contributions from a participant's former qualified plan or individual retirement account are also allowed. Employer contributions are determined at the discretion of the Company's Board of Directors. For the years ended December 31, 1997 and 1996, the Company contributed an amount equal to 25% of each participant's contributions, limited to 10% of the individual participant's annual compensation. Forfeited matching contributions revert to the Company and may be used in the following year to reduce the amount the Company must contribute for the matching contribution. Participant Accounts - Each participant's account is credited with the participant's contributions and an allocation of (a) the Company's contributions and (b) Plan earnings. Vesting - Participants are immediately vested as to participant contributions and earnings thereon. Vesting in the remainder of their accounts is based on years of continuous employment. Participants are fully vested after seven years of employment, attainment of age 65, or if employment is terminated by disability or death, regardless of years of service. Upon employee termination, all nonvested amounts will be forfeited upon the earlier of (i) the date the employee takes payment of his entire vested account balance or (ii) the date the employee incurs his fifth consecutive break in service. Spin-Off - During 1996, the Union Pacific Corporation spun off Union Pacific Resource Group. Each Plan participant's account received 0.846946 shares of Union Pacific Resource Group common stock for each share of Union Pacific common stock held in the account. Participants are not allowed to make additional purchases of Union Pacific Resource Group common stock.

5 Investment Options - Participants may direct the investment of their accounts in any of the following seven investment options: Vanguard Windsor II - Funds are invested with a growth and income objective in common stocks. Vanguard Investment Contract Trust - Funds are invested in contracts issued by insurance companies and banks, and in similar types of fixed income investments. Vanguard Index Trust 500 Portfolio - Funds are invested in all of the stocks included in the Standard & Poor's 500 Index. Vanguard International Growth Portfolio - Funds are invested in potential growth companies based outside of the United States. Union Pacific Company Stock Fund - Funds are invested in common stock of Union Pacific Corporation. Vanguard Total Bond Market Fund - Funds are invested in corporate bonds. Investment decisions may be changed on a daily basis. Payment of Benefits - On termination of employment a participant may elect to receive the benefit in one of the following forms: (1) a lump-sum amount equal to the value of the vested portion of the participant's account; (2) installments, payable at least annually over a period of years not to exceed the life expectancy of the participant and his beneficiary; (3) a nontransferable annuity contract providing for a monthly guaranteed income for a specified number of years; or (4) a combination of the above. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The financial statements of the Plan are prepared under the accrual method of accounting. Payment of Benefits - Benefits are recorded when paid. Investments are stated at fair value as determined by quoted market prices except for the Vanguard Investment Contract Trust, which is stated at contract value, and participant loans, which are stated at fair value. Administrative expenses of the Plan are paid by the Company. 3. PARTICIPANT LOANS The Plan permits participants to borrow against the lesser of 50% of the vested portion of their account balance, or 100% of their before-tax contribution and rollover amounts, to a maximum of $50,000. The loans bear interest at prime rate (8.5% at December 31, 1997) plus 1% and are payable over a maximum five-year period. Loan repayment generally is made through payroll deductions.

6 4. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants immediately become fully vested. 5. ASSETS OF TERMINATED EMPLOYEES At December 31, 1997 and 1996, approximately $25,000 and $24,000, respectively, of vested Plan assets were payable to terminated employees who have withdrawn from participation in the Plan. 6. INCOME TAX STATUS A favorable determination letter has been received from the Internal Revenue Service as to the qualified status of the Plan as amended through December 15, 1994. Therefore, management believes the Plan was qualified and tax-exempt as of and for the years ended December 31, 1997 and 1996. Accordingly, no provision for federal or state income taxes has been made. 7. INVESTMENT CONTRACT ACCOUNTS The Plan maintains contract accounts with Vanguard Group, Incorporated in its Investment Contract Account. The Plan's investment contract accounts are fully benefit responsive and therefore have been presented in the financial statements at contract value. The fair value of the Plan's investment contract accounts approximate the contract value at December 31, 1997. The average yield on investment contract accounts for the year ended December 31, 1997 and 1996 was 6.17% and 6.07%, respectively. The average crediting interest rates for the respective years were 6.08% and 6.00%. 8. SUPPLEMENTAL FUND INFORMATION Contributions, benefit payments and investment income by fund for the years ended December 31, 1997 and 1996 are as follows: 1997 1996 Contributions: Employee contributions: Vanguard Windsor II $ 416,624 $ 351,478 Vanguard Investment Contract Trust 164,261 212,402 Vanguard Index Trust 500 Portfolio 354,527 318,753 Vanguard International Growth Portfolio 241,529 251,915 Union Pacific Company Stock Fund 223,660 233,849 Union Pacific Resource Group Stock Fund - - Vanguard Total Bond Market Fund 128,313 141,429 ---------- ---------- $1,528,914 $1,509,826 ========== ==========

7 Employer matching contributions (net of forfeitures): Vanguard Windsor II $ 88,860 $ 82,560 Vanguard Investment Contract Trust 35,041 (43,293) Vanguard Index Trust 500 Portfolio 76,191 71,051 Vanguard International Growth Portfolio 50,687 61,064 Union Pacific Company Stock Fund 48,846 54,851 Union Pacific Resource Group Stock Fund - - Vanguard Total Bond Market Fund 33,913 34,596 ---------- ---------- $ 333,538 $ 260,829 ========== ========== 1997 1996 Benefit payments: Vanguard Windsor II $164,045 $171,898 Vanguard Investment Contract Trust 101,144 204,618 Vanguard Index Trust 500 Portfolio 98,429 166,416 Vanguard International Growth Portfolio 117,718 146,338 Union Pacific Company Stock Fund 67,365 132,546 Union Pacific Resource Group Stock Fund 18,317 10,528 Vanguard Total Bond Market Fund 38,191 62,011 Participant loans 72,163 50,048 -------- -------- $677,372 $944,403 ======== ======== Investment income: Vanguard Windsor II $ 730,620 $ 371,776 Vanguard Investment Contract Trust 74,656 71,316 Vanguard Index Trust 500 Portfolio 517,321 243,011 Vanguard International Growth Portfolio 35,364 136,962 Union Pacific Company Stock Fund 59,430 194,511 Union Pacific Resource Group Stock Fund (51,691) 82,864 Vanguard Total Bond Market Fund 64,180 23,098 Participant loans 33,285 25,084 ---------- ---------- $1,463,165 $1,148,622 ========== ========== * * * * *

9 SKYWAY RETIREMENT SAVINGS PLAN ITEM 27a - SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1997 Number Fair of Units Cost Value Vanguard Windsor II 111,791 $2,500,143 $ 3,199,466 Vanguard Investment Contract Trust 1,292,825 1,292,825 1,292,825 Vanguard Index Trust 500 Portfolio 26,331 1,632,667 2,371,655 Vanguard International Growth Portfolio 78,594 1,217,581 1,288,154 Union Pacific Company Stock Fund 1 96,311 763,247 986,225 Union Pacific Resource Group Stock Fund 1 24,923 210,353 216,834 Vanguard Total Bond Market Fund 76,337 744,609 770,236 Participant loans 2 - 560,754 560,754 ---------- ----------- $8,922,179 $10,686,149 ========== =========== 1 Represents a party-in-interest. 2 Consists of 149 individual loans with interest at prime plus 1% and terms ranging from one to five years.

10 SKYWAY RETIREMENT SAVINGS PLAN ITEM 27d - SUPPLEMENTAL SCHEDULE OF REPORTABLE PLAN TRANSACTIONS* YEAR ENDED DECEMBER 31, 1997 Description of Investment Cost Proceeds Gain SERIES OF TRANSACTIONS ACQUISITIONS: Vanguard Windsor II (72 transactions) $1,072,198 Vanguard Investment Contract Trust (110 transactions) 597,037 Vanguard Index Trust 500 Portfolio (84 transactions) 711,511 Vanguard International Growth Portfolio (64 transactions) 468,911 DISPOSITIONS: Vanguard Investment Contract Trust (110 transactions) $ 440,945 $440,939 $ 6 Vanguard Windsor II (82 transactions) 322,682 415,317 92,635 * Reportable Plan transactions are defined as transactions that exceed 5% of the fair market value of Plan assets at the beginning of the year.