ANNUAL REPORT 1999

ALASKA RAILROAD CORPORAT I O N TAB L E OF CON T E N T S Ch a i r m a n ’s message ...... 1 Pres i d e n t ’s message ...... 2 Year in rev i e w ...... 3 Co m m o d i t i e s ...... 4 Project rev i e w ...... 8 Project timeline ...... 9 Rail line map ...... 10 Emp l o yee listing ...... 11 Management statement ...... 13 Independent auditor’s rep o r t ...... 13 Fin a n c i a l s ...... 14 Bo a r d of Dire c t o r s / Ma n a g e m e n t . . . . .32 Contact numbers ...... Inside back cover CHA I R M A N ’S ME S S AGE Take a close look at the cover of this cargo and passenger business, the friends and rel a t i v es who 1999 annual rep o r t for the hear testimony about the vistas seen from the railroad and Ra i l r oad Corporation. You might need make plans to visit. a magnifying glass to see exactly what makes up this image. Hun d r eds and For our owners, the Alaska public, we pursue a mission of hu n d r eds of images wer e taken by economic development and community growth, not just Ch a i r man of the Board ra i l r oaders and the Alaska public and revenue and profit for the Alaska Railroad Corporation. Johne Bin k l e y put together by computer science to We are careful about keeping an eye on the bottom line, make a larger picture of the Alaska Railroa d . but we leverage the success of a profitable railroad to improve the value of the asset, bring new business to the In a way, that’s exactly what makes up this public state and maintain this critical transportation corridor for corporation – hundreds of customers we serve, thousands the public good. of Alaskans who take pride in owning and operating a key piece of the state’s transportation system, and more than And then there are our employees. Sev eral of the photos in 700 Alaskans who run it. It all fits together to make a larger the mosaic on the cover wer e taken by employees or feature picture of the Alaska Railroad. em p l o yees. Take a closer look and you get a sense of the pride our people have in this railroad. Many of the folks in the Unlike most regional railroads, the Alaska Railroad carries a pi c t u r es are second and third-generation Alaska Railroa d e r s . mix of passenger and freight traffic for a diverse set of Many more have been with the company for 15, 20 and 30 customers – from families sending materials to their cabins years or more. We have one of the most stable, dedicated and off the road system to Williams Energy, one of Alaska’s experienced employee populations in Alaska business. largest and most successful value-added resource companies. We make sure rural dwellers get into town and They are all there in that photomosaic – customers, own e r s back to their quiet piece of Alaska, and we carry hundreds and employees – and we’re lucky to have them. Over the next of thousands of annual visitors so they can see the Alaska of decade, the Alaska Railroad will continue its mission of safety, their dreams. se r vice and economic development. We are improving and in v esting in our track and roadbed, new equipment and new Each of these contacts influences another set of potential facilities to better serve Alaska. customers – the building supply company, the booming air

1 PRE S I D E N T ’S ME S S AGE

Ov er the last half of 1999, the Alaska Although the last three months of the year wer e ver y difficult, Ra i l r oad showed a dramatic the Alaska Railroad remains a strong engine of economic tu r n a r ound in employee injury tren d s gr owth for our state. With the help of the Alaska after implementing a new, more Co n g r essional delegation, we are continuing to invest $10 ag g re s s i v e safety system. From June 30 million in repair and maintenance over and above our usual th r ough the end of the yea r , the Alaska corporate allocation for track and roadbed. We rec e i v ed the Ra i l ro a d ’s injury frequency rate de l i ve r y of the first four of our 16 new SD70MAC President & CEO Bill She f f i e l d dr opped to among the lowest for lo c o m o t i v es, state-of-the-art alternating current locomotives ra i l r oads our size, helping us finish the that will improve service and prof i t a b i l i t y . year with the lowest rate we’ve had in four years. We also laid much of the roadbed for track realignments that Th a t ’s an indication to me that our railroad and our will improve safety and efficiency and implemented the first em p l o yees are capable of meeting the ambitious goals for phase of a computer-based dispatch and train control system. safety we set at the beginning of 1999. The safety We completed or are well ahead of schedule on initial im p r ovements in 1999 wer e marred by the death of Ker r y permitting and environmental work on key new facilities – Brookman, a 21-year employee of the Railroad. As we mourn the Sewa r d Dock, infrastruc t u r e at Wh i t t i e r , the new Den a l i his passing, we will redouble our efforts in 2000. Depot and the rail station at the Anchorage Int e r n a t i o n a l Ai r p o r t terminal. We selected an innovat i v e barge service that Unf o rt u n a t e l y , we also experienced two significant will bring cost savings and new efficiencies to an alrea d y derailments and resulting fuel spills in the last quarter of the successful part of our business. In addition, our passenger yea r . Although we cleaned up more than 95 percent of the se r vice is growing and 2000 will bring 12 new passenger fuel spilled in the first incident, we are still cleaning up at the coaches and diners to accommodate more passengers. second site and success there will come more slowl y . This is how the big picture comes together for the Alaska Reg a r dless of the effectiveness of the cleanups and our ability Ra i l r oad over the next five to 10 years: The combination of to mitigate environmental harm, the incidents caused track realignments, upgraded equipment, new facilities at key di s r uptions in service and pulled many employees and locations and new systems allow us to run a safer railroa d , managers off other projects. The ongoing costs of the reduce running times and costs, improve service to the response effort will have a significant impact on our net customer and increase the value of this publicly owned asset. earnings in 1999 and 2000. We are looking closely at ever y We are able to attract new business to both the Railroad and aspect of our operating safety and have instituted both short- the state. And we are lucky to have the quality of employee s and long-term measures, including initiating a compreh e n s i v e and long-time railroad managers to steer the Alaska Railroa d 2 risk assessment that will guide investment in preve n t i o n into the future. me a s u r es and proc e d u re s . YEA R IN RE V I E W

The year 1999 proved just how co n s t r uction stages. The Railroad also operational proc e d u r es to prev ent such successful the Railroad has become and began receiving its fleet of 16 new incidents from occurring while also ho w large a role it plays in the day-to- SD 7 0 M A CS locomotives in Jan u a r y of in c r easing response capability. Th o s e day lives all Alaskans. The yea r 20 0 0 . changes var y from giving loaded fuel culminated a 15-year process in which trains top priority on the main line to the Railroad has quadrupled its val u e adding a more aggres s i v e snow rem o val since its ownership was transferred to and inspection policy. The Railroad has the State of Alaska in 1985. That yea r , re-committed itself to becoming the the Railroad was valued at $22.3 safest and most environmentally secure million. Now, its equity position is form of transportation in Alaska. $90.5 million. Trains carried more than 2.5 times the passengers they carried in The Railroad continues to be an 1985 and almost four times the amount im p o r tant provider of jobs for Alaskans. of petroleum. It paid more than $36.2 million in Cleanup from two derailments will cost the wages and benefits in 1999, providing a Rai l r oad more than $12 million. In 1999, the Railroad posted rec o r d pa y r oll of $1.5 million ever y two wee k s rev enues in its three main sectors: to its more than 600 employee s . fr eight, real estate and passenger Tarnishing the yea r ’s success wer e two se r vices. Rev enues totaled more than derailments north of Talkeetna. Th e In 1999, the Railroad also welcomed a $90 million, the highest in 15 yea r s response efforts to the resulting fuel ne w member to its Board of Dire c t o r s . under state own e r s h i p . Mor e than seven spills will cost the Railroad more than Jacob Adams, President and CEO of million tons of freight wer e hauled, an $12 million over five years. It rev ersed a Ar ctic Slope Regional Corporation, in c r ease of more than 12 percent from ne a r - re c o r d profit into a $3.8 million took the seat previously held by former 1998. Passenger ridership totaled more loss. Although the cleanup continues, Alaska Governor Bill Sheffield, the than 670,000 passengers, an increase of all costs must be accrued in 1999, the President and Chief Exec u t i v e Off i c e r 9 perce n t . year in which the spill occurred. of the Alaska Railroa d .

The year also saw prog r ess with many of the Railroa d ’s capital improvem e n t Among the results of the derailments pr ojects moving into the design and was the institution of sever a l 3 COM M O D I T I E S RAIL FREIGHT revenue increasing more than 27 percent. But totals were down in interline, local railcar and container/trailer The Alaska Railroad’s freight division revenues. continued a five-year increase in revenue in 1999, completing a record The bottom line for freight would have been even better if year of $65.7 million – nearly not for the two derailments at the end of the yea r . Because of Rev enue from export $700,000 more than in 1998. The them, the Railroad lost business of roughly $360,000 due to coal increased in 1999. Railroad has been increasing its delays. The Railroad was also affected by the delay in freight revenue finalizing the proposed merger betwee n since it first began the current upward BP Amoco and ARCO. Oil f i e l d swing in 1995, when it recorded $49 co n s t r uction slowed considerably, million in freight revenue. The success of leaving the Railroad with no pipe to the freight operations can also be haul in 1999. measured in sheer tonnage as the Railroad hauled 7.3 million tons in The Railroad should see an 1999, an increase of 12.7 percent from im p r ovement in hauling pipe in 2000 – 1998. and it has a new system for unloading it mo r e safely and efficiently. The Railroa d This year’s increase can be directly in v ested more than $500,000 in a attributed to its petroleum-hauling sp e c i a l i z ed forklift and magnet efforts, especially in shipments for Rev enue from freight increased for the fifth arrangement for unloading pipe. Th e Williams Energy. Since Williams st r aight yea r . ne w system features a bar magnet completed its refinery expansion at the attached to the frame of a forklift. Th e end of 1998, the Railroad started carrying more petroleum magnet simply sticks to a layer of pipe and lifts it off, ensuring than ever – finishing the year with revenues of $29.6 a safer routine while also reducing cost and time. million in petroleum alone. That accounted for nearly a third of the Railroad’s total revenue. In addition, the Railroad signed a 10-year contract with Lynden Tra n s p o r t that will result in an upgraded frei g h t Freight was up in other areas as well. Export coal revenue hauling system intended to make the sea-to-land was up by nearly $900,000, while revenue for local coal tr a n s p o r tation route safer and more efficient. The contract 4 increased 3 percent as military installations around the state calls for the Railroad to connect its freight operations to rebuilt their stockpiles. Gravel had another record year with Lyn d e n ’s Alaska Railbelt Marine Ser vice, a frei g h t - h a u l i n g operation to begin in Mar ch 2001 with pr emier visitor destination. Th e and, with the addition of three new mo r e dependability, greater safety and Whittier run also experienced some dome cars, more passengers will enjoy less environmental impact than what gr owth, while the Sewa r d run was flat. riding on top of the world and seeing cu r r ently travels on the rou t e . In total, 671,967 passengers rode the Al a s k a ’s most stunning scenery. Th e Ra i l r oad in 1999. dome cars will go into service on the Chief among the servi c e ’s upgrades will Sewa r d and run s . be the addition of three new barges. Tugs will need less horsepower and fuel Continuing growth has reduced sever a l to pull the barges, thus prod u c i n g Ra i l r oad depots to standing roo m - o n l y lo wer emissions. The current barges, ar eas. Plans for new, larger depots in many of them more than 30 years old, Denali National Par k and Fairbanks are ar e less efficient moving through water on the drafting table. Construction at because of their design. Imp r oving rail Denali is scheduled for fall 2001 and barge operations is crucial to the completion in spring 2002. Fai r b a n k s Ra i l r oad, which depends on barges to co n s t r uction will begin in 2002. Th e haul railcars, ties, rail, heavy equipment ne w Fairbanks depot location will and bulk freight in and out of Alaska eliminate considerable switching time, for several customers. expense, and vehicle traffic delays and Arriving SD70MAC locomotives are each named for a community served by the Rai l ro a d . act as an intermodal center bringing PASSENGER SERVICES di r ect access between autos, buses and In response to customer surveys and ra i l . The Alaska Railroa d ’s passenger servi c e s requests, the Railroad doubled its once again outpaced the Alaska tourism passenger fleet. Debuting in the 2000 The Railroad opened a full-servi c e in d u s t r y in growth, showing a 9 passenger season will be three “Vis t a passenger depot in Sewa r d, the pe r cent increase in passenger ridership Dom e ” cars, three dining cars, four Ra i l ro a d ’s southernmost stop. Th e co m p a r ed to the 3 percent increase in si n g l e - l e v el dome cars, one conferen c e se r vice has helped in the devel o p m e n t tourists coming to Alaska. Th e car and a lounge car. During peak of the Railroa d ’s overall plan to partn e r Anchorage to Denali segment grew the passenger season, passengers often with the cruise ship industry, which most among all of the Railroa d ’s waited for seats in the diner car and docked more than 100 ships in 1999. passenger services routes, confirming many trips wer e sold out. The dome Agents are in Sewa r d to sell tickets, Denali National Par k as Alaska’s cars continue to be a major attraction an s w er questions and provide customer 5 se r vice. Remote airline check-in at the Sewa r d dock was also and fish cleaning tables for the popular salmon fishery along tested with great success. Ship Creek adjacent to the Railroa d ’s headquarters building. Real Estate has also accomplished several housekeeping tasks Early in the season, time was spent training res e r vation agents that invol v ed razing several dilapidated buildings in the area on aspects of customer service. For the year 2000, passenger to make way for new development. A number of se r vices will build on that training. Emp l o yees have set their de v elopment opportunities are pending, including possible goals on enhancing the visitor experience through timely and red e v elopment of the Knik Arm Power Plant that was built in th o r ough customer service. the 1950s to provide power and steam to all the Railroa d facilities. Federal funding is available for a Fisheries Center to LAND MANAGEMENT be located in the Ship Creek area . Int e r est has slowly increased as a result of For the Real Estate Dep a r tment, 1999 was the Railroa d ’s master plan. a year of planning for things to come. Ov erall rev enue was up 7 percent, earning The Railroad is now in direct control of $8.6 million in 1999 compared to the the second and third floors at the $8.0 million earned in 1998. Reve n u e after terminating the fr om leases and permits rose 5 perce n t . existing master lease agreement. This will Rev enue generated from transporta t i o n net the Railroad additional rev enue and corridor permits was up by $500,000. pr ojections show that the depot will be 100 percent occupied. The Railroa d ’s An early draft of the Ship Creek Mas t e r passenger services department will

Plan was approved by the Railroa d ’s Board Prel i m i n a r y work on the Ship Creek Master Pla n continue to use the first floor of the of Dir ectors. App r oval of the Ship Cree k began in 1999. depot as its center for passenger Mul t i - M odal Tra n s p o r tation Plan by the op e r a t i o n s . Municipality of Anchorage was pending entering 2000. Th e Ra i l r oad expects to have design standards completed and a The department continues its aggres s i v e marketing of the de v elopment package available for developers interested in Ra i l ro a d ’s real estate prop e r ties with emphasis on the Shi p pr ojects within the Ship Creek development area in 2000. Creek development area and the Chena subdivision in Fairbanks. Additional emphasis will be placed on Sewa r d in Plans wer e initiated for three separate construction projects to the upcoming year as activity related to the new dock take place over the next yea r , including sidewalk and lighting co n s t r uction takes place. im p r ovements, public res t r ooms, stream bank improvem e n t s

6 RAIL MAINTENANCE The mechanical department perfo r m e d The Railroa d ’s mechanical shops an additional 1,000 repairs to co n ve r ted the bearings of the passenger The Alaska Railroa d ’s construc t i o n equipment over 1999. They included fleet. This fix will standardi z e wheel sets plans and projects plus the addition of repairs in train yards in outlying area s for DHI and Union Pacific built cars. ne w locomotives have over s h a d o wed as well as at facilities in Anchorage and Installation of plastic pedestal liners has the day-to-day maintenance and care of Fairbanks. The department maintained been instrumental to the long-range the Railroad. But those duties are an average of 95 percent locomotive goal of reducing labor-intensive aspects among the most important. Th e av ailability throughout the yea r . of passenger car maintenance. A new mechanical and engineering wheel roller bearing press was de p a r tments continued to provi d e pu r chased and installed. The pres s quality maintenance to keep the Alaska eliminates the need to hand lift the Ra i l r oad run n i n g . bearings to the axle for mounting.

Prog r ess continued with the aggres s i v e Safety continues to be the first concern cr osstie replacement program that of the engineering and mechanical began in 1996. Gangs replaced 98,198 de p a r tments. Both departments will cr ossties and handled 82,769 feet of continue to participate in the safety rail. To prep a r e for the new and larger audit system and invol v e as many lo c o m o t i v es, 210,000 rail anchors wer e em p l o yees as possible. in s t a l l e d . Quality maintenance and improved safety wer e continuing goals of 1999 operat i o n s . Major work was also completed at the ra i l y a r d in Wh i t t i e r . New ties wer e installed at switches and 70-pound rail was replaced by 3,510 feet of 115- Crews completed reconditioning of the pound rail. Ballast was also placed at 12 fleet of ARR 19100 series arti c u l a t e d tu r n o u t s . flat cars. A repair program was instituted after yard inspections Bridge crews worked on 45 bridges, rev ealed a wear pattern on leased tank tunnels and culver ts. At eight locations cars. By the end of the yea r , repairs had wo r k prog r essed on replacing aging been completed on 22 tank cars within timber trestles with modern struc t u re s , the fleet of 127. The worst cases wer e primarily in areas of faster track. ad d r essed immediately. 7 PROJ E C T RE V I E W The Alaska Railroad made significant Major track upgrades between Sev eral other projects are also in the pro g r ess on several of its construc t i o n Anchorage and Wasilla continued planning stages: Sewa r d pr ojects in 1999. These projects will with a number of curves being Frei g h t / P assenger dock construc t i o n make the Railroad a safer, more straightened. A total of 70 curves will and rehabilitation; Whittier Ped e s t r i a n dependable form of transportation for be affected by this project. The Safety improvements, upgrade and Alaska. They are components of a Railroad is working closely with the rehabilitation to our Whittier dock. co m p re h e n s i v e, multi-year plan that military on Elmendorf Air Force Base Prel i m i n a r y planning began on the new will place the Alaska Railroad on the and Ft. Richardson Army Post to Fairbanks Intermodal Facility with an fo re f r ont of state-of-the-art rail make a number of improvements, initial environmental rev i e w completed tr a n s p o rt a t i o n . including installation of double tracks in November 1999. through the two bases and realigning At the end of the yea r , construc t i o n several curves. The Railroad is also began on the Anchorage Int e r n a t i o n a l working with several Alaska Native Ai r p o r t rail station with the digging of organizations to complete needed land the new pedestrian access tunnel under swaps. These land swaps will result in the automobile access lanes. The tunnel improvements to infrastructure and will provide safe access from the long- solve land access problems the Native term parking and rental car lots companies face. The Alaska State th r ough the rail station into the main Legislature must approve the land ai r p o r t entryw a y . The tunnel shell was swaps. completed in Mar ch 2000. Design of the new rail station and elevat e d platform proceeded on schedule. Close co o r dination with the Airport Red e v elopment Project team continues to ensure a smooth schedule betwee n the two proj e c t s .

Conceptual design of Airport Rail Term i n a l

8 1999 2000 2001 2002 TIM E L I N E JASONDJFMAMJJASONDJFMAMJJASOND JFMAMJJASOND

9 RAI L LI N E

Alaska Railroad facts:

Co n s t r uction of the Alaska Railroa d began in 1915

The first train pulled out of Anchorage on November 1, 1916

U.S. President War r en G. Hard i n g officially completed construction of the Alaska Railroad by driving in the Golden Spike on July 15, 1923, at Nen a n a

The U.S. military helped build the spur fr om Por tage to Whittier during Wor l d War II to accommodate the tr a n s p o r tation of supplies and soldiers

The Alaska Railroa d ’s main track st r etches 525 miles

Each mile of track contains 3,250 ties and 19,000 spikes

The last steam engine ret i r ed from the Alaska Railroad in 1962

Transfer of ownership from the federal go vernment to the State of Alaska took 10 place on Jan u a r y 5, 1985 EMP L OYE E S OF TH E ALAS K A RAI L R OAD COR P O R AT I O N

MICHAEL ACHESON • PAUL ACHESON • JAMES ADAMS • THOMAS ADAMS • JAMES AHIERS • TR OY ALBIN • KEVIN ALESHIRE • EDWARD ALFORD • JAMES ALLEN • JEROME ANDERSON • CHRISTINE ANDERSON • ANTHONY ARAGON • W. F. ARMSTRONG • ANTONELLI ARON • TR OY ARQUE T TE • TED ASHBRIDGE • MICHAEL AUL T • BILL BAILEY • WAR R ON BAINBRIDGE • JOSEPH BAKER • CHARLES BA L D WIN • DAVID BANG • SCOTT BANKS • JOHN BARBER • DONALD BARKER • JESSICA BARKER • KENNETH BARTL E T T • NICHOLAS BATCHELDER • DIANA BAUMAN • JERRY BEA • MARK BEAR • TH O M A S BEER • GARY BEITINGER • JAMES BELL • DAVID BERG • KEVIN BERGS R UD • ADAM BETTIS • DONALD BICKERS • DIANE BICKERS • GLEN BIEGEL • WILLIAM BIVINS • JULIE BLACK • LOUISE BLACKMUR • JIM BLA K L E Y • JAMES BLASINGAME • KAYLE BOND • MICHAEL BOODRY • JIM BOSCH • DENNIS BOUWENS • BRYANT BOWLES SR. • TOMMY BOYCE • MATTH E W BRADY • W. J. BRADY • RAYMOND BRADY • DIANA BRAKE • SETH BRANSON • DONALD BRINKMAN • JOHN BRITT JR. • KE R R Y BROOKMAN • THOMAS BROOKS • CHRISTOP HER BROOKS • WILLIAM BROWN • SCOTT BROWN • ROGER BROWN • JOHN BROWN • BRETT BROWN • ORLANDO BROWN • BART BROWNING • JAMES BRYAN • JEFFREY BUBNA • DOROTEO BUM A N G L AG • RICHARD BUR GENER • HEIDI BUR GER • ANDREW BUR GESS • JAMES BURKE • THOMAS BURKWIST • STEPHANIE BURNHAM • FRED BURRELL • LAR R Y BUR TON • JACK BUR TON • JOE BUR TON • GORDON BUR TON • KEITH BUR TON • RICHARD BUSH • BENJAMIN BUTLER • LEON BUTLER III • RUSSELL BYBEE • DENISE BYRNE • MICHELLE CAIN • STEVEN CAIN • BRAD CAMPBELL • WE S L E Y CANFIELD • LAR R Y CARBAUGH • ARCHIE L. CARD • ARCHIE W. CARD • LOURDES CAREY • ROB E R T CARLSON • BRUCE CARR • RICHARD CARTER • JEFFREY CASEY • ROBBIE CASEY • JAMES CATO • CHRISTIAN CEDERBERG • WAYNE CHALKER • LORRAINE CHAMBERS • STEVEN CHAPMAN • RON A L D CHEEK • RALPH CHIPERNO • STEPHEN CHIPERNO • GERALD CHRISTENSEN • DAVID CHURCH • ALTHEA CLAPP • MANUEL CLARK • RICK CLARK • JUDITH CLAUGUS • MARTHA CLAUGUS • AYA N N A CL I F T ON • ROB E R T CLOD F E L TER • DAVID COATN E Y • DONALD COCHRAN • GREGORY COLOMBIE • RICHARD COLOSSO • STEPHAN CONLAN • TI M O THY CONLEY • THOMAS CONNELLY • SCOTT COOK • DE LG R A K O COPEL AND • JOSHUA CORAN • DAVID CORBIN • BRAULIO CORIANO • STEPHEN CORVEN • DUANE COUCH • ANN COURTN E Y • NATHAN COUSINEAU • JANICE COX • PAM E L A COX • JIMMY COX JR. • CHRISTOP HER CRAMER • WILLIAM CRAWFORD • MICHAEL CROWL E Y • KRISTIAN CROZIER • JAMES CUFF • STEVE CULVER • THOMAS CURRY • JUSTIN DAHL • MISTY DAHLSTROM • JASON DAILY • JOHN DARNEILLE • JEFFREY DAVIES • JEFFERSON DAVIS • ANDREW DAVIS • ERNEST DAVIS • TI M O THY DAVIS • MICHAEL DAVIS • GERALD DAVIS • DAVID DAVIS • TI M O THY DAY • JEFFREY DEBROECK • LISA DE LO N E Y • SHARON DEMIERO • DONALD DEMUTH • JASON DENNIS • ELI DESARMO • SHAWNESSY DESLAURIERS • FRANKLIN DEWE Y • DAVID DIANOSKI • JOANNE DIBERNARDO • ALLEN DICKMAN • CHARLES DILLARD • MATT DITTBRENDER • SHAMERON DOAK • ELAINE DOTOMAIN • ERLINE DOTOMAIN • MARCE L L A DOUGHTY • KAMERON DRAPER • MORGAN DUFSETH • RAYMOND DUNCAN • MARK DUSTIN • RICHARD DYSON • CHELCIE EAGER • JOHN ELSON • ROB E R T EMERSON • DOUGLAS ENGEBRETSON • ROB E R T ENGLISH • GEORGE ERICKSON • HUGH EVANS • JACL YN EVANS • JOHN Ker r y Broo k m a n FAEO • TOMMY FAR R OW • JEFFERI FELTON • WAYL AND FERREIRA • RANDY FERRIS • JOHN FLEMING • ZACH A R Y FLEMING • JEREMY FLENTGE • JESSE FLORES • JEAN PIERRE FLOU R N O Y • ROB E R T FOGLIA • JOHN FORD • ERIK FORLAND • CAROL FORTIER • JEFF FOWLER • MARY FOX • DUANE FRANK • ROD N E Y FRANK • JOHN FRANKLIN • MICHAEL FRAZAR • IAN FRAZIER • HOWARD FREESE • DAVID FREESE • DONALD FREESTONE • DANIEL FRERICH • MICHAEL FRETWELL • ALBERT FYFE JR. • RASCHAD GALIMBA • JERRY GAMBLE • CLIFFORD GAMBLE • ERIC GAMBLE • PAUL GANGSTAD • DAVID GARCIA • It is with deep sadness that the KE N T ON GASS • JOHN GAULE • MARY GEIL • JOSEPH GELINAS • RYAN GEORGE • GRANT GERHART • CLIFFORD GILES • LISA GILLESPIE • VERN GILLIS • JEFFREY GINALIAS • VERNON GLEICH • STEVE N Alaska Rai l r oad mourns the passing GLESSING • JUSTEN GOBBI • TI M O THY GOBBI • IONE GOBBI • JOHN GODBEY • DANA GODFREY • LAR R Y GOLDING • ROB E R T GONZALEZ • BRUCE GOUGH • REBECCA GRADY • BRYAN GRAHAM • DAVI D GRAHAM • CLINTON GRAY • BRIAN GREEN • PAUL GREEN • KENNETH GREENE • DAVID GREENHALGH • DALE GRETH • KENNETH GRIFFIN • JOHNNY GRIFFIN • WILLIAM GRIFFITH • GUNNAR of Ker r y Brookman. Ker r y was not GUNDERSON • DAVID HAAG • PETER HACK E N B E R GER • JASON HACKER • KATHLEEN HAGAN • STEPHEN HAGEDORN • WILLIAM HAGG A R T • JOSEPH HALL • AARON HALL • ROB E R T HALPIN • DAVI D only a valuable employee, but also a HAMRE • HOWARD HANSEN • DONALD HARPOLE • LINDA HARRINGTON • MICHAEL HARRIS • THOMAS HARRIS • DWIGHT HARRIS • JOHN HARSTAD • SHARON HART • ROD N E Y HARVE Y • DAVI D HASTINGS • STEVEN HAYES • LAM B E R T HAZELAAR • CAROLINE HEATER • JOHN HEATER • JOANNE HECKEY • WILLIAM HEDGE • CHRIS HELKENN • MARTIN HELLER • OWEN HELLMAN • CHAD HELTON • friend. To the men and women of LAURIE HERMAN • GREG HERNANDEZ • PAUL A HERZNER • LEE HIGBIE • WILLIAM HIGHTOWER • KENNETH HIGHTOWER • DONALD HILL • DARRELL HILL • MICHAEL HILL • AUSTIN HILL • EDWAR D the Rai l r oad who worked with him HILLS • ROBIN HINDMARCH • ELENA HINDS • TE R R Y HINMAN • ROB E R T HINTERLEITNER • EVE R E T T HINTON • DENNIS HOAD L E Y • NATHANIEL HOCKER • FRED HOLDERBY • JAY HOLE • JOHN HOLLAN D • RICHARD HOLZAPFEL • WAYNE HORINE • WILLIAM HORSTMANN • ROB E R T HOUSTON • CLIFFORD HOWARD • JOHN HOWE • KRAIG HUGHES • MICHAEL HULS • R. T. HUNT • WILLIAM HUPPRICH • over the last 21 years, Ker r y was KENT IHDE • RANDY ISAACSON • GLENN JACKSON II • SEAN JANES • PHYLLIS JOHNSON • DOUGLAS E. JOHNSON • SAMUEL JOHNSON • GRANT JOHNSON • DOUGLAS L. JOHNSON • VI R GINIA JOHNSON • well liked and respected. He was a JEFF JOHNSON • TR OY JOHNSON • MICHAEL JOHNSTON • PHILIP JOHNSTON • FORREST JOHNSTON • CHARLES JONES • CLINT JONES • KEITH JONES • DONALD JUBB • VINCENT JUDY • DAVID KAMPSEN • DU ANE KAUKE • HERFF KEITH • SAMUEL KELLEY • TI M O THY KELLY • DAVID KELLY • THOMAS KENDALL • WILLIAM KENNEDY • DIANE KENNEDY • CONNOR KEOGH • CHRISTOP HER KERR • STEPHA N tr emendous asset to our company – KESTER • JOSEPH KETZLER • SUSAN KIGER • MELVIN KILGORE • ROB E R T KILLOUGH • JOHN KINCAID • BENJAMIN KING • KRIS KINNEY • SHAWN KIRKPATRICK • BYRON KLOCKNER • HEATHER KNIEFEL • one of our best heavy equipment PEGGY KNOLL • CHRISTOP HER KNOX • DENNIS KNUTH • GERALD KNUTSON • DAVID KOCHER • DARYL KOL L ANDER • ROB E R T KOOREN • PATRICIA KOS L OVICH • ROB E R T KOSUSNIK • DAVI D KRO M P ACKY • JAMES KUBITZ • DAWN LAAKSO • BRIAN LAF O R GE • ROB E R T LAL ONDE • SAMUEL LANE • THAD LANGFORD • GORDON LARSON • CHARLES LAVALLEE • SHELLY LEGGETT • RICKY LEGGETT • op e r ators. Ker r y put his life into AA R ON LEGGETT • JIMMY LEMKE • STEVEN LERWICK • MURIEL LEWIS • GENE LEWIS • JOHN LEWIS • KATHLEEN LEWIS • PAUL LIDREN • MICHAEL LINDBERG • DAVID LINDQUIST • WE N D Y LINDSKOOG • wo r king for the Alaska Rai l ro a d . PETER LINN • ROB E R T LOCKE • THEODORE LOMBARD • CHARLES LORITZ • STEVEN LOVE • MICHAEL LOVE • PATRICK LOWE • JOSHUA LUCCA • GARY LUND • THOMAS LUZ ACK • JOHN MACDONALD • MICHELLE MADDOX • LYLE MADSEN • WAL TER MAILLELLE • MICHAEL MAILLET • DANIEL MALON E Y • DOUGLAS MARKS • RUSSELL MARTIN • KATRINA MARTOL ANO • WAYNE MARTSOLF • TINA MARTY • The Rai l r oad will never be able to TR A VIS MATL OCK • ALBERT MAUR O • KEVIN MAYO • BRADLEY MCALPINE • FOREST MCCAHON • SABRINA MCCANN • JOHN MCDONALD • JOHN MCDOWELL • ROY MCKEE • CLYDE MCMAHON • PAM E L A fully thank him for that. It is, MEANS • KEVIN MEIER • NACOLE MERRELL • LANDON MESSELHEISER • KERI MESZAR OS • PAUL MILLER • SUE MILLER • RONALD MILLER • CHRISTOP HER MOORE • BRANDON MOORE • OUIDA MORRISON • KAREN MORRISSEY • RICK MOSHER • ELDRIDGE MOSS III • JOHN MUDICK • JAMES MURPHY • CLAY MURPHY • ROCKY MURRILL • ROB E R T MURTON • TI M O THY NAGY • GEORGE NASER • CARL NEELY • th e re f o r e, the honor of the Ala s k a JE F F R E Y NELSON • GORDON NELSON • ROB E R T NIESSINK • GEORGE NOLAN • CHARLES NORRIS • ANTHONY NORTON • JULIAN NORVILLE • STEVEN O’CONNOR • GARY ODENS • MICHAEL OLSON • Rai l r oad to name the Bir d Poi n t FRANKLIN O’MEARA • MICHAEL O’NEIL • ROB E R T O’NEILL • CARRY ORRISON • LOUIS OWENS • EUGENE OWENS • JAMES PAGE • REGINA PALMER • MARK PARKER • JERRY PARKS • SIDNEY PARRIS • AARON PASCAR • THOMAS PAYNE • DAMON PELHAM • JESS PELZEL • STEVE PERKINS • MICHAEL PER YAM • SCOTT PETERSEN • SHELDON PETERSON • WI L L OW PEYTON • WILLIAM PHELPS • GARY PHILLIPS • PAUL after Ker r y for his PIE R CE • JUSTIN PIE R CE • ERNEST PIP ER • GEORGE PITNER • THOMAS PLATTE N B E R GER • KEITH PLEASURE • MEILI POLEO • RONALD POLK • MARIANNE POLLAK • JAMES PRAIRIE • FRANKLIN PRICE • WAD E commitment and many years of PRO C T OR • CLIFFORD PROETZ • ED PRUSAK • PAUL A PSIK • JOHN PUCKETT • CAROL PULIS • JAMES PYPE • LUCAS PYRAH • DON RABIDEAU • FRANCIS RABIDEAU • RICK RAPUZZI • JAMES RECKERS • JAMES REDA • DOUGLAS REED • NICOLE REESE • DAVY REGISTE • GEORGE REIF • EILEEN REILLY • LYNN REITZ • WE N D Y RICHERSON • LORRAINE RISCH • LISA RIVERA • EDWARD RIVERA • JONATHAN ROB E R TS • se r vice. We have lost a great friend DA VID ROB E R TS • WANDA ROBINSON • MARY ROCK • BARBARA ROGERS • WE S L E Y ROGERS • JEFF ROGNES • BRITT ROGNES • ANTHONY ROSARIO • MARK ROS E VEAR • HARRY ROSS • MICHAEL ROSSO • and a great rai l ro a d e r . KIRBY ROUNTREE • JAY RUCKMAN • CURT RUDD • DARREN RUP E • GARY RUSSELL • CHRISTIAN RYLL • RAY SANDERFORD • EARL SANDMAN • JOANNE SANDMAN • WILLIAM SANDMEYER • RICHARD SANFORD • ANTONIO SANSONE • CHERYL SAUTEL • JEFFREY SAUT TER • DANIEL SAVAGE • PETER SCHAEFER • JAMES SCHEU • DOUGLAS SCHILLING • BENJAMIN SCHMIDT • CHARLES SCHMIDT • STEVE SCHOONMAKER • SUSAN SCHRADER • LAVERL SCHULENBERG • MICHAEL SCHULTZE • ROD N E Y SCHUMACHER • KATHLEEN SCHWALBE • BRIAN SCHWULST • RAYMOND SECHSER • JAMES SEEBERGER • TR OY SESSIONS • ADRIE SETTEN • GARY SETTEN • DAVID SHAFER • PATRICK SHAKE • WILLIAM SHEFFIELD • MICHAEL SHEPLER • FRANK SHEPPARD • GEORGE SHERMAN • JONATHAN SHERWOOD • PHI L I P SHIBE • GREGORY SHOEMAKER • DAVID SHOEMAKER • CYNTHIA SHOLLY • BARON SHOUCK • ANDY SIEBERT • SCOTT SIEGMANN • TE R R Y SIEVERS • STEVEN SILVERSTEIN • RICHARD SIMMONS • DOUGLAS SIMONDS • RONALD SIMS • RICHARD SINGSAAS • LEON SMITH • ROB E R T SMITH • JOHN SMITH • KENNETH SMITH, JR. • ROB E R T SMITH III • TI M O THY SNAPP •JEFFREY SNYDER • ROB E R T SOCHA • STEVE N SOMMER • RANDY SPRINGSTEED • STEWAR T STACKHOUSE • SEAN STAEHLI • BRIAN STAFFORD • LOREN STATZ • JEFFREY STERBENZ • WARNER STEWAR T • CRAIG STOS K OPF • ROB E R T STOUT • JOHN ST OVER • TR OY STRASS • JOHN STREET • GLENN SULLIVAN • LAWRENCE SULLIVAN • DONALD SUMMERS • TE R R Y SURLS • GARY SUTCH • TI M O THY SUTHERLAND • JOHN SWANSON • ERIK SWANSON • TINA SWARNER • HEATHER SWAR TZ • BRIAN SWEATT • RICHARD TEEPLES • CHARLES TE N N E Y • RICHARD TESCHER • PATRICIA TH I B O D E A UX • ROY THOMAS • DAVID THOMPSEN • LANCE THOMPSON • ED WARD THOMPSON • RONALD THOMPSON • LLOYD THOMPSON • MARK TIMBLIN • NANCY TJADEN • ERIC TOMSHA • ALLAN TOWNSEND • BRENT TR A UT • MICHAEL TRITZ • CHERYL TRO J O VSKY • GLEN TRO M B L E Y • JAMES TRU E B L OOD • CHRISTINE TURNER • PAUL TURNER • GERALD VALINSKE • SALLY VAN DER STARRE • LAWRENCE VAN KLEECK • JENNIFER VE R L E Y • JON VE R L E Y • EUGENE VI C E R E • TONY VIRNIG • PATRICK VOGEL • DUANE VOSSEN • DAVID WADE • TI M O THY WALLER • SANDRA WANNER • ROL ANDA WARD • JAMAR WAS H I N G T ON • SCOTT WATKINS • LEE WATNE • MICHAEL WE A THERELL • MARTIN WE A THERELL • KEITH WEBSTER • ADAM WEGNER • STEVE WELSH • JASON WERNER • DWIGHT WEST • KEITH WHITE • JASON WHITE • ROB E R T WHITEHEAD • MICHAEL 11 WIESKAMP • MARY WILLIAMS • JASON WILSON • TI F F ANY WILSON • CRYS T AL WILSON • GARY WING • CHARLES WINGFIELD • HERDER WINKELMAN • FRANK WI T H E Y • KEVIN WOOD • DONALD WORT H L E Y • DONALD WRIGHT • SEAN WRIGHT • CHARLES WULF • GREGORY WY A TT • JEFFREY WY A TT • ROB E R T YOST • DARRELL ZABLE • HENRY ZAWADZKI • TI M O THY ZIMBRICH MAN AGE M E N T STATE M E N T The management of the Alaska Railroad Corporation is responsible for the fair statement of the accompanying financial statements and all other information contained in the annual rep o r t. The financial statements wer e prep a r ed in conformity with generally accepted accounting principles and prev ailing railroad industry practices and reflect Man a g e m e n t ’s judgments and estimates concerning effects of events and transactions that are accounted for or disclosed. The financial information contained el s ew h e r e in the annual rep o r t is consistent with that in financial statements.

The Alaska Railroad Corporation maintains accounting systems that are supported by internal accounting controls. Th e s e systems and controls provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with Man a g e m e n t ’s authorization and rec o r ded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the related benefits. Management believes the company’s system provides this approp r i a t e balance in all material res p e c t s .

The financial statements have been audited by KPMG Peat Mar wick LLP, independent certified public accountants, who are appointed by the Board of Dir ectors. Their audit is conducted in accordance with generally accepted auditing standards which include an objective, outside rev i e w of operating results, financial condition, and the Corporation’s system of internal control s . The opinion of the independent auditors is contained in this annual rep o rt .

The audit committee of the board of directors, composed solely of outside directors, meets with independent auditors and management periodically to discuss audit findings and other accounting and financial matters. The committee rev i e ws the scope and results of the audit effort with the independent auditors as well as the annual financial statements and recommends their ap p r oval by the board of direc t o r s .

Vice President, Finance and Adm i n i s t r a t i o n

12 IND E P E N D E N T AUD I TO R ’S RE P O R T The Board of Dire c t o r s Alaska Railroad Corporation:

We have audited the accompanying balance sheets of the Alaska Railroad Corporation as of December 31, 1999 and 1998, and the related statements of operations, equity and co m p re h e n s i v e income, and cash flows for the years then ended. These financial statements are the responsibility of the Corporation’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. Th o s e st a n d a r ds req u i r e 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, the financial statements ref e r r ed to above present fairly, in all material res p e c t s , the financial position of the Alaska Railroad Corporation as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

Feb ru a r y 18, 2000

13 Net Income BALA NC E SH E E T S

AL ASKA RAILROAD CORPORATI O N December 31, 1999 and 1998 (I n Th o u s a n d s )

Ass e t s 19 9 9 19 9 8 Cur r ent assets: Cash and cash equival e n t s $ 4, 8 4 6 5, 2 0 9 Accounts rec e i v able, net of allowance for doubtful accounts of ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 $508 in 1999 and $638 in 1998 8, 4 6 4 10 , 9 9 2 Materials and supplies 4, 5 9 3 3, 8 3 9 Bo a r d designated assets 13 , 2 1 5 — Prepaid expenses and other current assets 42 7 35 3 Operating Revenue Total current assets 31 , 5 4 5 20 , 3 9 3

Operating prop e r ty and equipment Road and roadway struc t u re s 11 4 , 5 1 9 99 , 2 2 6 Equ i p m e n t 51 , 9 3 8 47 , 4 7 5 Road materials and supplies 3, 1 7 1 2, 2 1 6 Co n s t r uction in prog re s s 20 , 2 3 7 8, 5 0 2 Accumulated depreciation and amorti z a t i o n (6 6 , 8 8 8 ) (5 9 , 5 4 4 )

Total operating prop e r ty and equipment, net 12 2 , 9 7 7 97 , 8 7 5 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 Land and improvements (note 10) 15 , 8 7 9 13 , 8 5 0 Bo a r d designated assets (note 3) 1, 0 3 8 9, 1 6 6 Restricted assets (note 4) 51 , 4 5 2 26 , 7 5 0 Freight Revenue Other assets (note 5) 77 7 47 4

$ 22 3 , 6 6 8 16 8 , 5 0 8

‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 14 Passenger Revenue

Liabilities and Equ i t y 19 9 9 19 9 8 Cur r ent liabilities: Cur r ent portion of long-term debt (note 6) $ 2, 0 1 8 1, 0 9 6 Accounts payable and accrued liabilities (note 13) 12 , 5 2 9 4, 7 6 5 Pay r oll liabilities 6, 5 7 9 5, 3 2 1 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 Unearned reve n u e s 1, 6 8 3 1, 6 7 8

Total current liabilities 22 , 8 0 9 12 , 8 6 0 Passenger Ridership Long-term debt, less current portion (note 6) 22 , 0 5 1 4, 0 6 9 Acc r ued postret i r ement and pension benefits (note 7) 9, 0 1 8 8, 0 3 7 Env i r onmental remediation res e r ve (note 13) 3, 1 5 0 — Def e r r ed grant rev enue (note 8) 60 , 5 7 7 34 , 7 4 1 Def e r r ed rev enue (note 4) 15 , 5 1 4 14 , 6 7 3

Total liabilities 13 3 , 1 1 9 74 , 3 8 0

Equ i t y : Inv estment by the State of Alaska 34 , 1 7 4 34 , 1 7 4 Retained earnings 56 , 0 4 3 59 , 8 0 2 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 Accumulated other compreh e n s i v e income - net unrea l i z ed gain on securities available for sale 33 2 15 2

Total equity 90 , 5 4 9 94 , 1 2 8 Revenue Ton Miles Commitments and contingencies (notes 6, 7, 9, 11, 12 and 13) $ 22 3 , 6 6 8 16 8 , 5 0 8

‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 15 See accompanying notes to financial statements. STATE M E N T S OF OP E R AT I O N S AL ASKA RAILROAD CORPORATI O N Years ended December 31, 1999 and 1998 (I n Th o u s a n d s )

19 9 9 19 9 8 Operating reve n u e : Freight (note 9) $ 65 , 6 7 7 64 , 9 8 7 Pas s e n g e r 14 , 5 7 1 13 , 4 9 1 Oth e r 30 4 29 6

80 , 5 5 2 78 , 7 7 4

Grant rev enue (note 8) 1, 6 4 8 1, 6 0 7

82 , 2 0 0 80 , 3 8 1

Operating expense: Tra n s p o rt a t i o n 40 , 0 7 8 37 , 3 7 6 Engineering (note 8) 21 , 1 6 5 20 , 1 1 8 Mec h a n i c a l 10 , 7 6 3 9, 9 1 8 General and administrative 20 , 0 7 8 7, 9 4 7 92 , 0 8 4 75 , 3 5 9

Income (loss) from operations (9 , 8 8 4 ) 5, 0 2 2

Other income (expense): Real estate income, less direct expenses of $3,121 in 1999 and $3,560 in 1998 (note 10) 5, 5 0 5 4, 4 0 2 Int e r est income 1, 1 6 1 60 2 Int e r est expense (5 4 1 ) (9 0 )

6, 1 2 5 4, 9 1 4

Net income (loss) $ (3 , 7 5 9 ) 9, 9 3 6

16 See accompanying notes to financial statements. STATE M E N T S OF EQ U I T Y AN D COM P R E H E N S I V E IN COM E

AL ASKA RAILROAD CORPORATI O N Years ended December 31, 1999 and 1998 (I n Th o u s a n d s ) Acc u m u l a t e d Inve s t m e n t ot h e r by the Sta t e Ret a i n e d co m p re h e n s i v e Total of Alaska ea r n i n g s in c o m e eq u i t y

Balance at December 31, 1997 $ 34 , 1 7 4 49 , 8 6 6 — 84 , 0 4 0

Co m p re h e n s i v e income: Net income — 9, 9 3 6 — 9, 9 3 6 Change in unrea l i z ed holding gain on securities available for sale — — 15 2 15 2

Total compreh e n s i v e income 10 , 0 8 8

Balance at December 31, 1998 34 , 1 7 4 59 , 8 0 2 15 2 94 , 1 2 8

Co m p re h e n s i v e income: Net loss — (3 , 7 5 9 ) — (3 , 7 5 9 ) Change in unrea l i z ed holding gain on securities available for sale — — 18 0 18 0

Total compreh e n s i v e income (3 , 5 7 9 )

Balance at December 31, 1999 $ 34 , 1 7 4 56 , 0 4 3 33 2 90 , 5 4 9

17 See accompanying notes to financial statements. STATE M E N T S OF CAS H FL OWS AL ASKA RAILROAD CORPORATI O N Years ended December 31, 1999 and 1998 (I n Th o u s a n d s )

19 9 9 19 9 8 Operating activities: Net income (loss) $ (3 , 7 5 9 ) 9, 9 3 6 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Dep r eciation and amorti z a t i o n 8, 0 7 6 7, 5 6 7 (G ain) loss on disposal of assets 27 3 (1 5 0 ) Gain on sale of inves t m e n t (2 2 3 ) — Changes in assets and liabilities: Dec r ease in accounts rec e i v able, net of allowance for doubtful accounts 2, 5 2 8 54 4 Inc r ease in materials and supplies (7 5 4 ) (6 5 9 ) (In c r ease) decrease in prepaid expenses and other assets (2 5 4 ) 50 7 Inc r ease in accounts payable and accrued liabilities 7, 7 6 4 69 2 Inc r ease (decrease) in payroll liabilities 1, 2 5 8 (1 , 4 3 8 ) Inc r ease (decrease) in unearned reve n u e s 5 (5 7 2 ) Inc r ease in environmental res e r ve 3, 1 5 0 — Inc r ease in accrued postret i r ement and pension benefits 98 1 1, 1 5 6 Inc r ease in deferred reve n u e 84 1 81 6

Net cash provided by operating activities 19 , 8 8 6 18 , 3 9 9

18 19 9 9 19 9 8 Inv esting activities: Pur chases of operating prop e r ty and equipment (3 3 , 5 4 1 ) (2 3 , 7 7 2 ) Pur chases of land improvem e n t s (2 , 0 2 9 ) — Proceeds from sales of operating prop e r ty and equipment 90 15 0 Proceeds from sale of inves t m e n t 10 0 — Inc r ease in board designated assets, net of unrea l i z ed gain on available-for-sale securities (4 , 9 0 7 ) (5 , 8 0 4 ) Inc r ease in restricted assets (2 4 , 7 0 2 ) (1 2 , 8 9 3 ) Inc r ease in deferred grant reve n u e 25 , 8 3 6 20 , 0 3 7

Net cash used in investing activities (3 9 , 1 5 3 ) (2 2 , 2 8 2 )

Financing activities: Payments on long-term debt (1 , 0 9 6 ) (2 , 1 8 6 ) Proceeds from long-term debt 20 , 0 0 0 5, 3 6 0

Net cash provided by financing activities 18 , 9 0 4 3, 1 7 4

Net decrease in cash and cash equival e n t s (3 6 3 ) (7 0 9 )

Cash and cash equivalents at beginning of yea r 5, 2 0 9 5, 9 1 8

Cash and cash equivalents at end of yea r $ 4, 8 4 6 5, 2 0 9

Supplemental disclosure of cash activity: Int e r est paid $ 45 5 92

See accompanying notes to financial statements. 19 NOTE S TO FI NA NC I A L STATE M E N T S AL ASKA RAILROAD CORPORATI O N December 31, 1999 and 1998 (1) Organization and Operations The Congress authorized construction of the Alaska Railroad (ARR) in 1914 and operations began in 1923. Th e federal government operated the railroad until its sale to the State of Alaska in Jan u a r y 1985. The sale of the ARR to the State of Alaska was authorized under the Alaska Railroad Transfer Act of 1982, which was signed into law on Jan u a r y 14, 1983. Th e Alaska Railroad Corporation (the ARRC) is a corporation created by the State of Alaska legislature to own and operate the rail- road and manage the railroa d ’s rail, industrial, port and other prop e r ties. The ARRC commenced operations on Jan u a r y 6, 1985.

The ARRC operates 525 route miles, providing both freight and passenger services. The ARRC serves the cities of Anchorage and Fairbanks, the ports of Wh i t t i e r , Sewa r d, and Anchorage as well as Denali National Par k and military installations. Ves s e l and rail barge connections are provided from , Washington, and Prince Rup e r t, .

(2) Summary of Significant Accounting Policies In preparing the financial statements in accordance with generally accepted accounting principles management is req u i r ed to make a number of estimates and assumptions relating to the rep o r ting of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and rev enue and expenses for the rep o r ting period. Actual res u l t s could differ from these estimates. The more significant accounting and rep o r ting policies and estimates applied in the pr eparation of the accompanying financial statements are discussed below.

(a) Basis of Accounting The ARRC is subject to the jurisdiction of the Sur face Tra n s p o r tation Board (STB). Acc o rd i n g l y , the ARRC has prep a r ed the accompanying financial statements in accordance with the STB rules and regulations (US CFR Title 49), which are generally consistent with generally accepted accounting principles as promulgated by the Financial Accounting Sta n d a r ds Board.

(b) Cash and Cash Equivalents For purposes of the statements of cash flows, cash and cash equivalents include time deposits, money market accounts and rep u r chase agreements with original maturities of three months or less.

(c) Materials and Supplies Materials and supplies inventories are carried at the lower of average cost or market. Road materials and supplies include rail, ties, ballast, and other track materials. These items will generally be capitalized when placed into service, and accordingly are 20 included in operating prop e r ty and equipment. (d) Operating Property and Equipment Operating prop e r ty and equipment are stated at cost. Dep r eciation and amortization is computed on the straight-line basis over the estimated useful lives of the related assets, ranging from 5 to 32 yea r s .

(e) Board Designated Assets Board designated assets represent investment securities held by the ARRC in anticipation of funding future postretirement benefits and locomotive and equipment purchases. Management has both the ability and intent to hold the investment securities designated for locomotive and equipment purchases to maturity, and accordingly, has elected to account for them at amortized cost under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Investment securities designated for postretirement benefits are invested in equity mutual funds and are accounted for as available for sale securities under SFAS No. 115. Available for sale securities are stated at fair value with unrealized holding gains and losses excluded from earnings and reported as a separate component of other comprehensive income.

(f) Restricted Assets Restricted assets rep r esent investment securities held by the ARRC in anticipation of the approval of future capital projects. Management has both the ability and intent to hold the investment securities to maturity, and accordingly has elected to account for them at amorti z ed cost under SFAS No. 115. Funds rec e i v ed but not yet expended are rec o r ded as deferred reve n u e .

(g) Grants Grant rev enue is rec o r ded in the same period as expenses related to the grant. Grant funds rec e i v ed but not yet expensed are rec o r ded as deferred grant reve n u e .

(h) Income Taxes As a corporation owned by the State of Alaska, the ARRC is exempt from Federal and State income taxes .

(i) Environmental Remediation Costs The Corporation accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Costs of future expenditures for environmental remediation liabilities are not discounted to their present val u e .

21 (j) Fair Value of Financial Instruments Fair values of financial instruments, as defined under SFAS No. 107, Dis c l o s u r es About Fair Value of Financial Ins t r uments, are estimated by the ARRC’ s management. Fair values of restricted assets and related deferred rev enue are based on quoted market prices, when available, and quoted market prices of comparable instruments, when not available. Fair values for accounts rec e i v able are estimated using cash flows in comparison to assets with similar estimated average lives but bearing current market in t e r est rates. Fair values of long-term debt are based on the discounted value of contractual cash flows and interest rates being of f e r ed for similar debt. ARRC has determined the fair values of financial instruments do not differ significantly from their ca r r ying amounts with the exception of investments which are discussed in notes 3 and 4.

(k) Comprehensive Income Co m p re h e n s i v e income consists of net income and net unrea l i z ed gains and losses on securities and is presented in the statement of equity and compreh e n s i v e income.

(3) Board Designated Assets Th r ough December 31, 1999, the ARRC Board of Dir ectors has designated investments for the purchase of locomotives (note 13), for vehicles and equipment, and for postret i r ement benefits (note 7) as follows (in thousands):

Gros s Gros s Am o rt i ze d un re a l i ze d un re a l i ze d Mark e t Description of Sec u r i t y co s t ga i n s lo s s e s val u e 19 9 9 : Available for sale Equity mutual fund $ 70 6 33 2 — 1, 0 3 8

Held to maturity Money market accounts 4, 5 3 8 — — 4, 5 3 8 U.S. Agency notes (maturing within one yea r ) 6, 4 5 6 — (1 5 1 ) 6, 3 0 5 Corporate notes (maturing within one yea r ) 2, 2 2 1 — — 2, 2 2 1

$ 13 , 2 1 5 — (1 5 1 ) 13 , 0 6 4

19 9 8 :

Available for sale Equity mutual fund $ 70 6 15 2 — 85 8

Held to maturity Money market accounts 5, 7 5 5 — — 5, 7 5 5 U.S. Agency notes (maturing within one yea r ) 2, 5 5 3 1 — 2, 5 5 4

22 $ 8, 3 0 8 1 — 8, 3 0 9 (4) Restricted Assets The ARRC rec e i v ed $9,000,000 from the State of Alaska in 1990 for the purchase of locomotives and coal hopper cars for the Wishbone Hill Coal project. Any remaining funds, along with interest earned on the $9,000,000 while in the possession of the AR R C, may be used to purchase other equipment and improvements related to the project. This contribution from the State of Alaska is accounted for as deferred rev enue, which will be amorti z ed over the life of the project. Acc o r ding to the agreement, the AR R C is to refund the $9,000,000 plus interest earned less administrative fees during the holding period if the Wishbone Hill Coal Project is canceled. At December 31, 1999, these restricted assets totaled $15,263,000.

Also included in restricted assets is $251,000 rec e i v ed in 1990 from the Dep a r tment of Natural Res o u r ces. These funds are being managed by the ARRC in anticipation of future capital projects. If no capital projects are undertaken, the funds, including accrue d in t e r est, would be returned to the Dep a r tment of Natural Res o u rc e s .

As part of the 1997 Tax p a y er Relief Act passed by the U.S. Congress, states without Amtrak service are due a benefit to be spent on passenger service improvements in lieu of the tax benefits rec e i v ed through Amtrak subsidies over the years. Alaska’s share of this benefit is $23,230,000, $11,615,000 of which was rec e i v ed by ARRC in 1998, with the remaining $11,615,000 rec e i v ed in 1999. The unspent portion of the amount rec e i v ed, along with investment income thereon, is rep o r ted as deferred grant rev enue (note 8). At December 31, 1999, these restricted assets totaled $15,579,000.

To finance the purchase of sixteen new locomotives, the ARRC incurred debt in the amount of $20 million during 1999 (note 6). The locomotives will be deliver ed and paid for in early 2000. As of the balance sheet date, these restricted loan proceeds and accrue d in t e r est total $20,359,000.

Restricted assets are considered held to maturity at December 31, 1999 and 1998 consisted of the following (in thousands): Gros s Gros s Am o rt i ze d un re a l i ze d un re a l i ze d Mark e t Description of Sec u r i t y co s t ga i n s lo s s e s val u e 19 9 9 : Money market accounts $ 9, 3 5 3 — — 9, 3 5 3 U.S. Agency notes (maturing within one yea r ) 3, 9 9 0 — (5 6 ) 3, 9 3 4 U.S. Agency notes (maturing in 1-5 yea r s ) 21 , 0 4 6 13 (2 0 3 ) 20 , 8 5 6 Corporate notes (maturing within one yea r ) 14 , 2 4 6 — (2 1 4 ) 14 , 0 3 2 Corporate notes (maturing in 1-5 yea r s ) 2, 8 1 7 16 (9 ) 2, 8 2 4 Tot a l $ 51 , 4 5 2 29 (4 8 2 ) 50 , 9 9 9 19 9 8 : Money market accounts $ 1, 6 0 5 — — 1, 6 0 5 U.S. Agency notes (maturing within one yea r ) 2, 0 2 2 3 — 2, 0 2 5 U.S. Agency notes (maturing in 1-5 yea r s ) 18 , 2 3 4 22 (3 5 ) 18 , 2 2 1 Corporate notes (maturing in 1-5 yea r s ) 4, 8 8 9 33 (4 ) 4, 9 1 8 Tot a l $ 26 , 7 5 0 58 (3 9 ) 26 , 7 6 9 23 (5) Investment in Partnership During 1992, the ARRC entered into a general partnership agreement to develop and operate a hotel complex in the Shi p Creek area. The ARRC sold its interest in the partnership on November 12, 1999 to the existing partners for $600,000, of which $500,000 will be rec e i v ed over 10 years. The sale resulted in a gain of $223,000.

(6) Long-Term Debt and Notes Payable Long-term debt at December 31, 1999 and 1998 consists of the following (in thousands): 19 9 9 19 9 8 Note payable, secured by equipment, due in monthly payments of $165, 936, including interest at 5.38%, matures September 2014. $ 20,000 — Note payable, secured by equipment, due in monthly payments of $74,173 including interest at 4.28%, matures September 2003. 3, 0 7 8 3, 8 1 9 Note payable, secured by equipment, due in monthly payments of $30,603, including interest at 4.28%, matures October 2003. 99 1 1, 3 0 9 Note payable, secured by equipment, due in monthly payments of $18,616 including interest at 4.44%, matures Feb ru a r y 1999. — 37

24 , 0 6 9 5, 1 6 5 Less current porti o n 2, 0 1 8 1, 0 9 6 $ 22 , 0 5 1 4, 0 6 9 AR R C has met all debt covenants at December 31, 1999.

Long-term debt maturities are as follows at December 31, 1999 (in thousands):

Year ending December 31 Am o u n t

20 0 0 $ 2, 0 1 8 20 0 1 2, 0 8 8 20 0 2 2, 0 4 3 20 0 3 1, 8 8 8 20 0 4 1, 1 3 2 2005 and beyon d 14 , 9 0 0

$ 24 , 0 6 9

The ARRC borrowed $20 million in 1999 from GE Capital to finance a portion of the purchase of sixteen new SD70MAC lo c o m o t i v es. The note bears 5.38% interest maturing in 2014. At year-end the full balance was outstanding and ARRC was in 24 compliance with all debt coven a n t s . The ARRC has arrangements for short-term unsecured lines of credit of up to $10,000,000 each with two banks. The general purpose line of credit allows borrowing up to $10,000,000 at a rate of 56% of the prime rate of a major bank. The self- insurance line of credit allows borrowing up to $10,000,000 at a rate of 65% of the prime rate of a major bank. Neither line of credit had an outstanding balance as of December 31, 1999.

(7) Employee Benefits (a) Defined Benefit Plan The ARRC has a defined benefit pension plan (Plan) covering all regular rep r esented and nonrep r esented employees who are not co ver ed by the Civil Ser vice Ret i r ement System. Benefits under this Plan are based upon the employee ’s years of service and final average compensation. The ARRC’ s funding policy is to contribute each year an amount equal to the net periodic pension cost. In 1999 and 1998, the ARRC contributed an amount for the periodic pension cost which was net of a prepaid pension amount. Emp l o yees contribute an amount equal to 9% of compensation. Contributions are made continuously throughout the yea r . Plan assets are comprised of fixed income securities and common stocks. The following table sets forth the Pla n ’s funded status at December 31, 1999 and 1998 (in thousands): 19 9 9 19 9 8 Change in benefit obligation: Benefit obligation at beginning of yea r $ 24 , 2 2 3 20 , 3 4 9 Ser vice cost 85 8 86 5 Int e r est cost 1, 6 7 7 1, 5 1 6 Par ticipant contributions 1, 6 4 9 1, 4 5 3 Actuarial (gain) loss (3 , 7 6 0 ) 51 2 Benefits paid (5 7 5 ) (4 7 2 )

Benefit obligation at end of yea r 24 , 0 7 2 24 , 2 2 3

Change in plan assets: Fair value of plan assets at beginning of yea r 27 , 0 2 6 22 , 3 3 2 Actual return on plan assets 3, 8 7 4 3, 7 1 3 Par ticipant contributions 1, 6 4 9 1, 4 5 3 Benefits paid (5 7 5 ) (4 7 2 )

Fair value of plan assets at end of yea r 31 , 9 7 4 27 , 0 2 6

Funded status 7, 9 0 2 2, 8 0 3 Unre c o g n i z ed net actuarial gain (1 0 , 4 4 2 ) (5 , 0 8 8 ) Unre c o g n i z ed prior service cost 95 4 1, 0 2 7 Unre c o g n i z ed transition asset 12 2 18 2

Acc r ued benefit cost $ (1 , 4 6 4 ) (1 , 0 7 6 ) 25 The following table sets forth the Pla n ’s weighted average assumptions used in determining the actuarial present value of the pr ojected benefit obligation at December 31, 1999 and 1998:

19 9 9 19 9 8

Discount rate 8.00 % 6.75 % Expected return on plan assets 8.00 % 8.00 % Rate of compensation increa s e 4.25 % 4.00 %

Components of 1999 and 1998 net pension costs are as follows (in thousands):

19 9 9 19 9 8

Ser vice cost $ 85 8 86 5 Int e r est cost 1, 6 7 7 1, 5 1 6 Expected return on plan assets (2 , 1 9 7 ) (1 , 8 1 4 ) Am o r tization of prior service costs 73 73 Am o r tization of unrec o g n i z ed transition obligation 61 61 Rec o g n i z ed net actuarial gain (8 3 ) —

Net periodic benefit cost $ 38 9 70 1

(b) Defined Contribution Plan Federal employees who transferred to the ARRC continue to participate in the Civil Ser vice Ret i r ement System (CSRS). ARRC is req u i r ed to contribute 8.5% of the transferred employee s ’ base pay. Pension expense related to CSRS was $779,000 and $687,000 for the years ended December 31, 1999 and 1998, res p e c t i ve l y .

(c) Postretirement Benefits Other Than Pension The ARRC sponsors a defined benefit health care plan (Plan) that provides postret i r ement medical benefits to employees receiving ret i r ement under the corporate ret i r ement plan and ret i r ed CSRS employees who do not qualify for the federal medical insurance. The Plan is contributory, with ret i r ee contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the Plan anticipates future cost-sharing changes to the written plan that are consistent with ARRC’ s ex p r essed intent to increase the ret i r ee contribution rate by the amount of that yea r ’s premium increase. ARRC’ s policy is to fund the cost of medical benefits in amounts determined at the discretion of management. At December 31, 1999 and 1998, the ARRC has designated assets with a market value of $1,038,000 and $858,000 res p e c t i v ely for the funding of these benefits (note 3).

26 The ARRC accounts for postret i r ement health care by accruing these benefits over the period in which active employee s become eligible for such postret i r ement benefits. The following table sets forth the Pla n ’s funded status, at December 31, 1999 and 1998 (in thousands): 19 9 9 19 9 8 Change in benefit obligation: Benefit obligation at beginning of yea r $ 5, 8 0 7 5, 2 7 1 Ser vice cost 52 8 43 2 Int e r est cost 34 4 31 4 Actuarial gain (1 , 8 8 4 ) (1 0 ) Benefits paid (2 0 0 ) (2 0 0 )

Benefit obligation at end of yea r 4, 5 9 5 5, 8 0 7

Funded status (4 , 5 9 5 ) (5 , 8 0 7 ) Una m o rt i z ed prior service costs (2 7 1 ) (2 9 8 ) Unre c o g n i z ed net actuarial gain (2 , 6 8 8 ) (8 5 6 )

Acc r ued benefit cost $ (7 , 5 5 4 ) (6 , 9 6 1 )

The components of 1999 and 1998 net periodic cost for these postret i r ement benefits are as follows (in thousands):

19 9 9 19 9 8

Ser vice costs $ 52 8 43 2 Int e r ests costs 34 5 31 4 Rec o g n i z ed prior service costs (2 7 ) (2 7 ) Rec o g n i z ed net actuarial gains (5 3 ) (6 4 )

Net periodic cost $ 79 3 65 5

For measuring the 1999 expected postretirement benefit obligation, a 9.25% annual rate of increase in the per capita claims cost was utilized for all participants. This rate was assumed to decrease over a three-year period to an ultimate rate of 5.25% in 2002.

For measuring the 1998 expected postret i r ement benefit obligation, a 9% annual rate of increase in the per capita claims cost was utilized. This rate was assumed to decrease over a four-year period to an ultimate rate of 5.25% in 2002.

27 Assumed health care cost trend rates have a significant effect on the amounts rep o r ted for the health care plans. A one- pe r centage-point change in assumed health care cost trend rates would have the following effects (in thousands):

19 9 9 19 9 8 One perce n t a g e One perce n t a g e One perce n t a g e One perce n t a g e point increa s e point decrea s e point increa s e point decrea s e

Effect on total service and interest cost components $ 24 3 18 2 23 9 (1 7 8 ) Effect on postret i r ement benefit obligation $ 1, 4 5 9 (1 , 1 1 3 ) 1, 4 7 9 (1 , 1 2 4 )

(8) Federal Grants The ARRC has spent grant funding on a variety of operating prop e r ty and equipment. Grant rev enue will be rec o g n i z ed equal to depreciation on these assets each yea r . The cost of assets constructed with grant funding as of December 31, 1999 consists of the following (in thousands):

Road and roadway struc t u re s 15 – 25 year life $ 30 , 5 2 1 Co n s t r uction in proc e s s 18 , 3 4 7

$ 48 , 8 6 8

Def e r r ed grant rev enue as of December 31 consists of the following (in thousands): 19 9 9 19 9 8

Federal Railway Administration - Net book value of assets construc t e d $ 27 , 9 0 4 23 , 4 9 4 Co n s t r uction in proc e s s 8, 8 8 6 — Amount rec e i v able from grantor (1 , 0 8 7 ) (8 3 0 )

Tax p a y er Relief Act - Co n s t r uction in proc e s s 6, 6 3 8 — Grant funding rec e i v ed in advan c e 16 , 5 9 1 11 , 5 9 0 Inv estment earnings on funding 1, 4 0 7 48 7

Federal Transit Administration - Co n s t r uction in proc e s s 2, 8 2 3 — Amount rec e i v able from grantor (2 , 8 2 3 ) —

Federal Emergency Management Agency - Net book value of assets construc t e d 23 8 —

$ 60 , 5 7 7 34 , 7 4 1 28 The ARRC rec o g n i z ed the following grant rev enue during the years ended December 31:

19 9 9 19 9 8 Federal Railway Administration – Dep r eciation on assets construc t e d $ 1, 0 4 3 72 5 Grant funded engineering expense 59 7 85 7 Tax p a y er Relief Act – Grant funded project planning expense — 25

Federal Emergency Management Agency – Dep r eciation on assets construc t e d 8 —

$ 1, 6 4 8 1, 6 0 7

(9) Major Customer One ARRC customer accounted for 45% and 34% of freight rev enue in 1999 and 1998 res p e c t i ve l y .

(10) Land The ARRC leases a significant portion of its land to various parties under long-term agreements. Rental income on these leases, which is included in Real Estate income, was $6,872,000 and $6,385,000 in 1999 and 1998, res p e c t i ve l y .

The following table summarizes future minimum lease payments rec e i v able as of December 31, 1999 (in thousands):

Year ending December 31 Am o u n t

20 0 0 $ 6, 9 2 7 20 0 1 6, 8 7 3 20 0 2 6, 6 2 1 20 0 3 6, 3 7 7 20 0 4 6, 1 3 4 Th e re a f t e r 12 1 , 2 7 2

$ 15 4 , 2 0 4

The ARRC has $1,049,000 in rent credits outstanding on these leases at December 31, 1999.

29 (11) Operating Leases and Agreements The ARRC leases its headquarters, certain operating equipment, and barge services under operating leases and agree m e n t s . Payments under the leases and agreements totaled $15,730,000 and $15,707,000 in 1999 and 1998, res p e c t i ve l y . Fut u r e minimum lease payments as of December 31, 1999 are summarized as follows (in thousands):

Year ending December 31 Am o u n t

20 0 0 $ 14 , 5 0 1 20 0 1 10 , 8 9 0 20 0 2 9, 8 7 7 20 0 3 9, 7 7 0 20 0 4 9, 7 7 0 Th e re a f t e r 61 , 0 4 9

11 5 , 8 5 7 Amounts to be rec e i ve d under non-cancellable su b - l e a s e s (8 , 8 4 5 )

$ 10 7 , 0 1 2

(12) Insurance The ARRC is self-insured to certain limits for employee health benefits, personal injury, prop e r ty and casualty damage claims and establishes res e r ves for the estimated losses of such claims. The ARRC is also self-insured against worke r s ’ compensation claims. The ARRC carries commercial insurance policies limiting their exposure for health benefits to $2.5 million, for casualty/liability to $5 million and for prop e r ty to $10 million at December 31, 1999.

(13) Commitments and Contingencies During 1997, and as amended in 1998, the ARRC entered into an agreement to purchase 16 locomotives for approxi m a t e l y $32,347,000. The locomotives are scheduled for deliver y in the first half of 2000. The Board of Dir ectors has designated assets and restricted assets with carrying values of $12,107,000 and $20,359,000 res p e c t i v ely towa r d the purchase of these lo c o m o t i v es (note 4).

30 During 1992, the EPA filed a complaint seeking to fine the ARRC for alleged violations of the Res o u r ce Conservation and Rec o ver y Act in relation to storing hazardous wastes at the Anchorage rail yard. A consent agreement was executed during 1994 settling the alleged violations. The accrual included in the financial statements does not reflect any costs to clean up any contamination in the area cover ed by the settlement. No contamination has been discover ed, but the ARRC believes most, if not all, contamination in this area would have occurred prior to the transfer of the ARRC from the federal government to the State of Alaska. That liability for contamination will be ultimately imposed on the federal government under the transfer act and a 1990 agreement between the federal government and the ARRC.

During 1999, two derailments resulted in fuel spills along the ARRC tracks at Canyon and at Gold Creek. The ARRC is responsible for the remediation, restoration and monitoring of environmental contamination at these sites. The ARRC has ac c r ued its best estimate of its obligation with respect to the sites at December 31, 1999, which is $11,376,000. Of this amount, $8,226,000 is expected to be paid during 2000 and is included in accounts payable and accrued liabilities. Th e remaining $3,150,000 is expected to be incurred through 2004 and is rep o r ted as environmental remediation res e r ve. Th e total expense relating to these derailments and reflected in the statement of operations was $12,853,000 during 1999. Th e ag g r egate undiscounted amount has been rec o r ded since it rep r esents management’s best estimate of the cost, but the payments ar e not considered to be fixed and reliably determinable. The estimate of costs and their timing of payment could change as a result of changes to the remediation plan, changes in technology available to treat the site and unforeseen circumstances existing at the site. It is not possible to estimate the amount losses may exceed amounts accrued at this time as a result of these factors.

The ARRC is a defendant in various legal proceedings related to the conduct of its business. Provision has been made in the financial statements for probable losses, if any, from such litigation. In the opinion of management, the outcome of the litigation will not have a material effect on the financial position of the ARRC.

31 BOAR D OF DIR E C TO R S AN D CE O

(L to R back row) Ed Bau e r Professional Railway Consultant

Jacob Ada m s President & CEO Arctic Slope Regional Corporation

Deborah Sed w i c k Commissioner of Community and Economic Deve l o p m e n t

Jack Burt o n Track Ins p e c t o r , Alaska Railroad Corporation

Joe Perk i n s Commissioner of Tra n s p o r tation and Public Fac i l i t i e s

(L to R front row) Dale R. Lindsey, Vice Chairma n President & CEO Harbor Enterprises, Inc .

Johne Bin k l e y, Chairma n Chairman & CEO Alaska River ways, Inc .

Bill She f f i e l d President & CEO Alaska Railroad Corporation

OFF I C E R S

Jer r y Anderson, Vice President, Finance & Adm i n i s t r a t i o n James M. Kubitz, Vice President, Real Estate, James B. Blasingame, Vice President, Corporate Affairs Facilities and Project Pla n n i n g Thomas E. Brooks, Chief Eng i n e e r Ernie Pip e r , Assistant Vice President, Safety and George L. Erickson, Vice President, Tra n s p o r tation Serv i c e s Env i r onmental Serv i c e s Laurie Herman, Dire c t o r , Passenger Serv i c e s Eileen Rei l l y , Chief Information Off i c e r 32 Phyllis C. Johnson, Vice President, General Counsel Patrick C. Shake, Superintendent, Tra n s p o rt a t i o n John E. Kincaid, Chief Mechanical Off i c e r Rob e r t Stout, Vice President, Mechanical and Eng i n e e r i n g CON T ACT NU M B E R S Alaska Railroad Corporation Offices P.O. Box 107500, Anchorage, Alaska 99510-7500

Anchorage, Alaska Offices Physical Address Telephone Fax Headquarters Offices 327 W Ship Creek Avenue (907) 265-2300 (907) 265-2312 Ticket Office 411 W 1st Avenue (907) 265-2494 (907) 265-2509 Yard Office 1221 Whitney Road (907) 265-2434 (907) 265-2698 ABOU T TH E COVE R

The cover of the 1999 Alaska Railroad Annual Rep o r t Fairbanks, Alaska Offices Physical Address Telephone Fax fe a t u r es the Railroa d ’s 2000 poster, a photomosaic Passenger Depot 280 North Cushman (907) 458-6025 (907) 452-5582 cr eated by nationally ren o wned artist Rob e r t Sil ve r s . Yard Office 1888 Fox Avenue (907) 458-6022 (907) 458-6052 Freight House 1888 Fox Avenue (907) 458-6048 (907) 458-6061 The photomosaic is made up of more than 1,000

images submitted by Alaskans, visitors and railroad fans. Seward, Alaska P.O. Box 95, Seward, Alaska 99664 The limited-edition prints and the posters are avai l a b l e Telephone: (907) 224-5552 or 265-2696 for purchase at the Anchorage and Fairbanks depots. Fax: (907) 265-2660

Seattle, Washington 5615 W. Marginal Way S.W., Seattle, WA 98106 Telephone: (206) 767-1100 Fax; (206) 767-1112 Design and production: Northwest Strategies

Mosaic panel photography contributed by fans of the 800 Numbers Within Alaska Alaska Railroad throughout the world. (Outside Anchorage) From Lower 48 Cover image by Robert Silvers, Runaway Technology, Freight Customer Service 1-800-478-2442 1-800-247-3153 © 1999 The Alaska Railroad Corporation Freight Marketing 1-800-321-6518 1-800-321-6518 Passenger Service 1-800-544-0552 1-800-544-0552 Additional photography by Chris Arend, Seattle Office 1-800-843-2772 1-800-843-2772 Randy Brandon, Danny Daniels, Calvin Hall and Clark Mishler

Printing: Professional Colorgraphics C The Alaska Railroad Corporation has not received any bona-fide offers of a sale arrangement within the calendar year of 1999, nor is the Corporation aware of any potenetial sales that require analysis under AS 42.40.260 Corporate Headquarters • Alaska Railroad Corporation P.O. Box 107500 • Anchorage, Alaska 99510-7500 • (907) 265-2300 • http://www.akrr. c o m