UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From to Commission file number 1-2967. UNION ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Missouri 43-0559760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1901 Chouteau Avenue, St. Louis, Missouri 63103 (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code: (314) 621-3222 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 . Shares outstanding of each of registrant's classes of common stock as of July 31, 1998: Common Stock, $5 par value - 102,123,834 Union Electric Company Index Page No. Part I Financial Information (Unaudited) Management's Discussion and Analysis 2 Balance Sheet - June 30, 1998 and December 31, 1997 6 Statement of Income - Three months, six months and 12 months ended June 30, 1998 and 1997 7 Statement of Cash Flows - Six months ended June 30, 1998 and 1997 8 Notes to Financial Statements 9 Part II Other Information PART I. FINANCIAL INFORMATION (UNAUDITED) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Union Electric Company (AmerenUE or the Registrant) is a subsidiary of Ameren Corporation (Ameren), a newly created holding company which is registered under the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, AmerenUE and CIPSCO Incorporated (CIPSCO) combined to form Ameren, with AmerenUE and CIPSCO's subsidiaries, Central Illinois Public Service Company (AmerenCIPS) and CIPSCO Investment Company (CIC), becoming wholly-owned subsidiaries of Ameren (the Merger). The following discussion and analysis should be read in conjunction with the Notes to Financial Statements beginning on page 9, and the Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the Audited Financial Statements and the Notes to Financial Statements appearing in the Registrant's 1997 Annual Report included in its 1997 Form 10-K. RESULTS OF OPERATIONS Earnings Second quarter 1998 earnings of $64 million declined $3 million compared to 1997 second quarter earnings. Earnings for the six months ended June 30, 1998 decreased $5 million from the year-ago period to $92 million. Earnings for the 12 months ended June 30, 1998, were $288 million, a $3 million decrease from the preceding 12-month period. Excluding the extraordinary charge recorded in the fourth quarter of 1997 to write off the generation-related regulatory assets and liabilities of the Registrant's Illinois retail electric business, earnings for the 12-month period ended June 30, 1998, were $324 million. Earnings fluctuated due to many conditions, the primary ones being: weather variations, credits to electric customers, sales growth, fluctuating operating costs, the write-off of certain generation-related regulatory assets and liabilities, and merger-related costs. The significant items affecting revenues, costs and earnings during the three-month, six-month and 12-month periods ended June 30, 1998, and 1997 are detailed below. Electric Operations Electric Operating Revenues Variations for periods ended June 30, 1998 from comparable prior-year periods - ------------------------------ ---------------- --------------- ---------------- (Millions of Dollars) Three Months Six Months Twelve Months - ------------------------------ ---------------- --------------- ---------------- Credit to customers $ (26) $ (24) $ (22) Effect of abnormal weather 33 22 53 Growth and other 31 47 63 Interchange sales - (12) (29) - ------------------------------ ---------------- --------------- ---------------- $ 38 $ 33 $ 65 - ------------------------------ ---------------- --------------- ---------------- The $38 million increase in second quarter electric revenues compared to the year-ago quarter was primarily due to warm weather, a strong regional economy and benefits realized from elimination of the retail electric fuel adjustment clause in the Registrant's Illinois jurisdiction effective May 1998, partially offset by increased credits to Missouri electric customers (see Note 5 under Notes to Financial Statements for further information). Weather-sensitive residential kilowatthour sales increased 18 percent, commercial sales increased 7 percent and industrial sales increased 1 percent. Electric revenues for the first six months of 1998 increased $33 million over the same period in 1997 primarily due to warm weather and benefits realized from elimination of the retail electric fuel adjustment clause in the Registrant's Illinois jurisdiction in the second quarter of 1998, partially offset by increased credits to customers (see Note 5 under Notes to Financial Statements for further information) and a decrease in interchange sales. Residential, commercial, and industrial sales increased 7 percent, 3 percent, and 2 percent, respectively, due to the strong regional economy. Interchange sales decreased 37 percent due to decreased sales opportunities. The increase in electric revenues for the 12 months ended June 30, 1998, compared to the prior 12-month period was primarily due to favorable weather, partially offset by a higher estimated Missouri customer credit recorded during the period (see Note 5 under Notes to Financial Statements for further information) and a 37 percent decline in interchange sales. Residential sales 2 increased 6 percent, while commercial and industrial sales increased 3 percent and 2 percent, respectively, due to the strong regional economy. Fuel and Purchased Power Variations for periods ended June 30, 1998 from comparable prior-year periods - ------------------------------------ -------------- ------------ --------------- (Millions of Dollars) Three Months Six Months Twelve Months - ------------------------------------ -------------- ------------ --------------- Fuel: Variation in generation $ (9) $ (6) $ (6) Price 4 6 (2) Generation efficiencies and other 2 2 2 Purchased power variation 25 15 29 - ------------------------------------ -------------- ------------ --------------- $ 22 $ 17 $ 23 - ------------------------------------ -------------- ------------ --------------- The increase in fuel and purchased power costs for the three, six, and twelve months ended June 30, 1998, versus the comparable prior year periods was primarily due to increased sales volumes and higher purchased power prices. While unprecedented prices for power purchases occurred in the marketplace during the last week of June 1998, the Registrant was able to effectively manage its power costs in the face of soaring wholesale electricity prices. Overall, the abnormally high prices for power purchases in June had little impact on the Registrant's financial results for the periods presented. Gas Operations Gas revenues for the six and twelve month periods ended June 30, 1998, decreased $3 million and $4 million, respectively, compared to the same year-ago periods due to an overall decrease in dekatherm sales due to milder winter weather, partially offset by the annual $11.5 million Missouri gas rate increase effective February 1998. Gas costs for the six and twelve months ended June 30, 1998, decreased $9 million and $12 million, respectively, compared to the same year-ago periods primarily due to lower gas prices and a decline in dekatherm sales. Other Operating Expenses Other operating expense variations reflected recurring factors such as growth, inflation, labor and benefit increases. Other operations expenses for the three, six, and twelve months ended June 30, 1998, increased $21 million, $26 million, and $43 million, respectively, compared to the same year-ago periods primarily due to an increase in injuries and damages expense and increased information system-related costs and professional services expenses. Maintenance expenses for the three and six months ended June 30, 1998, increased $5 million and $4 million, respectively, compared to the year-ago periods primarily due to the costs of refueling the Callaway Nuclear Plant, partially offset by a reduction in scheduled fossil plant maintenance. The spring 1998 scheduled refueling was completed in 31 days. The $3 million decrease in maintenance expenses for the 12-month period ended June 30, 1998, compared to the prior 12-month period was due to decreased scheduled fossil plant maintenance. Depreciation and amortization expense for the three, six, and twelve-month periods ended June 30, 1998, increased $3 million, $6 million, and $9 million, respectively, versus the comparable 1997 periods, primarily due to increased depreciable property and amortization of the Missouri portion of merger-related costs which were recorded as a regulatory asset upon Merger close under the conditions of the Missouri Public Service Commission (MoPSC) order approving the Merger. In March 1998, Ameren announced plans to reduce its other operating expenses, including plans to eliminate approximately 400 employee positions by mid-1999 through a hiring freeze and a targeted voluntary separation plan (the Plan). In July 1998, Ameren offered separation packages to employees whose positions are to be eliminated through the Plan. The Registrant expects that the Plan will result in a charge to earnings in the third quarter of 1998 once the number of employees that will accept the terms of the Plan is known. At this time, the Registrant is unable to estimate the expected charge to earnings resulting from the Plan. Other Income and Deductions Miscellaneous, net for the three months and six months ended June 30, 1998, increased $3 million and $4 million, respectively, versus the comparable 1997 periods, primarily due to reduced merger-related costs. Miscellaneous, net increased $17 million for the 12-month period ended June 30, 1998, compared to the year-ago period primarily due to the reversal of the Missouri 3 portion of merger-related costs which were recorded as a regulatory asset upon Merger close under conditions of the MoPSC order approving the Merger. Balance Sheet The $82 million increase in trade accounts receivable and unbilled revenues was due primarily to higher revenues in May and June 1998 compared to November and December 1997. Changes in accounts and wages payable and other taxes accrued result from the timing of various payments to taxing authorities and suppliers. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities totaled $158 million for the six months ended June 30, 1998, compared to $198 million during the same 1997 period. Cash flows used in investing activities totaled $104 million and $151 million for the six months ended June 30, 1998 and 1997, respectively. Construction expenditures for the six months ended June 30, 1998 for constructing new or improving existing facilities, and complying with the Clean Air Act were $101 million. In addition, the Registrant expended $9 million for the acquisition of nuclear fuel. Capital requirements for the remainder of 1998 are expected to be principally for construction expenditures and the acquisition of nuclear fuel. Cash flows used in financing activities were $44 million for the six months ended June 30, 1998, compared to $38 million during the same 1997 period. The Registrant's principal financing activities for the six months ended June 30, 1998, included the issuance of long-term debt of $149 million, the redemption of short-term debt and the nuclear fuel lease of $21 million and $51 million, respectively, and the payment of dividends. The Registrant plans to continue utilizing short-term debt to support normal operations and other temporary requirements. The Registrant is authorized by the Securities and Exchange Commission under PUHCA to have up to $1.1 billion of short-term unsecured debt instruments outstanding at any one time. Short-term borrowings consist of bank loans (maturities generally on an overnight basis) and commercial paper (maturities generally within 10 to 45 days). At June 30, 1998, the Registrant had committed bank lines of credit aggregating $154 million (all of which were unused at such date) which make available interim financing at various rates of interest based on LIBOR, the bank certificate of deposit rate or other options. The lines of credit are renewable annually at various dates throughout the year. At June 30, 1998, the Registrant had no outstanding short-term borrowings. The Registrant also has a bank credit agreement due 2000 which permits the borrowing of up to $300 million on a long-term basis, all of which was unused and $116 million was available at June 30, 1998. Additionally, the Registrant has a lease agreement which provides for the financing of nuclear fuel. At June 30, 1998, the maximum amount which could be financed under the agreement was $120 million. Cash provided from financing for the first six months of 1998 included redemptions under the lease for nuclear fuel of $51 million, offset in part by $8 million of issuances. At June 30, 1998, $75 million was financed under the lease. RATE MATTERS As a result of the Electric Service Customer Choice and Rate Relief Law of 1997 (the Law) providing for electric utility restructuring in Illinois, AmerenUE filed a proposal with the Illinois Commerce Commission to eliminate the electric fuel adjustment clause for Illinois retail customers, thereby including a historical level of fuel costs in base rates. The ICC approved AmerenUE's filing on April 28, 1998. In June 1998, the Registrant filed a residential rate reduction tariff with the ICC to comply with the requirements of the Law. Under provisions of the Law, a rate decrease of 5 percent will become effective for Illinois residential electric customers beginning August 1, 1998. See Note 5 under Notes to Financial Statements for further discussion of Rate Matters. 4 ACCOUNTING MATTERS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires recognition of all derivatives in the balance sheet measured at fair value. SFAS 133 is effective for fiscal years beginning after June 15, 1999. Earlier application is encouraged, but permitted only as of the beginning of any fiscal quarter that begins after issuance of the standard. At this time, the Registrant is unable to determine the impact of SFAS 133 on its financial position or results of operations upon adoption. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS 132 revises employers' disclosures about pension and other postretirement benefit plans. SFAS 132 is effective for fiscal years beginning after December 15, 1998, although earlier application is encouraged. SFAS 132 is not expected to have a material impact on the Registrant's financial position or results of operations upon adoption. In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use. Under SOP 98-1, certain costs which are currently expensed by the Registrant may be capitalized and amortized over some future period. SOP 98-1 is effective for fiscal years beginning after December 15, 1998, although earlier application is encouraged. At this time, the Registrant is unable to determine the impact of SOP 98-1 on its financial position or results of operations upon adoption. SAFE HARBOR STATEMENT Statements made in this Form 10-Q which are not based on historical facts, are forward-looking and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. In connection with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Registrant is providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. Factors include, but are not limited to, the effects of regulatory actions; changes in laws and other governmental actions; competition; future market prices for electricity; average rates for electricity in the Midwest; business and economic conditions; weather conditions; fuel prices and availability; generation plant performance; monetary and fiscal policies; and legal and administrative proceedings. 5 UNION ELECTRIC COMPANY ---------------------- BALANCE SHEET ------------- UNAUDITED --------- (Thousands of Dollars, Except Shares) June 30, December 31, ASSETS 1998 1997 - ------ ----------- ----------- Property and plant, at original cost: Electric $8,919,032 $8,832,039 Gas 202,808 197,959 Other 36,023 36,023 ---------- ---------- 9,157,863 9,066,021 Less accumulated depreciation and amortization 3,983,466 3,866,925 ---------- ---------- 5,174,397 5,199,096 Construction work in progress: Nuclear fuel in process 97,088 134,804 Other 86,015 68,074 ---------- ---------- Total property and plant, net 5,357,500 5,401,974 ---------- ---------- Investments and other assets: Nuclear decommissioning trust fund 148,699 122,438 Other 40,667 33,315 ---------- ---------- Total investments and other assets 189,366 155,753 ---------- ---------- Current assets: Cash and cash equivalents 12,925 3,232 Accounts receivable - trade (less allowance for doubtful accounts of $5,336 and $3,645, respectively) 229,433 179,708 Unbilled revenue 103,703 71,156 Other accounts and notes receivable 53,552 41,028 Materials and supplies, at average cost - Fossil fuel 53,605 49,574 Other 95,779 97,375 Other 15,130 11,040 ---------- ---------- Total current assets 564,127 453,113 ---------- ---------- Regulatory assets: Deferred income taxes 610,047 611,740 Other 170,589 179,705 ---------- ---------- Total regulatory assets 780,636 791,445 ---------- ---------- Total Assets $6,891,629 $6,802,285 ========== ========== CAPITAL AND LIABILITIES Capitalization: Common stock, $5 par value, authorized 150,000,000 shares - outstanding 102,123,834 shares $ 510,619 $ 510,619 Other paid-in capital, principally premium on common stock 701,896 716,879 Retained earnings 1,128,939 1,159,956 ---------- ---------- Total common stockholders' equity 2,341,454 2,387,454 Preferred stock not subject to mandatory redemption 155,197 155,197 Long-term debt 1,967,807 1,846,482 ---------- ---------- Total capitalization 4,464,458 4,389,133 ---------- ---------- Current liabilities: Current maturity of long-term debt 12,740 28,797 Short-term debt -- 21,300 Accounts and wages payable 146,036 188,014 Accumulated deferred income taxes 43,517 35,809 Taxes accrued 151,758 94,167 Other 158,858 142,859 ---------- ---------- Total current liabilities 512,909 510,946 ---------- ---------- Accumulated deferred income taxes 1,259,467 1,264,800 Accumulated deferred investment tax credits 147,034 149,891 Regulatory liability 166,111 175,638 Other deferred credits and liabilities 341,650 311,877 ---------- ---------- Total Capital and Liabilities $6,891,629 $6,802,285 ========== ========== 6 UNION ELECTRIC COMPANY ---------------------- STATEMENT OF INCOME ------------------- UNAUDITED --------- (Thousands of Dollars) Three Months Ended Six Months Ended Twelve Months Ended June 30, June 30, June 30, 1998 1997 1998 1997 1998 1997 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Electric $ 574,962 $ 537,494 $ 1,011,279 $ 978,461 $ 2,221,389 $ 2,157,000 Gas 13,621 12,359 55,715 58,469 95,505 99,055 Other 93 101 267 282 488 508 ----------- ----------- ----------- ----------- ----------- ----------- Total operating revenues 588,676 549,954 1,067,261 1,037,212 2,317,382 2,256,563 OPERATING EXPENSES: Operations Fuel and purchased power 135,847 114,329 247,624 230,520 517,099 494,331 Gas 8,456 9,453 28,435 36,962 54,926 66,938 Other 120,188 98,966 220,297 194,443 430,810 387,346 ----------- ----------- ----------- ----------- ----------- ----------- 264,491 222,748 496,356 461,925 1,002,835 948,615 Maintenance 66,830 61,722 114,875 110,920 221,381 224,090 Depreciation and amortization 64,254 61,220 128,775 122,664 254,072 244,677 Income taxes 45,831 48,293 70,263 69,628 193,401 194,132 Other taxes 54,443 51,887 102,045 102,404 211,590 212,463 ----------- ----------- ----------- ----------- ----------- ----------- Total operating expenses 495,849 445,870 912,314 867,541 1,883,279 1,823,977 OPERATING INCOME 92,827 104,084 154,947 169,671 434,103 432,586 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 1,201 953 2,218 1,830 4,849 4,499 Miscellaneous, net 1,409 (1,760) 890 (2,841) 11,065 (5,549) ----------- ----------- ----------- ----------- ----------- ----------- Total other income and deductions 2,610 (807) 3,108 (1,011) 15,914 (1,050) INCOME BEFORE INTEREST CHARGES 95,437 103,277 158,055 168,660 450,017 431,536 INTEREST CHARGES: Interest 30,660 35,453 64,820 70,633 132,863 135,749 Allowance for borrowed funds used during construction (1,474) (1,818) (3,318) (3,245) (6,749) (6,274) ----------- ----------- ----------- ----------- ----------- ----------- Net interest charges 29,186 33,635 61,502 67,388 126,114 129,475 INCOME BEFORE EXTRAORDINARY CHARGE 66,251 69,642 96,553 101,272 323,903 302,061 ----------- ----------- ----------- ----------- ----------- ----------- EXTRAORDINARY CHARGE (NET OF INCOME TAXES) -- -- -- -- (26,967) -- ----------- ----------- ----------- ----------- ----------- ----------- NET INCOME 66,251 69,642 96,553 101,272 296,936 302,061 ----------- ----------- ----------- ----------- ----------- ----------- PREFERRED STOCK DIVIDENDS 2,205 2,205 4,409 4,409 8,817 11,033 ----------- ----------- ----------- ----------- ----------- ----------- NET INCOME AFTER PREFERRED STOCK DIVIDENDS $ 64,046 $ 67,437 $ 92,144 $ 96,863 $ 288,119 $ 291,028 =========== =========== =========== =========== =========== =========== 7 UNION ELECTRIC COMPANY ---------------------- STATEMENT OF CASH FLOWS ----------------------- UNAUDITED --------- (Thousands of Dollars) Six Months Ended June 30, ----------------- 1998 1997 ---- ---- Cash Flows From Operating: Net income $ 96,553 $ 101,272 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 123,981 118,107 Amortization of nuclear fuel 16,182 19,901 Allowance for funds used during construction (5,536) (5,075) Deferred income taxes, net (5,511) (728) Deferred investment tax credits, net (2,857) (3,085) Changes in assets and liabilities: Receivables, net (94,796) (13,623) Materials and supplies (2,435) 11,847 Accounts and wages payable (41,978) (96,619) Taxes accrued 57,591 74,364 Other, net 16,742 (8,549) --------- --------- Net cash provided by operating activities 157,936 197,812 Cash Flows From Investing: Construction expenditures (100,525) (146,079) Allowance for funds used during construction 5,536 5,075 Nuclear fuel expenditures (9,352) (10,401) --------- --------- Net cash used in investing activities (104,341) (151,405) Cash Flows From Financing: Dividends on common stock (123,161) (129,697) Dividends on preferred stock (4,409) (4,409) Redemptions - Nuclear fuel lease (51,152) (12,717) Short-term debt (21,300) -- Long-term debt -- (45,000) Preferred stock -- (63,924) Issuances - Nuclear fuel lease 7,620 20,703 Short-term debt -- 56,700 Long-term debt 148,500 140,000 --------- --------- Net cash used in financing activities (43,902) (38,344) Net increase in cash and cash equivalents 9,693 8,063 Cash and cash equivalents at beginning of year 3,232 4,897 --------- --------- Cash and cash equivalents at end of period $ 12,925 $ 12,960 ========= ========= Cash paid during the periods: Interest (net of amount capitalized) $ 63,904 $ 62,799 Income taxes, net $ 62,138 $ 45,536 8 UNION ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1998 Note 1 - Effective December 31, 1997, following the receipt of all required state and federal regulatory approvals, Union Electric Company (AmerenUE or the Registrant) and CIPSCO Incorporated (CIPSCO) combined to form Ameren Corporation (Ameren)(the Merger). Note 2 - Financial statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of the Registrant, the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. See Notes to Financial Statements included in the 1997 Form 10-K for information relevant to the financial statements contained in this Form 10-Q, including information as to the significant accounting policies of the Registrant. Note 3 - In the opinion of the Registrant the interim financial statements filed as part of this Form 10-Q reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Registrant's financial statements were prepared to permit the information required in the Financial Data Schedule (FDS), Exhibit 27, to be directly extracted from the filed statements. The FDS amounts correspond to or are calculable from the amounts reported in the financial statements or notes thereto. Note 4 - Due to the effect of weather on sales and other factors which are characteristic of public utility operations, financial results for the periods ended June 30, 1998 and 1997, are not necessarily indicative of trends for any three-month, six-month, or twelve-month period. Note 5 - On July 21, 1995, the Missouri Public Service Commission (MoPSC) approved an agreement involving the Registrant's Missouri electric rates. The Agreement included a three-year experimental alternative regulation plan that provides that earnings in excess of a 12.61 percent regulatory return on equity (ROE) will be shared equally between customers and shareholders and earnings above 14 percent ROE will be credited to customers. The formula for computing the credit uses twelve-month results ending June 30, rather than calendar year earnings. During the six months ended June 30, 1998, the Registrant recorded an estimated $43 million credit for the third year of the plan compared to a $20 million credit recorded for 1997. This credit, which the Registrant expects to pay to Missouri customers later this year, was reflected as a reduction in electric revenues. A new three-year experimental alternative regulation plan was included in the joint agreement approved by the MoPSC in its February 1997 order approving the Merger. Like the current plan, the new plan requires that earnings over a 12.61 percent ROE up to a 14 percent ROE will be shared equally between customers and stockholders. The new three-year plan will also return to customers 90 percent of all earnings above a 14 percent ROE up to a 16 percent ROE. Earnings above 16 percent ROE will be credited entirely to customers. The joint agreement also provides for a Missouri electric rate decrease, effective September 1, 1998, based on the weather-adjusted average annual credits to customers under the current experimental alternative regulation plan. Note 6 - Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" became effective on January 1, 1998. SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the financial statements with the same prominence as other financial statement components. Adoption of SFAS 130 did not have a material effect on the financial position, results of operations, liquidity or presentation of financial information of the Registrant. 9 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION Any stockholder proposal intended for inclusion in the proxy material for the Registrant's 1999 annual meeting of stockholders must be received by December 1, 1998. In addition, under the Registrant's By-Laws, shareholders who intend to submit a proposal in person at an Annual Meeting, or who intend to nominate a director at a Meeting, must provide advance written notice along with other prescribed information. In general, said notice must be received by the Secretary of the Registrant not later than 60 nor earlier than 90 days prior to the Meeting. For the Registrant's 1999 annual meeting of stockholders, such a proposal should be received not later than February 27, 1999 nor earlier than January 28, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements, 12 Months Ended June 30, 1998. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. None SIGNATURES 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. UNION ELECTRIC COMPANY (Registrant) August 13, 1998 By /s/ Donald E. Brandt ----------------------- Donald E. Brandt Senior Vice President Finance and Corporate Services 10