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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File Number 1-13175
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
VALERO ENERGY CORPORATION
One Valero Place
San Antonio, TX 78212-3186
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VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
Index
Page
----
Reports of Independent Auditors............................................ 3
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2001 and 2000.................................... 5
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2001 and 2000...................... 6
Notes to Financial Statements......................................... 7
Supplemental Schedules:
Schedule G, Part III - Schedule of Nonexempt Transactions
for the Year Ended December 31, 2001................................ 15
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2001............................................. 16
Signature.................................................................. 17
Consent of Independent Auditors............................................ 18
Notice Regarding Consent of Arthur Andersen LLP............................ 19
2
REPORT OF INDEPENDENT AUDITORS
To the Administrative Committee of
Valero Energy Corporation
We have audited the accompanying statement of net assets available for benefits
of Valero Savings Plan (formerly UDS 401(k) Retirement Savings Plan) as of
December 31, 2001 and the related statement of changes in net assets available
for benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001 and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the 2001
financial statements taken as a whole. The supplemental schedules of nonexempt
transactions for the year ended December 31, 2001 and assets (held at end of
year) as of December 31, 2001 are presented for the purpose of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
San Antonio, Texas
June 26, 2002
3
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THE VALERO SAVINGS PLAN'S (FORMERLY UDS 401(k) RETIREMENT
SAVINGS PLAN) FILING ON FORM 11-K FOR THE YEAR ENDED DECEMBER 31, 2000. THIS
AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION WITH
THIS FILING ON FORM 11-K. SEE EXHIBIT 23.2 FOR FURTHER DISCUSSION.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefits Committee of
Ultramar Diamond Shamrock Corporation:
We have audited the accompanying statements of net assets available for plan
benefits of the UDS 401(k) Retirement Savings Plan (the Plan) as of December 31,
2000 and 1999, and the related statements of changes in net assets available for
plan benefits for the years then ended. These financial statements and the
schedule referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2000 and 1999, and the changes in net assets available for plan
benefits for each of the years then ended, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2000 included as Schedule I is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department
of Labor Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
San Antonio, Texas
June 20, 2001
4
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------
Assets: 2001 2000
---- ----
Investments, at fair value............. $ 260,897,764 $ 236,460,520
----------- -----------
Contributions receivable:
Employer............................. 908,205 783,829
Employee............................. 2,462,133 2,193,586
----------- -----------
3,370,338 2,977,415
----------- -----------
Net assets available for benefits...... $ 264,268,102 $ 239,437,935
=========== ===========
See Notes to Financial Statements.
5
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31,
------------------------
2001 2000
---- ----
Additions to net assets:
Investment income:
Interest income ....................... $ 2,651,173 $ 2,160,144
Dividend income ....................... 5,391,527 11,977,346
Net appreciation in fair value
of investments ...................... 12,970,272 4,207,739
------------ -----------
21,012,972 18,345,229
----------- -----------
Contributions:
Employee............................... 16,151,623 12,974,092
Employer .............................. 6,623,279 4,724,109
------------ -----------
22,774,902 17,698,201
----------- -----------
Asset transfers in from other plans ..... 524,491 33,733,099
------------ -----------
Total additions .................... 44,312,365 69,776,529
----------- -----------
Deductions from net assets:
Withdrawals by participants ............. 19,482,198 30,873,610
----------- -----------
Net increase in net assets available
for benefits........................... 24,830,167 38,902,919
Net assets available for benefits:
Beginning of year ....................... 239,437,935 200,535,016
----------- -----------
End of year ............................. $ 264,268,102 $ 239,437,935
=========== ===========
See Notes to Financial Statements.
6
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS
1. Description of the Plan
As used in this report, the term "UDS" may refer, depending upon the context, to
Ultramar Diamond Shamrock Corporation, one or more of its consolidated
subsidiaries, or all of them taken as a whole.
Prior to its acquisition by Valero Energy Corporation (Valero) on December 31,
2001, via the merger of UDS with and into Valero, UDS was an independent refiner
and retailer of refined products and convenience store merchandise in the
central, southwest and northeast regions of the United States and eastern
Canada. UDS owned and operated seven refineries located in Texas (2), California
(2), Oklahoma, Colorado and Quebec, Canada, and marketed its products through
approximately 4,500 company-operated and dealer-operated convenience stores and
86 unattended cardlock stations. In the northeast region of the United States
and in eastern Canada, UDS sold, on a retail basis, home heating oil to
approximately 250,000 households.
Effective April 1, 2002, the UDS 401(k) Retirement Savings Plan was renamed the
Valero Savings Plan. The following description of the Valero Savings Plan (the
Plan) provides only general information. Participants should refer to the Plan
agreement for a more complete description of the Plan's provisions.
General:
The Plan is a defined contribution plan that previously covered all eligible
employees of UDS. Eligible employees included all non-union employees and
certain union employees who had completed one year of service and who were at
least 18 years old. Effective April 1, 2002, non-store employees of UDS are no
longer eligible to participate in the Plan but are eligible to participate in
the Valero Energy Corporation Thrift Plan. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
Prior to its acquisition by Valero, UDS was the sponsor of the Plan. The
Employee Benefits Committee (the Administrator), which consisted of at least
three members appointed by the Chief Executive Officer of UDS, administered the
Plan. Effective December 31, 2001, Valero became the Plan sponsor and Valero's
Benefit Plans Administrative Committee became the Administrator of the Plan.
Vanguard Fiduciary Trust Company is the trustee and record keeper of the Plan
and has custody of the securities and investments of the Plan.
Plan Merger and Acquisitions:
On December 31, 2001, Valero completed its acquisition of UDS (UDS Acquisition).
Under the terms of the acquisition agreement, UDS shareholders (excluding
certain UDS benefit plan participants) received, for each share of UDS common
stock they held, at their election, cash, Valero common stock or a combination
of cash and Valero common stock. Based on the exchange election results, UDS'
shareholders electing Valero shares received, for each share of UDS common
stock, 0.9265 shares of Valero common stock and $16.32 in cash. Shareholders
electing cash and non-electing shareholders received $49.47 in cash for each
share of UDS common stock. Based on the above, the total consideration paid by
Valero to UDS shareholders included approximately $2.1 billion in cash and
approximately 45.9 million shares of Valero common stock. Valero accounted for
the UDS Acquisition using the purchase method.
7
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
Shares of UDS common stock held under the Plan, whether in the Ultramar Diamond
Shamrock Corporation Common Stock Fund, the UDS ESOP1 Stock Fund or the UDS
ESOP2 Stock Fund, were not subject to the proration of cash and Valero common
stock as described above. Per the terms of the acquisition agreement, effective
December 31, 2001, these shares were converted into Valero common stock based on
the exchange ratio of 1.3826 shares of Valero common stock for each share of UDS
common stock.
On September 29, 2000, UDS acquired Valley Shamrock, Inc. Effective with this
acquisition, employees of Valley Shamrock, Inc. became eligible to participate
in the Plan. Effective August 1, 2001, the Valley Shamrock, Inc. Employee's
401(k) Plan was merged into the Plan. For the year ended December 31, 2001,
asset transfers in from other plans in the statement of changes in net assets
available for benefits includes $405,837 related to this plan merger.
On August 31, 2000, UDS acquired the Golden Eagle Refinery from Tosco
Corporation. Effective September 1, 2000, the employees at the Golden Eagle
Refinery became eligible to participate in the Plan. In connection with this
acquisition, UDS agreed to accept the one-time voluntary rollover of each Golden
Eagle employee's account balance including outstanding loan balance from the
Tosco Corporation Capital Accumulation Plan (the Tosco Plan). Effective October
31, 2000, the Golden Eagle employee accounts in the Tosco Plan were transferred
to the Plan. These rollovers are included in asset transfers in from other plans
in the statement of changes in net assets available for benefits for the year
ended December 31, 2000.
Effective September 30, 1999, the Ultramar Diamond Shamrock Corporation Employee
Stock Ownership Plan I and the Ultramar Diamond Shamrock Employee Stock
Ownership Plan II (collectively known as the ESOP Plans) were merged with the
Plan. Participant account balances from the respective ESOP Plans were
transferred during 1999 from Key Trust Company, the trustee of the ESOP Plans,
to Vanguard Fiduciary Trust Company's UDS ESOP1 Stock Fund and UDS ESOP2 Stock
Fund. After the transfers were completed, 25% of the common shares were
immediately eligible for diversification by the ESOP Plans' participants, with
an additional 25% becoming eligible on January 1, 2000, 2001 and 2002.
Contributions to the UDS ESOP1 Stock Fund or the UDS ESOP2 Stock Fund by the
participants are not permitted. Included in asset transfers in from other plans
in the statement of changes in net assets available for benefits for the year
ended December 31, 2001 is $101,527 and $17,127 of transfers in from the UDS
ESOP1 Stock Fund and UDS ESOP2 Stock Fund, respectively. There were no transfers
from the UDS ESOP1 Stock Fund or the UDS ESOP2 Stock Fund during the year ended
December 31, 2000.
Contributions:
Participants can contribute from 1% to 15% of their compensation, as defined in
the Plan. In addition, any employee may make rollover contributions. For the
years ended December 31, 2001 and 2000, rollover contributions were $1,314,842
and $1,419,209, respectively, and are included in employee contributions in the
statements of changes in net assets available for benefits. UDS contributes from
$0.60 to $1.00 for every $1.00 of the participant's contribution up to 6% of
compensation. UDS also makes a profit-sharing contribution based on 2% of
compensation for certain participants from the Golden Eagle Refinery.
8
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
UDS may make discretionary company contributions to the Plan for a plan year,
subject to certain limitations. For the years ended December 31, 2001 and 2000,
UDS did not make additional discretionary company contributions to the Plan.
The Internal Revenue Code establishes an annual limitation on the amount of
individual pre-tax salary deferral contributions. This limit was $10,500 for the
years ended December 31, 2001 and 2000.
Participant Accounts:
Each participant's account is valued on a daily basis and is equal to the
participant's and company contributions plus investment income less benefits
paid to the participant.
Vesting:
Participants vest immediately in their contributions, rollover contributions and
actual earnings thereon. Participants become 100% vested in company matching and
discretionary contributions and related earnings after five years of service.
Certain participants are subject to accelerated vesting as a result of special
Plan provisions associated with past mergers. However, a participant will be
vested in 100% of his account balance upon his death, disability, attainment of
normal retirement age, as defined in the Plan, termination or partial
termination of the Plan or a change in control, as defined in the Plan.
Investment Options:
During the years ended December 31, 2001 and 2000, participants were able to
allocate their contributions and employer matching contributions and transfer
existing account balances, except for certain amounts restricted under the UDS
ESOP1 Stock Fund and the UDS ESOP2 Stock Fund, among mutual funds, a collective
trust, other self-directed investments and the Ultramar Diamond Shamrock
Corporation Common Stock Fund.
Participant Loans:
Participants may borrow a minimum of $1,000 up to a maximum equal to the lesser
of $50,000 or 50% of their vested account balance. The participant may elect a
repayment term of up to five years for general purpose loans or up to 10 years
for the purchase of a primary residence. The loan is secured by a lien on the
participant's vested account balance and bears interest at a reasonable rate as
determined by the Administrator. Principal and interest is repaid through
payroll deductions. A participant can have only one loan outstanding at any time
and must wait three months after paying off a loan before initiating a new loan.
Withdrawals and Distributions:
Upon termination of service, a participant can choose a lump-sum distribution
equal to the vested interest of his or her account or can defer receipt of such
distribution, depending on the terminated participant's vested account balance.
If the vested account balance is less than $5,000, the distribution can not be
deferred. If the vested account balance is more than $5,000, the participant can
consent to the distribution, or can defer to a later date, but not later than
the normal retirement date. If the participant takes no action, the distribution
is made at normal retirement date. Optional forms of payments are available to
certain participants as described in the Plan agreement.
9
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
In the event of hardship, participants can elect to withdraw a portion of their
vested account balance, subject to income tax and penalties.
Forfeitures:
In the event a participant terminates before becoming 100% vested in the
employer contributions, the nonvested employer contribution amounts held in the
participant's account will be forfeited. If the terminated participant receives
a distribution from the vested portion of his account, the nonvested amounts
remaining in the participant's account are treated as a forfeiture. Forfeited
amounts are used to reduce future employer contributions or defray Plan
administrative costs. During the years ended December 31, 2001 and 2000,
employer contributions were reduced by $159,066 and $230,659 from forfeited
nonvested accounts, respectively. As of December 31, 2001, $18,209 in unused
forfeitures is available for future use under the Plan.
Plan Expenses:
UDS pays the administrative expenses of the Plan and provides certain other
services at no cost to the Plan.
2. Summary of Accounting Policies
Basis of Accounting:
The Plan's financial statements are prepared on the accrual basis of accounting
in accordance with United States generally accepted accounting principles.
Use of Estimates:
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
that affect the amounts reported in the financial statements of assets and
changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Investment Valuation:
Investments in mutual funds are valued at quoted market prices, which represent
the net asset value of shares held by the Plan as of the balance sheet date. The
investment in common/collective trust is stated at fair value as determined by
the issuer of the fund based on the fair value of the underlying assets.
Self-directed investments are valued at quoted market prices as of the balance
sheet date. Participant loans are valued at cost which approximates fair value.
UDS common stock is valued at its quoted market price as of the balance sheet
date.
Income Recognition:
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Net appreciation (depreciation) in fair value of investments consists of net
realized gains and losses on the sale of investments and net unrealized
appreciation (depreciation) of investments.
10
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
Withdrawals by Participants:
Withdrawals by participants are recorded when paid.
Risks and Uncertainties:
The Plan's investments, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility risk. Due to the level of
risk associated with certain investment securities, it is reasonably possible
that changes in the value of investment securities will occur in the near term
and that such changes could materially affect participants' account balances and
amounts presented in the statements of net assets available for benefits.
Reclassifications:
Certain previously reported amounts have been reclassified to conform to the
2001 presentation.
3. Investments
Investments that represent 5% or more of the Plan's net assets are as follows:
December 31,
------------
2001 2000
---- ----
Vanguard PRIMECAP Fund ..................... $ 50,876,590 $ 57,159,426
Vanguard Retirement Savings Trust........... 38,472,131 27,341,012
Vanguard Wellington Fund Investor Shares ... 33,173,502 29,783,466
Vanguard 500 Index Fund Investor Shares..... 26,106,977 28,700,428
UDS common stock:
UDS Common Stock Fund.................... 14,389,188 8,712,973
UDS ESOP1 Stock Fund* ................... 46,726,029 36,290,707
UDS ESOP2 Stock Fund* ................... 11,644,077 8,879,465
--------------
* Nonparticipant-directed.
During the year ended December 31, 2001 and 2000, the Plan's investments
(including gains and losses on investments bought and sold, as well as held
during the year) appreciated (depreciated) in value as follows:
Years Ended December 31,
------------------------
2001 2000
---- ----
Mutual funds.............................. $(17,924,869) $(10,746,926)
Self-directed investments ................ 782 944
Common shares of UDS ..................... 30,894,359 14,953,721
---------- ----------
Net appreciation in fair value
of investments ..................... $ 12,970,272 $ 4,207,739
========== ==========
11
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
4. Nonparticipant-Directed Investments
The net assets and the changes in net assets relating to nonparticipant-directed
investments (comprised of the UDS ESOP1 Stock Fund and UDS ESOP2 Stock Fund) as
of and for the years ended December 31, 2001 and 2000 are shown below.
December 31,
------------
2001 2000
---- ----
Net assets:
Common shares of UDS.................. $ 58,370,106 $ 45,170,172
========== ==========
Years Ended December 31,
------------------------
2001 2000
---- ----
Changes in net assets:
Interest and dividend income .......... $ 856,465 $ 1,710,261
Net appreciation in fair value
of investments ...................... 25,441,892 12,456,093
Participant loan repayments ........... 1,048 -
Asset transfers in from other
plans ............................... 118,654 -
Benefits paid to participants ......... (3,619,969) (3,809,393)
Transfers to participant-directed
investments ......................... (9,598,156) (4,728,777)
---------- ----------
Net increase in net assets .......... 13,199,934 5,628,184
Net assets as of beginning of year ......... 45,170,172 39,541,988
---------- ----------
Net assets as of end of year ............... $ 58,370,106 $ 45,170,172
========== ==========
5. Party In Interest Transactions
Certain Plan investments are shares of mutual funds and a collective trust
managed by an affiliate of the Trustee and shares of UDS common stock.
Transactions in these investments qualify as party in interest transactions.
6. Plan Termination
Although it has not expressed any intent to do so, UDS, and now Valero, has the
right under the Plan to discontinue or reduce its contributions and to terminate
the Plan at any time subject to the provisions of ERISA. In the event of plan
termination, participants will become 100% vested in their accounts.
7. Tax Status
The Internal Revenue Service has determined and informed UDS by a letter dated
September 22, 1995, that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code. Although the Plan has
been amended since receiving the determination letter, UDS, and now Valero,
believe that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the Internal Revenue Code.
12
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
8. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 Annual Return/Report of Employee Benefit
Plan:
December 31,
------------
2001 2000
---- ----
Net assets available for benefits per the financial statements............ $ 264,268,102 $ 239,437,935
Amounts allocated to withdrawing participants ........................ (16,326) (1,167)
----------- -----------
Net assets available for benefits per the Form 5500 ...................... $ 264,251,776 $ 239,436,768
=========== ===========
The following is a reconciliation of withdrawals by participants per the
financial statements to the Form 5500 Annual Return/Report of Employee Benefit
Plan:
Years Ended December 31,
------------------------
2001 2000
---- ----
Withdrawals by participants per the financial statements ................. $ 19,482,198 $ 30,873,610
Add: Amounts allocated to withdrawing participants
as of end of year................................................... 16,326 1,167
Less: Amounts allocated to withdrawing participants
as of beginning of year............................................. (1,167) (221,857)
---------- ----------
Benefits paid to participants per the Form 5500 .......................... $ 19,497,357 $ 30,652,920
========== ==========
9. Subsequent Events
Effective January 1, 2002, the Plan was amended as follows:
o participants will vest in company matching and discretionary contributions
at the rate of 20% per year with 100% vesting after five years of service;
and
o the change in control provision in which a participant becomes 100% vested
in his account balance was eliminated.
Effective January 1, 2002, the company matching contribution for UDS non-store
employees was changed to 75% of 8% of employee contributions.
Effective April 1, 2002, UDS non-store employees are no longer eligible to
participate in the Plan but are eligible to participate in the Valero Energy
Corporation Thrift Plan. A UDS non-store employee is an employee who is not a
retail store employee, corporate kitchen employee, employee of Ultramar Energy,
Inc. or employee of the Golden Eagle Refinery. However, eligibility is
maintained in the Plan for any non-store hold separate business employee, as
defined in the Plan.
13
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
NOTES TO FINANCIAL STATEMENTS - (Continued)
Effective May 1, 2002, the portion of the Plan related to UDS non-store
employees was merged into the Valero Energy Corporation Thrift Plan. The assets
transferred from the Plan to the Valero Energy Corporation Thrift Plan totaled
approximately $153.0 million. For details regarding the Valero Energy
Corporation Thrift Plan, participants should refer to the financial statements
and notes thereto included in Valero Energy Corporation Thrift Plan Form 11-K
for the year ended December 31, 2001.
On April 5, 2002, the Plan was amended effective July 1, 2002, to provide as
follows:
o participants can contribute up to a maximum of 30% of their compensation,
as defined in the Plan,
o participants may elect distributions of their vested account balance in
equal monthly installments over a period not to exceed five years, and
o participants may elect that funds in the Employer Stock Account, UDS ESOP1
Stock Fund account or UDS ESOP2 Stock Fund account be distributed in Valero
common stock as a single payment or equal annual installments over a period
not to exceed five years.
On April 5, 2002, the Plan was amended effective August 1, 2002, to limit the
number of outstanding loans permitted for each participant to two outstanding
loans at a time.
14
SCHEDULE G, Part III
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
EIN: 13-3663331
Plan No. 008
Schedule of Nonexempt Transactions
Year Ended December 31, 2001
Relationship to plan,
Identity of employer or other Description of
party involved party-in-interest transactions Amount Interest
-------------- ----------------- ------------------ ------ --------
Ultramar Employer Participant
Diamond contributions were
Shamrock not remitted to the
Corporation Plan in a timely
manner:
Deemed loan:
June 21, 2001
Contributions
remitted:
July 16, 2001 $ 704 $ 15
Interest remitted:
October 11, 2001
15
SCHEDULE H, Line 4i
VALERO SAVINGS PLAN
(formerly UDS 401(k) Retirement Savings Plan)
EIN: 13-3663331
Plan No. 008
Schedule of Assets (Held at End of Year)
As of December 31, 2001
Current
Identity of Issue Description of Investment Cost Value
----------------- ------------------------- ---- -------
* The Vanguard Group Vanguard 500 Index Fund Investor Shares ** $ 26,106,977
* The Vanguard Group Vanguard Extended Market Index
Fund Investor Shares ** 1,167,696
* The Vanguard Group Vanguard Federal Money Market Fund ** 5,618,954
* The Vanguard Group Vanguard International Growth Fund ** 2,101,958
* The Vanguard Group Vanguard International Value Fund ** 863,282
* The Vanguard Group Vanguard Long Term Corporate
Fund Investor Shares ** 2,210,432
* The Vanguard Group Vanguard Long Term Treasury
Fund Investor Shares ** 764,282
* The Vanguard Group Vanguard PRIMECAP Fund ** 50,876,590
* The Vanguard Group Vanguard Total Bond Market Index Fund ** 2,818,580
* The Vanguard Group Vanguard U.S. Growth Fund ** 7,819,450
* The Vanguard Group Vanguard Wellington Fund Investor Shares ** 33,173,500
* The Vanguard Group Vanguard Windsor II Fund Investor Shares ** 8,791,717
Credit Suisse Warburg Pincus Value II ** 227,322
* The Vanguard Group Vanguard Retirement Savings Trust ** 38,472,131
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation ESOP1 Common Stock Fund $ 18,235,551 46,726,029
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation ESOP2 Common Stock Fund 5,168,781 11,644,077
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation Common Stock Fund ** 14,389,188
* UDS 401(k) Retirement Participant loans --
Savings Plan Interest rates range from 7% - 11.5% ** 7,071,335
Self-directed investments:
Salomon Smith Barney Inc. Smith Barney Money Funds ** 16,095
Salomon Smith Barney Inc. Smith Barney Appreciation Fund ** 17,997
Salomon Smith Barney Inc. Government Backed Trust CL T-1 ** 9,576
Salomon Smith Barney Inc. Government Trust CTF CL 3-C-REG ** 10,596
-----------
$ 260,897,764
===========
* Parties-in-interest to the Plan.
** Historical cost information is omitted as it is participant-directed and
disclosure is not required.
16
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
Valero Savings Plan
(formerly UDS 401(k) Retirement Savings Plan)
By: /s/ John D. Gibbons
John D. Gibbons
Chairman, Administrative Committee and
Executive Vice President and Chief Financial Officer,
Valero Energy Corporation
Date: June 28, 2002
17
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-47322 and 333-81858) pertaining to the Savings Plan of Valero
Energy Corporation (formerly UDS 401(k) Retirement Savings Plan) of our report
dated June 26, 2002, with respect to the financial statements and schedules of
the Valero Savings Plan (formerly UDS 401(k) Retirement Savings Plan) included
in this Annual Report (Form 11-K) for the year ended December 31, 2001.
/s/ ERNST & YOUNG LLP
San Antonio, Texas
June 26, 2002
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EXHIBIT 23.2
NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP
On June 12, 2002, the Valero Savings Plan (formerly UDS 401(k) Retirement
Savings Plan) dismissed Arthur Andersen LLP as its independent auditors and
appointed Ernst & Young LLP to replace Arthur Andersen LLP as the independent
auditor of the Plan. Prior to the date of this Form 11-K (which is incorporated
by reference into Valero Energy Corporation's filings on Form S-8 Nos. 333-47322
and 333-81858), the Arthur Andersen partner responsible for the audit of the
most recent audited financial statements of the Valero Savings Plan (formerly
UDS 401(k) Retirement Savings Plan) as of December 31, 2000 and for the year
then ended resigned from Arthur Andersen. As a result, after reasonable efforts,
the Plan has been unable to obtain Arthur Andersen's written consent to the
incorporation by reference into Valero Energy Corporation's filings on Form S-8
Nos. 333-47322 and 333-81858 of its audit report with respect to the Plan's
financial statements as of December 31, 2000 and for the year then ended. Under
these circumstances, Rule 437a under the Securities Act permits the Plan to file
this Form 11-K without a written consent from Arthur Andersen LLP. However, as a
result, Arthur Andersen LLP will not have any liability under Section 11(a) of
the Securities Act for any untrue statements of a material fact contained in the
financial statements audited by Arthur Andersen LLP or any omissions of a
material fact required to be stated therein. Accordingly, you would be unable to
assert a claim against Arthur Andersen LLP under Section 11(a) of the Securities
Act because it has not consented to the incorporation by reference of its
previously issued report into Valero Energy Corporation's filings on Form S-8
Nos. 333-47322 and 333-81858.
19