Table of Contents. Company Vision/Mission Statement. Company Overview. Investor Inquiries. Web Site Information. Overview

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2 Table of Contents Company Vision/Mission Statement VISION Building America Our vision symbolizes the Union Pacific experience for all the people whose lives we touch. It connects the importance of UP s rail transportation to America s economy, honors the generations that preceded us and is the promise for the generations that will follow us. MISSION The Men and Women of Union Pacific Are Dedicated to Serve. Union Pacific works for the good of our customers, our shareholders and one another. Our commitment defines us and drives the economic strength of our company and our country. VALUES Focus on Performance. Our concentration and determination will drive our safety, customer satisfaction and quality results. Ensure High Ethical Standards. Our reputation will always be a source of pride for our employees and a bond with our customers, shareholders and community partners. Work as a Team. We are all part of the same team, and working together to reach our common goals is one of our strengths. Communication and respect are the foundation of great teamwork. Company Overview Union Pacifi c Corporation (NYSE:UNP) is one of America s leading transportation companies. Its principal operating company, Union Pacifi c Railroad, is the largest railroad in North America, covering 23 states across two-thirds of the United States. Investor Inquiries Union Pacific s investor relations are coordinated through the Corporate Treasurer. Requests for interviews, investor packages and general information should be directed to: (402) or (877) or investor.relations@up.com Web Site Information For immediate receipt of new information as it becomes available, we invite you to regularly visit In the Investors section, you can view on-line or download a variety of informative documents, including SEC filings, annual reports, proxy statements, quarterly earnings, press releases, company presentations and corporate governance information. For automatic updates, please subscribe to the Company s RSS (Really Simple Syndication) feed which provides links to new headlines and summaries through your news reader. Overview System Map and Facts Company Overview The Year in Review Financial Results Operations Marketing Operations & Productivity Safety and the Environment Investing in Our Future Track and Terminal Density Expense Initiatives Markets Agricultural Automotive Chemicals Energy Industrial Products Intermodal Mexico Financials Selected Financial Data Consolidated Statements of Income Consolidated Statements of Financial Position Consolidated Statements of Cash Flow Financial and Operating Statistics Non-GAAP Definitions Non-GAAP Reconciliations Free Cash Flow Return on Invested Capital (ROIC) Debt to Capital/Adjusted Debt to Capital Income Tax Adjustment Cautionary Information

3 System Map and Facts 2008 Facts Track Miles (As of 12/31/08) Route Miles 32,012 Other Main Line 6,510 Passing Lines and Turnouts 3,037 Switching and Classifi cation Yard Lines 9,207 Total Track Miles 50,766 Miles of Rail Installed and Replaced * New 1,049 Used 570 Total 1,619 Track Miles of Continuous Welded Rail 28,017 Track Miles Under Centralized Traffi c Control 19,776 Track Miles Ballasted 11,369 Ties Installed and Replaced (thousands) * 4,743 Equipment Owned or Leased at Year End Locomotives 8,448 Covered Hoppers 35,655 Open Hoppers 18,134 Gondolas 13,923 Boxcars 9,834 Other 12,459 Total 90,005 Average Age of Equipment (Years) Road Locomotives 14.6 Switch Locomotives 30.6 Covered Hoppers 29.4 Open Hoppers 29.4 Gondolas 26.9 Boxcars 27.0 Mechanical Refrigerated 20.8 Flat Cars 31.2 * Represent all-in numbers, which include engineering replacement programs, commercial facility and capacity work, and other miscellaneous rail and tie projects. 2

4 Company Overview Union Pacifi c Corporation owns one of America s leading transportation companies, the Union Pacifi c Railroad Company (Company, UP or Railroad). The Railroad links 23 states in the western two-thirds of the country and serves the fastest-growing U.S. population centers. The Company maintains coordinated schedules with other rail carriers to move freight to and from the Atlantic Coast, the Pacifi c Coast, the Southeast, the Southwest, Canada, and Mexico. The Railroad serves the East through major gateways in Chicago, St. Louis, Memphis and New Orleans. In addition, UP is the only railroad serving all six major Mexican gateways and operates key north/south corridors for interchange traffi c with the Canadian and Mexican rail systems. UP reaches north into Canada through the Eastport gateway in Idaho, as well as through exchange points in Minnesota, Wisconsin and Illinois. That network, combined with a well-balanced and diverse traffi c mix, makes UP the premier rail franchise in North America, generating $17.1 billion in freight revenue in Union Pacifi c s freight traffi c consists of bulk, manifest and premium business. Bulk traffi c is primarily the shipment of coal, grain, rock and soda ash in unit trains. Access to the Southern Powder River Basin (SPRB) coal fi elds of northeastern Wyoming is a key franchise strength. UP also provides direct routes from major grain-producing areas in the Midwest to domestic markets, Mexico and ports in the Gulf Coast and Pacifi c Northwest (PNW) for export. Traffic Classification Carloads Bridged 3% Forwarded 21% UP Destination 15% Local 61% Local = UP Origin + UP Destination Forwarded = UP Origin + Other Destination UP Destination = Other Origin + UP Destination Bridged = Other Origin + UP Intermediate + Other Destination Freight Traffic Carloads Premium 41% Bulk 34% Manifest traffi c is individual carload or less-than-trainload business, including commodities such as lumber, steel, paper and food, transported from thousands of locations on Union Pacifi c s vast network. Union Pacifi c also accesses the large chemicalproducing areas along the Gulf Coast. The Railroad s premium business includes the transportation of fi nished vehicles, intermodal containers and truck trailers. UP s extensive automotive network handles 75 percent of the rail-shipped automotive traffi c west of the Mississippi River. The Railroad also serves the international import market with its competitive long-haul routes connecting the West Coast ports and eastern gateways, particularly along the Sunset Corridor from Los Angeles to El Paso. The strength of this diverse franchise and effi cient utilization of the Railroad s capacity enables the Company to provide its customers with excellent service, which generates solid fi nancial returns for our shareholders. Business Mix Freight Revenue Intermodal 18% Industrial Products 19% Manifest 25% Energy 22% Agricultural 18% Automotive 8% Chemicals 15% 3

5 The Year in Review - Financial Results Union Pacifi c recorded solid fi nancial performance across the board in Despite a softer U.S. economy and record fuel prices, Union Pacifi c combined continued core price improvement with signifi cant operating effi ciency gains to set best-ever levels in many measures. The Company also enhanced shareholder returns through increased dividend payments and continuation of a share repurchase program initiated in Union Pacifi c reported record operating revenue of $18 billion, a 10 percent increase over 2007 notwithstanding lower year-overyear volumes. Five of the Company s six business groups achieved record annual revenue levels in UP improved its operating ratio by two points, fi nishing the year at 77.3 percent, a postmerger record. Net income increased 26 percent to $2.3 billion, an all-time record. Diluted earnings per share grew to $4.54 in 2008, up 31 percent from Return on invested capital improved 1.5 points from 2007 to 10.2 percent. These fi nancial results were achieved in the face of declining volume, down fi ve percent for the year. Weak housing, tight credit markets, decreased auto and industrial production, lower consumer spending and declining intermodal volumes at West Coast ports all contributed to the decline. Fuel prices rose steadily through the fi rst half of the year (peaking in July) before decreasing sharply in the fourth quarter. Union Pacifi c s average diesel fuel price increased 39 percent to $3.15 per gallon, adding $1.1 billion in operating expense versus UP s fuel surcharge programs help offset the impact of higher fuel prices. Approximately 85 percent of the Company s business is covered by some type of fuel surcharge program. The goal is to achieve 100 percent coverage. During 2008, Union Pacifi c repurchased 22.2 million shares, returning $1.5 billion to shareholders. As the year came to a close and the economy faltered, repurchase activity slowed. Dividend payments increased 23 percent during the year. Including dividends paid, cash returned to shareholders exceeded $2 billion. Operating Ratio Improvement (Percent) points Financial Summary Union Pacific Corporation Operating Revenues (millions) $17,970 $16,283 $15,578 Operating Income (millions) $4,075 $3,375 $2,884 Operating Ratio 77.3% 79.3% 81.5% Operating Margin 22.7% 20.7% 18.5% Employees (Average) 48,242 50,089 50,739 Average Fuel Price per Gallon Consumed $3.15 $2.27 $2.09 Cash Capital Expenditures (millions) $2,780 $2,496 $2,242 Long-Term Leases (millions) (a) $353 $516 $443 (a) Represents the net present value of long-term operating leases for new equipment. 4

6 The Year in Review - Operations Improving operational effi ciency is a critical goal for Union Pacifi c, especially in the current economic environment. The Company is focused on simplifying and streamlining rail operations across its vast, complex network. Using resources effi ciently is essential to improving service and shareholder value. Process improvement, organizational effectiveness, technology and capacity investment all improved network fl uidity and increased customer satisfaction. Lower volumes also contributed to the effi ciency improvements. System velocity increased 8 percent over 2007, and the Company s service delivery index, a composite metric of all customer commitments, set an all-time record for the year, up nearly 11 percent over More effi cient asset utilization reduced terminal dwell times by 1 percent and lowered overall car inventories by 3 percent. Workforce productivity is key at Union Pacifi c, and in 2008 the Company correlated its staffi ng levels with volume. For the year, Gross Ton-Miles (GTMs) were 3 percent lower than 2007, and the Company had 4 percent fewer employees. A high attrition rate due to an aging workforce combined with increased effi ciency and technology made these necessary staffi ng reductions possible. The Company s Unifi ed Plan streamlines segments of the transportation plan. Enhancements to this ongoing program produced more effi cient train processing at terminals during the year. Additionally, targeted capital investments and continued use of industrial engineering techniques increased capacity and contributed to improved network fl uidity and asset utilization. AAR Train Speed (MPH) Service Delivery Index (SDI)* * Includes early deliveries Operations Summary Union Pacific Corporation Revenue Carloads (thousands) 9,261 9,733 9,852 Revenue Ton-Miles (billions) Gross Ton-Miles (billions) 1,020 1,052 1,073 Average Train Speed (miles per hour) (a) Average System Dwell (hours) (a) Average Rail Car Inventory (a) 300, , ,566 Fuel Consumed (millions of gallons) 1,229 1,326 1,372 GTMs per Employee (millions) (a) As reported to the Association of American Railroads. 5

7 The Year in Review - Operations The Company modifi es its transportation plans to refl ect traffi c patterns, customer demand and to take advantage of new opportunities to improve effi ciency. For example, manifest business carloads declined 7 percent over the past couple of years. Left unchanged, this decrease would have meant running shorter trains with little to no savings on crew expenses, fuel, or equipment rents. Through the Unifi ed Plan s evergreen process, average manifest train length increased by three cars in 2007 and by two cars in 2008 to leverage lower volumes into fewer train starts. Similarly, coal carloadings increased 2 percent over the past two years. Increasing the average coal train size by two cars in 2007 and one car in 2008 resulted in train starts essentially remaining fl at. Technology enables the Company to continually focus on inventory management, using tools such as the Customer Inventory Management System (CIMS). CIMS is a car demand management process that matches the fl ow of rail cars to and from customer locations with the track capacity at those locations. This proactive approach to inventory control means fewer cars in rail yards, which in turn decreases terminal dwell time, reduces switching and congestion, and improves throughput. Technology is also employed in the increased usage of distributed power locomotives, adding to the effi ciency of locomotive and crew resources and saving fuel. 6

8 The Year in Review - Marketing Despite the challenge of a weakening economy that resulted in a 5 percent decline in volume, Union Pacifi c s freight revenue grew to a record $17.1 billion in The Company continued to create customer value through strategic investments, operating initiatives, process improvements and innovation. The economic downturn hit the Automotive business particularly hard in 2008, as fi nished automobile volume dropped 23 percent and auto parts shipments declined 13 percent. Union Pacifi c is the leading vehicle transporter in the West, and this signifi cant shortfall of demand drove the decreases. Weakness in housing and construction markets held Industrial Products volume 6 percent below last year. Intermodal volumes declined 8 percent, as a portion of the international intermodal market is tied to the automotive and housing industries. Chemicals shipments ran at levels similar to 2007 through the fi rst eight months of 2008, then fi nished the year down 5 percent. The two major Gulf Coast hurricanes that disrupted customers facilities in late September, followed by the sharp downturn in the economy in the fourth quarter, led to the decline. In 2008, UP benefi ted from a strong service performance, making it possible to capture growth opportunities. Combining service with innovation facilitates the launch of new products, such as adding a second California origin to the Produce Railexpress perishables service and pioneering vehicle co-loading in the automotive marketplace. Additionally, a number of intermodal service products were improved. Targeted capital investments over the past few years contributed to service improvement and increased value for customers. In 2008, UP reported record levels of customer satisfaction. Pricing Opportunities (Percentage of revenue as of January 1, 2009) Repriced 82% since 2004 <1% % % 7% % With strong worldwide demand for food and energy through most of 2008, Agricultural Products and Energy posted year-over-year volume growth. Agricultural Products grew 5 percent, as ethanol and its co-product, dried distiller grain with soluables (DDGS), increased 25 percent and grain exports were up 16 percent. Record coal tonnage from the SPRB in Wyoming drove Energy volume up 2 percent. Pricing is a key part of the effort to earn an adequate return on investment. Core prices improved 6 percent in 2008, and the renegotiation of legacy contracts contributed to those gains. With 18 percent of revenue remaining in legacy contracts at the start of 2009, renegotiations will remain a signifi cant opportunity for future yield improvement. Annual Summary by Quarter - Total Freight Revenue st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) 4,059 4,349 4,630 4,080 17,118 3,655 3,853 3,990 3,988 15,486 3,514 3,721 3,789 3,767 14,791 Revenue Ton-Miles (millions) 140, , , , , , , , , , , , , , ,211 Revenue Carloads (thousands) 2,335 2,371 2,398 2,157 9,261 2,334 2,433 2,522 2,444 9,733 2,393 2,510 2,509 2,440 9,852 Average Revenue Per Car (dollars) 1,738 1,835 1,931 1,891 1,848 1,566 1,584 1,582 1,632 1,591 1,469 1,482 1,510 1,544 1,501 7

9 Safety and the Environment Safety Safety is a core value at Union Pacifi c, affecting the Company s key constituents: employees, customers, shareholders and the public. All employees are responsible for maintaining safe working conditions and preventing personal injuries and accidents. Demonstrating UP s commitment to safety are the tools and processes used to drive continuous improvement in this critical area. In a multi-faceted approach, the Railroad uses communication, engagement, technology, process improvement, engineering and investment. These comprehensive efforts seek to enhance employee training and engagement, increase public education, make targeted capital investments, and take proactive steps to eliminate or reduce safety risks. Crossing Accidents per Million Train Miles Safety improved in 2008, with employee injury incident rates declining 11 percent from 2007 to the lowest level ever. Additionally, derailment incidents were reduced 14 percent. With respect to public safety, a total of 435 grade crossings were closed to reduce exposure to incidents. Throughout 2008, the Railroad continued installing video cameras in its road locomotives. Over 90 percent of road trains now have cameraequipped locomotives in the lead position. These video cameras allow Union Pacifi c to better analyze grade crossing conditions and incidents, increasing safety for its employees and the public. The number of grade crossing incidents decreased 18 percent during the year, to the lowest number on record. Also, through extensive public safety programs, trespasser incidents declined 9 percent. Union Pacifi c s goal is to further improve safety by expanding Total Safety Culture (TSC) across the Company. TSC is a peer-to-peer observation and feedback process, empowering employees to support safe behavior and correct at-risk behaviors among coworkers. Originally implemented in UP s Mechanical Department, this program is expanding and will include Train, Engine & Yard employees across UP s 21 service units. Preliminary results show the 15 service units with TSC realized a safety improvement rate two to three times greater than the six units without it. Environment Union Pacifi c is committed to protecting the environment now and for future generations. As one of America s largest transportation companies, UP s role is critical to the U.S. economy. It is also critical that service be provided in a manner that protects the country s natural resources. Railroads are the most fuel effi cient, environmentally friendly mode of ground freight transportation, and Union Pacifi c is committed to becoming even greener. Rails are nearly four times more fuel effi cient than trucks, and Union Pacifi c is working to further improve fuel effi ciency. An example of rail fuel effi ciency is illustrated by examining fuel data for a Los Angeles to Houston intermodal train. This train carried an average of 290 loaded containers from Los Angeles to Houston (1,700 miles), consuming nearly 16,000 gallons of fuel. If those 290 containers moved by truck instead of rail, fuel consumption would increase to more than 89,000 gallons. In this example, rail transportation saved over 73,000 gallons of fuel. One double-stack train can take up to 300 trucks off congested highways. Locomotive technology, engineer training, and employee involvement are all being utilized to improve fuel consumption in conjunction with operational enhancements that increase asset utilization and network effi ciency. Improvements in 2008 enabled the Company to reduce its fuel consumption rate by 4 percent, saving approximately 58 million gallons of fuel versus Union Pacifi c is also aggressively working to reduce locomotive emissions. The U.S. Environmental Protection Agency (EPA) has set fi ve tiers of locomotive emission standards, which are progressively more stringent. These standards require continuing reductions in locomotive exhaust emissions of nitrogen oxides, 8

10 Safety and the Environment particulate matter and other pollutants. With more than twothirds of its road locomotives certifi ed under the existing EPA tier standards, UP owns the cleanest fl eet in the nation. Further improvements are on the horizon as the Company works with manufacturers to fi eld-test new, high-horsepower locomotives that surpass the EPA s most stringent standards. UP is also retrofi tting older locomotives with new emission-reduction equipment. Union Pacifi c has a comprehensive waste reduction and recycling program that touches nearly every part of the Company. Concerted efforts are made to address high-volume items such as wooden track ties and used oil. When possible, wooden track ties are refurbished for use elsewhere on the UP system or sold to contractors. UP is also installing more concrete ties, which require lower maintenance and generate less waste than wooden ties. UP helped test and develop an ultra low-emissions switch locomotive, the Genset Switcher. These units utilize off-road truck style diesel engines that are projected to reduce emissions of nitrogen oxide by 80 percent and particulate matter by 90 percent. Additionally, these engines use as much as 37 percent less fuel compared to current older switching locomotives. UP s commitment to, and operation of, the Genset resulted in the company earning the 2008 CALSTART Blue Sky Merit Award. This award recognizes outstanding contributions to clean air, energy effi ciency and a cleaner transportation industry overall. Union Pacifi c also partnered with the EPA on one-of-a-kind fi eld testing to reduce emissions on older road and switch locomotives. Did you know...? Trains are almost four times more fuel effi cient than trucks on a ton-mile basis. If just 10 percent of the freight moved by highway were diverted to rail, the nation could save as much as 1 billion gallons of fuel annually. Fuel effi ciency for U.S. railroads has increased by 86 percent since One double-stack train can take up to 300 trucks off congested highways. 9

11 Investing in Our Future Union Pacifi c s vast network requires large capital commitments each year in order to ensure and enhance operational safety, expand capacity to meet the transportation needs of current and future customers and improve operational effi ciency. Capital investments include the replacement and improvement of track and facilities, and the acquisition of new locomotives and freight cars. In 2008, UP s total capital investments were $3.1 billion, including cash spending of $2.8 billion. The Company s capital can be broadly classifi ed into two categories: replacement capital and growth capital. Replacement capital is spending required to improve safety or replace current infrastructure, such as track, facilities and equipment. Growth capital is targeted at future needs of the Company and its customers, supporting both volume expansion and effi ciency. Equipment acquisitions are included within both of these capital categories. New equipment is needed to add capacity to the network as well as to replace older, less effi cient assets. Replacement Capital The Company spent approximately $1.7 billion replacing track and facilities under its engineering replacement program in This program included the installation of nearly 4.1 million ties and 694 track miles of rail, providing safe and fl uid operations and increasing network effi ciency through capital investments. All together, UP spent approximately $2.2 billion in 2008 on replacement capital. In 2009, Union Pacifi c expects to spend around $1.7 billion in engineering replacement, installing nearly 4.4 million ties and over 850 track miles of rail. Additionally, the Company plans to acquire 125 high-horsepower locomotives during the year. The locomotives represent the fi nal tranche of a three-year purchasing contract, and will replace older units that are at the end of their useful life. Total replacement capital spending for 2009 should approximate $2.1 billion. Capital Spending ($ Billions) % % 25% % 29% 19% E Replacement Capital Growth Capital 2008, making it approximately 60 percent double tracked at year end. Given the signifi cant decline in traffi c volume in late 2008 and early 2009, the Company scaled back the project spending. Only 11 miles are scheduled for completion in During 2008, a new intermodal facility at San Antonio, TX opened, and the Company acquired property for the construction of an intermodal facility in Joliet, IL. An important part of Union Pacifi c s franchise is its access to the SPRB coal fi elds of northeastern Wyoming through a joint line, which UP owns with the BNSF (the Joint Line). In 2007 the fi nal sections of the Joint Line were triple tracked, and capacity expansion continued in 2008 with 20 miles of quadruple track added. Ten miles of triple track were also added to UP s line into the SPRB during 2008, and an additional 8 miles are scheduled for The Company also spent approximately $105 million on technology to support growth during the year. Upgrades to telecommunications and mainframe software systems, a new crew dispatching system and advancement of positive train control were the major technology spending initiatives in Growth Capital Union Pacifi c spent approximately $900 million on growth capital in One of the Company s key routes is the Sunset Corridor, which runs between Los Angeles, CA and El Paso, TX. This heavily traveled corridor carries about 20 percent of all traffi c operated by the Railroad. UP added 45 miles of double track to the corridor in In 2009, Union Pacifi c expects to spend approximately $500 million for growth capital. Capacity expansion on the Overland Route, which runs between Oakland, CA and Chicago, IL, and the Sunset Corridor is expected to continue during the year. Further progress is anticipated on the Joliet, IL intermodal facility, and technology spending is planned to upgrade information technology systems and continue testing new operational technology such as positive train control. 10

12 Track and Terminal Density Lane density based on carloadings Line thickness depicts traffi c density 2008 Terminal Volumes Major Classification Yards Average Daily Volume/Cars North Platte, Nebraska 2,500 North Little Rock, Arkansas 1,600 Proviso (Chicago), Illinois 1,500 Englewood (Houston), Texas 1,300 Fort Worth, Texas 1,300 Roseville, California 1,300 Livonia, Louisiana 1,200 West Colton, California 1,200 Pine Bluff, Arkansas 1,200 Neff (Kansas City), Missouri 1,000 Major Intermodal Terminals Annual Lifts ICTF (Los Angeles), California 619,000 East Los Angeles, California 383,000 Marion (Memphis), Tennessee 360,000 Global 2 (Chicago), Illinois 299,000 Dallas, Texas 294,000 Global 1 (Chicago), Illinois 291,000 Seattle, Washington 228,000 Yard Center (Chicago), Illinois 227,000 Oakland, California 222,000 Englewood (Houston), Texas 207,000 11

13 Expense Initiatives Railroads are very asset-intensive businesses, so economic downturns and associated volume declines put effi ciency at the forefront. Cost Structure In 2008, Union Pacifi c s operating expenses totaled $13.9 billion, with fuel and compensation comprising more than 60 percent of the total. Approximately 30 percent of the total costs are linked to quarterly volume changes. Expenses for train crews, locomotive fuel and some short-term equipment costs fl uctuate directly with business levels. In addition, changes in fuel prices impact expenses, especially since the Railroad does not recover 100 percent of its annual fuel costs through surcharges and other cost recovery mechanisms. The Company s costs that vary with volume increase to approximately 50 percent of the total over a period of several quarters. However, the key to expanding from 30 to 50 percent is visibility with respect to future business levels. In an environment of sustained lower volumes, the Railroad requires less mechanical and engineering work, equipment and staff. Longer-term, over a number of years, costs can be even more variable as the business is sized to match volume levels. Resource Management UP s resources must be adequate to meet volume demand. In 2004, the Company experienced more demand than capacity. Today the other extreme is seen - excess capacity. Although the fi xed network is sized to handle roughly 200,000 weekly carloads, fi rst quarter 2009 demand levels resulted in approximately 146,000 weekly carloads. As volumes remain soft, the Company is acting aggressively to align its resources with current demand levels by furloughing employees and storing locomotives and freight cars. These idle resources position Union Pacifi c to effi ciently handle the volumes when freight demand recovers. Management of train operations improved over the past several years through continued implementation of the Unifi ed Plan to simplify the network. The management of train crews also changed. Limiting crew miles and staffi ng cutback engineers allows more trains to run with the existing crew base, and provides extra personnel trained as engineers to be available for immediate use as volumes increase. Ongoing cost reduction action must be taken while still protecting service commitments. Excellent service is the key to entering new, truck-competitive markets and increasing the value of rail transportation for customers Operating Expenses Compensation & Benefits 32% Fuel 29% Purchased Services & Material 14% Equipment Rents 9% Depreciation 10% Other 6% Short-Term Variable ( 30% of Expenses) - Train Crews - Locomotive Fuel - Equipment Rents Long-Term Variable (Increases to 50%) - Mechanical & Engineering Expense - Equipment Rents - Workforce Levels Project Operating Ratio Project Operating Ratio (Project OR) is part of Union Pacifi c s ongoing effi ciency improvement efforts. This corporate-wide initiative seeks to increase effi ciency, effectiveness and safety. Project OR is helping the Railroad manage through the current economic challenges, while positioning it for the long term. Union Pacifi c employees use the principles of Project OR to focus on driving higher returns. Employees are making changes to improve overall effi ciency and effectiveness, and these changes are expected to yield benefi ts for the Company now and in the future. 12

14 Agricultural Commodity Profile Agricultural transportation, including whole grains, commodities produced from these grains, and food and beverage products, provided 18 percent of the Railroad s 2008 freight revenue. With access to most major grain markets, Union Pacifi c provides a critical link between the Midwest and western producing areas and export terminals in the PNW and Gulf Coast ports, as well as Mexico. Unit shuttle trains transport a single commodity effi ciently between producers and export terminals or domestic markets. UP also serves signifi cant domestic markets, including grain processors, animal feeders and ethanol producers in the Midwest, West, South and Rocky Mountain states Carloads Whole Grains 45% Domestic Feed Grains 21% Export Feed Grains 11% Wheat & Food Grains 13% International 16% Mexico 14% Domestic 70% Grain Products 37% Meals & Oils 14% Feed Ingredients 9% Flour & Rice 5% Corn Refining & Ethanol 9% Union Pacifi c owns and operates the largest refrigerated boxcar fl eet in the industry, providing a competitive advantage that leverages the Company s unique franchise. Produce Railexpress and Express Lane are UP s premium perishables service offerings. Produce Railexpress carries fresh produce from the West Coast to New York. Express Lane moves dairy products, canned goods, wine, frozen foods and some fresh produce from the West Coast to destinations in the East and Southeast. California and Washington, the states directly served by these services, produce over 60 percent of the nation s fresh fruits and vegetables. Additionally, the Railroad transports frozen meat and poultry from the Midwest and Mid-South to the West Coast for export. Through alliances with other railroads, UP considers Canada and Mexico important extensions of its domestic markets. Southbound shipments of feed grains, wheat, soybean meal, DDGS and rice comprise nearly 70 percent of Agricultural carloads to and from Agricultural Line Density Map Food & Beverage 18% Brewers & Food 9% Frozen & Refrigerated 5% Malt, Barley & Sugar 4% Mexico. Shipments of beer account for most of the northbound traffi c into the U.S Market Drivers Agricultural Products reported record revenue in Volumes are expected to be lower in 2009 due to weaker export demand, reduced animal feeding and less soybean processing. Weaker U.S. and world economies, and more abundant non-u.s. grain supplies softened the demand for food and bio-fuel based goods produced in the U.S. Livestock inventories for the fi rst quarter of 2009 were about 5 percent below the same period last year. This reduction translates into less animal feeding of corn and other protein-based feeds such as soybean meal. Through March 2009, export corn sales for the fi rst seven months of the 2008/2009 crop year came in 34 percent below last year s levels. Export wheat sales for the fi rst ten months of the 2008/2009 crop year declined 23 percent year-over-year. Although export soybeans for the fi rst seven months of the 2008/2009 crop year were 10 percent higher than last year, soybean crushing for the fi rst six months of the 2008/2009 crop year was 10 percent below the same period last year. The USDA expects soybean crush to fi nish the 2008/2009 crop year down 9 percent from last year. At the same time, the overall UDSA agricultural outlook calls for improved conditions in the last half of 2009, and U.S. grain production is the key variable behind this Lane density based on carloadings. Line thickness depicts traffi c density. 13

15 Agricultural expectation. While overall production levels in 2009 are projected to be lower than 2008, the results should depict a more normal year for grain volumes. Paul Hammes, VP & GM Agricultural Ethanol is expected to deliver continued year-over-year volume growth for Union Pacifi c. However, as the market begins to mature, the annual growth rate should slow. As of March 2009, the annualized rate of ethanol blending was about 5 percent below the mandated levels of The Energy Independence and Security Act of As with grain markets, ethanol volumes are forecasted to increase in the latter part of Amid some of the overall economic uncertainty, the refrigerated markets show opportunity. The Produce Railexpress service should continue to grow in 2009, with a second California train starting. Additional opportunities to transport frozen meat for export as well as domestic produce are also anticipated. How has your team adjusted to the current economic situation? Agricultural demand in the first quarter of 2009 has been weak. Animal feeding, grain exports, soybean processing and ethanol production levels are all below industry projections. However, demand for these commodities should begin to increase in the last half of The key variable for 2009 is the number of acres of corn, soybeans and wheat that are planted, as well as the growing conditions. Union Pacific has adjusted to these lower volumes with improved service and resource availability, allowing us to secure additional refrigerated business for both meat exports and U.S. produce markets. What is the biggest opportunity in your business group over the next 2 to 3 years? Future opportunities will include continued development of our infrastructure to support ethanol production and growth in our Produce Railexpress Unit Train service. Corn-based ethanol demand should grow another 4.5 billion gallons per year (up 42 percent) by 2015 due to the government mandate. A good portion of the new demand will come from California and Texas. In 2010, when California extends its ethanol mandate from 5 to 10 percent, Union Pacific expects to see additional opportunities to supply corn to existing forward ethanol plants. These plants produce ethanol closer to consumption areas and account for more than 300 million gallons of annual production capacity. The Produce Railexpress service continues to build momentum in the produce markets of Washington and California while increasing its demand base into the Northeast. This consistent and truck-competitive service makes it a very viable product with strong growth potential. Annual Summary by Quarter - Agricultural st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , ,385 Revenue Ton-Miles (millions) 22,485 22,111 22,431 21,560 88,588 19,249 18,935 20,613 21,735 80,532 20,085 19,756 19,793 21,378 81,012 Revenue Carloads (thousands) Average Revenue Per Car (dollars) 3,151 3,301 3,486 3,472 3,352 2,793 2,855 2,888 3,006 2,888 2,386 2,494 2,626 2,825 2,584 14

16 Automotive Commodity Profile 2008 Carloads Shipments of fi nished vehicles and automotive parts and materials generated 8 percent of Union Pacifi c s 2008 freight revenue. Finished vehicles accounted for 77 percent of this revenue, with the remaining 23 percent coming from the movement of automotive parts and materials. Union Pacifi c s franchise provides excellent accessibility to all major markets west of the Mississippi River for delivery of fi nished vehicles to the manufacturers dealer networks. UP continues to be the largest automotive carrier in the western U.S., directly serving six vehicle assembly plants. Service is also provided to 38 automotive distribution facilities directly or through short line railroads. Additionally, connections to six West Coast ports and the Port of Houston accommodate both imported vehicles and vehicles moving to and from Hawaii and Alaska. Union Pacifi c also receives and delivers a signifi cant number of vehicles through interchange with railroads in Mexico, Canada and the U.S. U.S. new light vehicle sales declined to 13.2 million vehicles in 2008, down 18 percent from 2007 levels. North American light vehicle production for the year was down 16 percent to 13.0 million units. UP s fi nished vehicle shipment revenue declined 11 percent while carloads were off nearly 23 percent in Although auto parts and materials volume decreased 13 percent from 2007, pricing actions and increased fuel surcharges increased revenue by 3 percent year-over-year. Automotive Line Density Map International 7% Mexico 44% Domestic 49% Assembled Autos 60% Automotive Materials 40% Union Pacifi c handled more than 75 percent of the automotive carload business in the western U.S. in each of the last two years. Changing dynamics among manufacturers in the industry is expected to affect fi nished vehicle shipments as the manufacturers work to keep or gain market share. The Domestic Big Three incurred a market share loss during Collectively they hold about 48 percent of the new light vehicle market share in the U.S. Toyota, Nissan and other non-detroit manufacturers have domestic manufacturing capabilities and import a signifi cant number of vehicles via West Coast ports. Union Pacifi c faces competition from trucks for the fi nished vehicles imported through the West Coast and destined for western automotive dealerships. Nearly 44 percent of UP s automotive shipments move either to or from Mexico. This amount includes fi nished vehicle carloads as well as parts and materials moving in intermodal or boxcar service. Union Pacifi c handles more than 85 percent of all automotive traffi c into and out of Mexico. During 2008, Mexico parts and materials shipments decreased 10 percent while fi nished vehicle moves decreased 8 percent. Lane density based on carloadings. Line thickness depicts traffi c density. UP launched new product offerings in 2008 with the new Unilevel and AutoMax cars. The Unilevel railcars are designed to effi ciently handle oversize products, while the AutoMax can convert from a tri-level to a bi-level confi guration. The AutoMax s ability to handle different vehicle sizes positions Union Pacifi c to support future vehicle market trends. Also, the Railroad introduced a long-term vehicle storage program to help alleviate customers accumulating inventory issues in today s challenging market. 15

17 Automotive 2009 Market Drivers U.S. light vehicle sales are expected to decline in 2009, continuing a trend that began in Further, manufacturers extended plant shutdowns and shift reductions are negatively impacting production volumes. UP is primarily a destination hauler of fi nished vehicles and has a diverse customer base that includes import and transplant manufacturers, which helps mitigate the effects of lower Domestic Big Three vehicle sales. Additionally, the Railroad is engaged in monitoring the development of distribution plans for imports from China and India. The Company is implementing an active sales strategy for China to handle the expected import parts and vehicle volume. Participation by Chrysler and General Motors in the Troubled Asset Relief Program (TARP) may have indirect consequences for UP. Failure under this program could result in bankruptcy or corporate restructuring. However, success may allow for the continuation of current relationships and contracts, and, therefore, Union Pacifi c is closely monitoring these matters. Traffi c to and from Mexico is also expected to decline as the fi nancial turmoil impacts the global economy. Shipping fi rms continue to look for opportunities to improve asset utilization. UP is seeking to develop import business which would access rail from West Coast ports, bypassing the Panama Canal and subsequent East Coast port originations. UP is making infrastructure improvements across its system to handle profi table traffi c growth. Improvements at Portland, OR, Houston, TX, and Chicago, IL are directed at the automotive business. Also, continued implementation of the vehicle inventory dwell system will help ensure a high level of inventory accuracy and effi cient asset utilization. The Railroad capitalizes on its strong interline carrier alliances to secure opportunities for automotive parts and materials. These opportunities include boxcar direct and moves bundled with cross dock truck-to-rail and rail-to-truck shipments. Additional growth opportunities exist with the Railroad subsidiaries: Insight Network Logistics, Insight Network Transport and Union Pacifi c Distribution Services (UPDS). These companies Julie Krehbiel, VP & GM Automotive How has your team adjusted to the current economic situation? Although economic conditions are affecting automotive carloads, UP is well-positioned over the long term with a broad base of customers. With a significantly weakened economy, it is very important to strengthen the automotive service network by improving transit times, ensuring consistency, and incorporating transportation efficiencies into the delivered product. In 2008, gateway changes were made and product was shifted to more strategically placed auto ramps. The Railroad also leveraged its intermodal network to maintain customer service despite lower volumes. In addition, the first ever interline co-load capability was launched with the Norfolk Southern (NS) by loading Chrysler and Ford vehicles together on the same railcars. This approach allows the original equipment manufacturers to reduce vehicle dwell time at the load and unload facilities. In fact, the Ford-Chrysler interline move is yielding a 20 percent reduction in origin dwell time. These efforts improve the Company s economics and benefits customers as well. What is the biggest opportunity in your business group over the next 2 to 3 years? Many of UP s opportunities are for organic growth associated with the existing traffic base. The Railroad holds a market share of more than 75 percent of all vehicles moving in the western U.S by rail. Our unparalleled automotive ramp network, including facilities in six of the top ten fastest growing U.S. states, is expected to facilitate market growth once the overall industry rebounds. Parts opportunities continue as production parts convert from over-the-road to intermodal and boxcar rail service. Union Pacific is also looking at non-traditional markets such as service parts, mini-cars and European manufacturers. We reallocated sales resources in late 2008 to focus on these areas as well as production parts, to offset the current vehicle market weakness. The co-load capability launched in 2008 is expected to facilitate expansion of our footprint in the used car arena through joint efforts with Insight Network Transportation, a UP subsidiary and used car transportation broker. For the long term, we also see significant opportunities associated with vehicles assembled in China and India. We are positioning our network accordingly by aligning with key steamship lines, ports and transportation partners. offer supply chain logistic services for major automotive manufacturers. Insight Network Transport is making inroads into the used car remarketing area by providing management and coordination services for vehicle auction companies and rental car fi rms. Marketed jointly with UP s rail services, these subsidiaries can assist manufacturers in meeting customers changing inventory needs and provide continued growth opportunities. In fact, 2008 revenue in this area was up 20 percent from 2007, and this growth trend is expected to continue in 2009 and beyond. 16

18 Automotive Facilities and Assembly Centers Kent Tacoma Spokane Barnes St. John s Silver Bow St. Paul Janesville Benicia Milpitas Fremont Valley Roper Rolla Council Bluffs Muncie Fairfax Belvidere Centreville West Chicago Chicago Heights Port Hueneme Wilmington Mira Loma Calexico Phoenix Nogales Santa Rosa Distribution Centers, Union Pacific-Owned/Leased Distribution Centers/Ports, Privately-Owned Assembly Centers Gateways to Mexico El Paso Amarillo Eagle Pass Laredo Oklahoma City Mesquite Midlothian San Antonio Arlington Kirby Brownsville Shreveport Reisor Candleridge Westfield Port of Houston Gavin Port Allen Annual Summary by Quarter - Automotive st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , ,427 Revenue Ton-Miles (millions) 3,890 3,646 3,278 3,169 13,983 4,330 4,685 4,250 4,217 17,482 4,661 4,994 4,143 4,521 18,319 Revenue Carloads (thousands) Average Revenue Per Car (dollars) 1,930 2,005 2,114 2,040 2,017 1,759 1,754 1,729 1,823 1,766 1,705 1,737 1,697 1,698 1,710 17

19 Chemicals Commodity Profile Transporting chemicals provided 15 percent of Union Pacifi c s freight revenue in The Railroad s franchise enables it to serve the large chemical megaplex along the Gulf Coast, as roughly two-thirds of the Company s chemical business originates, terminates or travels through this area. UP s chemical franchise also accesses chemical producers in the Rocky Mountains and on the West Coast. The Company classifi es chemical shipments into three broad categories: Petrochemicals, Fertilizer and Soda Ash. Petrochemicals includes liquid and dry chemicals, plastics, petroleum and liquid petroleum products, making up two-thirds of UP s chemical business. These products move primarily to and from the Gulf Coast region. Barges, pipelines, and to a lesser extent trucks, provide transportation alternatives for some of these commodities. The liquid and dry market consists of several dozen segments of basic, intermediate and specialty chemicals produced by, and shipped to, large and small customers. Strong demand from industrial manufacturers is key to this market segment. Plastics shipments support many vital sectors of the U.S. economy, including the automotive, housing, and durable and disposable consumer goods markets. UP is an important link in the plastics supply-chain through its ownership and operation of storagein-transit (SIT) facilities. Plastics customers utilize railroad SIT yards for intermediate storage of their plastic resins, and UP s SIT capacity exceeds that of any other railroad. Chemicals Line Density Map 2008 Carloads International 21% Mexico 5% Domestic 74% Liquid & Dry 26% Plastics 24% Fertilizer 21% Petroleum & Other 16% Soda Ash 13% In 2008, strong pricing and increased fuel surcharges drove UP s petrochemicals average revenue per car up 14 percent, while volume declined 8 percent year-over-year. Weak market conditions and business interruptions resulting from Hurricanes Gustav and Ike contributed to lower shipments. Fertilizer movements originate in the Gulf Coast region, the western part of the U.S. and Canada. Shipments are bound for major agricultural users in the Midwest, western U.S. and abroad. Fertilizer accounted for 21 percent of the Railroad s chemical business in In the fi rst three quarters of 2008, export potash shipments through the Pacifi c Northwest and a robust planting season for corn drove strong demand. A late fall harvest and collapsing commodity prices in the fourth quarter partially offset this strength. Volume for the year fi nished up 2 percent, while strong price and increased fuel surcharges resulted in average revenue per car growth of more than 15 percent year-over-year. Soda ash represented 13 percent of chemical business in Shipments of this product originate in southwestern Wyoming and California for delivery to chemical and glass producing markets in North America and abroad. UP directly serves Green River, Wyoming, the world s largest natural soda ash reserve and producing region. During 2008, strength in export soda ash demand offset softness in the domestic automotive and housing production markets. In total, volume for the year was up a modest 1 percent over Lane density based on carloadings. Line thickness depicts traffi c density. 18

20 Chemicals 2009 Market Drivers The current state of the North American and global economy presents signifi cant challenges for the plastics, liquid and dry chemicals, and soda ash segments of the chemicals industry. Production curtailment at major petrochemical facilities due to reduced industrial demand and consumer spending is expected to continue. Export demand for polyethylene and polypropylene will likely remain low as UP expects world production to increase. Shipments of domestic soda ash will continue to mirror demand in the building and automotive markets. Demand for export soda ash remains dependent on the global economy and rational global sourcing. More positively, sectors of the chemicals business related to agriculture and energy are less impacted by the economic slowdown and hold some promise for Strong corn plantings, global demand for food and local fertilizer inventories should drive volumes. Overall, the widespread reduction of North American demand across virtually all sectors of the economy directly affects chemical producers. Companies are consolidating production from older, less effi cient and geographically dispersed locations to more effi cient mega-production facilities in the Gulf Coast. UP will seek to capitalize on these market dynamics by continuing to deliver on service and promoting the durability and strength of its value proposition in this region. Annual Summary by Quarter - Chemicals Diane Duren, VP & GM Chemicals How has your team adjusted to the current economic situation? The team continues to deliver and look for additional opportunities to provide value for our customers. Over the last several years our customers have expressed satisfaction with our service. As we pursue new opportunities, it is imperative we continue meeting customer expectations through responsiveness and delivering the high quality service our customers depend on. This is particularly important as we make adjustments to our transportation plan in response to fluctuating volumes. The Chemical team is actively working with the Operating department to evaluate proposed service changes and communicate them to our customers prior to implementation. We want to ensure that as Union Pacific adjusts to the changing business environment, we do so in a way that maintains service quality. What is the biggest opportunity in your business group over the next 2 to 3 years? Over the next three years we expect further rationalization of North American chemical production, and continued development of international import and export markets. Many of the major chemical producers in North America are consolidating operations into the Gulf Coast region. Union Pacific s chemical franchise is positioned to capitalize on these new business opportunities. Our ongoing investment in rail infrastructure throughout this region, as well as in other parts of the network, ensures our ability to support future growth. Additionally, we are focused on designing services that address existing and emerging markets. By doing so, Union Pacific expects to efficiently handle customer volumes when markets recover. Beyond that, we are working closely with our customers to identify supply chain efficiencies that support long-term global competitiveness. One such example is investment in the soda ash market infrastructure at Green River, Wyoming st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , ,084 Revenue Ton-Miles (millions) 13,939 14,559 13,668 12,641 54,808 14,044 14,406 14,107 13,964 56,521 14,037 14,583 13,927 13,371 55,918 Revenue Carloads (thousands) Average Revenue Per Car (dollars) 2,676 2,714 2,951 2,957 2,818 2,430 2,395 2,469 2,564 2,464 2,280 2,265 2,351 2,414 2,326 19

21 Energy Commodity Profile Coal and petroleum coke transportation accounted for 22 percent of Union Pacifi c s freight revenue in 2008, the largest share of revenue among UP s six business teams. The Railroad s franchise supports the transportation of coal and coke to utilities, industrial facilities, interchange points and water terminals. The water terminals support shipments to eastern utilities located on the Mississippi and Ohio Rivers and the Great Lakes. Union Pacifi c also utilizes the same river network to support export coal to Europe, along with the West Coast ports to support export coal to Asia. SPRB coal is the largest segment in UP s energy business. In 2008, SPRB carloadings totaled 74 percent of UP-originated coal volumes. The Railroad also moves high-btu (British Thermal Units), low sulfur bituminous coal from Colorado and Utah to domestic utilities and industries. For 2008, Colorado/Utah coal traffi c represented 16 percent of total coal volumes. The remaining coal loadings originated in southern Wyoming s Hanna Basin and southern Illinois, and also included SPRB coal forwarded to UP from another carrier. Demand for coal held up throughout 2008, as domestic strength and continued conversion to western coal was supplemented by increased international demand for western U.S. bituminous coal. Overall, coal carloadings were up 2 percent year-over-year. The year began with a robust 6 percent fi rst quarter volume increase fueled by strong demand and supply chain performance. Despite heavy rain and SPRB mine fl ooding in May and widespread Energy Line Density Map 2008 Carloads Origin Regions Southern Powder River Basin 74% Colorado/Utah 16% Other 10% Destination Regions Industrial 5% West 9% East 19% North 27% South 40% Midwestern fl ooding in June, second quarter volume grew 2 percent. Although lingering effects of the Midwest fl ooding continued into the third quarter, volume still rose 3 percent over the prior year. Fourth quarter volume slipped 1 percent due primarily to Colorado/Utah production problems. With an emphasis on productivity initiatives, SPRB average train size increased more than 1 percent to a record 15,488 tons per train during An increase in average tons per car, as well as a one-car increase in train length, drove the improvement. The train length improvement was aided by track expansions at select utilities to accommodate longer trains and improved North Platte terminal operations in consistently fulfi lling train length targets. UP set numerous volume records out of the SPRB in Most notably, an all-time train loading record was set in August with 1,190 trains. Between July and December, more than 1,100 coal trains were loaded each month. In addition to the train size increase, SPRB annual records were established for trains (13,212), tons (204.6 million) and carloads (1.73 million). Colorado/Utah volume dipped 4 percent from 2007 levels due largely to mine production and coal quality issues. These issues included numerous longwall moves, high methane gas levels, signifi cant geological shifts, poor coal quality caused by excessive rock intrusions, and production delays caused by regulatory safety concerns. However, in spite of these challenges, UP still Lane density based on carloadings. Line thickness depicts traffi c density. 20

22 Energy established train size productivity records in 2008 for tons per train (10,989), tons per car (110.5), and cars per train (99.4). The largest volume of UP s petroleum coke traffi c originates on the Gulf Coast. Other key areas include Oklahoma, Kansas, Wyoming and California. Shipments are transported to destinations such as Texas, California and Louisiana. Petroleum coke is a source of high sulfur fuel for electricity generation, and is used by industrial customers in the production of aluminum, steel and cement. The decline in overall industrial production, particularly in the cement industry, caused coke shipments to decrease 6 percent versus 2007, while average revenue per car increased 17 percent. Powder River Basin (PRB) Economic Advantage On a cost per million BTU basis, the PRB consistently remains a low cost energy alternative in North America. Among the domestic coal regions, PRB coal is about one-third as expensive as eastern options and is equal to Rocky Mountain coal for the lowest sulfur content. PRB coal competes with natural gas prices as low as $3.25 per million BTU in most markets Market Drivers Reaching last year s record-setting volume performance is not expected in Strong supply chain performance in 2008, along with greatly reduced electrical demand associated with the recession, has contributed to above normal coal inventories entering Manufacturing plant closings in the automobile and aluminum industries lowered industrial electrical demand, while conservation and an increase in foreclosures and vacant homes reduced residential electricity demand. Additionally, despite success in legacy contract renegotiations in 2008, some SPRB business shifted away from UP. Doug Glass, VP & GM Energy How has your team adjusted to the current economic situation? While the current economic environment has affected coal traffic levels less than other commodity lines, most industry veterans view this recession as one of the worst in recent memory. Lower industrial activity and some residential conservation reduced demand for electrical power in the first quarter of However, Union Pacific still sees the long-term potential for conversion to western coal by power plants east of the Mississippi River. Additionally, higher BTU Colorado/Utah coal made inroads into the Central and Southeastern energy markets in late 2008 as eastern coal was being exported overseas. UP will continue to serve these markets under multi-year agreements even as changes in global demand reduced U.S. export coal business. Velocity improvements over the last year strengthened the coal supply chain. Many utility customers added coal unloading capacity or increased trackage to accommodate larger trains and further improve coal deliveries. Customers continue to modernize their coal fleets with all-aluminum railcars to increase carrying capacity and efficiency. Additionally, the Railroad is implementing new technology to provide more precise train arrival and departure information to utilities. Incremental rail/barge capacity is also being built along the Mississippi River, which will benefit interchange business with CSX and NS. Furthermore, this capacity will enable the Railroad to successfully meet the strong demand anticipated for western coal when the economy recovers. What is the biggest opportunity in your business group over the next 2 to 3 years? Repricing expiring legacy contracts at levels that support reinvestment in the railroad s energy business represents the largest single financial opportunity over the next 2 to 3 years. Contracts for over 15 percent of the Railroad s coal business will expire by the end of On the business development side, eight new coal plants are under construction in Union Pacific s territory, with four new plants recently completed and five plants under development. Some of the proposed plants would use advanced carbon capture technology and set new standards for power plant construction. In fact, the CO2 environmental footprint of these plants is projected to be at, or better than, a natural gas fired plant. The captured CO2 at these plants could be used in secondary oil recovery or eventually sequestered in safe, underground caverns. Additionally, these new plants could yield business opportunities beyond coal, such as the inbound transportation of the chemicals used to reduce NOX and SOX emissions, and the outbound movement of the captured CO2. 21

23 Coal-Fired Units Under Construction Southern Powder River Basin Uinta Basin Coal-Fired Units Under Construction Served by Union Pacific - 8 New Plants - 15 Million Tons - Completed by 12/31/13 Annual Summary by Quarter - Energy st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , , ,949 Revenue Ton-Miles (millions) 63,334 61,748 67,887 65, ,362 60,005 60,657 65,133 65, ,408 60,075 62,426 62,982 63, ,152 Revenue Carloads (thousands) , , ,296 Average Revenue Per Car (dollars) 1,473 1,639 1,709 1,664 1,622 1,326 1,381 1,374 1,368 1,363 1,266 1,268 1,312 1,291 1,285 22

24 Industrial Products Commodity Profile 2008 Carloads The Railroad s extensive network enables the Industrial Products group to move numerous commodities between thousands of shippers and customers throughout North America. In 2008, Industrial Products provided 19 percent of Union Pacifi c s total freight revenue. International 9% Mexico 8% Domestic 83% Lumber shipments originate primarily in the PNW and Canada for destinations throughout the U.S. for new home construction and repair and remodeling markets. Commercial and highway construction drive shipments of steel and construction products, consisting of rock, cement and roofi ng. Shipments of paper and consumer goods, including furniture and appliances, move to major metropolitan areas for consumers. Industrial manufacturing plants receive shipments of nonferrous metals and industrial minerals. In addition, the Railroad provides effi cient and safe transportation for government entities and waste companies. Demand is driven by macro-economic factors such as industrial production and housing starts. In 2008, U.S. industrial production declined 2 percent and housing starts fell 33 percent, contributing to a 6 percent decrease in carloads for the Industrial Products group. Pricing actions and fuel surcharges increased average revenue per car growth by 13 percent for the year, more than offsetting volume declines. As a result, Industrial Products revenue increased 6 percent in Construction Products 34% Metals 22% Minerals/Consumer 13% Paper 12% Lumber 10% Government/Waste 9% Fewer housing starts, surplus production and general market uncertainty drove weak lumber volumes in Lumber carloadings decreased by 26 percent and revenue fell by 15 percent year-over-year. Steel and scrap steel carloadings increased 8 percent in 2008 versus 2007, due to domestic market strength. Specifi cally, international prices exceeded domestic, in part due to the weak U.S. dollar, and service centers restocked from low inventory levels. Price increases and fuel surcharges drove a 22 percent revenue increase year-over-year. Industrial Products Line Density Map Soft residential, commercial and highway construction reduced stone volume by 6 percent in 2008 versus However, price increases and fuel surcharges yielded a 4 percent increase in total revenue. Volumes of non-metallic minerals grew in Increases in natural gas drilling activity presented business opportunities in fracturing sand (frac sand) and barite, driving a 6 percent increase in non-metallic mineral volume. Price and fuel surcharges pushed average revenue per car up 15 percent, resulting in revenue growth of 21 percent. Lane density based on carloadings. Line thickness depicts traffi c density. 23

25 Industrial Products 2009 Market Drivers With housing starts expected to decline somewhat from already low levels and reduced overall economic activity impacting many of the markets, Industrial Products faces an uphill battle. Weakness in autos, housing, and residential, commercial, and highway construction, as well as tight credit, reduced consumer spending and the strengthening U.S. dollar are expected to adversely impact markets such as lumber, stone, cement, sheet and structural steel, ferrous scrap, aluminum and appliances. However, the Railroad recently began the short haul movement of uranium tailings for the Department of Energy. The arrangement falls under the Moab Uranium Mill Tailings Remedial Action (UMTRA) Project. The movement of 16 million tons of tailings approximately 30 miles to a permanent disposal site in southern Utah is expected to take several years to complete. Union Pacifi c is also working with customers, associations and a variety of state and federal agencies to identify and act upon any opportunities related to stimulus funding coming from the American Recovery and Reinvestment Act of Eric Butler, VP & GM Industrial Products How has your team adjusted to the current economic situation? We are aggressively designing new products and prospecting with non-traditional and even non-direct rail served customers using our UPDS based network extension strategy. While there is clearly significant softness in our core businesses of lumber, steel and aggregates, we are seeing growth in our emerging markets businesses, such as wind energy components. What is the biggest opportunity in your business group over the next 2 to 3 years? It is difficult to see the end of the current economic downturn. However, we believe that in the next 2 to 3 years, all of our major markets will be operating at more normal volumes, indicative of typical economic activity. Additionally, UP s record-setting customer service levels and the favorable economics of rail are expected to yield growth opportunities in both new and existing markets. Annual Summary by Quarter - Industrial Products st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , ,135 Revenue Ton-Miles (millions) 17,507 19,138 18,648 15,421 70,714 18,516 19,974 18,908 17,711 75,109 21,740 22,055 20,785 18,428 83,008 Revenue Carloads (thousands) , , ,446 Average Revenue Per Car (dollars) 2,540 2,537 2,747 2,662 2,620 2,331 2,308 2,327 2,324 2,322 2,084 2,110 2,215 2,273 2,167 24

26 Intermodal Commodity Profile 2008 Units UP s Intermodal business represented 18 percent of freight revenue in 2008, and includes international and domestic shipments. International business consists of imported container traffi c that arrives at West Coast ports via ocean carriers for destinations throughout the United States. Domestic business includes domestic container and trailer traffi c for intermodal marketing companies (primarily shipper agents and logistics companies), as well as truckload carriers. Less-than-truckload and package carriers with time-sensitive business requirements are also an important part of domestic shipments. International imports and exports move in 20, 40 or 45 foot shipping containers through ports on the West Coast. The majority of domestic shipments move in 48 or 53 foot containers or trailers to and from points within the U.S., Canada and Mexico. Union Pacifi c s key East/West intermodal lanes run between the West Coast and Chicago, Texas, and interchange connections to the eastern U.S. The Company s key North/South intermodal lanes operate between Los Angeles and the Pacifi c Northwest, as well as Chicago and the upper Midwest and points south in Texas and Mexico. UP accesses all six Mexican gateways and serves most of the major metropolitan areas in the western two-thirds of the U.S. Nearly all routes are competitive with other railroads and are comparable to shipping distances on the highway network. In 2008, total Intermodal volumes declined 8 percent year-overyear due to a faltering economy and the related impact on global Intermodal Line Density Map International 63% Domestic 37% shipping. However, pricing actions and fuel surcharges increased revenue 3 percent. International intermodal revenue grew 4 percent on 11 percent less volume. Domestic intermodal revenue also grew 4 percent on a volume decline of 3 percent. Overall, Intermodal average revenue per box increased 13 percent in Domestic average revenue per box improved 7 percent and international shipments increased 17 percent per box. Legacy contract repricing, ongoing contract escalations and fuel surcharges drove these increases. Union Pacifi c continues to offer truck-competitive, priority rail service in key lanes to encourage the conversion of highway business to intermodal. During periods of volatile fuel costs, shippers increasingly look to rail as the cost-competitive alternative to trucks. Union Pacifi c s service continued to improve during 2008, providing customers consistent and reliable transit. An important project for Union Pacifi c is the double tracking of the Sunset Corridor, which ended the year at 60 percent complete. The added network fl exibility provided by this project improves service, and the added capacity will support future growth. Lane density based on carloadings. Line thickness depicts traffi c density. 25

27 Intermodal 2009 Market Drivers The current economic situation is likely to present challenges in Imports are projected to decrease from 2008, and the Railroad expects international volume to struggle for most of the year, with the potential for a slight increase during peak season in the fourth quarter. On the domestic side, conversions from truck are expected to drive growth. In both markets UP anticipates continued pricing opportunities. The Company is moving forward with service initiatives and capital expenditures to both support current volumes and provide for future growth. Network service improvements, additional capacity projects and close communication with ocean carriers, domestic shippers and interchange partners enable UP to operate effi ciently with current volumes. John Kaiser, VP & GM Intermodal How has your team adjusted to the current economic situation? We increased our focus on growing the overall intermodal market through truckload conversion. A down economy forces shippers to lower costs, and converting from truck to intermodal helps accomplish this objective. Union Pacific Intermodal continues to add and expand service offerings that provide reliable, truck-competitive and environmentally friendly service. The capital investments made in our intermodal network over the past few years are paying off with best-ever service and reliability metrics. We have recently enhanced our train schedules to provide truck-competitive service between Los Angeles and Chicago, Dallas, Memphis and Seattle. We ve also added refrigerated service in several lanes. We are also expanding the number of locations served. We recently opened a new ramp in San Antonio, TX. This intermodal facility enhances our ability to attract highway freight in target markets in Texas, along the Mexican/U.S. border and within the interior of Mexico. Further, we opened a ramp in Tacoma, WA, which positions us to capture business for the large domestic warehouse market in the PNW. What is the biggest opportunity in your business group over the next 2 to 3 years? The biggest opportunity over the next few years comes from moving legacy contract volumes to market rates. This pricing opportunity will provide Union Pacific with the returns required to continue expanding capacity for future growth. Long-term investments to expand track and terminal capacity serving the Sunset Corridor are expected to allow Union Pacific to capitalize on the fast growing markets across the Sunbelt and the Southeast. Continued expansion of trade with Asia and conversion of highway freight are expected to drive long-term growth opportunities. 26

28 Intermodal Terminals Seattle Tacoma Portland Sparks Salt Lake City Council Bluffs Chicago Oakland Lathrop Denver St. Louis Kansas City Las Vegas Los Angeles/ Long Beach Memphis Tucson El Paso Dallas Major Trailer/Container Terminals San Antonio Houston New Orleans Laredo Annual Summary by Quarter - Intermodal st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Total Freight Revenue (millions of dollars) , , ,811 Revenue Ton-Miles (millions) 19,552 19,737 19,875 17,014 76,178 18,994 20,543 21,024 20,232 80,793 18,689 19,630 20,014 19,469 77,802 Revenue Carloads (thousands) , , ,457 Average Revenue Per Car (dollars) ,

29 Mexico Commodity Profile Union Pacifi c s franchise provides the most effi cient rail route between markets in Mexico, the U.S. and Canada, serving all six major gateways to Mexico and connecting directly to the two largest Mexican railroads. UP exchanges approximately 58 percent of shipments to and from Mexico with Kansas City Southern de Mexico (KCSM) and the remaining 42 percent with Ferrocarril Mexicano (Ferromex or FXE). Union Pacifi c has a 26 percent ownership interest in Ferromex. Trucks are the dominant transportation mode in Mexico s freight transportation market, which exceeds $7 billion annually. The Mexico market includes a broad range of commodities from raw materials to fi nished goods. Historically, Automotive was the largest commodity group by both revenue and volume. Although Automotive is still the largest group by volume, Agricultural Products generated the most revenue from Mexico traffi c in 2007 and Union Pacifi c works closely with both Mexican railroads to capture opportunities created by the North American Free Trade Agreement (NAFTA). The Mexican railroads continue making substantial investments in track structure, equipment and facilities to improve service, equipment utilization, safety and damage prevention, which ultimately should enable them to capture more market share from trucks. In 2008, revenue from shipments to and from Mexico increased 13 percent over 2007 to a record $1.6 billion, refl ecting the impact of pricing improvements and fuel surcharges. At the same time, volume decreased 4 percent year-over-year. All business groups Mexico Line Density Map 2008 Carloads Automotive 40% Intermodal 22% Agricultural 18% Industrial Products 13% Chemicals 6% Energy 1% reported increased revenue versus Agricultural Products revenue grew 14 percent, despite a 2 percent volume decline. DDGS revenue increased 19 percent with a 2 percent volume increase. Corn and feed grains revenue increased 13 percent while volume decreased 1 percent year-over-year. Revenue for Industrial Products grew 10 percent, driven by volume increases in metallic minerals and steel, offsetting a 7 percent decline in overall volume. Automotive revenue increased 7 percent over 2007, while volumes declined 9 percent. Chemicals revenue grew 10 percent primarily from growth in plastics and liquid/dry chemicals. Chemicals volume, however, decreased 3 percent. Intermodal revenue increased 13 percent with volume up 3 percent. Historically, a majority of UP s business in this market involved southbound shipments to Mexico. However, over the last three years northbound shipments grew due to increased manufacturing located in Mexico. Northbound shipments now make up about 47 percent of revenue from Mexico operations. The largest volume of commodities shipped from Mexico in 2008 included assembled autos and auto parts, beer and food products, intermodal, steel, cement and consumer goods like appliances. These six commodity groups represented approximately 94 percent of northbound revenue. Southbound traffi c from the U.S. to Mexico is much more diversifi ed. Corn, dry feed ingredients, autos and auto parts, intermodal, meals and oils, steel and newsprint shipments make up about 73 percent of southbound revenue with the remainder spread across the Company s six commodity groups Market Drivers Union Pacifi c expects that 2009 will be a challenging year economically both in the U.S. and Mexico. Consequently, volumes Lane density based on carloadings. Line thickness depicts traffi c density. 28

30 Mexico for all commodities are expected to decline, especially those tied to the auto industry. The slowdown in automotive production is likely to have a negative impact on the chemical business, specifi cally plastics and similar products. Increased Mexican consumption of domestic crops and a lower count of animals on feed should reduce agriculture exports to Mexico. Additionally, housing market conditions signifi cantly affect volumes of clay, sands, tile and other construction materials to and from Mexico. However, UP could experience some positive volume offset in construction materials later in 2009 due to demand resulting from stimulus-funded infrastructure projects in the U.S. and Mexico. While existing economic conditions call for a conservative 2009 outlook, UP remains optimistic about the longer term. Current strategies focus on new business development and core price improvement. These strategies, in conjunction with maintaining an effi cient and fl uid network, support an expectation of retaining current business and potentially generating growth. Foreign investment in Mexico is forecast to continue throughout 2009 and the current outlook suggests that markets such as the maquiladora industry, renewable energy, steel and coal should trend upwards. Concern about the Mexican political climate is due primarily to the government s escalated efforts against drug-related crimes. Bernardo Ayala, VP Mexico Markets How has your team adjusted to the current economic situation? Several aspects of UP s unique franchise should help UP weather the current economic situation. Among them are a strong and experienced sales force strategically based in different areas of Mexico and the U.S., a fluid and efficient network and service-oriented processes that deliver high customer satisfaction levels. With these key elements in place, the Company can successfully take on the current challenges, retain its existing customer base and continue growing the business. What is the biggest opportunity in your business group over the next 2 to 3 years? Mexico is still a strong target for Foreign Direct Investment. Existing industries are expanding capacity and building new facilities. In addition, the Mexican railroads continue to upgrade and add capacity to the current infrastructure to improve rail traffic handling. Therefore, as markets develop, UP can leverage its value proposition and service offering to capture new business. However, rail operations across the border remain fl uid. It appears that the Mexican government will continue waging a strong campaign against drugs. The U.S. government supports these efforts, as demonstrated through plans such as the Merida Initiative, which seeks to reduce growing drug traffi cking and other criminal activities on the two countries mutual border. Percent of Carloads at Border Crossings Calexico (2%) Nogales (12%) El Paso (7%) Eagle Pass (21%) Laredo (54%) Brownsville (4%) FXE FXE Trackage on KCSM KCSM KCSM Trackage on FXE FSRR Coahuila Durango Chiapas Mayab Short Lines 29