This review should be read in combination with the consolidated financial statements, notes to the consolidated financial statements and supplementary information.

Union Pacific Corporation (UPC or the Corporation) consists of one reportable segment, rail transportation, and UPC's other product lines (Other Operations). The rail segment includes the operations of the Corporation's wholly owned subsidiary, Union Pacific Railroad Company (UPRR) and UPRR's subsidiaries and rail affiliates (collectively, the Railroad). Other Operations includes the trucking product line (Overnite Transportation Company or Overnite), as well as the "other" product line operations that include the corporate holding company (which largely supports the Railroad), Fenix LLC and affiliated technology companies (Fenix), self-insurance activities, and all appropriate consolidating entries (see note 1 to the consolidated financial statements).

Corporate Structure

In 2000, the Corporation continued to focus on its core rail transportation business by investing approximately $1.7 billion in capital-related assets at the Railroad. The capital assets are used to sustain current operations and introduce innovative rail services across every commodity line. The Corporation's rail investments in the last five years include the 1996 acquisition of Southern Pacific Rail Corporation (Southern Pacific), and the 1997 and 1999 investments in the Pacific-North and Chihuahua Pacific lines in Mexico. The details of the Corporation's key strategic transactions in recent years are as follows:

Fenix – During 2000, the Corporation announced the formation of a new subsidiary, Fenix, to develop and expand the Corporation's technology and telecommunication assets beyond the Corporation's core transportation business.

Mexican Railway Concession – During 1997, the Railroad and a consortium of partners were granted a 50-year concession to operate the Pacific-North and Chihuahua Pacific lines in Mexico and a 25% stake in the Mexico City Terminal Company at a price of $525 million. The consortium assumed operational control of both lines in 1998. In March 1999, the Railroad purchased an additional 13% ownership interest for $87 million from one of its partners. The Railroad currently holds a 26% ownership share in the consortium. This investment is accounted for using the equity method of accounting.

Overnite – In May 1998, the Corporation's Board of Directors approved a formal plan to divest of UPC's investment in Overnite through an initial public offering. However, market conditions deteriorated to the point that UPC did not consummate the offering (see note 1 to the consolidated financial statements).

Skyway – In November 1998, the Corporation completed the sale of Skyway Freight Systems, Inc. (Skyway), a wholly owned subsidiary. Skyway provided contract logistics and supply chain management services. The proceeds were used to repay outstanding debt. The sale of Skyway generated a net after-tax loss of $50 million (see note 3 to the consolidated financial statements).

Southern Pacific – During 2000, UPC continued its integration of Southern Pacific's rail operations. This process is expected to be completed in 2001 (see notes 1 and 2 to the consolidated financial statements). UPC consummated the acquisition of Southern Pacific in September 1996 for $4.1 billion. Sixty percent of the outstanding Southern Pacific common shares were converted into UPC common stock, and the remaining 40% of the outstanding shares were acquired for cash. UPC initially funded the cash portion of the acquisition with credit facility borrowings, all of which have been subsequently refinanced with other borrowings. The acquisition of Southern Pacific has been accounted for using the purchase method of accounting.

Assets
Union Pacific Corporation