(Mark	One)

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2015

Commission	File	Number	1-6075

# UNION	PACIFIC	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

UTAH (State	or	other	jurisdiction	of

incorporation	or	organization)

1400	DOUGLAS	STREET,	OMAHA,	NEBRASKA (Address	of	principal	executive	offices)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Title	of	each	Class

# Name	of	each	exchange	on	which	registered

Common	Stock	(Par	Value	$2.50	per	share) New	York	Stock	Exchange,	Inc. § Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.

§ Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.

§ Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the Securities	Exchange	Act	of	1934	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.

§ Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Website,	if	any,	every Interactive	Data	File	required	to	be	submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	(§232.405	of	this	chapter) during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and	post	such	files).

§ Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§229.405	of	this	chapter)	is not	contained	herein,	and	will	not	be	contained,	to	the	best	of	the	registrant's	knowledge,	in	definitive	proxy	or	information statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.

§ Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a smaller	reporting	company.		See	the	definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company" in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer	☑ Accelerated	filer	☐ Non-accelerated	filer	☐ Smaller	reporting	company	☐

§ Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).

As	of	June	30,	2015,	the	aggregate	market	value	of	the	registrant's	Common	Stock	held	by	non-affiliates	(using	the	New	York Stock	Exchange	closing	price)	was	$82.7	billion.

The	number	of	shares	outstanding	of	the	registrant's	Common	Stock	as	of	January	29,	2016	was	846,414,350.

Documents Incorporated	 by	 Reference	–	 Portions	 of the	 registrant's	 definitive	 Proxy	 Statement	 for	 the	Annual Meeting	of	Shareholders	to	be	held	on	May	12,	2016 ,	are	incorporated	by	reference	into	Part	III	of	this	report.	The registrant's	Proxy	Statement	will	be	filed	with	the	Securities	and	Exchange	Commission	pursuant	to	Regulation	14A.

# TABLE	OF	CONTENTS

# PART	I

# PART	II

# PART	III

# PART	IV

# Fellow	Shareholders:

This	past	year	was	a	difficult	one	in	many	respects,	but	our	team	did	outstanding	work	in	the	face	of	dramatic	declines in	volumes	and	shifts	in	our	business	mix.		Although	our	earnings	per	share	of	$5.49	fell	short	of	last	year's	record	of $5.75	per	share,	we	were	able	 to	 improve	our	operating	ratio	 to	a	record	 low	63.1	percent,	0.4	points	better	 than 2014.		Our	return	on	invested	capital*	of	14.3	percent	also	fell	short	of	last	year's	all-time	high	of	16.2	percent.	Despite these	shortfalls,	Union	Pacific	was	able	to	increase	the	cash	returned	to	shareholders	in	2015.		We	increased	our quarterly	 declared	 dividend	 per	 share	 by	 10	 percent,	 with	 total	 dividends	 declared	 per	 share	 for	 2015	 growing	 15 percent	compared	to	the	full	year	2014.	We	also	repurchased	$3.5	billion	in	Union	Pacific	shares,	a	7	percent	increase compared	to	2014.

Union	Pacific	experienced	a	6	percent	decline	in	volume	last	year.		Carloadings	declined	in	five	of	our	six	commodity groups. Low	 natural	 gas	 prices	 and	 high	 coal	 inventory	 levels	 led	 to	 a	 significant	 reduction	 in	 our	 Coal volumes.		Declines	in	shale	drilling	activity	due	to	lower	energy	prices	drove	reductions	in	frac	sand	shipments.	Steel shipments	also	declined	due	 to	 lower	drilling	activity	as	well	as	 from	 the	strength	of	 the	U.S.	dollar.	 	Lower	grain commodity	 prices,	 abundant	 worldwide	 inventories,	 and	 a	 strong	 U.S.	 Dollar	 negatively	 impacted	 grain	 shipments. International	intermodal	shipments	declined	as	a	result	of	the	West	Coast	port	work	disruptions	and	higher	than	normal retail	inventory	levels.		Crude	oil	shipments	declined	as	a	result	of	lower	crude	oil	prices	and	unfavorable	spreads,	while fertilizer	shipments	also	declined	year-over-year	due	 to	 the	uncertainty	of	grain	commodity	prices.	 Increased	auto production	and	vehicle	sales	drove	strong	growth	in	Automotive,	our	only	business	group	which	experienced	volume growth	in	2015.

As	volumes	began	to	decrease	from	2014	levels,	we	were	effective	in	aligning	our	resources	to	meet	demand,	while safely	and	efficiently	serving	our	customers.		Our	operating	metrics	showed	a	step	function	improvement	throughout	last year.		Average	system	velocity,	as	reported	to	the	AAR,	increased	6	percent	and	average	terminal	dwell	decreased	3 percent	when	compared	to	2014.	By	year	end,	our	velocity	was	at	an	all-time	best	for	that	level	of	demand,	and	we continue	to	drive	toward	further	network	improvement.

2015	was	a	strong	year	for	employee	safety	performance.		Our	reportable	personal	injury	rate	of	0.87	declined	11 percent	from	last	year,	and	was	an	all-time	record	low.	As	we	move	forward,	we	continue	to	utilize	our	safety	strategy	to yield	 record	 results	 on	 our	 way	 toward	 achieving	 our	 ultimate	 goal	 of	 an	 incident	 free	 environment.	 We	 have	 an unrelenting	focus	on	risk	reduction	through	internal	programs	such	as	Courage	to	Care	and	Total	Safety	Culture.		This	is the	cornerstone	of	our	safety	strategy	so	that	every	employee	returns	home	safely	at	the	end	of	each	day.

Our	robust	capital	program	helps	ensure	we	have	the	resources	and	network	capacity	required	to	efficiently	handle	our current	volumes	and	future	growth,	while	improving	our	network	fluidity	and	generating	returns	for	our	shareholders.		We invested	$4.3	billion	in	2015	strengthening	the	franchise.		This	included	$1.9	billion	in	replacement	capital	to	harden	our infrastructure,	and	to	improve	the	safety	and	resiliency	of	our	network.		In	addition,	we	spent	$1.1	billion	on	locomotives and	other	equipment,	and	nearly	$700	million	on	new	capacity	and	commercial	facilities.		We	also	spent	almost	$400 million	toward	completing	the	federally	mandated	Positive	Train	Control	project.		The	deadline	for	completing	PTC	was extended	to	December	31,	2018,	and	we	will	continue	to	work	diligently	to	safely	complete	this	mandate.

Overall	economic	conditions,	uncertainty	in	the	energy	markets,	commodity	prices,	and	the	strength	of	the	U.S.	dollar will	continue	to	have	a	major	impact	on	our	business	this	year.		We	are	well-positioned	to	serve	customers	in	existing markets	 as	 they	 rebound.	 	The	 strength	 and	 diversity	 of	 the	 Union	 Pacific	 franchise	 also	 will	 provide tremendous opportunities	for	new	business	development	as	both	domestic	and	global	markets	evolve.

When	combined	with	our	unrelenting	focus	on	safety,	productivity,	and	service,	these	opportunities	will	translate	into	an excellent	experience	for	our	customers	and	strong	value	for	our	shareholders	in	the	years	ahead.

Chairman,	President	and	Chief	Executive	Officer

*See	Item	7	of	this	report	for	reconciliations	to	U.S.	GAAP.

# DIRECTORS	AND	SENIOR	MANAGEMENT

# BOARD	OF	DIRECTORS

Andrew	H.	Card,	Jr. Judith	Richards	Hope Thomas	F.	McLarty	III President Emerita	Professor	of	Law	and President Franklin	Pierce	University Distinguished	Visitor	from	Practice McLarty	Associates Board	Committees:	Audit, Georgetown	University	Law	Center Board	Committees:	Finance, Compensation	and	Benefits Board	Committees:	Corporate Corporate	Governance	and Governance	and	Nominating, Nominating Erroll	B.	Davis,	Jr. Finance Former	Chairman, Steven	R.	Rogel President	&	CEO Charles	C.	Krulak Former	Chairman Alliant	Energy	Corporation General,	USMC,	Ret. Weyerhaeuser	Company Board	Committees:	Compensation Board	Committees:	Audit,	Finance Lead	Independent	Director and	Benefits	(Chair),	Corporate Board	Committees:	Compensation Governance	and	Nominating Michael	R.	McCarthy and	Benefits,	Corporate	Governance Chairman and	Nominating	(Chair) David	B.	Dillon McCarthy	Group,	LLC Former	Chairman Board	Committees:	Corporate Jose	H.	Villarreal The	Kroger	Company Governance	and	Nominating, Advisor Board	Committees:	Audit, Finance	(Chair) Akin,	Gump,	Strauss,	Hauer	& Compensation	and	Benefits Feld,	LLP Michael	W.	McConnell Board	Committees:	Audit, Lance	M.	Fritz General	Partner	and Compensation	and	Benefits Chairman,	President	and Former	Managing	Partner Chief	Executive	Officer Brown	Brothers	Harriman	&	Co. Union	Pacific	Corporation	and Board	Committees:	Audit	(Chair), Union	Pacific	Railroad	Company Finance

# SENIOR	MANAGEMENT

Lance	M.	Fritz Chairman,	President	and Chief	Executive	Officer Union	Pacific	Corporation	and Union	Pacific	Railroad	Company

Eric	L.	Butler Executive	Vice	President- Marketing	and	Sales Union	Pacific	Railroad	Company

Diane	K.	Duren Executive	Vice	President	and Corporate	Secretary Union	Pacific	Corporation

Mary	Sanders	Jones Vice	President	and	Treasurer Union	Pacific	Corporation

Robert	M.	Knight,	Jr. Executive	Vice	President–Finance and	Chief	Financial	Officer Union	Pacific	Corporation

Scott	D.	Moore Senior	Vice	President– Corporate	Relations Union	Pacific	Corporation

Joseph	E.	O'Connor,	Jr. Vice	President–Labor	Relations Union	Pacific	Railroad	Company

Patrick	J.	O'Malley Vice	President–Taxes	and	General Tax	Counsel Union	Pacific	Corporation

Michael	A.	Rock D.	Lynn	Kelley Vice	President–External	Relations Senior	Vice	President–Supply	and Union	Pacific	Corporation Continuous	Improvement Union	Pacific	Railroad	Company

Todd	M.	Rynaski Vice	President	and	Controller Union	Pacific	Corporation

Cameron	A.	Scott Executive	Vice	President	– Operations Union	Pacific	Railroad	Company

Lynden	L.	Tennison Senior	Vice	President	and Chief	Information	Officer Union	Pacific	Corporation

James	J.	Theisen,	Jr. Associate	General	Counsel	and Interim	Chief	of	Legal	Staff Union	Pacific	Corporation

# Item	1.	Business

# GENERAL

Union	Pacific	Railroad	Company	is	the	principal	operating	company	of	Union	Pacific	Corporation.	One	of	America's most	recognized	companies,	Union	Pacific	Railroad	Company	links	23	states	in	the	western	two-thirds	of	the	country	by rail,	providing	a	critical	link	in	the	global	supply	chain.		The	Railroad's	diversified	business	mix	includes	Agricultural Products,	Automotive,	Chemicals,	Coal,	Industrial	Products	and	Intermodal.	Union	Pacific	serves	many	of	the	fastest- growing	 U.S.	 population	 centers,	 operates	 from	 all	 major	 West	 Coast	 and	 Gulf	 Coast	 ports	 to	 eastern	 gateways, connects	with	Canada's	rail	systems	and	 is	 the	only	railroad	serving	all	six	major	Mexico	gateways.	Union	Pacific provides	 value	 to	 its	 roughly 10,000 customers	 by	 delivering	 products	 in	 a	 safe,	 reliable,	 fuel-efficient	 and environmentally	responsible	manner.

Union	 Pacific	 Corporation	 was	 incorporated	 in	 Utah	 in	 1969	 and	 maintains	 its	 principal	 executive	 offices	 at	 1400 Douglas	Street,	Omaha,	NE	68179.	The	telephone	number	at	that	address	is	(402)	544-5000.	The	common	stock	of Union	Pacific	Corporation	is	listed	on	the	New	York	Stock	Exchange	(NYSE)	under	the	symbol	"UNP".

For	 purposes	 of	 this	 report,	 unless	 the	 context	 otherwise	 requires,	 all	 references	 herein	 to	 "UPC",	 "Corporation", "Company",	"we",	"us",	and	"our"	shall	mean	Union	Pacific	Corporation	and	its	subsidiaries,	including	Union	Pacific Railroad	Company,	which	we	separately	refer	to	as	"UPRR"	or	the	"Railroad".

Available	Information	–	Our	Internet	website	is	www.up.com.	We	make	available	free	of	charge	on	our	website	(under the	 "Investors"	 caption	 link)	 our	Annual	 Reports	 on	 Form	 10-K;	 our	 Quarterly	 Reports	 on	 Form	 10-Q;	 eXtensible Business	Reporting	Language	(XBRL)	documents;	our	current	reports	on	Form	8-K;	our	proxy	statements;	Forms	3,	4, and	5,	filed	on	behalf	of	our	directors	and	certain	executive	officers;	and	amendments	to	such	reports	filed	or	furnished pursuant	 to	 the	Securities	Exchange	Act	of	1934,	as	amended	(the	Exchange	Act).	We	provide	 these	reports	and statements	 as	 soon	 as	 reasonably	 practicable	 after	 such	 material	 is	 electronically	 filed	 with,	 or	 furnished	 to,	 the Securities	and	Exchange	Commission	(SEC).	We	also	make	available	on	our	website	previously	filed	SEC	reports	and exhibits	 via	 a	 link	 to	 EDGAR	 on	 the	 SEC's	 Internet	 site	 at	 www.sec.gov.	Additionally,	 our	 corporate	 governance materials,	including	By-Laws,	Board	Committee	charters,	governance	guidelines	and	policies,	and	codes	of	conduct	and ethics	for	directors,	officers,	and	employees	are	available	on	our	website.	From	time	to	time,	the	corporate	governance materials	on	our	website	may	be	updated	as	necessary	to	comply	with	rules	issued	by	the	SEC	and	the	NYSE	or	as desirable	to	promote	the	effective	and	efficient	governance	of	our	Company.	Any	security	holder	wishing	to	receive, without	charge,	a	copy	of	any	of	our	SEC	filings	or	corporate	governance	materials	should	send	a	written	request	to: Secretary,	Union	Pacific	Corporation,	1400	Douglas	Street,	Omaha,	NE	68179.

We	have	included	the	Chief	Executive	Officer	(CEO)	and	Chief	Financial	Officer	(CFO)	certifications	regarding	our public	disclosure	required	by	Section	302	of	the	Sarbanes-Oxley	Act	of	2002	as	Exhibits	31(a)	and	(b)	to	this	report.

References	to	our	website	address	in	this	report,	including	references	in	Management's	Discussion	and	Analysis	of Financial	Condition	and	Results	of	Operations,	Item	7,	are	provided	as	a	convenience	and	do	not	constitute,	and	should not	 be	 deemed,	 an	 incorporation	 by	 reference	 of	 the	 information	 contained	 on,	 or	 available	 through,	 the	 website. Therefore,	such	information	should	not	be	considered	part	of	this	report.

# OPERATIONS

The	Railroad,	along	with	its	subsidiaries	and	rail	affiliates,	is	our	one	reportable	operating	segment.	Although	we	provide revenue	by	commodity	group,	we	analyze	the	net	financial	results	of	the	Railroad	as	one	segment	due	to	the	integrated nature	of	our	rail	network.	Additional	information	regarding	our	business	and	operations,	including	revenue	and	financial information	and	data	and	other	information	regarding	environmental	matters,	is	presented	in	Risk	Factors,	Item	1A; Legal	 Proceedings,	 Item	 3;	 Selected	 Financial	 Data,	 Item	 6;	 Management's	 Discussion	 and	Analysis	 of	 Financial Condition	and	Results	of	Operations,	Item	7;	and	the	Financial	Statements	and	Supplementary	Data,	Item	8	(which include	information	regarding	revenues,	statements	of	income,	and	total	assets).

Operations	–	UPRR	is	a	Class	I	railroad	operating in	 the	 U.S.	 We	 have	 32,084	 route	 miles,	 linking Pacific	 Coast	 and	 Gulf	 Coast	 ports	 with	 the Midwest	and	eastern	U.S.	gateways	and	providing several	 corridors	 to	 key	 Mexican	 gateways.	 We serve	 the	 Western	 two-thirds	 of	 the	 country	 and maintain	 coordinated	 schedules	 with	 other	 rail carriers	 to	 move	 freight	 to	 and	 from	 the	Atlantic Coast,	 the	 Pacific	 Coast,	 the	 Southeast,	 the Southwest,	 Canada,	 and	 Mexico.	 Export	 and import	traffic	moves	through	Gulf	Coast	and	Pacific Coast	ports	and	across	the	Mexican	and	Canadian borders.	Our	freight	traffic	consists	of	bulk,

manifest,	and	premium	business.	Bulk	traffic	primarily	consists	of	coal,	grain,	soda	ash,	ethanol,	rock	and	crude	oil shipped	 in	unit	 trains	–	 trains	 transporting	a	single	commodity	 from	one	source	 to	one	destination.	Manifest	 traffic includes	individual	carload	or	less	than	train-load	business	involving	commodities	such	as	lumber,	steel,	paper,	food and	chemicals.	The	transportation	of	finished	vehicles,	auto	parts,	intermodal	containers	and	truck	trailers	are	included as	part	of	our	premium	business.	In	2015,	we	generated	freight	revenues	totaling	$20.4	billion	from	the	following	six commodity	groups:

Agricultural	Products	–	Transportation	of	grains,	commodities	produced from these	grains,	and food	and	beverage products	generated	17%	of the	Railroad's	2015 freight	revenue.	We	access	most	major	grain	markets, linking the Midwest	and	Western	U.S.	producing	areas	to	export	terminals	in	the	Pacific	Northwest	and	Gulf	Coast	ports,	as	well	as Mexico.	We	also	serve	significant	domestic	markets,	including	grain	processors,	animal	feeders	and	ethanol	producers in	 the	Midwest,	West,	South	and	Rocky	Mountain	states.	Unit	 trains,	which	 transport	a	single	commodity	between producers	and	export	terminals	or	domestic	markets,	represent	approximately	40%	of	our	agricultural	shipments.

Automotive	–	We	are	the	largest	automotive	carrier	west	of	the	Mississippi	River	and	operate	or	access	over	40	vehicle distribution	centers.	The	Railroad's	extensive	franchise	serves	five	vehicle	assembly	plants	and	connects	to	West	Coast ports,	Mexico	gateways	and	 the	Gulf	of	Mexico	 to	accommodate	both	 import	and	export	shipments.	 In	addition	 to transporting	finished	vehicles,	UPRR	provides	expedited	handling	of	automotive	parts	in	both	boxcars	and	intermodal containers	destined	for	Mexico,	the	U.S.	and	Canada.	The	automotive	group	generated	11%	of	Union	Pacific's	freight revenue	in	2015.

Chemicals	–	Transporting	chemicals	generated	17%	of	our	freight	revenue	in	2015.	The	Railroad's	unique	franchise serves	the	chemical	producing	areas	along	the	Gulf	Coast,	where	roughly	60%	of	the	Company's	chemical	business originates,	terminates	or	travels.	Our	chemical	franchise	also	accesses	chemical	producers	in	the	Rocky	Mountains	and on	the	West	Coast.	The	Company's	chemical	shipments	include	six	categories:		industrial	chemicals,	plastics,	fertilizer, petroleum	and	liquid	petroleum	gases,	crude	oil	and	soda	ash.	Currently,	these	products	move	primarily	to	and	from	the Gulf	Coast	region.	Fertilizer	movements	originate	in	the	Gulf	Coast	region,	the	western	U.S.	and	Canada	(through interline	access)	for	delivery	to	major	agricultural	users	in	the	Midwest,	western	U.S.,	as	well	as	abroad.	Soda	ash originates	 in	 southwestern	 Wyoming	 and	 California,	 destined	 for	 chemical	 and	 glass	 producing	 markets	 in	 North America	and	abroad.

Coal	–	Shipments	of	coal	and	petroleum	coke	accounted	for	16%	of	our	freight	revenue	in	2015.	The	Railroad's	network supports	the	transportation	of	coal	and	petroleum	coke	to	independent	and	regulated	power	companies	and	industrial facilities	throughout	the	U.S.	Through	interchange	gateways	and	ports,	UPRR's	reach	extends	to	eastern	U.S.	utilities, Mexico,	Europe	and	Asia.	Water	terminals	allow	the	Railroad	to	move	western	U.S.	coal	east	via	the	Mississippi	and Ohio	 Rivers,	 as	 well	 as	 the	 Great	 Lakes.	 Export	 coal	 moves	 through	 West	 Coast	 ports	 to	Asia	 and	 through	 the Mississippi	River	and	Houston	to	Europe.		Coal	traffic	originating	in	the	Southern	Powder	River	Basin	(SPRB)	area	of Wyoming	is	the	largest	segment	of	the	Railroad's	coal	business.

Industrial	Products	–	Our	extensive	network	facilitates	the	movement	of	numerous	commodities	between	thousands	of origin	and	destination	points	throughout	North	America.	The	Industrial	Products	group	consists	of	several	categories, including	 construction	 products,	 minerals,	 consumer	 goods,	 metals,	 lumber,	 paper,	 and	 other	 miscellaneous products.		In	2015,	this	group	generated	19%	of	our	total	freight	revenue.	Commercial,	residential	and	governmental infrastructure	investments	drive	shipments	of	steel,

aggregates	(cement	components),	cement	and	wood	products.		Oil	and	gas	drilling	generates	demand	for	raw	steel, finished	pipe,	frac	sand,	stone	and	drilling	fluid	commodities.	Industrial	and	light	manufacturing	plants	receive	steel, nonferrous	materials,	minerals	and	other	raw	materials.	Paper	and	packaging	commodities,	as	well	as	appliances,	move to	major	metropolitan	areas	for	consumers.	Lumber	shipments	originate	primarily	in	the	Pacific	Northwest	and	western Canada	and	move	throughout	the	U.S.	for	use	in	new	home	construction	and	repair	and	remodeling.

Intermodal	–	 Our Intermodal	 business	 includes	 two	 segments:	 international	 and	 domestic.	 International	 business consists	of	import	and	export	container	traffic	that	mainly	passes	through	West	Coast	ports	served	by	UPRR's	extensive terminal	network.	Domestic	business	includes	container	and	trailer	traffic	picked	up	and	delivered	within	North	America 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.	Together,	our	international	and	domestic	Intermodal	business	generated	20%	of	our	2015	freight revenue.

Seasonality	–	Some	of	the	commodities	we	carry	have	peak	shipping	seasons,	reflecting	either	or	both	the	nature	of the	commodity	and	 the	demand	cycle	 for	 the	commodity	(such	as	certain	agricultural	and	 food	products	 that	have specific	growing	and	harvesting	seasons).	The	peak	shipping	seasons	for	these	commodities	can	vary	considerably each	 year	 depending	 upon	 various	 factors,	 including	 the	 strength	 of	 domestic	 and	 international	 economies	 and currencies	and	the	strength	of	harvests	and	market	prices	for	agricultural	products.	In	response	to	an	annual	request from	the	Surface	Transportation	Board	(STB)	to	all	of	the	Class	I	railroads	operating	in	the	U.S.,	we	submit	a	publicly available	letter	during	the	third	quarter	detailing	our	plans	for	handling	traffic	during	the	third	and	fourth	quarters	each year	and	provide	other	information	requested	by	the	STB.

Working	 Capital	 –	At	 December	 31,	 2015	 and	 2014,	 we	 had	 a	 modest	 working	 capital	 surplus,	 which	 provides enhanced	liquidity.	In	addition,	we	believe	we	have	adequate	access	to	capital	markets	to	meet	any	foreseeable	cash requirements,	and	we	have	sufficient	financial	capacity	to	satisfy	our	current	liabilities.

Competition	 –	 We	 are	 subject	 to	 competition	 from	 other	 railroads,	 motor	 carriers,	 ship	 and	 barge	 operators,	 and pipelines.	Our	main	railroad	competitor	is	Burlington	Northern	Santa	Fe	LLC.	Its	primary	subsidiary,	BNSF	Railway Company	(BNSF),	operates	parallel	routes	in	many	of	our	main	traffic	corridors.	In	addition,	we	operate	in	corridors served	by	other	railroads	and	motor	carriers.	Motor	carrier	competition	exists	 for	 five	of	our	six	commodity	groups (excluding	most	coal	shipments).	Because	of	the	proximity	of	our	routes	to	major	inland	and	Gulf	Coast	waterways, barges	can	be	particularly	competitive,	especially	for	grain	and	bulk	commodities	in	certain	areas	where	we	operate.	In addition	to	price	competition,	we	face	competition	with	respect	to	transit	times,	quality	and	reliability	of	service	from motor	carriers	and	other	railroads.	Motor	carriers	in	particular	can	have	an	advantage	over	railroads	with	respect	to transit	times	and	timeliness	of	service.		However,	railroads	are	much	more	fuel-efficient	than	trucks,	which	reduces	the impact	of	transporting	goods	on	the	environment	and	public	infrastructure,	and	we	have	been	making	efforts	to	convert certain	truck	traffic	to	rail.		Additionally,	we	must	build	or	acquire	and	maintain	our	rail	system;	trucks	and	barges	are able	to	use	public	rights-of-way	maintained	by	public	entities.	Any	of	the	following	could	also	affect	the	competitiveness of	our	transportation	services	for	some	or	all	of	our	commodities:	(i)	improvements	or	expenditures	materially	increasing the	 quality	 or	 reducing	 the	 costs	 of	 these	 alternative	 modes	 of	 transportation,	 (ii)	 legislation	 that	 eliminates	 or significantly	reduces	the	size	or	weight	limitations	applied	to	motor	carriers,	or	(iii)	legislation	or	regulatory	changes	that impose	operating	restrictions	on	railroads	or	that	adversely	affect	the	profitability	of	some	or	all	railroad	traffic.	Finally, many	movements	face	product	or	geographic	competition	where	our	customers	can	use	different	products	(e.g.	natural gas	instead	of	coal,	sorghum	instead	of	corn)	or	commodities	from	different	locations	(e.g.	grain	from	states	or	countries that	we	do	not	serve,	crude	oil	 from	different	regions).	Sourcing	different	commodities	or	different	 locations	allows shippers	to	substitute	different	carriers	and	such	competition	may	reduce	our	volume	or	constrain	prices.	For	more information	regarding	risks	we	face	from	competition,	see	the	Risk	Factors	in	Item	1A	of	this	report.

Key	Suppliers	 –	 We	 depend	 on	 two	 key	 domestic	 suppliers	 of	 high	 horsepower	 locomotives.	 Due	 to	 the	 capital intensive	nature	of	the	locomotive	manufacturing	business	and	sophistication	of	this	equipment,	potential	new	suppliers face	high	barriers	of	entry	into	this	industry.	Therefore,	if	one	of	these	domestic	suppliers	discontinues	manufacturing locomotives	for	any	reason,	including	insolvency	or	bankruptcy,	we	could	experience	a	significant	cost	increase	and	risk reduced	availability	of	the	locomotives	that	are	necessary	to	our	operations.	Additionally,	for	a	high	percentage	of	our rail	purchases,	we	utilize	two	steel	producers	(one	domestic	and	one	international)	that	meet	our	specifications.	Rail	is critical	for

maintenance,	replacement,	improvement,	and	expansion	of	our	network	and	facilities.	Rail	manufacturing	also	has	high barriers	 of	 entry,	 and, if	 one	 of those	 suppliers	 discontinues	 operations for	 any reason, including insolvency	 or bankruptcy,	we	could	experience	cost	increases	and	difficulty	obtaining	rail.

Employees 	–	Approximately	 85%	 of	 our	 47,457 full-time-equivalent	 employees	 are represented	 by	 14	 major rail unions.	On	January	1,	2015,	current	labor	agreements	became	subject	to	modification	and	we	began	the	current	round of	negotiations	with	the	unions.	Existing	agreements	remain	in	effect	until	new	agreements	are	reached	or	the	Railway Labor	Act's	procedures	(which	 include	mediation,	cooling-off	periods,	and	 the	possibility	of	Presidential	Emergency Boards	and	Congressional	 intervention)	are	exhausted.	 	Contract	negotiations	historically	continue	 for	an	extended period	of	time	and	we	rarely	experience	work	stoppages	while	negotiations	are	pending.

Railroad	Security	–	Our	security	efforts	consist	of	a	wide	variety	of	measures	including	employee	training,	engagement with	 our	 customers,	 training	 of	 emergency	 responders,	 and	 partnerships	 with	 numerous	 federal,	 state,	 and	 local government	agencies.		While	federal	law	requires	us	to	protect	the	confidentiality	of	our	security	plans	designed	to safeguard	against	 terrorism	and	other	security	 incidents,	 the	 following	provides	a	general	overview	of	our	security initiatives.

UPRR	Security	Measures	–	We	maintain	a	comprehensive	security	plan	designed	to	both	deter	and	respond	to	any potential	 or	 actual	 threats	 as	 they	 arise.	 	 The	 plan	 includes	 four	 levels	 of	 alert	 status,	 each	 with	 its	 own	 set	 of countermeasures.		We	employ	our	own	police	force,	consisting	of	more	than	250	commissioned	and	highly-trained officers.	 Our	 employees	 also	 undergo	 recurrent	 security	 and	 preparedness training,	 as	 well	 as federally-mandated hazardous	materials	and	security	training.	We	regularly	review	the	sufficiency	of	our	employee	training	programs.	We maintain	the	capability	to	move	critical	operations	to	back-up	facilities	in	different	locations.

We	operate	an	emergency	response	management	center	24	hours	a	day.		The	center	receives	reports	of	emergencies, dangerous	or	potentially	dangerous	conditions,	and	other	safety	and	security	issues	from	our	employees,	the	public,	law enforcement	and	other	government	officials.		In	cooperation	with	government	officials,	we	monitor	both	threats	and public	events,	and,	as	necessary,	we	may	alter	rail	traffic	flow	at	times	of	concern	to	minimize	risk	to	communities	and our	operations.		We	comply	with	the	hazardous	materials	routing	rules	and	other	requirements	imposed	by	federal law.		We	also	design	our	operating	plan	to	expedite	the	movement	of	hazardous	material	shipments	to	minimize	the time	rail	cars	remain	idle	at	yards	and	terminals	located	in	or	near	major	population	centers.		Additionally,	in	compliance with	Transportation	Security	Agency	regulations,	we	deployed	information	systems	and	instructed	employees	in	tracking and	documenting	the	handoff	of	Rail	Security	Sensitive	Materials	with	customers	and	interchange	partners.

We	also	have	established	a	number	of	our	own	innovative	safety	and	security-oriented	initiatives	ranging	from	various investments	in	technology	to	The	Officer	on	the	Train	program,	which	provides	local	law	enforcement	officers	with	the opportunity	 to	 ride	 with	 train	 crews	 to	 enhance	 their	 understanding	 of	 railroad	 operations	 and	 risks.	 Our	 staff	 of information	security	professionals	continually	assesses	cyber	security	risks	and	implements	mitigation	programs	that evolve	with	the	changing	technology	threat	environment.	To	date,	we	have	not	experienced	any	material	disruption	of our	operations	due	to	a	cyber	threat	or	attack	directed	at	us.

Cooperation	with	Federal,	State,	and	Local	Government	Agencies	 –	We	work	closely	on	physical	and	cyber	security initiatives	with	government	agencies,	including	the	DOT	and	the	Department	of	Homeland	Security	(DHS)	as	well	as local	police	departments,	fire	departments,	and	other	first	responders.		In	conjunction	with	the	Association	of	American Railroads	 (AAR),	 we	 sponsor	Ask	 Rail,	 a	 mobile	 application	 which	 provides	 first	 responders	 with	 secure	 links	 to electronic	information,	including	commodity	and	emergency	response	information	required	by	emergency	personnel	to respond	to	accidents	and	other	situations.		We	also	participate	in	the	National	Joint	Terrorism	Task	Force,	a	multi- agency	effort	established	by	the	U.S.	Department	of	Justice	and	the	Federal	Bureau	of	Investigation	to	combat	and prevent	terrorism.

We	work	with	the	Coast	Guard,	U.S.	Customs	and	Border	Protection	(CBP),	and	the	Military	Transport	Management Command,	which	monitor	shipments	entering	the	UPRR	rail	network	at	U.S.	border	crossings	and	ports.		We	were	the first	railroad	in	the	U.S.	to	be	named	a	partner	in	CBP's	Customs-Trade	Partnership	Against	Terrorism,	a	partnership designed	to	develop,	enhance,	and	maintain	effective	security	processes	throughout	the	global	supply	chain.

Cooperation	with	Customers	and	Trade	Associations –		 Through	TransCAER	(Transportation	Community	Awareness and	Emergency	Response)	we	work	with	the	AAR,	the	American	Chemistry	Council,	the	American	Petroleum	Institute, and	other	chemical	trade	groups	to	provide	communities	with	preparedness	tools,	including	the	training	of	emergency responders.		In	cooperation	with	the	Federal	Railroad	Administration	(FRA)	and	other	interested	groups,	we	are	also working	to	develop	additional	improvements	to	tank	car	design	that	will	further	limit	the	risk	of	releases	of	hazardous materials.

# GOVERNMENTAL	AND	ENVIRONMENTAL	REGULATION

Governmental	Regulation	–	Our	operations	are	subject	to	a	variety	of	federal,	state,	and	local	regulations,	generally applicable	to	all	businesses.		(See	also	the	discussion	of	certain	regulatory	proceedings	in	Legal	Proceedings,	Item	3.)

The	operations	of	the	Railroad	are	also	subject	to	the	regulatory	jurisdiction	of	the	STB.		The	STB	has	jurisdiction	over rates	charged	on	certain	regulated	rail	traffic;	common	carrier	service	of	regulated	traffic;	freight	car	compensation; transfer,	extension,	or	abandonment	of	rail	lines;	and	acquisition	of	control	of	rail	common	carriers.	In	2015,	the	STB continued	 its	efforts	 to	explore	whether	 to	expand	rail	regulation.	The	STB	requested	parties	 to	discuss	 the	STB's methodology	for	determining	railroad	revenue	adequacy	and	the	possible	use	of	a	revenue	adequacy	constraint	 in regulating	railroad	rates.	The	STB	conducted	a	hearing	on	expanding	and	easing	procedures	for	grain	rate	complaints.

The	Surface	Transportation	Board	Reauthorization	Act	of	2015	became	law	on	December	18,	2015.	The	legislation increased	the	number	of	STB	board	members	from	three	to	five,	requires	the	STB	to	post	quarterly	reports	on	rate reasonableness	 cases	 and	 maintain	 a	 database	 on	 service	 complaints,	 and	 grants the	 STB	 authority to initiate investigations,	among	other	things.

The	operations	of	the	Railroad	also	are	subject	to	the	regulations	of	the	FRA	and	other	federal	and	state	agencies.		On January	12,	2010,	the	FRA	issued	initial	rules	governing	installation	of	Positive	Train	Control	(PTC)	by	the	end	of	2015. The	 final	 regulation	 was	 issued	 on	 August	 8,	 2014.	 Although	 still	 under	 further	 development,	 PTC	 is	 a	 collision avoidance	 technology	 intended	 to	 override	 engineer	 controlled	 locomotives	 and	 stop	 train-to-train	 and	 overspeed accidents,	misaligned	switch	derailments,	and	unauthorized	entry to	work	zones.	Through	2015,	we	have invested approximately	$2.0	billion	in	the	ongoing	development	of	PTC.

Following	the	issuance	of	the	initial	rules,	the	FRA	acknowledged	that	projected	costs	will	exceed	projected	benefits	by a	ratio	of	at	least	22	to	one,	and	we	estimate	that	our	final	costs	will	be	higher	than	those	assumed	by	the	FRA.	On October	 29,	 2015,	 Congress	 extended	 the	 December	 31,	 2015	 PTC	 implementation	 deadline	 until	 December	 31, 2018.		The	PTC	implementation	deadline	may	be	extended	to	December	31,	2020,	provided	certain	other	criteria	are satisfied.	We	are	planning	to	submit	our	required	PTC	safety	plan	to	the	FRA	in	the	first	half	of	2016.

On	May	1,	2015,	the	Pipeline	and	Hazardous	Materials	Safety	Administration	(PHMSA)	issued	final	rules	governing	the transportation	of	flammable	liquids.		The	final	rule	included	provisions	for	improved	tank	car	standards,	braking	system requirements, community notification, and operating restrictions for certain trains carrying flammable liquids.	 	 Subsequently,	 Congress	 enacted	 the	 Fixing	 America's	 Surface	 Transportation	 Act,	 which	 requires	 the Government	Accountability	 Office	 (GAO)	 to	 conduct	 an	 independent	 study	 on	 the	 rule's	 proposed	 braking	 system requirements.	Pending	the	outcome	of	the	study,	the	braking	system	requirement	may	be	eliminated	or	revised.		We	will participate	in	and	monitor	the	progress	of	the	GAO	study.

DOT,	the	Occupational	Safety	and	Health	Administration,	PHMSA	and	DHS,	along	with	other	federal	agencies,	have jurisdiction	 over	 certain	 aspects	 of	 safety,	 movement	 of	 hazardous	 materials	 and	 hazardous	 waste,	 emissions requirements,	and	equipment	standards.	Additionally,	various	state	and	local	agencies	have	jurisdiction	over	disposal	of hazardous	waste	and	seek	to	regulate	movement	of	hazardous	materials	in	ways	not	preempted	by	federal	law.

Environmental	 Regulation	–	We	are	subject	to	extensive	federal	and	state	environmental	statutes	and	regulations pertaining	to	public	health	and	the	environment.	The	statutes	and	regulations	are	administered	and	monitored	by	the Environmental	Protection	Agency	(EPA)	and	by	various	state	environmental	agencies.	The	primary	laws	affecting	our operations	are	the	Resource	Conservation	and	Recovery	Act,	regulating	the	management	and	disposal	of	solid	and hazardous	 wastes;	 the	 Comprehensive	 Environmental	 Response,	 Compensation,	 and	 Liability	 Act,	 regulating	 the cleanup	of

contaminated	properties;	the	Clean	Air	Act,	regulating	air	emissions;	and	the	Clean	Water	Act,	regulating	waste	water discharges.

Information	 concerning	 environmental	 claims	 and	 contingencies	 and	 estimated	 remediation	 costs	 is	 set	 forth	 in Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	Critical	Accounting	Policies –	Environmental,	Item	7	and	Note	18	to	the	Consolidated	Financial	Statements	in	Item	8,	Financial	Statements	and Supplementary	Data.

# Item	1A.	Risk	Factors

The	information	set	forth	in	this	Item	1A	should	be	read	in	conjunction	with	the	rest	of	the	information	included	in	this report,	including	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,	Item	7,	and Financial	Statements	and	Supplementary	Data,	Item	8.

We	Must	Manage	Fluctuating	Demand	for	Our	Services	and	Network	Capacity –	If	there	is	significant	demand	for	our services that	 exceeds the	 designed capacity	 of	 our	 network,	 we	 may	 experience	 network	 difficulties, including congestion	and	reduced	velocity,	that	could	compromise	the	level	of	service	we	provide	to	our	customers.	This	level	of demand	 may	 also	 compound	 the	 impact	 of	 weather	 and	 weather-related	 events	 on	 our	 operations	 and	 velocity. Although	we	continue	 to	 improve	our	 transportation	plan,	add	capacity,	 improve	operations	at	our	yards	and	other facilities,	and	improve	our	ability	to	address	surges	in	demand	for	any	reason	with	adequate	resources,	we	cannot	be sure	that	these	measures	will	fully	or	adequately	address	any	service	shortcomings	resulting	from	demand	exceeding our	planned	capacity.		We	may	experience	other	operational	or	service	difficulties	related	to	network	capacity,	dramatic and	unplanned	 fluctuations	 in	our	customers'	demand	 for	rail	service	with	respect	 to	one	or	more	commodities	or operating	regions,	or	other	events	that	could	negatively	impact	our	operational	efficiency,	any	of	which	could	have	a material	adverse	effect	on	our	results	of	operations,	financial	condition,	and	liquidity.		In	the	event	that	we	experience significant	reductions	in	demand	for	rail	services	with	respect	to	one	or	more	commodities	or	changes	in	consumer preferences	that	affect	the	businesses	of	our	customers,	we	may	experience	increased	costs	associated	with	resizing our	operations,	 including	higher	unit	operating	costs	and	costs	 for	 the	storage	of	 locomotives,	rail	cars,	and	other equipment;	work-force	adjustments;	and	other	related	activities,	which	could	have	a	material	adverse	effect	on	our results	of	operations,	financial	condition,	and	liquidity.

We	Transport	Hazardous	Materials	–	We	transport	certain	hazardous	materials	and	other	materials,	including	crude	oil, ethanol,	and	toxic	inhalation	hazard	(TIH)	materials,	such	as	chlorine,	that	pose	certain	risks	in	the	event	of	a	release	or combustion.	Additionally,	U.S.	laws	impose	common	carrier	obligations	on	railroads	that	require	us	to	transport	certain hazardous	materials	regardless	of	risk	or	potential	exposure	to	loss.	A	rail	accident	or	other	incident	or	accident	on	our network,	at	our	facilities,	or	at	the	facilities	of	our	customers	involving	the	release	or	combustion	of	hazardous	materials could	 involve	 significant	 costs	 and	 claims	 for	 personal	 injury,	 property	 damage,	 and	 environmental	 penalties	 and remediation	in	excess	of	our	insurance	coverage	for	these	risks,	which	could	have	a	material	adverse	effect	on	our results	of	operations,	financial	condition,	and	liquidity.

We	Are	Subject	to	Significant	Governmental	Regulation	 –	We	are	subject	to	governmental	regulation	by	a	significant number	of	federal,	state,	and	local	authorities	covering	a	variety	of	health,	safety,	labor,	environmental,	economic	(as discussed	below),	and	other	matters.		Many	laws	and	regulations	require	us	to	obtain	and	maintain	various	licenses, permits,	and	other	authorizations,	and	we	cannot	guarantee	that	we	will	continue	to	be	able	to	do	so.	Our	failure	to comply	with	applicable	laws	and	regulations	could	have	a	material	adverse	effect	on	us.	Governments	or	regulators may	change	the	legislative	or	regulatory	frameworks	within	which	we	operate	without	providing	us	any	recourse	to address	any	adverse	effects	on	our	business,	including,	without	limitation,	regulatory	determinations	or	rules	regarding dispute	resolution,	business	relationships	with	other	railroads,	calculation	of	our	cost	of	capital	or	other	inputs	relevant	to computing	our	revenue	adequacy,	 the	prices	we	charge,	and	costs	and	expenses.	Significant	 legislative	activity	 in Congress	or	regulatory	activity	by	the	STB	could	expand	regulation	of	railroad	operations	and	prices	for	rail	services, which	could	reduce	capital	spending	on	our	rail	network,	facilities	and	equipment	and	have	a	material	adverse	effect	on our	results	of	operations,	 financial	condition,	and	liquidity.	As	part	of	the	Rail	Safety	Improvement	Act	of	2008,	rail carriers	were	to	implement	PTC	by	the	end	of	 2015	(the	Rail	Safety	Improvement	Act).		The	Surface	Transportation Extension	Act	of	2015	amended	the	Rail	Safety	Improvement	Act	to	require	implementation	of	PTC	by	the	end	of	2018, which	 deadline	 may	 be	 extended	 to	 December 31, 2020,	 provided	 certain	 other	 criteria	 are	 satisfied.	 	 This implementation	could	have	a	material	adverse	effect	on	our	ability	to	make	other	capital	investments.	Additionally,	one or	more	consolidations	of	Class	I	railroads	could	also	lead	to	increased	regulation	of	the	rail	industry.

We	May	Be	Affected	by	General	Economic	Conditions	 –	Prolonged	severe	adverse	domestic	and	global	economic conditions	or	disruptions	of	financial	and	credit	markets	may	affect	the	producers	and	consumers	of	the	commodities	we carry	and	may	have	a	material	adverse	effect	on	our	access	to	liquidity	and	our	results	of	operations	and	financial condition.

We	Face	Competition	from	Other	Railroads	and	Other	Transportation	Providers 	–	We face	competition from	other railroads,	motor	carriers,	ships,	barges,	and	pipelines.	In	addition	to	price	competition,	we	face	competition	with	respect to	transit	times	and	quality	and	reliability	of	service.	We	must	build	or	acquire	and	maintain	our	rail	system,	while	trucks, barges and	 maritime operators are able to use public rights-of-way	 maintained by public entities.	 Any future improvements	 or	 expenditures	 materially	 increasing	 the	 quality	 or	 reducing	 the	 cost	 of	 alternative	 modes	 of transportation,	or	legislation	that	eliminates	or	significantly	reduces	the	burden	of	the	size	or	weight	limitations	currently applicable	to	motor	carriers,	could	have	a	material	adverse	effect	on	our	results	of	operations,	financial	condition,	and liquidity.	Additionally,	any	future	consolidation	of	the	rail	industry	could	materially	affect	the	competitive	environment	in which	we	operate.

We	 Rely	 on	 Technology	 and	 Technology Improvements in	 Our	 Business	 Operations 	 –	 We rely	 on information technology	in	all	aspects	of	our	business.	If	we	do	not	have	sufficient	capital	to	acquire	new	technology	or	if	we	are unable	to	develop	or	implement	new	technology	such	as	PTC	or	the	latest	version	of	our	transportation	control	systems, we	 may	 suffer	 a	 competitive	 disadvantage	 within the rail industry	 and	 with	 companies	 providing	 other	 modes	 of transportation	service,	which	could	have	a	material	adverse	effect	on	our	results	of	operations,	financial	condition,	and liquidity.	Additionally,	 if	a	cyber	attack	or	other	event	causes	significant	disruption	or	 failure	of	one	or	more	of	our information	 technology	systems,	 including	computer	hardware,	software,	and	communications	equipment,	we	could suffer	a	significant	service	interruption,	safety	failure,	security	breach,	or	other	operational	difficulties,	which	could	have a	material	adverse	impact	on	our	results	of	operations,	financial	condition,	and	liquidity.

We	May	Be	Subject	to	Various	Claims	and	Lawsuits	That	Could	Result	in	Significant	Expenditures –	As	a	railroad	with operations	in	densely	populated	urban	areas	and	other	cities	and	a	vast	rail	network,	we	are	exposed	to	the	potential	for various	claims	and	litigation	related	to	labor	and	employment,	personal	injury,	property	damage,	environmental	liability, and	 other	 matters.	Any	 material	 changes to litigation trends	 or	 a	 catastrophic rail	 accident	 or	 series	 of	 accidents involving	any	or	all	of	property	damage,	personal	injury,	and	environmental	liability	that	exceed	our	insurance	coverage for	such	risks	could	have	a	material	adverse	effect	on	our	results	of	operations,	financial	condition,	and	liquidity.

We	Are	Subject	to	Significant	Environmental	Laws	and	Regulations 	–	Due	to	the	nature	of	the	railroad	business,	our operations	are	subject	to	extensive	federal,	state,	and	local	environmental	laws	and	regulations	concerning,	among other	things,	emissions	to	the	air;	discharges	to	waters;	handling,	storage,	transportation,	disposal	of	waste	and	other materials;	and	hazardous	material	or	petroleum	releases.	We	generate	and	transport	hazardous	and	non-hazardous waste	in	our	operations,	and	we	did	so	in	our	former	operations.	Environmental	liability	can	extend	to	previously	owned or	operated	properties,	leased	properties,	and	properties	owned	by	third	parties,	as	well	as	to	properties	we	currently own.	Environmental	liabilities	have	arisen	and	may	also	arise	from	claims	asserted	by	adjacent	landowners	or	other third	parties	in	toxic	tort	litigation.	We	have	been	and	may	be	subject	to	allegations	or	findings	that	we	have	violated,	or are	 strictly	 liable	 under,	 these	 laws	 or	 regulations.	 We	 currently	 have	 certain	 obligations	 at	 existing	 sites	 for investigation,	remediation	and	monitoring,	and	we	likely	will	have	obligations	at	other	sites	in	the	future.		Liabilities	for these	obligations	affect	our	estimate	based	on	our	experience	and,	as	necessary,	the	advice	and	assistance	of	our consultants.		However,	actual	costs	may	vary	from	our	estimates	due	to	any	or	all	of	several	factors,	including	changes to	environmental	laws	or	interpretations	of	such	laws,	technological	changes	affecting	investigations	and	remediation, the	participation	and	financial	viability	of	other	parties	responsible	for	any	such	liability	and	the	corrective	action	or change	to	corrective	actions	required	to	remediate	any	existing	or	future	sites.	We	could	incur	significant	costs	as	a result	of	any	of	the	foregoing,	and	we	may	be	required	to	incur	significant	expenses	to	investigate	and	remediate	known, unknown,	 or	 future	 environmental	 contamination,	 which	 could	 have	 a	 material	 adverse	 effect	 on	 our	 results	 of operations,	financial	condition,	and	liquidity.

We	May	Be	Affected	by	Climate	Change	and	Market	or	Regulatory	Responses	to	Climate	Change 	–	Climate	change, including	the	impact	of	global	warming,	could	have	a	material	adverse	effect	on	our	results	of	operations,	financial condition,	and	liquidity.		Restrictions,	caps,	taxes,	or	other	controls	on	emissions	of	greenhouse	gasses,	including	diesel exhaust,	could	significantly	increase	our	operating	costs.		Restrictions	on	emissions	could	also	affect	our	customers	that (a)	use	commodities	that	we	carry	to	produce	energy,	(b)	use	significant	amounts	of	energy	in	producing	or	delivering the	commodities	we

carry,	or	(c)	manufacture	or	produce	goods	that	consume	significant	amounts	of	energy	or	burn	fossil	fuels,	including chemical	producers,	farmers	and	food	producers,	and	automakers	and	other	manufacturers.		Significant	cost	increases, government	regulation,	or	changes	of	consumer	preferences	for	goods	or	services	relating	to	alternative	sources	of energy	or	emissions	reductions	could	materially	affect	the	markets	for	the	commodities	we	carry,	which	in	turn	could have	a	material	adverse	effect	on	our	results	of	operations,	financial	condition,	and	liquidity.		Government	incentives encouraging	the	use	of	alternative	sources	of	energy	could	also	affect	certain	of	our	customers	and	the	markets	for certain	 of	 the	 commodities	 we	 carry	 in	 an	 unpredictable	 manner	 that	 could	 alter	 our	 traffic	 patterns,	 including,	 for example,	the	impacts	of	ethanol	incentives	on	farming	and	ethanol	producers.	Finally,	we	could	face	increased	costs related	to	defending	and	resolving	legal	claims	and	other	litigation	related	to	climate	change	and	the	alleged	impact	of our	operations	on	climate	change.		Any	of	these	factors,	individually	or	in	operation	with	one	or	more	of	the	other factors,	 or	 other	 unforeseen	 impacts	 of	 climate	 change	 could	 reduce	 the	 amount	 of traffic	 we	 handle	 and	 have	 a material	adverse	effect	on	our	results	of	operations,	financial	condition,	and	liquidity.

Severe	 Weather	 Could	 Result in	 Significant	 Business Interruptions	 and	 Expenditures –	As	 a	 railroad	 with	 a	 vast network,	 we are exposed to severe	 weather conditions and other natural phenomena, including	 earthquakes, hurricanes,	fires,	floods,	mudslides	or	landslides,	extreme	temperatures,	and	significant	precipitation.	Line	outages	and other	interruptions	caused	by	these	conditions	can	adversely	affect	our	entire	rail	network	and	can	adversely	affect revenue,	 costs,	 and	 liabilities,	 which	 could	 have	 a	 material	 adverse	 effect	 on	 our	 results	 of	 operations,	 financial condition,	and	liquidity.

Strikes	or	Work	Stoppages	Could	Adversely	Affect	Our	Operations 	–	The	U.S.	Class	I	railroads	are	party	to	collective bargaining	agreements	with	various	labor	unions.	The	majority	of	our	employees	belong	to	labor	unions	and	are	subject to	 these	agreements.	Disputes	with	regard	 to	 the	 terms	of	 these	agreements	or	our	potential	 inability	 to	negotiate acceptable	contracts	with	these	unions	could	result	in,	among	other	things,	strikes,	work	stoppages,	slowdowns,	or lockouts,	which	could	cause	a	significant	disruption	of	our	operations	and	have	a	material	adverse	effect	on	our	results of	operations,	financial	condition,	and	liquidity.	Additionally,	future	national	labor	agreements,	or	renegotiation	of	labor agreements	or	provisions	of	labor	agreements,	could	compromise	our	service	reliability	or	significantly	increase	our costs	 for	 health	 care,	 wages,	 and	 other	 benefits,	 which	 could	 have	 a	 material	 adverse	 impact	 on	 our	 results	 of operations,	 financial	 condition,	 and	 liquidity. Labor	 disputes,	 work	 stoppages,	 slowdowns	 or	 lockouts	 at loading/unloading	facilities,	ports	or	other	transport	access	points	could	compromise	our	service	reliability	and	have	a material	adverse	impact	on	our	results	of	operations,	financial	condition,	and	liquidity.		Labor	disputes,	work	stoppages, slowdowns	or	lockouts	by	employees	of	our	customers	or	our	suppliers	could	compromise	our	service	reliability	and have	a	material	adverse	impact	on	our	results	of	operations,	financial	condition,	and	liquidity.

The	Availability	of	Qualified	Personnel	Could	Adversely	Affect	Our	Operations 	–	Changes	in	demographics,	training requirements,	 and	 the	 availability	 of	 qualified	 personnel	 could	 negatively	 affect	 our	 ability	 to	 meet	 demand	 for	 rail service.	Unpredictable	increases	in	demand	for	rail	services	and	a	lack	of	network	fluidity	may	exacerbate	such	risks, which	could	have	a	negative	impact	on	our	operational	efficiency	and	otherwise	have	a	material	adverse	effect	on	our results	of	operations,	financial	condition,	and	liquidity.

We	May	Be	Affected	 By	 Fluctuating	 Fuel	 Prices 	 –	 Fuel	 costs	 constitute	 a	 significant	 portion	 of	 our	 transportation expenses.	 Diesel	 fuel	 prices	 can	 be	 subject	 to	 dramatic	 fluctuations,	 and	 significant	 price	 increases	 could	 have	 a material	adverse	effect	on	our	operating	results.	Although	we	currently	are	able	to	recover	a	significant	amount	of	our fuel	expenses	from	our	customers	through	revenue	from	fuel	surcharges,	we	cannot	be	certain	that	we	will	always	be able	 to	 mitigate	 rising	 or	 elevated	 fuel	 costs	 through	 our	 fuel	 surcharges.	Additionally,	 future	 market	 conditions	 or legislative	 or	 regulatory	 activities	 could	 adversely	 affect	 our	 ability	 to	 apply	 fuel	 surcharges	 or	 adequately	 recover increased	fuel	costs	through	fuel	surcharges.	As	fuel	prices	fluctuate,	our	fuel	surcharge	programs	trail	such	fluctuations in	fuel	price	by	approximately	two	months,	and	may	be	a	significant	source	of	quarter-over-quarter	and	year-over-year volatility,	particularly	in	periods	of	rapidly	changing	prices.	International,	political,	and	economic	factors,	events	and conditions	affect	 the	volatility	of	 fuel	prices	and	supplies.	Weather	can	also	affect	 fuel	supplies	and	 limit	domestic refining	capacity.	A	severe	shortage	of,	or	disruption	to,	domestic	fuel	supplies	could	have	a	material	adverse	effect	on our	results	of	operations,	financial	condition,	and	liquidity.		Alternatively,	lower	fuel	prices	could	have	a	positive	impact on	 the	economy	by	 increasing	consumer	discretionary	spending	 that	potentially	could	 increase	demand	 for	various consumer	products	we	transport.	However,	lower	fuel	prices	could	have	a	negative	impact	on	other	commodities	we

transport,	such	as	coal,	frac	sand	and	crude	oil	shipments,	which	could	have	a	material	adverse	affect	on	our	results	of operations,	financial	condition,	and	liquidity.

We	Utilize	Capital	Markets	–	Due	to	the	significant	capital	expenditures	required	to	operate	and	maintain	a	safe	and efficient	railroad,	we	rely	on	the	capital	markets	to	provide	some	of	our	capital	requirements.		We	utilize	long-term	debt instruments,	 bank	 financing	 and	 commercial	 paper	 from	 time-to-time,	 and	 we	 pledge	 certain	 of	 our receivables.		Significant	instability	or	disruptions	of	the	capital	markets,	including	the	credit	markets,	or	deterioration	of our	 financial	 condition	 due	 to	 internal	 or	 external	 factors	 could	 restrict	 or	 prohibit	 our	 access	 to,	 and	 significantly increase	the	cost	of,	commercial	paper	and	other	financing	sources,	including	bank	credit	facilities	and	the	issuance	of long-term	debt,	including	corporate	bonds.	A	significant	deterioration	of	our	financial	condition	could	result	in	a	reduction of	our	credit	rating	to	below	investment	grade,	which	could	restrict,	or	at	certain	credit	levels	below	investment	grade may	prohibit	us,	from	utilizing	our	current	receivables	securitization	facility.	This	may	also	limit	our	access	to	external sources	of	capital	and	significantly	increase	the	costs	of	short	and	long-term	debt	financing.

A	Significant	Portion	of	Our	Revenue	Involves	Transportation	of	Commodities	to	and	from	International	Markets 	 – Although	revenues	from	our	operations	are	attributable	to	transportation	services	provided	in	the	U.S.,	a	significant portion	of	our	revenues	involves	the	transportation	of	commodities	to	and	from	international	markets,	including	Mexico and	 Southeast	Asia,	 by	 various	 carriers	 and,	 at	 times,	 various	 modes	 of	 transportation.	 Significant	 and	 sustained interruptions	of	trade	with	Mexico	or	countries	in	Southeast	Asia,	including	China,	could	adversely	affect	customers	and other	entities	 that,	directly	or	 indirectly,	purchase	or	rely	on	rail	 transportation	services	 in	 the	U.S.	as	part	of	 their operations,	and	any	such	 interruptions	could	have	a	material	adverse	effect	on	our	results	of	operations,	 financial condition	and	liquidity.	Any	one	or	more	of	the	following	could	cause	a	significant	and	sustained	interruption	of	trade	with Mexico	or	countries	in	Southeast	Asia:	(a)	a	deterioration	of	security	for	international	trade	and	businesses;	(b)	the adverse	impact	of	new	laws,	rules	and	regulations	or	the	interpretation	of	laws,	rules	and	regulations	by	government entities,	courts	or	regulatory	bodies,	including	taxing	authorities,	that	affect	our	customers	doing	business	in	foreign countries;	(c)	any	significant	adverse	economic	developments,	such	as	extended	periods	of	high	 inflation,	material disruptions	in	the	banking	sector	or	in	the	capital	markets	of	these	foreign	countries,	and	significant	changes	in	the valuation	of	the	currencies	of	these	foreign	countries	that	could	materially	affect	the	cost	or	value	of	imports	or	exports; (d)	shifts	in	patterns	of	international	trade	that	adversely	affect	import	and	export	markets;	and	(e)	a	material	reduction in	foreign	direct	investment	in	these	countries.

We	Are	Subject	to	Legislative,	Regulatory,	and	Legal	Developments	Involving	Taxes –	Taxes	are	a	significant	part	of our	expenses.		We	are	subject	to	U.S.	federal,	state,	and	foreign	income,	payroll,	property,	sales	and	use,	fuel,	and other	types	of	taxes.	Changes	in	tax	rates,	enactment	of	new	tax	laws,	revisions	of	tax	regulations,	and	claims	or litigation	with	taxing	authorities	could	result	in	substantially	higher	taxes	and,	therefore,	could	have	a	material	adverse effect	on	our	results	of	operations,	financial	condition,	and	liquidity.

We	Are	 Dependent	 on	 Certain	 Key	 Suppliers	 of	 Locomotives	 and	 Rail	 –	 Due to	 the	 capital	 intensive	 nature	 and sophistication	of	locomotive	equipment,	potential	new	suppliers	face	high	barriers	to	entry.		Therefore,	if	one	of	the domestic	suppliers	of	high	horsepower	locomotives	discontinues	manufacturing	locomotives	for	any	reason,	including bankruptcy	or	insolvency,	we	could	experience	significant	cost	increases	and	reduced	availability	of	the	locomotives	that are	 necessary	 for	 our	 operations.	 	Additionally,	 for	 a	 high	 percentage	 of	 our	 rail	 purchases,	 we	 utilize	 two	 steel producers	(one	domestic	and	one	international)	that	meet	our	specifications.		Rail	is	critical	to	our	operations	for	rail replacement	 programs,	 maintenance,	 and	 for	 adding	 additional	 network	 capacity,	 new	 rail	 and	 storage	 yards,	 and expansions	 of	 existing	 facilities.	 	 This	 industry	 similarly	 has	 high	 barriers	 to	 entry,	 and	 if	 one	 of	 these	 suppliers discontinues	operations	for	any	reason,	including	bankruptcy	or	insolvency,	we	could	experience	both	significant	cost increases	for	rail	purchases	and	difficulty	obtaining	sufficient	rail	for	maintenance	and	other	projects.

We	May	Be	Affected	by	Acts	of	Terrorism,	War,	or	Risk	of	War –	Our	rail	lines,	facilities,	and	equipment,	including	rail cars	carrying	hazardous	materials,	could	be	direct	targets	or	indirect	casualties	of	terrorist	attacks.	Terrorist	attacks,	or other	similar	events,	any	government	response	 thereto,	and	war	or	risk	of	war	may	adversely	affect	our	results	of operations,	financial	condition,	and	liquidity.	In	addition,	insurance	premiums	for	some	or	all	of	our	current	coverages could	increase	dramatically,	or	certain	coverages	may	not	be	available	to	us	in	the	future.

# Item	1B.	Unresolved	Staff	Comments

# None.

# Item	2.	Properties

We	employ	a	variety	of	assets	in	the	management	and	operation	of	our	rail	business.	Our	rail	network	covers	23	states in	the	western	two-thirds	of	the	U.S.

# 2014_UP_Annual_Report_System_Map.tif

# TRACK

Our	rail	network	includes	32,084	route	miles.		We	own	26,064	miles	and	operate	on	the	remainder	pursuant	to	trackage rights	or	leases.	The	following	table	describes	track	miles	at	December	31,	2015	and	2014.

|  | 2015 | 2014 |
| :--- | :--- | :--- |
| Route | 32,084 | 31,974 |
| Other\tmain\tline | 7,012 | 6,943 |
| Passing\tlines\tand\tturnouts | 3,235 | 3,197 |
| Switching\tand\tclassification\tyard\tlines | 9,108 | 9,058 |
| Total\tmiles | 51,439 | 51,172 |

# HEADQUARTERS	BUILDING

We	 own	 our	 headquarters	 building in	 Omaha,	 Nebraska.	 The facility	 has	 1.2	 million square feet	 of space for approximately	4,000	employees.

# HARRIMAN	DISPATCHING	CENTER

The	Harriman	Dispatching	Center	(HDC),	located	in	Omaha,	Nebraska,	is	our	primary	dispatching	facility.	It	is	linked	to regional	dispatching	and	locomotive	management	facilities	at	various	locations	along	our	network.	HDC	employees coordinate	 moves	 of	 locomotives	 and	 trains,	 manage	 traffic	 and	 train	 crews	 on	 our	 network,	 and	 coordinate interchanges	with	other	railroads.	Approximately	900	employees	currently	work	on-site	in	the	facility.	In	the	event	of	a disruption	of	operations	at	HDC	due	to	a	cyber	attack,	flooding	or	severe	weather	or	other	event,	we	maintain	the capability	to	conduct	critical	operations	at	back-up	facilities	in	different	locations.

# RAIL	FACILITIES

In	addition	to	our	track	structure,	we	operate	numerous	facilities,	including	terminals	for	intermodal	and	other	freight;	rail yards	for	building	trains	(classification	yards),	switching,	storage-in-transit	(the	temporary	storage	of	customer	goods	in rail	cars	prior	to	shipment)	and	other	activities;	offices	to	administer	and	manage	our	operations;	dispatching	centers	to direct	traffic	on	our	rail	network;	crew	quarters	to	house	train	crews	along	our	network;	and	shops	and	other	facilities	for fueling,	maintenance,	and	repair	of	locomotives	and	repair	and	maintenance	of	rail	cars	and	other	equipment.		The following	table	includes	the	major	yards	and	terminals	on	our	system:

# Major	Classification	Yards

North	Platte,	Nebraska

# Major	Intermodal	Terminals

ICTF	(Los	Angeles),	California

North	Little	Rock,	Arkansas Joliet	(Global	4),	Illinois Englewood	(Houston),	Texas East	Los	Angeles,	California Proviso	(Chicago),	Illinois DIT	(Dallas),	Texas Fort	Worth,	Texas Global	I	(Chicago),	Illinois Livonia,	Louisiana Marion	(Memphis),	Tennessee Roseville,	California Global	II	(Chicago),	Illinois Pine	Bluff,	Arkansas Mesquite,	Texas West	Colton,	California City	of	Industry,	California Neff	(Kansas	City),	Missouri Lathrop,	California

# RAIL	EQUIPMENT

Our	equipment	includes	owned	and	leased	locomotives	and	rail	cars;	heavy	maintenance	equipment	and	machinery; other	equipment	and	tools	in	our	shops,	offices,	and	facilities;	and	vehicles	for	maintenance,	transportation	of	crews, and	other	activities.	As	of	December	31,	2015,	we	owned	or	leased	the	following	units	of	equipment:

|  |  |  |  | Average |
| :--- | :--- | :--- | :--- | :--- |
| Locomotives | Owned | Leased | Total | Age\t(yrs.) |
| Multiple\tpurpose | 5,917 | 2,135 | 8,052 | 18.7 |
| Switching | 273 | 12 | 285 | 35.0 |
| Other | 70 | 57 | 127 | 36.6 |
| Total\tlocomotives | 6,260 | 2,204 | 8,464 | N/A |

|  |  |  |  | Average |
| :--- | :--- | :--- | :--- | :--- |
| Freight\tcars | Owned | Leased | Total | Age\t(yrs.) |
| Covered\thoppers | 12,693 | 15,189 | 27,882 | 20.2 |
| Open\thoppers | 7,272 | 3,464 | 10,736 | 29.0 |
| Gondolas | 5,856 | 3,674 | 9,530 | 25.2 |
| Boxcars | 3,147 | 4,432 | 7,579 | 32.9 |
| Refrigerated\tcars | 2,681 | 4,006 | 6,687 | 25.1 |
| Flat\tcars | 2,617 | 1,447 | 4,064 | 29.3 |
| Other | 33 | 352 | 385 | 22.2 |
| Total\tfreight\tcars | 34,299 | 32,564 | 66,863 | N/A |

|  |  |  |  | Average |
| :--- | :--- | :--- | :--- | :--- |
| Highway\trevenue\tequipment | Owned | Leased | Total | Age\t(yrs.) |
| Containers | 33,633 | 25,998 | 59,631 | 8.0 |
| Chassis | 22,086 | 26,837 | 48,923 | 9.6 |
| Total\thighway\trevenue\tequipment | 55,719 | 52,835 | 108,554 | N/A |

# CAPITAL	EXPENDITURES

Our	rail	network	requires	significant	annual	capital	investments	for	replacement,	improvement,	and	expansion.	These investments	enhance	safety,	support	the	transportation	needs	of	our	customers,	and	improve	our	operational	efficiency. Additionally,	we	add	new	locomotives	and	freight	cars	to	our	fleet	to	replace	older,	less	efficient	equipment,	to	support growth	and	customer	demand,	and to	reduce	our impact	on the	environment through the	acquisition	of	more fuel- efficient	and	low-emission	locomotives.

2015	Capital	Program	–	During	2015,	our	capital	program	totaled	$4.3	billion.	(See	the	cash	capital	expenditures	table in	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	Liquidity	and	Capital Resources,	Item	7.)

2016	 Capital	 Plan	 – In	 2016,	 we	 expect	 our	 capital	 plan	 to	 be	 approximately	 $3.75	 billion,	 which	 will	 include expenditures	for	PTC	of	approximately	$375	million	and	may	include	non-cash	investments.		We	may	revise	our	2016 capital	plan	if	business	conditions	warrant	or	if	new	laws	or	regulations	affect	our	ability	to	generate	sufficient	returns	on these	investments.		(See	discussion	of	our	2016	capital	plan	in	Management's	Discussion	and	Analysis	of	Financial Condition	and	Results	of	Operations	–	2016	Outlook,	Item	7.)

# OTHER

Equipment	 Encumbrances	 –	 Equipment	 with	 a	 carrying	 value	 of	 approximately	 $2.6	 billion	 and	 $2.8	 billion	 at December	 31,	 2015,	 and	 2014,	 respectively	 served	 as	 collateral	 for	 capital	 leases	 and	 other	 types	 of	 equipment obligations	 in	 accordance	 with	 the	 secured	 financing	 arrangements	 utilized	 to	 acquire	 or	 refinance	 such	 railroad equipment.

As	a	result	of	the	merger	of	Missouri	Pacific	Railroad	Company	(MPRR)	with	and	into	UPRR	on	January	1,	1997,	and pursuant	to	the	underlying	indentures	for	the	MPRR	mortgage	bonds,	UPRR	must	maintain	the	same	value	of	assets after	the	merger	in	order	to	comply	with	the	security	requirements	of	the	mortgage	bonds.	As	of	the	merger	date,	the value	of	the	MPRR	assets	that	secured	the	mortgage	bonds	was	approximately	$6.0	billion.	In	accordance	with	the terms	 of	 the	 indentures,	 this	 collateral	 value	 must	 be	 maintained	 during	 the	 entire	 term	 of	 the	 mortgage	 bonds irrespective	of	the	outstanding	balance	of	such	bonds.

Environmental	 Matters	 –	 Certain	 of	 our	 properties	 are	 subject to federal,	 state,	 and local laws	 and regulations governing	the	protection	of	the	environment.		(See	discussion	of	environmental	issues	in	Business	–	Governmental	and Environmental	Regulation,	Item	1,	and	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	–	Critical	Accounting	Policies	–	Environmental,	Item	7.)

# Item	3.	Legal	Proceedings

From	time	to	time,	we	are	involved	in	legal	proceedings,	claims,	and	litigation	that	occur	in	connection	with	our	business. We	routinely	assess	our	liabilities	and	contingencies	in	connection	with	these	matters	based	upon	the	latest	available information	 and,	 when	 necessary,	 we	 seek	 input	 from	 our	 third-party	 advisors	 when	 making	 these	 assessments. Consistent	 with	 SEC	 rules	 and	 requirements,	 we	 describe	 below	 material	 pending	 legal	 proceedings	 (other	 than ordinary	routine	litigation	incidental	to	our	business),	material	proceedings	known	to	be	contemplated	by	governmental authorities,	 other	 proceedings	 arising	 under	 federal,	 state,	 or	 local	 environmental	 laws	 and	 regulations	 (including governmental	proceedings	involving	potential	fines,	penalties,	or	other	monetary	sanctions	in	excess	of	$100,000),	and such	other	pending	matters	that	we	may	determine	to	be	appropriate.

# ENVIRONMENTAL	MATTERS

As	previously	reported	in	our	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2012,	the	Illinois Attorney	 General's	 Office	 notified	 UPRR	 on	 January	 14,	 2013,	 that	 it	 will	 seek	 a	 penalty	 against	 the	 Railroad	 for environmental	conditions	caused	by	its	predecessor	at	a	former	locomotive	fueling	facility	in	South	Pekin,	Illinois.	This former	 CNW	 facility	 discontinued	 fueling	 operations	 in	 the	 early	 1980s.	 Subsequent	 environmental	 investigation revealed	evidence	of	fuel	releases	to	soil	and	groundwater.	In	January	2007,	the	State	rejected	UPRR's	proposed compliance	commitment	agreement	and	responded	with	a	notice	of	intent	to	pursue	legal	action.	UPRR	continued	to perform	remedial	 investigations	under	 the	supervision	of	 the	 Illinois	EPA.	 In	June	2012,	 the	 Illinois	EPA	approved UPRR's	proposed	remedial	action	plan	for	the	site,	consisting	of	no	further	action	and	monitoring	for	a	period	of	ten years.	Subsequently,	the	State	notified	UPRR	that	it	would	seek	to	recover	a	civil	penalty,	and	during	early	negotiations, it	offered	to	settle	its	claim	for	$240,000.		UPRR	rejected	this	offer.		The	State	sued	UPRR	on	October	26,	2013,	in	the Circuit	Court	for	the	Tenth	Judicial	Circuit,	Tazewell	County,	Illinois.	Through	continued	settlement	negotiations,	the parties	reached	an	agreement	to	settle	this	matter	in	exchange	for	a	payment	by	UPRR	of	$100,000.		 A	final	agreement was	signed	by	the	parties	and	approved	by	the	Circuit	Court	and	UPRR	completed	payment	of	$100,000.

As	previously	reported	in	our	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2015,	a	punctured	tank car	resulted	in	an	accidental	release	of	sulfuric	acid	in	a	rail	yard	in	Herington,	Kansas	in	January,	2012.	The	acid	was released	on	the	ground	and	entered	a	creek	that	runs	adjacent	to	the	yard.	Environmental	remediation	at	the	site	is complete.	Despite	negotiations	with	the	federal	government,	the	Assistant	U.S.	Attorney	(District	of	Kansas)	filed	a criminal	charge	against	the	Railroad	on	March	30,	2015,	in	the	U.S.	District	Court	for	Kansas.	The	action	alleges	a misdemeanor	charge	for	negligent	violation	of	the	Clean	Water	Act.	The	penalty	range	wa s	$2,500	to	$200,000.	In addition,	the	federal	government	may	debar	the	facility	if	UPRR	were	convicted.	A	debarment	would	prevent	Herington Yard	from	participating	in	new	government	contract	work.		On	January	12,	2016,	the	federal	judge	in	the	U.S.	District Court	for	Kansas	dismissed	the	charge	against	the	Railroad.		The	EPA	is	considering	whether	to	appeal	the	case	or pursue	civil	penalties.		We	cannot	predict	the	ultimate	impact	of	this	proceeding	at	this	time,	but	the	proposed	penalty could	exceed	$100,000.

We	receive	notices	from	the	EPA	and	state	environmental	agencies	alleging	that	we	are	or	may	be	liable	under	federal or	state	environmental	laws	for	remediation	costs	at	various	sites	throughout	the	U.S.,	including	sites	on	the	Superfund National	Priorities	List	or	state	superfund	lists.	We	cannot	predict	the	ultimate	impact	of	these	proceedings	and	suits because	of	the	number	of	potentially	responsible	parties	involved,	the	degree	of	contamination	by	various	wastes,	the scarcity	and	quality	of	volumetric	data	related	to	many	of	the	sites,	and	the	speculative	nature	of	remediation	costs.

Information	 concerning	 environmental	 claims	 and	 contingencies	 and	 estimated	 remediation	 costs	 is	 set	 forth	 in Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	Critical	Accounting	Policies –	Environmental,	Item	7.

# OTHER	MATTERS

Antitrust	Litigation	-	As	we	reported	in	our	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2007,	20 rail	shippers	(many	of	whom	are	represented	by	the	same	law	firms)	filed	virtually	identical antitrust	lawsuits	in	various	federal	district	courts	against	us	and	four	other	Class	I	railroads	in	the	U.S.	Currently,	UPRR and	three	other	Class	I	railroads	are	the	named	defendants	in	the	lawsuit.	The	original	plaintiff	filed	the	first	of	these claims	in	the	U.S.	District	Court	in	New	Jersey	on	May	14,	2007.	The	number	of	complaints	reached	a	total	of	30. These	suits	allege	that	the	named	railroads	engaged	in	price-fixing	by	establishing	common	fuel	surcharges	for	certain rail	traffic.

In	addition	to	suits	filed	by	direct	purchasers	of	rail	transportation	services,	a	few	of	the	suits	involved	plaintiffs	alleging that	they	are	or	were	indirect	purchasers	of	rail	transportation	and	sought	to	represent	a	purported	class	of	indirect purchasers	of	rail	transportation	services	that	paid	fuel	surcharges.	These	complaints	added	allegations	under	state antitrust	and	consumer	protection	laws.	On	November	6,	2007,	the	Judicial	Panel	on	Multidistrict	Litigation	ordered	that all	of	the	rail	fuel	surcharge	cases	be	transferred	to	Judge	Paul	Friedman	of	the	U.S.	District	Court	in	the	District	of Columbia	 for	 coordinated	 or	 consolidated	 pretrial	 proceedings.	 Following	 numerous	 hearings	 and	 rulings,	 Judge Friedman	dismissed	the	complaints	of	the	indirect	purchasers,	which	the	indirect	purchasers	appealed.	On	April	16, 2010,	the	U.S.	Court	of	Appeals	for	the	District	of	Columbia	affirmed	Judge	Friedman's	ruling	dismissing	the	indirect purchasers'	claims	based	on	various	state	laws.

On	 June	 21,	 2012,	 Judge	 Friedman issued	 a	 decision that	 certified	 a	 class	 of	 plaintiffs	 with	 eight	 named	 plaintiff representatives.	The	decision	included	in	the	class	all	shippers	that	paid	a	rate-based	fuel	surcharge	to	any	one	of	the defendant	railroads	for	rate-unregulated	rail	transportation	from	July	1,	2003,	through	December	31,	2008.	This	was	a procedural	ruling,	which	did	not	affirm	any	of	the	claims	asserted	by	the	plaintiffs	and	does	not	address	the	ability	of	the railroad	defendants	to	disprove	the	allegations	made	by	the	plaintiffs.	On	July	5,	2012,	the	defendant	railroads	filed	a petition	with	the	U.S.	Court	of	Appeals	for	the	District	of	Columbia	requesting	that	the	court	review	the	class	certification ruling.	On	August	28,	2012,	a	panel	of	the	Circuit	Court	of	the	District	of	Columbia	referred	the	petition	to	a	merits	panel of	 the	 court	 to	 address	 the	 issues	 in	 the	 petition	 and	 to	 address	 whether	 the	 district	 court	 properly	 granted	 class certification.	The	Circuit	Court	heard	oral	arguments	on	May	3,	2013.	On	August	9,	2013,	the	Circuit	Court	vacated	the class	certification	decision	and	remanded	the	case	to	the	district	court	to	reconsider	the	class	certification	decision	in light	of	a	recent	Supreme	Court	case	and	incomplete	consideration	of	errors	in	the	expert	report	of	the	plaintiffs.	On October	 31,	 2013,	 Judge	 Friedman	 approved	 a	 schedule	 agreed	 to	 by	 all	 parties	 for	 consideration	 of	 the	 class certification	issue	on	remand.

On	October	2,	2014,	the	plaintiffs	informed	Judge	Friedman	that	their	economic	expert	had	a	previously	undisclosed conflict	of	interest.	Judge	Friedman	ruled	on	November	26,	2014,	that	the	plaintiffs	had	until	April	1,	2015,	to	file	a supplemental	expert	report	to	support	their	motion	for	class	certification.	The	plaintiffs	filed	their	supplemental	expert report	on	April	1,	2015.	Judge	Friedman	issued	a	scheduling	order	on	June	19,	2015,	scheduling	a	class	certification hearing	for	November	2,	2015.	Judge	Friedman	then	vacated	the	hearing	date	in	an	Order	on	September	28,	2015 because	 of	 the	 potential	 impact	 resulting	 from	 the	 decision	 of	 the	 U.S.	 Supreme	 Court case,	Tyson	 Foods v. Bouaphakeo,	related	to	class	action	certification	and	damages,	which	w as	heard	on	November	10,	2015.	The	Order requires	the	parties	to	file	a	joint	schedule	and	briefing	statement	within	fourteen	days	after	the	U.S.	Supreme	Court decision	in	the	Tyson	Foods	matter,	which	is	expected	to	be	issued	during	the	first	half	of	2016.

As	we	reported	in	our	Current	Report	on	Form	8-K,	filed	on	June	10,	2011,	the	Railroad	received	a	complaint	filed	in	the U.S.	District	Court	for	the	District	of	Columbia	on	June	7,	2011,	by	Oxbow	Carbon	&	Minerals	LLC	and	related	entities (Oxbow).	The	complaint	named	the	Railroad	and	one	other	U.S.	Class	I	Railroad	as	defendants	and	alleged	that	the named	railroads	engaged	in	price-fixing	and	monopolistic	practices	in	connection	with	fuel	surcharge	programs	and pricing	of	shipments	of	certain	commodities,	including	coal	and	petroleum	coke.	The	complaint	sought	injunctive	relief and	payment	of	damages	of	over	$30	million,	and	other	unspecified	damages,	including	treble	damages.	Some	of	the allegations	in	the	complaint	were	addressed	in	the	existing	fuel	surcharge	litigation	referenced	above.	The	complaint also	included	additional	unrelated	allegations	regarding	alleged	limitations	on	competition	for	shipments	of	Oxbow's commodities.	Judge	Friedman,	who	presides	over	the	fuel	surcharge	matter	described	above,	also	presides	over	this matter.	On	February	26,	2013,	Judge	Friedman	granted	the	defendants'	motion	to	dismiss	Oxbow's	complaint	for	failure to	state	properly	a	claim	under	the	antitrust	laws.	However,	the	dismissal	was	without	prejudice	to	refile	the	complaint. Judge	Friedman	approved	a	schedule	that	allowed	Oxbow	to	file	a	revised	complaint,	which	Oxbow	filed	on	May	1, 2013.	The	amended	complaint	alleges	 that	UPRR	and	one	other	Class	 I	railroad	violated	Sections	1	and	2	of	 the Sherman	Antitrust	Act	and	that	UPRR	also	breached	a	tolling	agreement	between	Oxbow	and	UPRR.	Oxbow	claims that	it	paid	more	than	$50	million	in	wrongfully	imposed	fuel	surcharges.	UPRR	and	the	other	railroad	filed	separate motions	to	dismiss	the	Oxbow	revised	complaint	on	July	1,	2013.	Judge	Friedman	heard	oral	arguments	on	the	motions to	dismiss	filed	by	UPRR	and	the	other	railroad	on	January	8,	2015.	Judge	Friedman	denied	the	motions	to	dismiss	on February	24,	2015.	This	was	a	procedural	ruling,	which	did	not	affirm	any	of	the	claims	asserted	by	Oxbow	and	does not	affect	the	ability	of	the	railroad	defendants	to	disprove	the	allegations	made	by	Oxbow.	UPRR	filed	its	answer	to Oxbow's	complaint	on	March	24,	2015,	and	the	parties	have	commenced	discovery.

We	deny	the	allegations	that	our	fuel	surcharge	programs	violate	the	antitrust	laws	or	any	other	laws.	We	believe	that these	lawsuits	are	without	merit,	and	we	will	vigorously	defend	our	actions.	Therefore,	we	currently	believe	that	these matters	will	not	have	a	material	adverse	effect	on	any	of	our	results	of	operations,	financial	condition,	and	liquidity.

# Item	4.	Mine	Safety	Disclosures

Not	applicable.

# Executive	Officers	of	the	Registrant	and	Principal	Executive	Officers	of	Subsidiaries

The	Board	of	Directors	typically	elects	and	designates	our	executive	officers	on	an	annual	basis	at	the	board	meeting held	in	conjunction	with	the	Annual	Meeting	of	Shareholders,	and	they	hold	office	until	their	successors	are	elected. Executive	 officers	 also	 may	 be	 elected	 and	 designated	 throughout	 the	 year,	 as	 the	 Board	 of	 Directors	 considers appropriate.	There	 are	 no	 family	 relationships	 among	 the	 officers,	 nor	 is	 there	 any	 arrangement	 or	 understanding between	any	officer	and	any	other	person	pursuant	to	which	the	officer	was	selected.	The	following	table	sets	forth certain	information	current	as	of	February	5,	2016,	relating	to	the	executive	officers.

|  |  |  | Business |
| :--- | :--- | :--- | :--- |
|  |  |  | Experience\tDuring |
| Name | Position | Age | Past\tFive\tYears |
| Lance\tM.\tFritz | Chairman,\tPresident\tand\tChief\tExecutive\tOfficer\tof\tUPC\tand | 53 | [1] |
|  | the\tRailroad |  |  |
| Robert\tM.\tKnight,\tJr. | Executive\tVice\tPresident\t–\tFinance\tand\tChief\tFinancial | 58 | Current\tPosition |
|  | Officer\tof\tUPC\tand\tthe\tRailroad |  |  |
| Eric\tL.\tButler | Executive\tVice\tPresident\t–\tMarketing\tand\tSales\tof\tthe | 55 | [2] |
|  | Railroad |  |  |
| Diane\tK.\tDuren | Executive\tVice\tPresident\tand\tCorporate\tSecretary\tof\tUPC | 56 | [3] |
|  | and\tthe\tRailroad |  |  |
| Todd\tM.\tRynaski | Vice\tPresident\tand\tController\tof\tUPC\tand\tChief\tAccounting | 45 | [4] |
|  | Officer\tand\tController\tof\tthe\tRailroad |  |  |
| Cameron\tA.\tScott | Executive\tVice\tPresident\t–\tOperations\tof\tthe\tRailroad | 53 | [5] |

[1] On	July	30,	2015,	Mr.	Fritz	was	named	Chairman	of	the	Board	of	UPC	and	the	Railroad	effective	October	1,	2015.	Mr.	Fritz	was	elected President	and	Chief	Executive	Officer	of	UPC	and	the	Railroad	effective	February	5,	2015.	Previously,	Mr.	Fritz	was	President	and	Chief Operating	Officer	of	the	Railroad	effective	February	6,	2014,	Executive	Vice	President	–	Operations	of	the	Railroad	effective	September 1,	2010,	and	Vice	President	–	Operations	of	the	Railroad	effective	January	1,	2010.

[2] Mr.	Butler	was	elected	to	his	current	position	effective	March	15,	2012.	He	previously	was	Vice	President	and	General	Manager	- Industrial	Products	effective	April	14,	2005.

[3] Ms.	Duren	was	elected	Executive	Vice	President	of	UPC	and	the	Railroad	effective	October	1,	2012.	In	addition,	Ms.	Duren	was	elected Corporate	Secretary	effective	March	1,	2013.	She	previously	was	Vice	President	and	General	Manager	-	Chemicals	effective	August	1, 2006.

[4] Mr.	Rynaski	was	elected	Vice	President	and	Controller	of	UPC	and	Chief	Accounting	Officer	and	Controller	of	the	Railroad	effective September	1,	2015.	He	previously	was	Assistant	Vice	President	–	Accounting	of	the	Railroad	effective	January	1,	2014,	and	Assistant Vice	President	–	Financial	Reporting	and	Analysis	effective	April	1,	2011,	and	General	Director	–	Information	Technologies	effective September	1,	2008.

[5] Mr.	Scott	was	elected	 to	his	current	position	effective	February	6,	2014.	He	previously	was	Vice	President	Network	Planning	and Operations	effective	June	30,	2012,	Regional	Vice	President	–	Western	Region	effective	April	1,	2012,	and	Assistant	Vice	President Operations	–	Western	Region	effective	February	16,	2009.

# Item	 5.	Market	for	the	Registrant's	Common	Equity,	Related	Stockholder	Matters,	and Issuer	Purchases	of

# Equity	Securities

Our	common	stock	is	traded	on	the	New	York	Stock	Exchange	(NYSE)	under	the	symbol	"UNP".		The	following	table presents	the	dividends	declared	and	the	high	and	low	prices	of	our	common	stock	for	each	of	the	indicated	quarters.	All amounts	are	retroactively	adjusted	to	reflect	the	June	6,	2014	stock	split.

| 2015	-	Dollars	Per	Share | Q1 | Q2 | Q3 | Q4 |
| :--- | :--- | :--- | :--- | :--- |
| Dividends\nCommon\tstock\tprice: | $0.55 | $0.55 | $0.55 | $0.55 |
| \t\t\t\tHigh | 124.52 | 112.44 | 99.71 | 98.28 |
| \t\t\t\tLow | 106.75 | 94.91 | 79.31 | 74.78 |

| 2014	-	Dollars	Per	Share | Q1 | Q2 | Q3 | Q4 |
| :--- | :--- | :--- | :--- | :--- |
| Dividends | $0.455 | $0.455 | $0.50 | $0.50 |
| Common\tstock\tprice: |  |  |  |  |
| \t\t\t\tHigh | 95.24 | 102.96 | 110.26 | 123.61 |
| \t\t\t\tLow | 82.49 | 90.36 | 96.76 | 96.17 |

At	January	29,	2016,	there	were	846,414,350	shares	of	common	stock	outstanding	and	 32,209		common	shareholders of	record.	On	that	date,	the	closing	price	of	the	common	stock	on	the	NYSE	was	$72.00.	We	paid	dividends	to	our common	shareholders	during	each	of	the	past	116	years.	We	declared	dividends	totaling	$1,906	million	in	2015	and $1,714	million	in	2014.	We	are	subject	to	certain	restrictions	regarding	retained	earnings	with	respect	to	the	payment	of cash	dividends	to	our	shareholders.	The	amount	of	retained	earnings	available	for	dividends	decreased	to	$13.6	billion at	December	31,	2015,	from	$15.4	billion	at	December	31,	2014.		(See	discussion	of	this	restriction	in	Management's Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	Liquidity	and	Capital	Resources,	 Item 7.)		We	do	not	believe	the	restriction	on	retained	earnings	will	affect	our	ability	to	pay	dividends,	and	we	currently	expect to	pay	dividends	in	2016.

Comparison	Over	One-	and	Three-Year	Periods 	–	The	following	table	presents	the	cumulative	total	shareholder returns,	assuming	reinvestment	of	dividends,	over	one-	and	three-year	periods	for	the	Corporation	(UNP),	a	peer	group index	(comprised	of	CSX	Corporation	and	Norfolk	Southern	Corporation),	the	Dow	Jones	Transportation	Index	(DJ Trans),	and	the	Standard	&	Poor's	500	Stock	Index	(S&P	500).

| Period | UNP | Peer	Group | DJ	Trans | S&P	500 |
| :--- | :--- | :--- | :--- | :--- |
| 1\tYear\t(2015) | (32.9)% | (23.9)% | (16.8)% | 1.4\t% |
| 3\tYear\t(2013\t-\t2015) | 32.2 | 43.9 | 47.2 | 52.5 |

Five-Year	Performance	Comparison	–	The following	 graph	 provides	 an	 indicator	 of	 cumulative	 total	 shareholder returns	for	the	Corporation	as	compared	to	the	peer	group	index	(described	above),	the	DJ	Trans,	and	the	S&P	500. The	graph	assumes	that	$100	was	invested	in	the	common	stock	of	Union	Pacific	Corporation	and	each	index	on December	31,	2010	and	that	all	dividends	were	reinvested.	The	information	below	is	historical	in	nature	and	is	not necessarily	indicative	of	future	performance.

# 5_Year_Cumulative_Return_2014.tif

Purchases	 of	 Equity	 Securities	–	During	2015,	we	repurchased	36,921,641	shares	of	our	common	s tock	 at	 an average	price	of	$99.16.	The	following	table	presents	common	stock	repurchases	during	each	month	for	the	fourth quarter	of	2015:

| Period | Total	Number	of<br>Shares<br>Purchased	[a] | Average	Price<br>Paid	Per	Share | Total	Number	of	Shares<br>Purchased	as	Part	of	a<br>Publicly	Announced<br>Plan	or	Program	[b] | Maximum	Number	of		Shares<br>Remaining	Under	the	Plan	or<br>Program	[b] |
| :--- | :--- | :--- | :--- | :--- |
| Oct.\t1\tthrough\tOct.\t31 | 3,247,731 | $92.98 | 3,221,153 | 56,078,192 |
| Nov.\t1\tthrough\tNov.\t30 | 2,325,865 | 86.61 | 2,322,992 | 53,755,200 |
| Dec.\t1\tthrough\tDec.\t31 | 1,105,389 | 77.63 | 1,102,754 | 52,652,446 |
| Total | 6,678,985 | $88.22 | 6,646,899 | N/A |

[a] Total	number	of	shares	purchased	during	the	quarter	includes	approximately	32,086	shares	delivered	or	attested	to	UPC	by	employees to	pay	stock	option	exercise	prices,	satisfy	excess	tax	withholding	obligations	for	stock	option	exercises	or	vesting	of	retention	units,	and pay	withholding	obligations	for	vesting	of	retention	shares.

[b] Effective	January	1,	2014,	our	Board	of	Directors	authorized	 the	repurchase	of	up	 to	120	million	shares	of	our	common	stock	by December	31,	2017.	These	repurchases	may	be	made	on	the	open	market	or	through	other	transactions.	Our	management	has	sole discretion	with	respect	to	determining	the	timing	and	amount	of	these	transactions.

# Item	6.	Selected	Financial	Data

The	following	table	presents	as	of,	and	for	the	years	ended,	December	31,	our	selected	financial	data	for	each	of	the last	five	years.	The	selected	financial	data	should	be	read	in	conjunction	with	Management's	Discussion	and	Analysis	of Financial	Condition	and	Results	of	Operations,	Item	7,	and	with	the	Financial	Statements	and	Supplementary	Data, Item	8.	The	information	below	is	historical	in	nature	and	is	not	necessarily	indicative	of	future	financial	condition	or results	of	operations.

| Carloads,	Employee	Statistics,	and	Ratios | 2015 | 2014 | 2013 | 2012 | 2011 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYear\tEnded\tDecember\t31 |  |  |  |  |  |
| Operating\trevenues\t[a] | $21,813 | $23,988 | $21,963 | $20,926 | $19,557 |
| Operating\tincome | 8,052 | 8,753 | 7,446 | 6,745 | 5,724 |
| Net\tincome | 4,772 | 5,180 | 4,388 | 3,943 | 3,292 |
| Earnings\tper\tshare\t-\tbasic\t[b] | 5.51 | 5.77 | 4.74 | 4.17 | 3.39 |
| Earnings\tper\tshare\t-\tdiluted\t[b] | 5.49 | 5.75 | 4.71 | 4.14 | 3.36 |
| Dividends\tdeclared\tper\tshare\t[b] | 2.20 | 1.91 | 1.48 | 1.245 | 0.965 |
| Cash\tprovided\tby\toperating\tactivities | 7,344 | 7,385 | 6,823 | 6,161 | 5,873 |
| Cash\tused\tin\tinvesting\tactivities | (4,476) | (4,249) | (3,405) | (3,633) | (3,119) |
| Cash\tused\tin\tfinancing\tactivities | (3,063) | (2,982) | (3,049) | (2,682) | (2,623) |
| Cash\tused\tfor\tcommon\tshare\trepurchases | (3,465) | (3,225) | (2,218) | (1,474) | (1,418) |
| At\tDecember\t31 |  |  |  |  |  |
| Total\tassets\t[c] | $54,600 | $52,372 | $49,410 | $46,842 | $44,742 |
| Long-term\tobligations\t[c]\t[d] | 30,692 | 27,419 | 24,395 | 23,847 | 22,848 |
| Debt\tdue\tafter\tone\tyear\t[c] | 13,607 | 10,952 | 8,820 | 8,754 | 8,650 |
| Common\tshareholders'\tequity | 20,702 | 21,189 | 21,225 | 19,877 | 18,578 |
| Additional\tData |  |  |  |  |  |
| Freight\trevenues\t[a] | $20,397 | $22,560 | $20,684 | $19,686 | $18,508 |
| Revenue\tcarloads\t(units)\t(000) | 9,062 | 9,625 | 9,022 | 9,048 | 9,072 |
| Operating\tratio\t(%)\t[e] | 63.1 | 63.5 | 66.1 | 67.8 | 70.7 |
| Average\temployees\t(000) | 47.5 | 47.2 | 46.4 | 45.9 | 44.9 |
| Financial\tRatios\t(%) |  |  |  |  |  |
| Debt\tto\tcapital\t[c]\t[f] | 40.7 | 35.0 | 31.0 | 31.0 | 32.3 |
| Return\ton\taverage\tcommon\n\t\t\t\t\tshareholders'\tequity\t[g] | 22.8 | 24.4 | 21.4 | 20.5 | 18.1 |

[a] Includes	fuel	surcharge	revenue	of	$1.3	billion,	$2.8	billion,	$2.6	billion,	$2.6	billion,	and	$2.2	billion	for	2015,	 2014,	 2013,	 2012,	and 2011,	respectively,	which	partially	offsets	increased	operating	expenses	for	fuel.	(See	further	discussion	in	Management's	Discussion and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	Results	of	Operations	–	Operating	Revenues,	Item	7.)

[b] Earnings	per	share	and	dividends	declared	per	share	are	retroactively	adjusted	to	reflect	the	June	6,	2014	stock	split.

[c] Total	assets,	long-term	obligations,	debt	due	after	one	year,	and	debt	to	capital	are	retroactively	adjusted	 to	reflect	 the	adoption	of accounting	standard	updates	on	deferred	debt	issuance	costs	and	deferred	taxes.	(See	further	discussion	in	Financial	Statements	and Supplementary	Data–	Accounting	Pronouncements,	Item	8.)

[d] Long-term	obligations	is	determined	as	follows:	total	liabilities	less	current	liabilities.

[e] Operating	ratio	is	defined	as	operating	expenses	divided	by	operating	revenues.

[f] Debt	to	capital	is	determined	as	follows:	total	debt	divided	by	total	debt	plus	common	shareholders'	equity.

[g] Return	on	average	common	shareholders'	equity	is	determined	as	follows:	Net	income	divided	by	average	common	shareholders'	equity.

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

The	following	discussion	should	be	read	in	conjunction	with	the	Consolidated	Financial	Statements	and	applicable	notes to	the	Financial	Statements	and	Supplementary	Data,	Item	8,	and	other	information	in	this	report,	including	Risk	Factors set	forth	in	Item	1A	and	Critical	Accounting	Policies	and	Cautionary	Information	at	the	end	of	this	Item	7.

The	Railroad,	along	with	its	subsidiaries	and	rail	affiliates,	is	our	one	reportable	business	segment.	Although	revenue	is analyzed	by	commodity,	we	analyze	the	net	financial	results	of	the	Railroad	as	one	segment	due	to	the	integrated nature	of	the	rail	network.

# EXECUTIVE	SUMMARY

· Safety	–	During	2015,	we	continued	our	focus	on	safety	to	reduce	risk	and	eliminate	incidents	for	our	employees, our	 customers	 and	 the	 public.	 We	 achieved	 our	 best	 ever	 reportable	 personal	 injury	 incidents	 per	 200,000 employee-hours	of	0.87.	In	addition,	we	finished	2015	with	a	3%	improvement	in	our	crossing	incident	rate	per million	train	miles	compared	to	the	prior	year.	These	results	demonstrate	our	employees'	dedication	to	our	safety initiatives	and	our	efforts	to	further	engage	the	workforce	through	programs	such	as	Courage	to	Care,	Total	Safety Culture,	and	UP	Way	(our	continuous	improvement	culture).

· Financial	Performance	–	In	2015,	we	generated	operating	income	of	$8.1	billion,	an	8%	decrease	compared	to	a record-setting	2014.		Despite	a	6%	decrease	in	carloads,	it	was	our	second-best	financial	performance	ever.	 Core pricing	 gains	of	 3.7%,	 productivity,	 and	 improved	 network	 operations	 partially	 offset	 the	 lower	 volumes.	 	 Our operating	ratio	for	2015	of	63.1%	was	an	all-time	best,	improving	from	last	year's	operating	ratio	of	63.5%.		Net income	of	$4.8	billion	translated	into	earnings	of	$5.49	per	diluted	share	for	2015.

· Freight	Revenues	–	Our	freight	revenues	declined	10%	year-over-year	to	$20.4	billion	as	a	result	of	lower	volume levels	in	five	of	our	six	commodity	groups	and	overall	lower	fuel	surcharge	revenue,	partially	offset	by	core	pricing gains.	Volume	declines	in	coal,	international	intermodal,	frac	sand,	metals,	crude	oil,	and	grain	shipments	more than	offset	volume	growth	in	domestic	intermodal,	finished	vehicles,	automotive	parts,	industrial	chemicals	and plastics	shipments.

· Network	Operations		–	Significant	improvements	were	made	in	our	operating	and	service	metrics,	as	our	average train	speed,	as	reported	to	the	AAR,	increased	6%	in	2015	compared	to	2014,	and	our	average	terminal	dwell	time decreased	3%,	both	reflecting	the	impact	of	lower	volumes	and	improved	network	fluidity.

· Fuel	Prices	–	Our	average	price	per	gallon	of	diesel	fuel	in	2015	decreased	38%	from	the	average	price	in	2014, as	both	crude	oil	and	 the	conversion	spreads	between	crude	oil	and	diesel	declined	 in	2015.	The	 lower	price decreased	operating	expenses	by	$1.2	billion	(excluding	any	impact	from	year-over-year	volume	declines).	Gross- ton	 miles	 decreased	 9%,	 which	 also	 decreased	 fuel	 expense.	 	 These	 declines	 were	 partially	 offset	 by	 a	 1% increase	 in	 our	 fuel	 consumption	 rate,	 computed	 as	 gallons	 of	 fuel	 consumed	 divided	 by	 gross	 ton-miles	 in thousands.

· Free	Cash	Flow	–	Cash	generated	by	operating	activities	totaled	$7.3	billion,	yielding	free	cash	flow	of 	$524	million after	reductions	of	$4.5	billion	for	cash	used	in	investing	activities	and	a	15%	increase	in	dividends	declared	per share.	In	2015,	the	timing	of	the	dividend	declaration	and	payable	dates	was	aligned	to	occur	within	the	same quarter,	which	resulted	in	two	payments	in	the	first	quarter	of	2015.	Free	cash	flow	is	defined	as	cash	provided	by operating	activities	less	cash	used	in	investing	activities	and	dividends	paid.

Free	cash	flow	is	not	considered	a	financial	measure	under	accounting	principles	generally	accepted	in	the	U.S. (GAAP)	by	SEC	Regulation	G	and	Item	10	of	SEC	Regulation	S-K	and	may	not	be	defined	and	calculated	by	other companies	in	the	same	manner.	We	believe	free	cash	flow	is	important	to	management	and	investors	in	evaluating our	financial	performance	and	measures	our	ability	to	generate	cash	without	additional	external	financings.	Free cash	flow	should	be	considered	in	addition

to,	rather	than	as	a	substitute	for,	cash	provided	by	operating	activities.	The	following	table	reconciles	cash	provided by	operating	activities	(GAAP	measure)	to	free	cash	flow	(non-GAAP	measure):

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Cash\tprovided\tby\toperating\tactivities | $7,344 | $7,385 | $6,823 |
| Cash\tused\tin\tinvesting\tactivities | (4,476) | (4,249) | (3,405) |
| Dividends\tpaid | (2,344) | (1,632) | (1,333) |
| Free\tcash\tflow | $524 | $1,504 | $2,085 |

· Safety	–	Operating	a	safe	railroad	benefits	all	our	constituents:	our	employees,	customers,	shareholders	and	the communities	 we	 serve.	 	 We	 will	 continue	 using	 a	 multi-faceted	 approach	 to	 safety,	 utilizing	 technology,	 risk assessment,	 quality	 control,	 training	 and	 employee	 engagement,	 and	 targeted	 capital	 investments.	 	 We	 will continue	 using	 and	 expanding	 the	 deployment	 of	 Total	 Safety	 Culture	 and	 Courage	 to	 Care	 throughout	 our operations,	which	allows	us	to	identify	and	implement	best	practices	for	employee	and	operational	safety.		We	will continue	our	efforts	to	increase	detection	of	rail	defects;	improve	or	close	crossings;	and	educate	the	public	and	law enforcement	 agencies	 about	 crossing	 safety	 through	 a	 combination	 of	 our	 own	 programs	 (including	 risk assessment	strategies),	industry	programs	and	local	community	activities	across	our	network.

· Network	Operations	–	In	2016,	we	will	continue	to	align	resources	with	customer	demand,	continue	to	improve network	performance,	and	maintain	our	surge	capability.

· Fuel	Prices	–	With	the	dramatic	drop	in	fuel	prices	 during	2015,		fuel	price	projections	continue	to	be	uncertain	in the	current	environment.	We	again	could	see	volatile	fuel	prices	during	the	year,	as	they	are	sensitive	to	global	and U.S.	domestic	demand,	refining	capacity,	geopolitical	events,	weather	conditions	and	other	 factors.	 	As	prices fluctuate,	there	will	be	a	timing	impact	on	earnings,	as	our	fuel	surcharge	programs	trail	fluctuations	in	fuel	price	by approximately	two	months.

Continuing	lower	fuel	prices	could	have	a	positive	impact	on	the	economy	by	increasing	consumer	discretionary spending	that	potentially	could	increase	demand	for	various	consumer	products	that	we	transport.	Alternatively, lower	fuel	prices	will	likely	have	a	negative	impact	on	other	commodities	such	as	coal,	frac	sand	and	crude	oil shipments.

· Capital	Plan	–	In	2016,	we	expect	our	capital	plan	to	be	 approximately	$3.75	billion,	including	expenditures	for PTC,	230	locomotives	and	450	freight	cars .	The	capital	plan	may	be	revised	if	business	conditions	warrant	or	if	new laws	or	regulations	affect	our	ability	to	generate	sufficient	returns	on	these	investments.	(See	further	discussion	in this	Item	7	under	Liquidity	and	Capital	Resources	–	Capital	Plan.)

· Financial	Expectations	–	Economic	conditions	in	many	of	our	market	sectors	continue	to	drive	uncertainty	with respect	to	our	volume	levels.		We	expect	volumes	to	be	down	slightly	in	2016	compared	to	2015,	but	will	depend	on the	overall	economy	and	market	conditions.		The	strong	U.S.	dollar	and	historic	low	commodity	prices	could	also drive	continued	volatility.		One	of	the	biggest	uncertainties	is	the	outlook	for	energy	markets,	which	will	bring	both challenges	and	opportunities.		In	the	current	environment,	we	expect	continued	margin	improvement	driven	by continued	 pricing	 opportunities,	 ongoing	 productivity	 initiatives,	 and	 the	 ability	 to	 leverage	 our	 resources and	strengthen	our	franchise.	Over	the	longer	term,	we	expect	the	overall	U.S.	economy	to	continue	to	improve	at	a modest	pace,	with	some	markets	outperforming	others.

# RESULTS	OF	OPERATIONS

# Operating	Revenues

|  |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Freight\trevenues | $20,397 | $22,560 | $20,684 | (10)% | 9\t% |
| Other\trevenues | 1,416 | 1,428 | 1,279 | (1)% | 12\t% |
| Total | $21,813 | $23,988 | $21,963 | (9)% | 9\t% |

We	 generate	 freight	 revenues	 by	 transporting	 freight	 or	 other	 materials	 from	 our	 six	 commodity	 groups.	 Freight revenues	 vary	 with	 volume	 (carloads)	 and	 average	 revenue	 per	 car	 (ARC).	 Changes	 in	 price,	 traffic	 mix	 and	 fuel surcharges	 drive	 ARC.	 We	 provide	 some	 of	 our	 customers	 with	 contractual	 incentives	 for	 meeting	 or	 exceeding specified	 cumulative	 volumes	 or	 shipping	 to	 and	 from	 specific	 locations,	 which	 we	 record	 as	 reductions	 to	 freight revenues	based	on	the	actual	or	projected	future	shipments.	We	recognize	freight	revenues	as	shipments	move	from origin	to	destination.	We	allocate	freight	revenues	between	reporting	periods	based	on	the	relative	transit	time	in	each reporting	period	and	recognize	expenses	as	we	incur	them.

Other	revenues	include	revenues	earned	by	our	subsidiaries,	revenues	from	commuter	rail	operations	that	we	manage, accessorial	revenues,	which	we	earn	when	customers	retain	equipment	owned	or	controlled	by	us	or	when	we	perform additional	services	such	as	switching	or	storage,	and	miscellaneous	contract	revenue.	We	recognize	other	revenues	as we	perform	services	or	meet	contractual	obligations.

Freight	revenues	from	five	of	our	six	commodity	groups	decreased	in	2015	compared	to	2014	 due	to	a	6%	decline	in carloadings	 and	lower	 fuel	 surcharge	 revenue,	 partially	 offset	 by	 core	 pricing	 gains.		 Volume	declines	 in	 coal, international	intermodal,	frac	sand,	metals,	crude	oil,	and	grain	shipments	more	than	offset	volume	growth	in	domestic intermodal,	finished	vehicles,	automotive	parts,	industrial	chemicals	and	plastics	shipments.

Freight	revenues	from	all	six	commodity	groups	increased	during	2014	compared	to	2013	driven	by	7%	volume	growth and	core	pricing	gains	of	2.5%.		Volume	growth	from	grain,	frac	sand,	rock,	and	intermodal	(domestic	and	international) shipments	offset	declines	in	crude	oil.

Our	fuel	surcharge	programs	generated	freight	revenues	of	$ 1.3	billion,	$2.8	billion,	and	$2.6	billion	in	2015,	2014,	and 2013,	respectively.	Fuel	surcharge	revenue	in	2015	decreased	$1.5	billion	as	a	result	of	a	38%	decrease	in	fuel	price and	 a	 6%	 reduction	 in	 carloadings.	 	 Fuel	 surcharge	revenue	in	 2014	 increased	 6%	based	on	 our	 7%	 carloadings increase.

In	2015,	other	revenue	decreased	from	2014	due	to	lower	revenues	at	our	subsidiaries,	primarily	those	that	broker intermodal	 and	 automotive	services,	partially	offset	by	higher	accessorial	revenue	driven	by increased	revenue for container	usage	and	demurrage	fees.

In	2014,	other	revenue	increased	from	2013	due	to	higher	revenues	at	our	subsidiaries,	primarily	those	that	broker intermodal	 and	 automotive	 services,	 accessorial	 revenue	 driven	 by	 increased	 volume	 and	 per	 diem	 revenue	 for container	usage	(previously	included	in	automotive	freight	revenue).

The following tables	 summarize the	 year-over-year	 changes in freight revenues, revenue	 carloads,	 and	 ARC	 by commodity	type:

| Freight	Revenues |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Agricultural\tProducts | $3,581 | $3,777 | $3,276 | (5)% | 15\t% |
| Automotive | 2,154 | 2,103 | 2,077 | 2 | 1 |
| Chemicals | 3,543 | 3,664 | 3,501 | (3) | 5 |
| Coal | 3,237 | 4,127 | 3,978 | (22) | 4 |
| Industrial\tProducts | 3,808 | 4,400 | 3,822 | (13) | 15 |
| Intermodal | 4,074 | 4,489 | 4,030 | (9) | 11 |
| Total | $20,397 | $22,560 | $20,684 | (10)% | 9\t% |

| Revenue	Carloads |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Thousands | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Agricultural\tProducts | 941 | 973 | 874 | (3)% | 11\t% |
| Automotive | 863 | 809 | 781 | 7 | 4 |
| Chemicals | 1,098 | 1,116 | 1,103 | (2) | 1 |
| Coal | 1,459 | 1,768 | 1,703 | (17) | 4 |
| Industrial\tProducts | 1,213 | 1,368 | 1,236 | (11) | 11 |
| Intermodal\t[a] | 3,488 | 3,591 | 3,325 | (3) | 8 |
| Total | 9,062 | 9,625 | 9,022 | (6)% | 7\t% |

|  |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Average\tRevenue\tper\tCar | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Agricultural\tProducts | $3,805 | $3,881 | $3,746 | (2)% | 4\t% |
| Automotive | 2,498 | 2,602 | 2,659 | (4) | (2) |
| Chemicals | 3,227 | 3,282 | 3,176 | (2) | 3 |
| Coal | 2,218 | 2,334 | 2,336 | (5) | \t- |
| Industrial\tProducts | 3,139 | 3,217 | 3,093 | (2) | 4 |
| Intermodal\t[a] | 1,168 | 1,250 | 1,212 | (7) | 3 |
| Average | $2,251 | $2,344 | $2,293 | (4)% | 2\t% |

[a] Each	intermodal	container	or	trailer	equals	one	carload.

Agricultural	Products	–	Lower	fuel	surcharge	revenue and	volume	declines,	partially	offset	by	core	pricing gains,	 decreased	 freight	 revenue	 from	 agricultural shipments	 in	 2015	 compared	 to	 2014.	 Grain shipments	 decreased	11%	 in	 2015	 compared	 to 2014.	 The	 strength	 of	 the	 U.S.	 dollar,	 lower	 grain commodity	prices,	and	higher	worldwide	 inventories contributed	to	the	reduction	in	overall	demand.

# 2015	Agricultural	Products	Carloads

drought	also	negatively	impacted	the	first	three	quarters	of	2013,	which	created	favorable	comparisons	for	the	first	three quarters	of	2014.		Lower	export	wheat	shipments	due	to	a	larger	world	crop	partially	offset	gains	in	grain.

Automotive	– Freight	 revenue	 from	 automotive shipments	 increased	 compared	 to	 2014	 driven	 by volume	 growth	 and	core	 pricing	 gains,	 which	 were partially	 offset	 by	lower	 fuel	 surcharge	 revenue. 	 Higher	 automotive	 production	 and	 record	 sales levels	drove	the	volume	growth.

Freight revenue from automotive shipments increased	 in	 2014	 compared	 to	 2013.	 Growth	 in automotive	parts	and	finished	vehicle	shipments	and core	price	 improvements	drove	 the	higher	revenue. The	increase	in	automotive	parts	volume	was	driven by	 continued	 strength	 in	 production	 and	 market penetration.		Finished	vehicles	shipments	increased the	last	three

# 2015	Automotive	Carloads

quarters	of	2014	with	improved	sales	and	production,	which	offset	declines	in	the	first	quarter	due	to	winter	weather. Shifts	in	business	mix	and	a	change	in	how	we	are	compensated	for	container	usage,	which	is	now	included	as	a	per diem	charge	in	other	revenue,	negatively	impacted	ARC	compared	to	2013.

# 2015	Chemicals	Carloads

Core	price	improvements,	higher	volumes	and

ARC	driven	by	positive	business	mix	increased	freight	revenue	from	chemicals	in	2014	compared	to	2013.		Shipments of	 industrial	 chemicals	 grew	 as	 a	 result	 of	 continued	 strong	 demand	 in	 the	 drilling	 market.	 	 Fertilizer	 shipments increased	due	 to	strong	exports	of	potash.	 	Reduced	 shipments	 of	 crude	 oil	 from	 the	 Bakken	 and	 Permian	 shale formations	 to	 the	 Gulf	 area	 partially	 offset	 these	 gains	 as	 market	 factors,	 primarily	 regional	 pricing	 differences	 for various	types	of	crude	oil,	displaced	some	of	the	former	Gulf	Coast	shipments	to	the	East	and	West	Coasts.

# 2015	Coal	Carloads

coal.	 	This	 lower	demand	was	a	result	of	several	utilities	switching to	other fuel	sources	due to lower	natural	gas prices.		In	addition,	coal	exports	declined	due	to	a	soft	global	market.

Freight	revenue	from	coal	shipments	increased	in	2014	compared	to	2013,	driven	by	higher	volumes.	Shifts	in	business mix	negatively	impacted	ARC	compared	to	2013.		SPRB	shipments	increased	3%	from	2013.	Strong	demand	continued throughout	the	year	due	to	inventory	replenishment	but	network	performance	and	contract	losses	limited	year-over-year volume	growth.		Shipments	from	Colorado	and	Utah	mines	increased	6%	compared	to	2013,	driven	by	higher	natural gas	prices	for	most	of	the	year	and	strong	exports	through	the	West	Coast.		However,	in	the	fourth	quarter	volumes from	Colorado	and	Utah	mines	declined	as	exports	to	the	Gulf	Coast	decreased.

Volume	growth,	core	pricing	gains	and	positive	business	mix	in	2014	increased	freight	revenue	for	industrial	products shipments	versus	2013.	Shipments	of	non-metallic	minerals	(primarily	frac	sand,	up	31%)		grew	as	a	result	of	drilling activity	for	energy	products,	as	well	as	evolving	drilling	practices,	which	can	increase	the	amount	of	frac	sand	used	at certain	wells.		Additionally,	rock	and	lumber	shipments	increased	from	2013,	driven	by	new	housing	and	commercial construction.

# 2015	Intermodal	Carloads

volume	growth,	core	pricing	improvements	and	positive	business	mix.		Domestic	traffic	increased	11%	due	to	continued conversions	from	truck	transportation	to	rail	and	new	premium	services.		International	traffic	grew	5%	versus	2013, driven	primarily	by	new	business	and	improving	economic	conditions.		International	gains	in	the	last	three	quarters	of the	year	offset	the	declines	in	the	first	quarter	due	to	severe	weather	that	negatively	impacted	consumer	demand.

Mexico	 Business	–	Each	of	our	commodity	groups	includes	revenue	from	shipments	to	and	from	Mexico. 	 Freight revenue	from	Mexico	business	decreased	4%	to	$2.2	billion	in	2015	compared	to	2014	primarily	due	to	lower	fuel surcharge	revenue.	Volume	 levels	were	 flat	compared	 to	2014	as	 lower	shipments	of	 Intermodal,	Agricultural,	and Industrial	Products	were	offset	by	growth	in	Automotive,	Coal,	and	Chemical	shipments.

Revenue	from	Mexico	business	increased	8%	to	$2.3	billion	in	2014	versus	2013.		Volume	levels	increased	8%	from 2013,	as	increases	in	Agricultural	Products,	Chemicals,	Intermodal,	Automotive	and	Industrial	Products	offset	lower export	Coal	shipments.

# Operating	Expenses

|  |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Compensation\tand\tbenefits | $5,161 | $5,076 | $4,807 | 2\t% | 6\t% |
| Purchased\tservices\tand\tmaterials | 2,421 | 2,558 | 2,315 | (5) | 10 |
| Fuel | 2,013 | 3,539 | 3,534 | (43) | \t- |
| Depreciation | 2,012 | 1,904 | 1,777 | 6 | 7 |
| Equipment\tand\tother\trents | 1,230 | 1,234 | 1,235 | \t- | \t- |
| Other | 924 | 924 | 849 | \t- | 9 |
| Total | $13,761 | $15,235 | $14,517 | (10)% | 5\t% |

Operating	 expenses	 decreased	nearly	$1.5	 billion compared	to	2014	driven	by	significantly	 lower	 fuel prices	and	volume-related	cost	savings.		P roductivity gains	 in	 the	 second	 half	 of	 the	 year	 also	 drove expenses	 lower.	 	 These	 decreases	 were	 partially offset	by	 wage	 inflation,	 higher	depreciation,	 and property taxes. In addition, we incurred approximately	$35	million	of	weather-related	costs	in 2014.

Operating	expenses	 increased	$718	million	 in	2014 versus	2013.	Volume-related	expenses,	incremental costs	 associated	 with	 operating	 a	 slower	 network,

depreciation,	 wage	 and	 benefit	 inflation,	 and locomotive	and	freight	car

# 2015	Operating	Expenses

materials	contributed	to	the	higher	costs.		Lower	fuel	price	partially	offset	these	increases.		In	addition,	there	were approximately	$35	million	of	weather-related	costs	in	the	first	quarter	of	2014.

Compensation	and	Benefits –	Compensation	 and	 benefits include	 wages,	 payroll taxes,	 health	 and	 welfare	 costs, pension	costs,	other	postretirement	benefits,	and	incentive	costs.	In	2015,	lower	volume-related	costs	and	second	half productivity	gains	were	more	than	offset	by	general	wage	inflation	and	increased	hiring	and	training	expenses	related	to a	larger	workforce	in	the	first	half	of	the	year.

Volume-related	expenses,	including	training,	and	a	slower	network	increased	our	train	and	engine	work	force,	which, along	with	general	wage	and	benefit	inflation,	resulted	in	increased	wages	in	2014	compared	to	2013.		Weather-related costs	in	the	first	quarter	of	2014	also	increased	costs.

Purchased	Services	and	Materials	 –	Expense for	purchased	services	and	materials includes the	costs	of	services purchased	 from	 outside	 contractors	 and	 other	 service	 providers	 (including	 equipment	 maintenance	 and	 contract expenses	incurred	by	our	subsidiaries	for	external	transportation	services);	materials	used	to	maintain	the	Railroad's lines,	structures,	and	equipment;	costs	of	operating	facilities	jointly	used	by	UPRR	and	other	railroads;	transportation and	 lodging	 for	 train	 crew	 employees;	 trucking	 and	 contracting	 costs	 for	 intermodal	 containers;	 leased	 automobile maintenance	expenses;	and	tools	and	supplies.	Purchased	services	and	materials	 decreased	$137	million	compared	to 2014	primarily	due	to	lower	volume-related	costs,	including	a	decrease	in	external	transportation	expenses	incurred	by our	logistics	subsidiaries.		Expenses	also	decreased	due	to	lower	locomotive	and	freight	car	repair	costs.

Expenses	for	purchased	services	in	2014	increased	8%	compared	to	2013	primarily	due	to	volume-related	expenses incurred	by	our	logistics	subsidiaries	for	external	transportation	and	increased	crew	transportation	and	lodging	due	to volumes	and	a	slower	network.		In	addition,	higher	consulting	fees	and	higher	contract	expenses	(including	equipment maintenance)	 increased	 costs	 compared	 to	 2013.		Locomotive	and	freight	car	material	expenses	increased	in	2014 compared	to	2013	due	to	additional	volumes,	including	the	impact	of	activating	stored	equipment	to	address	operational issues	caused	by	demand	and	a	slower	network.

Fuel	 –	 Fuel	 includes	 locomotive	 fuel	 and	 gasoline	 for	 highway	 and	 non-highway	 vehicles	 and	 heavy	 equipment. Locomotive	 diesel	 fuel	 prices,	 which	averaged	$1.84	per	gallon	(including	 taxes	and	 transportation	costs)	 in	2015, compared	to	$2.97	per	gallon	in	2014,	decreased	expenses	$1.2	billion.	In

addition,	fuel	costs	were	lower	as	gross-ton	miles	decreased	9%.	The	fuel	consumption	rate	(c-rate),	computed	as gallons	of	fuel	consumed	divided	by	gross	ton-miles	in	thousands,	increased	1%	compared	to	2014.	Decreases	in heavier,	more	fuel-efficient	shipments,	decreased	gross-ton	miles	and	increased	the	c-rate.

Volume	growth	of	7%,	as	measured	by	gross	ton-miles,	 drove	the	increase	in	fuel	expense	in	2014	compared	to	2013. This	was	essentially	offset	by	lower	locomotive	diesel	fuel	prices,	which	averaged	$2.97	per	gallon	(including	taxes	and transportation	costs)	 in	2014,	compared	 to	$3.15	 in	2013,	along	with	a	slight	 improvement	 in	c-rate,	computed	as gallons	of	fuel	consumed	divided	by	gross	ton-miles.

Depreciation	– The	 majority	 of	 depreciation	 relates	 to	 road	 property,	 including	 rail,	 ties,	 ballast,	 and	 other	 track material.		A	higher	depreciable	asset	base,	reflecting	higher	capital	spending	in	recent	years,	increased	depreciation expense	in	2015	compared	to	2014.	This	increase	was	partially	offset	by	our	recent	depreciation	studies	that	resulted	in lower	depreciation	rates	for	some	asset	classes.

Depreciation	was	up	7%	in	2014	compared	to	2013.		A	higher	depreciable	asset	base,	reflecting	higher	ongoing	capital spending	drove	the	increase.

Equipment	and	Other	Rents	–	Equipment	and	other	rents	expense	primarily	includes	rental	expense	that	the	Railroad pays	for	freight	cars	owned	by	other	railroads	or	private	companies;	freight	car,	intermodal,	and	locomotive	leases;	and office	and	other	rent	expenses.	Equipment	and	other	rents	expense	decreased	$ 4	million	compared	to	2014	primarily from	a	decrease	in	manifest	and	intermodal	shipments,	partially	offset	by	growth	in	finished	vehicle	shipments.

Higher	intermodal	volumes	and	longer	cycle	times	increased	short-term	freight	car	rental	expense	in	2014	compared	to 2013.	 Lower	 equipment	 leases	 essentially	 offset	 the	 higher	 freight	 car	 rental	 expense,	 as	 we	 exercised	 purchase options	on	some	of	our	leased	equipment.

Other	–	Other	expenses	include	state	and	local	taxes,	freight,	equipment	and	property	damage,	utilities,	insurance, personal	injury,	environmental,	employee	travel,	telephone	and	cellular,	computer	software,	bad	debt,	and	other	general expenses.		Other	expenses	were	flat	in	2015	compared	to	2014	as	higher	property	taxes 	were	offset	by	lower	costs	in other	areas.

Higher	property	taxes,	personal	injury	expense	and	utilities	costs	partially	offset	by	lower	environmental	expense	and costs	associated	with	damaged	freight	resulted	in	an	increase	in	other	costs	in	2014	compared	to	2013.

# Non-Operating	Items

|  |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Other\tincome | $226 | $151 | $128 | 50\t% | 18\t% |
| Interest\texpense | (622) | (561) | (526) | 11 | 7 |
| Income\ttaxes | (2,884) | (3,163) | (2,660) | (9)% | 19\t% |

Other	Income	–	Other	income	increased	in	2015	compared	to	2014	 primarily	due	to	a	$113	million	gain	from	a	real estate	sale	in	the	second	quarter	of	2015,	partially	offset	by	a	gain	from	the	sale	of	a	permanent	easement	in	2014 .

Other	income	increased	in	2014	versus	2013	due	to	higher	gains	from	real	estate	sales	and	a	sale	of	a	permanent easement.		These	gains	were	partially	offset	by	higher	environmental	costs	on	non-operating	property	in	2014	and lower	lease	income	due	to	the	$17	million	settlement	of	a	land	lease	contract	in	2013.

Interest	Expense	–	Interest	expense	increased	in	2015	compared	to	2014	due	to	an	increased	weighted-average	debt level	of	$13.0	billion	in	2015	from	$10.7	billion	in	2014,	partially	offset	by	the	impact	of	a	lower	effective	interest	rate	of 4.8%	in	2015	compared	to	5.3%	in	2014.

Interest	expense	increased	in	2014	versus	2013	due	to	an	increased	weighted-average	debt	level	of	$10.7	billion	in 2014	from	$9.6	billion	in	2013,	which	more	than	offset	the	impact	of	the	lower	effective	interest	rate	of	5.3%	in	2014 versus	5.7%	in	2013.

# OTHER	OPERATING/PERFORMANCE	AND	FINANCIAL	STATISTICS

We	report	a	number	of	key	performance	measures	weekly	to	the	Association	of	American	Railroads.		We	provide	this data	on	our	website	at	www.up.com/investor/aar-stb_reports/index.htm.

# Operating/Performance	Statistics

Railroad	performance	measures	are	included	in	the	table	below:

|  |  |  |  | %	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | 2013 | 2015\tv\t2014 | 2014\tv\t2013 |
| Average\ttrain\tspeed\t(miles\tper\thour) | 25.4 | 24.0 | 26.0 | 6\t% | (8)% |
| Average\tterminal\tdwell\ttime\t(hours) | 29.3 | 30.3 | 27.1 | (3)% | 12\t% |
| Gross\tton-miles\t(billions) | 927.7 | 1,014.9 | 949.1 | (9)% | 7\t% |
| Revenue\tton-miles\t(billions) | 485.0 | 549.6 | 514.3 | (12)% | 7\t% |
| Operating\tratio | 63.1 | 63.5 | 66.1 | (0.4)pts | (2.6)pts |
| Employees\t(average) | 47,457 | 47,201 | 46,445 | 1\t% | 2\t% |

Average	Train	Speed	 –		Average	train	speed	is	calculated	by	dividing	train	miles	by	hours	operated	on	our	main	lines between	terminals.		Average	train	speed,	as	reported	to	the	Association	of	American	Railroads,	 improved	6%	in	2015 compared	 to	 2014.		Velocity	 gains	 resulted	 from	 lower	 volumes,	 improved	 network	 fluidity	 and	 a	 strong	 resource position.	More	 favorable	weather	conditions	 in	 the	 first	quarter	of	2015	also	contributed	 to	 the	 improvement	 in	our average	train	speed.

Average	train	speed	decreased	8%	in	2014	versus	2013.		The	decline	was	 as	result	of	a	7%	volume	increase,	a	major infrastructure	project	 in	Fort	Worth,	Texas	and	 inclement	weather,	 including	 flooding	 in	 the	Midwest	 in	 the	second quarter	and	severe	weather	conditions	in	the	first	quarter	that	impacted	all	major	U.S.	and	Canadian	railroads.

Average	Terminal	Dwell	Time 	–	Average	terminal	dwell	time	is	the	average	time	that	a	rail	car	spends	at	our	terminals. Lower	average	terminal	dwell	time	improves	asset	utilization	and	service.	Average	terminal	dwell	time	improved	3%	in 2015	compared	to	2014,	reflecting	the	impact	of	lower	volume	and	improved	network	operations.

Average terminal	 dwell time increased	 12% in	 2014	 compared to	 2013,	 caused	 by	 higher	 volumes	 and inclement weather.

Gross	and	Revenue	Ton-Miles 	–	Gross	ton-miles	are	calculated	by	multiplying	the	weight	of	loaded	and	empty	freight cars	by	the	number	of	miles	hauled.	Revenue	ton-miles	are	calculated	by	multiplying	the	weight	of	freight	by	the	number of	tariff	miles.		Gross	ton-miles	and	revenue	ton-miles	decreased	9%	and	12%,	respectively	in	2015	compared	to	2014, resulting	from	a	6%	decrease	in	carloads.	Changes	in	commodity	mix	drove	the	variances	in	year-over-year	declines between	gross	ton-miles,	revenue	ton-miles	and	carloads.

Gross	ton-miles,	revenue	ton-miles	and	carloadings	all	increased	7%	in	2014	compared	to	2013.

Operating	Ratio	–	Operating	ratio	 is	our	operating	expenses	reflected	as	a	percentage	of	operating	revenue.	 	Our operating	ratio	improved	0.4	points	to	a	new	record	low	of	63.1%	in	2015	compared	to	2014.		Core	pricing	gains,	the impact	of	lower	fuel	prices,	resource	realignments,	network	efficiencies	and	productivity	gains	more	than	offset	 the impact	of	lower	volume	and	inflation.

Our	operating	ratio	improved	2.6	points	to	63. 5%	in	2014	versus	2013.		Core	pricing,	business	demand	and	productivity more	than	offset	the	incremental	operating	costs	associated	with	volume,	a	slower	network,	weather	and	inflation.

Employees	–	Employee	levels	increased	1%	in	2015	compared	to	2014,	 driven	by	more	employees	in	training	and	an increase	in	capital	project	work.	More	employees	were	in	training	as	a	result	of	the	number	of	transportation	employees hired	during	the	last	half	of	2014	and	early	2015	to	handle	expected	volume	increases,	and	who	continued	receiving training	in	2015,	most	of	which	occurred	in	the	first	nine	months	of	the	year.

Employee	levels	increased	2%	in	2014	versus	2013.		A	decrease	in	our	capital	workforce	due	to	improved	productivity and	project	mix	partially	offset	the	larger	train	and	engine	workforce	required	for	higher	volume	levels	and	a	slower network.		We	successfully	managed	the	growth	of	our	full-time	equivalent	train	and	engine	force	levels	at	a	rate	less than	our	volume	growth	in	2014.

# Return	on	Average	Common	Shareholders'	Equity

| Millions,	Except	Percentages | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Average\tequity | $20,946 | $21,207 | $20,551 |
| Return\ton\taverage\tcommon\tshareholders'\tequity | 22.8% | 24.4% | 21.4% |

# Return	on	Invested	Capital	as	Adjusted	(ROIC)

| Millions,	Except	Percentages | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Interest\texpense | 622 | 561 | 526 |
| Interest\ton\tpresent\tvalue\tof\toperating\tleases | 135 | 158 | 175 |
| Taxes\ton\tinterest | (285) | (273) | (264) |
| Net\toperating\tprofit\tafter\ttaxes\tas\tadjusted\t(a) | $5,244 | $5,626 | $4,825 |
| Average\tequity | $20,946 | $21,207 | $20,551 |
| Average\tdebt* | 12,807 | 10,469 | 9,237 |
| Average\tpresent\tvalue\tof\toperating\tleases | 2,814 | 2,980 | 3,077 |
| Average\tinvested\tcapital\tas\tadjusted\t(b) | $36,567 | $34,656 | $32,865 |
| Return\ton\tinvested\tcapital\tas\tadjusted\t(a/b) | 14.3% | 16.2% | 14.7% |

* Adjusted	for	the	retrospective	adoption	of	Accounting	Standard	Update	2015-03	related	to	the	presentation	of	deferred	debt			issuance costs.

ROIC	is	considered	a	non-GAAP	financial	measure	by	SEC	Regulation	G	and	Item	10	of	SEC	Regulation	S-K,	and	may not	 be	 defined	 and	 calculated	 by	 other	 companies	 in	 the	 same	 manner.	 We	 believe	 this	 measure	 is	 important	 to management	 and	 investors	 in	 evaluating	 the	 efficiency	 and	 effectiveness	 of	 our	 long-term	 capital	 investments.	 In addition,	we	currently	use	ROIC	as	a	performance	criteria	in	determining	certain	elements	of	equity	compensation	for our	executives.	ROIC	should	be	considered	in	addition	to,	rather	than	as	a	substitute	for,	other	information	provided	in accordance	with	GAAP.	The	most	comparable	GAAP	measure	is	Return	on	Average	Common	Shareholders'	Equity. The	tables	above	provide	reconciliations	from	return	on	average	common	shareholders'	equity	to	ROIC.	Our	2015	ROIC decreased	1.9	points	compared	to	2014,	primarily	as	a	result	of	lower	 earnings	and	a	higher	invested	capital	base.

# Debt	to	Capital

| Millions,	Except	Percentages | 2015 | 2014 |
| :--- | :--- | :--- |
| Debt*\t(a) | $14,201 | $11,413 |
| Equity | 20,702 | 21,189 |
| Capital\t(b) | $34,903 | $32,602 |
| Debt\tto\tcapital\t(a/b) | 40.7% | 35.0% |

# Adjusted	Debt	to	Capital

| Millions,	Except	Percentages | 2015 | 2014 |
| :--- | :--- | :--- |
| Debt | $14,201 | $11,413 |
| Net\tpresent\tvalue\tof\toperating\tleases | 2,726 | 2,902 |
| Unfunded\tpension\tand\tOPEB,\tafter\ttax | 463 | 523 |
| Adjusted\tdebt*\t(a) | $17,390 | $14,838 |
| Equity | 20,702 | 21,189 |
| Adjusted\tcapital\t(b) | $38,092 | $36,027 |
| Adjusted\tdebt\tto\tcapital\t(a/b) | 45.7% | 41.2% |

Adjusted	debt	to	capital	is	a	non-GAAP	financial	measure	under	SEC	Regulation	G	and	Item	10	of	SEC	Regulation	S-K, and	may	not	be	defined	and	calculated	by	other	companies	in	the	same	manner.	We	believe	this	measure	is	important to	management	and	investors	in	evaluating	the	total	amount	of	leverage	in	our	capital	structure,	including	off-balance sheet	lease	obligations,	which	we	generally	incur	in	connection	with	financing	the	acquisition	of	locomotives	and	freight cars	and	certain	facilities.		Operating	leases	were	discounted	using	4.8%	and	5.3%	at	December	31,	2015	and	2014, respectively.	The	discount	rate	reflects	our	effective	interest	rate.	We	monitor	the	ratio	of	adjusted	debt	to	capital	as	we manage	our	capital	structure	to	balance	cost-effective	and	efficient	access	to	the	capital	markets	with	our	overall	cost	of capital.	Adjusted	debt	to	capital	should	be	considered	in	addition	to,	rather	than	as	a	substitute	for,	debt	to	capital.	The tables	above	provide	reconciliations	from	debt	to	capital	to	adjusted	debt	to	capital.	Our	December	31,	2015	debt	to capital	ratios	increased	as	a	result	of	a	$2.8	billion	increase	in	debt	from	December	31,	2014.

# LIQUIDITY	AND	CAPITAL	RESOURCES

As	 of	 December 31, 2015,	 our	 principal	 sources	 of	 liquidity	 included	 cash,	 cash	 equivalents,	 our	 receivables securitization	facility,	and	our	revolving	credit	facility,	as	well	as	the	availability	of	commercial	paper	and	other	sources	of financing	through	the	capital	markets.	We	had	$1.7	billion	of	committed	credit	available	under	our	credit	facility,	with	no borrowings	outstanding	as	of	December	31,	2015.	We	did	not	make	any	borrowings	under	this	facility	during	2015.	The value	of	the	outstanding	undivided	interest	held	by	investors	under	the	$650	million	capacity	receivables	securitization facility	was	$400	million	as	of	December	31,	2015,	and	is	included	in	our	Consolidated	Statements	of	Financial	Position as	debt	due	after	one	year.		Our	access	to	this	receivables	securitization	facility	may	be	reduced	or	restricted	if	our	bond ratings	fall	to	certain	levels	below	investment	grade.	If	our	bond	rating	were	to	deteriorate,	it	could	have	an	adverse impact	on	our	liquidity.	Access	to	commercial	paper	as	well	as	other	capital	market	financings	is	dependent	on	market conditions.	Deterioration	of	our	operating	results	or	financial	condition	due	to	internal	or	external	factors	could	negatively impact	our	ability	to	access	capital	markets	as	a	source	of	liquidity.	Access	to	liquidity	through	the	capital	markets	is	also dependent	on	our	financial	stability.	We	expect	that	we	will	continue	to	have	access	to	liquidity	through	any	or	all	of	the following	 sources	 or	 activities:	 (i)	 increasing	 the	 size	 or	 utilization	 of	 our	 receivables	 securitization,	 (ii)	 issuing commercial	paper,	(iii)	entering	into	bank	loans,	outside	of	our	revolving	credit	facility,	or	(iv)	issuing	bonds	or	other	debt securities	to	public	or	private	investors	based	on	our	assessment	of	the	current	condition	of	the	credit	markets.	The Company's	$1.7	billion	revolving	credit	facility	is	intended	to	support	the	issuance	of	commercial	paper	by	UPC	and	also serves	as	an	emergency	source	of	liquidity.	The	Company	currently	does	not	intend	to	make	any	borrowings	under	this facility.

At	December	31,	2015	and	2014,	we	 had	a	modest	working	capital	surplus.	This 	reflects	a	strong	cash	position	that provides	enhanced	liquidity	in	an	uncertain	economic	environment.	In	addition,	we	believe	we	have	adequate	access	to capital	markets	to	meet	any	foreseeable	cash	requirements,	and	we	have	sufficient	financial	capacity	to	satisfy	our current	liabilities.

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Cash\tprovided\tby\toperating\tactivities | $7,344 | $7,385 | $6,823 |
| Cash\tused\tin\tinvesting\tactivities | (4,476) | (4,249) | (3,405) |
| Cash\tused\tin\tfinancing\tactivities | (3,063) | (2,982) | (3,049) |
| Net\tchange\tin\tcash\tand\tcash\tequivalents | $(195) | $154 | $369 |

# Operating	Activities

Cash	provided	by	operating	activities	decreased	in	2015	compared	to	2014	due	to	lower	net	income	and	changes	in working	capital,	partially	offset	by	the	timing	of	tax	payments.

Federal	tax	law	provided	for	100%	bonus	depreciation	for	qualified	investments	made	during	2011	and	50%	bonus depreciation	for	qualified	investments	made	during	2012-2013.	As	a	result,	the	Company	deferred	a	substantial	portion of	 its	 2011-2013	 income	 tax	 expense,	 contributing	 to	 the	 positive	 operating	 cash	 flow	 in	 those	 years.	 Congress extended	50%	bonus	depreciation	 for	2014,	but	 this	extension	occurred	 in	December,	and	 the	related	benefit	was realized	in	2015,	rather	than	2014.		Similarly,	in	December	of	2015,	Congress	extended	bonus	depreciation	through 2019,	which	delayed	the	benefit	of	2015	bonus	depreciation	into	2016.		Bonus	depreciation	will	be	at	a	rate	of	50%	for 2015,	2016	and	2017,	40%	for	2018	and	30%	for	2019.

Higher	net	income	in	2014	increased	cash	provided	by	operating	activities	compared	to	2013,	despite	higher	income	tax payments.	2014	income	tax	payments	were	higher	than	2013	primarily	due	to	higher	income,	but	also	because	we	paid taxes	previously	deferred	by	bonus	depreciation.

# Investing	Activities

Higher	capital	investments	in	locomotives	and	freight	cars,	including	$327	million	in	early	lease	buyouts, 	which	we exercised	 due	 to	 favorable	 economic	 terms	 and	 market	 conditions,	 drove	 the	 increase	 in	 cash	 used	 in	 investing activities	in	2015	compared	to	2014.

Higher	capital	investments,	including	the	early	buyout	of	the	long-term	operating	lease	of	our	headquarters	building	for approximately	$261	million,	drove	the	increase	in	cash	used	in	investing	activities	in	2014	compared	to	2013.	Significant investments	also	were	made	for	new	locomotives,	freight	cars	and	containers,	and	capacity	and	commercial	facility projects.	Capital	investments	in	2014	also	included	$99	million	for	the	early	buyout	of	locomotives	and	freight	cars	under long-term	operating	leases,	which	we	exercised	due	to	favorable	economic	terms	and	market	conditions.

The	following	tables	detail	cash	capital	investments	and	track	statistics	for	the	years	ended	December	31,	2015,	2014, and	2013:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Rail\tand\tother\ttrack\tmaterial | $734 | $749 | $743 |
| Ties | 455 | 415 | 438 |
| Ballast | 233 | 204 | 226 |
| Other\t[a] | 438 | 378 | 326 |
| Total\troad\tinfrastructure\treplacements | 1,860 | 1,746 | 1,733 |
| Line\texpansion\tand\tother\tcapacity\tprojects | 457 | 515 | 455 |
| Commercial\tfacilities | 227 | 217 | 146 |
| Total\tcapacity\tand\tcommercial\tfacilities | 684 | 732 | 601 |
| Locomotives\tand\tfreight\tcars\t[b] | 1,436 | 1,067 | 580 |
| Positive\ttrain\tcontrol | 381 | 384 | 419 |
| Technology\tand\tother\t[c] | 289 | 417 | 163 |
| Total\tcash\tcapital\tinvestments | $4,650 | $4,346 | $3,496 |

[a] Other	includes	bridges	and	tunnels,	signals,	other	road	assets,	and	road	work	equipment.

[c] Technology	and	other	includes	the	$261	million	early	buyout	of	our	headquarters	building	operating	lease	in	2014.

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Track\tmiles\tof\trail\treplaced | 767 | 912 | 834 |
| Track\tmiles\tof\trail\tcapacity\texpansion | 103 | 119 | 97 |
| New\tties\tinstalled\t(thousands) | 4,178 | 4,076 | 3,870 |
| Miles\tof\ttrack\tsurfaced | 10,076 | 10,791 | 11,017 |

Capital	Plan	–	In	2016,	we	expect	our	capital	plan	to	be	approximately	 $3.75	billion,	which	may	be	revised	if	business conditions	or	the	regulatory	environment	affect	our	ability	to	generate	sufficient	returns	on	these	investments.		While asset	 replacements	 will	 fluctuate	 as	 part	 of	 our	 renewal	 strategy,	 we	 expect	 to	 use	 55%	 to	 60%	 of	 our	 capital investments	to	renew	and	improve	existing	capital	assets.		We	will	continue	to	invest	in	our	network	and	terminals where	 appropriate,	 balancing	 terminal	 capacity	 with	 mainline	 capacity.	 	 Significant	 investments	 in	 technology improvements	 are	 planned,	 including	 approximately	$375	 million	 for	 PTC.	 	 We	 will	 also	 continue	 commercial investments	in	rail	facilities	and	equipment,	including	230	locomotives	and	450	freight	cars.

We	expect	to	fund	our	2016	cash	capital	plan	by	using	some	or	all	of	the	following:	cash	generated	from	operations, proceeds	from	the	sale	or	lease	of	various	operating	and	non-operating	properties,	proceeds	from	the	issuance	of	long- term	debt,	and	cash	on	hand.	Our	annual	capital	plan	is	a	critical	component	of	our	long-term	strategic	plan.	We	expect our	plan	will	enhance	the	long-term	value	of	the	Company	for	our	shareholders	by	providing	sufficient	resources	to	(i) replace	and	improve	our	existing	track	infrastructure	to	provide	safe	and	fluid	operations,	(ii)	increase	network	efficiency by	adding	or	improving	facilities	and	track,	and	(iii)	make	investments	that	meet	customer	demand	and	take	advantage of	opportunities	for	long-term	growth.

# Financing	Activities

Cash	used	in	financing	activities	increased	in	2015	compared	to	2014.	 An	increase	of	$712	million	in	dividends	paid 	and $240	million	for	the	repurchase	of	shares	under	our	common	stock	repurchase	program	more	than	offset	an	increase	of $740	million	in	debt	issued	and	a	decrease	of	$154	million	in	debt	repaid.	The	higher	dividend	payments	primarily	were a	 result	 of	 adjusting	 the	 dividend	 payable	 dates	 to	 align	 with	 the	 timing	 of	 the	 quarterly	 dividend	 declaration	 and payment	within	the	same	quarter.	Aligning	the	quarterly	dividend	declaration	and	payment	resulted	in	two	payments	in the	first	quarter	of	2015:	the	fourth	quarter	2014	dividend	of	$438	million,	which	was	paid	on	January	2,	2015,	as	well	as the	first	quarter	2015	dividend	of	$484	million,	which	was	paid	on	March	30,	2015.	The	second	quarter	2015	dividend	of $479	million	was	paid	on	June	30,	2015,	the	third	quarter	2015	dividend	of	$476	million	was	paid	on	September	30, 2015,	and	the	fourth	quarter	2015	dividend	of	$467	million	was	paid	on	December	31,	2015.	Higher	dividends	per	share also	contributed	to	the	increase	in	dividends	paid.

Cash	used	in	financing	activities	remained	flat	in	2014	versus	2013.	Increases	for	the	repurchase	of	shares	under	our common	stock	repurchase	program	and	higher	dividend	payments	in	2014	of	$1.6	billion	compared	to	$1.3	billion	in 2013	were	offset	by	higher	debt	issuances	in	2014.

Credit	Facilities	–	At	December	31,	2015,	we	had	$1.7	billion	of	credit	available	under	our	revolving	credit	facility	(the facility),	which	is	designated	for	general	corporate	purposes	and	supports	the	issuance	of	commercial	paper.	We	did	not draw	on	the	facility	during	2015.	Commitment	fees	and	interest	rates	payable	under	the	facility	are	similar	to	fees	and rates	available	to	comparably	rated,	investment-grade	borrowers.	The	facility	allows	for	borrowings	at	floating	rates based	on	London	Interbank	Offered	Rates,	plus	a	spread,	depending	upon	credit	ratings	for	our	senior	unsecured	debt. The	facility	matures	in	May	2019	under	a	five-year	term	and	requires	UPC	to	maintain	a	debt-to-net-worth	coverage ratio.	At	December	31,	2015,	and	December	31,	2014	(and	at	all	times	during	the	periods	presented),	we	were	in compliance	with	this	covenant.

The	definition	of	debt	used for	purposes	of	calculating the	debt-to-net-worth	coverage	ratio includes,	among	other things,	certain	credit	arrangements,	capital	leases,	guarantees	and	unfunded	and	vested	pension	benefits	under	Title	IV of	ERISA.	At	December	31,	2015,	the	debt-to-net-worth	coverage	ratio	allowed	us	to	carry	up	to	$41.4	billion	of	debt	(as defined	in	the	facility),	and	we	had	$14.3	billion	of	debt	(as	defined	in	the	facility)	outstanding	at	that	date.	Under	our current	capital	plans,	we	expect	 to	continue	 to	satisfy	 the	debt-to-net-worth	coverage	ratio;	however,	many	 factors beyond	our	reasonable	control	could	affect	our	ability	to	comply	with	this	provision	in	the	future.	The	facility	does	not include	any	other	financial	restrictions,	credit	rating	triggers	(other	than	rating-dependent	pricing),	or	any	other	provision that	could	require	us	to	post	collateral.	The	facility	also	includes	a	$125	million	cross-default	provision	and	a	change-of- control	provision.

During	2015,	we	did	not	issue	or	repay	any	commercial	paper,	and	at	December	31,	2015,	and	2014,	we	had	no commercial	paper	outstanding.	Our	revolving	credit	facility	supports	our	outstanding	commercial	paper	balances,	and, unless	we	change	the	terms	of	our	commercial	paper	program,	our	aggregate	issuance	of	commercial	paper	will	not exceed	the	amount	of	borrowings	available	under	the	facility.

(See	further	discussion	in	this	Item	7	under	Receivables	Securitization	Facility	for	information	regarding	the	Company's receivables	securitization	facility.)

# Ratio	of	Earnings	to	Fixed	Charges

For	each	of	the	years	ended	December	31,	2015,	2014,	and	2013,	our	ratio	of	earnings	to	fixed	charges	was 11.6,	13.5, and	 11.8,	 respectively.	 The	 ratio	 of	 earnings	 to	 fixed	 charges	 was	 computed	 on	 a	 consolidated	 basis.	 Earnings represent	income	from	continuing	operations,	less	equity	earnings	net	of	distributions,	plus	fixed	charges	and	income taxes.	Fixed	charges	represent	interest	charges,	amortization	of	debt	discount,	and	the	estimated	amount	representing the	interest	portion	of	rental	charges.		(See	Exhibit	12	to	this	report	for	the	calculation	of	the	ratio	of	earnings	to	fixed charges.)

# Common	Shareholders'	Equity

Dividend	Restrictions	–	Our	revolving	credit	facility	includes	a	debt-to-net	worth	covenant	(discussed	in	the	Credit Facilities	section	above)	that,	under	certain	circumstances,	restricts	the	payment	of	cash	dividends	to	our	shareholders. The	amount	of	retained	earnings	available	for	dividends	was	$13.6	billion	and	$15.4	billion	at	December	31,	2015,	and 2014,	respectively.

# Share	Repurchase	Program

Effective	January	1,	2014,	our	Board	of	Directors	authorized	the	repurchase	of	up	to	120	million	shares	of	our	common stock	by	December	31,	2017,	replacing	our	previous	repurchase	program.	As	of	December	31,	2015,	we	repurchased	a total	of	$16.0	billion	of	our	common	stock	since	the	commencement	of	our	repurchase	programs	in	2007.		The	table below	represents	shares	repurchased	under	this	repurchase	program.

|  | Number	of	Shares	Purchased | Number	of	Shares	Purchased |  | Average	Price	Paid |
| :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | 2015 | 2014 |
| First\tquarter | 6,881,455 | 7,640,000 | $117.28 | $89.43 |
| Second\tquarter | 7,975,100 | 8,320,000 | 104.62 | 96.84 |
| Third\tquarter | 13,800,700 | 8,347,000 | 89.65 | 102.54 |
| Fourth\tquarter | 6,646,899 | 7,736,400 | 88.19 | 113.77 |
| Total | 35,304,154 | 32,043,400 | $98.14 | $100.65 |
| Remaining\tnumber\tof\tshares\tthat\tmay\tbe\trepurchased\tunder\tcurrent\tauthority | Remaining\tnumber\tof\tshares\tthat\tmay\tbe\trepurchased\tunder\tcurrent\tauthority |  | 52,652,446 | 52,652,446 |

Management's	 assessments	 of	 market	 conditions	 and	 other	 pertinent	 facts	 guide	 the	 timing	 and	 volume	 of	 all repurchases.		We	expect	to	fund	any	share	repurchases	under	this	program	through	cash	generated	from	operations, the	sale	or	lease	of	various	operating	and	non-operating	properties,	debt	issuances,	and	cash	on	hand.		Repurchased shares	are	recorded	in	treasury	stock	at	cost,	which	includes	any	applicable	commissions	and	fees.

# Shelf	Registration	Statement	and	Significant	New	Borrowings 	–	We	filed	a	new	shelf	registration	statement	with	the

SEC	that	became	effective	on	February	9,	2015.	The	Board	of	Directors	authorized	the	issuance	of	up	to	$4.0	billion	of debt	securities,	replacing	the	$4.0	billion	authorized	under	our	shelf	registration	filed	in	February	2013,	which	was	fully utilized	after	our	January	2015	debt	offering	noted	below.	Under	our	current	shelf	registration,	we	may	issue,	from	time to	time,	any	combination	of	debt	securities,	preferred	stock,	common	stock,	or	warrants	for	debt	securities	or	preferred stock	in	one	or	more	offerings.		We	have	no	immediate	plans	to	issue	equity	securities;	however,	we	will	continue	to explore	opportunities	to	replace	existing	debt	or	access	capital	through	issuances	of	debt	securities	under	our	shelf registration,	and,	therefore,	we	may	issue	additional	debt	securities	at	any	time.

During	2015,	we	issued	the	following	unsecured,	fixed-rate	debt	securities	under	our	shelf	registrations:

We	used	the	net	proceeds	from	the	offerings	for	general	corporate	purposes,	including	the	repurchase	of	common stock	 pursuant	 to	 our	 share	 repurchase	 program.	 These	 debt	 securities	 include	 change-of-control	 provisions.	 At December	31,	2015,	we	had	remaining	authority	to	issue	up	to	$2.2	billion	of	debt	securities	under	our	current	shelf registration.

Equipment	Trust	–	On	May	12,	2015,	UPRR	consummated	a	pass-through	(P/T)	financing,	whereby	a	P/T	trust	was created,	 which	 issued	 $399	 million	 of	 P/T	 trust	 certificates	 with	 a	 stated	 interest	 rate	 of	 2.695%.	 The	 P/T	 trust certificates	will	mature	on	May	12,	2027.	The	proceeds	from	the	issuance	of	the	P/T	trust	certificates	were	used	to purchase	 equipment	 trust	 certificates	 to	 be	 issued	 by	 UPRR	 to	 finance	 the	 acquisition	 of	 182	 locomotives.	 The equipment	trust	certificates	are	secured	by	a	lien	on	the

locomotives.	The	$399	million	is	classified	as	debt	due	after	one	year	in	our	Consolidated	Statements	of	Financial Position.

Debt	Exchange	–	On	August	21,	2013,	we	exchanged	$1,170	million	of	various	outstanding	notes	and	debentures	due between	2016	and	2040	(the	Existing	Notes)	for	$439	million	of	3.646%	notes	(the	New	2024	Notes)	due	February	15, 2024	 and	 $700	 million	 of	 4.821%	 notes	 (the	 New	 2044	 Notes)	 due	 February	 1,	 2044,	 plus	 cash	 consideration	 of approximately	 $280	 million	 in	 addition	 to	 $8	 million	 for	 accrued	 and	 unpaid	 interest	 on	 the	 Existing	 Notes. In accordance	 with	 ASC 470-50-40, Debt-Modifications	 and	 Extinguishments-Derecognition,	 this	 transaction	 was accounted	 for	 as	 a	 debt	 exchange,	 as	 the	 exchanged	 debt	 instruments	 are	 not	 considered	 to	 be	 substantially different.		The	cash	consideration	was	recorded	as	an	adjustment	to	the	carrying	value	of	debt,	and	the	balance	of	the unamortized	discount	and	issue	costs	from	the	Existing	Notes	is	being	amortized	as	an	adjustment	of	interest	expense over	the	terms	of	the	New	2024	Notes	and	the	New	2044	Notes.		No	gain	or	loss	was	recognized	as	a	result	of	the exchange.	 	 Costs	 related	 to	 the	 debt	 exchange	 that	 were	 payable	 to	 parties	 other	 than	 the	 debt	 holders	 totaled approximately	$9	million	and	were	included	in	interest	expense	during	the	year	ended	December	31,	2013.

The	following	table	lists	the	outstanding	notes	and	debentures	that	were	exchanged:

|  | Principal	amount |
| :--- | :--- |
| Millions | exchanged |
| The\t2024\tOffers |  |
| \t\t\t\t7.000%\tDebentures\tdue\t2016 | $8 |
| \t\t\t\t5.650%\tNotes\tdue\t2017 | 38 |
| \t\t\t\t5.750%\tNotes\tdue\t2017 | 70 |
| \t\t\t\t5.700%\tNotes\tdue\t2018 | 103 |
| \t\t\t\t7.875%\tNotes\tdue\t2019 | 20 |
| \t\t\t\t6.125%\tNotes\tdue\t2020 | 238 |
| The\t2044\tOffers |  |
| \t\t\t\t7.125%\tDebentures\tdue\t2028 | 73 |
| \t\t\t\t6.625%\tDebentures\tdue\t2029 | 177 |
| \t\t\t\t6.250%\tDebentures\tdue\t2034 | 19 |
| \t\t\t\t6.150%\tDebentures\tdue\t2037 | 138 |
| \t\t\t\t5.780%\tNotes\tdue\t2040 | 286 |
| Total | $1,170 |

Receivables	Securitization	Facility	–	The	Railroad	maintains	a	$650	million,	3-year	receivables	securitization	facility maturing	in	July	2017	under	which	it	sells	most	of	its	eligible	third-party	receivables	to	Union	Pacific	Receivables,	Inc. (UPRI),	a	consolidated,	wholly-owned,	bankruptcy-remote	subsidiary	that	may	subsequently	transfer,	without	recourse, an	undivided	interest	in	accounts	receivable	to	investors.	The	investors	have	no	recourse	to	the	Railroad's	other	assets except	for	customary	warranty	and	indemnity	claims.	Creditors	of	the	Railroad	do	not	have	recourse	to	the	assets	of UPRI.

The	amount	outstanding	under the facility	was	$400	million	at	both	December	31,	2015,	and	December	31,	2014, respectively.	The	facility	was	supported	by	$0.9	billion	and	$1.2	billion	of	accounts	receivable	as	collateral	at	December 31,	2015,	and	December	31,	2014,	respectively,	which,	as	a	retained	interest,	is	included	in	accounts	receivable,	net	in our	Consolidated	Statements	of	Financial	Position.

The	outstanding	amount	the	Railroad	is	allowed	to	maintain	under	the	facility,	with	a	maximum	of	$650	million,	may fluctuate	based	on	the	availability	of	eligible	receivables	and	is	directly	affected	by	business	volumes	and	credit	risks, including	receivables	payment	quality	measures	such	as	default	and	dilution	ratios.	If	default	or	dilution	ratios	increase one	percent,	the	allowable	outstanding	amount	under	the	facility	would	not	materially	change.

The	costs	of	the	receivables	securitization	facility	include	interest,	which	will	vary	based	on	prevailing	benchmark	and commercial	 paper	 rates,	 program	 fees	 paid	 to	 participating	 banks,	 commercial	 paper	 issuance	 costs,	 and	 fees	 of participating	banks	for	unused	commitment	availability.		The	costs	of	the	receivables	securitization	facility	are	included in	interest	expense	and	were	$5	million,	$4	million,	and	$5	million	for	2015,	2014,	and	2013,	respectively.

# Contractual	Obligations	and	Commercial	Commitments

As	described	in	the	notes	to	the	Consolidated	Financial	Statements	and	as	referenced	in	the	tables	below,	we	have contractual	obligations	and	commercial	commitments	that	may	affect	our	financial	condition.	Based	on	our	assessment of	the	underlying	provisions	and	circumstances	of	our	contractual	obligations	and	commercial	commitments,	including material	sources	of	off-balance	sheet	and	structured	 finance	arrangements,	other	 than	 the	risks	 that	we	and	other similarly	situated	companies	face	with	respect	to	the	condition	of	the	capital	markets	(as	described	in	Item	1A	of	Part	II of	this	report),		there	is	no	known	trend,	demand,	commitment,	event,	or	uncertainty	that	is	reasonably	likely	to	occur that	would	have	a	material	adverse	effect	on	our	consolidated	results	of	operations,	financial	condition,	or	liquidity.	In addition,	our	commercial	obligations,	financings,	and	commitments	are	customary	transactions	that	are	similar	to	those of	other	comparable	corporations,	particularly	within	the	transportation	industry.

The	following	tables	identify	material	obligations	and	commitments	as	of	December	31,	2015:

| Contractual	Obligations |  |  |  |  |  |  | After |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2020 | Other |
| Debt\t[a] | $22,885 | $1,006 | $1,434 | $938 | $981 | $1,339 | $17,187 | $\t- |
| Operating\tleases\t[b] | 3,430 | 491 | 446 | 371 | 339 | 282 | 1,501 | \t- |
| Capital\tlease\tobligations\t[c] | 1,587 | 217 | 220 | 198 | 184 | 193 | 575 | \t- |
| Purchase\tobligations\t[d] | 3,983 | 2,309 | 673 | 306 | 255 | 211 | 197 | 32 |
| Other\tpost\tretirement\tbenefits\t[e] | 453 | 45 | 45 | 46 | 46 | 46 | 225 | \t- |
| Income\ttax\tcontingencies\t[f] | 94 | \t- | \t- | \t- | \t- | \t- | \t- | 94 |
| Total\tcontractual\tobligations | $32,432 | $4,068 | $2,818 | $1,859 | $1,805 | $2,071 | $19,685 | $126 |

[a] Excludes	capital	lease	obligations	of	$1,268	million,	as	well	as	unamortized	discount	and	deferred	issuance	costs	of	$(674)	million. Includes	an	interest	component	of	$9,278	million.

[b] Includes	leases	for	locomotives,	freight	cars,	other	equipment,	and	real	estate.

[c] Represents	total	obligations,	including	interest	component	of	$319	million.

[d] Purchase	obligations	include	locomotive	maintenance	contracts;	purchase	commitments	for	fuel	purchases,	locomotives,	ties,	ballast, and	rail;	and	agreements	 to	purchase	other	goods	and	services. 	For	amounts	where	we	cannot	reasonably	estimate the	year	of settlement,	they	are	reflected	in	the	Other	column.

[e] Includes	estimated	other	post	retirement,	medical,	and	life	insurance	payments,	payments	made	under	the	unfunded	pension	plan	for the	next	ten	years.

[f] Future	cash	flows	for	income	tax	contingencies	reflect	the	recorded	liabilities	and	assets	for	unrecognized	tax	benefits,	including	interest and	penalties,	as	of	December	31,	2015.		For	amounts	where	the	year	of	settlement	is	uncertain,	they	are	reflected	in	the	Other	column.

| Other	Commercial	Commitments |  |  |  |  |  |  | After |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2020 |
| Credit\tfacilities\t[a] | $1,700 | $\t- | $\t- | $\t- | $1,700 | $\t- | $\t- |
| Receivables\tsecuritization\tfacility\t[b] | 650 | \t- | 650 | \t- | \t- | \t- | \t- |
| Guarantees\t[c] | 53 | 9 | 10 | 11 | 8 | 5 | 10 |
| Standby\tletters\tof\tcredit\t[d] | 35 | 33 | 2 | \t- | \t- | \t- | \t- |
| Total\tcommercial\tcommitments | $2,438 | $42 | $662 | $11 | $1,708 | $5 | $10 |

[a] None	of	the	credit	facility	was	used	as	of	December	31,	2015.

[b] $400	million	of	the	receivables	securitization	facility	was	utilized	as	of	December	31,	2015,	which	is	accounted	for	as	debt.	The	full program	matures	in	July	2017.

[c] Includes	guaranteed	obligations	related	to	our	affiliated	operations.

[d] None	of	the	letters	of	credit	were	drawn	upon	as	of	December	31,	2015.

# Off-Balance	Sheet	Arrangements

Guarantees	–	 At	 December	 31,	 2015,	 and	 2014,	 we	 were	 contingently	 liable	 for	 $53	 million	 and	 $82	 million	 in guarantees.	We	have	recorded	liabilities	of	$0	and	$0.3	million	for	the	fair	value	of	these	obligations	as	of	December	31, 2015,	and	2014,	respectively.	We	entered	into	these	contingent	guarantees	in	the	normal	course	of	business,	and	they include	guaranteed	obligations	related	to	our	affiliated	operations.	The	final	guarantee	expires	in	2022.	We	are	not aware	of	any	existing	event	of

default	that	would	require	us	to	satisfy	these	guarantees.	We	do	not	expect	that	these	guarantees	will	have	a	material adverse	effect	on	our	consolidated	financial	condition,	results	of	operations,	or	liquidity.

Labor	Agreements	–	Approximately	85%	of	our	47,457	full-time-equivalent	employees	are	represented	by	14	major	rail unions.	On	January	1,	2015,	current	labor	agreements	became	subject	to	modification	and	we	began	the	current	round of	negotiations	with	the	unions.	Existing	agreements	remain	in	effect	until	new	agreements	are	reached	or	the	Railway Labor	Act's	procedures	(which	 include	mediation,	cooling-off	periods,	and	 the	possibility	of	Presidential	Emergency Boards	and	Congressional	 intervention)	are	exhausted.	 	Contract	negotiations	historically	continue for	an	extended period	of	time	and	we	rarely	experience	work	stoppages	while	negotiations	are	pending.

Inflation	–	Long	periods	of	inflation	significantly	increase	asset	replacement	costs	for	capital-intensive	companies.	As	a result,	assuming	 that	we	replace	all	operating	assets	at	current	price	 levels,	depreciation	charges	(on	an	 inflation- adjusted	basis)	would	be	substantially	greater	than	historically	reported	amounts.

Derivative	Financial Instruments	 –	 We	 may	 use	 derivative	 financial	 instruments	 in	 limited	 instances	 to	 assist	 in managing	 our	 overall	 exposure to	 fluctuations	 in	 interest	 rates	 and	 fuel	 prices.	 We	 are	 not	 a	 party	 to	 leveraged derivatives	and,	by	policy,	do	not	use	derivative	 financial	 instruments	 for	speculative	purposes.	Derivative	 financial instruments	 qualifying	 for	 hedge	 accounting	 must	 maintain	 a	 specified	 level	 of	 effectiveness	 between	 the	 hedging instrument	and	the	item	being	hedged,	both	at	inception	and	throughout	the	hedged	period.	We	formally	document	the nature	 and	 relationships	 between	 the	 hedging	 instruments	 and	 hedged	 items	 at	 inception,	 as	 well	 as	 our	 risk- management	objectives,	strategies	for	undertaking	the	various	hedge	transactions,	and	method	of	assessing	hedge effectiveness.	 Changes	 in	 the	 fair	 market	 value	 of	 derivative	 financial	 instruments	 that	 do	 not	 qualify	 for	 hedge accounting	are	charged	to	earnings.	We	may	use	swaps,	collars,	futures,	and/or	forward	contracts	to	mitigate	the	risk	of adverse	movements	in	interest	rates	and	fuel	prices;	however,	the	use	of	these	derivative	financial	instruments	may limit	future	benefits	from	favorable	price	movements.

Market	and	Credit	Risk	–	We	address	market	risk	related	to	derivative	financial	instruments	by	selecting	instruments with	value	fluctuations	that	highly	correlate	with	the	underlying	hedged	item.	We	manage	credit	risk	related	to	derivative financial	instruments,	which	is	minimal,	by	requiring	high	credit	standards	for	counterparties	and	periodic	settlements.	At December	31,	2015	and	2014,	we	were	not	required	to	provide	collateral,	nor	had	we	received	collateral,	relating	to	our hedging	activities.

Determination	of	Fair	Value	–	We	determine	the	fair	values	of	our	derivative	financial	instrument	positions	based	upon current	fair	values	as	quoted	by	recognized	dealers	or	the	present	value	of	expected	future	cash	flows.

Sensitivity	Analyses	–	The	sensitivity	analyses	that	follow	illustrate	the	economic	effect	that	hypothetical	changes	in interest	 rates	 could	 have	 on	 our	 results	 of	 operations	 and	 financial	 condition.	 These	 hypothetical	 changes	 do	 not consider	other	factors	that	could	impact	actual	results.

At	December	31,	2015,	we	had	variable-rate	debt	representing	approximately	4.2%	of	our	total	debt.	If	variable	interest rates	average	one	percentage	point	higher	in	2016	than	our	December	31,	2015	variable	rate,	which	was	approximately 1.1%,	our	interest	expense	would	increase	by	approximately	$6	million.	This	amount	was	determined	by	considering	the impact	of	the	hypothetical	interest	rate	on	the	balances	of	our	variable-rate	debt	at	December	31,	2015.

Market	risk	for	fixed-rate	debt	 is	estimated	as	 the	potential	 increase	 in	 fair	value	resulting	 from	a	hypothetical	one percentage	point	decrease	in	interest	rates	as	of	December	31,	2015,	and	amounts	to	an	increase	of	approximately $1.6	billion	to	the	fair	value	of	our	debt	at	December	31,	2015.	We	estimated	the	fair	values	of	our	fixed-rate	debt	by considering	the	impact	of	the	hypothetical	interest	rates	on	quoted	market	prices	and	current	borrowing	rates.

Interest	Rate	Fair	Value	Hedges	 –	We	manage	our	overall	exposure	to	fluctuations	in	interest	rates	by	adjusting	the proportion	of	fixed	and	floating	rate	debt	instruments	within	our	debt	portfolio	over	a	given	period.	We	generally	manage the	mix	of	fixed	and	floating	rate	debt	through	the	issuance	of	targeted	amounts	of	each	as	debt	matures	or	as	we require	incremental	borrowings.	We	employ	derivatives,	primarily	swaps,	as	one	of	the	tools	to	obtain	the	targeted	mix. In	addition,	we	also	obtain	flexibility	in

managing	interest	costs	and	the	interest	rate	mix	within	our	debt	portfolio	by	evaluating	the	issuance	of	and	managing outstanding	callable	fixed-rate	debt	securities.

Swaps	allow	us	to	convert	debt	from	fixed	rates	to	variable	rates	and	thereby	hedge	the	risk	of	changes	in	the	debt's	fair value	attributable	 to	 the	changes	 in	 interest	rates.	We	account	 for	swaps	as	 fair	value	hedges	using	 the	short-cut method	as	allowed	by	the	Derivatives	and	Hedging	Topic	of	the	Financial	Accounting	Standards	Board	(FASB)	ASC 815;	therefore,	we	do	not	record	any	ineffectiveness	within	our	Consolidated	Financial	Statements.	As	of	December	31, 2015	and	2014,	we	had	no	interest	rate	fair	value	hedges	outstanding.

Interest	Rate	Cash	Flow	Hedges	–	We	report	changes	in	the	fair	value	of	cash	flow	hedges	in	accumulated	other comprehensive	loss	until	the	hedged	item	affects	earnings.	As	of	December	31,	2015,	and	2014,	we	had	no	interest rate	cash	flow	hedges	outstanding.

Accounting	Pronouncements	–	In	May	2014,	the	FASB	issued	Accounting	Standards	Update	No.	2014-09	(ASU 2014-09),	Revenue	from	Contracts	with	Customers	(Topic	606) .		ASU	2014-09	supersedes	the	revenue	recognition guidance	in	Topic	605,	Revenue	Recognition.		The	core	principle	of	the	guidance	is	that	an	entity	should	recognize revenue	to	depict	the	transfer	of	promised	goods	and	services	to	customers	in	an	amount	that	reflects	the	consideration to	which	the	entity	expects	to	be	entitled	in	the	exchange	for	those	goods	or	services.		This	standard	is	effective	for annual	 reporting	 periods	 beginning	 after	 December	 15,	 2017,	 and	 can	 be	 adopted	 either	 retrospectively	 or	 as	 a cumulative	effect	adjustment	as	of	the	date	of	adoption.		ASU	2014-09	is	not	expected	to	have	a	material	impact	on	our consolidated	financial	position,	results	of	operations,	or	cash	flows.

In	April	2015,	the	FASB	issued	Accounting	Standards	Update	No.	2015-03	(ASU	2015-03), Interest	-	Imputation	of Interest	(Subtopic	835-30).	ASU	2015-03	changes	the	presentation	of	debt	issuance	costs	in	the	financial	statements	to present	such	costs	as	a	direct	deduction	from	the	related	debt	liability	rather	than	as	an	asset.	Amortization	of	debt issuance	costs	will	be	reported	as	interest	expense.	This	standard	is	effective	for	annual	reporting	periods	beginning after	December	15,	2015.	We	elected	to	early	adopt	ASU	2015-03	on	December	31,	2015.	As	a	result,	the	Company reclassified	 debt	 issuance	 costs	 from	 other	 assets	 to	 a	 direct	 deduction	 from	 debt	 due	 after	 one	 year	 on	 the Consolidated	 Statements	 of	 Financial	 Position.	ASU	 2015-03	 did	 not	 have	 a	 material	 impact	 on	 our	 consolidated financial	position,	and	had	no	impact	on	our	results	of	operations 	or	cash	flows.		All	prior	period	financial	information presented	herein	has	been	adjusted	to	reflect	the	retrospective	application	of	this	ASU.

In	 November	 2015, the	 FASB issued	Accounting	 Standards	 Update	 No.	 2015-17 (ASU	 2015-17),	 Balance	 Sheet Classification	of	Deferred	Taxes	(Subtopic	740-10).	ASU	2015-17	simplifies	the	presentation	of	deferred	income	taxes by	eliminating	the	requirement	for	companies	to	present	deferred	tax	liabilities	and	assets	as	current	and	non-current	on the	Consolidated	Statements	of	Financial	Position.	 Instead,	companies	will	be	required	 to	classify	all	deferred	 tax assets	 and	 liabilities	 as	 non-current.	 	 This	 guidance	 is	 effective	 for	 annual	 and	 interim	 periods	 beginning	 after December	 15,	 2016	 and	 early	 adoption	 is	 permitted.	 	 We	 elected	 to	 early	 adopt	ASU	 2015-17	 on	 December	 31, 2015.		ASU	2015-17	did	not	have	a	material	impact	on	our	consolidated	financial	position,	and	had	no	impact	on	our results	of	operations	or	cash	flows.		All	prior	period	financial	information	presented	herein	has	been	adjusted	to	reflect the	retrospective	application	of	this	ASU.

In	 January	 2016, the	 FASB issued	 Accounting	 Standards	 Update	 No.	 2016-01 (ASU	 2016-01),	 Recognition	 and Measurement	of	Financial	Assets	and	Financial	Liabilities	(Subtopic	825-10).	ASU	2016-01	provides	guidance	for	the recognition,	measurement,	presentation,	and	disclosure	of	financial	instruments.	This	guidance	is	effective	for	annual and	 interim	 periods	 beginning	 after	 December	 15,	 2017,	 and	 early	 adoption	 is	 not	 permitted.	ASU	 2016-01	 is	 not expected	to	have	a	material	impact	on	our	consolidated	financial	position,	results	of	operations,	or	cash	flows.

Asserted	 and	 Unasserted	 Claims	 –	 Various claims	 and	 lawsuits	 are	 pending	 against	 us	 and	 certain	 of	 our subsidiaries.	We	cannot	fully	determine	the	effect	of	all	asserted	and	unasserted	claims	on	our	consolidated	results	of operations,	financial	condition,	or	liquidity.	To	the	extent	possible,	we	have	recorded	a	liability	where	asserted	and unasserted	claims	are	considered	probable	and	where	such	claims	can	be	reasonably	estimated.	We	do	not	expect	that any	known	lawsuits,	claims,	environmental	costs,	commitments,	contingent	liabilities,	or	guarantees	will	have	a	material adverse	 effect	 on	 our	 consolidated	 results	 of	 operations,	 financial	 condition,	 or	 liquidity	 after	 taking	 into	 account liabilities	and	insurance	recoveries	previously	recorded	for	these	matters.

Indemnities –	 Our	 maximum	 potential	 exposure	 under	 indemnification	 arrangements,	 including	 certain	 tax indemnifications,	can	range	from	a	specified	dollar	amount	to	an	unlimited	amount,	depending	on	the	nature	of	the transactions	and	the	agreements.	Due	to	uncertainty	as	to	whether	claims	will	be	made	or	how	they	will	be	resolved,	we cannot	reasonably	determine	the	probability	of	an	adverse	claim	or	reasonably	estimate	any	adverse	liability	or	the	total maximum	exposure	under	these	indemnification	arrangements.	We	do	not	have	any	reason	to	believe	that	we	will	be required	to	make	any	material	payments	under	these	indemnity	provisions.

Climate	 Change –	 Although	 climate	 change	 could	 have	 an	 adverse	 impact	 on	 our	 operations	 and	 financial performance	in	the	future	(see	Risk	Factors	under	Item	1A	of	this	report),	we	are	currently	unable	to	predict	the	manner or	severity	of	such	impact.	However,	we	continue	to	take	steps	and	explore	opportunities	to	reduce	the	impact	of	our operations	 on	 the	 environment,	 including	 investments	 in	 new	 technologies,	 using	 training	 programs	 to	 reduce	 fuel consumption,	and	changing	our	operations	to	increase	fuel	efficiency.

# CRITICAL	ACCOUNTING	POLICIES

Our	 Consolidated	 Financial	 Statements	 have	 been	 prepared in	 accordance	 with	 GAAP.	 The	 preparation	 of these financial	statements	requires	estimation	and	judgment	that	affect	the	reported	amounts	of	revenues,	expenses,	assets, and	liabilities.	We	base	our	estimates	on	historical	experience	and	on	various	other	assumptions	that	we	believe	are reasonable	under	 the	circumstances,	 the	results	of	which	 form	 the	basis	 for	making	 judgments	about	 the	carrying values	of	assets	and	liabilities	that	are	not	readily	apparent	from	other	sources.	The	following	critical	accounting	policies are	a	subset	of	our	significant	accounting	policies	described	in	Note	2	to	the	Financial	Statements	and	Supplementary Data,	Item	8.	These	critical	accounting	policies	affect	significant	areas	of	our	financial	statements	and	involve	judgment and	 estimates.	 If	 these	 estimates	 differ	 significantly	 from	 actual	 results,	 the	 impact	 on	 our	 Consolidated	 Financial Statements	may	be	material.

Personal	Injury	–	The	cost	of	personal	injuries	to	employees	and	others	related	to	our	activities	is	charged	to	expense based	on	estimates	of	the	ultimate	cost	and	number	of	incidents	each	year.	We	use	an	actuarial	analysis	to	measure the	 expense	 and	 liability,	 including	 unasserted	 claims.	 The	 Federal	 Employers'	 Liability	 Act	 (FELA)	 governs compensation	 for	work-related	accidents.	Under	FELA,	damages	are	assessed	based	on	a	 finding	of	 fault	 through litigation	 or	 out-of-court	 settlements.	 We	 offer	 a	 comprehensive	 variety	 of	 services	 and	 rehabilitation	 programs	 for employees	who	are	injured	at	work.

Our	personal	injury	liability	is	not	discounted	to	present	value	due	to	the	uncertainty	surrounding	the	timing	of	future payments.	Approximately	94%	of	the	recorded	liability	is	related	to	asserted	claims	and	approximately	6%	is	related	to unasserted	claims	at	December	31,	2015.	Because	of	the	uncertainty	surrounding	the	ultimate	outcome	of	personal injury	claims,	it	is	reasonably	possible	that	future	costs	to	settle	these	claims	may	range	from	approximately	$318	million to	$345	million.	We	record	an	accrual	at	the	low	end	of	the	range	as	no	amount	of	loss	within	the	range	is	more probable	than	any	other.		Estimates	can	vary	over	time	due	to	evolving	trends	in	litigation.

Our	personal	injury	liability	activity	was	as	follows:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $335 | $294 | $334 |
| Current\tyear\taccruals | 89 | 96 | 87 |
| Changes\tin\testimates\tfor\tprior\tyears | (3) | 9 | (38) |
| Payments | (103) | (64) | (89) |
| Ending\tbalance\tat\tDecember\t31 | $318 | $335 | $294 |
| Current\tportion,\tending\tbalance\tat\tDecember\t31 | $63 | $111 | $82 |

Our	personal	injury	claims	activity	was	as	follows:

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Open\tclaims,\tbeginning\tbalance | 2,618 | 2,605 | 2,792 |
| New\tclaims | 2,573 | 2,773 | 2,705 |
| Settled\tor\tdismissed\tclaims | (2,787) | (2,760) | (2,892) |
| Open\tclaims,\tending\tbalance\tat\tDecember\t31 | 2,404 | 2,618 | 2,605 |

In	conjunction	with	the	liability	update	performed	in	2015,	we	also	reassessed	our	estimated	insurance	recoveries.	We have	recognized	an	asset	for	estimated	insurance	recoveries	at	December	31,	2015,	and	2014.

Asbestos	–	We	are	a	defendant	in	a	number	of	lawsuits	in	which	current	and	former	employees	and	other	parties allege	 exposure	 to	 asbestos.	 We	 assess	 our	 potential	 liability	 using	 a	 statistical	 analysis	 of	 resolution	 costs	 for asbestos-related	claims.	 	This	 liability	 is	updated	annually	and	excludes	 future	defense	and	processing	costs.	The liability	for	resolving	both	asserted	and	unasserted	claims	was	based	on	the	following	assumptions:

· The	ratio	of	future	claims	by	alleged	disease	would	be	consistent	with	historical	averages	adjusted	for	inflation. · The	number	of	claims	filed	against	us	will	decline	each	year.

· The	average	settlement	values	for	asserted	and	unasserted	claims	will	be	equivalent	to	historical	averages. · The	percentage	of	claims	dismissed	in	the	future	will	be	equivalent	to	historical	averages.

Our	liability	for	asbestos-related	claims	is	not	discounted	to	present	value	due	to	the	uncertainty	surrounding	the	timing of	 future	payments.	Approximately	22%	of	 the	recorded	 liability	related	 to	asserted	claims	and	approximately	78% related	to	unasserted	claims	at	December	31,	2015.		Because	of	the	uncertainty	surrounding	the	ultimate	outcome	of asbestos-related	claims,	it	is	reasonably	possible	that	future	costs	to	settle	these	claims	may	range	from	approximately $120	million	to	$129	million.		We	record	an	accrual	at	the	low	end	of	the	range	as	no	amount	of	loss	within	the	range	is more	probable	than	any	other.

Our	asbestos-related	liability	activity	was	as	follows:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $126 | $131 | $139 |
| Accruals/(Credits) | \t- | 1 | 2 |
| Payments | (6) | (6) | (10) |
| Ending\tbalance\tat\tDecember\t31 | $120 | $126 | $131 |
| Current\tportion,\tending\tbalance\tat\tDecember\t31 | $6 | $8 | $9 |

Our	asbestos-related	claims	activity	was	as	follows:

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Open\tclaims,\tbeginning\tbalance | 1,065 | 1,140 | 1,258 |
| New\tclaims | 193 | 183 | 192 |
| Settled\tor\tdismissed\tclaims | (169) | (258) | (310) |
| Open\tclaims,\tending\tbalance\tat\tDecember\t31 | 1,089 | 1,065 | 1,140 |

In	conjunction	with	the	liability	update	performed	in	2015,	we	also	reassessed	our	estimated	insurance	recoveries.	We have	recognized	an	asset	for	estimated	insurance	recoveries	at	December	31,	2015,	and	2014.		The	amounts	recorded for	asbestos-related	liabilities	and	related	insurance	recoveries	were	based	on	currently	known	facts.	However,	future events,	such	as	the	number	of	new	claims	filed	each	year,	average	settlement	costs,	and	insurance	coverage	issues, could	cause	the	actual	costs	and	insurance	recoveries	to	be	higher	or	lower	than	the	projected	amounts.	Estimates	also may	vary	in	the	future	if	strategies,	activities,	and	outcomes	of	asbestos	litigation	materially	change;	federal	and	state laws

governing	asbestos	litigation	increase	or	decrease	the	probability	or	amount	of	compensation	of	claimants;	and	there are	material	changes	with	respect	to	payments	made	to	claimants	by	other	defendants.

Environmental	 Costs	–	We	are	subject to	 federal,	state,	and	 local	environmental	 laws	and	regulations.	We	have identified	290	sites	at	which	we	are	or	may	be	liable	for	remediation	costs	associated	with	alleged	contamination	or	for violations	 of	 environmental	 requirements.	This	 includes	 31	 sites	 that	 are	 the	 subject	 of	 actions	 taken	 by	 the	 U.S. government,	19	of	which	are	currently	on	the	Superfund	National	Priorities	List.	Certain	federal	legislation	imposes	joint and	several	liability	for	the	remediation	of	identified	sites;	consequently,	our	ultimate	environmental	liability	may	include costs	relating	to	activities	of	other	parties,	in	addition	to	costs	relating	to	our	own	activities	at	each	site.

When	we	identify	an	environmental	issue	with	respect	to	property	owned,	leased,	or	otherwise	used	in	our	business,	we perform,	with	assistance	of	our	consultants,	environmental	assessments	on	the	property.	We	expense	the	cost	of	the assessments	as	incurred.	We	accrue	the	cost	of	remediation	where	our	obligation	is	probable	and	such	costs	can	be reasonably	estimated.	Our	environmental	liability	is	not	discounted	to	present	value	due	to	the	uncertainty	surrounding the	timing	of	future	payments.

Our	environmental	liability	activity	was	as	follows:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $182 | $171 | $170 |
| Accruals | 61 | 56 | 58 |
| Payments | (53) | (45) | (57) |
| Ending\tbalance\tat\tDecember\t31 | $190 | $182 | $171 |
| Current\tportion,\tending\tbalance\tat\tDecember\t31 | $52 | $60 | $53 |

Our	environmental	site	activity	was	as	follows:

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Open\tsites,\tbeginning\tbalance | 270 | 268 | 284 |
| New\tsites | 66 | 55 | 41 |
| Closed\tsites | (46) | (53) | (57) |
| Open\tsites,\tending\tbalance\tat\tDecember\t31 | 290 | 270 | 268 |

The	environmental	liability	includes	future	costs	for	remediation	and	restoration	of	sites,	as	well	as	ongoing	monitoring costs,	but	excludes	any	anticipated	recoveries	from	third	parties.	Cost	estimates	are	based	on	information	available	for each	site,	financial	viability	of	other	potentially	responsible	parties,	and	existing	technology,	laws,	and	regulations.	The ultimate	liability	for	remediation	is	difficult	to	determine	because	of	the	number	of	potentially	responsible	parties,	site- specific	cost	sharing	arrangements	with	other	potentially	responsible	parties,	the	degree	of	contamination	by	various wastes,	 the	 scarcity	 and	 quality	 of	 volumetric	 data	 related	 to	 many	 of	 the	 sites,	 and	 the	 speculative	 nature	 of remediation	costs.	Estimates	of	liability	may	vary	over	time	due	to	changes	in	federal,	state,	and	local	laws	governing environmental	remediation.	Current	obligations	are	not	expected	to	have	a	material	adverse	effect	on	our	consolidated results	of	operations,	financial	condition,	or	liquidity.

Property	and	Depreciation	–	Our	railroad	operations	are	highly	capital	intensive,	and	our	large	base	of	homogeneous, network-type	assets	turns	over	on	a	continuous	basis.		Each	year	we	develop	a	capital	program	for	the	replacement	of assets	and	for	the	acquisition	or	construction	of	assets	that	enable	us	to	enhance	our	operations	or	provide	new	service offerings	to	customers.		Assets	purchased	or	constructed	throughout	the	year	are	capitalized	if	they	meet	applicable minimum	units	of	property	criteria.		Properties	and	equipment	are	carried	at	cost	and	are	depreciated	on	a	straight-line basis	over	their	estimated	service	lives,	which	are	measured	in	years,	except	for	rail	in	high-density	traffic	corridors	(i.e., all	rail	lines	except	for	those	subject	to	abandonment,	yard	and	switching	tracks,	and	electronic	yards)	for	which	lives are	measured	in	millions	of	gross	tons	per	mile	of	track.		We	use	the	group	method	of	depreciation	in	which	all	items with	similar	characteristics,	use,	and	expected	lives	are	grouped	together	in	asset	classes,	and	are	depreciated	using composite	depreciation	rates.		The	group	method	of	depreciation	treats	each	asset	class	as	a	pool	of	resources,	not	as singular	items.		We	currently	have	more	than	60	depreciable

asset	classes,	and	we	may	increase	or	decrease	the	number	of	asset	classes	due	to	changes	in	technology,	asset strategies,	or	other	factors.

We	 determine	 the	 estimated	 service	 lives	 of	 depreciable	 railroad	 property	 by	 means	 of	 depreciation	 studies.	 	 We perform	depreciation	studies	at	least	every	three	years	for	equipment	and	every	six	years	for	track	assets	(i.e.,	rail	and other	track	material,	ties,	and	ballast)	and	other	road	property.		Our	depreciation	studies	take	into	account	the	following factors:

· Statistical	analysis	of	historical	patterns	of	use	and	retirements	of	each	of	our	asset	classes; · Evaluation	of	any	expected	changes	in	current	operations	and	the	outlook	for	continued	use	of	the	assets;

· Evaluation	of	technological	advances	and	changes	to	maintenance	practices;	and · Expected	salvage	to	be	received	upon	retirement.

For	rail	in	high-density	traffic	corridors,	we	measure	estimated	service	lives	in	millions	of	gross	tons	per	mile	of	track.		It has	been	our	experience	that	the	lives	of	rail	in	high-density	traffic	corridors	are	closely	correlated	to	usage	(i.e.,	the amount	of	weight	carried	over	the	rail).		The	service	lives	also	vary	based	on	rail	weight,	rail	condition	(e.g.,	new	or secondhand),	and	rail	type	(e.g.,	straight	or	curve).		Our	depreciation	studies	for	rail	in	high-density	traffic	corridors consider	each	of	these	factors	in	determining	the	estimated	service	lives.		For	rail	in	high-density	traffic	corridors,	we calculate	depreciation	rates	annually	by	dividing	the	number	of	gross	ton-miles	carried	over	the	rail	(i.e.,	the	weight	of loaded	 and	 empty	 freight	 cars,	 locomotives	 and	 maintenance	 of	 way	 equipment	 transported	 over	 the	 rail)	 by	 the estimated	service	lives	of	the	rail	measured	in	millions	of	gross	tons	per	mile.	 	 Rail	 in	 high-density	 traffic	corridors accounts	for	approximately	70	percent	of	the	historical	cost	of	rail	and	other	track	material.		Based	on	the	number	of gross	ton-miles	carried	over	our	rail	 in	high	density	 traffic	corridors	during	2015,	 the	estimated	service	 lives	of	 the majority	of	this	rail	ranged	from	approximately	19	years	to	approximately	39	years.		For	all	other	depreciable	assets,	we compute	 depreciation	 based	 on	 the	 estimated	 service	 lives	 of	 our	 assets	 as	 determined	 from	 the	 analysis	 of	 our depreciation	studies.		Changes	in	the	estimated	service	lives	of	our	assets	and	their	related	depreciation	rates	are implemented	prospectively.

Estimated	service	lives	of	depreciable	railroad	property	may	vary	over	time	due	to	changes	in	physical	use,	technology, asset	strategies,	and	other	factors	that	will	have	an	impact	on	the	retirement	profiles	of	our	assets.		We	are	not	aware	of any	specific	factors	that	are	reasonably	likely	to	significantly	change	the	estimated	service	lives	of	our	assets.		Actual use	and	retirement	of	our	assets	may	vary	from	our	current	estimates,	which	would	impact	the	amount	of	depreciation expense	recognized	in	future	periods.

Changes	in	estimated	useful	lives	of	our	assets	due	to	the	results	of	our	depreciation	studies	could	significantly	impact future	periods'	depreciation	expense	and	have	a	material	impact	on	our	Consolidated	Financial	Statements.		If	the estimated	 useful	 lives	 of	 all	 depreciable	 assets	 were	 increased	 by	 one	 year,	 annual	 depreciation	 expense	 would decrease	by	approximately	$66	million.		If	the	estimated	useful	lives	of	all	depreciable	assets	were	decreased	by	one year,	annual	depreciation	expense	would	increase	by	approximately	$70	million.		Our	recent	depreciation	studies	have resulted	 in	 lower	depreciation	rates	 for	some	asset	classes.	These	 lower	 rates	will	partially	offset	 the	 impact	of	a projected	higher	depreciable	asset	base,	resulting	in	an	increase	in	total	depreciation	expense	by	approximately	1%	to 2%	in	2016	versus	2015.

Under	group	depreciation,	the	historical	cost	(net	of	salvage)	of	depreciable	property	that	is	retired	or	replaced	in	the ordinary	course	of	business	is	charged	to	accumulated	depreciation	and	no	gain	or	loss	is	recognized.		The	historical cost	of	certain	track	assets	is	estimated	using	(i)	inflation	indices	published	by	the	Bureau	of	Labor	Statistics	and	(ii)	the estimated	useful	lives	of	the	assets	as	determined	by	our	depreciation	studies.		The	indices	were	selected	because	they closely	correlate	with	the	major	costs	of	the	properties	comprising	the	applicable	track	asset	classes.		Because	of	the number	of	estimates	inherent	in	the	depreciation	and	retirement	processes	and	because	it	is	impossible	to	precisely estimate	each	of	these	variables	until	a	group	of	property	is	completely	retired,	we	continually	monitor	the	estimated service	 lives	 of	 our	 assets	 and	 the	 accumulated	 depreciation	 associated	 with	 each	 asset	 class	 to	 ensure	 our depreciation	rates	are	appropriate.		In	addition,	we	determine	if	the	recorded	amount	of	accumulated	depreciation	is deficient	(or	in	excess)	of	the	amount	indicated	by	our	depreciation	studies.		Any	deficiency	(or	excess)	is	amortized	as a	component	of	depreciation	expense	over	the	remaining	service	lives	of	the	applicable	classes	of	assets.

For	retirements	of	depreciable	railroad	properties	that	do	not	occur	in	the	normal	course	of	business,	a	gain	or	loss	may be	recognized	if	the	retirement	meets	each	of	the	following	three	conditions:	(i)	it	is	unusual,	(ii)	it	is	material	in	amount, and	(iii)	it	varies	significantly	from	the	retirement	profile	identified	through	our	depreciation	studies.		During	the	last	three fiscal	years,	no	gains	or	losses	were	recognized	due	to	the	retirement	of	depreciable	railroad	properties.		A	gain	or	loss is	recognized	in	other	income	when	we	sell	land	or	dispose	of	assets	that	are	not	part	of	our	railroad	operations.

Income	 Taxes	–	We	account for	 income	 taxes	by	recording	 taxes	payable	or	refundable	 for	 the	current	year	and deferred	tax	assets	and	liabilities	for	the	expected	future	tax	consequences	of	events	that	have	been	recognized	in	our financial	statements	or	tax	returns.	These	expected	future	tax	consequences	are	measured	based	on	current	tax	law; the	effects	of	future	tax	legislation	are	not	anticipated.		Future	tax	legislation,	such	as	a	change	in	the	corporate	tax	rate, could	have	a	material	impact	on	our	financial	condition,	results	of	operations,	or	liquidity.		For	example,	a	1%	increase	in future	income	tax	rates	would	increase	our	deferred	tax	liability	by	approximately	$390	million.

When	appropriate,	we	record	a	valuation	allowance	against	deferred	tax	assets	to	reflect	that	these	tax	assets	may	not be	realized.	In	determining	whether	a	valuation	allowance	is	appropriate,	we	consider	whether	it	is	more	likely	than	not that	 all	 or	 some	 portion	 of	 our	 deferred	 tax	 assets	 will	 not	 be	 realized,	 based	 on	 management's	 judgments	 using available	evidence	for	purposes	of	estimating	whether	future	taxable	income	will	be	sufficient	to	realize	a	deferred	tax asset.	In	2015	and	2014,	there	were	no	valuation	allowances.

We	recognize	tax	benefits	that	are	more	likely	than	not	to	be	sustained	upon	examination	by	tax	authorities.	The	amount recognized	is	measured	as	the	largest	amount	of	benefit	that	is	greater	than	50	percent	likely	to	be	realized	upon settlement.	A	liability	for	"unrecognized	tax	benefits"	is	recorded	for	any	tax	benefits	claimed	in	our	tax	returns	that	do not	meet	these	recognition	and	measurement	standards.

Pension	and	Other	Postretirement	Benefits	–	We	use	an	actuarial	analysis	to	measure	the	liabilities	and	expenses associated	with	providing	pension	and	medical	and	life	insurance	benefits	(OPEB)	to	eligible	employees.	In	order	to	use actuarial	methods	to	value	the	liabilities	and	expenses,	we	must	make	several	assumptions.	The	critical	assumptions used	to	measure	pension	obligations	and	expenses	are	the	discount	rate	and	expected	rate	of	return	on	pension	assets. For	OPEB,	the	critical	assumptions	are	the	discount	rate	and	health	care	cost	trend	rate.

We	evaluate	our	critical	assumptions	at	least	annually,	and	selected	assumptions	are	based	on	the	following	factors:

· Discount	rate	is	based	on	a	Mercer	yield	curve	of	high	quality	corporate	bonds	(rated	AA	by	a	recognized	rating agency)	for	which	the	timing	and	amount	of	cash	flows	matches	our	plans'	expected	benefit	payments.

· Expected	 return	 on	 plan	 assets	 is	 based	 on	 our	 asset	 allocation	 mix	 and	 our	 historical	 return, taking into consideration	current	and	expected	market	conditions. · Health	care	cost	trend	rate	is	based	on	our	historical	rates	of	inflation	and	expected	market	conditions.

The	following	tables	present	the	key	assumptions	used	to	measure	net	periodic	pension	and	OPEB	cost/(benefit)	for 2015	and	the	estimated	impact	on	2015	net	periodic	pension	and	OPEB	cost/(benefit)	relative	to	a	change	in	those assumptions:

| Assumptions | Pension | OPEB |
| :--- | :--- | :--- |
| Discount\trate | 3.94% | 3.74% |
| Expected\treturn\ton\tplan\tassets | 7.50% | N/A |
| Compensation\tincrease | 4.00% | N/A |
| Health\tcare\tcost\ttrend\trate: |  |  |
| \t\t\t\t\tPre-65\tcurrent | N/A | 6.34% |
| \t\t\t\t\tPre-65\tlevel\tin\t2028 | N/A | 4.50% |

| Sensitivities |  | Increase	in	Expense |
| :--- | :--- | :--- |
| Millions | Pension | OPEB |
| 0.25%\tdecrease\tin\tdiscount\trate | $14 | $1 |
| 0.25%\tincrease\tin\tcompensation\tscale | $9 | N/A |
| 0.25%\tdecrease\tin\texpected\treturn\ton\tplan\tassets | $8 | N/A |
| 1%\tincrease\tin\thealth\tcare\tcost\ttrend\trate | N/A | $3 |

The	following	table	presents	the	net	periodic	pension	and	OPEB	cost	for	the	years	ended	December	31:

|  | Est. |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
| Millions | 2016 | 2015 | 2014 | 2013 |
| Net\tperiodic\tpension\tcost | $42 | $120 | $69 | $110 |
| Net\tperiodic\tOPEB\tcost | 13 | 19 | 15 | 14 |

In	 2016,	 we	 will	 measure	 the	 service	 cost	 and	 interest	 cost	 components	 of	 our	 net	 periodic	 benefit	 cost	 by	 using individual	 spot	 rates	 matched	 with	 separate	 cash	 flows	 for	 each	 future	 year	 instead	 of	 a	 single	 weighted-average discount	rate	approach.	Our	net	periodic	pension	cost	is	expected	to	decrease	to	approximately	$42	million	in	2016	from $120	million	in	2015.		Our	net	periodic	OPEB	expense	is	expected	to	decrease	to	approximately	$13	million	in	2016 from	$19	million	in	2015.

# CAUTIONARY	INFORMATION

Certain	statements	in	this	report,	and	statements	in	other	reports	or	information	filed	or	to	be	filed	with	the	SEC	(as	well as	information	included	in	oral	statements	or	other	written	statements	made	or	to	be	made	by	us),	are,	or	will	be, forward-looking	statements	as	defined	by	the	Securities	Act	of	1933	and	the	Securities	Exchange	Act	of	1934.	These forward-looking	statements	and	information	include,	without	limitation,	(A)	statements	in	the	Chairman's	letter	preceding Part	I;	statements	regarding	planned	capital	expenditures	under	the	caption	"2016	 Capital	Plan"	in	Item	2	of	Part	I; statements	regarding	dividends	in	Item	5	of	Part	II;	and	statements	and	information	set	forth	under	the	captions	"2016 Outlook";	"Liquidity	and	Capital	Resources";	and	"Pension	and	Other	Postretirement	Benefits"	in	this	Item	7	of	Part	II, and	 (B)	 any	 other	 statements	 or	 information	 in	 this	 report	 (including	 information	 incorporated	 herein	 by	 reference) regarding:	expectations	as	to	financial	performance,	revenue	growth	and	cost	savings;		the	time	by	which	goals,	targets, or	 objectives	 will	 be	 achieved;	 	 projections,	 predictions,	 expectations,	 estimates,	 or	 forecasts	 as	 to	 our	 business, financial	and	operational	results,	future	economic	performance,	and	general	economic	conditions;		expectations	as	to operational	or	service	performance	or	improvements;		expectations	as	to	the	effectiveness	of	steps	taken	or	to	be	taken to	 improve	operations	and/or	service,	 including	capital	expenditures	 for	 infrastructure	 improvements	and	equipment acquisitions,	any	strategic	business	acquisitions,	and	modifications	 to	our	 transportation	plans;	 	expectations	as	 to existing	or	proposed	new	products	and	services;	expectations	as	 to	 the	 impact	of	any	new	regulatory	activities	or legislation	 on	 our	 operations	 or	 financial	 results;	 	 estimates	 of	 costs	 relating	 to	 environmental	 remediation	 and restoration;	estimates	and	expectations	regarding	tax	matters;	expectations	that	claims,	litigation,	environmental	costs, commitments,	contingent	liabilities,	labor	negotiations	or	agreements,	or	other	matters	will	not	have	a	material	adverse effect	 on	 our	 consolidated	 results	 of	 operations,	 financial	 condition,	 or	 liquidity	 and	 any	 other	 similar	 expressions concerning	matters	that	are	not	historical	facts.		Forward-looking	statements	may	be	identified	by	their	use	of	forward- looking	 terminology,	 such	 as	 "believes,"	 "expects,"	 "may,"	 "should,"	 "would,"	 "will,"	 "intends,"	 "plans,"	 "estimates," "anticipates,"	"projects"	and	similar	words,	phrases	or	expressions.

Forward-looking	statements	should	not	be	read	as	a	guarantee	of	future	performance	or	results,	and	will	not	necessarily be	accurate	indications	of	the	times	that,	or	by	which,	such	performance	or	results	will	be	achieved.	Forward-looking statements	and	information	are	subject	to	risks	and	uncertainties	that	could	cause	actual	performance	or	results	to	differ materially	from	those	expressed	in	the	statements	and	information.		Forward-looking	statements	and	information	reflect the	 good	 faith	 consideration	 by	 management	 of	 currently	 available	 information,	 and	 may	 be	 based	 on	 underlying assumptions	believed	to	be	reasonable	under	the	circumstances.	However,	such	information	and	assumptions	(and, therefore,	 such	 forward-looking	 statements	 and	 information)	 are	 or	 may	 be	 subject	 to	 variables	 or	 unknown	 or unforeseeable	events	or	circumstances	over	which	management	has	little	or	no	influence	or	control.		The	Risk	Factors in	 Item	 1A	 of	 this	 report	 could	 affect	 our	 future	 results	 and	 could	 cause	 those	 results	 or	 other	 outcomes	 to	 differ materially	 from	 those	 expressed	 or	 implied	 in	 any	 forward-looking	 statements	 or	 information.	 To	 the	 extent circumstances	require	or	we	deem	it	otherwise	necessary,	we	will	update	or

amend	these	risk	factors	in	a	Form	10-Q,	Form	8-K	or	subsequent	Form	10-K.		All	forward-looking	statements	are qualified	by,	and	should	be	read	in	conjunction	with,	these	Risk	Factors.

Forward-looking	statements	speak	only	as	of	the	date	the	statement	was	made.	We	assume	no	obligation	to	update forward-looking	 information	 to	 reflect	 actual	 results,	 changes	 in	 assumptions	 or	 changes	 in	 other	 factors	 affecting forward-looking	information.	If	we	do	update	one	or	more	forward-looking	statements,	no	inference	should	be	drawn	that we	will	make	additional	updates	with	respect	thereto	or	with	respect	to	other	forward-looking	statements.

# Item	7A.	Quantitative	and	Qualitative	Disclosures	about	Market	Risk

Information	concerning	market	risk	sensitive	instruments	is	set	forth	under	Management's	Discussion	and	Analysis	of Financial	Condition	and	Results	of	Operations	–	Other	Matters,	Item	7.

# Item	8.	Financial	Statements	and	Supplementary	Data

| Index	to	Consolidated	Financial	Statements | Page |
| :--- | :--- |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 51 |
| Consolidated\tStatements\tof\tIncome\nFor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014,\tand\t2013 | 52 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\nFor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014,\tand\t2013 | 52 |
| Consolidated\tStatements\tof\tFinancial\tPosition\nAt\tDecember\t31,\t2015\tand\t2014 | 53 |
| Consolidated\tStatements\tof\tCash\tFlows\nFor\tthe\tYears\tEnded\tDecember\t31,\t201 5,\t2014,\tand\t2013 | 54 |
| Consolidated\tStatements\tof\tChanges\tin\tCommon\tShareholders'\tEquity\nFor\tthe\tYears\tEnded\tDecember\t31,\t201 5,\t2014,\tand\t2013 | 55 |
| Notes\tto\tthe\tConsolidated\tFinancial\tStatements | 56 |

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# To	the	Board	of	Directors	and	Shareholders	of 	Union	Pacific	Corporation

# Omaha,	Nebraska

We	have	audited	the	accompanying	consolidated	 statements	of	financial	position	 of	Union	Pacific	Corporation	and Subsidiary	Companies	(the	"Corporation")	as	of	December	31,	2015	and	2014,	and	the	related	consolidated	statements of	income,	comprehensive	income,	changes	in	common	shareholders'	equity,	and	cash	flows	for	each	of	the	three years	in	the	period	ended	December	31,	2015.	Our	audits	also	included	the	financial	statement	schedule	listed	in	the Table	of	Contents	at	Part	IV,	Item	15.	These	financial	statements	and	financial	statement	schedule	are	the	responsibility of	the	Corporation's	management.	Our	responsibility	is	to	express	an	opinion	on	the	financial	statements	and	financial statement	schedule	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(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,	such	consolidated	financial	statements	present	fairly,	in	all	material	respects,	the	financial	position	of Union	Pacific	Corporation	and	Subsidiary	Companies	as	of	December	31,	2015	and	2014,	and	the	results	of	 their operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2015,	in	conformity	with accounting	principles	generally	accepted	in	the	United	States	of	America.	Also,	in	our	opinion,	such	financial	statement schedule,	when	considered	in	relation	to	the	basic	consolidated	financial	statements	taken	as	a	whole,	presents	fairly, in	all	material	respects,	the	information	set	forth	therein.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United States),	 the	 Corporation's	 internal	 control	 over	 financial	 reporting	 as	 of	 December	 31,	 2015,	 based	 on	 the	 criteria established	in	Internal	Control	—	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of the	 Treadway	 Commission	 and	 our	 report	 dated	 February 5, 2016	 expressed an	 unqualified	 opinion	 on	 the Corporation's	internal	control	over	financial	reporting.

# Picture	2

# CONSOLIDATED	STATEMENTS	OF	INCOME

# Union	Pacific	Corporation	and	Subsidiary	Companies

| for	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Operating\trevenues: |  |  |  |
| \t\t\t\t\tFreight\trevenues | $20,397 | $22,560 | $20,684 |
| \t\t\t\t\tOther\trevenues | 1,416 | 1,428 | 1,279 |
| Total\toperating\trevenues | 21,813 | 23,988 | 21,963 |
| Operating\texpenses: |  |  |  |
| \t\t\t\t\tCompensation\tand\tbenefits | 5,161 | 5,076 | 4,807 |
| \t\t\t\t\tPurchased\tservices\tand\tmaterials | 2,421 | 2,558 | 2,315 |
| \t\t\t\t\tFuel | 2,013 | 3,539 | 3,534 |
| \t\t\t\t\tDepreciation | 2,012 | 1,904 | 1,777 |
| \t\t\t\t\tEquipment\tand\tother\trents | 1,230 | 1,234 | 1,235 |
| \t\t\t\t\tOther | 924 | 924 | 849 |
| Total\toperating\texpenses | 13,761 | 15,235 | 14,517 |
| Operating\tincome | 8,052 | 8,753 | 7,446 |
| Other\tincome\t(Note\t7) | 226 | 151 | 128 |
| Interest\texpense | (622) | (561) | (526) |
| Income\tbefore\tincome\ttaxes | 7,656 | 8,343 | 7,048 |
| Income\ttaxes\t(Note\t8) | (2,884) | (3,163) | (2,660) |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Share\tand\tPer\tShare\t(Note\t9): |  |  |  |
| \t\t\t\t\tEarnings\tper\tshare\t-\tbasic | $5.51 | $5.77 | $4.74 |
| \t\t\t\t\tEarnings\tper\tshare\t-\tdiluted | $5.49 | $5.75 | $4.71 |
| \t\t\t\t\tWeighted\taverage\tnumber\tof\tshares\t-\tbasic | 866.2 | 897.1 | 926.5 |
| \t\t\t\t\tWeighted\taverage\tnumber\tof\tshares\t-\tdiluted | 869.4 | 901.1 | 931.5 |
| Dividends\tdeclared\tper\tshare | $2.20 | $1.91 | $1.48 |

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

| for	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Other\tcomprehensive\tincome/(loss): |  |  |  |
| \t\t\t\t\tDefined\tbenefit\tplans | 58 | (448) | 436 |
| \t\t\t\t\tForeign\tcurrency\ttranslation | (43) | (12) | (1) |
| \t\t\t\t\tDerivatives | \t- | \t- | 1 |
| Total\tother\tcomprehensive\tincome/(loss)\t[a] | 15 | (460) | 436 |
| Comprehensive\tincome | $4,787 | $4,720 | $4,824 |

The	accompanying	notes	are	an	integral	part	of	these	Consolidated	Financial	Statements.

# CONSOLIDATED	STATEMENTS	OF	FINANCIAL	POSITION

| as	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Assets |  |  |
| Current\tassets: |  |  |
| \t\t\t\t\tCash\tand\tcash\tequivalents | $1,391 | $1,586 |
| \t\t\t\t\tAccounts\treceivable,\tnet\t(Note\t11) | 1,356 | 1,611 |
| \t\t\t\t\tMaterials\tand\tsupplies | 736 | 712 |
| \t\t\t\t\tOther\tcurrent\tassets | 647 | 492 |
| Total\tcurrent\tassets | 4,130 | 4,401 |
| Investments | 1,410 | 1,390 |
| Net\tproperties\t(Note\t12) | 48,866 | 46,272 |
| Other\tassets | 194 | 309 |
| Total\tassets | $54,600 | $52,372 |
| Liabilities\tand\tCommon\tShareholders'\tEquity |  |  |
| Current\tliabilities: |  |  |
| \t\t\t\t\tAccounts\tpayable\tand\tother\tcurrent\tliabilities\t(Note\t13) | $2,612 | $3,303 |
| \t\t\t\t\tDebt\tdue\twithin\tone\tyear\t(Note\t15) | 594 | 461 |
| Total\tcurrent\tliabilities | 3,206 | 3,764 |
| Debt\tdue\tafter\tone\tyear\t(Note\t15) | 13,607 | 10,952 |
| Deferred\tincome\ttaxes\t(Note\t8) | 15,241 | 14,403 |
| Other\tlong-term\tliabilities | 1,844 | 2,064 |
| Commitments\tand\tcontingencies\t(Notes\t17\tand\t18) |  |  |
| Total\tliabilities | 33,898 | 31,183 |
| Common\tshareholders'\tequity: |  |  |
| \t\t\t\t\tCommon\tshares,\t$2.50\tpar\tvalue,\t1,400,000,000\tauthorized; |  |  |
| \t\t\t\t\t1,110,426,354\tand\t1,110,100,423\tissued;\t849,211,436\tand\t883,366,476 |  |  |
| \t\t\t\t\toutstanding,\trespectively | 2,776 | 2,775 |
| \t\t\t\t\tPaid-in-surplus | 4,417 | 4,321 |
| \t\t\t\t\tRetained\tearnings | 30,233 | 27,367 |
| \t\t\t\t\tTreasury\tstock | (15,529) | (12,064) |
| \t\t\t\t\tAccumulated\tother\tcomprehensive\tloss\t(Note\t10) | (1,195) | (1,210) |
| Total\tcommon\tshareholders'\tequity | 20,702 | 21,189 |
| Total\tliabilities\tand\tcommon\tshareholders'\tequity | $54,600 | $52,372 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

| Millions,	for	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities |  |  |  |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tcash\tprovided\nby\toperating\tactivities: |  |  |  |
| \t\tDepreciation | 2,012 | 1,904 | 1,777 |
| \t\tDeferred\tand\tother\tincome\ttaxes | 765 | 895 | 723 |
| \t\tNet\tgain\ton\tnon-operating\tasset\tdispositions | (144) | (69) | (32) |
| \t\tOther\toperating\tactivities,\tnet | 116 | (216) | (194) |
| \t\tChanges\tin\tcurrent\tassets\tand\tliabilities: |  |  |  |
| \t\t\t\t\tAccounts\treceivable,\tnet | 255 | (197) | (83) |
| \t\t\t\t\tMaterials\tand\tsupplies | (24) | (59) | 7 |
| \t\t\t\t\tOther\tcurrent\tassets | (47) | (35) | 1 |
| \t\t\t\t\tAccounts\tpayable\tand\tother\tcurrent\tliabilities | (276) | 295 | 40 |
| \t\t\t\t\tIncome\tand\tother\ttaxes | (85) | (313) | 196 |
| Cash\tprovided\tby\toperating\tactivities | 7,344 | 7,385 | 6,823 |
| Investing\tActivities |  |  |  |
| Capital\tinvestments | (4,650) | (4,346) | (3,496) |
| Proceeds\tfrom\tasset\tsales | 251 | 138 | 98 |
| Other\tinvesting\tactivities,\tnet | (77) | (41) | (7) |
| Cash\tused\tin\tinvesting\tactivities | (4,476) | (4,249) | (3,405) |
| Financing\tActivities |  |  |  |
| Common\tshare\trepurchases\t(Note\t19) | (3,465) | (3,225) | (2,218) |
| Debt\tissued | 3,328 | 2,588 | 1,443 |
| Dividends\tpaid | (2,344) | (1,632) | (1,333) |
| Debt\trepaid | (556) | (710) | (640) |
| Debt\texchange | \t- | \t- | (289) |
| Other\tfinancing\tactivities,\tnet | (26) | (3) | (12) |
| Cash\tused\tin\tfinancing\tactivities | (3,063) | (2,982) | (3,049) |
| Net\tchange\tin\tcash\tand\tcash\tequivalents | (195) | 154 | 369 |
| Cash\tand\tcash\tequivalents\tat\tbeginning\tof\tyear | 1,586 | 1,432 | 1,063 |
| Cash\tand\tcash\tequivalents\tat\tend\tof\tyear | $1,391 | $1,586 | $1,432 |
| Supplemental\tCash\tFlow\tInformation |  |  |  |
| \t\tNon-cash\tinvesting\tand\tfinancing\tactivities: |  |  |  |
| \t\t\t\t\tCapital\tinvestments\taccrued\tbut\tnot\tyet\tpaid | $100 | $174 | $133 |
| \t\t\t\t\tCapital\tlease\tfinancings | 13 | \t- | 39 |
| \t\t\t\t\tCash\tdividends\tdeclared\tbut\tnot\tyet\tpaid\t(Note\t13) | \t- | 438 | 356 |
| \t\tCash\tpaid\tduring\tthe\tyear\tfor: |  |  |  |
| \t\t\t\t\tIncome\ttaxes,\tnet\tof\trefunds | $(2,156) | $(2,492) | $(1,656) |
| \t\t\t\t\tInterest,\tnet\tof\tamounts\tcapitalized | (592) | (554) | (528) |

# CONSOLIDATED	STATEMENTS	OF	CHANGES	IN	COMMON	SHAREHOLDERS'	EQUITY

| Millions | Common<br>Shares | Treasury<br>Shares | Common<br>Shares | Paid-in-<br>Surplus | Retained<br>Earnings | Treasury<br>Stock | AOCI<br>[a] | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1,\t2013 | 1,109.3 | (170.3) | $\t\t\t2,773 | $\t\t\t4,113 | $\t\t\t20,884 | $\t\t\t\t(6,707) | $\t\t(1,186) | $\t\t\t19,877 |
| Net\tincome |  |  | \t- | \t- | 4,388 | - | - | 4,388 |
| Other\tcomp.\tincome |  |  | \t- | \t- | \t- | - | 436 | 436 |
| Conversion,\tstock\toption\n\t\t\texercises,\tforfeitures,\tand\tother | 0.4 | 1.6 | 1 | 97 | \t- | 15 | - | 113 |
| Share\trepurchases\t(Note\t19) | \t- | (29.0) | \t- | \t- | \t- | (2,218) | - | (2,218) |
| Cash\tdividends\tdeclared\n\t\t\t($1.48\tper\tshare) | \t- | \t- | \t- | \t- | (1,371) | - | - | (1,371) |
| Balance\tat\tDecember\t31,\t2013 | 1,109.7 | (197.7) | $\t\t\t2,774 | $\t\t\t4,210 | $\t\t\t23,901 | $\t\t\t\t(8,910) | $\t\t\t\t\t(750) | $\t\t\t21,225 |
| Net\tincome |  |  | \t- | \t- | 5,180 | - | - | 5,180 |
| Other\tcomp.\tloss |  |  | \t- | \t- | \t- | - | (460) | (460) |
| Conversion,\tstock\toption\n\t\t\texercises,\tforfeitures,\tand\tother | 0.4 | 3.0 | 1 | 111 | \t- | 71 | - | 183 |
| Share\trepurchases\t(Note\t19) | \t- | (32.0) | \t- | \t- | \t- | (3,225) | - | (3,225) |
| Cash\tdividends\tdeclared\n\t\t\t($1.91\tper\tshare) | \t- | \t- | \t- | \t- | (1,714) | - | - | (1,714) |
| Balance\tat\tDecember\t31,\t2014 | 1,110.1 | (226.7) | $\t\t\t2,775 | $\t\t\t4,321 | $\t\t\t27,367 | $\t\t(12,064) | $\t\t(1,210) | $\t\t\t21,189 |
| Net\tincome |  |  | \t- | \t- | 4,772 | - | - | 4,772 |
| Other\tcomp.\tincome |  |  | \t- | \t- | \t- | - | 15 | 15 |
| Conversion,\tstock\toption\n\t\t\texercises,\tforfeitures,\tand\tother | 0.3 | 0.8 | 1 | 96 | \t- | - | - | 97 |
| Share\trepurchases\t(Note\t19) | \t- | (35.3) | \t- | \t- | \t- | (3,465) | - | (3,465) |
| Cash\tdividends\tdeclared\n\t\t\t($2.20\tper\tshare) | \t- | \t- | \t- | \t- | (1,906) | - | - | (1,906) |
| Balance\tat\tDecember\t31,\t2015 | 1,110.4 | (261.2) | $\t\t\t2,776 | $\t\t\t4,417 | $\t\t\t30,233 | $\t\t(15,529) | $\t\t(1,195) | $\t\t\t20,702 |

[a] AOCI	=	Accumulated	Other	Comprehensive	Income/(Loss)	(Note	10)

# NOTES	TO	THE	CONSOLIDATED	FINANCIAL	STATEMENTS

For	 purposes	 of	 this	 report,	 unless	 the	 context	 otherwise	 requires,	 all	 references	 herein	 to	 the	 "Corporation", "Company",	"UPC",	"we",	"us",	and	"our"	mean	Union	Pacific	Corporation	and	its	subsidiaries,	including	Union	Pacific Railroad	Company,	which	will	be	separately	referred	to	herein	as	"UPRR"	or	the	"Railroad".

# 1.	Nature	of	Operations

Operations	and	Segmentation	–	We	are	a	Class	I	railroad	operating	in	the	U.S.	Our	network	includes 32,084	route miles,	linking	Pacific	Coast	and	Gulf	Coast	ports	with	the	Midwest	and	Eastern	U.S.	gateways	and	providing	several corridors	to	key	Mexican	gateways.	We	own	26,064	miles	and	operate	on	the	remainder	pursuant	to	trackage	rights	or leases.	We	serve	the	western	two-thirds	of	the	country	and	maintain	coordinated	schedules	with	other	rail	carriers	for the	handling	of	freight	to	and	from	the	Atlantic	Coast,	the	Pacific	Coast,	the	Southeast,	the	Southwest,	Canada,	and Mexico.	Export	and	import	traffic	is	moved	through	Gulf	Coast	and	Pacific	Coast	ports	and	across	the	Mexican	and Canadian	borders.

The	 Railroad,	 along	 with	 its	 subsidiaries	 and	 rail	 affiliates,	 is	 our	 one	 reportable	 operating	 segment.	Although	 we provide	and	analyze	revenue	by	commodity	group,	we	treat	the	financial	results	of	the	Railroad	as	one	segment	due	to the	integrated	nature	of	our	rail	network.	The	following	table	provides	freight	revenue	by	commodity	group:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Agricultural\tProducts | $3,581 | $3,777 | $3,276 |
| Automotive | 2,154 | 2,103 | 2,077 |
| Chemicals | 3,543 | 3,664 | 3,501 |
| Coal | 3,237 | 4,127 | 3,978 |
| Industrial\tProducts | 3,808 | 4,400 | 3,822 |
| Intermodal | 4,074 | 4,489 | 4,030 |
| Total\tfreight\trevenues | $20,397 | $22,560 | $20,684 |
| Other\trevenues | 1,416 | 1,428 | 1,279 |
| Total\toperating\trevenues | $21,813 | $23,988 | $21,963 |

Although	our	revenues	are	principally	derived	from	customers	domiciled	in	the	U.S.,	the	ultimate	points	of	origination	or destination	for	some	products	transported	by	us	are	outside	the	U.S.	Each	of	our	commodity	groups	includes	revenue from	shipments	to	and	from	Mexico.	Included	in	the	above	table	are	freight	revenues	from	our	Mexico	business	which amounted	to	$2.2	billion	in	2015,	$2.3	billion	in	2014,	and	$2.1	billion	in	2013.

Basis	 of	 Presentation	 –	 The	 Consolidated	 Financial	 Statements	 are	 presented	 in	 accordance	 with	 accounting principles	generally	accepted	 in	 the	U.S.	(GAAP)	as	codified	 in	 the	Financial	Accounting	Standards	Board	(FASB) Accounting	Standards	Codification	(ASC).	Certain	prior	period	amounts	in	the	statement	of	cash	flows	and	income	tax footnote	have	been	aggregated	or	disaggregated	further	to	conform	to	the	current	period	financial	pre sentation.

# 2.	Significant	Accounting	Policies

Principles	 of	 Consolidation –	 The	 Consolidated	 Financial	 Statements	 include	 the	 accounts	 of	 Union	 Pacific Corporation	and	all	of	its	subsidiaries.	Investments	in	affiliated	companies	(20%	to	50%	owned)	are	accounted	for	using the	equity	method	of	accounting.	All	intercompany	transactions	are	eliminated.	We	currently	have	no	less	than	majority- owned	investments	that	require	consolidation	under	variable	interest	entity	requirements.

Cash	and	Cash	Equivalents	–	Cash	equivalents	consist	of	investments	with	original	maturities	of	three	months	or	less.

Accounts	Receivable	–	Accounts	receivable	includes	receivables	reduced	by	an	allowance	for	doubtful	accounts.	The allowance	is	based	upon	historical	losses,	credit	worthiness	of	customers,	and	current

economic	 conditions.	 	 Receivables	 not	 expected	 to	 be	 collected	 in	 one	 year	 and the	 associated	 allowances	 are classified	as	other	assets	in	our	Consolidated	Statements	of	Financial	Position.

Investments	–	Investments	represent	our	investments	in	affiliated	companies	(20%	to	50%	owned)	that	are	accounted for	under	the	equity	method	of	accounting	and	investments	in	companies	(less	than	20%	owned)	accounted	for	under the	cost	method	of	accounting.

Materials	and	Supplies	–	Materials	and	supplies	are	carried	at	the	lower	of	average	cost	or	market.

Property	and	Depreciation	–	Properties	and	equipment	are	carried	at	cost	and	are	depreciated	on	a	straight-line	basis over	their	estimated	service	lives,	which	are	measured	in	years,	except	for	rail	in	high-density	traffic	corridors	(i.e.,	all rail	lines	except	for	those	subject	to	abandonment,	yard	and	switching	tracks,	and	electronic	yards),	for	which	lives	are measured	in	millions	of	gross	tons	per	mile	of	track.		We	use	the	group	method	of	depreciation	in	which	all	items	with similar	 characteristics,	 use,	 and	 expected	 lives	 are	 grouped	 together	 in	 asset	 classes,	 and	 are	 depreciated	 using composite	depreciation	rates.		The	group	method	of	depreciation	treats	each	asset	class	as	a	pool	of	resources,	not	as singular	 items.	 	We	determine	 the	estimated	service	 lives	of	depreciable	railroad	assets	by	means	of	depreciation studies.		Under	the	group	method	of	depreciation,	no	gain	or	loss	is	recognized	when	depreciable	property	is	retired	or replaced	in	the	ordinary	course	of	business.

Impairment	 of	 Long-lived	Assets	–	We	review long-lived	assets,	 including	 identifiable	 intangibles,	 for	 impairment when	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	an	asset	may	not	be	recoverable.	If impairment	indicators	are	present	and	the	estimated	future	undiscounted	cash	flows	are	less	than	the	carrying	value	of the	long-lived	assets,	the	carrying	value	is	reduced	to	the	estimated	fair	value	as	measured	by	the	discounted	cash flows.

Revenue	Recognition	–	We	recognize	freight	revenues	as	freight	moves	from	origin	to	destination.	The	allocation	of revenue	 between	 reporting	 periods	 is	 based	 on	 the	 relative	 transit	 time	 in	 each	 reporting	 period	 with	 expenses recognized	 as	 incurred.	 Other	 revenues,	 which	 include	 revenues	 earned	 by	 our	 subsidiaries,	 revenues	 from	 our commuter	rail	operations,	and	accessorial	revenue,	are	recognized	as	service	is	performed	or	contractual	obligations are	met.	Customer	 incentives,	which	are	primarily	provided	 for	shipping	a	specified	cumulative	volume	or	shipping to/from	 specific	 locations,	 are	 recorded	 as	 a	 reduction	 to	 operating	 revenues	 based	 on	 actual	 or	 projected	 future customer	shipments.

Translation	of	Foreign	Currency	–	Our	portion	of	the	assets	and	liabilities	related	to	foreign	investments	are	translated into	U.S.	dollars	at	the	exchange	rates	in	effect	at	the	balance	sheet	date.	Revenue	and	expenses	are	translated	at	the average	 rates	 of	 exchange	 prevailing	 during	 the	 year.	 Unrealized	 gains	 or	 losses	 are	 reflected	 within	 common shareholders'	equity	as	accumulated	other	comprehensive	income	or	loss.

Fair	Value	Measurements	–	We	use	a	fair	value	hierarchy	that	prioritizes	the	inputs	to	valuation	techniques	used	to measure	 fair	 value	 into	 three	 broad	 levels.	 	 The	 level	 in	 the	 fair	 value	 hierarchy	 within	 which	 the	 fair	 value measurement	 in	 its	 entirety	 falls	 is	 determined	 based	 on the lowest level input that is	 significant to the fair	 value measurement	in	its	entirety.		These	levels	include:

Level	1:		Quoted	market	prices	in	active	markets	for	identical	assets	or	liabilities.

Level	2:		Observable	market-based	inputs	or	unobservable	inputs	that	are	corroborated	by	market	data. Level	3:		Unobservable	inputs	that	are	not	corroborated	by	market	data.

We	have	applied	fair	value	measurements	to	our	pension	plan	assets	and	short-	and	long-term	debt.

Stock-Based	Compensation	–	We	have	several	stock-based	compensation	plans	under	which	employees	and	non- employee	 directors	 receive	 stock	 options,	 nonvested	 retention	 shares,	 and	 nonvested	 stock	 units.	 We	 refer	 to	 the nonvested	shares	and	stock	units	collectively	as	"retention	awards".	We	have	elected	to	issue	treasury	shares	to	cover option	exercises	and	stock	unit	vestings,	while	new	shares	are	issued	when	retention	shares	are	granted.

We	 measure	 and	 recognize	 compensation	 expense	 for	 all	 stock-based	 awards	 made	 to	 employees	 and	 directors, including	stock	options.	Compensation	expense	is	based	on	the	calculated	fair	value	of	the	awards	as	measured	at	the grant	date	and	is	expensed	ratably	over	the	service	period	of	the	awards	(generally	the	vesting	period).	The	fair	value of	retention	awards	is	the	closing	stock	price	on	the	date	of	grant,	while	the	fair	value	of	stock	options	is	determined	by using	the	Black-Scholes	option	pricing	model.

Earnings	Per	Share	–	Basic	earnings	per	share	are	calculated	on	the	weighted-average	number	of	common	shares outstanding	during	each	period.	Diluted	earnings	per	share	include	shares	issuable	upon	exercise	of	outstanding	stock options	and	stock-based	awards	where	the	conversion	of	such	instruments	would	be	dilutive.

Income	 Taxes	–	We	account for	 income	 taxes	by	recording	 taxes	payable	or	refundable	 for	 the	current	year	and deferred	tax	assets	and	liabilities	for	the	expected	future	tax	consequences	of	events	that	have	been	recognized	in	our financial	statements	or	tax	returns.	These	expected	future	tax	consequences	are	measured	based	on	current	tax	law; the	effects	of	future	tax	legislation	are	not	anticipated.		Future	tax	legislation,	such	as	a	change	in	the	corporate	tax	rate, could	have	a	material	impact	on	our	financial	condition,	results	of	operations,	or	liquidity.

When	appropriate,	we	record	a	valuation	allowance	against	deferred	tax	assets	to	reflect	that	these	tax	assets	may	not be	realized.	In	determining	whether	a	valuation	allowance	is	appropriate,	we	consider	whether	it	is	more	likely	than	not that	 all	 or	 some	 portion	 of	 our	 deferred	 tax	 assets	 will	 not	 be	 realized,	 based	 on	 management's	 judgments	 using available	evidence	for	purposes	of	estimating	whether	future	taxable	income	will	be	sufficient	to	realize	a	deferred	tax asset.

Pension	 and	 Postretirement	 Benefits	–	We	incur	certain	employment-related	expenses	associated	with	pensions and	postretirement	health	benefits.	In	order	to	measure	the	expense	associated	with	these	benefits,	we	must	make various	assumptions	including	discount	rates	used	to	value	certain	liabilities,	expected	return	on	plan	assets	used	to fund	 these	 expenses,	 compensation	 increases,	 employee	 turnover	 rates,	 anticipated	 mortality	 rates,	 and	 expected future	health	care	costs.	The	assumptions	used	by	us	are	based	on	our	historical	experience	as	well	as	current	facts and	circumstances.	We	use	an	actuarial	analysis	to	measure	the	expense	and	liability	associated	with	these	benefits.

Personal	Injury	–	The	cost	of injuries	 to	employees	and	others	on	our	property	 is	charged	 to	expense	based	on estimates	of	the	ultimate	cost	and	number	of	incidents	each	year.	We	use	an	actuarial	analysis	to	measure	the	expense and	liability.	Our	personal	injury	liability	is	not	discounted	to	present	value.	Legal	fees	and	incidental	costs	are	expensed as	incurred.

Asbestos	–	We	estimate	a	liability	for	asserted	and	unasserted	asbestos-related	claims	based	on	an	assessment	of	the number	and	value	of	those	claims.	We	use	a	statistical	analysis	to	assist	us	in	properly	measuring	our	potential	liability. Our	liability	for	asbestos-related	claims	is	not	discounted	to	present	value	due	to	the	uncertainty	surrounding	the	timing of	future	payments.	Legal	fees	and	incidental	costs	are	expensed	as	incurred.

Environmental	–	When	environmental	issues	have	been	identified	with	respect	to	property	currently	or	formerly	owned, leased,	 or	 otherwise	 used	 in	 the	 conduct	 of	 our	 business,	 we	 perform,	 with	 the	 assistance	 of	 our	 consultants, environmental	assessments	on	such	property.	We	expense	the	cost	of	the	assessments	as	incurred.	We	accrue	the cost	of	remediation	where	our	obligation	is	probable	and	such	costs	can	be	reasonably	estimated.	We	do	not	discount our	environmental	liabilities	when	the	timing	of	the	anticipated	cash	payments	is	not	fixed	or	readily	determinable.	Legal fees	and	incidental	costs	are	expensed	as	incurred.

Use	 of	 Estimates	–	 The	 preparation	 of	 our	Consolidated	 Financial	 Statements	in	 conformity	 with	 GAAP	 requires management	to	make	estimates	and	assumptions	 that	affect	certain	reported	assets	and	liabilities,	and	the	disclosure of	certain	contingent	assets	and	liabilities	as	of	the	date	of	the	consolidated	financial	statements,	as	well	as	the	reported amounts	of	revenue	and	expenses	during	the	reporting	period.	Actual	future	results	may	differ	from	such	estimates.

# 3.	Accounting	Pronouncements

In	May	2014,	the	FASB	issued	Accounting	Standards	Update	No.	2014-09	(ASU	2014-09),	 Revenue	from	Contracts with	 Customers	 (Topic	 606). 	ASU	 2014-09	 supersedes	 the	 revenue	 recognition	 guidance	 in	Topic	 605,	 Revenue Recognition.		The	core	principle	of	the	guidance	is	that	an	entity	should	recognize	revenue	to	depict	the	transfer	of promised	goods	and	services	to	customers	in	an	amount	that	reflects	the

consideration	to	which	the	entity	expects	to	be	entitled	in	the	exchange	for	those	goods	or	services.		This	standard	is effective	for	annual	reporting	periods	beginning	after	December	15,	2017,	and	can	be	adopted	either	retrospectively	or as	a	cumulative	effect	adjustment	as	of	the	date	of	adoption.		ASU	2014-09	is	not	expected	to	have	a	material	impact on	our	consolidated	financial	position,	results	of	operations,	or	cash	flows.

In	April	2015,	the	FASB	issued	Accounting	Standards	Update	No.	2015-03	(ASU	2015-03), Interest	-	Imputation	of Interest	(Subtopic	835-30).	ASU	2015-03	changes	the	presentation	of	debt	issuance	costs	in	the	financial	statements	to present	such	costs	as	a	direct	deduction	from	the	related	debt	liability	rather	than	as	an	asset.	Amortization	of	debt issuance	costs	will	be	reported	as	interest	expense.	This	standard	is	effective	for	annual	reporting	periods	beginning after	December	15,	2015.	We	elected	to	early	adopt	ASU	2015-03	on	December	31,	2015.	As	a	result,	the	Company reclassified	debt	issuance	costs	from	other	assets	to	debt	on	the	Consolidated	Statements	of	Financial	Position.	ASU 2015-03	did	not	have	a	material	impact	on	our	consolidated	financial	position,	and	had	no	impact	on	our	results	of operations	 or	 cash	 flows.	 	All	 prior	 period	 financial	 information	 presented	 herein	 has	 been	 adjusted	 to	 reflect	 the retrospective	application	of	this	ASU.

# 4.	Stock	Split

On	June	6,	2014,	we	completed	a	two-for-one	stock	split,	effected	in	the	form	of	a	 100%	stock	dividend.	The	stock	split entitled	all	shareholders	of	record	at	the	close	of	business	on	May	27,	2014,	to	receive	one	additional	share	of	our common	stock,	par	value	$2.50	per	share,	for	each	share	of	common	stock	held	on	that	date.	All	references	to	common shares	and	per	share	amounts	have	been	retroactively	adjusted	to	reflect	the	stock	split	for	all	periods	presented.

# 5.	Stock	Options	and	Other	Stock	Plans

There	 are	7,140	restricted	shares	outstanding	under	the	1992	Restricted	Stock	Plan	for	Non-Employee	Directors	of Union	Pacific	Corporation.	We	no	longer	grant	awards	of	restricted	shares	under	this	plan.

In	April	2000,	the	shareholders	approved	the	Union	Pacific	Corporation	2000	Directors	Plan	(Directors	Plan)	whereby 2,200,000	shares	of	our	common	stock	were	reserved	for	issuance	to	our	non-employee	directors.	 Under	the	Directors Plan,	each	non-employee	director,	upon	his	or	her	initial	election	to	the	Board	of	Directors,	receives	a	grant	of	4,000 retention	shares	or	retention	stock	units.	Prior	to	December	31,	2007,	each	non-employee	director	received	annually	an option	to	purchase	at	fair	value	a	number	of	shares	of	our	common	stock,	not	to	exceed	20,000	shares	during	any calendar	year,	determined	by	dividing	60,000	by	1/3	of	the	fair	market	value	of	one	share	of	our	common	stock	on	the date	of	such	Board	of	Directors	meeting,	with	the	resulting	quotient	rounded	up	or	down	to	the	nearest	50	shares.	In September	2007,	the	Board	of	Directors	eliminated	the	annual	payment	of	options	for	2008	and	all	future	years.	As	of December	31,	2015,	36,000	restricted	shares	and	45,400	options	were	outstanding	under	the	Directors	Plan.

The	Union	Pacific	Corporation	2004	Stock	Incentive	Plan	(2004	Plan)	was	approved	by	shareholders	in	April	2004.	The 2004	Plan	reserved	84,000,000	shares	of	our	common	stock	for	issuance,	plus	any

shares	subject	to	awards	made	under	previous	plans	that	were	outstanding	on	April	16,	2004,	and	became	available	for regrant	pursuant	to	the	terms	of	the	2004	Plan.	Under	the	2004	Plan,	non-qualified	options,	stock	appreciation	rights, retention	shares,	stock	units,	and	incentive	bonus	awards	may	be	granted	to	eligible	employees	of	the	Corporation	and its	subsidiaries.	Non-employee	directors	are	not	eligible	for	awards	under	the	2004	Plan.	As	of	December	31,	2015, 3,652,954	 options	 and	2,092,721	retention	shares	and	stock	units	were	outstanding	under	 the	2004	Plan.	 	We	no longer	grant	any	stock	options	or	other	stock	or	unit	awards	under	this	plan.

The	Union	Pacific	Corporation	2013	Stock	Incentive	Plan	(2013	Plan)	was	approved	by	shareholders	in	May	2013.	The 2013	Plan	reserved	78,000,000	shares	of	our	common	stock	for	issuance,	plus	any	shares	subject	to	awards	made under	previous	plans	as	of	February	28,	2013,	that	are	subsequently	cancelled,	expired,	forfeited	or	otherwise	not issued	under	previous	plans.		Under	the	2013	Plan,	non-qualified	options,	incentive	stock	options,	retention	shares, stock	units,	and	incentive	bonus	awards	may	be	granted	to	eligible	employees	of	the	Corporation	and	its	subsidiaries. Non-employee	directors	are	not	eligible	for	awards	under	the	2013	Plan.	As	of	December	31,	2015,	1,873,014	options and	2,061,737	retention	shares	and	stock	units	were	outstanding	under	the	2013	Plan.

Information	regarding	stock-based	compensation	appears	in	the	table	below:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Stock-based\tcompensation,\tbefore\ttax: |  |  |  |
| \t\t\t\t\tStock\toptions | $17 | $21 | $19 |
| \t\t\t\t\tRetention\tawards | 81 | 91 | 79 |
| Total\tstock-based\tcompensation,\tbefore\ttax | $98 | $112 | $98 |
| Excess\ttax\tbenefits\tfrom\tequity\tcompensation\tplans | $62 | $118 | $76 |

Stock	Options	–	We	estimate	the	fair	value	of	our	stock	option	awards	using	the	Black-Scholes	option	pricing	model. The	table	below	shows	the	annual	weighted-average	assumptions	used	for	valuation	purposes:

| Weighted-Average	Assumptions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Risk-free\tinterest\trate | 1.3% | 1.6% | 0.8% |
| Dividend\tyield | 1.8% | 2.1% | 2.1% |
| Expected\tlife\t(years) | 5.1 | 5.2 | 5.0 |
| Volatility | 23.4% | 30.0% | 36.2% |
| Weighted-average\tgrant-date\tfair\tvalue\tof\toptions\tgranted | $22.30 | $20.18 | $17.49 |

The	risk-free	rate	is	based	on	the	U.S.	Treasury	yield	curve	in	effect	at	the	time	of	grant;	the	 expected	dividend	yield	is calculated	as	the	ratio	of	dividends	paid	per	share	of	common	stock	to	the	stock	price	on	the	date	of	grant;	the	expected life	is	based	on	historical	and	expected	exercise	behavior;	and	expected	volatility	is	based	on	the	historical	volatility	of our	stock	price	over	the	expected	life	of	the	option.

# A	summary	of	stock	option	activity	during	2015	is	presented	below:

|  | Options<br>(thous.) | Weighted-<br>Average	Exercise<br>Price | Weighted-Average<br>Remaining	Contractual<br>Term | Aggregate<br>Intrinsic	Value<br>(millions) |
| :--- | :--- | :--- | :--- | :--- |
| Outstanding\tat\tJanuary\t1,\t2015 | 5,387 | $53.56 | 5.8\nyrs. | $353 |
| Granted | 934 | 122.85 | N/A | N/A |
| Exercised | (716) | 40.10 | N/A | N/A |
| Forfeited\tor\texpired | (34) | 89.24 | N/A | N/A |
| Outstanding\tat\tDecember\t31,\t2015 | 5,571 | $66.69 | 5.4\nyrs. | $114 |
| Vested\tor\texpected\tto\tvest\n\t\t\t\t\tat\tDecember\t31,\t2015 | 5,532 | $66.32 | 5.4\nyrs. | $114 |
| Options\texercisable\tat\tDecember\t31,\t2015 | 3,672 | $49.00 | 4.1\nyrs. | $110 |

Stock	options	are	granted	at	the	closing	price	on	the	date	of	grant,	have	 ten-year	contractual	terms,	and	vest	no	later than	three	years	from	the	date	of	grant.	 None	of	the	stock	options	outstanding	at	December	31,	2015,	are	subject	to performance	or	market-based	vesting	conditions.

At	 December	 31,	 2015,	 there	 was	$18	million	of	unrecognized	compensation	 expense	 related	 to	 nonvested	 stock options,	 which	 is	 expected	 to	 be	 recognized	 over	 a	 weighted-average	 period	 of	1.0	 year.	Additional	 information regarding	stock	option	exercises	appears	in	the	table	below:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Intrinsic\tvalue\tof\tstock\toptions\texercised | $50 | $194 | $112 |
| Cash\treceived\tfrom\toption\texercises | 27 | 54 | 51 |
| Treasury\tshares\trepurchased\tfor\temployee\tpayroll\ttaxes | (12) | (24) | (21) |
| Tax\tbenefit\trealized\tfrom\toption\texercises | 19 | 74 | 43 |
| Aggregate\tgrant-date\tfair\tvalue\tof\tstock\toptions\tvested | 19 | 17 | 16 |

Retention	Awards	–	The	fair	value	of	retention	awards	is	based	on	the	closing	price	of	the	stock	on	the	grant	date. Dividends	and	dividend	equivalents	are	paid	to	participants	during	the	vesting	periods.

Changes	in	our	retention	awards	during	2015	were	as	follows:

|  | Shares	(thous.) | Weighted-Average<br>Grant-Date	Fair	Value |
| :--- | :--- | :--- |
| Nonvested\tat\tJanuary\t1,\t2015 | 3,403 | $64.39 |
| Granted | 521 | 122.79 |
| Vested | (934) | 47.66 |
| Forfeited | (90) | 72.87 |
| Nonvested\tat\tDecember\t31,\t2015 | 2,900 | $80.01 |

Retention	awards	are	granted	at	no	cost	to	the	employee	or	non-employee	director	and	vest	over	periods	lasting	up	to four	 years.	At	 December	 31,	 2015,	 there	 was	 $88	 million	 of	 total	 unrecognized	 compensation	 expense	 related	 to nonvested	retention	awards,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	1.5	years.

Performance	Retention	Awards	–	In	February	2015,	our	Board	of	Directors	approved	performance	stock	unit	grants. Other	 than	 different	 performance	 targets,	 the	 basic	 terms	 of	 these	 performance	 stock	 units	 are	 identical	 to	 those granted	 in	 February	 2013	 and	 February	 2014,	 including	 using	 annual	 return	 on	 invested	 capital	 (ROIC)	 as	 the performance	measure.			We	define	ROIC	as	net	operating	profit	adjusted	for	interest	expense	(including	interest	on	the present	value	of	operating	leases)	and	taxes	on	interest	divided	by	average	invested	capital	adjusted	for	the	present value	of	operating	leases.

Stock	units	awarded	to	selected	employees	under	these	grants	are	subject	to	continued	employment	for	37	months	and the	attainment	of	certain	levels	of	ROIC.	We	expense	the	fair	value	of	the	units	that	are

probable	of	being	earned	based	on	our	forecasted	ROIC	over	the	3-year	performance	period. 	We	measure	the	fair value	of	these	performance	stock	units	based	upon	the	closing	price	of	the	underlying	common	stock	as	of	the	date	of grant,	reduced	by	the	present	value	of	estimated	future	dividends.	Dividend	equivalents	are	paid	to	participants	only after	the	units	are	earned.

The	assumptions	used	to	calculate	the	present	value	of	estimated	future	dividends	related	to	the	February	2015	grant were	as	follows:

Changes	in	our	performance	retention	awards	during	2015	were	as	follows:

|  | Shares	(thous.) | Weighted-Average<br>Grant-Date	Fair	Value |
| :--- | :--- | :--- |
| Nonvested\tat\tJanuary\t1,\t2015 | 1,583 | $65.33 |
| Granted | 339 | 117.42 |
| Vested | (580) | 54.38 |
| Forfeited | (87) | 86.66 |
| Nonvested\tat\tDecember\t31,\t2015 | 1,255 | $82.98 |

At	 December	 31,	 2015,	 there	 was	$19	 million	 of	 total	 unrecognized	 compensation	 expense	 related	 to	 nonvested performance	retention	awards,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	0.7	years.	This expense	is	subject	to	achievement	of	the	ROIC	levels	established	for	the	performance	stock	unit	grants.

# 6.	Retirement	Plans

# Pension	and	Other	Postretirement	Benefits

Pension	Plans	–	We	provide	defined	benefit	retirement	income	to	eligible	non-union	employees	through	qualified	and non-qualified	(supplemental)	pension	plans.	Qualified	and	non-qualified	pension	benefits	are	based	on	years	of	service and	 the	 highest	 compensation	 during	 the	 latest	 years	 of	 employment,	 with	 specific	 reductions	 made	 for	 early retirements.

Other	 Postretirement	 Benefits	 (OPEB)	–	We	provide	medical	and	life	insurance	benefits	for	eligible	retirees.	These benefits	are	funded	as	medical	claims	and	life	insurance	premiums	are	paid.

# Funded	Status

We	are	required	by	GAAP	to	separately	recognize	the	overfunded	or	underfunded	status	of	our	pension	and	OPEB plans	as	an	asset	or	 liability.	The	 funded	status	represents	 the	difference	between	 the	projected	benefit	obligation (PBO)	and	the	fair	value	of	the	plan	assets.	Our	non-qualified	(supplemental)	pension	plan	is	unfunded	by	design.	The PBO	of	the	pension	plans	is	the	present	value	of	benefits	earned	to	date	by	plan	participants,	including	the	effect	of assumed	future	compensation	increases.	The	PBO	of	the	OPEB	plan	is	equal	to	the	accumulated	benefit	obligation,	as the	present	value	of	the	OPEB	liabilities	is	not	affected	by	compensation	increases.	Plan	assets	are	measured	at	fair value.	We	use	a	December	31	measurement	date	for	plan	assets	and	obligations	for	all	our	retirement	plans.

Changes	in	our	PBO	and	plan	assets	were	as	follows	for	the	years	ended	December	31:

| Funded	Status | Pension |  | OPEB |  |
| :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2015 | 2014 |
| Projected\tBenefit\tObligation |  |  |  |  |
| Projected\tbenefit\tobligation\tat\tbeginning\tof\tyear | $4,142 | $3,372 | $354 | $330 |
| Service\tcost | 106 | 70 | 3 | 2 |
| Interest\tcost | 163 | 158 | 13 | 14 |
| Actuarial\tloss/(gain) | (267) | 735 | (18) | 33 |
| Gross\tbenefits\tpaid | (186) | (193) | (23) | (25) |
| Projected\tbenefit\tobligation\tat\tend\tof\tyear | $3,958 | $4,142 | $329 | $354 |
| Plan\tAssets |  |  |  |  |
| Fair\tvalue\tof\tplan\tassets\tat\tbeginning\tof\tyear | $3,654 | $3,429 | $\t- | $\t- |
| Actual\treturn\ton\tplan\tassets | (43) | 185 | \t- | \t- |
| Voluntary\tfunded\tpension\tplan\tcontributions | 100 | 200 | \t- | \t- |
| Non-qualified\tplan\tbenefit\tcontributions | 19 | 33 | 23 | 25 |
| Gross\tbenefits\tpaid | (186) | (193) | (23) | (25) |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tyear | $3,544 | $3,654 | $\t- | $\t- |
| Funded\tstatus\tat\tend\tof\tyear | $(414) | $(488) | $(329) | $(354) |

Amounts	recognized	in	the	statement	of	financial	position	as	of	December	31,	2015	and	2014	consist	of:

|  | Pension |  | OPEB |  |
| :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2015 | 2014 |
| Noncurrent\tassets | $1 | $1 | $\t- | $\t- |
| Current\tliabilities | (22) | (19) | (23) | (23) |
| Noncurrent\tliabilities | (393) | (470) | (306) | (331) |
| Net\tamounts\trecognized\tat\tend\tof\tyear | $(414) | $(488) | $(329) | $(354) |

Pre-tax	amounts	recognized	in	accumulated	other	comprehensive	income/(loss)	as	of	December	31,	2015	and	2014 consist	of:

|  |  | 2015 |  |  | 2014 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | Pension | OPEB | Total | Pension | OPEB | Total |
| Prior\tservice\t(cost)/credit | $\t- | $7 | $7 | $\t- | $17 | $17 |
| Net\tactuarial\tloss | (1,652) | (117) | (1,769) | (1,727) | (148) | (1,875) |
| Total | $(1,652) | $(110) | $(1,762) | $(1,727) | $(131) | $(1,858) |

Pre-tax	changes	recognized	in	other	comprehensive	income/(loss)	during	2015,	2014	and	2013	were	as	follows:

|  |  | Pension |  |  | OPEB |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Net\tactuarial\t(loss)/gain | $(31) | $(780) | $561 | $18 | $(33) | $34 |
| Amortization\tof: |  |  |  |  |  |  |
| \t\t\t\t\tPrior\tservice\tcost/(credit) | \t- | \t- | \t- | (10) | (11) | (16) |
| \t\t\t\t\tActuarial\tloss | 106 | 71 | 106 | 13 | 10 | 15 |
| Total | $75 | $(709) | $667 | $21 | $(34) | $33 |

Amounts	included	in	accumulated	other	comprehensive	income/(loss)	expected	to	be	amortized	into	net	periodic	cost during	2016:

| Millions | Pension | OPEB | Total |
| :--- | :--- | :--- | :--- |
| Prior\tservice\tcredit | $\t- | $9 | $9 |
| Net\tactuarial\tloss | (80) | (10) | (90) |
| Total | $(80) | $(1) | $(81) |

Underfunded	 Accumulated	 Benefit	 Obligation	–	 The	 accumulated	 benefit	 obligation (ABO)	 is	 the	 present	 value	 of benefits	earned	to	date,	assuming	no	future	compensation	growth.	The	underfunded	accumulated	benefit	obligation represents	the	difference	between	the	ABO	and	the	fair	value	of	plan	assets.	At	December	31,	2015	and	2014,	the	non- qualified	(supplemental)	plan	ABO	was	$388	million	and	$379	million,	respectively.	The	following	table	discloses	only the	PBO,	ABO,	and	fair	value	of	plan	assets	for	pension	plans	where	the	accumulated	benefit	obligation	is	in	excess	of the	fair	value	of	the	plan	assets	as	of	December	31:

| Millions | 2015 | 2014 |
| :--- | :--- | :--- |
| Projected\tbenefit\tobligation | $398 | $388 |
| Accumulated\tbenefit\tobligation | $388 | $379 |
| Fair\tvalue\tof\tplan\tassets | \t- | \t- |
| Underfunded\taccumulated\tbenefit\tobligation | $(388) | $(379) |

Assumptions	–	The	weighted-average	actuarial	assumptions	used	to	determine	benefit	obligations	at	December	31:

|  | Pension |  | OPEB | OPEB |
| :--- | :--- | :--- | :--- | :--- |
| Percentages | 2015 | 2014 | 2015 | 2014 |
| Discount\trate | 4.37% | 3.94% | 4.16% | 3.74% |
| Compensation\tincrease | 4.10% | 4.00% | N/A | N/A |
| Health\tcare\tcost\ttrend\trate\t(employees\tunder\t65) | N/A | N/A | 6.52% | 6.34% |
| Ultimate\thealth\tcare\tcost\ttrend\trate | N/A | N/A | 4.50% | 4.50% |
| Year\tultimate\ttrend\trate\treached | N/A | N/A | 2038 | 2028 |

# Expense

Both	pension	and	OPEB	expense	are	determined	based	upon	the	annual	service	cost	of	benefits	(the	actuarial	cost	of benefits	earned	during	a	period)	and	the	interest	cost	on	those	liabilities,	less	the	expected	return	on	plan	assets.	The expected	long-term	rate	of	return	on	plan	assets	is	applied	to	a	calculated	value	of	plan	assets	that	recognizes	changes in	fair	value	over	a	five-year	period.	This	practice	is	intended	to	reduce	year-to-year	volatility	in	pension	expense,	but	it can	have	the	effect	of	delaying	the	recognition	of	differences	between	actual	returns	on	assets	and	expected	returns based	on	long-term	rate	of	return	assumptions.	Differences	in	actual	experience	in	relation	to	assumptions	are	not recognized	in	net	income	immediately,	but	are	deferred	in	accumulated	other	comprehensive	income	and,	if	necessary, amortized	as	pension	or	OPEB	expense.

The	components	of	our	net	periodic	pension	and	OPEB	cost/(benefit)	were	as	follows	for	the	years	ended	December 31:

|  |  | Pension |  |  | OPEB |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Millions | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Net\tPeriodic\tBenefit\tCost: |  |  |  |  |  |  |
| \t\t\t\t\tService\tcost | $106 | $70 | $72 | $3 | $2 | $3 |
| \t\t\t\t\tInterest\tcost | 163 | 158 | 134 | 13 | 14 | 12 |
| \t\t\t\t\tExpected\treturn\ton\tplan\tassets | (255) | (230) | (202) | \t- | \t- | \t- |
| Amortization\tof: |  |  |  |  |  |  |
| \t\t\t\t\tPrior\tservice\tcost/(credit) | \t- | \t- | \t- | (10) | (11) | (16) |
| \t\t\t\t\tActuarial\tloss | 106 | 71 | 106 | 13 | 10 | 15 |
| Net\tperiodic\tbenefit\tcost/(benefit) | $120 | $69 | $110 | $19 | $15 | $14 |

Assumptions	–	The	weighted-average	actuarial	assumptions	used	to	determine	expense	were	as	follows:

|  |  | Pension |  |  | OPEB |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Percentages | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Discount\trate | 3.94% | 4.72% | 3.78% | 3.74% | 4.47% | 3.48% |
| Expected\treturn\ton\tplan\tassets | 7.50% | 7.50% | 7.50% | N/A | N/A | N/A |
| Compensation\tincrease | 4.00% | 4.00% | 3.43% | N/A | N/A | N/A |
| Health\tcare\tcost\ttrend\trate\t(employees\tunder\t65) | N/A | N/A | N/A | 6.34% | 6.49% | 6.64% |
| Ultimate\thealth\tcare\tcost\ttrend\trate | N/A | N/A | N/A | 4.50% | 4.50% | 4.50% |
| Year\tultimate\ttrend\treached | N/A | N/A | N/A | 2028 | 2028 | 2028 |

The	discount	rate	was	based	on	a	yield	curve	of	high	quality	corporate	bonds	with	cash	flows	matching	our	plans' expected	benefit	payments.		The	expected	return	on	plan	assets	is	based	on	our	asset	allocation	mix	and	our	historical return,	taking	into	account	current	and	expected	market	conditions.	The	actual	return	on	pension	plan	assets,	net	of fees,	was	approximately	(1)%	in	2015,	6%	in	2014,	and	17%	in	2013.

Assumed	health	care	cost	trend	rates	have	an	effect	on	the	expense	and	liabilities	reported	for	health	care	plans.	The assumed	health	care	cost	trend	rate	is	based	on	historical	rates	and	expected	market	conditions.	The	2016	assumed health	care	cost	trend	rate	for	employees	under	65	is	6.34%.		It	is	assumed	the	rate	will	decrease	gradually	to	an ultimate	rate	of	4.5%	in	2028	and	will	remain	at	that	level.		 A	one-percentage	point	change	in	the	assumed	health	care cost	trend	rates	would	have	the	following	effects	on	OPEB:

| Millions | One	%	pt.<br>Increase | One	%	pt.<br>Decrease |
| :--- | :--- | :--- |
| Effect\ton\ttotal\tservice\tand\tinterest\tcost\tcomponents | $1 | $(1) |
| Effect\ton\taccumulated\tbenefit\tobligation | 17 | (14) |

# Cash	Contributions

The	following	table	details	our	cash	contributions	for	the	qualified	pension	plans	and	the	benefit	payments	for	the	non- qualified	(supplemental)	pension	and	OPEB	plans:

|  | Pension |  |  |
| :--- | :--- | :--- | :--- |
| Millions | Qualified | Non-qualified | OPEB |
| 2014 | $200 | $33 | $25 |
| 2015 | 100 | 19 | 23 |

Our	policy	with	respect	to	funding	the	qualified	plans	is	to	fund	at	least	the	minimum	required	by	law	and	not	more	than the	maximum	amount	deductible	for	tax	purposes.	All	contributions	made	to	the	qualified	pension	plans	in	2015	were voluntary	and	were	made	with	cash	generated	from	operations.

The	non-qualified	pension	and	OPEB	plans	are	not	funded	and	are	not	subject	to	any	minimum	regulatory	funding requirements.	Benefit	payments	for	each	year	represent	supplemental	pension	payments	and	claims	paid	for	medical and	 life	 insurance.	 We	 anticipate	 our	 2016	 supplemental	 pension	 and	 OPEB	 payments	 will	 be	 made	 from	 cash generated	from	operations.

# Benefit	Payments

The	following	table	details	expected	benefit	payments	for	the	years	2016	through	2025:

| Millions | Pension | OPEB |
| :--- | :--- | :--- |
| 2016 | $191 | $23 |
| 2017 | 194 | 23 |
| 2018 | 198 | 23 |
| 2019 | 202 | 23 |
| 2020 | 205 | 22 |
| Years\t2021\t-\t2025 | 1,077 | 102 |

# Asset	Allocation	Strategy

Our	pension	plan	asset	allocation	at	December	31,	2015	and	2014,	and	target	allocation	for	2016,	are	as	follows:

|  |  | Percentage	of	Plan	Assets | Percentage	of	Plan	Assets |
| :--- | :--- | :--- | :--- |
|  | Target |  | December\t31, |
|  | Allocation\t2016 | 2015 | 2014 |
| Equity\tsecurities | 60%\tto\t70% | 67% | 68% |
| Debt\tsecurities | 20%\tto\t30% | 23 | 23 |
| Real\testate | 2%\tto\t8% | 6 | 4 |
| Commodities | 4%\tto\t6% | 4 | 5 |
| Total |  | 100% | 100% |

The	investment	strategy	for	pension	plan	assets	is	to	maintain	a	broadly	diversified	portfolio	designed	to	achieve	our target	average	long-term	rate	of	return	of	7.5%.	While	we	believe	we	can	achieve	a	long-term	average	rate	of	return	of 7.5%,	we	cannot	be	certain	that	the	portfolio	will	perform	to	our	expectations.	Assets	are	strategically	allocated	among equity,	debt,	and	other	investments	in	order	to	achieve	a	diversification	level	that	reduces	fluctuations	in	investment returns.	Asset	allocation	target	ranges	for	equity,	debt,	and	other	portfolios	are	evaluated	at	least	every	three	years	with the	assistance	of	an	 independent	consulting	 firm.	Actual	asset	allocations	are	monitored	monthly,	and	rebalancing actions	are	executed	at	least	quarterly,	if	needed.

The	pension	plan	investments	are	held	in	a	Master	Trust.	The	majority	of	pension	plan	assets	are	invested	in	equity securities	because	equity	portfolios	have	historically	provided	higher	returns	than	debt	and	other	asset	classes	over extended	time	horizons	and	are	expected	to	do	so	in	the	future.	Correspondingly,	equity	investments	also	entail	greater risks	than	other	investments.		Equity	risks	are	balanced	by	investing	a	significant	portion	of	the	plans'	assets	in	high quality	debt	securities.	The	average	credit	rating	of	the	debt	portfolio	exceeded	A	as	of	December	31,	2015	and	A+	as of	December	31,	2014.	The	debt	portfolio	is	also	broadly	diversified	and	invested	primarily	in	U.S.	Treasury,	mortgage, and	corporate	securities.	The	weighted-average	maturity	of	the	debt	portfolio	was	12	years	at	both	December	31,	2015 and	2014.

The	investment	of	pension	plan	assets	in	securities	issued	by	UPC	is	explicitly	prohibited	by	the	plan	for	both	the	equity and	debt	portfolios,	other	than	through	index	fund	holdings.

# Fair	Value	Measurements

The	pension	plan	assets	are	valued	at	fair	value.	The	following	is	a	description	of	the	valuation	methodologies	used	for the	 investments	 measured	 at	 fair	 value,	 including	 the	 general	 classification	 of	 such	 instruments	 pursuant	 to	 the valuation	hierarchy.

Temporary	Cash	Investments	–	These	investments	consist	of	U.S.	dollars	and	foreign	currencies	held	in	master	trust accounts	at	The	Northern	Trust	Company	(the	Trustee).		Foreign	currencies	held	are	reported	in	terms	of	U.S.	dollars based	on	currency	exchange	rates	readily	available	in	active	markets.	These	temporary	cash	investments	are	classified as	Level	1	investments.

Registered Investment	 Companies	 –	 Registered Investment	 Companies	 are	 real	 estate	 investments	 and	 bond investments	registered	with	the	Securities	and	Exchange	Commission.		The	real	estate	investments	are	traded	actively on	public	exchanges.	The	share	prices	for	these	investments	are	published	at	the	close	of	each	business	day.		The Plan's	holdings	of	real	estate	investments	are	classified	as	Level	1	investments.		The	bond	investments	are	not	traded publicly,	but	the	underlying	assets	held	in	these	funds	are	traded	on	active	markets	and	the	prices	for	these	assets	are readily	observable.		The	Plan's	holdings	in	bond	investments	are	classified	as	Level	2	investments.

Federal	 Government	 Securities	–	 Federal	 Government	 Securities	 consist	 of	 bills,	 notes,	 bonds,	 and	 other	 fixed income	securities	 issued	directly	by	 the	U.S.	Treasury	or	by	government-sponsored	enterprises.	These	assets	are valued	using	a	bid	evaluation	process	with	bid	data	provided	by	independent	pricing	sources.		Federal	Government Securities	are	classified	as	Level	2	investments.

Bonds	and	Debentures	–	Bonds	and	debentures	consist	of	 fixed	 income	securities	 issued	by	U.S.	and	non-U.S. corporations	as	well	as	state	and	local	governments.		These	assets	are	valued	using	a	bid	evaluation	process	with	bid data	provided	by	independent	pricing	sources.		Corporate,	state,	and	municipal	bonds	and	debentures	are	classified	as Level	2	investments.

Corporate	 Stock	–	This	investment	category	consists	of	common	and	preferred	stock	issued	by	U.S.	and	non-U.S. corporations.		Most	common	shares	are	traded	actively	on	exchanges	and	price	quotes	for	these	shares	are	readily available.	Common	stock	is	classified	as	a	Level	1	investment.		Preferred	shares	included	in	this	category	are	valued using	a	bid	evaluation	process	with	bid	data	provided	by	independent	pricing	sources.		Preferred	stock	is	classified	as	a Level	2	investment.

Venture	Capital	and	Buyout	Partnerships	–	This	investment	category	is	comprised	of	interests	in	limited	partnerships that	 invest	primarily	 in	privately-held	companies.	 	Due	 to	 the	private	nature	of	 the	partnership	 investments,	pricing inputs	 are	 not	 readily	 observable.	 	 Asset	 valuations	 are	 developed	 by	 the	 general	 partners	 that	 manage	 the partnerships.		These	valuations	are	based	on	the	application	of	public	market	multiples	to	private	company	cash	flows, market	transactions	that	provide	valuation	information	for	comparable	companies,	and	other	methods.		The	fair	value recorded	by	the	Plan	is	calculated	using	each	partnership's	net	asset	value	(NAV),	which	is	derived	from	the	valuation method	described	here.	The	Plan's	holdings	of	limited	partnership	interests	are	classified	as	Level	3	investments.

Real	Estate	Partnerships	–	Most	of	the	Plan's	real	estate	investments	are	partnership	interests.		The	Real	Estate Partnership	 category	 also	 includes	 real	 estate	 investments	 held	 in	 similar	 structures	 such	 as	 private	 real	 estate investment	trusts	and	limited	liability	companies.	Valuations	for	the	holdings	in	this	category	are	not	based	on	readily observable	inputs	and	are	primarily	derived	from	property	appraisals.	The	fair	value	recorded	by	the	Plan	is	calculated using	the	NAV	for	each	investment,	which	is	derived	from	the	valuation	methods	described	here.	The	Plan's	interests	in private	real	estate	partnerships,	investment	trusts,	and	limited	liability	companies	are	classified	as	Level	3	investments.

Collective	Trust	and	Other	Funds	–	Collective	trust	funds	are	comprised	of	shares	or	units	in	commingled	funds	that are	not	publicly	traded.		The	underlying	assets	in	these	funds	(U.S.	stock	funds,	non-U.S.	stock	funds,	commodity funds,	and	short	term	investment	funds)	are	publicly	traded	on	exchanges	and	price	quotes	for	the	assets	held	by	these funds	are	readily	available.	The	Plan's	holdings	of	common	trust	funds	are	classified	as	Level	2	investments.

This	category	also	includes	investments	in	limited	liability	companies	that	invest	in	publicly-traded	securities.	The	limited liability	company	investments	are	funds	that	invest	in	both	long	and	short	positions	in	convertible	securities,	stocks, commodities,	and	fixed	income	securities.		The	underlying	securities	held	by	the	funds	are	traded	actively	on	public exchanges	and	price	quotes	for	these	investments	are	readily	available.		Interests	in	the	limited	liability	companies	are classified	as	Level	2	investments.

As	of	December	31,	2015,	the	pension	plan	assets	measured	at	fair	value	on	a	recurring	basis	were	as	follows:

|  | Quoted	Prices | Significant |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | in\tActive | Other | Significant |  |
|  | Markets\tfor | Observable | Unobservable |  |
|  | Identical\tInputs | Inputs | Inputs |  |
| Millions | (Level\t1) | (Level\t2) | (Level\t3) | Total |
| Plan\tassets: |  |  |  |  |
| \t\t\t\t\tTemporary\tcash\tinvestments | $13 | $\t- | $\t- | $13 |
| \t\t\t\t\tRegistered\tinvestment\tcompanies | 179 | 270 | \t- | 449 |
| \t\t\t\t\tFederal\tgovernment\tsecurities | \t- | 125 | \t- | 125 |
| \t\t\t\t\tBonds\t&amp;\tdebentures | \t- | 383 | \t- | 383 |
| \t\t\t\t\tCorporate\tstock | 1,034 | 7 | \t- | 1,041 |
| \t\t\t\t\tVenture\tcapital\tand\tbuyout\tpartnerships | \t- | \t- | 256 | 256 |
| \t\t\t\t\tReal\testate\tpartnerships | \t- | \t- | 199 | 199 |
| \t\t\t\t\tCollective\ttrust\tand\tother\tfunds | \t- | 1,075 | \t- | 1,075 |
| Total\tplan\tassets\tat\tfair\tvalue | $1,226 | $1,860 | $455 | 3,541 |
| Other\tassets\t[a] |  |  |  | 3 |
| Total\tplan\tassets |  |  |  | $3,544 |

# [a] Other	assets	include	accrued	receivables	and	pending	broker	settlements.

|  | Quoted	Prices | Significant |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | in\tActive | Other | Significant |  |
|  | Markets\tfor | Observable | Unobservable |  |
|  | Identical\tInputs | Inputs | Inputs |  |
| Millions | (Level\t1) | (Level\t2) | (Level\t3) | Total |
| Plan\tassets: |  |  |  |  |
| \t\t\t\t\tTemporary\tcash\tinvestments | $22 | $\t- | $\t- | $22 |
| \t\t\t\t\tRegistered\tinvestment\tcompanies | 12 | 282 | \t- | 294 |
| \t\t\t\t\tFederal\tgovernment\tsecurities | \t- | 163 | \t- | 163 |
| \t\t\t\t\tBonds\t&amp;\tdebentures | \t- | 381 | \t- | 381 |
| \t\t\t\t\tCorporate\tstock | 1,076 | 15 | \t- | 1,091 |
| \t\t\t\t\tVenture\tcapital\tand\tbuyout\tpartnerships | \t- | \t- | 234 | 234 |
| \t\t\t\t\tReal\testate\tpartnerships | \t- | \t- | 139 | 139 |
| \t\t\t\t\tCollective\ttrust\tand\tother\tfunds | \t- | 1,340 | \t- | 1,340 |
| Total\tplan\tassets\tat\tfair\tvalue | $1,110 | $2,181 | $373 | 3,664 |
| Other\tassets\t[a] |  |  |  | (10) |
| Total\tplan\tassets |  |  |  | $3,654 |

The	following	table	presents	a	reconciliation	of	the	beginning	and	ending	balances	of	the	fair	value	measurements using	significant	unobservable	inputs	(Level	3	investments)	during	2015:

|  | Venture	Capital |  |  |
| :--- | :--- | :--- | :--- |
|  | and\tBuyout | Real\tEstate |  |
| Millions | Partnerships | Partnerships | Total |
| Beginning\tbalance\t-\tJanuary\t1,\t2015 | $234 | $139 | $373 |
| Realized\tgain | 18 | 5 | 23 |
| Unrealized\tgain | 13 | 8 | 21 |
| Purchases | 54 | 74 | 128 |
| Sales | (63) | (27) | (90) |
| Ending\tbalance\t-\tDecember\t31,\t2015 | $256 | $199 | $455 |

|  | Venture	Capital |  |  |
| :--- | :--- | :--- | :--- |
|  | and\tBuyout | Real\tEstate |  |
| Millions | Partnerships | Partnerships | Total |
| Beginning\tbalance\t-\tJanuary\t1,\t2014 | $213 | $139 | $352 |
| Realized\tgain | 17 | 8 | 25 |
| Unrealized\tgain | 5 | 6 | 11 |
| Purchases | 54 | 19 | 73 |
| Sales | (55) | (33) | (88) |
| Ending\tbalance\t-\tDecember\t31,\t2014 | $234 | $139 | $373 |

# Other	Retirement	Programs

401(k)/Thrift	 Plan –	We	 provide	 a	 defined	 contribution	 plan	 (401(k)/thrift	 plan)	 to	 eligible	 non-union	 and	 union employees	for	whom	we	make	matching	contributions.	We	match	50	cents	for	each	dollar	contributed	by	employees	up to	the	first	six	percent	of	compensation	contributed.	Our	plan	contributions	were	$20	million	in	2015,	$19	million	in	2014, and	$18	million	in	2013.

Railroad	Retirement	System	–	All	Railroad	employees	are	covered	by	the	Railroad	Retirement	System	(the	System). Contributions	made	to	the	System	are	expensed	as	incurred	and	amounted	to	approximately	$749	million	in	2015,	$711 million	in	2014,	and	$670	million	in	2013.

Collective	 Bargaining	 Agreements	– Under	 collective	 bargaining	 agreements,	 we	 participate	 in	 multi-employer benefit	plans	that	provide	certain	postretirement	health	care	and	life	insurance	benefits	for	eligible	union	employees. 	Premiums	paid	under	these	plans	are	expensed	as	incurred	and	amounted	to	$46	million	in	2015,	$52	million	in	2014, and	$57	million	in	2013.

# 7.	Other	Income

Other	income	included	the	following	for	the	years	ended	December	31:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tgain\ton\tnon-operating\tasset\tdispositions\t[a] | $144 | $69 | $32 |
| Rental\tincome\t[b] | 96 | 96 | 106 |
| Interest\tincome | 5 | 4 | 4 |
| Non-operating\tenvironmental\tcosts\tand\tother\t[c] | (19) | (18) | (14) |
| Total | $226 | $151 | $128 |

[a] 2015	includes	$113	million	related	to	a	real	estate	sale.

[b] 2013	includes	$17	million	related	to	a	land	lease	contract	settlement.

[c] 2014	includes	$14	million	related	to	the	sale	of	a	permanent	easement.

# 8.	Income	Taxes

Components	of	income	tax	expense	were	as	follows	for	the	years	ended	December	31:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Current\ttax\texpense: |  |  |  |
| \t\t\t\t\tFederal | $1,901 | $2,019 | $1,727 |
| \t\t\t\t\tState | 210 | 239 | 199 |
| \t\t\t\t\tForeign | 8 | 10 | 11 |
| Total\tcurrent\ttax\texpense | 2,119 | 2,268 | 1,937 |
| Deferred\tand\tother\ttax\texpense: |  |  |  |
| \t\t\t\t\tFederal | 644 | 753 | 605 |
| \t\t\t\t\tState | 121 | 142 | 118 |
| Total\tdeferred\tand\tother\ttax\texpense | 765 | 895 | 723 |
| Total\tincome\ttax\texpense | $2,884 | $3,163 | $2,660 |

For	the	years	ended	December	31,	reconciliations	between	statutory	and	effective	tax	rates	are	as	follows:

| Tax	Rate	Percentages | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Federal\tstatutory\ttax\trate | 35.0\t% | 35.0\t% | 35.0\t% |
| State\tstatutory\trates,\tnet\tof\tfederal\tbenefits | 3.1 | 3.1 | 3.1 |
| Tax\tcredits | (0.5) | (0.4) | (0.2) |
| Deferred\ttax\tadjustments | \t- | \t- | (0.1) |
| Other | 0.1 | 0.2 | (0.1) |
| Effective\ttax\trate | 37.7\t% | 37.9\t% | 37.7\t% |

Deferred	tax	assets	and	liabilities	are	recorded	for	the	expected	future	tax	consequences	of	events	that	are	reported	in different	periods	for	financial	reporting	and	income	tax	purposes.		The	majority	of	our	deferred	tax	assets	relate	to deductions	that	already	have	been	claimed	for	financial	reporting	purposes	but	not	for	tax	purposes.		The	majority	of	our deferred	 tax	 liabilities	relate	 to	differences	between	 the	 tax	bases	and	 financial	reporting	amounts	of	our	 land	and depreciable	 property,	 due	 to	 accelerated	 tax	 depreciation	 (including	 bonus	 depreciation), revaluation	 of	 assets in purchase	accounting	transactions,	and	differences	in	capitalization	methods.

Deferred	income	tax	(liabilities)/assets	were	comprised	of	the	following	at	December	31:

| Millions | 2015 | 2014 |
| :--- | :--- | :--- |
| Deferred\tincome\ttax\tliabilities: |  |  |
| \t\t\tProperty | $(16,079) | $(15,173) |
| \t\t\tOther | (352) | (411) |
| Total\tdeferred\tincome\ttax\tliabilities | (16,431) | (15,584) |
| Deferred\tincome\ttax\tassets: |  |  |
| \t\t\tAccrued\twages | 76 | 74 |
| \t\t\tAccrued\tcasualty\tcosts | 237 | 228 |
| \t\t\tStock\tcompensation | 72 | 69 |
| \t\t\tDebt\tand\tleases | 149 | 86 |
| \t\t\tRetiree\tbenefits | 204 | 392 |
| \t\t\tCredits | 156 | 164 |
| \t\t\tOther | 296 | 168 |
| Total\tdeferred\tincome\ttax\tassets\t[a] | $1,190 | $1,181 |
| Net\tdeferred\tincome\ttax\tliability | $(15,241) | $(14,403) |

[a] Prior	to	the	adoption	of	Accounting	Standard	Update	(ASU)	2015-17,	deferred	tax	assets	were	required	to	be	presented	as	current	and non-current	on	the	Consolidated	Statement	of	Financial	Position.		In	2015,	UP	adopted	ASU	2015-17	retrospectively.		Current	deferred income	tax	assets	at	December	31,	2014	of	$277	million	were	reclassified	from	current	to	non-current	for	2015	presentation.

Tax	benefits	are	recognized	only	for	tax	positions	that	are	more	likely	than	not	to	be	sustained	upon	examination	by	tax authorities.	The	amount	recognized	is	measured	as	the	largest	amount	of	benefit	that	is	greater	than	50	percent	likely	to be	realized	upon	settlement.	Unrecognized	tax	benefits	are	tax	benefits	claimed	in	our	tax	returns	that	do	not	meet these	recognition	and	measurement	standards.

A	reconciliation	of	changes	in	unrecognized	tax	benefits	liabilities/(assets)	from	the	beginning	to	the	end	of	the	reporting period	is	as	follows:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Unrecognized\ttax\tbenefits\tat\tJanuary\t1 | $151 | $59 | $115 |
| Increases\tfor\tpositions\ttaken\tin\tcurrent\tyear | 38 | 92 | 24 |
| Increases\tfor\tpositions\ttaken\tin\tprior\tyears | 13 | 22 | 15 |
| Decreases\tfor\tpositions\ttaken\tin\tprior\tyears | (87) | (14) | (35) |
| Payments\tto\tand\tsettlements\twith\ttaxing\tauthorities | (13) | (8) | (58) |
| Increases/(decreases)\tfor\tinterest\tand\tpenalties | (5) | 1 | \t- |
| Lapse\tof\tstatutes\tof\tlimitations | (3) | (1) | (2) |
| Unrecognized\ttax\tbenefits\tat\tDecember\t31 | $94 | $151 | $59 |

We	recognize	interest	and	penalties	as	part	of	income	tax	expense.	Total	accrued	liabilities	for	interest	and	penalties were	$2	million	and	$6	million	at	December	31,	2015	and	2014,	respectively.	Total	interest	and	penalties	recognized	as part	of	income	tax	expense	(benefit)	were	$(3)	million	for	2015,	$9	million	for	2014,	and	$7	million	for	2013.

Internal	Revenue	Service	(IRS)	examinations	have	been	completed	and	settled	for	all	years	prior	to	2011,	and	the statute	of	limitations	bars	any	additional	tax	assessments.	UPC	is	not	currently	under	audit	by	the	Internal	Revenue Service.

In	the	third	quarter	of	2015,	UPC	and	the	IRS	signed	a	closing	agreement	resolving	all	tax	matters	for	tax

years	 2009-2010.	 The	 settlement	 had	 an	 immaterial	 effect	 on	 our income tax	 expense. In	 connection	 with the settlement,	UPC	paid	$10	million	in	the	fourth	quarter	of	2015.

In	the	fourth	quarter	of	2014,	UPC	and	the	IRS	signed	a	closing	agreement	resolving	all	tax	matters	for	tax	years	2005- 2008.	The	settlement	had	an	immaterial	effect	on	our	income	tax	expense.	In	connection	with	the	settlement,	UPC	paid $11	million	in	2014.

Several	state	tax	authorities	are	examining	our	state	income	tax	returns	for	years	2006	through	2012.

We	do	not	expect	our	unrecognized	tax	benefits	to	change	significantly	in	the	next	12	months.	At	December	31,	2015, we	had	a	net	unrecognized	tax	benefit	liability	of	$94	million.

The	portion	of	our	unrecognized	tax	benefits	that	relates	to	permanent	changes	in	tax	and	interest	would	reduce	our effective	tax	rate,	if	recognized.	The	remaining	unrecognized	tax	benefits	relate	to	tax	positions	for	which	only	the	timing of	the	benefit	is	uncertain.	Recognition	of	the	tax	benefits	with	uncertain	timing	would	reduce	our	effective	tax	rate	only through	a	reduction	of	accrued	interest	and	penalties.		The	unrecognized	tax	benefits	that	would	reduce	our	effective tax	rate	are	as	follows:

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Unrecognized\ttax\tbenefits\tthat\twould\treduce\tthe\teffective\ttax\trate | $31 | $33 | $34 |
| Unrecognized\ttax\tbenefits\tthat\twould\tnot\treduce\tthe\teffective\ttax\trate | 63 | 118 | 25 |
| Total\tunrecognized\ttax\tbenefits | $94 | $151 | $59 |

# 9.	Earnings	Per	Share

The	 following table	 provides	 a reconciliation	 between	 basic	 and	 diluted	 earnings	 per	 share for the	 years	 ended December	31:

| Millions,	Except	Per	Share	Amounts | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $4,772 | $5,180 | $4,388 |
| Weighted-average\tnumber\tof\tshares\toutstanding: |  |  |  |
| \t\t\t\tBasic | 866.2 | 897.1 | 926.5 |
| \t\t\t\tDilutive\teffect\tof\tstock\toptions | 1.5 | 2.1 | 2.4 |
| \t\t\t\tDilutive\teffect\tof\tretention\tshares\tand\tunits | 1.7 | 1.9 | 2.6 |
| Diluted | 869.4 | 901.1 | 931.5 |
| Earnings\tper\tshare\t–\tbasic | $5.51 | $5.77 | $4.74 |
| Earnings\tper\tshare\t–\tdiluted | $5.49 | $5.75 | $4.71 |

Common	stock	options	totaling	1.1	 million,	0.4	million,	and	0.5	million	for	2015,	2014,	and	2013,	respectively,	were excluded	from	the	computation	of	diluted	earnings	per	share	because	the	exercise	prices	of	these	options	exceeded	the average	market	price	of	our	common	stock	for	the	respective	periods,	and	the	effect	of	their	inclusion	would	be	anti- dilutive.

# 10.	Accumulated	Other	Comprehensive	Income/(Loss)

Reclassifications	out	of	accumulated	other	comprehensive	income/(loss)	were	as	follows	(net	of	tax):

| Millions | Defined<br>benefit<br>plans | Foreign	currency<br>translation | Total |
| :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1,\t2015 | $(1,161) | $(49) | $(1,210) |
| Other\tcomprehensive\tincome/(loss)\tbefore\treclassifications | (4) | (43) | (47) |
| Amounts\treclassified\tfrom\taccumulated\tother\tcomprehensive\nincome/(loss)\t[a] | 62 | \t- | 62 |
| Net\tyear-to-date\tother\tcomprehensive\tincome/(loss),\nnet\tof\ttaxes\tof\t$(8)\tmillion | 58 | (43) | 15 |
| Balance\tat\tDecember\t31,\t2015 | $(1,103) | $(92) | $(1,195) |
| Balance\tat\tJanuary\t1,\t2014 | $(713) | $(37) | $(750) |
| Other\tcomprehensive\tincome/(loss)\tbefore\treclassifications | 10 | (12) | (2) |
| Amounts\treclassified\tfrom\taccumulated\tother\tcomprehensive\nincome/(loss)\t[a] | (458) | \t- | (458) |
| Net\tyear-to-date\tother\tcomprehensive\tincome/(loss),\nnet\tof\ttaxes\tof\t$291\tmillion | (448) | (12) | (460) |
| Balance\tat\tDecember\t31,\t2014 | $(1,161) | $(49) | $(1,210) |

[a] The	accumulated	other	comprehensive	income/(loss)	reclassification	components	are	1)	prior	service	cost/(benefit)	and	2)	net	actuarial loss	which	are	both	included	in	the	computation	of	net	periodic	pension	cost.		See	Note	6	Retirement	Plans	for	additional	details.

# 11.	Accounts	Receivable

Accounts	 receivable	 includes	 freight	 and	 other	 receivables	 reduced	 by	 an	 allowance	 for	 doubtful	 accounts.	 The allowance	is	based	upon	historical	losses,	credit	worthiness	of	customers,	and	current	economic	conditions.	At	both December	31,	2015,	and	2014,	our	accounts	receivable	were	reduced	by	$5	million.		Receivables	not	expected	to	be collected	in	one	year	and	the	associated	allowances	are	classified	as	other	assets	in	our	Consolidated	Statements	of Financial	 Position.	 	 At	 December	 31,	 2015,	 and	 2014,	 receivables	 classified	 as	 other	 assets	 were	 reduced	 by allowances	of	$11	million	and	$16	million,	respectively.

The	amount	outstanding	under	the	facility	was	$400	million	at	both	December	31,	2015,	and	December	31,	2014.	The facility	was	supported	by	$0.9	billion	and	$1.2	billion	of	accounts	receivable	as	collateral	at	December	31,	2015,	and December	 31,	 2014,	 respectively,	 which,	 as	 a	 retained	 interest,	 is	 included	 in	 accounts	 receivable,	 net	 in	 our Consolidated	Statements	of	Financial	Position.

The	costs	of	the	receivables	securitization	facility	include	interest,	which	will	vary	based	on	prevailing	benchmark	and commercial	 paper	 rates,	 program	 fees	 paid	 to	 participating	 banks,	 commercial	 paper	 issuance	 costs,	 and	 fees	 of participating	banks	for	unused	commitment	availability.		The	costs	of	the

receivables	securitization	facility	are	included	in	interest	expense	and	were $5	million,	$4	million	and	$5	million	for	2015, 2014,	and	2013,	respectively.

# 12.	Properties

The	following	tables	list	the	major	categories	of	property	and	equipment,	as	well	as	the	weighted-average	estimated useful	life	for	each	category	(in	years):

| Millions,	Except	Estimated	Useful	Life<br>As	of	December	31,	2015 | Cost | Accumulated<br>Depreciation | Net	Book<br>Value | Estimated<br>Useful	Life |
| :--- | :--- | :--- | :--- | :--- |
| Land | $5,195 | $\t\t\t\t\t\tN/A | $5,195 | N/A |
| Road: |  |  |  |  |
| \t\t\t\t\tRail\tand\tother\ttrack\tmaterial | 15,236 | 5,495 | 9,741 | 37 |
| \t\t\t\t\tTies | 9,439 | 2,595 | 6,844 | 33 |
| \t\t\t\t\tBallast | 5,024 | 1,350 | 3,674 | 34 |
| \t\t\t\t\tOther\troadway\t[a] | 17,374 | 3,021 | 14,353 | 47 |
| Total\troad | 47,073 | 12,461 | 34,612 | N/A |
| Equipment: |  |  |  |  |
| \t\t\t\t\tLocomotives | 9,027 | 3,726 | 5,301 | 19 |
| \t\t\t\t\tFreight\tcars | 2,203 | 962 | 1,241 | 24 |
| \t\t\t\t\tWork\tequipment\tand\tother | 897 | 191 | 706 | 19 |
| Total\tequipment | 12,127 | 4,879 | 7,248 | N/A |
| Technology\tand\tother | 919 | 358 | 561 | 11 |
| Construction\tin\tprogress | 1,250 | \t- | 1,250 | N/A |
| Total | $66,564 | $17,698 | $48,866 | N/A |

| Millions,	Except	Estimated	Useful	Life<br>As	of	December	31,	2014 | Cost | Accumulated<br>Depreciation | Net	Book<br>Value | Estimated<br>Useful	Life |
| :--- | :--- | :--- | :--- | :--- |
| Land | $5,194 | $\t\t\t\t\t\tN/A | $5,194 | N/A |
| Road: |  |  |  |  |
| \t\t\t\t\tRail\tand\tother\ttrack\tmaterial | 14,588 | 5,241 | 9,347 | 33 |
| \t\t\t\t\tTies | 9,102 | 2,450 | 6,652 | 33 |
| \t\t\t\t\tBallast | 4,826 | 1,264 | 3,562 | 34 |
| \t\t\t\t\tOther\troadway\t[a] | 16,476 | 2,852 | 13,624 | 47 |
| Total\troad | 44,992 | 11,807 | 33,185 | N/A |
| Equipment: |  |  |  |  |
| \t\t\t\t\tLocomotives | 8,276 | 3,694 | 4,582 | 20 |
| \t\t\t\t\tFreight\tcars | 2,116 | 968 | 1,148 | 25 |
| \t\t\t\t\tWork\tequipment\tand\tother | 684 | 153 | 531 | 18 |
| Total\tequipment | 11,076 | 4,815 | 6,261 | N/A |
| Technology\tand\tother | 872 | 320 | 552 | 10 |
| Construction\tin\tprogress | 1,080 | \t- | 1,080 | N/A |
| Total | $63,214 | $16,942 | $46,272 | N/A |

[a] Other	roadway	includes	grading,	bridges	and	tunnels,	signals,	buildings,	and	other	road	assets.

Property	and	Depreciation	–	Our	railroad	operations	are	highly	capital	intensive,	and	our	large	base	of	homogeneous, network-type	assets	turns	over	on	a	continuous	basis.		Each	year	we	develop	a	capital	program	for	the	replacement	of assets	and	for	the	acquisition	or	construction	of	assets	that	enable	us	to	enhance	our	operations	or	provide	new	service offerings	to	customers.		Assets	purchased	or	constructed	throughout	the	year	are	capitalized	if	they	meet	applicable minimum	units	of	property	criteria.		Properties	and	equipment	are	carried	at	cost	and	are	depreciated	on	a	straight-line basis	over	their	estimated	service	lives,	which	are	measured	in	years,	except	for	rail	in	high-density	traffic	corridors	(i.e., all	rail	lines	except	for	those	subject	to	abandonment,	yard	and	switching	tracks,	and	electronic	yards)	for	which	lives are	measured	in	millions	of	gross	tons	per	mile	of	track.		We	use	the	group	method	of	depreciation	in

which	all	items	with	similar	characteristics,	use,	and	expected	lives	are	grouped	together	in	asset	classes,	and	are depreciated	using	composite	depreciation	rates.		The	group	method	of	depreciation	treats	each	asset	class	as	a	pool	of resources,	not	as	singular	items.		We	currently	have	more	than	60	depreciable	asset	classes,	and	we	may	increase	or decrease	the	number	of	asset	classes	due	to	changes	in	technology,	asset	strategies,	or	other	factors.

We	determine	the	estimated	service	lives	of	depreciable	railroad	assets	by	means	of	depreciation	studies.		We	perform depreciation	studies	at	least	every	three	years	for	equipment	and	every	 six	years	for	track	assets	(i.e.,	rail	and	other track	material,	 ties,	and	ballast)	and	other	road	property.	 	Our	depreciation	studies	 take	 into	account	 the	 following factors:

For	rail	in	high-density	traffic	corridors,	we	measure	estimated	service	lives	in	millions	of	gross	tons	per	mile	of	track.		It has	been	our	experience	that	the	lives	of	rail	in	high-density	traffic	corridors	are	closely	correlated	to	usage	(i.e.,	the amount	of	weight	carried	over	the	rail).		The	service	lives	also	vary	based	on	rail	weight,	rail	condition	(e.g.,	new	or secondhand),	and	rail	type	(e.g.,	straight	or	curve).		Our	depreciation	studies	for	rail	in	high-density	traffic	corridors consider	each	of	these	factors	in	determining	the	estimated	service	lives.		For	rail	in	high-density	traffic	corridors,	we calculate	depreciation	rates	annually	by	dividing	the	number	of	gross	ton-miles	carried	over	the	rail	(i.e.,	the	weight	of loaded	 and	 empty	 freight	 cars,	 locomotives	 and	 maintenance	 of	 way	 equipment	 transported	 over	 the	 rail)	 by	 the estimated	service	lives	of	the	rail	measured	in	millions	of	gross	tons	per	mile.		For	all	other	depreciable	assets,	we compute	 depreciation	 based	 on	 the	 estimated	 service	 lives	 of	 our	 assets	 as	 determined	 from	 the	 analysis	 of	 our depreciation	studies.		Changes	in	the	estimated	service	lives	of	our	assets	and	their	related	depreciation	rates	are implemented	prospectively.

For	retirements	of	depreciable	railroad	properties	that	do	not	occur	in	the	normal	course	of	business,	a	gain	or	loss	may be	recognized	if	the	retirement	meets	each	of	the	following	three	conditions:	(i)	is	unusual,	(ii)	is	material	in	amount,	and (iii)	 varies	 significantly	 from	 the	 retirement	 profile	 identified	 through	 our	 depreciation	 studies.	 	 A	 gain	 or	 loss	 is recognized	in	other	income	when	we	sell	land	or	dispose	of	assets	that	are	not	part	of	our	railroad	operations.

When	we	purchase	an	asset,	we	capitalize	all	costs	necessary	to	make	the	asset	ready	for	its	intended	use.		However, many	of	our	assets	are	self-constructed.		A	large	portion	of	our	capital	expenditures	is	for	replacement	of	existing	track assets	and	other	road	properties,	which	is	typically	performed	by	our	employees,	and	for	track	line	expansion	and	other capacity	 projects. Costs	 that	 are	 directly	 attributable	 to	 capital	 projects	 (including	 overhead	 costs)	 are capitalized.	 	 Direct	 costs	 that	 are	 capitalized	 as	 part	 of	 self-constructed	 assets	 include	 material,	 labor,	 and	 work equipment.		Indirect	costs	are	capitalized	if	they	clearly	relate	to	the	construction	of	the	asset.

General	and	administrative	expenditures	are	expensed	as	incurred.	Normal	repairs	and	maintenance	are	also	expensed as	incurred,	while	costs	incurred	that	extend	the	useful	life	of	an	asset,	improve	the	safety	of	our	operations	or	improve operating	efficiency	are	capitalized.	These	costs	are	allocated	using

appropriate	statistical	bases.	Total	expense	for	repairs	and	maintenance incurred	was	$2.5	billion	for	2015,	$2.4	billion for	2014,	and	$2.3	billion	for	2013.

Assets	held	under	capital	leases	are	recorded	at	the	lower	of	the	net	present	value	of	the	minimum	lease	payments	or the	fair	value	of	the	leased	asset	at	the	inception	of	the	lease.	Amortization	expense	is	computed	using	the	straight-line method	over	the	shorter	of	the	estimated	useful	lives	of	the	assets	or	the	period	of	the	related	lease.

# 13.	Accounts	Payable	and	Other	Current	Liabilities

|  | Dec.	31, | Dec.	31, |
| :--- | :--- | :--- |
| Millions | 2015 | 2014 |
| Accounts\tpayable | $743 | $877 |
| Income\tand\tother\ttaxes\tpayable | 434 | 412 |
| Accrued\twages\tand\tvacation | 391 | 409 |
| Interest\tpayable | 208 | 178 |
| Accrued\tcasualty\tcosts | 181 | 249 |
| Equipment\trents\tpayable | 105 | 100 |
| Dividends\tpayable\t[a] | \t- | 438 |
| Other | 550 | 640 |
| Total\taccounts\tpayable\tand\tother\tcurrent\tliabilities | $2,612 | $3,303 |

[a] Beginning	in	2015,	the	timing	of	the	dividend	declaration	and	payable	dates	was	aligned	to	occur	within	the	same	quarter.	The	2015 dividends	paid	amount	includes	the	fourth	quarter	2014	dividend	of	$438	million,	which	was	paid	on	January	2,	2015,	the	first	quarter 2015	dividend	of	$484	million,	which	was	paid	on	March	30,	2015,	the	second	quarter	2015	dividend	of	$479	million,	which	was	paid	on June	30,	2015,	the	third	quarter	2015	dividend	of	$476	million,	which	was	paid	on	September	30,	2015,	as	well	as	the	fourth	quarter 2015	dividend	of	$467	million,	which	was	paid	on	December	30,	2015.

# 14.	Financial	Instruments

Strategy	and	Risk	–	We	may	use	derivative	financial	instruments	in	limited	instances	for	other	than	trading	purposes	to assist	in	managing	our	overall	exposure	to	fluctuations	in	interest	rates	and	fuel	prices.	We	are	not	a	party	to	leveraged derivatives	and,	by	policy,	do	not	use	derivative	 financial	 instruments	 for	speculative	purposes.	Derivative	 financial instruments	 qualifying	 for	 hedge	 accounting	 must	 maintain	 a	 specified	 level	 of	 effectiveness	 between	 the	 hedging instrument	and	the	item	being	hedged,	both	at	inception	and	throughout	the	hedged	period.	We	formally	document	the nature	 and	 relationships	 between	 the	 hedging	 instruments	 and	 hedged	 items	 at	 inception,	 as	 well	 as	 our	 risk- management	objectives,	strategies	for	undertaking	the	various	hedge	transactions,	and	method	of	assessing	hedge effectiveness.	 Changes	 in	 the	 fair	 market	 value	 of	 derivative	 financial	 instruments	 that	 do	 not	 qualify	 for	 hedge accounting	are	charged	to	earnings.	We	may	use	swaps,	collars,	futures,	and/or	forward	contracts	to	mitigate	the	risk	of adverse	movements	in	interest	rates	and	fuel	prices;	however,	the	use	of	these	derivative	financial	instruments	may limit	future	benefits	from	favorable	interest	rate	and	fuel	price	movements.

Interest	Rate	Fair	Value	Hedges 	–	We	manage	our	overall	exposure	to	fluctuations	in	interest	rates	by	adjusting	the proportion	of	fixed	and	floating	rate	debt	instruments	within	our	debt	portfolio	over	a	given	period.	We	generally	manage the	mix	of	fixed	and	floating	rate	debt	through	the	issuance	of	targeted	amounts	of	each	as	debt	matures	or	as	we require	incremental	borrowings.	We	employ	derivatives,	primarily	swaps,	as	one	of	the	tools	to	obtain	the	targeted	mix. In	addition,	we	also	obtain	flexibility	in	managing	interest	costs	and	the	interest	rate	mix	within	our	debt	portfolio	by evaluating	the	issuance	of	and	managing	outstanding	callable	fixed-rate	debt	securities.

Swaps	allow	us	to	convert	debt	from	fixed	rates	to	variable	rates	and	thereby	hedge	the	risk	of	changes	in	the	debt's	fair value	attributable	 to	 the	changes	 in	 interest	rates.	We	account	 for	swaps	as	 fair	value	hedges	using	 the	short-cut method;	therefore,	we	do	not	record	any	ineffectiveness	within	our

Consolidated	Financial	Statements.	As	of	December	31,	2015,	and	2014,	we	had no	interest	rate	fair	value	hedges outstanding.

Earnings	Impact	–	Our	use	of	derivative	financial	instruments	had no	impact	on	pre-tax	income	for	the	years	ended December	31,	2015,	2014,	and	2013.

Fair	Value	of	Financial	Instruments	–	The	fair	value	of	our	short-	and	long-term	debt	was	estimated	using	a	market value	price	model,	which	utilizes	applicable	U.S.	Treasury	rates	along	with	current	market	quotes	on	comparable	debt securities.	All	of	the	inputs	used	to	determine	the	fair	market	value	of	the	Corporation's	long-term	debt	are	Level	2 inputs	and	obtained	from	an	independent	source.	At	December	31,	2015,	the	fair	value	of	total	debt	was	$15.2	billion, approximately	$1.0	billion	more	than	the	carrying	value.		At	December	31,	2014,	the	fair	value	of	total	debt	was $13.0 billion,	approximately	$1.5	billion	more	than	the	carrying	value.	The	fair	value	of	the	Corporation's	debt	is	a	measure	of its	current	value	under	present	market	conditions.	It	does	not	impact	the	financial	statements	under	current	accounting rules.	At	December	31,	2015,	and	2014,	approximately	$155	million	and	$163	million,	respectively,	of	debt	securities contained	call	provisions	that	allow	us	to	retire	the	debt	instruments	prior	to	final	maturity,	with	the	payment	of	fixed	call premiums,	or	in	certain	cases,	at	par.		The	fair	value	of	our	cash	equivalents	approximates	their	carrying	value	due	to the	short-term	maturities	of	these	instruments.

| Millions | 2015 | 2014 |
| :--- | :--- | :--- |
| Notes\tand\tdebentures,\t1.8%\tto\t7.9%\tdue\tthrough\t2065 | $11,964 | $9,266 |
| Capitalized\tleases,\t3.1%\tto\t8.4%\tdue\tthrough\t2028 | 1,268 | 1,520 |
| Equipment\tobligations,\t2.8%\tto\t6.7%\tdue\tthrough\t2031 | 963 | 597 |
| Receivables\tSecuritization\t(Note\t11) | 400 | 400 |
| Term\tloans\t-\tfloating\trate,\tdue\tin\t2016 | 200 | 200 |
| Mortgage\tbonds,\t4.8%\tdue\tthrough\t2030 | 57 | 57 |
| Medium-term\tnotes,\t9.3%\tto\t10.0%\tdue\tthrough\t2020 | 23 | 23 |
| Tax-exempt\tfinancings\t-\tfloating\trate,\tdue\tin\t2015 | \t- | 8 |
| Unamortized\tdiscount\tand\tdeferred\tissuance\tcosts\t[a] | (674) | (658) |
| Total\tdebt | 14,201 | 11,413 |
| Less:\tcurrent\tportion | (594) | (461) |
| Total\tlong-term\tdebt | $13,607 | $10,952 |

[a] Includes	deferred	debt	issuance	costs	of	$89	million	and	$67	million	as	of	December	31,	2015,	and	2014,	respectively,	as	a	result	of	the retrospective	adoption	of	Accounting	Standard	Update	(ASU)	2015-03	on	December	31,	2015.		Prior	to	the	ASU	adoption,	deferred	debt issuance	costs	were	presented	in	other	assets.

Debt	Maturities	–	The	following	table	presents	aggregate	debt	maturities	as	of	December	31,	2015,	excluding	market value	adjustments:

| Millions |  |
| :--- | :--- |
| 2016 | $594 |
| 2017 | 1,052 |
| 2018 | 566 |
| 2019 | 637 |
| 2020 | 1,034 |
| Thereafter | 10,318 |
| Total\tdebt | $14,201 |

Equipment Encumbrances	–	 Equipment	 with	 a	 carrying	 value	 of	 approximately	 $2.6 billion and	$2.8	 billion	 at December	31,	2015,	and	2014,	respectively,	served	as	collateral	for	capital	leases	and	other

types	of	equipment	obligations	in	accordance	with	the	secured	financing	arrangements	utilized	to	acquire	such	railroad equipment.

Credit	Facilities	–	At	December	31,	2015,	we	had	 $1.7	billion	of	credit	available	under	the	facility,	which	is	designated for	general	corporate	purposes	and	supports	the	issuance	of	commercial	paper.	We	did	not	draw	on	the	facility	during 2015.	 Commitment	 fees	 and	 interest	 rates	 payable	 under	 the	 facility	 are	 similar	 to	 fees	 and	 rates	 available	 to comparably	rated,	investment-grade	borrowers.	The	facility	allows	for	borrowings	at	floating	rates	based	on	London Interbank	 Offered	 Rates,	 plus	 a	 spread,	 depending	 upon	 credit	 ratings	 for	 our	 senior	 unsecured	 debt.	The	 facility matures	in	May	2019	under	a	five-year	term	and	requires	UPC	to	maintain	a	debt-to-net-worth	coverage	ratio.

SEC	that	became	effective	on	February	9,	2015.	The	Board	of	Directors	authorized	the	issuance	of	up	to	$4.0	billion	of debt	securities,	replacing	the	$4.0	billion	authorized	under	our	shelf	registration	filed	in	February	2013,	which	was	fully utilized	after	our	January	2015	debt	offering	noted	below.	Under	our	current	shelf	registration,	we	may	issue,	from	time to	time,	any	combination	of	debt	securities,	preferred	stock,	common	stock,	or	warrants	for	debt	securities	or	preferred stock	in	one	or	more	offerings.

We	used	the	net	proceeds	from	the	offerings	for	general	corporate	purposes,	including	the	repurchase	of	common stock	 pursuant	 to	 our	 share	 repurchase	 program.	 These	 debt	 securities	 include	 change-of-control	 provisions.	 At December	31,	2015,	we	had	remaining	authority	to	issue	up	to	$2.2	billion	of	debt	securities	under	our	shelf	registration.

Equipment	Trust	–	On	May	12,	2015,	UPRR	consummated	a	pass-through	(P/T)	financing,	whereby	a	P/T	trust	was created,	 which	 issued	$399	 million	 of	 P/T	 trust	 certificates	 with	 a	 stated	 interest	 rate	 of	 2.695%.	 The	 P/T	 trust certificates	will	mature	on	May	12,	2027.	The	proceeds	from	the	issuance	of	the	P/T	trust	certificates	were	used	to purchase	 equipment	 trust	 certificates	 to	 be	 issued	 by	 UPRR	 to	 finance	 the	 acquisition	 of	182	 locomotives.	 The equipment	trust	certificates	are	secured	by	a	lien	on	the	locomotives.	The	$399	million	is	classified	as	debt	due	after one	year	in	our	Consolidated	Statements	of	Financial	Position.

Receivables	 Securitization	 Facility	–	 As	 of	 both	 December	 31,	 2015	 and	 2014,	 we	 recorded	 $400	 million	 of borrowings	under	our	receivables	securitization	facility,	as	secured	debt.	(See	further	discussion	of	our	receivables securitization	facility	in	Note	11).

# 16.	Variable	Interest	Entities

We	have	entered	into	various	lease	transactions	in	which	the	structure	of	the	leases	contain	variable	interest	entities (VIEs).	 These	 VIEs	 were	 created	 solely	 for	 the	 purpose	 of	 doing	 lease	 transactions	 (principally	 involving	 railroad equipment	and	facilities)	and	have	no	other	activities,	assets	or	liabilities	outside	of	the	lease	transactions.		Within	these lease	arrangements,	we	have	the	right	to	purchase	some	or	all	of	the	assets	at	fixed	prices.	Depending	on	market conditions,	fixed-price	purchase	options	available	in	the	leases	could	potentially	provide	benefits	to	us;	however,	these benefits	are	not	expected	to	be	significant.

We	maintain	and	operate	the	assets	based	on	contractual	obligations	within	the	lease	arrangements,	which	set	specific guidelines	 consistent	 within	 the	 railroad	 industry.	As	 such,	 we	 have	 no	 control	 over	 activities	 that	 could	 materially impact	the	fair	value	of	the	leased	assets.	We	do	not	hold	the	power	to	direct	the	activities	of	the	VIEs	and,	therefore, do	 not	 control	 the	 ongoing	 activities	 that	 have	 a	 significant	 impact	 on	 the	 economic	 performance	 of	 the	 VIEs. Additionally,	we	do	not	have	the	obligation	to	absorb	losses	of	the	VIEs	or	the	right	to	receive	benefits	of	the	VIEs	that could	potentially	be	significant	to	the	VIEs.

We	are	not	considered	 to	be	 the	primary	beneficiary	and	do	not	consolidate	 these	VIEs	because	our	actions	and decisions	do	not	have	the	most	significant	effect	on	the	VIE's	performance	and	our	fixed-price	purchase	options	are	not considered	to	be	potentially	significant	to	the	VIEs.		The	future	minimum	lease	payments	associated	with	the	VIE	leases totaled	$2.6	billion	as	of	December	31,	2015.

We	lease	certain	locomotives,	freight	cars,	and	other	property.	The	Consolidated	Statements	of	Financial	Position	as	of December	31,	2015	and	2014	included	$2,273	million,	net	of	$1,189	million	of	accumulated	depreciation,	and	 $2,454 million,	 net	 of	$1,210	 million	 of	 accumulated	 depreciation,	 respectively,	 for	 properties	 held	 under	 capital	 leases.	A charge	to	income	resulting	from	the	depreciation	for	assets	held	under	capital	leases	is	included	within	depreciation expense	in	our	Consolidated	Statements	of	Income.	Future	minimum	lease	payments	for	operating	and	capital	leases with	initial	or	remaining	non-cancelable	lease	terms	in	excess	of	one	year	as	of	December	31,	2015,	were	as	follows:

| Millions | Operating<br>Leases | Capital<br>Leases |
| :--- | :--- | :--- |
| 2016 | $491 | $217 |
| 2017 | 446 | 220 |
| 2018 | 371 | 198 |
| 2019 | 339 | 184 |
| 2020 | 282 | 193 |
| Later\tyears | 1,501 | 575 |
| Total\tminimum\tlease\tpayments | $3,430 | $1,587 |
| Amount\trepresenting\tinterest | N/A | (319) |
| Present\tvalue\tof\tminimum\tlease\tpayments | N/A | $1,268 |

Approximately	95%	of	capital	 lease	payments	relate	 to	 locomotives.	Rent	expense	 for	operating	 leases	with	 terms exceeding	one	month	was	$590	million	 in	2015,	$593	million	 in	2014,	and	$618	million	in	2013.	When	cash	rental payments	are	not	made	on	a	straight-line	basis,	we	recognize	variable	rental	expense	on	a	straight-line	basis	over	the lease	term.	Contingent	rentals	and	sub-rentals	are	not	significant.

# 18.	Commitments	and	Contingencies

Our	personal	injury	liability	is	not	discounted	to	present	value	due	to	the	uncertainty	surrounding	the	timing	of	future payments.	Approximately	94%	of	the	recorded	liability	is	related	to	asserted	claims	and

approximately	6%	is	related	to	unasserted	claims	at	December	31,	2015.	Because	of	the	uncertainty	surrounding	the ultimate	outcome	of	personal	injury	claims,	it	is	reasonably	possible	that	future	costs	to	settle	these	claims	may	range from	approximately	$318	million	to	$345	million.	We	record	an	accrual	at	the	low	end	of	the	range	as	no	amount	of	loss within	the	range	is	more	probable	than	any	other.		Estimates	can	vary	over	time	due	to	evolving	trends	in	litigation.

| Millions | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $335 | $294 | $334 |
| Current\tyear\taccruals | 89 | 96 | 87 |
| Changes\tin\testimates\tfor\tprior\tyears | (3) | 9 | (38) |
| Payments | (103) | (64) | (89) |
| Ending\tbalance\tat\tDecember\t31 | $318 | $335 | $294 |
| Current\tportion,\tending\tbalance\tat\tDecember\t31 | $63 | $111 | $82 |

In	conjunction	with	the	liability	update	performed	in	2015,	we	also	reassessed	our	estimated	insurance	recoveries.	We have	recognized	an	asset	for	estimated	insurance	recoveries	at	December	31,	2015,	and	2014.		The	amounts	recorded for	asbestos-related	liabilities	and	related	insurance	recoveries	were	based	on	currently	known	facts.	However,	future events,	such	as	the	number	of	new	claims	filed	each	year,	average	settlement	costs,	and	insurance	coverage	issues, could	cause	the	actual	costs	and	insurance	recoveries	to	be	higher	or	lower	than	the	projected	amounts.	Estimates	also may	vary	in	the	future	if	strategies,	activities,	and	outcomes	of	asbestos	litigation	materially	change;	federal	and	state laws	governing	asbestos	litigation	increase	or	decrease	the	probability	or	amount	of	compensation	of

claimants;	and	there	are	material	changes	with	respect	to	payments	made	to	claimants	by	other	defendants.

Insurance	–	The	Company	has	a	consolidated,	wholly-owned	captive	insurance	subsidiary	(the	captive),	that	provides insurance	 coverage	 for	 certain	 risks	 including	 FELA	 claims	 and	 property	 coverage	 which	 are	 subject	 to reinsurance.	 	 The	 captive	 entered	 into	 annual	 reinsurance	 treaty	 agreements	 that	 insure	 workers	 compensation, general	liability,	auto	liability	and	FELA	risk.	The	captive	cedes	a	portion	of	its	FELA	exposure	through	the	treaty	and assumes	a	proportionate	share	of	the	entire	risk.		The	captive	receives	direct	premiums,	which	are	netted	against	the Company's	premium	costs	in	other	expenses	in	the	Consolidated	Statements	of	Income.	The	treaty	agreements	provide for	certain	protections	against	the	risk	of	treaty	participants'	non-performance,	and	we	do	not	believe	our	exposure	to treaty	participants'	non-performance	is	material	at	this	time.	In	the	event	the	Company	leaves	the	reinsurance	program, the	Company	is	not	relieved	of	its	primary	obligation	to	the	policyholders	for	activity	prior	to	the	termination	of	the	treaty agreements.	 We	 record	 both	 liabilities	 and	 reinsurance	 receivables	 using	 an	 actuarial	 analysis	 based	 on	 historical experience	in	our	Consolidated	Statements	of	Financial	Position.

Guarantees	 –	At	 December	 31,	 2015,	 and	 2014,	 we	 were	 contingently	 liable	 for	 $53	 million	 and	$82	 million	 in guarantees,	respectively.	We	have	recorded	liabilities	of	$0	and	$0.3	million	for	the	fair	value	of	these	obligations	as	of December	31,	2015,	and	2014,	respectively.	We	entered	into	these	contingent	guarantees	in	the	normal	course	of business,	and	they	include	guaranteed	obligations	related	to	our	affiliated	operations.	The	final	guarantee	expires	in 2022.	We	are	not	aware	of	any	existing	event	of	default	that	would	require	us	to	satisfy	these	guarantees.	We	do	not expect	 that	 these	guarantees	will	have	a	material	adverse	effect	on	our	consolidated	 financial	condition,	results	of operations,	or	liquidity.

Indemnities	–	We	are	contingently	obligated	under	a	variety	of	indemnification	arrangements,	although	in	some	cases the	extent	of	our	potential	liability	is	limited,	depending	on	the	nature	of	the	transactions	and

the	 agreements.	 Due	 to	 uncertainty	 as	 to	 whether	 claims	 will	 be	 made	 or	 how	 they	 will	 be	 resolved,	 we	 cannot reasonably	 determine	 the	 probability	 of	 an	 adverse	 claim	 or	 reasonably	 estimate	 any	 adverse	 liability	 or	 the	 total maximum	exposure	under	these	indemnification	arrangements.	We	do	not	have	any	reason	to	believe	that	we	will	be required	to	make	any	material	payments	under	these	indemnity	provisions.

Gain	Contingency	–	UPRR	and	Santa	Fe	Pacific	Pipelines	(SFPP,	a	subsidiary	of	Kinder	Morgan	Energy	Partners, L.P.)	currently	are	engaged	in	a	proceeding	to	resolve	the	fair	market	rent	payable	to	UPRR	commencing	on	January	1, 2004,	for	pipeline	easements	on	UPRR	rights-of-way	(Union	Pacific	Railroad	Company	vs.	Santa	Fe	Pacific	Pipelines, Inc.,	SFPP,	L.P.,	Kinder	Morgan	Operating	L.P.	"D"	Kinder	Morgan	G.P.,	Inc.,	et	al.,	Superior	Court	of	the	State	of California	for	the	County	of	Los	Angeles,	filed	July	28,	2004).	In	February	2007,	a	trial	began	to	resolve	this	issue,	and in	May	2012,	the	trial	judge	rendered	an	opinion	establishing	the	fair	market	rent	and	entering	judgment	for	back	rent, including	prejudgment	interest.	SFPP	appealed	the	judgment.	On	November	5,	2014,	the	Second	District	Circuit	Court of	Appeal	in	California	issued	an	opinion	holding	that	UPRR	was	not	entitled	to	collect	rent	from	SFPP	for	easements	on the	 portions	 of	 the	 property	 acquired	 solely	 through	 federal	 government	 land	 grants	 issued	 during	 the	 1800s.	The Appellate	Court	also	reversed	the	award	of	prejudgment	interest	and	remanded	the	case	to	the	trial	court.	A	favorable final	judgment	may	materially	affect	UPRR's	results	of	operations	in	the	period	of	any	monetary	recoveries.	Due	to	the uncertainty	regarding	the	amount	and	timing	of	any	recovery	or	any	subsequent	proceedings,	we	consider	this	a	gain contingency	and	have	not	recognized	any	amounts	in	the	Consolidated	Financial	Statements	as	of	December	31,	2015.

|  | Number	of	Shares	Purchased | Number	of	Shares	Purchased | Average	Price	Paid | Average	Price	Paid |
| :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | 2015 | 2014 |
| First\tquarter | 6,881,455 | 7,640,000 | $117.28 | $89.43 |
| Second\tquarter | 7,975,100 | 8,320,000 | 104.62 | 96.84 |
| Third\tquarter | 13,800,700 | 8,347,000 | 89.65 | 102.54 |
| Fourth\tquarter | 6,646,899 | 7,736,400 | 88.19 | 113.77 |
| Total | 35,304,154 | 32,043,400 | $98.14 | $100.65 |
| Remaining\tnumber\tof\tshares\tthat\tmay\tbe\trepurchased\tunder\tcurrent\tauthority | Remaining\tnumber\tof\tshares\tthat\tmay\tbe\trepurchased\tunder\tcurrent\tauthority |  | 52,652,446 | 52,652,446 |

Management's	 assessments	 of	 market	 conditions	 and	 other	 pertinent	 factors	 guide	 the	 timing	 and	 volume	 of	 all repurchases.	Repurchased	shares	are	recorded	in	treasury	stock	at	cost,	which	includes	any	applicable	commissions and	fees.

# 20.	Related	Parties

UPRR	and	other	North	American	railroad	companies	jointly	own	TTX	Company	(TTX).		UPRR	has	a 36.79%	economic and	voting	interest	in	TTX	while 	the	other	North	American	railroads	own 	the	remaining	interest.		In	accordance	with ASC 323	Investments	-	Equity	Method	and	Joint	Venture,	 UPRR	 applies the	 equity	 method	 of	 accounting	 to	 our investment	in	TTX.

TTX	is	a	railcar	pooling	company	that	owns	railcars	and	intermodal	wells	to	serve	 North	America's	railroads.		TTX assists	railroads	in	meeting	the	needs	of	their	customers	by	providing	railcars	in	an	efficient,	pooled	environment.		All railroads	have	the	ability	to	utilize	TTX	railcars	through	car	hire	by	renting	railcars	at	stated	rates.

UPRR	had	$830	million	and	$795	million	recognized	as	investments	related	to	TTX	in	our	consolidated	statements	of financial	position	as	of	December	31,	2015	and	2014,	respectively.	TTX	car	hire	expenses

of	$376	million	in	2015,	$350	million	in	2014,	and	$326	million	in	2013	are	included	in	equipment	and	other	rents	in	our consolidated	statements	of	income.		In	addition,	UPRR	had	accounts	payable	to	TTX	of $61	million	and	$53	million	as of	December	31,	2015	and	2014,	respectively.

# 21.	Selected	Quarterly	Data	(Unaudited)

# Millions,	Except	Per	Share	Amounts

| 2015 | Mar.	31 | Jun.	30 | Sep.	30 | Dec.	31 |
| :--- | :--- | :--- | :--- | :--- |
| Operating\trevenues | $5,614 | $5,429 | $5,562 | $5,208 |
| Operating\tincome | 1,977 | 1,949 | 2,208 | 1,918 |
| Net\tincome | 1,151 | 1,204 | 1,300 | 1,117 |
| Net\tincome\tper\tshare: |  |  |  |  |
| \t\t\t\t\tBasic | 1.31 | 1.38 | 1.51 | 1.31 |
| \t\t\t\t\tDiluted | 1.30 | 1.38 | 1.50 | 1.31 |

| 2014 | Mar.	31 | Jun.	30 | Sep.	30 | Dec.	31 |
| :--- | :--- | :--- | :--- | :--- |
| Operating\trevenues | $5,638 | $6,015 | $6,182 | $6,153 |
| Operating\tincome | 1,854 | 2,196 | 2,330 | 2,373 |
| Net\tincome | 1,088 | 1,291 | 1,370 | 1,431 |
| Net\tincome\tper\tshare: |  |  |  |  |
| \t\t\t\t\tBasic | 1.20 | 1.43 | 1.53 | 1.62 |
| \t\t\t\t\tDiluted | 1.19 | 1.43 | 1.53 | 1.61 |

Per	share	net	income	for	the	four	quarters	combined	may	not	equal	the	per	share	net	income	for	the	year	due	to rounding.

# Item	9.	Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9A.	Controls	and	Procedures

As	of	the	end	of	the	period	covered	by	this	report,	the	Corporation	carried	out	an	evaluation,	under	the	supervision	and with	the	participation	of	the	Corporation's	management,	including	the	Corporation's	Chief	Executive	Officer	(CEO)	and Executive	Vice	President	–	Finance	and	Chief	Financial	Officer	(CFO),	of	the	effectiveness	of	the	design	and	operation of the	 Corporation's	 disclosure	 controls	 and	 procedures	 pursuant to	 Exchange	Act	 Rules	 13a-15	 and	 15d-15. In designing	 and	 evaluating	 the	 disclosure	 controls	 and	 procedures,	 management	 recognized	 that	 any	 controls	 and procedures,	 no	 matter	 how	 well	 designed	 and	 operated,	 can	 provide	 only	 reasonable	 assurance	 of	 achieving	 the desired	control	objectives.	Based	upon	that	evaluation,	the	CEO	and	the	CFO	concluded	that,	as	of	the	end	of	the period	covered	by	this	report,	the	Corporation's	disclosure	controls	and	procedures	were	effective	to	provide	reasonable assurance	that	information	required	to	be	disclosed	in	our	Exchange	Act	reports	is	recorded,	processed,	summarized and	reported	within	the	time	periods	specified	by	the	SEC,	and	that	such	information	is	accumulated	and	communicated to	management,	including	the	CEO	and	CFO,	as	appropriate,	to	allow	timely	decisions	regarding	required	disclosure.

Additionally, the	 CEO	 and	 CFO	 determined that there	 were	 no	 changes to the	 Corporation's internal	 control	 over financial	 reporting	 (as	 defined	 in	 Exchange	 Act	 Rules	 13a-15(f)	 and	 15d-15(f))	 during	 the	 last	 fiscal	 quarter	 that materially	affected,	or	are	reasonably	likely	to	materially	affect,	the	Corporation's	internal	control	over	financial	reporting.

# MANAGEMENT'S	ANNUAL	REPORT	ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

The	 management	 of	 Union	 Pacific	 Corporation	 and	 Subsidiary	 Companies	 (the	 Corporation)	 is	 responsible	 for establishing	and	maintaining	adequate	internal	control	over	financial	reporting	(as	defined	in	Exchange	Act	Rules	13a- 15(f)	and	15d-15(f)).	The	Corporation's	internal	control	system	was	designed	to	provide	reasonable	assurance	to	the Corporation's	management	and	Board	of	Directors	regarding	the	preparation	and	fair	presentation	of	published	financial statements.

All	internal	control	systems,	no	matter	how	well	designed,	have	inherent	limitations.	Therefore,	even	those	systems determined	to	be	effective	can	provide	only	reasonable	assurance	with	respect	to	financial	statement	preparation	and presentation.

The	Corporation's	management	assessed	the	effectiveness	of	the	Corporation's	internal	control	over	financial	reporting as	of	December	31,	2015.	In	making	this	assessment,	it	used	the	criteria	set	forth	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	(COSO)	in	Internal	Control	–	Integrated	Framework	(2013).	Based	on	our assessment,	management	believes	that,	as	of	December	31,	2015,	the	Corporation's	internal	control	over	financial reporting	is	effective	based	on	those	criteria.

The	Corporation's	independent	registered	public	accounting	firm	has	issued	an	attestation	report	on	the	effectiveness	of the	Corporation's	internal	control	over	financial	reporting.	This	report	appears	on	the	next	page.

We	have	audited	the	internal	control	over	financial	reporting	of	 Union	Pacific	Corporation	and	Subsidiary	Companies (the	Corporation)	as	of	December	31,	2015,	based	on	criteria	established	in Internal	Control	—	Integrated	Framework (2013) issued	 by	 the	 Committee	 of	 Sponsoring	 Organizations	 of the	 Treadway	 Commission.	 The	 Corporation's management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of the	 effectiveness	 of	 internal	 control	 over	 financial	 reporting,	 included	 in the	 accompanying	Management's	 Annual Report	on	Internal	Control	Over	Financial	Reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Corporation's internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United States).	Those	standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audit	included	obtaining	an understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable basis	for	our	opinion.

A	 company's	 internal	 control	 over	 financial	 reporting	 is	 a	 process	 designed	 by,	 or	 under	 the	 supervision	 of,	 the company's	principal	executive	and	principal	financial	officers,	or	persons	performing	similar	functions,	and	effected	by the	company's	board	of	directors,	management,	and	other	personnel	to	provide	reasonable	assurance	regarding	the reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with generally	accepted	accounting	principles.	A	company's	internal	control	over	financial	reporting	includes	those	policies and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	 and	 directors	 of	 the	 company;	 and	 (3)	 provide	 reasonable	 assurance	 regarding	 prevention	 or	 timely detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on the	financial	statements.

Because	of	the	inherent	limitations	of	internal	control	over	financial	reporting,	including	the	possibility	of	collusion	or improper	management	override	of	controls,	material	misstatements	due	 to	error	or	 fraud	may	not	be	prevented	or detected	on	a	timely	basis.	Also,	projections	of	any	evaluation	of	the	effectiveness	of	the	internal	control	over	financial reporting	to	future	periods	are	subject	to	the	risk	that	the	controls	may	become	inadequate	because	of	changes	in conditions,	or	that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	the	Corporation	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as of	December	31,	2015,	based	on	the	criteria	established	in	Internal	Control	—	Integrated	Framework	(2013)	issued	by the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United States),	the	consolidated	financial	statements	and	financial	statement	schedule	as	of	and	for	the	year	ended	December 31,	2015	of	the	Corporation	and	our	report	dated	February	5,	2016	expressed		an	unqualified	opinion	on	those	financial statements	and	financial	statement	schedule.

# Item	9B.	Other	Information

# Item	10.	Directors,	Executive	Officers,	and	Corporate	Governance

# (a) Directors	of	Registrant.

Information	as	to	the	names,	ages,	positions	and	offices	with	UPC,	terms	of	office,	periods	of	service,	business experience	during	the	past	five	years	and	certain	other	directorships	held	by	each	director	or	person	nominated	to become	 a	 director	 of	 UPC	 is	 set	 forth	 in	 the	 Election	 of	 Directors	 segment	 of	 the	 Proxy	 Statement	 and	 is incorporated	herein	by	reference.

Information	concerning	our	Audit	Committee	and	the	independence	of	its	members,	along	with	information	about the	audit	committee	financial	expert(s)	serving	on	the	Audit	Committee,	is	set	forth	in	the	Audit	Committee	segment of	the	Proxy	Statement	and	is	incorporated	herein	by	reference.

# (b) Executive	Officers	of	Registrant.

Information	concerning	the	executive	officers	of	UPC	and	its	subsidiaries	is	presented	in	Part	I	of	this	report	under Executive	Officers	of	the	Registrant	and	Principal	Executive	Officers	of	Subsidiaries.

# (c) Section	16(a)	Compliance.

Information	concerning	compliance	with	Section	16(a)	of	the	Securities	Exchange	Act	of	1934	is	set	forth	in	the Section	16(a)	Beneficial	Ownership	Reporting	Compliance	segment	of	the	Proxy	Statement	and	is	incorporated herein	by	reference.

(d) Code	of	Ethics	for	Chief	Executive	Officer	and	Senior	Financial	Officers	of	Registrant.

The	Board	of	Directors	of	UPC	has	adopted	the	UPC	Code	of	Ethics	for	the	Chief	Executive	Officer	and	Senior Financial	 Officers	 (the	 Code).	 A	 copy	 of	 the	 Code	 may	 be	 found	 on	 the	 Internet	 at	 our	 website www.up.com/investor/governance.	 We	 intend	 to	 disclose	 any	 amendments	 to	 the	 Code	 or	 any	 waiver	 from	 a provision	of	the	Code	on	our	website.

# Item	11.	Executive	Compensation

Information	concerning	compensation	received	by	our	directors	and	our	named	executive	officers	is	presented	in	the Compensation	Discussion	and	Analysis,	Summary	Compensation	Table,	Grants	of	Plan-Based	Awards	in	Fiscal	Year 2015,	Outstanding	Equity	Awards	at	2015	Fiscal	Year-End,	Option	Exercises	and	Stock	Vested	in	Fiscal	Year	2015, Pension	Benefits	at	2015	Fiscal	Year-End,	Nonqualified	Deferred	Compensation	at	2015	Fiscal	Year-End,	Potential Payments	Upon	Termination	or	Change	in	Control	and	Director	Compensation	in	Fiscal	Year	2015	segments	of	the Proxy	Statement	and	is	incorporated	herein	by	reference.	Additional	information	regarding	compensation	of	directors, including	 Board	 committee	 members,	 is	 set	 forth	 in	 the	 By-Laws	 of	 UPC	 and	 the	 Stock	 Unit	 Grant	 and	 Deferred Compensation	 Plan	 for	 the	 Board	 of	 Directors,	 both	 of	 which	 are	 included	 as	 exhibits	 to	 this	 report.	 Information regarding	the	Compensation	and	Benefits	Committee	is	set	forth	in	the	Compensation	Committee	Interlocks	and	Insider Participation	and	Compensation	Committee	Report	segments	of	the	Proxy	Statement	and	is	incorporated	herein	by reference.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

Information	as	to	the	number	of	shares	of	our	equity	securities	beneficially	owned	by	each	of	our	directors	and	nominees for	director,	our	named	executive	officers,	our	directors	and	executive	officers	as	a	group,	and	certain	beneficial	owners is	set	forth	in	the	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	segment	of	the	Proxy	Statement and	is	incorporated	herein	by	reference.

The	following	table	summarizes	the	equity	compensation	plans	under	which	UPC	common	stock	may	be	issued	as	of

|  |  |  |  |  | Number	of	securities	remaining |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Number\tof\tsecurities\tto | Number\tof\tsecurities\tto | Weighted-average | Weighted-average | available\tfor\tfuture\tissuance |
|  | be\tissued\tupon\texercise | be\tissued\tupon\texercise | exercise\tprice\tof | exercise\tprice\tof | under\tequity\tcompensation |
| Plan\tCategory | of\toutstanding\toptions,\nwarrants\tand\trights | of\toutstanding\toptions,\nwarrants\tand\trights | outstanding\toptions,\nwarrants\tand\trights | outstanding\toptions,\nwarrants\tand\trights | plans\t(excluding\tsecurities\nreflected\tin\tcolumn\t(a)) |
| Equity\tcompensation\tplans\tapproved\n\t\t\tby\tsecurity\tholders | 7,720,201 | [1] | $66.67 | [2] | 76,548,520 |
| Total | 7,720,201 |  | $66.67 |  | 76,548,520 |

[1] Includes	2,148,833	retention	units	that	do	not	have	an	exercise	price.	Does	not	include	2,048,765	retention	shares	that	have	been	issued and	are	outstanding.

[2] Does	not	include	the	retention	units	or	retention	shares	described	above	in	footnote	1.

# Item	13.	Certain	Relationships	and	Related	Transactions	and	Director	Independence

Information	 on	 related	 transactions	 is	 set	 forth	 in	 the	 Certain	 Relationships	 and	 Related	 Transactions	 and Compensation	Committee	Interlocks	and	Insider	Participation	segments	of	the	Proxy	Statement	and	is	incorporated herein	by	reference.	We	do	not	have	any	relationship	with	any	outside	third	party	that	would	enable	such	a	party	to negotiate	terms	of	a	material	transaction	that	may	not	be	available	to,	or	available	from,	other	parties	on	an	arm's-length basis.

Information	regarding	the	independence	of	our	directors	is	set	forth	in	the	Director	Independence	segment	of	the	Proxy Statement	and	is	incorporated	herein	by	reference.

# Item	14.	Principal	Accountant	Fees	and	Services

Information	concerning	the	fees	billed	by	our	independent	registered	public	accounting	firm	and	the	nature	of	services comprising	the	fees	for	each	of	the	two	most	recent	fiscal	years	in	each	of	the	following	categories:	(i)	audit	fees,	(ii) audit-related	fees,	(iii)	tax	fees,	and	(iv)	all	other	fees,	is	set	forth	in	the	Independent	Registered	Public	Accounting Firm's	Fees	and	Services	segment	of	the	Proxy	Statement	and	is	incorporated	herein	by	reference.

Information	concerning	our	Audit	Committee's	policies	and	procedures	pertaining	to	pre-approval	of	audit	and	non-audit services	rendered	by	our	independent	registered	public	accounting	firm	is	set	forth	in	the	Audit	Committee	segment	of the	Proxy	Statement	and	is	incorporated	herein	by	reference.

# Item	15.	Exhibits,	Financial	Statement	Schedules

(a)				Financial	Statements,	Financial	Statement	Schedules,	and	Exhibits:

# (1)				Financial	Statements

The financial	 statements filed	 as	 part	 of this filing	 are listed	 on the index to the	 Financial	 Statements	 and Supplementary	Data,	Item	8,	on	page	50.

# (2)				Financial	Statement	Schedules

# Schedule	II	-	Valuation	and	Qualifying	Accounts

Schedules	not	listed	above	have	been	omitted	because	they	are	not	applicable	or	not	required	or	the	information required	to	be	set	forth	therein	is	included	in	the	Financial	Statements	and	Supplementary	Data,	Item	8,	or	notes thereto.

Exhibits	 are listed in the	 exhibit index	 beginning	 on	 page	 93.	 The	 exhibits include	 management	 contracts, compensatory	plans	and	arrangements	required	to	be	filed	as	exhibits	to	the	Form	10-K	by	Item	601	(10)	(iii)	of Regulation	S-K.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly caused	this	report	to	be	signed	on	its	behalf	by	the	undersigned,	thereunto	duly	authorized,	on	this	5th	day	of	February, 2016.

By /s/	Lance	M.	Fritz

Lance	M.	Fritz,

Chairman,	President	and

# Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below,	on	this	5th	day of	February,	2016,	by	the	following	persons	on	behalf	of	the	registrant	and	in	the	capacities	indicated.

# PRINCIPAL	EXECUTIVE	OFFICER

# AND	DIRECTOR:

| Millions,	for	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Allowance\tfor\tdoubtful\taccounts: |  |  |  |
| \t\t\t\t\tBalance,\tbeginning\tof\tperiod | $21 | $23 | $37 |
| \t\t\t\t\tCharges/(reduction)\tto\texpense | 1 | 5 | (4) |
| \t\t\t\t\tNet\trecoveries/(write-offs) | (6) | (7) | (10) |
| Balance,\tend\tof\tperiod | $16 | $21 | $23 |
| Allowance\tfor\tdoubtful\taccounts\tare\tpresented\tin\tthe\nConsolidated\tStatements\tof\tFinancial\tPosition\tas\tfollows: |  |  |  |
| \t\t\t\t\tCurrent | $5 | $5 | $1 |
| \t\t\t\t\tLong-term | 11 | 16 | 22 |
| Balance,\tend\tof\tperiod | $16 | $21 | $23 |
| Accrued\tcasualty\tcosts: |  |  |  |
| \t\t\t\t\tBalance,\tbeginning\tof\tperiod | $757 | $702 | $734 |
| \t\t\t\t\tCharges\tto\texpense | 227 | 256 | 188 |
| \t\t\t\t\tCash\tpayments\tand\tother\treductions | (248) | (201) | (220) |
| Balance,\tend\tof\tperiod | $736 | $757 | $702 |
| Accrued\tcasualty\tcosts\tare\tpresented\tin\tthe\nConsolidated\tStatements\tof\tFinancial\tPosition\tas\tfollows: |  |  |  |
| \t\t\t\t\tCurrent | $181 | $249 | $207 |
| \t\t\t\t\tLong-term | 555 | 508 | 495 |
| Balance,\tend\tof\tperiod | $736 | $757 | $702 |

# Exhibit	Index

4(a) Indenture,	dated	as	of	December	20,	1996,	between	UPC	and	Wells	Fargo	Bank,	National Association,	as	successor	to	Citibank,	N.A.,	as	Trustee,	is	incorporated	herein	by	reference to	Exhibit	4.1	to	UPC's	Registration	Statement	on	Form	S-3	(No.	333-18345).

4(e) Form	of	3.250%	Note	due	2025	is	incorporated	herein	by	reference	to	Exhibit	4.1	to	the Corporation's	Current	Report	on	Form	8-K	dated	October	29,	2015.

4(f) Form	of	4.050%	Note	due	2045	is	incorporated	herein	by	reference	to	Exhibit	4.2	to	the Corporation's	Current	Report	on	Form	8-K	dated	October	29,	2015.



Question: what percentage of total freight revenues was the intermodal commodity group in 2014?
Calculation: revenue_intermodal = 4489
revenue_total = 22560
percent_intermodal = revenue_intermodal / revenue_total
answer = percent_intermodal * 100
Answer: 20%