54480--2/12/2010--KANSAS_CITY

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{operation, natural, condition}

{cost, regulation, environmental}

{operation, international, foreign}

{condition, economic, financial}

{debt, indebtedness, cash}

{loss, insurance, financial}

{competitive, industry, competition}

{cost, operation, labor}

{provision, law, control}

{stock, price, share}

{system, service, information}

{capital, credit, financial}

{personnel, key, retain}

{product, candidate, development}

{financial, litigation, operation}

{tax, income, asset}

Sales of substantial amounts of KCS common stock in the public market could adversely affect the prevailing market price of the common stock. KCS has provisions in its charter, bylaws and Rights Agreement that could deter, delay or prevent a third party from acquiring a controlling interest in KCS and that could deprive an investor of an opportunity to obtain a takeover premium for shares of KCS common stock. The failure of a bank to fund a request (or any portion of such request) by KCS to borrow money under its existing revolving credit facility could reduce KCS ability to fund capital expenditures or otherwise properly fund its operations. The failure of any bank in which the Company deposits funds could reduce the amount of cash the Company has available to pay distributions and make additional investments. Risks Related to KCS Business KCS competes against other railroads and other transportation providers. KCS business strategy, operations and growth rely significantly on agreements with other railroads and third parties. KCSM s operations are subject to certain trackage rights, haulage rights and interline service agreements with another Mexican rail carrier, some of which are in dispute. KCS debt capitalization ratio (total debt as a percentage of total debt plus equity) is 45.8%. KCS leverage could adversely affect its ability to fulfill obligations under various debt instruments and operate its business. A downturn in the debt capital markets may increase the cost of borrowing and make financing difficult to obtain, each of which may have a material adverse effect on the Company s results of operations and business. KCS business is capital intensive. KCS depends on the stability and availability of its information technology systems to operate its business. KCS business may be adversely affected by changes in general economic, weather or other conditions. KCS business may be affected by market and regulatory responses to climate change. KCS is exposed to the credit risk of its customers and counterparties and their failure to meet their financial obligations could adversely affect KCS business. KCS business is subject to regulation by international, federal, state and local regulatory agencies, including tax, environmental, health, and safety laws and regulations that could require KCS to incur material costs or liabilities relating to tax, environmental, health, or safety compliance or remediation. KCS failure to comply with these regulations could have a material adverse effect on its operations. KCS, as a common carrier by rail, is required by United States and Mexican laws to transport hazardous materials, which could expose KCS to significant costs and claims. KCS business is vulnerable to rising fuel costs and disruptions in fuel supplies. Any significant increase in the cost of fuel that is not adequately covered by fuel surcharges, or severe disruption of fuel supplies, would have a material adverse effect on KCS business, results of operations and financial condition. Market fluctuations could adversely impact KCS s operating results as it hedges certain transactions. The loss of key personnel could negatively affect business. A majority of KCS employees belong to labor unions. Strikes or work stoppages could adversely affect operations. KCS faces possible catastrophic loss and liability and its insurance may not be sufficient to cover its damages or damages to others. KCS business may be affected by future acts of terrorism war or other acts of violence or crime. KCSM s Mexican Concession is subject to revocation or termination in certain circumstances which would prevent KCSM from operating its railroad and would have a material adverse effect on the Company s business and financial condition. KCS ownership of KCSM and operations in Mexico subject it to economic and political risks. Downturns in the United States economy or in trade between the United States and Asia or Mexico and fluctuations in the peso-dollar exchange rate would likely have adverse effects on KCS business and results of operations. Mexico may experience high levels of inflation in the future which could adversely affect KCS results of operations. Risk Factors Relating to Ongoing Litigation KCSM was named as a defendant in a lawsuit, which if adversely resolved, could result in KCS being ordered to return the stock of KCSM to the Federal Government of Mexico, thus losing its Concession to operate its Mexican railroad. KCSM is involved in several disputes related to providing service to a Mexican subsidiary of a large U.S. auto manufacturer, which if adversely resolved could have a negative impact on its business and operations.

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54480--2/12/2010--KANSAS_CITY_SOUTHERN