---

---

UNITED STATESSECURITIES
  AND EXCHANGE COMMISSION Washington, D.C. 20549

---

FORM 40-F

---

[   ]
  REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT
  OF 1934 
  OR [X] ANNUAL
  REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934

|For
      the fiscal year ended: **December 31, 2002** | Commission
      File Number: **1-2413**
|------------------------------------------------------ | ----------------------------------------

CANADIAN
  NATIONAL RAILWAY COMPANY(Exact name of registrant as specified in its charter)

|Canada                                                                                                                            | 4011                               | E.I.
      980018609     
|--------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | -------------------------
|(Jurisdiction
      of                                                                                                            | (Primary
      Standard Industrial | (I.R.S.
      Employer   
|incorporation
      or organization)                                                                                              | Classification
      Code Number)  | Identification
      No.)
|                                                                                                                                  |                                    |                          
|935
      de La Gauchetiere Street West                                                                                          
|Montreal,
      Quebec                                                                                                           
|Canada
      H3B 2M9                                                                                                             
|(514) 399-5430                                                                                                                   
|(Address,
      including zip code, and telephone number, including area code, of Registrants
      principal executive offices)

---

CT
  Corporation System111 Eighth Avenue
  New York, NY 10011
  (212) 894-8600(Name, address,
  including zip code, and telephone number, including area code, of agent for
  service in the United States)

---

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

|Title
      of each class | Name
      of each exchange on which registered
|------------------------- | -----------------------------------------------
|Common
      shares       | New
      York Stock Exchange                  
|                          | Toronto
      Stock Exchange                   

Securities registered pursuant to Section 12(g) of the Act:None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:Debentures and
Notes (Debt Securities) of Registrant

For
  annual reports, indicate by check mark the information filed with this Form:

|[X]
      Annual information form | [  ]
      Audited annual financial statements
|--------------------------------- | ----------------------------------------------

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:

At December 31, 2002, 197,500,000 common shares were issued and outstanding.

Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934 (the Exchange Act). If Yes is marked, indicate the file number assigned to the Registrant in connection with such Rule.
YesoNoý

Indicate by check
  mark whether the Registrant (1) has filed all reports required to be filed by
  Section 13 or 15(d) of the Exchange Act 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.

YesýNoo

---

---

---

DISCLOSURE CONTROLS AND PROCEDURES

Canadian National Railway Companys President and Chief Executive Officer (the CEO) and its Executive Vice-President and Chief Financial Officer (the "CFO"), after
evaluating the effectiveness of Canadian National Railway Companys "disclosure controls and procedures" (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days prior to the filing date of
this annual report on Form 40-F, have concluded that as of the Evaluation Date, Canadian National Railway Companys disclosure controls and procedures were adequate and effective and designed to ensure that material information relating to
Canadian National Railway Company and its consolidated subsidiaries would be made known to them by others within those entities.

Subsequent
  to the Evaluation Date, there were no significant changes in Canadian National
  Railway Companys internal controls or in other factors that could significantly
  affect Canadian National Railway Companys internal controls, including
  any corrective actions with regard to significant deficiencies and material
  weaknesses. The CEO and CFO hereby report that, to their knowledge, the foregoing
  sentence is true.

UNDERTAKING

Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do
so by the Commission staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises or transactions in said securities.

---





2002

ANNUAL
  INFORMATION FORM

April
  22, 2003

---

- i -

|       |                                                          |    |                                                                       | TABLE
      OF CONTENTS                            |    | 
|------ | -------------------------------------------------------- | -- | --------------------------------------------------------------------- | -------------------------------------------------- | -- | 
|       |                                                          |    |                                                                       |                                                    |    | 
|Item 1 | Incorporation                                            |    | 1                                                                     |                                                   
|       |                                                          |    |                                                                       |                                                    |    | 
|       | 1.1                                                      |    | Incorporation
      of the Issuer                                     | 1                                                  |   
|       | 1.2                                                      |    | Subsidiaries                                                          | 1                                                  |   
|       |                                                          |    |                                                                       |                                                    |    | 
|Item 2 | General
      Development of the Business                | 2  |                                                                      
|       |                                                          |    |                                                                       |                                                    |    | 
|       | 2.1                                                      |    | Overview                                                              | 2                                                  |   
|       | 2.2                                                      |    | General Development
      of the Business During the Last Three Years | 2                                                  |   
|       |                                                          |    |                                                                       |                                                    |    | 
|Item 3 | Narrative
      Description of the Business              | 5  |                                                                      
|       |                                                          |    |                                                                       |                                                    |    | 
|       | 3.1                                                      |    | Divisional
      Organization                                         | 5                                                  |   
|       | 3.2                                                      |    | Business Units                                                        | 6                                                  |   
|       |                                                          |    | 3.2.1                                                                 | Petroleum
      and Chemicals                      | 6  | 
|       |                                                          |    | 3.2.2                                                                 | Metals and
      Minerals                          | 7  | 
|       |                                                          |    | 3.2.3                                                                 | Forest Products                                    | 7  | 
|       |                                                          |    | 3.2.4                                                                 | Coal                                               | 8  | 
|       |                                                          |    | 3.2.5                                                                 | Grain and
      Fertilizers                        | 8  | 
|       |                                                          |    | 3.2.6                                                                 | Intermodal                                         | 9  | 
|       |                                                          |    | 3.2.7                                                                 | Automotive                                         | 9  | 
|       | 3.3                                                      |    | Technology                                                            | 10                                                 |   
|       | 3.4                                                      |    | Labour                                                                |                                                    | 11 | 
|       |                                                          |    | 3.4.1                                                                 | Canada                                             | 11 | 
|       |                                                          |    | 3.4.2                                                                 | United States                                      | 11 | 
|       | 3.5                                                      |    | Facilities,
      Right-of-way, Rolling Stock and Equipment           | 12                                                 |   
|       | 3.6                                                      |    | Passenger Rail
      Services                                         | 14                                                 |   
|       | 3.7                                                      |    | Safety                                                                |                                                    | 15 | 
|       | 3.8                                                      |    | Regulation                                                            | 15                                                 |   
|       |                                                          |    | 3.8.1                                                                 | Canadian
      Regulation                          | 15 | 
|       |                                                          |    | 3.8.2                                                                 | CTA Review                                         | 16 | 
|       |                                                          |    | 3.8.3                                                                 | U.S. Regulation                                    | 16 | 
|       |                                                          |    | 3.8.4                                                                 | Canada U.S.
      Customs and US Homeland Security | 17 | 
|       | 3.9                                                      |    | Environmental
      Matters                                           | 17                                                 |   
|       |                                                          |    | 3.9.1                                                                 | Canada                                             | 18 | 
|       |                                                          |    | 3.9.2                                                                 | United States                                      | 18 | 
|       |                                                          |    | 3.9.3                                                                 | Future Costs                                       | 18 | 
|       | 3.10                                                     |    | Legal                                                                 |                                                    | 19 | 
|       |                                                          |    | 3.10.1                                                                | General                                            | 19 | 
|       |                                                          |    | 3.10.2                                                                | Aboriginal
      Claims                            | 20 | 
|       |                                                          |    |                                                                      
|Item 4 | Selected
      Consolidated Financial and Operating Data | 21 |                                                                      
|       |                                                          |    |                                                                       |                                                    |    | 
|       | 4.1                                                      |    | Selected Three-Year
      Annual Consolidated Financial Information   | 21                                                 |   
|       | 4.2                                                      |    | Selected Two-Year
      Quarterly Consolidated Financial Information  | 23                                                 |   
|       | 4.3                                                      |    | Dividends                                                             | 23                                                 |   

---

- ii -

|Item
      5                                                                                           | Managements
      Discussion and Analysis of Financial Condition and Results of |     | 
|------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------- | --- | 
|                                                                                                       | Operations                                                                       | 23  | 
|                                                                                                       |                                                                                  |     | 
|Item
      6                                                                                           | Market
      for Securities                                                      | 23  | 
|                                                                                                       |                                                                                  |     | 
|Item
      7                                                                                           | Directors
      and Executive Officers                                           | 24  | 
|                                                                                                       |                                                                                  |     | 
|                                                                                                       | 7.1  
      Directors                                                            | 24  | 
|                                                                                                       | 7.2  
      Executive Officers                                                   | 24  | 
|                                                                                                       |                                                                                  |     | 
|Item
      8                                                                                           | Additional
      Information                                                     | 25  | 
|                                                                                                       |                                                                                  |     | 
|                                                                                                       | 8.1  
      Executive Compensation; Financial Information                        | 25  | 
|                                                                                                       | 8.2  
      Undertaking to Provide Documents                                     | 25  | 
|                                                                                                       | 8.3
        Auditors Report and Consolidated Financial Statements               | 25  | 
|                                                                                                       | 8.4  
      Factors for Forward-Looking Information                              | 26  | 
|                                                                                                       |                                                                                  |     | 
|Exhibit
      A Cautionary Statements for Purposes of the Safe Harbor Provisions
      of the United |                                                                                  |    
|                                                                                                       | States
      Private Securities Litigation Reform Act of 1995                    | A-1 | 
|                                                                                                       |                                                                                  |     | 
|Exhibit
      B Facilities                                                                             | B-1                                                                              |    
|                                                                                                       |                                                                                  |     | 
|Exhibit
      C GAAP Reconciliation                                                                    | C-1                                                                              |    

---

|Documents
      incorporated by reference |                                           | 
|----------------------------------------- | ----------------------------------------- | 
|                                          |                                           | 
|Documents                                 |                                           | 
|                                          |                                           | 
|1.                                        | Portions
      of the Companys 2002      | 
|                                          | Report
      to shareholders for the year | 
|                                          | ended
      December 31, 2002.            | 
|                                          |                                           | 
|2.                                        | Portions
      of the Companys Notice of | 
|                                          | 2003
      Annual Meeting of Shareholders | 
|                                          | and
      Management Proxy Circular.      | 
|                                          |                                           | 
|3.                                        | Auditors
      Report and Consolidated   | 
|                                          | Financial
      Statements.               | 

---

ITEM 1   INCORPORATION

1.1    INCORPORATION
  OF THE ISSUER

Canadian National Railway
  Company (CN or the Company) was incorporated in 1922
  by special act of the Parliament of Canada. CNs continuance under the
  Canada Business Corporations Actwas authorized by the CN Commercialization
  Actand was effected by Certificate of Continuance dated August 24, 1995.
  On November 9, 1995, CN filed Articles of Amendment in order to subdivide its
  outstanding Common Shares. As of November 28, 1995, CN ceased to be a Crown
  corporation. On April 19, 2002, CN filed Articles of Amendment in order to provide
  that shareholder meetings may be held at places in the United States.

The Companys registered
  and head office is located at 935 de La Gauchetière Street West, Montreal,
  Quebec, H3B 2M9, Canada, and its telephone number is (514) 399-5430.

All references herein to
  dollars or $ are to Canadian dollars and all financial
  information reflected herein is determined on the basis of Canadian generally
  accepted accounting principles (Canadian GAAP), unless otherwise
  indicated.

The information in this Annual
  Information Form includes Wisconsin Central Transportation Corporation as of
  October 9, 2001, unless otherwise indicated.

This Annual Information Form
  contains or makes reference to Non-GAAP measures that do not have any standardized
  meaning prescribed by GAAP and are therefore not necessarily comparable to similar
  measures presented by other companies and as such, should not be considered
  in isolation. Management believes that measures such as adjusted net income,
  and the resulting adjusted performance measures for items such as operating
  income, operating ratio and per share data, are useful measures of performance
  that facilitate period-to-period comparisons, as they exclude items that do
  not arise as part of the normal day-to-day business operations or that could
  potentially distort the analysis of trends. Schedule C attached to this Annual
  Information Form provides the corresponding GAAP measures to Non-GAAP measures
  used herein and a reconciliation of such Non-GAAP measures to the corresponding
  GAAP measures.

1.2    SUBSIDIARIES

CNs principal subsidiaries
  as of December 31, 2002, all of which are wholly owned (directly or indirectly),
  and their jurisdiction of incorporation are indicated below:

|                                                                                 | Jurisdiction
      of
|-------------------------------------------------------------------------------- | ---------------------
|Name                                                                             | incorporation        
|                                                                                 |                      
|Grand Trunk Corporation                                                          | Delaware             
|Grand Trunk Western Railroad
      Incorporated (Grand Trunk Western or "GTW") | Delaware             
|Illinois Central Corporation
      (IC or Illinois Central)                  | Delaware             
|Illinois Central Railroad
      Company (ICRR)                                 | Illinois             
|Canadian National Railway
      Properties Inc.                                  | Canada               
|Wisconsin Central Transportation
      Corporation (WC)                        | Delaware             
|Wisconsin Central Limited                                                        | Delaware             

The financial statements
  of each of the above principal subsidiaries are consolidated with CNs
  financial statements.

---

- 2 -


ITEM 2   
  GENERAL DEVELOPMENT OF THE BUSINESS

2.1    OVERVIEW

As of December 31, 2002,
  CN operated approximately 11,700 route miles in eight Canadian provinces and
  6,100 route miles in 15 U.S. states totalling approximately 17,800 route miles
  with principal routes to every major metropolitan area in Canada and to the
  major U.S. rail hubs of Buffalo, Detroit, Duluth/Superior, Minneapolis/St. Paul,
  Chicago, St. Louis, Jackson, Memphis, New Orleans and Baton Rouge. The Company
  is North Americas only transcontinental railroad, and Canadas largest
  railroad serving all five major Canadian ports on the Atlantic and Pacific Oceans
  and the Great Lakes as well as New Orleans on the Gulf of Mexico.

The Companys revenues
  derive from the movement of a diversified and balanced portfolio of goods. In
  2002, no single business unit accounted for more than 22% of revenues. The sources
  of revenues also reflect a balanced mix of destinations. In 2002, 57% of revenues
  came from U.S. domestic and transborder traffic, 24% from Canadian domestic
  traffic, and 19% from overseas traffic.

CN originated more than 80%
  of traffic moving along its network in 2002. This allows the Company to both
  capitalize on service advantages and build on opportunities to efficiently use
  assets.

2.2   
  GENERAL DEVELOPMENT OF THE BUSINESS DURING THE LAST THREE YEARS

CNs performance has
  been the best in the industry since 1999 when measured by adjusted operating
  ratio on a U.S. GAAP basis, excluding items affecting comparability of results.1To maintain that position, CN has focused on strategies to grow the
  business profitably. Profitable growth is driven by high-quality service that
  meets customer needs and the relentless pursuit of productivity to contain and
  reduce its cost base. At CN, the ultimate goal is to achieve sustainable financial
  health, through the ups and downs of the business environment.

Growth

CNs revenues have increased
  from a level of $3.9 billion in 1995, the year in which it was privatized, to
  $6.1 billion in 2002. This has resulted from a combination of organic growth
  and well-executed acquisitions.

Revenues increased by 8%
  in 2002, largely reflecting the full-year impact of the acquisition of WC that
  took place in October 2001. On a pro-forma basis, assuming that WC had been
  acquired on January 1, 2001, revenue growth was only 0.3% due to a huge decline
  in grain traffic following a severe drought in western Canada. Excluding grain
  and fertilizers, pro-forma revenues were up 5% in 2002, due to major gains in
  our service-sensitive merchandise and intermodal businesses.

A key driver of value for
  customers is the extension of their reach in the North American Market. CN has
  been taking important steps in that regard through the implementation of alliances
  and arrangements with major players in the industry, including arrangements
  with CSX Corporation (CSX) in May 2001, and Union Pacific Corporation
  (UP) in September 2001. The strategy of extending reach and providing
  seamless service was effectively launched when CN took control of IC in 1999.
  The flawless integration of IC was acknowledged bythe Surface Transportation
  Board ("STB") following the first CN/IC merger oversight report in October 2000,
  and again in December 2001 when the STB decided to end the five-year oversight
  proceeding after only two years.

The acquisition of WC in
  2001 was another important step in increasing CNs ability to offer seamless
  service in the North American Free Trade Agreement ("NAFTA") market. As in the
  case of IC, the integration of WC into the CN family has been flawless. The
  integration of customers, many of which were



---



---

- 3 -

already being served by CN,
  the pooling of assets and resources to tap synergy benefits, and the step-by-step
  combination of systems have been proceeding very smoothly. All this has contributed
  to the success of the WC acquisition, which was accretive from day one.

CN understands that the best
  way to increase shareholder value is to create value for its customers. With
  an intense focus on the needs of its customers across each industry throughout
  North America and an understanding of what matters most to them and why, CN
  strives to grow the business with existing customers and to attract new business
  along its network.

Service

The purpose of CNs service
  plan, which was originally introduced in 1998, was to put the tools in place
  to deliver the quality and reliability that customers require, emphasizing the
  mindset and the focus needed for disciplined and precise execution. Under the
  plan, CN runs regularly scheduled trains that leave at predetermined times.
  Each car or container has a specific trip plan that fits into the design of
  the train schedule.

CNs success in the
  implementation of the service plan is seen in the performance of traffic compared
  to the trip plans set for each shipment on each day, with a very tight window
  of compliance. By the end of 2002, trip compliance was about 90% for merchandise
  and for intermodal, excluding WC. CN also believes its success in growing merchandise
  and intermodal traffic, in particular the strong growth of 2002, would not have
  been possible without the quality of service afforded by precise execution of
  the service plan.

For CN, service also entails
  ease of doing business, in particular responding promptly and effectively to
  customer requests for information and for equipment. Major efforts have been
  and are being made in this regard, such as the emphasis on pro-active account
  management and the availability of a product catalogue providing the sales force
  with the details of CNs service offering. Over the past several years,
  CN has expanded its local sales force to ensure a more effective interface with
  the customer base.

The key to the creation of
  value for customers is quality service, including speed, reliability, quality
  equipment and simpler customer processes. This is confirmed time and time again
  in customer satisfaction surveys conducted both internally and by third parties.
  Shippers value quality service because it allows them to better plan production
  schedules and inventory levels, reduce distribution costs, and deal reliably
  with their own customers. With the quality of service that CN offers, the Company
  is confident the business can grow and that yield can improve going forward.

Productivity

CNs focus on profitable,
  top-line growth implies a relentless pursuit of efficiency and productivity
  improvements in all aspects of the business and all corners of the organization.
  With an asset-intensive business, one of CNs top priorities is to constantly
  improve asset utilization in the network and the yards.

The service plan plays a
  central role in the pursuit of better asset utilization. It allows CN to simultaneously
  improve the quality of service and the productivity of assets. In the last three
  years, the productivity of locomotives, measured in gross ton miles (GTMs)
  per horsepower, increased by almost 20% excluding WC. Yard throughput, measured
  in terms of cars handled per yard switching hour, improved by approximately
  25% during the same period, excluding WC.

The reliability that is now
  possible at CN is also opening a whole new perspective on the intermodal business.
  Generally characterized by highly uneven traffic flows on different days of
  the week, intermodal business generates significant asset requirements for railways
  to meet peak demand. With the ability to deliver as promised each and every
  day, a high level of reliability at CN opens the road for better pricing and
  management of capacity on a daily basis.

---

- 4 -

Productivity improvements
  are also being pursued through the implementation of cutting-edge information
  technology. Over the last several years, CN has implemented a new enterprise
  system with SAP, a powerful integrated software application. After the completion
  of the third phase of the implementation of SAP in 2002, CN had replaced more
  than 70 fragmented mainframe component systems. CN plans to continue its implementation
  of SAP in respect of WC during 2003.

New savings opportunities
  can be identified to an extent that was not previously possible. Thanks to an
  integrated system that allows CN to base decisions on more timely and high quality
  information, no opportunity to save is ignored. Extensive zero-basing across
  a large number of activities, careful internal benchmarking across key operating
  locations, and detailed information on spending across all functions and divisions,
  enable CN to dig deeper on costs.

In an ongoing effort to improve
  labour productivity, the Company has been streamlining the organization. In
  that context, the Company recorded charges of $120 million in 2002 and $98 million
  in 2001 for workforce reductions.

Sustainable Profitability

Over the last three years,
  CN has continued to improve its performance in spite of significant turmoil
  in the business environment. With recession during 2001 in the U.S. and Canada,
  followed by severe drought in Canada and continued economic uncertainty in the
  North American economy in 2002, the Company managed to improve its adjusted
  earnings1 in an adverse marketplace. CNs 2002 net income on a reported
  basis declined from its 2001 level. However, once certain items impacting the
  comparability of CNs results are excluded for both 2001 and 2002, CN improved
  its adjusted diluted earnings per share by approximately 4.5% over 2001.1

CN continues to be an industry
  leader in free cash flow generation. In 2002, CN generated free cash flow of
  $513 million,1 reaching over 8% of revenues, compared to approximately
  $300 million, or 5.5% of revenues in 1999. The Company is constantly seeking ways to
  improve cash flow, through increased earnings, better asset utilization and
  tighter control of working capital.

Asset monetization is also
  a source of cash flow generation. For example, in early 2001, CN sold its 50
  per cent interest in the Detroit River Tunnel Company for net proceeds of $112
  million. In 2002, two of the foreign properties inherited with the acquisition
  of WC were sold, namely Tranz Rail Holdings Inc. in New Zealand and Australian
  Transport Network Limited in Australia for aggregate net proceeds of $69 million.
  In addition, IC Terminal Holdings Company, a U.S. subsidiary of IC, was sold
  for $28 million.

Given strong free cash flow
  and a solid balance sheet, CNs Board of Directors authorized a share repurchase
  program of up to 13.0 million common shares over the course of one year beginning
  on October 25, 2002 pursuant to a normal course issuer bid, at prevailing market
  prices. As at March 31, 2003, $565 million was used to repurchase 8.8 million
  common shares at an average price of $64.17 per share.

CNs ultimate goal is
  to achieve sustainable financial health through the ups and downs of the business
  environment. This means generating solid earnings both in good times and bad,
  but also solid free cash flow, after payment of capital expenditures and dividends.



---



---

- 5 -

ITEM 3   
  NARRATIVE DESCRIPTION OF THE BUSINESS

3.1   
  DIVISIONAL ORGANIZATION

Following its acquisition
  of IC, CN created five operating divisions along geographical lines and subsequently
  added a sixth division with the acquisition of WC. At the beginning of 2003,
  CN re-aligned its divisions and merged the WC Division into the Midwest Division,
  thereby reducing its operating divisions to five. Each division is headed by
  a senior officer and is charged with the authority to meet local customer service
  needs, control costs, expand local accounts and develop new business from medium-sized
  shippers. To ensure the integrity of the CN network, Company-wide control of
  operations and marketing remains at the corporate level. As of March 31, 2003,
  CN operated approximately 17,600 route miles of track.

CNs five operating
  divisions, as of March 31, 2003, are described as follows:

      Pacific
  Division

> The Pacific Division, headquartered
>     in North Delta, near Vancouver, B.C., extends from the western Saskatchewan
>     border to the ports of Vancouver and Prince Rupert on the Pacific Ocean. The
>     Division operates approximately 3,100 route miles of track, serves the Port
>     of Vancouver and is the exclusive rail link to Prince Rupert, the closest
>     North American port to Asia. CNs Pacific Division carries bulk export
>     commodities such as grain and fertilizers, coal and sulfur, as well as forest
>     products and intermodal.

      Prairie
  Division

> CNs Prairie Division,
>     headquartered in Winnipeg, Manitoba, extends from the western Saskatchewan
>     border east to Thunder Bay and Armstrong in northwestern Ontario. The Division
>     operates approximately 3,900 route miles of track and delivers grain and grain
>     products, coal and potash to the inland port of Thunder Bay destined for international
>     and U.S. markets.

      Eastern
  Canada Division

> The Eastern Canada Division,
>     headquartered in Toronto, Ontario, extends east from Armstrong in northwestern
>     Ontario to Halifax on the Atlantic Ocean, and from Chibougamau, Quebec south
>     to the Ontario-Michigan border. The Division operates approximately 4,500
>     route miles of track and serves the ports of Montreal, Saint John, New Brunswick
>     and Halifax. The principal commodities carried by the Division are automotive,
>     intermodal, metals, chemicals and forest products.

      Midwest
  Division

> The Midwest Division, headquartered
>     in Homewood, Illinois, extends from International Falls just south of Fort
>     Francis, Ontario, to Chicago, Illinois and from Minneapolis and St. Paul,
>     Minnesota to Sault Ste. Marie, Michigan, which encompasses WCs rail lines,
>     and from Chicago heading northeast to Port Huron and Detroit, Michigan, and
>     to Sarnia, Ontario. The Midwest Division operates approximately 2,900 route
>     miles of track and is the link between all Canadian operations and the Gulf
>     Division in the United States. Major commodities transported include finished
>     automobiles and auto parts, intermodal, iron and steel, chemicals, forest
>     products, coal and grain. With connections in Chicago and other locations
>     to all North American Class 1 carriers, the CN Midwest Division serves as
>     a critical link for the Companys NAFTA strategy.

---

- 6 -

      Gulf
  Division

> The Gulf Division, headquartered
>     in Homewood, Illinois, is the most southerly of the CN divisions extending
>     from Chicago, Illinois south to New Orleans on the Gulf of Mexico and from
>     Chicago west to Sioux City, Iowa and Omaha, Nebraska. The Division operates
>     approximately 3,200 route miles of track and serves the Gulf ports of Mobile,
>     Alabama and New Orleans and the river ports of Memphis, Tennessee and Baton
>     Rouge, Louisiana. CNs Gulf Division transports amongst other commodities,
>     petroleum and chemicals, grain, coal and fertilizers. The Division also serves
>     intermodal customers as well as forest products customers. The Division interchanges
>     traffic with Kansas City Southern Railroad (KCS) at Jackson, Mississippi,
>     as part of the marketing alliance that provides CN customers access to Mexico
>     and the U.S. Southwest.

3.2    
  BUSINESS UNITS

In addition to its divisional
  structure described above, the Company has organized its business under seven
  business units. The following table sets forth revenue and carload information
  by business unit for each of the years in the three-year period ended December
  31, 2002, presented under U.S. generally accepted accounting principles:

|                              | Rail
      Operating Revenues | Carloads      | Freight
      Revenues per
      Carload |          
|----------------------------- | ----------------------------- | ------------- | ---------------------------------------- | ---------
|                              |                               |               |                                          |          
|                              | 2002                          | 2001          | 2000                                     | 2002     
|                              |                               |               |                                          |          
|                              | (In
      million $)          | (Inthousands) | (In
      $)                             |          
|Petroleum
      and Chemicals | 1,102                         | 923           | 894                                      | 587      
|Metals
      and Minerals     | 521                           | 458           | 392                                      | 388      
|Forest
      Products         | 1,323                         | 1,088         | 1,008                                    | 600      
|Coal                          | 326                           | 338           | 328                                      | 499      
|Grain
      and Fertilizers   | 986                           | 1,161         | 1,136                                    | 535      
|Intermodal                    | 1,052                         | 969           | 919                                      | 1,237    
|Automotive                    | 591                           | 520           | 559                                      | 318      
|Other1                        | 209                           | 195           | 192                                      | n/a      
|                              |                               |               |                                          |          
|**Total**                     | **6,110**                     | **5,652**     | **5,428**                                | **4,164**

---

3.2.1    Petroleum
  and Chemicals

The Petroleum and Chemicals
  business unit includes a wide range of commodities which can be divided into
  the following categories: chemicals, representing 46% of the business units
  revenues in 2002, and plastics, petroleum and gas products, representing 54%.

The primary markets are within
  North America, and the business is closely correlated with the North American
  economy. The consolidation and rationalization of industrial production facilities
  have resulted in increased rail-based business opportunities in both the Canadian
  and U.S. markets.

This business unit is a strong
  originator of traffic. CN has full access to northern Alberta, a major center
  for natural gas, feedstock and world scale petrochemicals and plastics complex
  derivatives, as well as the

---

- 7 -

Tar Sands development. The
  Company also enjoys access to the low-cost Louisiana petrochemical corridor
  between New Orleans and Baton Rouge and a large number of eastern Canadian regional
  plants. CN provides a highly efficient route to the large consuming areas in
  the Midwest and Northeast of the United States.

3.2.2    Metals
  and Minerals

The Metals and Minerals business
  unit comprises metals (steel, aluminum and other non-ferrous metals), representing
  69% of the business units revenues in 2002, and equipment and parts, and construction
  materials, representing 31%. CNs unique rail access to major mines and
  smelters makes it a transportation leader of copper, lead, zinc concentrates,
  refined metals and aluminum. Copper and zinc commodities, such as ores, concentrates
  and anodes are produced in northern Quebec, Ontario and Manitoba. The commodities
  are shipped to refineries for further processing and then shipped to manufacturers
  of finished goods.

The province of Quebec is
  home to a large number of world scale plants for the electrometallurgical production
  of aluminum, magnesium and titanium. Availability over the next decade of blocks
  of electricity from hydro-electric generation plants at very competitive prices,
  for the production of these products, makes this business unit an important
  portion of CNs North American traffic.

Major producers of steel,
  primarily in Ontario and the U.S. Midwest, ship their products throughout North
  America and Mexico. Such products are mainly used in the automotive and construction
  industries.

Construction materials are
  mainly aggregates (stone and sand) and cement. CN enjoys access to major cement
  producers and aggregate mines in Canada as well as in the U.S.

CNs Metals and Minerals
  traffic is sensitive to fluctuations in the economy. CN serves a diversity of
  major industries along its network and has the most direct route to the Ports
  of New Orleans and Mobile from the Midwest, as well as an efficient route into
  Mexico via its marketing alliance with KCS.

3.2.3    
  Forest Products

CN is the leading carrier
  of forest products in North America. CN has superior rail access to the western
  and eastern Canadian fiber producing regions, which are among the largest fiber
  source areas in North America. This geographic position is a significant factor
  in attracting new mills to locate on CNs network. With the north-south
  corridor between Chicago, Illinois and New Orleans, Louisiana, CN can also take
  advantage of opportunities in the Southeastern U.S. The acquisition of WC has
  enabled CN to access approximately 38 additional paper mills on the WC network.
  CN services customers that are leaders in all areas of forest products.

The Forest Products business
  unit consists of four major commodity segments: lumber accounted for 31% of
  the business units revenues in 2002, fibers, 29%, paper, 28%, and panels 12%.

The key drivers for newsprint
  are advertising lineage and overall economic conditions in the United States.
  The ability to provide consistent, reliable service gives railroads the opportunity
  to convert traffic from truck to rail. The key driver for fibers (mainly wood
  pulp) is the consumption of paper worldwide. Housing starts and renovation activities
  in the United States, which were strong in 2002, are the key drivers for the
  lumber and panels traffic.

CN continues to hold a substantial
  share of the rail market for forest products in Canada. Although demand for
  forest products tends to be cyclical, CNs geographical advantages and
  product diversity tend to reduce the impact of market fluctuations. CNs scheduled
  service offering and guaranteed car order program has also been a significant
  contributor to growing market share.

---

- 8 -

3.2.4    
  Coal

Of the coal traffic moved
  by CN in 2002, 44% originated in Canada and 56% in the United States.

CNs coal business consists
  of thermal and metallurgical grades of bituminous coal. Canadian thermal coal
  is delivered to power utilities primarily in eastern Canada. Canadian metallurgical
  coal is largely exported to steel makers in Japan and other Asian markets from
  three coal terminals in British Columbia. CN continues to see further reductions
  in Canadian metallurgical coal production as another mine closed in early 2003
  and further mine closures are expected during 2003 and 2004. CN continues to
  work with existing and potential customers to optimize opportunities relating
  to any new mine project which may develop should there be a change in market
  conditions.

In the United States, thermal
  coal comprises the majority of coal movements for CN. Shipments of U.S. thermal
  coal are transported from mines served in southern Illinois or from western
  U.S. mines via interchange with other railroads to major utilities in the Midwest,
  east and southeast United States. CNs origin base continues to shrink
  as more industrial receivers look to Powder River Basin (PRB) coal
  origination as their primary energy source due to its low sulfur content, which
  is more environmentally compliant. However, as more PRB coal moves into these
  markets, CN has been able to aggressively market seamless service options through
  connections with western rail carriers. This strategy has allowed CN to stabilize
  volumes and target growth areas.

3.2.5    
  Grain and Fertilizers

This business unit depends
  primarily on crops grown and fertilizers processed in western Canada and the
  U.S. Midwest. Of the grain traffic moved by CN in 2002, 57% originated in Canada,
  almost all in the west, and 43% in the United States.

The grain segment, which
  represents 73% of the business units revenues, consists of three primary commodities:
  food grains, mainly wheat, representing 34% of the grain segments revenues
  in 2002; oilseeds and oilseed products (primarily canola seed, oil and meal),
  36%; and feed grains (including feed barley, feed wheat and corn), 30%.

The vast majority of the
  grain produced in western Canada is exported. Production of grain in Canada
  varies considerably from year to year, affected primarily by weather conditions.
  Grain exports are highly volatile, reflecting the size of the crop produced,
  international market conditions and foreign government policy. In fact, due
  to a severe drought in western Canada, the Grain and Fertilizers business units
  revenues declined by $175 million in 2002.

Most of the western Canadian
  grain destined to offshore markets is moved to the ports of Vancouver, Prince
  Rupert, B.C., or Thunder Bay, Ontario. Both major Canadian railroads, CN and
  Canadian Pacific Railway, operate branch lines and mainlines by which grain
  is moved from primary elevators to terminals at the ports of Vancouver and Thunder
  Bay. The port of Prince Rupert is served solely by CN. The principal offshore
  markets for Canadian grain are in the Pacific Rim and in the Middle East. CN
  also moves grain rail-direct into the domestic U.S. and into the growing Mexican
  market.

In the U.S., the CN rail
  system is well positioned in the heart of the grain producing territory. Two
  of the states where CN has direct access, Illinois and Iowa, historically have
  the largest annual production of corn and soybeans. This allows CN to serve
  large grain processors in Illinois, Iowa, Tennessee, and Mississippi. Other
  domestic grain movements are to the poultry feeder markets in the southeastern
  United States which rely on corn for feed. Exports of grain and grain products
  represent another market for CN due to its access to major export facilities
  on the Mississippi River and on the Gulf of Mexico.

Some of the worlds largest
  grain companies have processing plants located on the CN rail system. As a result,
  much of the grain traffic CN participates in involves the movement of grain
  products that are

---

- 9 -

produced and then shipped
  to other receiver markets. Soybean meal, corn gluten feed, vegetable oils, corn
  syrups and starches are some of the products moved by CN.

Fertilizers and potash represent
  27% of this business units revenues. CN is a significant player in the Canadian
  rail market for nitrogen-based fertilizers with production centered primarily
  in western Canada. CN serves or has access to all major potash mines in Saskatchewan,
  the center for western Canadian production. CN also serves a major production
  facility on Canadas east coast. Virtually all Canadian potash moves by
  rail to markets in the U.S. or overseas.

In the United States, CN
  serves producers of various types of fertilizers, including nitrogen solutions,
  ammonium nitrate, urea and phosphate fertilizers. U.S. and Canadian fertilizer
  production is heavily impacted by the price of natural gas that is a main raw
  material for most fertilizer production. When gas prices are high, many of the
  local producers reduce production. However, at the same time, imports can become
  more competitive and CN is positioned to handle this business through access
  to Gulf ports in Louisiana.

3.2.6    
  Intermodal

Intermodal has been a fast
  growing segment over the past several years and is a key growth driver for CN.
  This business unit comprises the following two segments:

Domestic, which
  represented 57% of the business units revenues in 2002, includes domestic
  Canada, transborder, Mexico and domestic U.S. traffic. The unit provides intermodal
  services through a number of channels in which services are retailed, directly
  to beneficial owners of freight, and wholesaled to motor carriers, intermodal
  marketing companies, third party logistics companies, and other transportation
  intermediaries.

The Domestic segment is driven
  by consumer markets, with market growth generally expected to be tied to the
  economy. The service is market driven and competition from the trucking industry
  is intense. The business units focus is to define its services as truck
  competitive and cost-effective. To that end, several products have been introduced
  in the domestic segment over the last few years, including Roadrailer, expedited
  intermodal train service and marketing arrangements with CSX and UP.

International, which
  represented 43% of the business units revenues in 2002, transports import/export
  container business on behalf of ocean carrier companies. Within Canada, CN ships
  from/to the ports of Vancouver, Montreal, St. John and Halifax. In the United
  States, CN ships from/to the ports of New Orleans, Mobile and Gulfport and via
  rail connections at Chicago and Detroit to both the U.S. east and west coast
  ports. Key growth markets for the international segment have been between the
  ports of Halifax, Vancouver and Montreal and locations in the Midwest. Connections
  with other Class 1 railways in Chicago have further extended the reach of CNs
  international business into the U.S. Southeast.

In 2002, growth in the international
  segment was driven by market share gains by steamship lines served by CN. The
  domestic segment benefited from growing North American markets.

3.2.7    
  Automotive

CN is a leading carrier of
  automotive products originating in southern Ontario and Michigan and moves finished
  vehicles and parts within Canada, the United States and in both directions across
  the border. The principal commodities within the automotive unit are finished
  vehicles, with 83% of the business units revenues in 2002, and automotive
  parts, with the remaining 17%.

CNs automotive revenues
  are closely correlated to automotive production and sales in North America.
  CN can access traffic from all the Canadian vehicle assembly plants, nine assembly
  plants in Michigan and one in Mississippi. CN also has access to parts production
  facilities in both the U.S. and Canada. CNs broad coverage enables it
  to consolidate full trainloads of automotive traffic for delivery to

---

- 10 -

connecting railroads at key
  interchange points. CN has the most direct rail link from southern Ontario to
  the Chicago gateway, providing efficient service in this time-sensitive sector.
  The St. Clair tunnel provides the ability to handle the tallest multi-level
  vehicle carriers as well as maximum clearance for stacking vehicle frames. With
  the IC network, CN offers single-line service through Chicago to a variety of
  other interchange locations for automotive traffic. CNs marketing alliance
  with KCS provides automotive customers with single-line service between facilities
  in Canada and Mexico.

3.3 TECHNOLOGY

CN runs a 7 days a week,
  24 hours a day operation, servicing all of Canada and central U.S. The infrastructure
  that supports CNs operations includes large central mainframe computers
  running major operational applications, geographically distributed servers supporting
  process control and specialized applications, as well as standard PC workstations
  connected to Local Area Networks ("LANs"). This network, as well as the internal
  telephone network, railroad signals and radio systems all share basic communications
  services on a Company-owned, high capacity fiber network, supplemented with
  public facilities as required. CNs customers, vendors and partners tie
  into this network through highly secured internet, direct connect or third party
  communication links, providing CN with the ability to conduct business electronically
  with its critical business customers and contacts.

With heightened security
  alerts, CN has focused intensely since 2002 on its disaster recovery and system
  security capabilities. CN participates in the Rail Security councils for North
  America through the Association of American Railroads and performs annual disaster
  recovery simulations to ensure that this capability remains up to date.

In 2002, the infrastructure
  was enhanced as CN completed its move to upgrade its LAN servers to Windows
  2000 and commenced the rollout of Windows XP to the desktop. This will allow
  CN to move to a locked down desktop environment that will facilitate improved
  remote management of the desktop and ensure compatibility for major investments
  it has made in SAP, E-Business and its Customer Relationship Management Systems
  in the recent past.

CNs commitment to become
  more productive and efficient is being realized through leading-edge technology,
  including its ongoing SAP implementation, which has replaced and consolidated
  the information and functions performed by more than 70 CN computer systems
  since 1998. In 2002, CN completed phase III of SAP. This provided state of the
  art systems and processes in the areas of plant maintenance for its Engineering
  function and equipment maintenance and repair for its Mechanical function. This
  phase was successfully completed and complements its previous successful SAP
  implementations in the areas of Financial, Human Resources, Payroll and Procurement
  completed in 2001. This positions CN as one of the few North American Class
  1 Railroads that have successfully replaced back office legacy systems.

CN has commenced its planning
  for the systems integration of the recently acquired WC railroad. This project
  will result in the replacement of WCs current systems with CNs own portfolio
  of applications. As with its previous merger with IC, CN will undertake this
  initiative in a carefully planned manner so as not to affect its operations,
  customers or partners. The project will also deliver six new areas of functionality
  across CN designated to drive more value from SAP such as inventory optimization
  and facility and environmental asset maintenance. CNs plan in respect
  of WC is to implement SAP and SRS (traffic systems) during 2003.

CN continued to invest in
  its E-business capabilities providing enhancements to existing applications
  such as the transit calculator, shipment tracking and electronic invoicing and
  payment. In 2002, CN also implemented enhanced internet-based shipment tracking
  and management capabilities for paper products moving through North America.
  CN continued to enhance its Customer Relationship Management capabilities providing
  enhanced pricing and rate publication capabilities, opportunity analysis and
  improved customer intelligence.

---

- 11 -

To further improve safety
  and efficiency, CN started the redesign of its train signaling and dispatch
  systems in 2002. This multi-year project will replace CNs current dispatch
  systems with state of the art technology.

CN will continue to implement
  and leverage strategic investments in information technology that will help
  to improve CNs already industry leading practices in safety, reliability
  and customer service.

3.4
  LABOUR

3.4.1    
  Canada

As of December 31, 2002,
  CN employed a total of 15,235 employees in Canada.

Labour agreements covering
  approximately 97% of CNs Canadian unionized workforce will expire on December
  31, 2003. The small remainder of employees are governed by collective agreements
  (ACR, NQISL) that expire in 2004 or later. Either the trade union(s) or the
  Company may, effective September 1, 2003, require the other party to the collective
  agreement to formally commence collective bargaining for the purpose of renewing
  or revising their collective agreement(s).

Where formal notice to bargain
  has been given, the union and the Company shall, without delay, meet and commence
  to bargain collectively in good faith and make every reasonable effort to enter
  into collective agreements. Under the terms of the Canada Labour Code (the governing
  legislation), no legal strikes or lockouts are possible before January of 2004.

CN is optimistic that it
  will be able to have all its collective agreements renewed and ratified without
  any major disruptions. However, there can be no assurance that there will not
  be any strikes or lockouts, or that the resolution of these collective bargaining
  negotiations will not have a material adverse effect on the Companys financial
  position or results of operations.

3.4.2    United
  States

As of December 31, 2002,
  CN employed a total of 6,879employees in the United States.

The U.S. properties of CN
  include the Grand Trunk Western, the Duluth, Winnipeg and Pacific ("DWP"), the
  Illinois Central, Chicago, Central and Pacific (CCP)
  and the recently acquired WC. Unlike other US Class 1 railroads who bargain
  on a collective national basis, CN prefers to conduct local negotiations as
  it better addresses both employee and the Companys issues.

There are risks associated
  with negotiating locally. Presidents and Congress have demonstrated that they
  will step in to avoid national strikes, while a local dispute may not generate
  federal intervention. CNs management believes the potential mutual benefits
  of local bargaining outweigh the risks. Evidence of this was the achievement
  of break-through collective agreements with several unions, representing train
  and engine service employees, which replaced the traditional mileage-based wage
  systems and work rules in existence in the Class I railroad industry for decades
  by an hourly wage system.

As of April 2003, the Company
  had in place agreements with bargaining units representing the entire unionized
  workforce at IC, GTW, DWP and CCP, and 68% of the unionized workforce at WC.
  These agreements have various durations ranging from the end of 2003 to 2005.
  Several of these agreements are currently under renegotiation and several will
  open for negotiation in 2003.

Negotiations are ongoing
  with the bargaining units with which the Company has not yet achieved new settlements.
  Until new agreements are reached or the processes under the Railway Labor
  Act (U.S.) have been exhausted, the terms and conditions of previous agreements
  continue to apply. Although the Company does not anticipate work action related
  to these negotiations while they are ongoing, there can

---

- 12 -



be no assurance that there
  will not be such work action or that the resolution of these negotiations will
  not have a material adverse effect on the Companys financial position
  or results of operations.

3.5 FACILITIES,
  RIGHT-OF-WAY, ROLLING STOCK AND EQUIPMENT

Unless otherwise indicated,
  the following information excludes WC for periods prior to October 9, 2001.

CNs main facilities
  are described in Exhibit B to this Annual Information Form.

As of December 31, 2002,
  CN operated the following track as part of its rail operations:

|                                     |        |  | Jointly |  |         |  | Trackage |  |        | 
|------------------------------------ | ------ |  | ------- |  | ------- |  | -------- |  | ------ | 
|                                     | Owned  |  | Owned   |  | Leased  |  | Rights   |  | Total  | 
|                                     |        |  |         |  |         |  |          |  |        | 
|                                     |        |  |         |  | (miles) |  |          |  |        | 
|Main
      track                     | 19,469 |  | 90      |  | 11      |  | 709      |  | 20,279 | 
|Passing
      siding                 | 1,571  |  | 9       |  | 1       |  | 52       |  | 1,633  | 
|Spurs,
      sidings and yard tracks | 5,934  |  | 135     |  | 18      |  | 1,344    |  | 7,431  | 
|                                     |        |  |         |  |         |  |          |  |        | 
|Total                                | 26,974 |  | 234     |  | 30      |  | 2,105    |  | 29,343 | 

CNs entire rail network
  is standard gauge. As of December 31, 2002, 8,839 miles of main track had centralized
  traffic control. In addition, 1,035track miles had automatic block signals.

The following table sets
  forth certain information with respect to CNs track for the last three
  years:

|    |                                         | Year
      ended December 31 | 
|--- | --------------------------------------- | ---------------------------- | 
|    |                                         |                              | 
|    |                                         | 2002                         | 
|    |                                         |                              | 
|    |                                         |                              | 
|    | Rail
      laid or relaid (track miles) | 348                          | 
|    | Ties
      installed (thousands)        | 711                          | 
|    |                                         |                              | 
|(1) | Excluding
      WC.                     |                              | 

Yards are located at various
  points along the lines, including large classification yards in Montreal, Quebec;
  Toronto, Ontario; Winnipeg, Manitoba; Vancouver, B.C.; Edmonton, Alberta; Battle
  Creek, Sault St. Marie, Michigan; Neenah, Fond du Lac and Stevens Point, Wisconsin,
  Centralia, Champaign and Markham, Illinois; Memphis, Tennessee and Jackson,
  Mississippi. Locomotive and freight car servicing and repair facilities are
  also located at various points on the network whereas heavy repair and rebuilding
  facilities are located in Winnipeg, Manitoba, Homewood and Centralia, Illinois
  and Fond du Lac, Wisconsin.

The table below shows other
  relevant information for the last three years:

|                                                        | Year
      ended December 31 | 
|------------------------------------------------------- | ---------------------------- | 
|                                                        |                              | 
|                                                        | 2002                         | 
|                                                        |                              | 
|                                                        |                              | 
|Train
      accidents per million train miles(1)        | 2.0                          | 
|Injury
      frequency rate per 200,000 person hours(1) | 3.0                          | 



---



---

- 13 -

CN owned and leased the following
  units of railroad rolling stock as of December 31, 2002 (including WC):

|                             | Owned(1) |  | Leased(2)(3) |  | Total  | 
|---------------------------- | -------- |  | ------------ |  | ------ | 
|                             |          |  |              |  |        | 
|Diesel
      locomotives     |          |  |              |  |        | 
|Road                         | 1,245    |  | 228          |  | 1,473  | 
|Yard                         | 439      |  | -            |  | 439    | 
|                             |          |  |              |  |        | 
|Total                        | 1,684    |  | 228          |  | 1,912  | 
|                             |          |  |              |  |        | 
|Freight
      cars           |          |  |              |  |        | 
|Box                          | 14,959   |  | 14,033       |  | 28,992 | 
|Gondola                      | 6,056    |  | 3,214        |  | 9,270  | 
|Hopper
       open top      | 1,270    |  | 3,357        |  | 4,627  | 
|Hopper
       covered       | 7,347    |  | 19,191       |  | 26,538 | 
|Flat
       multilevel      | 2,108    |  | 480          |  | 2,588  | 
|Flat
       other           | 6,831    |  | 6,079        |  | 12,910 | 
|Tank                         | 35       |  | 153          |  | 188    | 
|Other(4)                     | 3,764    |  | 881          |  | 4,645  | 
|                             |          |  |              |  |        | 
|Sub-total
      Revenue Cars | 42,370   |  | 47,388       |  | 89,758 | 
|                             |          |  |              |  |        | 
|Caboose/Passenger            | 151      |  | 24           |  | 175    | 
|Work
      equipment cars    | 3,760    |  | 6            |  | 3,766  | 
|                             |          |  |              |  |        | 
|Total
      freight cars     | 46,281   |  | 47,418       |  | 93,699 | 

---

|(1) | Includes
      units under capital leases.                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes
      long-term and short-term leases.                                                                                                                                   
|(3) | Includes
      405 coal gondolas and 8,817 grain hopper cars assigned to the Company by
      customers, and by the Government of Canada and provincial governments, respectively.
|(4) | Other
      revenue cars includes ballast cars which are classified as revenue cars
      for such potential use and refrigerator cars plus cars pending sale or disposal.      

The Company expects to meet
  service demands with improved car management utilization while continuing to
  optimize the number of cars in its fleet. Refurbishing of bad order cars generally
  will continue to precede acquisition of new cars of the same type.

The following table details,
  for the years listed, the acquisitions and retirements of equipment used in
  CNs rail operations. Acquisitions include equipment financed under capital
  leases, grain and coal cars owned by others but assigned to CN as well as second-hand
  equipment and remanufactures of equipment. Retirements relate solely to owned
  equipment. Although the Companys strategy involves increased utilization
  of its fleet, the Company continues to selectively acquire new cars to meet
  the demands of specific markets.

**Year
        ended December 31****2002**
      **2001(1)**
      **2002*****Acquisitions***Locomotives
      30
      -
      40Freight
        cars
      668
      1,287
      2,508***Retirements***Locomotives
      105
      103
      183Freight
        cars
      2,271
      1,731
      2,008(1) Excluding
        WC.




---

- 14 -

During 2001, CN negotiated
  the purchase of 60 General Electric Dash 9 (4,400 horsepower) locomotives. Thirty
  (30) of these units were delivered in late 2002, with the remaining scheduled
  for delivery in 2004.

The expected useful life
  of new locomotives, depending on horsepower and use, ranges from 20 to 40 years.
  Remanufacture can add up to 25 years for certain uses. The expected useful life
  of new freight cars is 40 years. A used car can be rebuilt but no car can be
  used under applicable regulations if it is older than 50 years.

The average age of equipment
  in CNs operations as at December 31, 2002 was 16.7 years for locomotives
  (based on a Canadian definition which assumes the age is reset upon remanufacture)
  and 24.4 years for freight cars.

The Company believes that
  its rail network and equipment are maintained adequately and that no significant
  rehabilitation is required to accommodate increased volume. The Company maintains
  insurance coverage for its rail and non-rail operations, which the Company believes
  is comparable in terms of amounts and coverage to that maintained by other major
  railroads in North America.

The following table shows
  the capital and maintenance expenditures (excluding depreciation and rent but
  including labour and materials) of CN for the years indicated:

**Year
        ended December 31****2002**
      
      **2001**
      
      **2000****(in million $)**Capital
        expendituresRoadway
      434
      
      541
      
      532Equipment
      251
      
      120
      
      224Total
      685
      
      661
      
      756Maintenance
        expendituresRoadway
      594
      
      571
      
      555Equipment
      539
      
      516
      
      495Total
      1,133
      
      1,087
      
      1,050


3.6 PASSENGER
  RAIL SERVICES

Inter-city passenger trains
  in Canada are operated in the most part by VIA Rail Canada Inc. (VIA),
  a corporation owned by the Government of Canada. Where VIA operates over CN
  infrastructure, CN provides the roadbed and related facilities and services
  for operations of these trains under commercial contracts. In anticipation of
  CNs ceasing to be owned by the Government of Canada in November 1995,
  CN and VIA agreed to review existing agreements. As a result, CN entered into
  new agreements with VIA on an arms-length, commercial and fair basis to
  continue arrangements with regard to facilities and services that were integral
  to VIAs operations. With the acquisition of WC, CN provides by Canadian
  federal contract an intercity passenger service between Sault Ste. Marie and
  Hearst, Ontario, a distance of about 296 miles. CN also provides certain commuter
  train services in Montreal, Quebec and Toronto, Ontario under contract with
  transit authorities. In addition, CN provides access to several seasonal tour
  operators, including a CN passenger tour train operating between Sault Ste.
  Marie, Ontario and the Agawa Canyon, a distance of about 114 miles. Total collectable
  revenues attributable to passenger train services and associated services amounted
  to $120.4 million in 2002. CNs passenger service operations contribute
  to its operating income.

The National Railroad Passenger
  Corporation (AMTRAK), a corporation subsidized by the United States federal
  government operates inter-city passenger trains in the United States. IC and
  GTW provide

---

- 15 -

roadbed and ancillary facilities
  under separate Operating Agreements dated February 1, 1995 and April 16, 1971,
  respectively. Operating expense reimbursements attributable to AMTRAK service
  in 2002 was about US$1.4 million on IC and another US$0.3 million on Grand Trunk
  Western.

3.7 SAFETY

In 2002, CNs train accident
  ratio, using the U.S. Federal Railroad Administration (FRA) reporting
  basis, remained at 2.0 per million train miles, unchanged from its 2001 ratio
  including WC. This was nonetheless an improvement versus the 2001 pro-forma
  performance of 2.2 per million train miles, assuming the acquisition of WC had
  occurred on January 1, 2001. CN continues to be one of the safest railroads
  in North America.

In 2002, CN achieved a major
  improvement in personal injuries. An FRA ratio of 3.0 per 200,000 person hours
  was achieved in 2002, which represents a 32% reduction versus the 2001 ratio
  of 4.4.

The Company continues to
  reinforce its ongoing commitment to safety by implementing and updating a systematic
  safety action plan with the active involvement of all its Divisions. The safety
  plan encompasses people, process and equipment while leveraging on the active
  participation of supervisors and health and safety committees to focus on prevention.
  A significant component of CNs safety plan involves the implementation
  of Best Safety Practices, which represent the most effective means of minimizing
  risk developed by all of CNs Divisions and through industry benchmarking.

Substantial investments are
  being made in training as well as equipment wayside detection where the distance
  between hot box detectors has been reduced from 25 to 15 miles on key corridors.
  The acquisition of wheel profile detectors and the enhancement of our monitoring
  process for wayside and wheel impact detectors is expected to further minimize
  the risk of rail accidents.

CN is a leader in Responsible
  Care®, being the first transportation company in Canada to achieve
  certification. The Responsible Care® initiative will continue
  to be actively progressed systemwide with the objective of continuously improving
  in the areas of health and safety, environment and community outreach. The recently
  refurbished CN 911 tank car will continue to be used along the entire CN network
  for training employees and others involved in emergency response.

The successful implementation
  of the safety integration plan for the IC merger was concluded in 2001 with
  the FRA praising it as a model document for the industry. Following CNs acquisition
  of WC, a similar safety integration plan was prepared for WC, which is currently
  being successfully implemented.

3.8
  REGULATION

The Companys rail operations
  in Canada are subject to regulation as to (1) rate setting and network rationalization
  by the Canadian Transportation Agency(the Agency) under
  the Canada Transportation Act (Canada) (the CTA), and (2)
  safety by the federal Minister of Transport under the Railway Safety Act(Canada) and certain other statutes. The Companys U.S. rail operations
  are subject to regulation by the STB (successor to the Interstate Commerce Commission)
  and the FRA.

3.8.1    Canadian
  Regulation

The CTA gives the railroads
  in Canada the freedom to negotiate prices according to market forces, subject
  to certain provisions aimed at protecting shippers. These shipper protections
  include, inter alia, interswitching, final offer arbitration and competitive
  line rates. Pursuant to interswitching provisions, all shippers within a 30
  km radius (approximately 19 miles) of an interchange between two federally regulated
  railroads have access to both at a prescribed interswitching rate. Final offer
  arbitration is used in cases of rate disputes between a shipper and railroad
  and involves the selection by an arbitrator of either the shippers or
  the carriers rate and service offer. Competitive line rate provisions
  can be invoked

---

- 16 -

to require an originating
  railroad to issue to a shipper with sole rail access, a rate covering the movement
  to the nearest junction with another railroad according to predetermined formulae.

The CTA permits confidential
  contracts. Furthermore, railroads are subject to common carrier obligations
  for their services and, in case of breach, shippers may seek redress from the
  Agency. However, these shipper protections, except for final offer arbitration,
  are subject to the requirement for the applicant to demonstrate that the shipper
  would suffer substantial commercial harm if the Agency did not intervene.

The CTA encourages the sale
  of lines to short-line operators and facilitates abandonment. The railroads
  are required to publish a three-year plan for sales and abandonments. For abandonment,
  the line must be advertised as being for sale to the public and, if no interest
  is shown, offered specifically for sale to applicable federal, provincial and
  municipal governments. The entire process is intended to take at most nine months.
  Legislation currently in force in the provinces of British Columbia and Saskatchewan
  requires a corporations successor by merger or purchase of assets to assume
  the predecessors labour arrangements. These successor rights
  therefore limit the Companys ability to dispose of routes to intraprovincial
  short-line operators in such provinces. The Company has considered provincial
  successor rights legislation in identifying routes for rationalization.

The Companys operations
  are also subject to safety and environmental provisions relating to track standards,
  equipment standards, transportation of hazardous materials, environmental assessments
  and certain labour regulations, which are in many respects similar when comparing
  Canadian and U.S. regulations.

3.8.2    CTA
  Review

Periodically, there is a
  comprehensive review of the effectiveness of theCTA and other statutes
  related to the economic regulation of transportation. A five-member CTA Review
  Panel was established in June 2000 to conduct the review through research and
  consultations with purchasers and suppliers of transportation services and other
  parties. The CTA Review Panel issued an interim report in December 2000 and
  a final report, including recommendations, to the federal Minister of Transport
  at the end of June, 2001. This review revisits many important issues for CN,
  including forced access, competitive access rates, and fiscal equity across
  modes of transportation. Subsequently, the Minister of Transport launched a
  broad consultation process, commonly referred to as the Blueprint Process
  which, combined with the review considerations, resulted in the Minister of
  Transport releasing on February 25, 2003, a policy document entitled Straight
  Ahead  A Vision for Transportation in Canada, which provides specific
  direction and calls for action in various areas of transportation and tabling
  Bill C-26 in the House of Commons, being an Act to amend the Canada Transportation
  Act and the Railway Safety Act, and to enact the VIA Rail Canada
  Act. The proposed legislative amendments are being considered by a committee
  of the House of Commons and, thereafter, are to be submitted to Parliament for
  enactment. No assurance can be given that any future legislative action by the
  federal government will not materially adversely affect the Companys position
  or results of operations.

3.8.3    U.S.
  Regulation

The STB has jurisdiction
  over, amongst other things, service levels, carrier practices, car compensation,
  and limited jurisdiction over carrier rates. It also has jurisdiction over the
  situations and terms under which one railroad may gain access to another railroads
  traffic or facilities, the construction, extension, or abandonment of rail lines,
  railroad consolidations, and labour protection provisions in connection with
  the foregoing. The STBs jurisdiction over rail transportation, including intrastate
  rail transportation, is exclusive, pre-empting other remedies under federal
  and state law.

The FRA has jurisdiction
  over railroad safety and equipment standards, and most rail safety regulation
  is handled at the federal level. In contrast to the exclusive role of the STB
  over railroad economic regulation, however, State and local regulatory agencies
  have jurisdiction over certain local safety and operating matters and these
  agencies are becoming more aggressive in their exercise of jurisdiction. State
  legislatures have also recently enacted new laws in this regard that are intended
  to regulate railroads more extensively.

---

- 17 -

Government regulation of
  the railroad industry is a significant determinant of the competitiveness and
  profitability of railroads. Deregulation of certain rates and services, plus
  the ability to enter into confidential contracts, pursuant to the Staggers
  Rail Act of 1980(the Staggers Act), has substantially increased
  the flexibility of railroads to respond to market forces and has resulted in
  highly competitive rates. Various interests have sought and continue to seek
  reimposition of government controls on the railroad industry in areas deregulated
  in whole or in part by the Staggers Act. Additional regulation, changes in regulation
  and re-regulation of the industry through legislative, administrative, judicial
  or other action could materially affect the Company.

Following an extended review,
  in June 2001 the STB issued new regulations governing mergers between Class
  1 Railroads. CN had recommended higher public interest standards for mergers
  and the new regulations effectively raised the bar for the quality of customer
  service in all future major railroad mergers. The Board also agreed with CN
  that U.S.-based railroads would be treated the same as foreign-headquartered
  railroads under its merger rules.

3.8.4    
  Canada U.S. Customs and U.S. Homeland Security

In October 2002, CN became
  the first North American railroad to gain membership in the U.S. Customs Services
  Customs-Trade Partnership Against Terrorism (C-TPAT). C-TPAT is a joint government-business
  initiative designed to build cooperative relationships that strengthen overall
  supply chain and border security regarding goods exported to the U.S. CN is
  also designated as a low-risk carrier under the Customs Self-Assessment ("CSA")
  program, a new Canada Customs and Revenue Agency (CCRA) program designed to
  expedite the cross-border movement of goods of CSA-accredited importing companies
  for goods imported into Canada. In addition, the Company is subject to new statutory
  and regulatory directives in the United States addressing homeland security
  concerns. These include new border security arrangements, pursuant to an agreement
  the Company and Canadian Pacific Railway entered into with the U.S. Bureau of
  Customs and Border Protection (CBP) and the Canada Customs and Revenue Agency
  (CCRA), requiring advance notice of manifest information of U.S.-bound traffic
  (eventually applicable to shipments of all modes) and cargo screening (including
  gamma ray and radiation screening), as well as U.S. government imposed restrictions
  on the transportation into the United States of certain commodities.

3.9
  ENVIRONMENTAL MATTERS

The Companys operations
  in Canada and the United States are subject to extensive federal, provincial,
  state and municipal regulation under environmental laws and regulations concerning,
  amongst other things, emissions to the air, discharges to waters, the generation,
  handling, storage, transportation, treatment and disposal of waste, hazardous
  substances and other materials, decommissioning of underground and aboveground
  storage tanks, and soil and groundwater contamination. A risk of environmental
  liability is inherent in the railroad and related transportation operations,
  real estate ownership, operation or control and other commercial activities
  of the Company with respect to both current and past operations.

Federal, provincial, state
  and local authorities continue to be increasingly active in the area of environmental
  legislation and its enforcement. The new regulations and active intervention
  by those different levels of government can be expected to affect the Company
  in the future and may increase the Companys future environmental costs.
  In addition, the Companys ongoing efforts to identify and address potential
  environmental concerns that may be associated with many of its properties may
  result in the identification of additional environmental costs and liabilities.
  As a result of all of the foregoing, the Company has in the past and will in
  the future continue to make substantial expenditures relating to environmental
  compliance issues and to the assessment and remediation of environmental conditions
  on its rail and general real estate properties and properties previously owned
  or operated by the Company. The insurance policies maintained by the Company
  have environmental exclusions; however, the Company does have coverage for discharges
  of an accidental and sudden nature.

---

- 18 -

3.9.1    Canada

In addition to the general
  areas of potential liability discussed above, there are specific environmental
  concerns relating to Canada. In Canada, environmental legislation can be adopted
  by both federal and provincial governments in their respective spheres of competence.
  The Company has operated the larger of Canadas two principal railways
  since the incorporation of the Company in 1922. Because of the nature of the
  operations of the Company, the date from which such operations began and the
  constitutional distribution of powers between the federal and provincial governments,
  some parts of federal, provincial and municipal environmental legislation may
  not be applicable in all circumstances to the railway operations of the Company
  or, in some instances, for various reasons, to its real estate.

In Canada, the matter of
  environmental permits for the Company is complex because of an overlap between
  federal and provincial jurisdictions. When projects require approval by federal
  regulatory authorities, environmental impact assessments are undertaken in accordance
  with federal requirements. Provincial and municipal environmental legislation
  may be applicable to railway activities if such legislation does not aim to
  regulate the management or operations of railways. Therefore, the Company does
  not apply systematically for provincial, municipal or local environmental permits
  for its railway operations in Canada except (i) where obtaining and complying
  with such permits would not interfere with the operations or management of its
  railway activities, (ii) where permitting issues were primarily of a provincial,
  municipal or local nature, (iii) where the Company or the governmental authority
  thought it was necessary to obtain such permits to continue minor aspects of
  its railway operations or maintenance, or (iv) where the absence of a permit
  may affect a third party (such as a customer or a supplier). Because of the
  multiple jurisdictions involved and the extensive provincial legislative authority
  to regulate environmental matters, there can be no assurance that additional
  provincial, municipal or local environmental permits will not be required in
  the future. The Company may incur additional expenses or changes in its operations
  if such additional permits were to be required in the future.

3.9.2    United
  States

In addition to the general
  areas of potential liability discussed above, the Company may incur other environmental
  liabilities with respect to its U.S. operations. The U.S. Comprehensive Environmental
  Response, Compensation and Liability Act (CERCLA or Superfund)
  and similar state laws (known as state Superfund laws) impose liability for
  the cost of remedial or removal actions, natural resources damages and related
  costs at certain sites identified as posing a threat to the environment or public
  health. Liability may be imposed, without regard to fault or the legality of
  the activity, on certain classes of persons, including the current and certain
  prior owners or operators of a site and persons that arranged for the disposal
  or treatment of hazardous substances. Liability is imposed on a joint and several
  basis, which means one Company could be held responsible for all costs even
  if other parties contributed to the contamination. In addition, other potentially
  responsible parties, adjacent landowners or other third parties, may initiate
  cost recovery actions or toxic tort litigation against sites subject to CERCLA
  or similar state laws.

The Company owns or previously
  owned or has been named as a potentially responsible party (PRP)
  by virtue of its activities with respect to certain properties that are the
  subject of claims by the federal government or by a state under CERCLA or a
  state Superfund statute.

3.9.3    Future
  Costs

The Companys total
  costs for environmental matters cannot be predicted with certainty due, amongst
  other things, to the various issues described above, as well as to incomplete
  technical information concerning environmental conditions at many sites and
  changing regulatory requirements. The Company regularly reviews potential environmental
  costs and liabilities which might be incurred by the Company in either Canada
  or the United States as a result of the Companys ongoing review of environmental
  matters or due to the various environmental regulations and issues described
  above. The Company has not materially changed its methodology for identifying
  and estimating environmental liabilities likely to be incurred in the next five
  years.

---

- 19 -

The Company estimates that
  capital expenditures for compliance and clean-up costs relating to environmental
  matters is expected to be similar to that of previous years. The Company also
  anticipates that it will incur up to approximately $106 million in additional
  remediation costs relating to environmental matters within the next five years
  and has made provisions relating to these remediation costs. In addition, the
  Company expects to incur other expenses, which may be considered environmental
  costs. Such other costs, however, are inextricably intertwined in the Companys
  operational budget and are not accounted for separately.

The Company has accrued for
  environmental matters with respect to compliance costs and operating and non-operating
  properties, as well as for certain properties previously sold, based on the
  costs estimated to be incurred when such costs are likely to occur and when
  amounts (or at least a minimum amount) can be estimated based on available information.
  To date, the Companys ongoing efforts to identify and address potential
  environmental concerns that may be associated with its properties or other events
  may lead to future environmental investigations which may result in the identification
  of additional environmental costs and liabilities. Due to the lack of technical
  information available with respect to specific sites, the absence of any governmental
  or third party orders or claims with respect to particular sites, the potential
  for development of new laws and remediation technologies and uncertainty regarding
  the timing of the work and the ability to recover costs from any third parties,
  the probability of particular additional liabilities occurring, the likelihood
  of any such additional costs being incurred or whether such costs would be material
  to the Company cannot be determined at this time and therefore no provisions
  have been made with respect to environmental matters which might arise during
  any period beyond the next five years. Therefore, there can be no assurance
  that material liabilities or costs related to environmental matters will not
  be incurred in the future or that the Companys liquidity will not be adversely
  impacted by such environmental liabilities or costs. However, the Company believes,
  based on current information, that environmental matters will not have a material
  adverse effect on the Companys financial condition or competitive position.

3.10 LEGAL

3.10.1    
  General

In the normal course of its
  operations, the Company becomes involved in various legal actions, including
  claims relating to personal injuries, occupational disease and damage to property.

In Canada, employee injuries
  are governed by the workers compensation legislation in each province
  whereby employees may be awarded either a lump sum or future stream of payments
  depending on the nature and severity of the injury. Accordingly, the Company
  accounts for costs related to employee work-related injuries based on actuarially
  developed estimates of the ultimate cost associated with such injuries, including
  compensation, health care and administration costs. For all other Canadian legal
  actions, the Company maintains, and regularly updates, on a case-by-case basis,
  provisions for such items when the expected loss is both probable and can be
  reasonably estimated based on currently available information.

Assumptions used in estimating
  the ultimate costs for Canadian employee injury claims consider, amongst others,
  the discount rate, the rate of inflation, wage increases and health care costs.
  The Company periodically reviews its assumptions to reflect currently available
  information. Over the past three years, the Company has changed certain of these
  assumptions, which have not had a material effect on its results of operations.
  For all other legal claims in Canada, estimates are based on case history, trends
  and judgment.

In the United States, employee
  work-related injuries, including occupational disease claims, are compensated
  according to the provisions of the Federal Employers Liability Act (FELA)
  and represent a major expense for the railroad industry. The FELA system, which
  requires either the finding of fault through the U.S. jury system or individual
  settlements, has contributed to a significant increase in the Companys
  personal injury expense in recent years. In view of the Companys growing
  presence in the

---

- 20 -

United States and the increase
  in the number of occupational disease claims over the past few years, an actuarial
  study was conducted in 2002, and in the fourth quarter of 2002, the Company
  changed its methodology for estimating its liability for U.S. personal injury
  and other claims, including occupational disease claims and claims for property
  damage, from a case-by-case approach to an actuarial-based approach. Consequently,
  the Company recorded a charge of $281 million ($173 million after tax) to increase
  its provision for these claims in the fourth quarter of 2002.

Under the actuarial-based
  approach, the Company accrues the cost for expected personal injuries and property
  damage claims and existing occupational disease claims, based on actuarial estimates
  of their ultimate cost. The Company is unable to estimate the total cost for
  unasserted occupational disease claims. However, a liability for unasserted
  occupational disease claims is accrued to the extent they are probable and can
  be reasonably estimated.

Under the case-by-case approach,
  the Company was accruing the cost for claims as incidents were reported based
  on currently available information. In addition, the Company did not record
  a liability for unasserted claims, as such amounts could not be reasonably estimated
  under the case-by-case approach.

For the U.S. personal injury
  and other claims liability, historical claim data is used to formulate assumptions
  relating to the expected number of claims and average cost per claim (severity)
  for each year. Changes in any one of these assumptions could materially affect
  Casualty and other expense as reported in the Companys results of operations.

The Companys expenses
  for personal injury and other claims, net of recoveries, and including the above-mentioned
  charge, were $393 million in 2002 ($78 million in 2001 and $60 million in 2000)
  and payments for such items were $156 million in 2002 ($149 million in 2001
  and $111 million in 2000). As of December 31, 2002, the Company had aggregate
  reserves for personal injury and other claims of $664 million ($430 million
  at December 31, 2001).

3.10.2    Aboriginal
  Claims

CN and its predecessor companies
  have acquired lands throughout Canada from the Crown, including certain lands
  contained in aboriginal reserves. A portion of the Companys network, primarily
  in British Columbia, is currently operated on these lands.

The Company believes that
  it possesses unrestricted and absolute title to lands acquired out of aboriginal
  reserves, but, in recent years, some aboriginal bands have claimed a continuing
  legal interest in such lands and they allege this interest prohibits the Company
  from disposing of the lands when they are no longer needed for railway purposes,
  except by allowing them to revert to the Crown for the benefit of aboriginals.
  This issue is one which will ultimately be decided by the courts, but regardless
  of the outcome, there is no perceived material adverse effect as the right of
  the Company to continue to occupy and operate over such lands is not being called
  into question.

As the issues surrounding
  aboriginal claims are complex and involve not only private interests but fiduciary
  and other obligations of the Government of Canada, CN has agreed with the Government
  not to sell or otherwise dispose of land which is not essential to its rail
  operations and which is located in or adjacent to an aboriginal reserve, unless
  each of CN and the Government are satisfied that there is no legitimate aboriginal
  claim with respect to such land. In addition, CN has agreed to convey to the
  Government, for no consideration, any land not integral to its rail operations
  which may be necessary to settle legitimate aboriginal claims with respect to
  such land, or lands which were formerly reserve lands and which have become
  non-rail assets. The Government of Canada, for its part, has agreed that it
  will provide the necessary compensation for settlement of legitimate aboriginal
  claims which would otherwise result in CN having to relinquish land essential
  to its rail network, unless such claims arise out of or are substantially based
  upon wilful, known, negligent or fraudulent acts or omissions of CN which adversely
  affected the rights or interests of aboriginal people.

---

- 21 -

ITEM 4 SELECTED
  CONSOLIDATED FINANCIAL AND OPERATING DATA

4.1 SELECTED THREE-YEAR ANNUAL CONSOLIDATED FINANCIAL INFORMATION

The selected financial data
  presented below for each of the years in the three-year period ended and as of
  December 31, 2002 under both Canadian generally accepted accounting principles
  (Canadian GAAP) and United States generally accepted accounting
  principles (U.S. GAAP) were derived from the consolidated financial
  statements incorporated by reference herein, which have been audited by KPMG
  LLP, independent auditors, for the years 2002, 2001 and 2000. Unless otherwise
  indicated, the financial data is presented on the basis of Canadian GAAP.

|                                                    | **Year
      ended December 31**               
|--------------------------------------------------- | -----------------------------------------------
|                                                    |                                                
|                                                    | **2002**                                       
|                                                    |                                                
|                                                    | (in
      million$, except
      per sharedata)
|**Canadian
      GAAP**(1)                          |                                                
|                                                    |                                                
|**Income
      Statement Data:**                    |                                                
|Revenues                                            | **6,110**                                      
|Operating
      expenses(3)                         | **4,994**                                      
|Operating
      income                              | **1,116**                                      
|Interest
      expense                              | **353**                                        
|Other
      income                                  | **76**                                         
|                                                    |                                                
|Net
      income                                    | **571**                                        
|Basic
      earnings per share                      | **$2.87**                                      
|Diluted
      earnings per share                    | **$2.82**                                      
|Dividend
      declared per share                   | **$0.86**                                      
|                                                    |                                                
|**Balance
      Sheet Data (at end of period)**(4): |                                                
|Cash
      and cash equivalents                     | **25**                                         
|Total
      assets                                  | **18,924**                                     
|Long-term
      debt (excluding current portion)    | **5,003**                                      
|Shareholders
      equity                          | **6,627**                                      
|                                                    |                                                
|**U.S.
      GAAP**                                 |                                                
|                                                    |                                                
|**Income
      Statement Data:**                    |                                                
|Revenues                                            | **6,110**                                      
|Operating
      expenses(3)                         | **4,641**                                      
|Operating
      income                              | **1,469**                                      
|Interest
      expense                              | **361**                                        
|Other
      income                                  | **76**                                         
|                                                    |                                                
|Net
      Income                                    | **800**                                        
|Basic
      earnings per share                      | **$4.07**                                      
|Diluted
      earnings per share                    | **$3.97**                                      
|Dividend
      declared per share                   | **$0.86**                                      
|                                                    |                                                
|**Balance
      Sheet Data (at end of period):**    |                                                
|Cash
      and cash equivalents                     | **25**                                         
|Total
      assets                                  | **21,738**                                     
|Long-term
      debt (excluding current portion and | **5,003**                                      
|including
      convertible preferred securities)   |                                                
|Shareholders
      equity                          | **8,369**                                      

---

|(1) | The Companys
      consolidated financial statements, from which the data is derived, are prepared
      on the basis of Canadian GAAP, which are different in some respects from
      U.S. GAAP, principally in the treatment of track replacement costs,
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 22 -

|    | expenditures
      relating to improvements of bridges and other structures and freight cars,
      derivative instruments, stock-based compensation and convertible preferred
      securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The 2001
      figures include WC from October 9, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(3) | Included
      in operating expenses was a fourth quarter 2002 charge of $281 million to
      increase the Companys U.S. personal injury and other claims liability
      and workforce reduction charges of $120 million and $98 million in 2002
      and 2001, respectively.
      Also included in operating expenses is depreciation and amortization expense.
      The Company follows the group method of depreciation and, as such conducts
      comprehensive depreciation studies generally every three years to assess
      the reasonableness of the depreciable lives of properties based upon current
      information, including actual results of prior years. In 2001, such a study
      was conducted for the Companys Canadian properties.
      Under U.S. GAAP, the study revealed that estimated depreciable lives for
      certain asset types had increased, and therefore, those asset lives have
      been extended prospectively, resulting in a reduction to depreciation and
      amortization expense of $44 million in 2001.
      Under Canadian GAAP, the study did not have a significant effect on depreciation
      expense as the benefit of increased depreciation lives was offset by deficiencies
      in certain accumulated depreciation balances.
|(4) | The 2000
      figures were restated to conform to the amended recommendations of the Canadian
      Institute of Chartered Accountants Section 1650 Foreign Currency
      Translation, which required retroactive restatement of all prior period
      financial data presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                                                    |        | Year
      ended December 31 |       
|------------------------------------------------------------------- | ------ | ---------------------------- | ------
|                                                                    |        |                              |       
|                                                                    |        | 2002                         |       
|                                                                    |        |                              |       
|Operating
      Data:                                               |        |                              |       
|                                                                    |        |                              |       
|Operating
      ratio(2) (3)                                        |        |                              |       
|Canadian
      GAAP (in %)                                          |        | 81.7                         |       
|U.S.
      GAAP (in %)                                              |        | 76.0                         |       
|Total
      carloads (thousands)                                    |        | 4,164                        |       
|Revenue
      ton miles of freight traffic (millions)(4)            |        | 159,876                      |       
|Freight
      revenue per revenue ton mile (cents)(5)               |        | 3.69                         |       
|Active
      railway employees (average during period)(6)           | 23,190 |                              | 22,668
|Revenue
      ton miles per average number of employees (thousands) | 6,894  |                              | 6,754 
|Carloads
      per average number of employees                      |        | 179.6                        |       
|Freight
      revenue per average number of employees (thousand $)  | 254    |                              | 241   
|Fuel
      consumption (liters in millions)                         |        | 1,420                        |       
|Fuel
      consumption (U.S. gallons in millions)                   |        | 375                          |       
|Average
      fuel price                                            |        |                              |       
|(Cdn
      $ per liter)                                             |        | 0.32                         |       
|(Cdn
      $ per U.S. gallon)                                       |        | 1.20                         |       
|Average
      length of haul (miles)                                |        | 611                          |       
|Route-miles
      at period end (includes Canada and the U.S.)      | 17,821 |                              | 17,986
|Track
      miles at period end                                     |        | 29,343                       |       

---

|(1) | Includes
      WC from October 9, 2001.                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Operating
      ratio represents total rail operating expenses as a percentage of total
      rail revenues. The operating ratio is a measure of operating performance
      commonly disclosed in the railroad industry that provides a useful basis
      for year-over-year comparison.
|(3) | Includes
      a fourth quarter 2002 charge of $281 million to increase the Companys U.S.
      personal injury and other claims liability and workforce reduction charges
      of $120 million and $98 million in 2002 and 2001, respectively.                                         
|(4) | Revenue
      ton miles represents the product of the weight of freight carried for hire
      and the miles such freight traveled (including across another railroads
      trackage pursuant to a haulage agreement).                                                                  
|(5) | Freight
      revenue per revenue ton mile represents freight revenues divided by revenue
      ton miles.                                                                                                                                                                                
|(6) | Excludes
      non-productive rail employees (employees on employment security status,
      furlough board, non-essential brakemen and employees on leave of absence)
      and those employed in non-rail units of the Company. Includes temporary
      employees.                     

---

- 23 -

4.2 SELECTED
  TWO-YEAR QUARTERLY CONSOLIDATED FINANCIAL INFORMATION

|                                      |   | **2002**                                                 
|------------------------------------- | - | ---------------------------------------------------------
|                                      |   |                                                          
|                                      |   | First
      Quarter                                      
|                                      |   |                                                          
|                                      |   | (Unaudited,in million$, except pershare data)            
|**Canadian
      GAAP**               |   |                                                          
|Revenues                              |   | 1,509                                                    
|Operating
      income                |   | 372                                                      
|Net
      income                      |   | 211                                                      
|                                      |   |                                                          
|Basic
      earnings per share (2)    | $ | 1.08                                                     
|Diluted
      earnings per share (2)  | $ | 1.04                                                     
|Dividend
      declared per share (2) | $ | 0.215                                                    
|                                      |   |                                                          
|                                      |   | **2001**                                                 
|                                      |   |                                                          
|                                      |   | First
      Quarter                                      
|                                      |   |                                                          
|                                      |   | (Unaudited,in million$,
      except pershare
      data)
|                                      |   |                                                          
|Revenues                              |   | 1,398                                                    
|Operating
      income                |   | 362                                                      
|Net
      income                      |   | 271                                                      
|                                      |   |                                                          
|Basic
      earnings per share (2)    | $ | 1.40                                                     
|Diluted
      earnings per share (2)  | $ | 1.36                                                     
|Dividend
      declared per share (2) | $ | 0.195                                                    

---

|(1) | In
      the fourth quarter of 2002, the Company recorded a charge of $281 million
      ($173 million after tax) to increase its liability for U.S. personal injury
      and other claims and a charge for workforce reductions of $120 million ($79
      million after tax).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | All
      per share data has been calculated using the weighted average number of
      common shares outstanding during the period.                                                                                                                                            

4.3 DIVIDENDS

The Company has declared,
  and intends to continue declaring, dividends in line with its overall financial
  performance and cash flow generation. The Board of Directors makes decisions
  on dividend payout on a quarterly basis. Consistent with this practice, the
  quarterly rate of $0.175 per share, starting with the first quarter of 2000,
  was increased to $0.195 per share, starting with the first quarter of 2001;
  to $0.215 per share, starting with the first quarter of 2002; and to $0.25 per
  share, starting with the first quarter of 2003. There can be no assurance as
  to the amount or timing of such dividends in the future.

ITEM 5 MANAGEMENTS
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
  OF OPERATIONS

A discussion and analysis
  by management of the financial condition and results of operations for the financial
  year ended December 31, 2002 (U.S. and Canadian GAAP) is presented under the
  item Managements Discussion and Analysis on pages 31 to 48
  (U.S. GAAP) and on pages 74 to 92 (Canadian GAAP) of the Companys 2002
  Annual Report, which item is incorporated herein by reference.

ITEM 6 MARKET
  FOR SECURITIES

CNs common shares are
  listed on both The Toronto Stock Exchange and the New York Stock Exchange under
  the stock symbols CNR and CNI, respectively.

---

- 24 -

ITEM 7 DIRECTORS
  AND EXECUTIVE OFFICERS

7.1 DIRECTORS

The information with respect
  to directors, which appears on pages 5 to 8 of the Companys Management
  Proxy Circular (the Circular) dated March 4, 2003, under the heading
  Election of Directors, is incorporated herein by reference.

7.2EXECUTIVE OFFICERS

|As
      of the date hereof, the following are the senior executive officers of the
      Company:
|--------------------------------------------------------------------------------------------------
|                                                                                                  
|Name                                                                                              
|                                                                                                  
|E.
      Hunter Harrison                                                                          
|                                                                                                  
|                                                                                                  
|Tullio
      Cedraschi                                                                            
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Les
      P. Dakens                                                                               
|                                                                                                  
|                                                                                                  
|Sean
      Finn                                                                                   
|                                                                                                  
|                                                                                                  
|                                                                                                  
|James
      M. Foote                                                                              
|                                                                                                  
|                                                                                                  
|Keith
      L. Heller                                                                             
|                                                                                                  
|                                                                                                  
|Jack
      T. McBain                                                                              
|                                                                                                  
|                                                                                                  
|Claude
      Mongeau                                                                              
|                                                                                                  

The senior executive officers
  are appointed by the Board of Directors and hold office until their successors
  are appointed, subject to resignation, retirement or removal by the Board of
  Directors.

For the past five years each
  of the senior executive officers of the Company has held the principal occupation
  indicated above or other positions within the Company or its affiliates except
  as follows: Les P. Dakens was appointed Senior Vice-President, People in January
  2003 and, prior to that, he was Senior Vice-President, Corporate Services of
  CN since June 2001; prior thereto, he was Vice-President, Human Resources and
  Administration, Heinz North America; E. Hunter Harrison was appointed President
  and Chief Executive Officer of the Company effective January 1, 2003, prior
  to which he was Executive Vice-President and Chief Operating Officer of the
  Company since March, 1998. He was also President and Chief Executive Officer
  and a director of Illinois Central Corporation prior to March 1998.

As of February 28, 2003,
  the directors and executive officers, including the above senior executive officers,
  of the Company, as a group, beneficially owned, directly or indirectly, or exercised
  control or direction over, or held options to exercise an

---

- 25 -

aggregate ofapproximately
  5.4 million Common Shares, representing approximately 2.8% of the outstanding
  Common Shares.

ITEM 8 ADDITIONAL
  INFORMATION

8.1 EXECUTIVE
  COMPENSATION; FINANCIAL INFORMATION

Additional information including
  directors and officers remuneration and indebtedness, principal
  holders of the Companys securities, options to purchase securities and
  interests of insiders in material transactions, if applicable, is contained
  in the Circular. Additional financial information is provided in the Companys
  Consolidated Financial Statements included in the 2002 Annual Report.

8.2
  UNDERTAKING TO PROVIDE DOCUMENTS

The Company will, upon request
  to the Corporate Secretary of the Company, 935 de La Gauchetière Street
  West, 16th Floor, Montreal, Quebec H3B 2M9, provide to any person
  or company, the documents specified below:

|(a) | when
      the Company is in the course of a distribution of its securities under a
      short form prospectus, or has filed a preliminary short form prospectus
      in respect of a proposed distribution of its securities;                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | (i)                                                                                                                                                                                                                                                                                                                                                             
|    | (ii)                                                                                                                                                                                                                                                                                                                                                            
|    | (iii)                                                                                                                                                                                                                                                                                                                                                           
|    | (iv)                                                                                                                                                                                                                                                                                                                                                            
|(b) | at any other time, the Company shall provide to any person or company one
      copy of any of the documents referred to in subparagraphs (a)(i),(ii) and
      (iii) above, provided that the Company may require the payment of a reasonable
      charge if the request is made by a person or company who is not a holder
      of the Companys securities.

8.3 AUDITORS
  REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

The Auditors Report
  and Consolidated Financial Statements included on pages 49 to 72 (U.S. GAAP)
  and 93 to 117 (Canadian GAAP) of the Companys 2002 Annual Report are incorporated
  herein by reference.

---

- 26 -

8.4 FACTORS
  FOR FORWARD-LOOKING INFORMATION

The United States Private
  Securities Litigation Reform Act of 1995(the Act) provides
  a safe harbor for forward-looking statements to encourage
  companies to provide prospective information, so long as such information is
  identified as forward-looking and is accompanied by meaningful cautionary statements
  identifying important factors that could cause actual results to differ materially
  from those discussed in the statement. Except for historical information, certain
  statements contained in this annual information form and annual report filed
  on Form 40-F with the U.S. Securities and Exchange Commission may be forward-looking
  statements within the meaning of the Act. In order to take advantage of
  the safe harbor provisions of the Act, the Company identified the
  important factors set forth below that could affect the Companys actual
  results and cause such results to differ materially from those projected, forecasted,
  estimated, budgeted or otherwise expressed by the Company in forward-looking
  statements made by or on behalf of the Company. Reference is made to Exhibit
  A hereto for additional discussion of the foregoing factors.

|(1)  | Significant
      competition may lead to reduced volumes and revenues and narrower profit
      margins.                                                                                                                              
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Significant
      environmental regulatory compliance and clean-up costs and unforeseen environmental
      liabilities and costs may adversely affect the Companys liquidity.                                                        
|(3)  | The outcome
      of outstanding or pending legal actions cannot be predicted with certainty.                                                                                                                                          
|(4)  | The outcome
      of the current labour negotiations of certain of the Companys labour
      agreements is uncertain.                                                                                                                 
|(5)  | New legislative,
      administrative or judicial actions that constrain market forces may have
      a material adverse effect on the Companys competitive position and
      profitability.                                         
|(6)  | A sustained
      increase in fuel prices may have a negative impact on the Companys
      earnings and cash flow.                                                                                                                    
|(7)  | Substantial
      ongoing capital expenditures may require the Company to seek additional
      financing or reduce dividends.                                                                                                         
|(8)  | Changes
      in the exchange rate between the Canadian dollar and other currencies may
      adversely affect the Companys results of operations.                                                                                    
|(9)  | Adverse
      economic conditions in the industries and geographic areas that produce
      and consume the freight the Company transports or the supplies it requires
      to operate may affect the Companys results of operations.
|(10) | International
      conflicts and potential terrorist actions may impact the Companys results
      of operations.                                                                                                                    
|(11) | Severe weather
      conditions, particularly in the winter months, may result in temporary halts
      or slowdown in train operations, which may lead to some revenue loss.                                                          

---

EXHIBIT
  A

CAUTIONARY
  STATEMENTS FOR PURPOSES OF THE
  SAFE HARBOR PROVISIONS OF THE UNITED STATES 
  PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The U.S. Private Securities
  Litigation Reform Act of 1995(the Act) provides a safe
  harbor for forward-looking statements to encourage companies
  to provide prospective information, so long as such information is identified
  as forward-looking and is accompanied by meaningful cautionary statements identifying
  important factors that could cause actual results to differ materially from
  those discussed in the forward-looking statement(s). Canadian National Railway
  Company (the Company) wishes to take advantage of the safe harbor
  provisions of the Act.

Except for historical information,
  the Companys annual information forms and annual reports filed on Form
  40-F with the U.S. Securities and Exchange Commission (including the annual
  information form and annual report on Form 40-F for the year ended December
  31, 2002 to which this exhibit is appended), the Companys current reports
  on Form 6-K, periodic press releases, as well as other public documents and
  statements, may contain forward-looking statements within the meaning of the
  Act.

In addition, the Company
  and its representatives from time to time participate in speeches and calls
  with market analysts, conferences with investors and potential investors in
  the Companys securities, and other meetings and conferences. Some of the
  information presented in such speeches, calls, meetings and conferences may
  be forward-looking within the meaning of the Act.

It is not reasonably possible
  to itemize all of the factors and specific events that could affect the Company
  and the railroad industry as a whole. In some cases, information regarding certain
  important factors that could cause actual results to differ materially from
  those projected, forecasted, estimated, budgeted or otherwise expressed in forward-looking
  statements made by or on behalf of the Company may appear or otherwise be conveyed
  together with such statements. The following additional factors (in addition
  to other possible factors not listed) could affect the Companys actual
  results and cause such results to differ materially from those projected, forecasted,
  estimated, budgeted or otherwise expressed in forward-looking statements made
  by or on behalf of the Company.

Significant Competition.The Company faces significant competition from a variety of carriers, including
  Canadian Pacific Railway Company, which operates the other major rail system
  in Canada, serving most of the same industrial and population centers as CN,
  long distance trucking companies and, in certain markets, major U.S. railroads
  and other Canadian and U.S. railroads. Competition is generally based on the
  quality and reliability of services provided, price and the condition and suitability
  of carriers equipment. Competition is particularly intense in eastern
  Canada, where an extensive highway network and population centers, located relatively
  close to one another, have encouraged significant competition from trucking
  companies. In addition, much of the freight carried by the Company consists
  of commodity goods that are available from other sources in competitive markets.
  Factors affecting the competitive position of suppliers of these commodities,
  including exchange rates, could materially affect the demand for goods supplied
  by the sources served by the Company and, therefore, the Companys volumes,
  revenues and profit margins.

To a greater degree than
  other rail carriers, the Companys subsidiary, Illinois Central Railroad
  Company (ICRR), is vulnerable to barge competition because its main
  routes are parallel to the Mississippi River system. The use of barges for some
  commodities, particularly coal and grain, often represents a lower cost mode
  of transportation. Barge competition and barge rates are affected by navigational
  interruptions from ice, floods and droughts, however, which can cause widely
  fluctuating barge rates. The ability of ICRR to maintain its market share of
  the freight that otherwise could move by barge has traditionally been affected
  by the navigational conditions on the river.

---

A-2

In recent years, there has
  been significant consolidation of rail systems in the United States. The resulting
  larger rail systems are able to offer seamless services in larger market areas
  and effectively compete with the Company in certain markets. There can be no
  assurance that the Company will be able to compete effectively against current
  and future competitors in the railroad industry and that further consolidation
  within the railroad industry would not adversely affect the Companys competitive
  position. No assurance can be given that competitive pressures will not lead
  to reduced revenues, profit margins or both.

Actual and Potential
  Environmental Liabilities. The Companys operations are subject to
  federal, provincial, state, municipal and local regulations under environmental
  laws and regulations concerning, among other things, emissions into the air,
  discharges into waters, the generation, handling, storage, transportation, treatment
  and disposal of waste, hazardous substances and other materials, decommissioning
  of underground and above ground storage tanks and soil and groundwater contamination.
  A risk of environmental liability is inherent in the railroad and related transportation
  operations, real estate ownership, operation or control and other commercial
  activities of the Company with respect to both current and past operations.
  As a result, the Company incurs significant compliance and capital costs, on
  an ongoing basis, associated with environmental regulatory compliance and cleanup
  requirements in its railway operations and relating to its past and present
  ownership, operation or control of real property.

While the Company believes
  that it has identified the costs likely to be incurred in the next several years,
  based on known information, for environmental matters, its ongoing efforts to
  identify potential environmental concerns that may be associated with its properties
  may lead to future environmental investigations, which may result in the identification
  of additional environmental costs and liabilities.

In the operation of a railroad,
  it is possible that derailments, explosions or other accidents may occur that
  could cause harm to human health or to the environment. As a result, the Company
  may incur costs in the future, which may be material, to address any such harm,
  including costs relating to the performance of the clean-up, natural resource
  damages and compensatory or punitive damages relating to harm to individuals
  or property.

The ultimate cost of known
  contaminated sites cannot be definitely established, and the estimated environmental
  liability for any given site may vary depending on the nature and extent of
  the contamination, the available clean-up technique, the Companys share
  of the costs and evolving regulatory standards governing environmental liability.
  Also, additional contaminated sites yet unknown may be discovered or future
  operations may result in accidental releases. For these reasons, there can be
  no assurance that material liabilities or costs related to environmental matters
  will not be incurred in the future, or will not have a material adverse effect
  on the Companys financial position or results of operations in a particular
  quarter or fiscal year, or that the Companys liquidity will not be adversely
  impacted by such environmental liabilities or costs.

Legal Actions.In
  the normal course of its operations, the Company becomes involved in various
  legal actions, including claims relating to personal injuries, occupational
  disease, and damage to property. The Company maintains, and regularly updates
  provisions for such items, which it considers to be adequate for all of its
  outstanding or pending claims.

In Canada, employee injuries
  are governed by workers compensation legislation in each province whereby employees
  may be awarded either a lump sum or future stream of payments depending on nature
  and severity of the injury. The Company accounts for costs related to employee
  work-related injuries based on actuarially developed estimates of the ultimate
  cost associated with such injuries. Assumptions used in making such estimates
  are periodically reviewed and revised by the Company. For all other Canadian
  legal actions, the Company maintains, and regularly updates, on a case-by-case
  basis, provisions for such items when the expected loss is both probable and
  can be reasonably estimated based on currently available information.

In the United States, employee
  work-related injuries, including occupational disease claims, are compensated
  according to the provisions of the Federal Employers Liability Act ("FELA")
  and represents

---

A-3

a major expense for the railroad
  industry. In view of the Companys growing presence in the United States and
  the increase in the number of occupational disease claims over the past few
  years, an actuarial study was conducted in 2002, and in the fourth quarter of
  2002 the Company changed its methodology for estimating its liability for U.S.
  personal injury and other claims, including occupational disease claims, from
  a case-by-case approach to an actuarial-based approach. Consequently, the Company
  recorded a charge of $281 million ($173 million after tax) to increase its provision
  for these claims.

Under the actuarial-based
  approach, the Company accrues the cost for expected personal injury and property
  damage claims and existing occupational disease claims, based on actuarial estimates
  of their ultimate cost. The Company is unable to estimate the total cost for
  unasserted occupational disease claims. However, a liability for unasserted
  occupational disease claims is accrued to the extent they are probable and can
  be reasonably estimated.

Although the Company considers
  such provisions to be adequate for these matters, the final outcome with respect
  to actions outstanding or pending at March 31, 2003, or future claims, cannot
  be predicted with certainty, and therefore there can be no assurance that their
  resolution will not have a material adverse effect on the Companys financial
  position or results of operations in a particular quarter or fiscal year.

Potential Adverse Consequences
  of Labour Negotiations.Labour agreements covering a vast majority of Canadian
  unionized employees will expire on December 31, 2003. The small remainder of
  employees are governed by collective agreements (ACR, NQISL) that expire in
  2004 or later. Either the trade union(s) or the Company may, effective September
  1, 2003, require the other party to the collective agreement to formally commence
  collective bargaining for the purpose of renewing or revising their collective
  agreement(s).

Where formal notice to bargain
  has been given, the union and the Company shall, without delay, meet and commence
  to bargain collectively in good faith and make every reasonable effort to enter
  into collective agreements. Under the terms of the Canada Labour Code, (the
  governing legislation) no legal strikes or lockouts are possible before January
  of 2004.

CN is optimistic that it
  will be able to have all its collective agreements renewed and ratified without
  any major disruptions. However, there can be no assurance that there will not
  be any strikes or lockouts or that the resolution of these collective bargaining
  negotiations will not have a material adverse effect on the Companys financial
  position or results of operations.

The U.S. properties of CN
  include the Grand Trunk Western, the Duluth, Winnipeg and Pacific (DWP),
  the Illinois Central, Chicago, Central and Pacific (CCP)
  and the recently acquired WC. Unlike other U.S. Class 1 railroads who bargain
  on a collective national basis, CN prefers to conduct local negotiations as
  it better addresses both employee and the Companys issues.

There are risks associated
  with negotiating locally. Presidents and Congress have demonstrated that they
  will step in to avoid national strikes, while a local dispute may not generate
  federal intervention. CNs management believes the potential mutual benefits
  of local bargaining outweigh the risks.

As of April 2003, the Company
  had in place agreements with bargaining units representing approximately 93%
  of the unionized workforce of CNs U.S. operations. These agreements have various
  durations ranging from the end of 2003 to 2005.

Negotiations are ongoing
  with the bargaining units with which the Company has not yet achieved new settlements.
  Until new agreements are reached, the terms and conditions of previous agreements
  continue to apply. Although the Company does not anticipate work action related
  to these negotiations while they are ongoing, there can be no assurance that
  their resolution will not have a material adverse effect on the Companys
  financial position or results of operations.

---

A-4

Potential Business Constraints
  Resulting from Regulation. The Companys rail operations in Canada
  are subject to regulation as to (1) rate setting and network rationalization
  by the Canadian Transportation Agency (the "Agency"), under the Canada Transportation
  Act (Canada) (the "CTA"), and (2) safety by the federal Minister of Transport
  under the Railway Safety Act (Canada) and certain other statutes. The Companys
  U.S. rail operations are subject to regulation by the Surface Transportation
  Board (the "STB") (the successor to the Interstate Commerce Commission) and
  the Federal Railroad Administration. In addition, the Company is subject to
  a variety of health, safety, labour, environmental and other regulations, all
  of which can affect its competitive position and profitability.

The CTA Review Panel, which
  was appointed by the federal government to carry out a comprehensive review
  of the Canadian transportation legislation, issued its report to the Minister
  of Transport at the end of June 2001. It was released to the public on July
  18, 2001 and contained numerous recommendations for legislative changes affecting
  all modes of transportation, including rail. Subsequently, the Canadian Minister
  of Transport released on February 25, 2003 its consultation document Straight
  Ahead  A Vision for Transportation in Canada and tabled in the House
  of Commons Bill C-26 entitled An Act to Amend the Canada Transportation Act
  and the Railway Safety Act, and to enact the VIA Rail Canada Act.
  No assurance can be given that any future legislative action by the federal
  government pursuant to the reports recommendations will not materially
  adversely affect the Companys financial position or results of operations.

Finally, the Company is subject
  to new statutory and regulatory directives in the United States addressing homeland
  security concerns. These include new border security arrangements, pursuant
  to an agreement the Company and Canadian Pacific Railway entered into with the
  U.S. Bureau of Customs and Border Protection (CBP) and the Canada Customs and
  Revenue Agency (CCRA), requiring advance notice of manifest information of U.S.-bound
  traffic (eventually applicable to shipments of all modes) and cargo screening
  (including gamma ray and radiation screening), as well as U.S. government imposed
  restrictions on the transportation into the United States of certain commodities.
  The Company has also worked with the Association of American Railroads to develop
  and put in place an extensive industry-wide security plan. While the Company
  will continue to work closely with CCRA, CBP, and other U.S. agencies, as above,
  no assurance can be given that future decisions by the U.S. government on homeland
  security matters, or joint decisions by the industry in response to threats
  to the North American rail network, will not materially adversely affect the
  Companys operations, or its competitive and financial position.

Adverse Factors Affecting
  Fuel Price.Fuel represents an appreciable proportion of the Companys
  annual operating expense. A sustained increase in fuel prices may have a negative
  impact on the Companys earnings and cash flow. To mitigate the effects
  of fuel price changes on its operating margins and overall profitability the
  Company has adopted a systematic approach to its hedging activities, which calls
  for regularly entering into swap positions to cover a target percentage of future
  fuel consumption up to two years in advance.

Potential Adverse Consequences
  of Limited Cash.The Companys business is capital intensive and requires
  substantial ongoing expenditures for, among other things, improvements to roadway,
  structures and technology, acquisition and repair of equipment and maintenance
  of the rail network. If the Companys cash from continuing operations fails
  to cover capital expenditures for a sustained period, the Company may have to
  seek additional financing, reduce planned capital expenditures, reduce or eliminate
  dividends on its Common Shares or some combination of the foregoing.

Currency Risks.Although
  the Company conducts its business and receives revenues primarily in Canadian
  dollars, a growing portion of its revenues, expenses, assets and debt are denominated
  in U.S. dollars. Thus, the Companys results are affected by fluctuations
  in the exchange rate between these currencies. Changes in the exchange rate
  between the Canadian dollar and other currencies (including the U.S. dollar)
  make the goods transported by the Company more or less competitive in the world
  marketplace and thereby affect the Companys revenues and expenses.

---

A-5

The Company has limited involvement
  with derivative financial instruments and does not use them for trading purposes.
  Collateral or other security to support financial instruments subject to credit
  risk is usually not obtained. However, the credit standing of counterparties
  is regularly monitored.

Adverse Economic Conditions.
  In any given year, the Company, like other railroads, is susceptible to changes
  in the economic conditions of the industries and geographic areas that produce
  and consume the freight it transports or the supplies it requires to operate.
  Many of the goods and commodities carried by the Company experience cyclicality
  in demand. However, many of the bulk commodities the Company transports move
  offshore and are impacted more by global economic conditions than North American
  cycles. The Companys results of operations can be expected to reflect
  this cyclicality because of the significant fixed costs inherent in railroad
  operations. The Companys revenues are affected by prevailing economic
  conditions and should a major economic slowdown or recession occur in North
  America or other key markets or should major industrial restructuring take place,
  the volume of rail shipments carried by the Company is likely to be affected.
  Global as well as North American economic conditions, including trade barriers
  on certain commodities, may interfere with the free circulation of goods across
  Canada and the United States.

Security. Potential
  terrorist actions can have a direct or indirect impact on the transportation
  infrastructure, including railway infrastructure in North America, and interfere
  with the free flow of trade across Canada and the United States. International
  conflicts can also have an impact on the Companys markets.

Impact of Severe Weather
  Conditions. In addition to the inherent risks of the business cycle, the
  Companys operations are occasionally susceptible to severe weather conditions.
  For example, in the first quarter of 1998, a severe ice storm hit eastern Canada,
  which disrupted operations and service for the railroad as well as CN customers.
  More recently, severe drought conditions in western Canada significantly reduced
  commodity revenues, principally grain.

---

EXHIBIT
  B

FACILITIES

SEE ATTACHED

---

B-2

Canadian National
  Railway Properties Inc.
  CN Facilities Inventory as at March 31, 2003

|  
|--
|  
|  
|  
|  
|  
|CN
|  
|  
|  
|  
|  
|  
|  
|  
|GT
|  
|  
|  
|  
|  
|IC
|  
|  
|  
|  
|  
|  
|  
|WC
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  

| | Other
      Facilities:         | #     | SF        |  | SUMMARY                          | #     | SF         | 
| | ------------------------------- | ----- | --------- |  | -------------------------------- | ----- | ---------- | 
| | GEC
      Alstom Buildings      | 6     | 901,881   |  |                                  |       |            | 
| | Containers/Truck
      Trailers | 795   | 172,483   |  |                                  |       |            | 
| | Fenced
      Compounds          | 92    | 1,285,943 |  |                                  |       |            | 
| | Loading
      Platform          | 136   | 337,157   |  | Major
      Buildings (> 10K sf) | 160   | 9,974,330  | 
| | Mobile
      Home               | 25    | 14,256    |  | Other
      Owned Facilities     | 5,191 | 7,712,286  | 
| | Mobile
      Trailer            | 275   | 141,277   |  | Other
      Leased Facilities    | 47    | 800,463    | 
| | Parking
      Lot               | 28    | 787,186   |  |                                 
| | Radio
      Tower Bases         | 236   | 73,774    |  | TOTAL                            | 5,398 | 18,487,079 | 
| | Storage
      Shed              | 1116  | 403,924   |  |                                 
| | Tank                            | 140   | 13,682    |  |                                  |       |            | 
| | Other                           | 60    | 15,939    |  |                                  |       |            | 
| |                                
| | Sub-Total                       | 2,909 | 4,147,502 |  |                                  |       |            | 
| |                                 |      

---

EXHIBIT
  C

GAAP
  RECONCILIATION

SEE ATTACHED

---

C-2

|Reconciliation
      of Non-GAAP Measures | U.S.
      GAAP
|----------------------------------------- | ---------------
|                                         

|**2002**                             |      |      |       | **Reported** |       | **Adjustments** | **(1)** |       | **Adjusted** |           |                                 |         |                              |      |       |          
|------------------------------------ | ---- | ---- | ----- | ------------ | ----- | --------------- | ------- | ----- | ------------ | --------- | ------------------------------- | ------- | ---------------------------- | ---- | ----- | ---------
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |     
|Revenues                             |      |      | $     | 6,110        |       | $               | -       |       | $            | 6,110     |                                 |         |                              |      |       |          
|Operating
      expenses             |      |      |       | (4,641       | )     |                 | 401     |       |              | (4,240    | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,469**    | ****  | ****            | **401** | ****  | ****         | **1,870** |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (361         | )     |                 | -       |       |              | (361      | )                               |         |                              |      |       |          
|Other
      income                   |      |      |       | 76           |       |                 | -       |       |              | 76        |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 1,184        |       |                 | 401     |       |              | 1,585     |                                 |         |                              |      |       |          
|Income
      tax expense             |      |      |       | (384         | )     |                 | (149    | )     |              | (533      | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **800**      | ****  | **$**           | **252** | ****  | **$**        | **1,052** | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      ratio**            | **** | **** | ****  | **76.0**     | **%** | ****            | ****    | ****  | ****         | **69.4**  | **%**                           |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **4.07**     | ****  | ****            | ****    | ****  | **$**        | **5.35**  | ****                            |         |                              |      |       |          
|**Diluted
      earnings per share** | **** | **** | **$** | **3.97**     | ****  | ****            | ****    | ****  | **$**        | **5.22**  | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**2001**                             |      |      |       | **Reported** |       | **Adjustments** | **(2)** |       | **Adjusted** |           | **Pro-forma
      adjustments** | **(3)** | **Adjusted
      Pro-forma** |     
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |        
|Revenues                             |      |      | $     | 5,652        |       | $               | -       |       | $            | 5,652     |                                 | $       | 438                          |      | $     | 6,090    
|Operating
      expenses             |      |      |       | (3,970       | )     |                 | 98      |       |              | (3,872    | )                               |         | (303                         | )    |       | (4,175   
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,682**    | ****  | ****            | **98**  | ****  | ****         | **1,780** | ****                            | ****    | **135**                      | **** | ****  | **1,915**
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (327         | )     |                 | -       |       |              | (327      | )                               |         | (80                          | )    |       | (407     
|Other
      income                   |      |      |       | 65           |       |                 | (2      | )     |              | 63        |                                 |         | 24                           |      |       | 87       
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 1,420        |       |                 | 96      |       |              | 1,516     |                                 |         | 79                           |      |       | 1,595    
|Income
      tax expense             |      |      |       | (380         | )     |                 | (158    | )     |              | (538      | )                               |         | (29                          | )    |       | (567     
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **1,040**    | ****  | **$**           | **(62** | **)** | **$**        | **978**   | ****                            | **$**   | **50**                       | **** | **$** | **1,028**
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      ratio**            | **** | **** | ****  | **70.2**     | **%** | ****            | ****    | ****  | ****         | **68.5**  | **%**                           | ****    | ****                         | **** | ****  | **68.6** 
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **5.41**     | ****  | ****            | ****    | ****  | **$**        | **5.09**  | ****                            | ****    | ****                         | **** | **$** | **5.35** 
|**Diluted
      earnings per share** | **** | **** | **$** | **5.23**     | ****  | ****            | ****    | ****  | **$**        | **4.92**  | ****                            | ****    | ****                         | **** | **$** | **5.17** 
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**2000**                             |      |      |       | **Reported** |       | **Adjustments** | **(4)** |       | **Adjusted** |           |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |     
|Revenues                             |      |      | $     | 5,428        |       | $               | -       |       | $            | 5,428     |                                 |         |                              |      |       |          
|Operating
      expenses             |      |      |       | (3,780       | )     |                 | -       |       |              | (3,780    | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,648**    | ****  | ****            | **-**   | ****  | ****         | **1,648** |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (311         | )     |                 | -       |       |              | (311      | )                               |         |                              |      |       |          
|Other
      income                   |      |      |       | 136          |       |                 | (84     | )     |              | 52        |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 1,473        |       |                 | (84     | )     |              | 1,389     |                                 |         |                              |      |       |          
|Income
      tax expense             |      |      |       | (536         | )     |                 | 26      |       |              | (510      | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **937**      | ****  | **$**           | **(58** | **)** | **$**        | **879**   | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      ratio**            | **** | **** | ****  | **69.6**     | **%** | ****            | ****    | ****  | ****         | **69.6**  | **%**                           |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **4.81**     | ****  | ****            | ****    | ****  | **$**        | **4.51**  | ****                            |         |                              |      |       |          
|**Diluted
      earnings per share** | **** | **** | **$** | **4.67**     | ****  | ****            | ****    | ****  | **$**        | **4.39**  | ****                            |         |                              |      |       |          

---

|(1) | Includes
      a fourth quarter charge of $281 million ($173 million after tax) to increase
      the Companys U.S. personal injury and other claims liability and a workforce
      reduction charge of $120 million ($79 million after tax).                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes a charge of
      $98 million ($62 million after tax) for workforce reductions, a gain of
      $101 million ($73 million after tax) from the sale of the Companys 50 per
      cent interest in the Detroit River Tunnel Company, a charge of $99 million
      ($71 million after tax) to write down the Companys net investment in 360networks
      Inc. and a deferred income tax recovery of $122 million.
|(3) | Wisconsin Central Transportation
      Corporation (WC) was acquired and consolidated on October 9, 2001. Pro forma
      assumes that the acquisition took place on January 1, 2001.                                                                                                                                                                                                                                      
|(4) | Includes a gain of $84
      million ($58 million after tax) related to the exchange of the Companys
      minority investments in certain joint venture companies for 11.4 shares
      of 360networks Inc.                                                                                                                                                                                                              

---

---

C-3

|Reconciliation
      of Non-GAAP Measures | Canadian
      GAAP
|----------------------------------------- | -------------------
|                                         

|**2002**                             |      |      |       | **Reported** |       | **Adjustments** | **(1)** |       | **Adjusted** |           |                                 |         |                              |      |       |          
|------------------------------------ | ---- | ---- | ----- | ------------ | ----- | --------------- | ------- | ----- | ------------ | --------- | ------------------------------- | ------- | ---------------------------- | ---- | ----- | ---------
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |     
|Revenues                             |      |      | $     | 6,110        |       | $               | -       |       | $            | 6,110     |                                 |         |                              |      |       |          
|Operating
      expenses             |      |      |       | (4,994       | )     |                 | 401     |       |              | (4,593    | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,116**    | ****  | ****            | **401** | ****  | ****         | **1,517** |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (353         | )     |                 | -       |       |              | (353      | )                               |         |                              |      |       |          
|Other
      income                   |      |      |       | 76           |       |                 | -       |       |              | 76        |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 839          |       |                 | 401     |       |              | 1,240     |                                 |         |                              |      |       |          
|Income
      tax expense             |      |      |       | (268         | )     |                 | (149    | )     |              | (417      | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **571**      | ****  | **$**           | **252** | ****  | **$**        | **823**   | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      ratio**            | **** | **** | ****  | **81.7**     | **%** | ****            | ****    | ****  | ****         | **75.2**  | **%**                           |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **2.87**     | ****  | ****            | ****    | ****  | **$**        | **4.15**  | ****                            |         |                              |      |       |          
|**Diluted
      earnings per share** | **** | **** | **$** | **2.82**     | ****  | ****            | ****    | ****  | **$**        | **4.07**  | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**2001**                             |      |      |       | **Reported** |       | **Adjustments** | **(2)** |       | **Adjusted** |           | **Pro-forma
      adjustments** | **(3)** | **Adjusted
      Pro-forma** |     
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |        
|Revenues                             |      |      | $     | 5,652        |       | $               | -       |       | $            | 5,652     |                                 | $       | 438                          |      | $     | 6,090    
|Operating
      expenses             |      |      |       | (4,286       | )     |                 | 98      |       |              | (4,188    | )                               |         | (327                         | )    |       | (4,515   
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,366**    | ****  | ****            | **98**  | ****  | ****         | **1,464** | ****                            | ****    | **111**                      | **** | ****  | **1,575**
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (312         | )     |                 | -       |       |              | (312      | )                               |         | (80                          | )    |       | (392     
|Other
      income                   |      |      |       | 65           |       |                 | (2      | )     |              | 63        |                                 |         | 24                           |      |       | 87       
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 1,119        |       |                 | 96      |       |              | 1,215     |                                 |         | 55                           |      |       | 1,270    
|Income
      tax expense             |      |      |       | (392         | )     |                 | (39     | )     |              | (431      | )                               |         | (19                          | )    |       | (450     
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **727**      | ****  | **$**           | **57**  | ****  | **$**        | **784**   | ****                            | **$**   | **36**                       | **** | **$** | **820**  
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      ratio**            | **** | **** | ****  | **75.8**     | **%** | ****            | ****    | ****  | ****         | **74.1**  | **%**                           | ****    | ****                         | **** | ****  | **74.1** 
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **3.72**     | ****  | ****            | ****    | ****  | **$**        | **4.02**  | ****                            | ****    | ****                         | **** | **$** | **4.21** 
|**Diluted
      earnings per share** | **** | **** | **$** | **3.62**     | ****  | ****            | ****    | ****  | **$**        | **3.90**  | ****                            | ****    | ****                         | **** | **$** | **4.08** 
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**2000**                             |      |      |       | **Reported** |       | **Adjustments** | **(4)** |       | **Adjusted** |           |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |     
|Revenues                             |      |      | $     | 5,446        |       | $               | -       |       | $            | 5,446     |                                 |         |                              |      |       |          
|Operating
      expenses             |      |      |       | (4,061       | )     |                 | -       |       |              | (4,061    | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Operating
      income**           | **** | **** | ****  | **1,385**    | ****  | ****            | **-**   | ****  | ****         | **1,385** |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Interest
      expense               |      |      |       | (295         | )     |                 | -       |       |              | (295      | )                               |         |                              |      |       |          
|Other
      income                   |      |      |       | 126          |       |                 | (84     | )     |              | 42        |                                 |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|Income
      before income taxes     |      |      |       | 1,216        |       |                 | (84     | )     |              | 1,132     |                                 |         |                              |      |       |          
|Income
      tax expense             |      |      |       | (442         | )     |                 | 26      |       |              | (416      | )                               |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |          
|**Net
      income**                 | **** | **** | **$** | **774**      | ****  | **$**           | **(58** | **)** | **$**        | **716**   | ****                            |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |     
|**Operating
      ratio**            | **** | **** | ****  | **74.6**     | **%** | ****            | ****    | ****  | ****         | **74.6**  | **%**                           |         |                              |      |       |          
|                                     |      |      |       |              |       |                 |         |       |              |           |                                 |         |                              |      |       |          
|**Basic
      earnings per share**   | **** | **** | **$** | **3.91**     | ****  | ****            | ****    | ****  | **$**        | **3.61**  | ****                            |         |                              |      |       |          
|**Diluted
      earnings per share** | **** | **** | **$** | **3.82**     | ****  | ****            | ****    | ****  | **$**        | **3.54**  | ****                            |         |                              |      |       |          

---

|(1) | Includes
      a fourth quarter charge of $281 million ($173 million after tax) to increase
      the Companys U.S. personal injury and other claims liability and a workforce
      reduction charge of $120 million ($79 million after tax).                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes a charge of
      $98 million ($62 million after tax) for workforce reductions, a gain of
      $101 million ($82 million after tax) from the sale of the Companys 50 per
      cent interest in the Detroit River Tunnel Company and a charge of $99 million
      ($77 million after tax) to write down the Companys net investment in 360networks
      Inc.
|(3) | Wisconsin Central Transportation
      Corporation (WC) was acquired and consolidated on October 9, 2001. Pro forma
      assumes that the acquisition took place on January 1, 2001.                                                                                                                                                                                     
|(4) | Includes a gain of $84
      million ($58 million after tax) related to the exchange of the Companys
      minority investments in certain joint venture companies for 11.4 shares
      of 360networks Inc.                                                                                                                                                             

---

---

C-4

Free cash flow

---

|**US
      GAAP**                                          |       | **2002**  |   |       | **2001**  |       |       | **2000**  |   |       | **1999**  |  
|---------------------------------------------------------- | ----- | --------- | - | ----- | --------- | ----- | ----- | --------- | - | ----- | --------- | -
|                                                           |      
|**Cash
      provided from operating activities**          | **$** | **1,612** |   | **$** | **1,621** |       | **$** | **1,506** |   | **$** | **1,278** |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|*Less:*                                                    |       |           |   |       |           |       |       |           |   |       |           |  
|Investing
      activities                                 |       | (924      | ) |       | (2,173    | )     |       | (981      | ) |       | (898      | )
|Dividends
      paid                                       |       | (170      | ) |       | (150      | )     |       | (136      | ) |       | (118      | )
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|**Cash
      provided (used) before financing activities** |       | **518**   |   |       | **(702**  | **)** |       | **389**   |   |       | **262**   |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|*Adjustments:*                                             |       |           |   |       |           |       |       |           |   |       |           |  
|Change
      in level of accounts receivable sold(1)       |       | (5        | ) |       | (133      | )     |       | (3        | ) |       | 14        |  
|Acquisition
      of WC(2)                                 |       | -         |   |       | 1,278     |       |       | -         |   |       | -         |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|**Free
      cash flow**                                   | **$** | **513**   |   | **$** | **443**   |       | **$** | **386**   |   | **$** | **276**   |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|**Canadian
      GAAP**                                    |       | **2002**  |   |       | **2001**  |       |       | **2000**  |   |       | **1999**  |  
|                                                           |      
|**Cash
      provided from operating activities**          | **$** | **1,173** |   | **$** | **1,232** |       | **$** | **1,128** |   | **$** | **962**   |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|*Less:*                                                    |       |           |   |       |           |       |       |           |   |       |           |  
|Investing
      activities                                 |       | (476      | ) |       | (1,764    | )     |       | (586      | ) |       | (557      | )
|Dividends
      paid                                       |       | (179      | ) |       | (174      | )     |       | (149      | ) |       | (127      | )
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|**Cash
      provided (used) before financing activities** | ****  | **518**   |   | ****  | **(706**  | **)** | ****  | **393**   |   | ****  | **278**   |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|*Adjustments:*                                             |       |           |   |       |           |       |       |           |   |       |           |  
|Change
      in level of accounts receivable sold(1)       |       | (5        | ) |       | (133      | )     |       | (3        | ) |       | 14        |  
|Acquisition
      of WC(2)                                 |       | -         |   |       | 1,278     |       |       | -         |   |       | -         |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|**Free
      cash flow**                                   | **$** | **513**   |   | **$** | **439**   |       | **$** | **390**   |   | **$** | **292**   |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  
|                                                           |       |           |   |       |           |       |       |           |   |       |           |  

---

|(1) | Changes in
      the level of accounts receivable sold under the securitization program are
      considered a financing activity.         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Significant acquisitions
      are excluded, as they are not indicative of normal day-to-day investments
      in the Companys asset base.

---

SIGNATURES

Pursuant
  to the requirements of the Exchange Act, the Registrant certifies that it meets
  all of the requirements for filing on Form 40-F and has duly caused this annual
  report to be signed on its behalf by the undersigned, thereto duly authorized.



| | CANADIAN
      NATIONAL RAILWAY COMPANY
| | ---------------------------------------
| |                                        
| | By:                                    
| |                                        
| |                                        
| |                                        
| |                                        

---

CEO SECTION 302 CERTIFICATION

I, E. Hunter Harrison, certify that:

|1. | I
      have reviewed this annual report on Form 40-F of Canadian National Railway
      Company (CN);                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Based
      on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this annual
      report;                                                             
|3. | Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects
      the financial condition, results of operations and cash flows of the registrant
      as of, and for, the periods presented in this annual report;                                                                                      
|4. | The
      registrants other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | The registrants other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrants auditors and the audit committee
      of registrants board of directors (and persons performing the equivalent
      function):                                                                                                                                                   
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                 
|6. | The
      registrants other certifying officer and I have indicated in this annual
      report whether or not there were significant changes in internal controls
      or in other factors that could significantly affect internal controls subsequent
      to the date of our most recent evaluation, including any corrective actions
      with regard to significant deficiencies and material weaknesses.

|Date: | May
      8th,
      2003 |                                            
|----- | ------------------------- | -------------------------------------------
|      |                           |                                            
|      |                           | (s)
      E. Hunter Harrison               
|      |                           |                                            
|      |                           | President
      and Chief Executive Officer

---



CFO
  SECTION 302 CERTIFICATION

I, Claude Mongeau,
  certify that:

|1. | I
      have reviewed this annual report on Form 40-F of Canadian National Railway
      Company (CN);                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Based
      on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this annual
      report;                                                             
|3. | Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects
      the financial condition, results of operations and cash flows of the registrant
      as of, and for, the periods presented in this annual report;                                                                                      
|4. | The
      registrants other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | The
      registrants other certifying officer and I have disclosed, based on our
      most recent evaluation, to the registrants auditors and the audit committee
      of registrants board of directors (and persons performing the equivalent
      function):                                                                                                                                             
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                 
|6. | The
      registrants other certifying officer and I have indicated in this annual
      report whether or not there were significant changes in internal controls
      or in other factors that could significantly affect internal controls subsequent
      to the date of our most recent evaluation, including any corrective actions
      with regard to significant deficiencies and material weaknesses.

|Date: | May
      8th,
      2003 |                                   
|----- | ------------------------- | ----------------------------------
|      |                           |                                   
|      |                           | (s)
      Claude Mongeau          
|      |                           |                                   
|      |                           | Executive
      Vice-President and
|      |                           | Chief
      Financial Officer