--------------------------------------------------------------------------------
--------------------------------------------------------------------------------






                          UNITED STATES SECURITIES AND
                               EXCHANGE COMMISSION
                             Washington, D.C. 20549

                   -------------------------------------------


                                   FORM 10-K/A



                               Amendment No. 1 to
                  Annual report pursuant to Section 13 or 15(d)
            of the Securities Exchange Act of 1934 for the fiscal year
                             ended December 31, 1997


                         Commission File Number 0-19150

                        WISCONSIN CENTRAL TRANSPORTATION
                                   CORPORATION
             -------------------------------------------------------


              (Exact name of registrant as specified in its charter)

           Delaware                                             36-3541743
 ------------------------------                           ---------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)


   6250 North River Road, Suite 9000
          Rosemont, Illinois                                       60018
 --------------------------------------                           --------
(Address of principal executive offices)                         (Zip Code)


               Registrant's telephone number,
                    including area code:     (847) 318-4600



         This Amendment No. 1 amends Registrant's Annual Report on Form
             10-K by adding the consolidated financial statements of
          English Welsh & Scottish Railway Holdings Limited pursuant to
                          Rule 3-09 of Regulation S-X.








--------------------------------------------------------------------------------
--------------------------------------------------------------------------------




<PAGE>





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                        INDEX TO FINANCIAL STATEMENTS
                                AND SCHEDULES

                                                                           PAGE
                                                                           ----

INDEPENDENT AUDITORS' REPORT........................................         28*

FINANCIAL STATEMENTS

         Consolidated Balance Sheets................................      29-30*
         Consolidated Statements of Income..........................         31*
         Consolidated Statements of Changes in Stockholders' Equity..        32*
         Consolidated Statements of Cash Flows......................         33*
         Notes to Consolidated Financial Statements.................      34-49*


FINANCIAL STATEMENTS OF ENGLISH WELSH & SCOTTISH RAILWAY HOLDINGS LIMITED **

         Auditor's Report..........................................         A-4
         Consolidated Profit and Loss Account......................         A-5
         Consolidated Balance Sheet................................       A-6-7
         Reconciliation of Movements in Shareholders' Funds........         A-8
         Consolidated Cash Flow Statement..........................         A-9
         Notes to Consolidated Financial Statements ...............     A-10-32


Note*:   The page numbers indicated are  those under which such  information was
         filed as  part of the  Company's Report on Form 10-K filed on March 31,
         1998. Such information is  not  being  amended by  this  Report on Form
         10-K/A.


Note**:  The amounts  shown in the  English  Welsh & Scottish  Railway  Holdings
         Limited  financial  statements are stated in pounds sterling.  At March
         31, 1998, each pound sterling equaled US $1.6413.













                                     A-1



<PAGE>




                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as a part of this Report:



                                                                           PAGE
                                                                           ----
    (a)(1) Financial Statements

           Consolidated Balance Sheets...............................     29-30*
           Consolidated Statements of Income.........................        31*
           Consolidated Statements of Changes in Stockholders' Equity        32*
           Consolidated Statements of Cash Flows.....................        33*
           Notes to Consolidated Financial Statements................     34-49*


       (2) Schedules

           Financial Statements of English Welsh & Scottish Railway Holdings
           Limited **

           Auditor's Report.........................................        A-4
           Consolidated Profit and Loss Account.....................        A-5
           Consolidated Balance Sheet...............................      A-6-7
           Reconciliation of Movements in Shareholders' Funds.......        A-8
           Consolidated Cash Flow Statement.........................        A-9
           Notes to Consolidated Financial Statements ..............    A-10-32


       (3) Exhibits

           The exhibits set forth in the Index to Exhibits in the Report on Form
           10-K filed on March 31, 1998 are not being amended by  this Report on
           Form 10-K/A.

    (b)    Reports on Form 8-K filed during the quarter ended December 31, 1997.

           The information  provided on the  Report on Form 10-K  filed on March
           31, 1998 is not being amended by this Report on Form 10-K/A.


Note*:     The page numbers indicated are those under which such information was
           filed as part of the Company's Report on Form 10-K filed on March 31,
           1998. Such  information is not  being  amended by this Report on Form
           10-K/A.


Note**:    The amounts shown in the  English Welsh & Scottish  Railway  Holdings
           Limited financial statements are stated in pounds sterling.  At March
           31, 1998, each pound sterling equaled US $1.6413.








                                      A-2



<PAGE>





                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the  registrant  has duly caused this  Amendment No. 1 to
Form  10-K  to be  signed  on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                                WISCONSIN CENTRAL TRANSPORTATION
                                                CORPORATION
                                                (Registrant)

Date: September 29, 1998                         By: /s/ Walter C. Kelly
                                                    ----------------------------
                                                         Walter C. Kelly
                                                         Vice-President, Finance








                                      A-3




<PAGE>








                         Independent Auditors' Report




To the Board of Directors and  Shareholders of English Welsh & Scottish  Railway
Holdings Limited:

We have audited the accompanying  consolidated balance sheets of English Welsh &
Scottish  Railway  Holdings  Limited and subsidiaries as of 31 March 1997 and 31
March   1998  and  the   related   consolidated   profit   and  loss   accounts,
reconciliations of movements in shareholders'  funds and consolidated cash flows
for the period from the company's  incorporation  on 16 October 1995 to 31 March
1997  and for the  year  ended  31  March  1998.  These  consolidated  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements.

We conducted our audits in accordance with generally accepted auditing standards
in the  United  Kingdom  which are  substantially  consistent  with those in the
United  States.  Those  standards  require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  mangement,  as well  as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of English Welsh &
Scottish  Railway  Holdings  Limited and subsidiaries as of 31 March 1997 and 31
March  1998 and the  results  of their  operations  and their cash flows for the
period from the company's  incorporation on 16 October 1995 to 31 March 1997 and
for  the  year  ended  31  March  1998 in  conformity  with  generally  accepted
accounting principles in the United Kingdom.

Generally accepted  accounting  principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States.  Application of generally accepted  accounting  principles in the United
States  would have  effected the results of  operations  for the period from the
company's  incorporation  on 16  October  1995 to 31 March 1997 and for the year
ended 31 March 1998 and shareholders'  equity at 31 March 1997 and 31 March 1998
to the extent summarised in supplemental  note 27 to the consolidated  financial
statements.





KPMG                                                                      London
Chartered Accountants                                          29 September 1998
Registered Auditors




                                      A-4



<PAGE>

<TABLE>
<CAPTION>


Consolidated profit and loss account
for the year ended 31 March 1998



in millions                                                 Note            1998                 1997
                                                                         12 months          17 1/2 months
                                                                                               Restated
                                                            ----         ---------             --------

<S>                                                          <C>           <C>                   <C>
Turnover                                                     2
Continuing operations
    Ongoing                                                                 507.0                 609.0
    Acquisitions                                                             21.2                     -
                                                                            -----                 -----
                                                                            528.2                 609.0
Operating costs                                              3
(acquisitions and continuing operations)                                   (460.1)               (592.3)

                                                                            -----                 -----

Operating profit/(loss)
Continuing operations                                        4
         Ongoing                                                             69.2                  16.7
         Acquisitions                                                        (1.1)                    -
                                                                            -----                 -----


                                                                             68.1                  16.7
Profit/(Loss) on sale of fixed assets                                         0.1                  (0.2)
Net interest payable and similar charges                     7              (11.3)                (15.8)
                                                                            -----                 -----

Profit on ordinary activities before taxation                4               56.9                   0.7
Tax on profit on ordinary activities                         8               (8.5)                  0.9
                                                                            -----                 -----

Retained profit on ordinary activities after
taxation for the period                                                      48.4                   1.6
                                                                            =====                 =====

</TABLE>

There were no  differences  between the profit and loss account  shown above and
that prepared on a historical cost basis.



                                      A-5


<PAGE>

<TABLE>
<CAPTION>


Consolidated balance sheet
at 31 March 1998


in millions                                                     Note            1998                1997
                                                                                                  Restated
                                                                ----            -----             --------

<S>                                                              <C>            <C>                 <C>  
Fixed assets
Tangible assets                                                  10             445.6               276.3

Goodwill                                                         12               5.4                 5.3
Negative goodwill                                                12            (126.2)              (25.3)
                                                                                -----               -----
                                                                               (120.8)              (20.0)

Investments                                                      11               1.3                   -
                                                                                -----               -----
                                                                                326.1               256.3
                                                                                -----               -----
Current assets
Stocks                                                           13              20.3                 9.0

Debtors due in more than one year                                14              96.3                66.8
Debtors due within one year                                      14             113.2                99.0
                                                                                -----               -----
                                                                                209.5               165.8

Cash at bank and in hand                                                         20.6                28.1
                                                                                -----               -----
                                                                                250.4               202.9

Creditors: amounts falling due within one year                   15            (117.9)             (106.3)
                                                                                -----               -----
Net current assets                                                              132.5                96.6
                                                                                -----               -----
Total assets less current liabilities                                           458.6               352.9

Creditors: amounts falling due after more than one year          16            (187.7)             (137.1)
Provisions for liabilities and charges                           17            (114.2)             (110.1)
Deferred income                                                  18              (5.8)               (4.3)
                                                                                -----               -----
Net assets                                                                      150.9               101.4
                                                                                =====               =====

Capital and reserves
Called up share capital                                          19              99.4                98.6
Share premium reserve                                            20               1.5                 1.2
Profit and loss account                                          20              50.0                 1.6
                                                                                -----               -----
Equity shareholders' funds                                                      150.9               101.4
                                                                                =====               =====

</TABLE>


These  financial  statements  were approved by the board of directors on 14 July
1998 and were signed on its behalf by:



E A Burkhardt
Chairman and Chief Executive


                                      A-6
<PAGE>

<TABLE>
<CAPTION>


Company balance sheet
at 31 March 1998



in millions                                                    Note             1998                1997
                                                                                                  Restated
                                                               ----             ----              --------

<S>                                                             <C>              <C>                 <C> 
Fixed assets
Investments                                                     11               96.0                49.3

Current assets
Debtors                                                         14              125.1               110.1

Creditors : amounts falling due within one year                 15              (14.4)               (2.8)
                                                                                -----               -----
Net current assets                                                              110.7               107.3
                                                                                -----               -----
Total assets less current liabilities                                           206.7               156.6

Creditors: amounts falling due after more than one year         16              (55.8)              (55.2)
                                                                                -----               -----
Net assets                                                                      150.9               101.4
                                                                                =====               =====

Capital and reserves
Called up share capital                                         19               99.4                98.6
Share premium reserve                                           20                1.5                 1.2
Revaluation reserve                                             20               52.6                 2.8
Profit and loss account                                                          (2.6)               (1.2)
                                                                                -----               -----
Equity shareholders' funds                                                      150.9               101.4
                                                                                =====               =====

</TABLE>


These  financial  statements  were approved by the board of directors on 14 July
1998 and were signed on its behalf by:



E A Burkhardt
Chairman and Chief Executive


                                      A-7

<PAGE>

<TABLE>
<CAPTION>


Group Statement of Total Recognised Gains and Losses
for the year ended 31 March 1998




in millions                                                                     1998             1997
                                                                              12 Months      17 1/2 months
                                                                                               Restated
                                                                              ---------        --------

<S>                                                                              <C>              <C>
Profit for the financial period                                                  48.4             1.6
Prior year adjustments (Note 9)                                                   3.4               -
                                                                                 ----             ---
Total recognised gains and losses recognised since last annual report            51.8             1.6
                                                                                 ====             ===

</TABLE>


<TABLE>
<CAPTION>

Reconciliation of movements in shareholders' funds
for the year ended 31 March 1998


in millions                                                            1998                          1997
                                                                 Group      Company          Group       Company
                                                                                            17 1/2        17 1/2
                                                                                            months        Months
                                                                                           Restated      Restated
                                                                 -----      -------        --------      --------

<S>                                                              <C>         <C>             <C>           <C>  
Profit/(Loss) for the financial period                            48.4        (2.2)            1.6          (1.2)

New share capital subscribed                                       0.8         0.8            98.6          98.6
Share premium arising on new share capital                         0.3         0.3             1.2           1.2
Revaluation of investment in subsidiaries                            -        50.6               -           2.8
                                                                 -----       -----           -----         -----

Net addition to shareholders' funds                               49.5        49.5           101.4         101.4
Opening shareholders' funds (originally 119.2 million
    before deducting a prior year adjustments of
    17.8 million)                                                101.4       101.4               -             -
                                                                 -----       -----           -----         -----
Closing shareholders' funds                                      150.9       150.9           101.4         101.4
                                                                 =====       =====           =====         =====


</TABLE>


The  impact  of prior  year  adjustments  on  opening  shareholders  funds is as
follows.


Opening shareholders funds as previously stated                           119.2
Transfer of negative goodwill to intangible assets                        (21.2)
Amortisation of negative goodwill                                           1.3
Capitalisation of interest                                                  2.1
                                                                          -----
Opening shareholders funds restated                                       101.4
                                                                          =====


                                      A-8

<PAGE>

<TABLE>
<CAPTION>


Consolidated cash flow statement
for the year ended 31 March 1998



in millions                                                  Note             1998              1997
                                                                                              Restated
                                                             ----             ----            --------

<S>                                                           <C>            <C>               <C> 
Net cash inflow from operating activities                     23              61.6               76.1

Return on investments and servicing of finance                24             (13.1)             (14.3)

Taxation paid                                                                    -               (1.2)

Capital expenditure and financial investment                  24             (77.2)             (29.3)

Acquisitions and disposals                                    24             (22.9)            (243.9)
                                                                              ----              -----

Net cash outflow before financing                                            (51.6)            (212.6)

Financing
  Issue of ordinary share capital                                              0.3               99.8
  Long term loans raised                                                      68.8              185.0
  Costs of raising long term loans                                            (0.9)             (11.7)
  Repayment of long term loans                                               (24.0)             (32.4)
  Repayment of finance leases                                                 (0.1)                 -
                                                                              ----              -----

Net cash inflow from financing                                                44.1              240.7
                                                                              ----              -----
(Decrease)/Increase in cash and cash equivalents              25              (7.5)              28.1
                                                                              ====              =====
</TABLE>



                                      A-9

<PAGE>



Notes

(forming part the financial statements)



1        Accounting Policies

         The following  accounting  policies have been applied  consistently  in
         dealing  with items  which are  considered  material in relation to the
         group's financial statements.

         Basis of Preparation
         The  financial   statements  have  been  prepared  in  accordance  with
         applicable   accounting   standards  and  under  the  historical   cost
         convention  modified  to include  the  revaluation  of  investments  in
         subsidiaries within the financial  statements of the company. The prior
         year figures have been  restated as explained in Note 9 to take account
         of the  directors  decision to adopt FRS 10  "Goodwill  and  Intangible
         Assets" with  retrospective  effect such that goodwill whether negative
         or positive is  capitalised  and amortised  through the profit and loss
         account.  In  addition  the  directors  considered  that it is now more
         appropriate to the group's  business to adopt a policy of  capitalising
         interest on loans entered into to finance capital expenditure.

         Basis of consolidation
         The group accounts consolidate the accounts of English Welsh & Scottish
         Railway  Holdings  Limited and all its subsidiary  undertakings.  These
         accounts are made up to 31 March 1998.  The  consolidated  accounts are
         based  on  accounts  of  subsidiary  undertakings,  all  of  which  are
         coterminous  with those of the parent  company,  and on the accounts of
         the parent  company.  The  acquisition  method of  accounting  has been
         adopted.  Under this method,  the results of subsidiary  and associated
         undertakings  acquired in the period are  included in the  consolidated
         profit and loss account from the date of acquisition.  In the company's
         accounts,  investments  in  subsidiary  undertakings  are  revalued  to
         reflect   the   underlying   book  value  of  the  net  assets  of  the
         subsidiaries.  The  result  for the year  dealt  with in the  financial
         statements  of English  Welsh & Scottish  Railway  Holdings  Limited is
         disclosed in note 20 to these accounts. The company has taken advantage
         of section  230(4) of the  Companies Act 1985 and has not presented its
         own profit and loss account.

         Goodwill
         The  group  has  decided  on early  adoption  of FRS 10  "Goodwill  and
         Intangible Assets".
         Goodwill  whether  negative or positive is disclosed  as an  intangible
         asset.  Negative  goodwill up to the fair value of non monetary  assets
         acquired  is  amortised  to the profit  and loss  account in periods in
         which these assets are  recovered.  Negative  goodwill in excess of the
         fair value of the assets acquired is amortised over the period in which
         the  losses  to which it  relates  are  expected  to  accrue.  Positive
         goodwill is amortised over 20 years.

         Fixed assets and depreciation
         Depreciation  is provided by the company to write off the cost less the
         estimated  residual value of tangible fixed assets by equal instalments
         over their  estimated  useful  economic lives from the time assets come
         into service as follows:
         o    Freehold buildings                 40 years
         o    Leasehold land and buildings       life of lease
         o    Plant, machinery and equipment     3 to 10 years
         o    Rolling stock                      20 to 50 years
         o    Infrastructure                     10 to 30 years

         No depreciation is provided on freehold land.


                                      A-10

<PAGE>



Notes continued

     1   Accounting Policies continued

         Capitalisation of interest
         Interest incurred on funding fixed assets in the course of construction
         is capitalised up until the asset in question is commissioned.

         Leases
         Where the group enters into a lease which entails taking  substantially
         all the risks  and  rewards  of  ownership  of an  asset,  the lease is
         treated as a 'finance  lease'.  The asset is  recorded  in the  balance
         sheet as a tangible fixed asset and is  depreciated  over its estimated
         useful  life or the term of the lease,  whichever  is  shorter.  Future
         instalments  under such leases,  net of finance  charges,  are included
         within creditors.  Rentals payable are apportioned  between the finance
         element,  which is  charged to the  profit  and loss  account,  and the
         capital  element which reduces the  outstanding  obligation  for future
         instalments.  All other leases are accounted for as 'operating  leases'
         and the rental  charges are charged to the profit and loss account on a
         straight line basis over the life of the lease.

         Government grants
         Capital  based  government  grants are  included  within  accruals  and
         deferred  income in the balance  sheet and  credited to trading  profit
         over the estimated  useful  economic  lives of the assets to which they
         relate.  Revenue based government grants are credited to trading profit
         in the  period  in which  the  expenditure  to  which  they  relate  is
         incurred.

         Stocks
         Stocks are stated at the lower of cost and net realisable value.

         Pensions and other post-retirement benefits
         The expected cost of providing pensions, as calculated  periodically by
         professionally  qualified actuaries,  is charged to the profit and loss
         account so as to spread the cost over the service lives of employees in
         the scheme in such a way that the pension cost is a substantially level
         percentage  of  current  and  expected  future   pensionable   payroll.
         Differences  between the amount  charged to the profit and loss account
         and payments  made to schemes are treated as assets or  liabilities  in
         the  Balance  Sheet.  Further  details  are  given  in  Note  22 to the
         accounts.

         Taxation
         The credit for taxation is based on the profit for the period and takes
         into account taxation  deferred because of timing  differences  between
         the  treatment of certain items for taxation and  accounting  purposes.
         Provision  is made  for  deferred  tax  only to the  extent  that it is
         probable  that  an  actual  liability  will   crystallise   within  the
         foreseeable   future.   Partial  provision  is  also  made  for  timing
         differences arising on the pension fund prepayment.

         Foreign Exchange
         Transactions  in foreign  currencies are recorded at the rate ruling at
         the date of the  transaction or at the contract rate if the transaction
         is  covered  by  a  forward  exchange  contract.  Monetary  assets  and
         liabilities  denominated  in foreign  currencies  are translated at the
         rate of exchange  ruling at balance sheet date or, if  appropriate,  at
         the forward  exchange  contract rate. All  differences are taken to the
         profit and loss  account  except  where they arise on loans or deposits
         which are being used to fund capital expenditure in which case they are
         capitalised.

2        Turnover

         Turnover  is  stated  net of value  added  tax and  represents  amounts
         invoiced  to third  parties  and  estimates  in respect of amounts  not
         invoiced.

         Turnover and operating  profit is  attributable  to one  activity,  the
         haulage  of  freight  and  mail  by rail  and  other  related  services
         throughout England, Wales and Scotland.



                                      A-11

<PAGE>



Notes continued

3        Operating costs

<TABLE>
<CAPTION>

in millions                                                   1998 12 Months                  1997
                                                    --------------------------------        --------
                                                          Continuing           Total         17 1/2
                                                          Operations                         Months
                                                    Ongoing   Acquisitions                  Restated
                                                    -------   ------------     -----        --------

<S>                                                  <C>            <C>        <C>            <C>
Change in stock of spares                            (13.3)         2.0        (11.3)           2.1
Other operating income                                   -            -            -           (0.3)
Raw materials and consumables                         41.4          2.1         43.5           83.3
Other external charges                               230.9          8.1        239.0          239.9
Staff costs (Note 6)                                 164.6          9.3        173.9          253.5
Depreciation and other amounts written off
tangible and intangible fixed assets                  14.2          0.8         15.0           13.8
                                                     -----         ----        -----          -----
                                                     437.8         22.3        460.1          592.3
                                                     =====         ====        =====          =====

</TABLE>


     The prior year figures include  exceptional  items of 59.7 million in staff
costs and 3.3 million in other external charges.



4        Profit on ordinary activities before taxation

<TABLE>
<CAPTION>

     in millions                                                                   1998           1997
                                                                                   ----           ----

     <S>                                                                           <C>            <C>   
     Profit on ordinary activities before taxation is stated after charging
     Auditors' remuneration:
         Audit                                                                      0.2            0.4
         Other services                                                             0.2            0.5
     Depreciation and other amounts written off tangible fixed assets:
         Owned                                                                     13.5           13.4
         Leased                                                                     1.6            1.7
     Hire of plant and machinery - rentals payable under operating leases           0.2            0.2
     Other operating leases                                                         2.0            1.6

     after crediting
     Grants credited to profit and loss account                                     4.0            0.3
     Rents receivable from property                                                 8.4            8.5
     Amortisation of negative goodwill                                              2.7            1.3

</TABLE>


     In addition to the above the  auditors  received  3,800  (1997:  1,931,000)
during the year in relating to the acquisition of subsidiaries. These costs have
been capitalised.

     The operating  profit dealt with in the accounts of the parent  company was
0.3 million (1997: 0.3 million).



                                      A-12

<PAGE>



Notes continued

5        Remuneration of directors

                                                               1998         1997
                                                               ----         ----
Aggregate emoluments of directors                           196,434      168,970
Number of directors for  whom retirement benefits are
accruing under a money purchase scheme                            1            1
Number of directors for  whom retirement benefits are
accruing under a defined benefits scheme                          1            1
Number of directors eligible for shares under a long
term incentive scheme                                             1            1

     Directors  interests  in the  ordinary  share  capital of the  company  and
options granted during the year are disclosed in the Director's Report.

     1,448,695 (1997: 1,453,772) was  paid to Wisconsin  Central  Transportation
Incorporated  in relation to a  management  contract  incorporating  among other
things, the provision of the services of E A Burkhardt and T F Power.

     32,000 (1997: 32,000) was paid or  is payable to Berkshire Partners for the
services of C Ferenbach and R K Lubin.

     16,000  (1997: 16,000)  was paid or is  payable  to Fay  Richwhite  for the
services of D M Richwhite.

     16,000  (1997:  12,000) was paid or is payable to McLachlan  Rissman & Doll
for the services of T W Rissman.


     Transactions involving directors
     Clarke  & Co. a  business  owned by R J G  Clarke  was paid  30,186  (1997:
59,208)  during  the  period  for  the  provision  of   consultancy   and  other
professional services.

     McLachlan  Rissman  &  Doll a  partnership  in  which  T W  Rissman  has an
interest,  was paid 139,230 (1997:  137,888) during the period for the provision
of legal and other professional services.

     Railroad  Financial  Corporation,  a specialist  adviser on financing  rail
equipment,  in which T W Rissman has an interest  was paid 160,911  (1997:  nil)
during the period for the provision of consultancy services.


6        Staff numbers and costs

                                                              1998          1997
                                                               No.           No.
                                                             -----         -----
Average number of people employed:
Management and operation of rail freight services            7,070         7,066
                                                             =====         =====



         The aggregate payroll costs of these persons were as follows:


in millions                                       Total         Total
                                                   1998          1997
                                                  -----         -----

Wages & salaries                                  149.0         159.1
Social security  costs                             11.9          12.6
Other pension costs (see note 22)                   1.9           3.0
Other staff costs                                  11.1          19.1
Redundancy costs                                      -          59.7
                                                  -----         -----
                                                  173.9         253.5
                                                  =====         =====



                                      A-13

<PAGE>



Notes continued

7        Net interest payable and similar charges

<TABLE>
<CAPTION>

in millions                                                                               1998        1997
                                                                                          ----        ----

<S>                                                                                      <C>         <C>
Other interest receivable and similar income                                               1.1         2.4

Other interest payable and similar charges:
On bank loans, overdrafts and other loans repayable within five years                    (14.0)      (15.6)
On bank loans repayable in more than five years                                           (2.5)       (4.3)
Finance charges payable in respect of finance leases and hire purchase contracts          (0.1)        0.3
Exchange gain/(loss) on monies on deposit                                                  0.1        (0.7)
                                                                                          ----        ----
                                                                                         (16.5)      (20.3)
Interest capitalised                                                                       4.1         2.1
                                                                                          ----        ----
                                                                                         (12.4)      (18.2)
                                                                                          ----        ----
                                                                                         (11.3)      (15.8)
                                                                                          ====        ====
</TABLE>


8        Taxation

in millions                                                     1998       1997
                                                                ----       ----
UK corporation tax at 31% (1997: 33%) on the profit for the
period on ordinary activities for the year to 31 March 1998     (4.7)      (2.1)
Deferred Taxation                                               (3.8)       3.0
                                                                 ---        ---
                                                                (8.5)       0.9
                                                                 ===        ===


     The  group  has a low  effective  tax  rate  due  to  the  availability  of
substantial capital allowances.

     Deferred  taxation  includes a credit of 0.8 million  (1997:  1.3  million)
resulting  from the  reduction  in the rate of  corporation  tax from 31% to 30%
announced in the budget on 17 March 1998.



9        Prior Year Adjustments

     In December 1997 the Accounting  Standards Board issued FRS10 "Goodwill and
Intangible  Assets"  which the Group has elected to implement  immediately.  The
standard  requires that goodwill whether positive or negative be disclosed as an
intangible asset and amortised  through the profit and loss account.  The impact
of this change in accounting  policy is to increase the reported profits for the
year by 3.5 million (1997: 1.3 million),  and reduce  shareholders  funds in the
consolidated   balance  sheet  by  122.7  million  (1997:  20.0  million)  as  a
consequence  of the  transfer  of  negative  goodwill  from  Capital  Reserve to
Intangible Assets.

     The Group has elected to  capitalise  interest  paid on deposits  and costs
associated with the purchase of locomotives,  until they come into service.  The
impact of this change in accounting  policy is to increase the reported  profits
for the year by 4.1 million (1997: 2.1 million).



                                      A-14

<PAGE>



Notes continued

10       Tangible fixed assets

<TABLE>
<CAPTION>

in millions              Land &       Rolling         Plant,         Infra-       Assets in         Total
                        buildings      stock        machinery      structure      course of
                                                        &                       construction
                                                    equipment
                        ---------      -----        ---------      ---------    ------------        -----
Group

<S>                       <C>           <C>            <C>            <C>            <C>            <C>  
Cost
(or valuation)
At 1 April 1997           30.5          225.4          16.3           0.7            30.3           303.2
Additions                  3.2           11.2           1.3           3.2            62.9            81.8
Acquisitions of
   subsidiaries           21.3           78.7           3.0             -               -           103.0
Disposals                    -           (0.4)         (0.3)            -               -            (0.7)
Transfers                  1.2            2.8           0.5           1.9            (6.5)           (0.1)
                          ----          -----          ----           ---            ----           -----
At 31 March 1998          56.2          317.7          20.8           5.8            86.7           487.2
                          ====          =====          ====           ===            ====           =====

Depreciation and
diminution in value

At 1 April 1997           (1.1)         (12.7)        (12.7)         (0.4)              -           (26.9)
Charge for period         (1.0)         (12.5)         (1.4)         (0.2)              -           (15.1)
On disposals                 -            0.1           0.2             -               -             0.3
Transfers                    -              -           0.1             -               -             0.1
                           ---           ----          ----           ---             ---            ----
At 31 March 1998          (2.1)         (25.1)        (13.8)         (0.6)              -           (41.6)
                           ===           ====          ====           ===             ===            ====
Net book value
At 31 March 1998          54.1          292.6          7.0            5.2            86.7           445.6
                          ====          =====         ====            ===            ====           =====
At 31 March 1997          29.4          212.7          3.6            0.3            30.3           276.3
                          ====          =====         ====            ===            ====           =====

</TABLE>

     On  acquisition  of the  companies  detailed  in Note  11 to the  financial
statements,  fair  values  were  assigned  to  the  assets  and  liabilities  in
accordance with FRS 7.

         The net book value of land and buildings at 31 March 1998 comprises:


in millions                         Group    Company          Group      Company
                                     1998      1998            1997        1997
                                     ----      ----            ----        ----

Freehold land and buildings          27.2         -            18.8           -
Long leasehold                       24.8         -            10.4           -
Short leasehold                       2.1         -             0.2           -
                                     ----       ---            ----         ---
                                     54.1         -            29.4           -
                                     ====       ===            ====         ===


     Included in freehold land and buildings is land valued at 17,650,000  which
is not depreciated.  Included in fixed assets is 6.2 million (1997: 2.1 million)
of capitalised interest.




                                      A-15

<PAGE>


Notes continued

10       Tangible fixed assets continued

     Included  within the amounts  for fixed  assets are the  following  amounts
relating to leased  assets.  These assets are held on  subleases  granted by the
British Railways Board to subsidiary companies prior to their acquisition by the
company.  The  headleases  are finance  leases which  continue to be held by the
British Railways Board. The subleases  transfer all the benefits and obligations
of  ownership  inherent  in the  headleases  to  the  subsidiaries.  All  future
liabilities  arising under the  headleases,  and included  within the subleases,
were   discharged  to  the  British   Railways   Board  on  acquisition  of  the
subsidiaries.  In addition, within the analysis below are assets with a net book
value of 0.1 million  (1997:  0.2  million)  for which  liabilities  continue to
exist.

         Assets held under finance leases


in millions                       Rolling         Plant,         Total
                                   stock        machinery
                                                   and
                                                equipment
                                   -----        ---------        -----
Cost:
At 1 April 1997                     40.0           0.2            40.2
Additions                              -             -               -
                                    ----           ---            ----
At 31 March 1998                    40.0           0.2            40.2
                                    ----           ---            ----

Depreciation:
At 1 April 1997                    (14.0)            -           (14.0)
Additions                              -             -               -
Provided in the period              (1.5)         (0.1)           (1.6)
                                    ----           ---            ----
At 31 March 1998                   (15.5)         (0.1)          (15.6)
                                    ----           ---            ----
Net Book Value
At 31 March 1998                    24.5           0.1            24.6
                                    ====           ===            ====
At 31 March 1997                    26.0           0.2            26.2
                                    ====           ===            ====


11       Fixed asset investments - company

<TABLE>
<CAPTION>

                                                      Own Shares     Associates        Trade         Total
                                                                                    Investment
                                                      ----------     ----------     ----------       -----

<S>                                                      <C>            <C>             <C>          <C>
Group
As at 1 April 1997                                          -             -               -             -
Acquired on the acquisition of subsidiaries                 -           0.6             0.6           1.2
Additions                                                 0.8             -               -           0.8
Less provision                                           (0.7)            -               -          (0.7)
                                                          ---           ---             ---           ---
At 31 March 1998                                          0.1           0.6             0.6           1.3
                                                          ===           ===             ===           ===

</TABLE>

     EW & S Employee Share Trust,  was created on 14 November 1996. The trustee,
EWS  Trustees  Ltd, at their  absolute  discretion  determines  at its  absolute
discretion  which  directors and employees are to  participate  in a bonus share
plan in any fiscal year. All costs incurred in the  administration  of the trust
are charged to the profit and loss account as incurred.

     At the date of signing these  accounts the trust held  1,277,554  shares of
which 1,164,977 were under option to employees and directors.




                                      A-16

<PAGE>



Notes continued

11       Fixed asset investments - company continued


in millions                          Own         Value of shares in       Total
                                    shares          subsidiaries
                                    ------          ------------          -----

Company
At 1 April 1997 restated               -                 49.3              49.3
Reduction of cost                      -                 (3.2)             (3.2)
Additions at cost                    0.8                    -               0.8
Less provision                      (0.7)                   -              (0.7)
Revaluation                            -                 49.8              49.8
                                     ---                 ----              ----
At 31 March 1998                     0.1                 95.9              96.0
                                     ===                 ====              ====

     Investments in group companies have been revalued to reflect the underlying
book  value of the net  assets of the  subsidiaries  adjusted  for the  goodwill
arising on consolidation.

     The  companies  in which  the  company's  interest  is more than 10% are as
follows:

<TABLE>
<CAPTION>

                                           Country of             Principal activity              Class and
                                        registration or                                         percentage of
                                         incorporation                                           shares held
                                                                                               Group & company
                                         -------------            ------------------           ---------------

<S>                                     <C>                   <C>                              <C>
Subsidiary undertakings
Boreal & Austral Railfreight Ltd        England & Wales             Holding company            100% 1 Ordinary
New Locomotive Finance Ltd              England & Wales       Acquisition and leasing of       100% 1 Ordinary
                                                                     rolling stock
Res (December) Ltd                      England & Wales             Holding company            100% 1 Ordinary
Rail Express Systems Ltd                England & Wales       Haulage of mail by rail and      100% 1 Ordinary
                                                                 provision of charter
                                                                  passenger services
Loadhaul Ltd                            England & Wales                 Dormant                100% 1 Ordinary
English Welsh & Scottish                England & Wales       Haulage of freight by rail       100% 1 Ordinary
Railway Ltd
Mainline Freight Ltd                    England & Wales                 Dormant                100% 1 Ordinary
NPJV Ltd                                England & Wales                 Dormant                100% 1 Ordinary
LGJV Ltd                                England & Wales                 Dormant                100% 1 Ordinary
EWS Finance Ltd                         England & Wales       Acquisition and leasing of       100% 1 Ordinary
                                                                     rolling stock
East & West Ltd                         England & Wales             Holding company            100% 1 Ordinary
Railfreight Distribution Ltd            England & Wales       Haulage of freight by rail       100% 1 Ordinary
EW & S Trustees Ltd                     England & Wales        Trustee of employee share       100% 1 Ordinary
                                                                         trust

Associated undertakings

Allied Continental Intermodal
Services Ltd                            England & Wales               Railfreight              25% 1 Ordinary
Autotrax Limited                        England & Wales           Terminal management          24% 1 Ordinary
Intermodal Wagon Systems
Limited                                 England & Wales               Railfreight              25% 1 Ordinary
Unilog NV                                   Belgium                   Railfreight              45% 1BFr Ordinary

</TABLE>


     The investments in associated  undertakings are unlisted. In the opinion of
the  directors,  the aggregate  value of these  investments is not less than the
amounts at which they are stated in the balance sheet.




                                      A-17

<PAGE>


     Notes continued

11     Fixed asset investments - company continued

     On 22 November  1997 EWS  completed  the  acquisition  of 100% of the share
capital of Railfreight  Distribution  Limited ("RfD") from the British  Railways
Board ("BRB"). In connection with that acquisition:

         o   BR has agreed that RfD will not be required to pay toll charges for
             access to the  Channel  Tunnel  until 30 April 2005,  such  charges
             being met by BR.
         o   In the event that freight operations through the Channel Tunnel are
             terminated,  RfD may be required  to sell  certain  tunnel  related
             assets to a publicly  owned railway  company and to pay a 5 million
             penalty.
         o   RfD intends to continue its Channel Tunnel  operations  after April
             2005,  but will not be able to do so unless  Eurotunnel  materially
             reduces its charges.  The present  contractual  arrangements do not
             compel  Eurotunnel  to do this,  and there is no certainty  that it
             will.  Full provision is therefore made for all  liabilities  which
             would arise if RfD  discontinued  Channel Tunnel  operations  after
             April 2005.
         o   BR has  agreed to pay a  restructuring  grant to RfD in  respect of
             specified  expenditure to a maximum of 25 million  within two years
             of the  acquisition  date.  The amount of the grant received during
             the year was 3.5  million.  The grant is potentially repayable over
             10 years from 2007 if average total access  charges fall  below and
             volumes exceed  specified  levels.  No  provision has been made for
             repayment of grants received to date.

     The cash  consideration  on this  purchase was 2.0 million and  acquisition
costs totalled 2.2 million.  Negative  goodwill of 103.9 million  arising on the
acquisition  is  included  in Note 12. The final  adjustments  to  consideration
payable are not yet finalised.

     The  directors  estimate  of fair value of the assets of RfD are set out in
the table below.

<TABLE>
<CAPTION>

in millions                  Book value    Re-valuation           Other         Fair value of
                                                              adjustments         the group
                             ----------    ------------       -----------         ---------
<S>                            <C>              <C>               <C>               <C> 
Fixed assets
   Tangible                     13.7            71.1                 -               84.8
   Intangible                    1.2               -                 -                1.2
                               -----            ----              ----              -----
                                14.9            71.1                 -               86.0
Current assets
   Stocks                        7.0               -                 -                7.0
   Debtors                      94.1               -                 -               94.1
   Pension prepayment              -               -              15.5               15.5
                               -----            ----              ----               ----
Total assets                   116.0            71.1              15.5              202.6
                               =====            ====              ====              =====

Liabilities
Provisions
   Deferred tax                    -               -              (2.7)              (2.7)
   Other                       (12.1)              -              (5.0)             (17.1)
                               -----            ----              ----              -----
                               (12.1)              -              (7.7)             (19.8)
Creditors
   Trade creditors             (20.8)              -                 -              (20.8)
   Other creditors             (43.6)              -                 -              (43.6)
   Accruals                    (10.3)              -                 -              (10.3)
                               -----            ----              ----              -----

Total Liabilities              (86.8)              -              (7.7)             (94.5)
                               -----            ----              ----              -----
Net Assets                      29.2            71.1               7.8              108.1
                               =====            ====              ====              =====

</TABLE>
     Included in the group profit for the year is a loss of 0.2 million incurred
from the date of acquisition by Railfreight Distribution Limited.



                                      A-18
<PAGE>



     Notes continued

11     Fixed asset investments -company continued

     On 31 March 1998 the group  acquired from National  Power PLC the assets of
its rail  division  for cash  consideration  of 18.7  million.  Goodwill  of 0.4
million arising on the acquisition is disclosed in Note 12.



     The directors  estimate of fair value of the assets acquired are set out in
the table below.



in millions                                    Book value and
                                              fair value of the
                                                    group
                                                    -----

Fixed assets
   Tangible                                          18.2

Current assets
   Stocks                                             0.5
                                                     ----
Total assets                                         18.7
                                                     ====

Liabilities
Creditors
   Other creditors                                   (0.4)
                                                     ----
Total Liabilities                                    (0.4)
                                                     ----
Net Assets                                           18.3
                                                     ====

     The National Power Rail Division  contributed neither a profit or a loss to
the group's results.



12       Goodwill

         Intangible  assets  consist of goodwill  arising on the  acquisition of
         businesses  acquired by the group. No goodwill is recorded in the books
         of the company.

<TABLE>
<CAPTION>

in millions                                                      Negative       Positive        Total
                                                                 Goodwill       Goodwill       Goodwill
                                                                 --------       --------       --------

<S>                                                               <C>             <C>          <C>   
Restated at 1 April 1997                                           (25.3)          5.3          (20.0)
Goodwill arising on acquisitions during the year                  (103.9)          0.4         (103.5)
Amortisation of goodwill during the year                             3.0          (0.3)           2.7
                                                                   -----           ---          -----
Balance at 31 March 1998                                          (126.2)          5.4         (120.8)
                                                                   =====           ===          =====
</TABLE>


     The  accumulated  positive  goodwill  amortised  is  0.6  million  and  the
accumulated  negative  goodwill  credited to the profit and loss  account is 4.5
million at 31 March 1998.




                                      A-19

<PAGE>


Notes continued

13       Stocks

         Stocks held by the group comprise spare parts held for the  maintenance
         of the group's assets. No stocks were held by the company.


14       Debtors

<TABLE>
<CAPTION>

in millions                                          Group        Company          Group         Company
                                                      1998          1998            1997           1997
                                                      ----          ----            ----           ----
<S>                                                  <C>           <C>              <C>           <C>   
Amounts falling due within one year
Trade debtors                                         80.4             -            84.2              -
Amounts owed by group undertakings                       -         123.2               -          107.3
Other debtors                                         24.0           1.9             8.1            2.8
Prepayments and accrued income                         8.8             -             6.7              -
                                                     -----         -----            ----          -----
                                                     113.2         125.1            99.0          110.1
                                                     =====         =====            ====          =====
Amounts falling due after more than one year
Pension fund prepayment                               82.1             -            66.8              -
Promissory notes                                      14.2             -               -              -
                                                     -----         -----            ----          -----
                                                      96.3             -            66.8              -
                                                     =====         =====            ====          =====
</TABLE>


15       Creditors: amounts falling due within one year

<TABLE>
<CAPTION>

in millions                                                    Group      Company        Group        Company
                                                                1998        1998          1997          1997
                                                                ----        ----          ----          ----
<S>                                                            <C>          <C>          <C>             <C>
Bank loans and overdrafts                                        5.0        12.6           7.5           0.7
Obligations under finance leases and hire purchase contracts     0.5           -             -             -
Amounts owed by associate undertakings                           0.1           -             -             -
Trade creditors                                                 50.8         0.1          60.4             -
Other creditors including taxation and social security:
Corporation tax                                                  5.6           -           0.9             -
Other taxes and social security costs                           19.1           -          15.2             -
Other creditors                                                  8.7         1.3          10.2           1.1
                                                               -----        ----         -----           ---
                                                                89.8        14.0          94.2           1.8
Accruals and deferred income                                    28.1         0.4          12.1           1.0
                                                               -----        ----         -----           ---
                                                               117.9        14.4         106.3           2.8
                                                               =====        ====         =====           ===
</TABLE>


16       Creditors: amounts falling due after more than one year

<TABLE>
<CAPTION>

in millions                                                       Group       Company         Group        Company
                                                                   1998         1998           1997          1997
                                                                   ----         ----           ----          ----
<S>                                                               <C>           <C>           <C>            <C> 
Bank loans (net of unamortised financing costs)                   185.7         55.8          137.0          55.2
Obligations under finance leases and hire purchase contracts        2.0            -            0.1             -
                                                                  -----         ----          -----          ----
                                                                  187.7         55.8          137.1          55.2
                                                                  =====         ====          =====          ====
</TABLE>



                                      A-20
<PAGE>



Notes continued

16       Creditors: amounts falling due after more than one year continued

         Interest Rates and Security on Loans

         The bank loans include:

     76.8 million  (1997:  89.3  million)  secured by a first fixed and floating
charge over all the assets and shares of the Group,  except for those to which a
charge attaches under the terms of the contract for the carriage of mail for the
Post Office and the shares and assets of New Locomotive Finance Ltd, Railfreight
Distribution Ltd, EWS Finance Ltd and East & West Ltd.

     55.8 million (1997: 55.2 million)  attracting  interest at LIBOR plus 0.65%
and is secured in the same  manner as the above loan but ranks after it in order
of preference.

     31.1 million  (1997:  nil) secured by a fixed and floating  charge over the
assets of New  Locomotive  Finance Ltd and  secondary  floating  charge over the
assets of the group,  except for those of Railfreight  Distribution  Ltd, East &
West Ltd and EWS Finance Ltd.

     27.0 million  (1997:  nil) secured by a fixed and floating  charge over the
assets of EWS Finance Ltd and secondary  floating  charge over the assets of the
group, except for those of Railfreight Distribution Ltd, East & West Ltd and New
Locomotive Finance Ltd.


         Bank loans payable by instalments


in millions                                 Group                  Company
                                       1998       1997         1998        1997
                                       ----       ----         ----        ----
Amounts falling due:
    between one and two years          20.0        5.0            -           -
    between two and five years        109.9       76.8            -           -
    payable after five years           55.8       55.2         55.8        55.2
                                      -----      -----         ----        ----
                                      185.7      137.0         55.8        55.2
                                      =====      =====         ====        ====


     The  maturity  of  obligations  under  finance  leases  and  hire  purchase
contracts is as follows:


in millions                          Group      Company       Group      Company
                                      1998        1998         1997        1997
                                      ----        ----         ----        ----

Within one year                        0.5           -          0.1           -
In the second to fifth years           2.0           -          0.1           -
Over five years                          -           -            -           -
                                       ---         ---          ---         ---
                                       2.5           -          0.2           -
Less future finance charges              -           -            -           -
                                       ---         ---          ---         ---
                                       2.5           -          0.2           -
                                       ===         ===          ===         ===



                                      A-21

<PAGE>


Notes continued

17       Provisions for liabilities and charges

<TABLE>
<CAPTION>

in millions                             Contaminated    Deferred      Redundancy          Other           Total
                                             Land          Tax             &           Provisions      Provisions
                                          Provision     Provision    Restructuring
                                                                       Provision
                                          ---------     ---------      ---------       ----------      ----------
<S>                                          <C>            <C>           <C>              <C>            <C>  
Group
At 1 April 1997                              16.1           18.7          38.3             37.0           110.1

Utilised during period                       (0.5)             -         (13.9)            (7.1)          (21.5)
Arising on acquisition of subsidiary
   undertaking                                4.4            2.7             -             12.7            19.8
Transferred to deferred income during
   the year                                     -              -             -             (1.6)           (1.6)
Charge/(credit) for the period in the
profit and loss account                         -            3.9             -              3.5             7.4
                                             ----           ----          ----             ----           -----
At 31 March 1998                             20.0           25.3          24.4             44.5           114.2
                                             ====           ====          ====             ====           =====

</TABLE>

         The amounts provided for deferred taxation and the amounts not provided
are set out below:

<TABLE>
<CAPTION>

in millions                                                       1998                            1997
                                                         Provided     Unprovided        Provided      Unprovided
                                                         --------     ----------        --------      ----------
<S>                                                         <C>           <C>             <C>             <C> 
Difference between accumulated depreciation and
amortisation and capital allowances                          3.7          45.9               -            52.0
Timing difference on pension fund surplus                   24.6             -            20.7               -
Timing difference on provision for redundancies and
restructuring                                               (5.0)            -            (2.0)           (4.8)
Other timing differences                                     2.0          10.7               -            (9.6)
                                                            ----          ----            ----            ----
                                                            25.3          56.6            18.7            37.6
                                                            ====          ====            ====            ====

</TABLE>



18       Deferred Income


in millions                                                   1998        1997
                                                              ----        ----

Government capital grants                                      1.8         1.6
Other deferred income                                          4.0         2.7
                                                               ---         ---
                                                               5.8         4.3
                                                               ===         ===

Government capital grants
At 1 April 1997                                                            1.6
Receivable during the period                                               0.3
Credited to profit and loss account                                       (0.1)
                                                                           ---
At 31 March 1998                                                           1.8
                                                                           ===



                                      A-22

<PAGE>



Notes continued

19       Called up share capital

<TABLE>
<CAPTION>


                                                      Number of shares                Group and Company
                                                   1998              1997             1998           1997
                                                    No                No          in millions    in millions
                                                 -------           -------        -----------    -----------
<S>                                           <C>               <C>                      <C>           <C>
Authorised

Ordinary shares of 1 each                     125,000,000       125,000,000              125           125
                                              ===========       ===========              ===           ===

</TABLE>


Allotted, called up and fully paid                          No       in millions
                                                            --       -----------
Ordinary shares of 1 each
At 1 April 1997                                        98,603,022         98.6
Shares issued at a premium of 0.30                        667,664          0.7
Shares issued at a premium of 0.69                        162,134          0.1
                                                       ----------         ----
                                                       99,432,820         99.4
                                                       ==========         ====


     At 31 March 1998 options  totalling  7,821,019  (1997:  7,546,521)  were in
issue exercisable at the prices and over the time frames detailed below.


Exercisable between                                  Exercise          Number
                                                       price           options
                                                       -----           -------
10 September 1999 and 10 September 2006                 1.00            900,000
10 September 1999 and 10 September 2003                 1.00          1,600,000
10 September 1999 and 10 September 2006                 1.00          1,050,000
16 September 2000 and 16 September 2004                 1.30            100,000
16 September 2000 and 16 September 2004                 1.69            179,498
18 November 2000 and 18 November 2004                   1.69             35,000
At any time                                             2.20          3,956,521
                                                                      ---------
                                                                      7,821,019
                                                                      =========


     At 31 March 1998 warrants  totalling  3,602,842  (1997:  3,565,747) were in
issue which are exercisable at the warrant holders discretion at a price of 0.01
each.  Subsequent to the balance sheet date a further  633,338  (1997:  667,661)
shares were issued to the Employee Share Trust in respect of options  granted to
employees  giving rise to an  entitlement  to a further  21,275  (1997:  24,059)
warrants.





                                      A-23

<PAGE>


Notes continued

20       Reserves

<TABLE>
<CAPTION>
Group                                Group &           Group              Company             Group
                                     Company
in millions                           Share       Capital reserve       Revaluation      Profit and loss
                                     premium            1998              reserve            account
                                     Account                                1998              1998
                                       1998
                                       ----             ----                ----              ----
<S>                                     <C>             <C>                 <C>              <C>  
At 1 April 1997                         1.2             21.2                20.6              (1.8)
Interest capitalised                      -                -                   -               2.1
Transfer to intangible assets             -            (21.2)              (17.8)              1.3
                                        ---             ----                ----              ----
Restated                                1.2                -                 2.8               1.6

Premium on shares issued                0.3                -                   -                 -
Retained profit for period                -                -                   -              48.4
Revaluation of investment in
   subsidiaries                           -                -                49.8                 -
                                        ---             ----                ----              ----
At 31 March 1998                        1.5                -                52.6              50.0
                                        ===             ====                ====              ====

</TABLE>
Company

The company's loss for the financial period was 1.4 million (1997: 1.2 million).


21       Commitments

     (i)  Capital  commitments  at the end of the  financial  year for  which no
provision has been made.


in millions                          Group      Company       Group      Company
                                      1998        1998         1997        1997
                                      ----        ----         ----        ----

Contracted                           411.0           -          1.1           -
Authorised but not contracted         45.1           -          0.3           -
                                     -----         ---          ---         ---
                                     456.1           -          1.4           -
                                     =====         ===          ===         ===

     (ii) There were no commitments at the year end to enter into finance leases
starting after the year end.

     (iii) Annual  commitments  under  non-cancellable  operating  leases are as
follows:

<TABLE>
<CAPTION>

in millions                                            1998                      1997
                                               Land and       Other      Land and       Other
                                               buildings                 buildings
                                               ---------      -----      ---------      -----
<S>                                               <C>          <C>           <C>          <C>
Group
Operating leases which expire:
Within one year                                   0.6            -             -            -
In the second to fifth years inclusive              -          0.4           0.6          0.1
Over five years                                   0.9            -           0.9            -
                                                  ---          ---           ---          ---
                                                  1.5          0.4           1.5          0.1
                                                  ===          ===           ===          ===
</TABLE>

     The company did not have any commitments  under  non-cancellable  operating
leases.



                                      A-24
<PAGE>



Notes continued

21       Commitments continued

     (iv) Fuel Hedge Contracts

     English  Welsh & Scottish  Railway  Ltd has  entered  into a number of fuel
hedge  contracts  for gas oil,  none of which extend  beyond 31 March 1999.  The
quantity hedged is equivalent to twenty one weeks consumption.

     (v) Interest Rate Contracts

     English  Welsh & Scottish  Railway  Holdings  Ltd  entered  into a contract
commencing  on 17  January  1997 of three  years  duration  to pay or receive as
appropriate  the  difference  between  interest on 25 million at a fixed rate of
7.08% and 3 month LIBOR.

     English  Welsh & Scottish  Railway  Holdings  Ltd  entered  into a contract
commencing  on 4  September  1997 of five  years  duration  to pay or receive as
appropriate  the  difference  between  interest on 25 million at a fixed rate of
7.269% and 3 month LIBOR.

     New Locomotive Finance Ltd entered into a contract commencing on 15 January
1998 of two years  duration  to pay or receive  as  appropriate  the  difference
between  interest  on  USD52  million  at a  fixed  rate  of  6.07%  and 3 month
USD-LIBOR.


22       Pension scheme

     Contributions  to the group's defined benefit pension scheme are charged to
the profit and loss account so as to spread the cost of pensions over employees'
working lives with the group.  The  contributions  are determined by a qualified
actuary  using the  projected  unit method.  The most recent  valuation was at 1
April 1998. The assumptions adopted by the pension fund's actuary which have the
most significant effect on the results of the valuation are detailed below.

     These assumptions are:

     o    Salary inflation has been assumed to be 6.5% per annum.

     o    Pensions growth has been assumed to be 4.5% per annum.

     o    Return on investments has been assumed to be 9% (1997:8.5%) per annum.

     The most recent  actuarial  valuation  showed that the market  value of the
scheme's  assets was 580.1 million (1997:  348.2 million) and that the actuarial
value of those assets  represented at least 110% of the liabilities for benefits
that had accrued to members,  after  allowing for expected  future  increases in
earnings.  Since acquisition a surplus has arisen of 18.1 million which is being
amortised to the profit and loss account over the estimated working lives of the
employees.

     On 15 October  1997 the  trustees of the Railway  Pension  Scheme  agreed a
package of benefit improvements for members. At the same time it was agreed that
employer  contributions,  previously  7.5% of  pensionable  pay, would cease for
three years and that employee  contributions would continue at 5% of pensionable
pay.

     On 22 June 1998 the trustees of the Railway Pension Scheme, agreed the same
package of benefit improvements for RfD employees.  Similarly it was agreed that
employer  contributions,  previously  7.5% of  pensionable  pay, would cease for
three years and that employee  contributions would continue at 5% of pensionable
pay.

     In addition, the group operates a defined contribution pension scheme under
which members  contributions are matched on a pound for pound basis. The pension
cost charge for the period amounted to 1.9 million (1997: 3 million).






                                      A-25

<PAGE>



Notes continued

23  Reconciliation  of  operating  profit  to net  cash  inflow  from  operating
activities

<TABLE>
<CAPTION>

in millions                                                            1998            1997
                                                                                      17 1/2
                                                                                      months
                                                                       ----           ------

<S>                                                                    <C>             <C> 
Operating profit                                                       68.1            16.7
Depreciation charge                                                    15.1            15.1
Amortisation of goodwill                                               (2.7)           (1.3)
Provision against shares held by EW & S Employee Share Trust            0.7               -
(Increase)/Decrease in stocks                                          (3.8)            2.1
(Increase)/Decrease in debtors                                         65.9           (12.8)
Increase/(Decrease) in creditors and provision                        (81.7)           56.3
                                                                       ----            ----
Net cash inflow from operating activities                              61.6            76.1
                                                                       ====            ====
</TABLE>


24 Analysis of cash flows for headings netted in the cash flow statement

<TABLE>
<CAPTION>

in millions                                                                         1998           1997
                                                                                                  17 1/2
                                                                                                  months
                                                                                    ----          ------

<S>                                                                                <C>           <C>
Returns on investments and servicing of finance
Interest received                                                                    1.1            2.4
Interest paid                                                                      (14.2)         (16.7)
                                                                                    ----           ----
Net cash outflow for returns on investments and servicing of finance               (13.1)         (14.3)
                                                                                    ====           ====

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                  (77.7)         (30.3)
Sale of tangible fixed assets                                                        0.5            1.0
                                                                                    ----           ----
Net cash outflow for capital expenditure and financial investment                  (77.2)         (29.3)
                                                                                    ====           ====

Acquisitions and disposals
Acquisition of subsidiary                                                           (4.2)        (243.9)
Acquisition of National Power rail unit assets                                     (18.7)             -
                                                                                    ----          -----
Net cash outflow for acquisitions and disposals                                    (22.9)        (243.9)
                                                                                    ====          =====

</TABLE>






                                      A-26
<PAGE>


Notes continued

25       Analysis of net debt

<TABLE>
<CAPTION>


in millions                 At 1 April       Cash flow      Acquisition        Non cash          At 31
                                1997                                            changes        March 1998
                                ----         ---------      -----------         -------        ----------

<S>                           <C>              <C>              <C>               <C>            <C> 
Cash at bank                    28.8             4.4               -                 -             33.2
Overdraft                       (0.7)          (11.9)              -                 -            (12.6)
                               -----            ----             ---               ---            -----
                                28.1            (7.5)              -                 -             20.6

Debt due after one year       (137.0)          (51.4)              -               2.7           (185.7)
Debt due within one year        (7.5)            7.5               -              (5.0)            (5.0)
Finance leases                  (0.2)            0.1            (2.4)                -             (2.5)
                               -----            ----             ---               ---            -----
                              (144.7)          (43.8)           (2.4)             (2.3)          (193.2)
                               -----            ----             ---               ---            -----
Total                         (116.6)          (51.3)           (2.4)             (2.3)          (172.6)
                               =====            ====             ===               ===            =====

</TABLE>


in millions                                                 1998          1997
                                                                         17 1/2
                                                                         months
                                                            ----         ------

Reconciliation of net cash flow to movement in debt

(Decrease)/Increase in cash in the period                   (7.5)          28.1

Cash inflow from increase in debt and lease financing      (43.8)        (140.9)
                                                           -----          -----

Change in debt resulting from cash flows                   (51.3)        (112.8)

Finance leases acquired with subsidiaries                   (2.4)          (0.2)

Amortisation of finance costs                               (2.3)          (3.6)
                                                           -----          -----

Movement in net debt in period                             (56.0)        (116.6)

Net debt at 31 March 1997                                 (116.6)             -
                                                           -----          -----
Net debt at 31 March 1998                                 (172.6)        (116.6)
                                                           =====          =====


26       Ultimate parent company and parent undertaking of larger group

         The company has no parent undertaking and therefore its results are not
         consolidated in the accounts of any other entity.




                                      A-27

<PAGE>



Notes continued

27       Supplemental US GAAP information

         As at 31  March  1998,  Wisconsin  Central  Transportation  Corporation
         (WCTC), a US company  registered  with the US  Securities  and Exchange
         Commission  (SEC), held an approximate 34% interest in English  Welsh &
         Scottish Railway Holdings Limited (EWSRH).

         a)   Basis of analysis :

          In compliance with UK legislation, the first accounts of EWSRH covered
          a  period  from   incorporation   to  31  March  1997,   a  period  of
          approximately seventeen  and a half months.  Set out below (to  comply
          with the  SEC's  rule  that  precludes  audited  financial  statements
          covering  periods  in excess of twelve  months)  is a summary of those
          results analysing how they arose between the period from incorporation
          to 31 March 1996 and the years ended 31 March 1997 and 1998.

<TABLE>
<CAPTION>



                                                    Year ended     Year ended   5 1/2 months    Period ended
                                                     31 March       31 March      ended 31        31 March
in millions                                             1998           1997      March 1996          1997
                                                        ----           ----      ----------          ----
Profit and loss account :

<S>                                                    <C>            <C>           <C>             <C>  
Turnover                                               528.2          535.5          73.5            609.0

Change in stock of spares                               11.3           (0.6)         (1.5)            (2.1)
Other operating income                                     -            0.2           0.1              0.3
Raw materials and consumables                          (43.5)         (80.0)         (3.3)           (83.3)
Other external charges                                (239.0)        (203.2)        (36.7)          (239.9)
Staff costs                                           (173.9)        (169.4)        (21.1)          (190.5)
Redundancy and restructuring costs                         -          (63.0)            -            (63.0)
Depreciation                                           (15.0)         (12.3)         (1.5)           (13.8)
                                                       -----          -----          ----            -----
Operating costs                                       (460.1)        (528.3)        (64.0)          (592.3)
                                                       -----          -----          ----            -----

Operating profit                                        68.1            7.2           9.5             16.7

Profit/(loss) on sale of fixed assets                    0.1           (0.2)            -             (0.2)
Other interest recievable and similar income             1.1            1.8           0.6              2.4
Interest payable and similar charges                   (12.4)         (16.2)         (2.0)           (18.2)
                                                       -----          -----          ----            -----

Profit/(loss) on ordinary activities before taxation    56.9           (7.4)          8.1              0.7

Current taxation                                        (4.7)           1.1          (3.2)            (2.1)
Deferred taxation                                       (3.8)           3.0             -              3.0
                                                       -----          -----          ----            -----
Retained profit/(loss) for the period                   48.4           (3.3)          4.9              1.6
                                                       =====          =====          ====            =====

Reconciliation of movement in shareholders' funds:

Retained profit/(loss) for the period                   48.4           (3.3)          4.9              1.6

New share capital subscribed                             0.8            7.6          91.0             98.6
Share premium arising on new share capital               0.3            1.2             -              1.2
                                                       -----          -----          ----            -----
Net addition to shareholders' funds                     49.5            5.5          95.9            101.4

Opening shareholders' funds                            101.4           95.9             -                -
                                                       -----          -----          ----            -----
Closing shareholders' funds                            150.9          101.4          95.9            101.4
                                                       =====          =====          ====            =====

</TABLE>


                                      A-28

<PAGE>



Notes continued

27       Supplemental US GAAP information continued

<TABLE>
<CAPTION>


                                                    Year ended     Year ended   5 1/2 months    Period ended
                                                     31 March       31 March      ended 31        31 March
in millions                                             1998           1997      March 1996          1997
                                                        ----           ----      ----------          ----
Cash flow statement:

<S>                                                    <C>             <C>         <C>              <C> 
Operating profit                                        68.1            7.2           9.5             16.7

Depreciation charge                                     15.1           13.7           1.4             15.1
Amortisation of goodwill                                (2.7)          (1.3)            -             (1.3)
Provision against shares held by
EWS employee share trust                                 0.7              -             -                -
(Increase)/Decrease in stocks                           (3.8)           0.6           1.5              2.1
(Increase)/Decrease in debtors                          65.9           32.6         (45.4)           (12.8)
Increase/(Decrease) in creditors and provisions        (81.7)          13.2          43.1             56.3
                                                       -----          -----         -----            -----

Net cash flow from operating activities                 61.6           66.0          10.1             76.1

Interest received                                        1.1            1.8           0.6              2.4
Interest paid                                          (14.2)         (14.7)         (2.0)           (16.7)
                                                       -----          -----         -----            -----
Net cash outflow from returns on investment and
servicing of finance                                   (13.1)         (12.9)         (1.4)           (14.3)


Purchase of fixed assets                               (77.7)         (27.8)         (2.5)           (30.3)
Sale of fixed assets                                     0.5           (0.4)          1.4              1.0
                                                       -----          -----         -----            -----
Net cash inflow from capital expenditure and
financial investment                                   (77.2)         (28.2)         (1.1)           (29.3)

Acquisitions of subsidiaries                           (22.9)           0.3        (244.2)          (243.9)

Financing :
Issue of ordinary share capital                          0.3            8.8          91.0             99.8
Long term loans raised                                  68.8            5.0         180.0            185.0
Costs of raising long term finance                      (0.9)          (3.0)         (8.7)           (11.7)
Repayment of long term loans                           (24.0)         (32.4)            -            (32.4)
Repayment of finance leases                             (0.1)             -             -                -
                                                       -----          -----         -----            -----

Net cash inflow from financing                          44.1          (21.6)        262.3            240.7
Taxation paid                                              -           (1.2)            -             (1.2)
                                                       -----          -----         -----            -----
(Decrease)Increase in cash and cash equivalents         (7.5)           2.4          25.7             28.1
                                                       =====          =====         =====            =====
</TABLE>


    
                                      A-29
<PAGE>



Notes continued

27       Supplemental US GAAP information continued


                                                          31 March      31 March
in millions                                                  1998          1997
                                                             ----          ----

Fixed assets :

Tangible assets                                              445.6        276.3
Intangible assets                                           (120.8)       (20.0)
Investments                                                    1.3            -
                                                             -----        -----
                                                             326.1        256.3

Current assets:

Stocks                                                        20.3          9.0
Debtors due in more than one year                             96.3         66.8
Debtors due within one year                                  113.2         99.0
Cash at bank and in hand                                      20.6         28.1
                                                             -----        -----
                                                             250.4        202.9

Creditors: amounts falling due within one year              (117.9)      (106.3)
                                                             -----        -----
Net current assets                                           132.5         96.6
                                                             -----        -----

Total assets less current liabilities                        458.6        352.9

Creditors: amounts falling due after more than one year     (187.7)      (137.1)
Provisions for liabilities and charges                      (114.2)      (110.1)
Deferred Income                                               (5.8)        (4.3)
                                                             -----        -----

Net assets                                                   150.9        101.4
                                                             =====        =====

Capital and reserves

Called up share capital                                       99.4         98.6
Share premium reserve                                          1.5          1.2
Profit and loss account                                       50.0          1.6
                                                             -----        -----

Equity shareholders' funds                                   150.9        101.4
                                                             =====        =====


                                      A-30

<PAGE>



Notes continued

     27  Supplemental US GAAP information continued



         b) Summary of significant differences between UK and US GAAP.

              As stated in note 9, the UK GAAP profit and loss  account for  the
              period ended 31 March 1997 has been restated to reflect changes in
              accounting policy.

              Set  out  below  is a  reconciliation  of  the  profit/(loss)  and
              shareholders'  funds as set out above under UK GAAP to those under
              US GAAP to comply with SEC requirements.

<TABLE>
<CAPTION>

                                                            Year ended    Year ended    5 1/2 months
                                                              31 March      31 March       ended 31
in millions                                                      1998          1997       March 1996
                                                                 ----          ----       ----------

<S>                                                             <C>           <C>             <C>
Net profit/(loss) in accordance with UK GAAP                     48.4          (3.3)           4.9


Redundancy and restructuring costs      (a)                         -          63.0              -
Expenditure on rolling stock            (b)                      13.1          21.8            6.4
Pensions                                (c)                       2.0           1.4            0.3
Capitalisation of interest              (d)                         -           0.2              -
Taxation                                (e)                     (11.5)        (29.2)          (2.2)
Amortisaton of goodwill                 (f)                      (0.5)         (3.0)          (0.2)
Application of negative goodwill
to fixed assets                         (g)                       0.8             -              -
                                                                 ----          ----            ---

Net profit in accordance with US GAAP                            52.3          50.9            9.2
                                                                 ====          ====            ===

</TABLE>


                                                             As at        As at
                                                           31 March     31 March
in millions                                                   1998         1997
                                                              ----         ----

Shareholders' funds in accordance with UK GAAP               150.9        101.4

Redundancy and restructuring costs      (a)                   63.0         63.0
Expenditure on rolling stock            (b)                   41.3         28.2
Pensions                                (c)                    3.7          1.7
Capitalisation of interest              (d)                    0.2          0.2
Taxation                                (e)                  (42.9)       (31.4)
Amortisaton of goodwill                 (f)                   (3.7)        (3.2)
Application of negative goodwill
to fixed assets                         (g)                    0.8            -
                                                             -----        -----

Shareholders' funds in accordance with US GAAP               213.3        159.9
                                                             =====        =====



                                      A-31

<PAGE>


Notes continued

     27  Supplemental US GAAP information continued


     The material adjustments made for US GAAP purposes as analysed above are as
follows:

a)        redundancy and restructuring  costs in connection with the acquisition
          of  businesses  which must be  expensed  under FRS 7: "Fair  Values in
          Acquisition   Accounting"  in  the  UK,  but  treated  as  fair  value
          adjustments  in the  acquisition  balance sheet for US GAAP  purposes,
          provided certain criteria are met;

b)        deferral,   net  of  6.9  million,  2.8  million and  0.1  million  of
          amortisation,  for the years ended 31 March 1998 and 31 March 1997 and
          the 5 1/2 month period ended 31 March 1996,  respectively,  of certain
          expenditures relating to rolling stock which have been expensed in the
          UK GAAP accounts;

c)        difference in calculation  of pension  surplus and charge between SSAP
          24:  "Acounting  for  Pensions"  in the UK and  SFAS  87:  "Employers'
          Accounting  for  Pensions"  and SFAS 88:  "Employers'  Accounting  for
          Settlements  and   Curtailments  of  Defined  Benefit  Plans  and  for
          Termination Benefits" for US GAAP purposes;

d)        capitalisation  of interest  costs  relating to the  purchase of fixed
          assets which have been expensed in the UK GAAP accounts;

e)        full   provisions  for  deferred   taxation  under  US  GAAP  for  the
          consequences of all temporary  differences between carrying values for
          financial reporting and tax purposes (UK GAAP only recognises deferred
          tax assets and  liabilities  to the extent  that they relate to timing
          differences  which are expected to reverse in the foreseeable  future)
          and taxation adjustments for other items included in the reconciliaton
          above;

f)        goodwill  has  been  adjusted  as  a  result  of  certain  US/UK  GAAP
          differences,   notably   being   increased  by  the   redundancy   and
          restructuring  costs  resulting  in the  elimination  of  the  capital
          reserve  (negative  goodwill)  arising  under  UK  GAAP.  Goodwill  is
          amortised over a 40 year period for US GAAP purposes;

g)        under acquisition accounting for US GAAP the capital reserve (negative
          goodwill) arising under UK GAAP is partially  eliminated against fixed
          assets;

h)        the group  prepares its  Consolidated  Statements  of Cashflows  under
          Financial Reporting Standard No. 1 "Cashflow  Statements" (FRS 1). Its
          objectives  and  principles  are  similar  to those  set out in the US
          Statement of Financial Accounting Standards No. 95, "Statement of Cash
          Flows"  (SFAS 95).  The  principal  difference  between the  standards
          relates  to  classification.  Under  FRS 1,  the  Group  presents  its
          cashflows  from (a) operating  activities;  (b) returns on investments
          and servicing of finance;  (c) taxation;  (d) investing activities and
          (e) financing  activities.  SFAS 95 requires only three  categories of
          cashflow activities:  (a) operating; (b) investing and (c) financing .
          Cashflows  from taxation and returns on  investments  and servicing of
          finance shown under FRS 1 would be included as cashflow from operating
          activities  under  SFAS 95.  In  addition,  under FRS 1, cash and cash
          equivalents  include short term borrowings with original maturities of
          three  months or less.  SFAS 95 requires  movements on such short term
          borrowings to be shown under financial activities.





                                      A-32