July 31, 2000

Canadian National Railway has continued its positive earnings trend in the second quarter of 2000. The company earned $1.15 per diluted share versus the comparable quarter’s earnings in 1999 of $1.00 per diluted share. These results are particularly impressive as the company battles increasing fuel costs. Although CN’s fuel expense significantly increased by 46% in the quarter, the company was still able to report its best ever-operating ratio of 68.6%.

In December 1999 CN and Burlington Northern Santa Fe Corp. announced plans to merge their two railways. Unfortunately, the U.S. Surface Transportation Board’s decision to implement a 15-month moratorium on rail mergers terminated their plans. Both companies felt that it was not in the best interests of shareholders to continue the merger proceedings once the moratorium was put in place. The decision to abandon the merger has definitely not discouraged new initiatives by CN. The company recently announced a route-sharing agreement with Canadian Pacific, which should be mutually beneficial to both companies. This agreement should reduce operating costs significantly.

It is evident that CN remains focused on becoming the best-run railroad in North America. CN’s solid fundamentals and excellent management team headed by Paul Tellier gives us continued confidence that the company is on the right track.

October 27, 2000

Canadian National Railway is an old economy stock that has had to contend with increasing fuel costs and the fear of a slowing economy. Despite this, we were pleased to see CN report earnings per share for third quarter 2000 of $1.09 compared to $0.96 in the same quarter of 1999. Revenues increased 4% to $1.33 billion and although fuel costs rose 44% in the quarter, total expenses only rose 2%. This led to an impressive operating ratio of 69.4%.

CN's strong free cash flow of approximately $290 million year to date has allowed the company to be aggressive in buying back its stock which is anti-dilutive. To date, CN has purchased 11.4 million shares of its 13 million share repurchase plan at an average price of $40.

CN is one of the most proactive companies in the railway industry. While we are unsure whether merger talks with Burlington Northern will be revisited, the two companies have, in the meantime formed an alliance in order to share some of their track systems. Joint ventures such as this along with continued cost cutting initiatives have strengthened CN's fundamental base and investor confidence.

January 26, 2001

Canadian National Railway once again reported impressive 2000 fourth quarter earnings of $1.20 versus $1.03 in the comparable quarter. Improved earnings were achieved despite an economic slowdown which produced flat quarter over quarter revenues. This economic slowdown, however, did not hinder CN's ability to achieve an operating ratio of 68.3%, the lowest in the industry despite significantly higher fuel costs. CN was also able to increase its free cash flow to 7% of revenues, which prompted the company to institute a dividend increase and share repurchase program.

Despite this excellent quarter, we are concerned that CN could be victim to further economic decline and have taken the opportunity to sell our entire position at an average price of about $49.50.