935 de La Gauchetière Street West, Montreal, Quebec H3B 2M9 www.cn.ca 2001 Annual Report How far can CN go? 2001 Annual Report Shareholder and investor information Contents Annual meeting Stock exchanges 1 2001 Overview The annual meeting of shareholders will be held Canadian National common shares are listed on the 18 Message from Paul M. Tellier at 10:30 am on Tuesday, April 16, 2002 Toronto and New York stock exchanges. 19 Financial summary at the World Trade and Convention Centre, Halifax, NS 22 How far can CN go? Ticker symbols: 24 Message from David McLean CNR (Toronto Stock Exchange) CNI (New York Stock Exchange) 25 Going further for our communities Annual information form 28 CN at a glance The annual information form may be obtained by writing to: 30 Glossary of terms The Corporate Secretary Investor relations 31 Financial Section (U.S. GAAP) Canadian National Railway Company Robert Noorigian 67 Financial Section (Canadian GAAP) 935 de La Gauchetière Street West Vice-President, Investor Relations 103 The CN Pension Plan and the Montreal, Quebec H3B 2M9 Telephone: 1-800-319-9929 CN 1935 Pension Plan (514) 399-0052 111 President’s Awards for Excellence 112 Board of Directors Transfer agent and registrar 114 Executive Officers of the Company Computershare Trust Company of Canada Shareholder services Shareholders having inquiries concerning their shares 115 Shareholder and investor information Offices in: or wishing to obtain information about CN should contact: Montreal, QC; Toronto, ON; Calgary, AB; Vancouver, BC Toll-free: 1-800-332-0095 Computershare Trust Company of Canada Montreal telephone: (514) 982-7800 Shareholder Services Fax: (514) 982-7635 Web: www.computershare.com P.O. Box 1542 Station B Montreal, Quebec H3B 3L2 Co-transfer agent and co-registrar Telephone: 1-800-332-0095 Computershare Trust Company of New York (514) 982-7800 88 Pine Street, 19th Floor Email: [email protected] Wall Street Plaza, New York, NY 10005 Telephone: (212) 701-7600 or 1-800-245-7630 Head office Canadian National Railway Company U.S. cash dividends 935 de La Gauchetière Street West Shareholders wishing to receive dividends in U.S. dollars may Montreal, Quebec H3B 2M9 obtain detailed information by communicating with: P.O. Box 8100 Computershare Trust Company of Canada Montreal, Quebec H3C 3N4 Telephone: (514) 982-7800 or 1-800-332-0095 The journey is Additional copies of this report are La version française du présent rapport available from: est disponible à l’adresse suivante : Except where otherwise Canadian National Canadien National indicated, all financial infor- Public Affairs Affaires publiques mation reflected in this docu- 935 de La Gauchetière Street West 935, rue de La Gauchetière Ouest ment is expressed in Canadian Montreal, Quebec H3B 2M9 Montréal (Québec) H3B 2M9 dollars and determined Telephone: (514) 399-7212 Téléphone : (514) 399-7212 on the basis of United States Toll-free: 1-888-888-5909 Numéro sans frais : 1-888-888-5909 generally accepted accounting Fax: (514) 399-5344 Télécopieur : (514) 399-5344 principles (U.S. GAAP). www.cn.ca www.cn.ca This report has been printed on recycled paper. “How far can CN go?” A good question, asked of us often. We did well our first six years. But that’s in the past. Our focus is forward. On how we can deliver quality top-line growth while we continue to drive out costs. On how we can extend competitive advantage and reach for our customers. On how we can continue to increase shareholder value. Everyone wants to know how much further we can go. Here’s our answer: far from over. We can go much further, for our customers, employees and investors, and that’s what we are doing. Canadian National Railway Company 1 The plan is 2 Canadian National Railway Company Our service plan is unlike any in the industry, enabling true scheduled operations across the entire CN network. It has created unheard-of levels of speed, efficiency and reliability of our service, and results have reflected it. working. Canadian National Railway Company 3 Operating Ratio Improvement and Top-line Growth Our service plan has steadily improved the reliability and precision of our operations while allowing us to dramatically reduce assets. We’ve increased our top line by 46 per cent since 1995 through internal growth and acquisitions; meanwhile CN operating ratio performance has moved from worst to first among rail companies. We can go further. 4 Canadian National Railway Company OperatingOperating RatioRatio(1)(1) ExcludingExcluding specialspecial chargescharges PercentagePercentage 19971997 78.478.4 19981998 75.375.3 19991999 72.072.0 20002000 69.669.6 20012001 68.568.5 TTop-lineop-line Growth(1) $ in billions 1997 4.3 1998 4.1 1999 5.2 2000 5.4 2001 5.7 (1) The 2001 figures include Wisconsin Central Transportation Corporation from October 9, 2001. Canadian National Railway Company 5 EarningsEarnings PerPer ShareShare (EPS)(EPS)(1)((1)(2)1)(2)(2) ExcludingExcluding specialspecial chargescharges InIn dollarsdollars 19971997 2.722.72 19981998 3.083.08 19991999 3.713.71 20002000 4.674.67 20012001 5.545.54 CNCN StockStock PerformancePerformance NovemberNovember 17,17, 19951995 toto DDecemberecember 31,31, 20012001 $500 $400 $300 $200 $100 0 9696 979 7 989 8 999 9 000 0 010 1 020 2 (Nov.(Nov. 17,17, 1995)1995) ● CNRCNR ● CNICNI ● S&PS&P 500500 ● TSETSE 300300 ● S&PS&P RailRail (1) Diluted EPS before cumulative effect of changes in accounting policy and discontinued operations. (2) The 2001 figure includes Wisconsin Central Transportation Corporation from October 9, 2001. 6 Canadian National Railway Company EPS Growth and Stock Performance Since the IPO, CN has always worked hard to drive profitable growth. Not just through cost containment and efficiency, but also by pursuing higher-quality revenue with higher-value service. The result, we believe, is reflected in EPS improvement as well as stock price growth that has consistently outperformed the industry and every major index. We can go further. Canadian National Railway Company 7 Extending CN’s Reach We are building the railroad we envisioned by con- tinuously and aggressively seeking to expand our network and services through acquisitions and alliances. Greater reach enhances the value we can provide our customers – which ultimately delivers growth for our investors. We can go further. 8 Canadian National Railway Company CN is collaborating CN CN-CSXI with other railroads CN-BNSF as hard as it competes KCS TM with them to find TFM CN-UP new ways to better CN-CP serve customers, reduce costs and grow the top line. Canadian National Railway Company 9 How far can 10 Canadian National Railway Company CN go? Our drive now is to take our performance to the next level, to take our customers further than they ever thought possible for a railroad. Canadian National Railway Company 11 12 Canadian National Railway Company Further for the Canadian Wheat Board CN delivers seamless Until two years ago, the Canadian Wheat Board used ocean vessels to get rail service from its product to customers in Mexico, part of a complicated chain – rail to western Canada to originating port, vessel to destination port, truck to customer. Mexico for grain CN saw a better way. Our service plan and our North American and grain products. north-south network enabled us to offer reliable, seamless single-line rail service from origin to destination. CN’s aluminum hopper cars, Web-based shipment tracking and just-in-time service made rail the clear choice to improve transit performance and inventory management. The result was a win-win. Less handling improved product quality for shippers and receivers while CN was able to convert short- haul, port-destination traffic to higher-revenue long-haul business. CN volume, shipped on behalf of the Canadian Wheat Board, increased twenty-fold from 1999 to 2001, and we see upside potential for this type of service to Mexico. 13 Canadian National Railway Company Canadian National Railway Company 13 14 Canadian National Railway Company Further for Abitibi- Consolidated The world’s largest Abitibi-Consolidated is CN’s largest forest products customer. They supplier of newsprint ship paper to major publishers and commercial printers worldwide. and commercial Since 1999, Abitibi-Consolidated and CN have been jointly exploring printing paper has opportunities to increase rail volumes. focused on improving Rail has inherent cost advantages on long-haul traffic by its transportation carrying, depending on product density, up to 85 metric tons in each efficiencies by increas- ing rail volumes. railcar. This has resulted in economic advantages for both CN and Abitibi-Consolidated. Abitibi-Consolidated and CN recently renewed their commit- ment to continue this joint initiative to maximize rail volume. 15 Canadian National Railway Company Canadian National Railway Company 15 16 Canadian National Railway Company Further for General Motors CN works closely with As GM’s logistics partner in the highly competitive aftermarket parts Schneider Logistics business, Schneider Logistics needed optimal performance in the to optimize rail rail portion of the distribution chain. Schneider Logistics called CN logistics for General Supply Chain Logistics. Motors’ Service Parts Rail traffic flows from GM’s central parts distribution center in Operations. Flint, Michigan, to 12 regional distribution hubs across the United States. Dedicated CN Logistics professionals work on-site at the Flint center to manage day-to-day rail activity, coordinating with Schneider Logistics and interfacing with a number of other rail carriers to maximize performance. In addition to base compensation, CN Supply Chain Logistics can receive incentives that are tied to continuous improvement in asset utilization, dwell time and car supply. CN revenues have steadily improved since the beginning of the contract two years ago. GM recently expanded the agreement to include management of inbound parts supply to the Flint center.