Financial Statement-31/12/99

RNS Number:3776R
St. Lawrence & Ottawa Railway Co   
22 September 2000

                  THE ST. LAWRENCE AND OTTAWA RAILWAY COMPANY

                               Financial Statement
                                December 31, 1999


Letter Dated March 22, 2000


Auditors' Report

To the Shareholders of
The St. Lawrence and Ottawa Railway Company

We have audited the balance sheet of The St. Lawrence and Ottawa Railway
Company as at December 31, 1999. This balance sheet is the responsibility
of the company's management. Our responsibility is to express an opinion
on this balance sheet based on our audit.

We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statement is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.

In our opinion, this balance sheet presents fairly, in all material
respects, the financial position of the company as at December 31, 1999
in accordance with Canadian generally accepted accounting principles.

PricewaterhouseCoopers LLP
Chartered Accountants

PricewaterbouseCoopers refers to the Canadian firm of
PricewaterhouseCoopers LLP and other members of the worldwide
PricewaterhouseCoopers organization.





The St. Lawrence and. Ottawa Railway Company
Balance Sheet
As at December 31, 1999

                                                      1999         1998
                                                         $            $
Assets

Rights under lease (note 2)                      1,763,242    1,763,242


Liabilities

4% First Mortgage Bonds due 2880
 (notes 3 and 4) #200,000 translated
  at the historical rate of Cdn$4.86-2/3
  to the #1                                         973,333     973,333


Shareholders' Equity

Capital stock
Authorized
   $3,500,000 in capital stock

Issued and fully paid
   Preference stock                                 789,909      789,909


                                                  1,763,242    1,763,242

See notes to balance sheet.



The St. Lawrence and Ottawa Railway Company
Notes to Financial Statement
December 31, 1999

1  Incorporation and business

  The St. Lawrence and Ottawa Railway Company ("the company") was
  incorporated as the Bytown and Prescott Railway Company by Special Act
  of the Parliament of Canada in 1850 to construct and operate a line
  from Bytown (Ottawa) to Prescott. In 1855 the company's name was
  changed to the Ottawa and Prescott Railway Company (0 & P). The
  railway was sold under foreclosure in 1866. In the same year, all the
  lands, rights, privileges, franchises and appurtenances belonging to
  the 0 & P were granted to Joseph Robinson for the purpose of railway
  construction. In 1867 the 0 & P was reincorporated as The St. Lawrence
  and Ottawa Railway Company, and the company was declared to be a work
  for the general advantage of Canada. In 1871 the line was extended to
  the Town of Hull, and this extension was known as the Chaudiere
  Extension.

   By lease dated September 26, 1884, the property of the company was
   leased to Canadian Pacific Railway Company (CPR) for 999 years from
   December 15, 1881.

2  Rights under lease

  The lease to CPR was made in consideration of a rental consisting of
  interest at the rate of 4% per annum on the First Mortgage Bonds (the
  Bonds) of the company. The interest was paid by CPR in respect of the
  year ended December 31, 1999 by semi-annual payments directly to the
  holders of the Bonds. The lease entitles CPR to exercise all the
  franchises and powers of the company, and obligates CPR to administer
  the affairs of the company at its own expense.

  As a result of the provisions of the lease, the company had no income
  and no expense during the year. Accordingly, as in previous years, no
  income statement has been prepared since it would reflect nil entries
  throughout. All expenses related to the company in the year ended
  December 31, 1999, including the interest payments due to holders of
  the Bonds described above, have been paid by CPR.

  All of the company's assets have been leased to CPR until the year
  2880 under the lease, as mentioned above. For the purposes of the
  financial statement, the company's interest in its undertaking has
  been stated at an amount equivalent to the aggregate of the
  outstanding amounts of the Bonds and Capital Stock.

  Lands considered surplus to railway requirements have been sold from
  time to time. CPR has reported that, in compliance with statutory
  requirements, the sale proceeds have been applied to permanent
  improvements of the company's line. CPR has advised that during 1999,
  no parcels of land accounted for in its St. Lawrence and Ottawa
  Railway Company property section were sold (1998 - nil) and that no
  expenditures were made by CPR (1998 - nil) for permanent
  improvements to property accounted for in this property section.



The St. Lawrence and Ottawa Railway Company
Notes to Financial Statement
December 31, 1999

3  Liabilities

   The lease provides for an undertaking by CPR to pay interest due to
   holders of the Bonds at the rate stipulated above during the term of
   the lease. As provided for under the lease, such payments are made by
   CPR directly to holders, without involvement by the company.

   As a result of the lease, the obligations of the company to holders
   of its Bonds became, in effect, obligations of CPR. Such obligations
   would revert to the company only in the event of the termination of
   the lease. Notwithstanding CPR's assumption of all the obligations
   related to the securities by CPR, the amounts of issue and outstand-
   ing Bonds continue to be shown on the company's balance sheet.

4  Exchange rate

   The company's balance sheet is presented in Canadian dollars. The
   Bonds were issued in pounds sterling (#).  The company's practice has been
   to translate the principal amount to Canadian dollars at the
   historical exchange rate of #1 = Cdn$4.86 - 2/3 (in effect in 1881).
   If the principal amount was translated into Canadian dollars at
   the exchange rate in effect as at December 31, 1999 (#1 = Cdn$2.33),
   the principal amount of the Bonds would be shown as $466,000.

5  Fair value of rights under lease

   The lease extends to the year 2880 and, as described above, provides
   for a fixed annual rent which exactly matches the aggregate amount of
   the annual payments the company is obligated to make to holders of
   its securities. All such payments are, as mentioned above, paid by
   CPR directly to the holders concerned. The company earns no income
   under the lease and has no other assets or income and therefore
   reports no income. The assets subject to the lease (the railway)
   revert to the company only on the termination of the lease. Since the
   lease extends to the year 2880 and there has been no event of
   termination since the lease came into effect in 1881, and no
   prospect of any such event occurring in the foreseeable future, there
   is no reasonably determinable basis upon which to ascribe any amount
   as the fair value of the rights under lease.

6  Related parties

   CPR holds a significant portion of all outstanding securities issued
   by the company (96.49% of the preference stock and 26.05% of the
   Bonds).


The St. Lawrence and- Ottawa Railway Company
Notes to Financial Statement 
December 31, 1999


7  Uncertainty due to the Year 2000 Issue

   The Year 2000 Issue arises because many computerized systems use two
   digits rather than four to identify a year. Date-sensitive systems may
   recognize the year 2000 as 1900 or some other date, resulting in
   errors when information using year 2000 dates is processed. In
   addition, similar problems may arise in some systems which use certain
   dates in 1999 to represent something other than a date. Although the
   change in date has occurred, it is not possible to conclude that all
   aspects of the Year 2000 Issue that may affect the entity, including
   those related to customers, suppliers, or other third parties, have
   been fully resolved.