SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

( X ) Filed by the Registrant
( ) Filed by a Party other than the Registrant

Check the appropriate box:

( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-b(e)(2))
( X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12

NORTH CAROLINA RAILROAD COMPANY

(Name of Registrant as Specified In Its Charter)

NORTH CAROLINA RAILROAD COMPANY

(Name of Person(s) Filing Proxy Statement If Other Than Registrant)

PAYMENT OF FILING FEE (Check the appropriate box):

( X ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

(Set forth the amount on which the filing fee is calculated and state how
it was determined)

( ) Fee previously paid with preliminary materials.

( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: $

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

NORTH CAROLINA RAILROAD COMPANY
--------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------

OCTOBER 18, 1996

NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF SHAREHOLDERS OF NORTH
CAROLINA RAILROAD COMPANY WILL BE HELD AT THE CRABTREE MARRIOTT HOTEL, 4500
MARRIOTT DRIVE, RALEIGH, NORTH CAROLINA, 27612 ON TUESDAY, NOVEMBER 12, 1996, AT
9:00 A.M., FOR THE FOLLOWING PURPOSES:

(1) TO ELECT TEN MEMBERS OF THE BOARD OF DIRECTORS OF
WHICH SEVEN DIRECTORS WILL BE ELECTED BY THE STATE OF
NORTH CAROLINA AND THREE DIRECTORS WILL BE ELECTED BY
THE OTHER SHAREHOLDERS;

(2) TO CONSIDER RATIFICATION OF THE SELECTION OF ERNST &
YOUNG AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1996; AND

(3) TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF.

PURSUANT TO THE BYLAWS OF THE NCRR THE BOARD OF DIRECTORS FIXED THE CLOSE
OF BUSINESS ON OCTOBER 3, 1996 AS THE RECORD DATE FOR THE DETERMINATION OF
STOCKHOLDERS ENTITLED TO NOTICE OF AND TO VOTE AT THE MEETING. A COMPLETE LIST
OF THE STOCKHOLDERS ENTITLED TO VOTE AT THE MEETING WILL BE AVAILABLE AT THE
OFFICE OF THE NCRR AT 3200 ATLANTIC AVENUE, SUITE 110, RALEIGH, NORTH CAROLINA
AT LEAST TEN DAYS PRIOR TO THE MEETING.

ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
EVEN IF YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY AS SOON AS POSSIBLE.

JOHN M. ALEXANDER, JR.
SECRETARY

NORTH CAROLINA RAILROAD COMPANY
3200 ATLANTIC AVENUE
SUITE 110
RALEIGH, NORTH CAROLINA 27604

PROXY STATEMENT

OCTOBER 18, 1996

GENERAL

THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY
THE BOARD OF DIRECTORS OF THE NORTH CAROLINA RAILROAD COMPANY ("NCRR") OF
PROXIES IN THE ACCOMPANYING FORM TO BE USED AT THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD TUESDAY, NOVEMBER 12, 1996, 9:00 A.M AT THE CRABTREE
MARRIOTT HOTEL, 4500 MARRIOTT DRIVE, RALEIGH, NORTH CAROLINA, 27612 AND AT ANY
SUBSEQUENT TIME AS MAY BE MADE NECESSARY BY ITS ADJOURNMENT. THE PROXY STATEMENT
AND FORM OF PROXY WERE FIRST SENT TO SHAREHOLDERS ON OR ABOUT OCTOBER 18, 1996.
THE SHARES REPRESENTED BY AND PROXY GIVEN AS A RESULT OF THIS REQUEST WILL BE
VOTED AS SPECIFIED.

AS TO ANY MATTER FOR WHICH NO CHOICE HAS BEEN SPECIFIED IN AN EXECUTED
PROXY, THE SHARES REPRESENTED THEREBY WILL BE VOTED BY THE PERSONS NAMED IN THE
PROXY (1) FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED HEREIN; AND (2)
FOR RATIFYING THE SELECTION OF ERNST AND YOUNG AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED DECEMBER 31, 1996.

THE NCRR'S ANNUAL REPORT INCLUDING FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1995, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, WERE SENT TO
SHAREHOLDERS IN JULY, 1996. ANOTHER COPY OF THE FORM 10-K AND ANY EXHIBIT TO
FORM 10-K IS AVAILABLE UPON REQUEST, WITHOUT CHARGE, TO THE PERSONS WHOSE
PROXIES ARE SOLICITED. WRITTEN REQUESTS SHOULD BE MADE TO JOHN M. ALEXANDER,
JR., SECRETARY, 3200 ATLANTIC AVENUE, SUITE 110, RALEIGH, NORTH CAROLINA 27604.

PROXY SOLICITATION

THE ENTIRE COST OF SOLICITATION OF PROXIES WILL BE BORNE BY NCRR. THE NCRR
EXPECTS TO SOLICIT PROXIES PRIMARILY BY MAIL ALTHOUGH PROXIES MAY BE SOLICITED
BY TELEPHONE, TELEGRAPH OR PERSONALLY BY OFFICERS AND EMPLOYEES OF THE NCRR.

PROXY REVOCATION

ANY SHAREHOLDER WHO HAS EXECUTED A PROXY AND ATTENDS THE MEETING MAY ELECT
TO VOTE IN PERSON RATHER THAN BY PROXY. A SHAREHOLDER MAY REVOKE HIS PROXY AT
ANY TIME BEFORE IT IS VOTED BY FILING WRITTEN NOTICE OF REVOCATION OR BY FILING
A LATER VALID PROXY WITH THE SECRETARY OF THE NCRR. REVOCATIONS WILL BE
EFFECTIVE IF DELIVERED TO THE PRINCIPAL OFFICE OF THE NCRR AT ANY TIME PRIOR TO
THE DAY OF THE SHAREHOLDERS' MEETING, OR IF DELIVERED TO THE SECRETARY OF THE
NCRR AT THE MEETING ANY TIME PRIOR TO THE TIME THE CHAIRMAN OF THE MEETING
CLOSES VOTING ON THE MATTER FOR WHICH THE PROXY IS SOUGHT TO BE REVOKED.

VOTING AND QUORUM REQUIREMENTS

PURSUANT TO THE BYLAWS OF THE NCRR THE BOARD OF DIRECTORS FIXED OCTOBER 3,
1996 AS THE RECORD DATE FOR SHAREHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING
AND ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON THAT DATE WILL BE
ENTITLED TO VOTE. THERE ARE OUTSTANDING 4,283,470 SHARES OF THE COMMON STOCK OF
THE NCRR OF WHICH 3,207,173 SHARES ARE OWNED BY THE STATE OF NORTH CAROLINA WITH
THE REMAINING 1,076,297 SHARES OWNED BY SHAREHOLDERS OTHER THAN THE STATE OF
NORTH CAROLINA (THE "PRIVATELY-OWNED" SHARES). (THE STATE OF NORTH CAROLINA ALSO
HOLDS SHARES IN ESCHEAT SUBJECT TO THE CLAIM OF UNKNOWN OWNERS. THE STATE OF
NORTH CAROLINA HAS ADVISED THAT IT DOES NOT CUSTOMARILY VOTE SHARES HELD IN
ESCHEAT.)

AS A GROUP, AS OF OCTOBER 3, 1996, DIRECTORS AND OFFICERS OF THE NCRR
BENEFICIALLY OWN 18,231 SHARES OF COMMON STOCK OF NCRR, OR APPROXIMATELY 0.42%
OF THE TOTAL ISSUED AND OUTSTANDING SHARES. AS A GROUP, DIRECTORS ELECTED BY THE
"PRIVATELY-OWNED" SHARES BENEFICIALLY OWN 9,305 SHARES OF COMMON STOCK OF THE
NCRR, OR APPROXIMATELY 0.22% OF THE TOTAL ISSUED AND OUTSTANDING SHARES, AND
APPROXIMATELY 0.86% OF THE TOTAL "PRIVATELY-OWNED" SHARES.

PURSUANT TO AGREEMENTS WITH SOME OF THE DIRECTORS ELECTED BY THE STATE OF
NORTH CAROLINA, THE STATE IS ENTITLED TO DIVIDENDS FROM, AND RETAINS TO RIGHT OF
REPURCHASE, AN ADDITIONAL 1,400 SHARES. SHARES OWNED OF RECORD BY DIRECTORS THAT
ARE SUBJECT TO REACQUISITION BY THE STATE OF NORTH CAROLINA ARE DEEMED OWNED BY
THE DIRECTOR PERSONALLY AND IF PRESENT AT THE MEETING AND VOTED WILL BE COUNTED
TOWARD THE MEETING THE QUORUM REQUIREMENTS AND VOTING REQUIREMENTS THAT PERTAIN
SOLELY TO SHAREHOLDERS OTHER THAN THE STATE OF NORTH CAROLINA.

VOTING

EACH SHARE OF COMMON STOCK IS ENTITLED TO ONE VOTE ON ALL MATTERS
PRESENTED AT THE MEETING. THERE IS NO CUMULATIVE VOTING IN THE ELECTION OF
DIRECTORS.

A PLURALITY OF THE VOTES CAST AT THE MEETING IS REQUIRED TO ELECT A
DIRECTOR. THE VOTE OF THE MAJORITY OF THE SHARES PRESENT AND VOTING AT THE
MEETING IS REQUIRED WITH RESPECT TO ALL OTHER MATTERS EXPECTED TO COME BEFORE
THE MEETING. IN THE ELECTION OF A DIRECTOR, ANY ACTION OTHER THAN A VOTE FOR A
NOMINEE WILL HAVE THE PRACTICAL EFFECT OF VOTING AGAINST THE NOMINEE.

QUORUM

UNDER NORTH CAROLINA LAW, A MATTER CAN NOT BE VOTED ON AT A MEETING OF THE
SHAREHOLDERS UNLESS A QUORUM IS PRESENT AT THE MEETING IN PERSON OR BY PROXY.
THE BYLAWS OF THE NCRR PROVIDE THAT A MAJORITY OF THE OUTSTANDING SHARES OF THE
NCRR ENTITLED TO VOTE, REPRESENTED IN PERSON OR BY PROXY, CONSTITUTES A QUORUM
AT A MEETING OF SHAREHOLDERS, PROVIDED, THAT A MAJORITY OF THE SHARES HELD BY
SHAREHOLDERS OTHER THAN THE STATE OF NORTH CAROLINA ARE REPRESENTED AT THE
MEETING, IN PERSON OR BY PROXY. ATTENDANCE AT THE MEETING FOR ANY PURPOSE
CONSTITUTES ATTENDANCE AT THE MEETING FOR ALL PURPOSES OF THE MEETING. NOT
ATTENDING THE MEETING, EITHER IN PERSON OR BY PROXY MAY HAVE THE EFFECT OF
CAUSING A QUORUM NOT TO BE PRESENT AT THE MEETING.

ABSTENTIONS AND "BROKER NON-VOTES" ARE COUNTED FOR PURPOSES OF DETERMINING
WHETHER A QUORUM IS PRESENT, BUT DO NOT REPRESENT VOTES CAST WITH RESPECT TO ANY
PROPOSAL. "BROKER NON-VOTES" ARE SHARES HELD BY A BROKER OR NOMINEE FOR WHICH AN
EXECUTED PROXY IS RECEIVED BY THE NCRR, BUT ARE NOT VOTED AS TO ONE OR MORE
PROPOSALS BECAUSE INSTRUCTIONS HAVE NOT BEEN RECEIVED FROM THE BENEFICIAL OWNERS
OR PERSONS ENTITLED TO VOTE AND THE BROKER OR NOMINEE DOES NOT HAVE
DISCRETIONARY VOTING POWER.

PROPOSALS

1. ELECTION OF DIRECTORS

IN THE ELECTION OF DIRECTORS, THE SHARES OWNED BY THE STATE OF NORTH
CAROLINA ARE ENTITLED TO VOTE ON AND ELECT A TOTAL OF TEN OF THE FIFTEEN
DIRECTORS AND THE "PRIVATELY-OWNED" SHARES ARE ENTITLED TO VOTE ON AND ELECT A
TOTAL OF FIVE DIRECTORS, FOR STAGGERED THREE YEAR TERMS ACCORDING TO THE CHARTER
AND BYLAWS OF THE NCRR. AT THE 1996 ANNUAL MEETING OF SHAREHOLDERS, THE STATE OF
NORTH CAROLINA IS EXPECTED TO ELECT SEVEN DIRECTORS AND THE "PRIVATELY-OWNED"
SHARES WILL ELECT THREE DIRECTORS. PROXIES ARE NOT SOLICITED BY THE BOARD OF
DIRECTORS OF THE NCRR FOR DIRECTORS ELECTED BY THE STATE OF NORTH CAROLINA.
PROXIES VOTED BY THE "PRIVATELY-OWNED" SHARES CANNOT BE VOTED FOR MORE THAN
THREE PERSONS AT THE 1996 ANNUAL MEETING.

THE NOMINATING COMMITTEE HAS RECOMMENDED TO THE BOARD OF DIRECTORS THAT
THE PERSONS NAMED BELOW BE NOMINATED AT THE ANNUAL MEETING FOR ELECTION BY THE
"PRIVATELY-OWNED" SHARES TO SERVE AS DIRECTORS FOR TERMS EXPIRING AT THE 1998 OR

1999 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED
AND QUALIFIED.

UNLESS CONTRARY INSTRUCTIONS ARE SET FORTH IN THE PROXIES, IT IS INTENDED
THAT THE PERSONS NAMED IN THE PROXY WILL VOTE ALL SHARES REPRESENTED BY SUCH
PROXY FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW. SHOULD THE
NOMINEES BECOME UNABLE OR UNWILLING TO ACCEPT NOMINATION OR ELECTION, IT IS
INTENDED THAT THE PERSONS ACTING UNDER THE PROXY WILL VOTE FOR THE ELECTION, IN
THE NOMINEES' STEAD, OF SUCH OTHER PERSONS AS THE BOARD OF DIRECTORS MAY
RECOMMEND. MANAGEMENT HAS NO REASON TO BELIEVE THAT THE NOMINEES WILL BE UNABLE
OR UNWILLING TO SERVE IF ELECTED.

NOMINEES

SET FORTH BELOW IS CERTAIN INFORMATION CONCERNING THE NOMINEES FOR
ELECTION AS DIRECTORS AT THE 1996 ANNUAL MEETING INCLUDING THE NOMINEES'
BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS:

PRESENT POSITION DIRECTOR NOMINATED FOR
NAME AGE WITH THE COMPANY SINCE TERM EXPIRING

J. MELVILLE BROUGHTON, JR. 74 VICE PRESIDENT & 1986 1998
DIRECTOR

P. C. BARWICK, JR. 59 DIRECTOR 1990 1999

PORTER B. THOMPSON 61 NONE - 1999

THE BUSINESS EXPERIENCE DURING THE PAST FIVE (5) YEARS OF THE NOMINEES IS
SUMMARIZED BELOW.

J. MELVILLE BROUGHTON, JR. - RETIRED, 1995. ATTORNEY AT LAW, 1974-1995,
BROUGHTON, WILKINS & WEBB, P.A., RALEIGH, NORTH CAROLINA.

P.C. BARWICK, JR. - ATTORNEY AT LAW, PRINCIPAL, WALLACE, MORRIS, BARWICK,
& ROCHELLE, P.A. (LAW FIRM), KINSTON, NORTH CAROLINA SINCE 1986. MR.
BARWICK SERVED AS SECRETARY AND TREASURER OF ANCRR FROM 1985 TO 1989.
DIRECTOR, STATE UNIVERSITY RAILROAD COMPANY FROM 1993 TO PRESENT. THE
REGISTRANT OWNS A MINORITY POSITION IN STATE UNIVERSITY RAILROAD COMPANY,
A MAJORITY WHOSE STOCK IS OWNED BY NORFOLK SOUTHERN.

PORTER B. THOMPSON - PRESIDENT AND OWNER OF LEADS CORPORATION, A
MANAGEMENT CONSULTING FIRM BASED IN WASHINGTON, DC. MR. THOMPSON HAS BEEN
A PRINCIPAL OF LEADS SINCE 1989. MR. THOMPSON HAS BEEN A CERTIFIED PUBLIC
ACCOUNTANT SINCE 1964, AND SERVED FOR OVER TWENTY YEARS WITH BLUE BELL,
INC., A GREENSBORO, N. C. MANUFACTURING COMPANY. HE SERVED FOR TEN YEARS
AS A VICE PRESIDENT AND FOR EIGHT YEARS AS A MEMBER OF THE BOARD OF
DIRECTORS OF BLUE BELL, INC.

THREE DIRECTORS ARE BEING ELECTED AT THIS ANNUAL MEETING BY THE
SHAREHOLDERS OTHER THAN THE STATE OF NORTH CAROLINA INSTEAD OF TWO DIRECTORS
WHICH WOULD OTHERWISE BE THE CASE. AT THE ANNUAL MEETING OF SHAREHOLDERS HELD ON
DECEMBER 15, 1995 (THE "1995 ANNUAL MEETING"), MR. BARWICK WAS ELECTED BY THE
PRIVATE SHAREHOLDERS TO A THREE-YEAR TERM. IN JULY 1996, A COURT DETERMINED THAT
A QUORUM WAS NOT PRESENT AT THE 1995 ANNUAL MEETING. IN AUGUST 1996, PURSUANT TO
THE BYLAWS, THE BOARD OF DIRECTORS APPOINTED MR. BARWICK TO THE BOARD. MR.
BARWICK HAD PREVIOUSLY SERVED AS A DIRECTOR ELECTED BY THE STATE OF NORTH
CAROLINA. UNDER THE BYLAWS, A DIRECTOR SO APPOINTED SERVES UNTIL THE NEXT ANNUAL
MEETING OF SHAREHOLDERS. MR. BARWICK IS BEING NOMINATED TO SERVE A THREE-YEAR
TERM THAT WILL EXPIRE IN 1999. MR. THOMPSON, WHO IS BEING NOMINATED FOR A
THREE-YEAR TERM, WOULD REPLACE MR. LEVER WHOSE TERM EXPIRES THIS YEAR. MR.
BROUGHTON IS BEING NOMINATED TO FILL THE TERM EXPIRING IN 1998. THE STATE OF
NORTH CAROLINA ("STATE") IS ELECTING SEVEN DIRECTORS THIS YEAR, INSTEAD OF THREE
FOR THE SAME REASONS. FOUR DIRECTORS WILL SERVE TERMS THAT END IN 1998 AND THREE
WILL SERVE TERMS THAT END IN 1999. THE STATE HAS NOT INFORMED THE NCRR OF THE
NAMES OF THE DIRECTORS IT INTENDS TO ELECT.

CURRENT DIRECTORS AND EXECUTIVE OFFICERS

THE FOLLOWING TABLE SETS FORTH INFORMATION REGARDING THE DIRECTORS AND THE
EXECUTIVE OFFICERS OF THE NCRR:

YEAR YEAR
ELECTED ELECTED POSITION
AS TERM AS WITH
OFFICER AGE DIRECTOR EXPIRES OFFICER COMPANY

JOHN F. MCNAIR III * (1) 69 1993 1996 1993 PRESIDENT
AND
DIRECTOR

J. MELVILLE BROUGHTON, JR. 74 1986 1996 1988 VICE
PRESIDENT
AND
DIRECTOR

JOHN M. ALEXANDER, JR. *(2) 47 1993 1997 1995 SECRETARY
AND
DIRECTOR

LYNN T. MCCONNELL* 41 1993 1996 1993 TREASURER
AND
DIRECTOR

CHAUNCEY W. LEVER 71 1987 1996 1995 ASSISTANT
SECRETARY
TREASURER
&
DIRECTOR

SCOTT M. SAYLOR 37 - - 1989 EXEC.VICE
PRESIDENT
AND
GENERAL
COUNSEL

YEAR YEAR
ELECTED ELECTED POSITION
AS TERM AS WITH
DIRECTOR AGE DIRECTOR EXPIRES OFFICER COMPANY

P.C. BARWICK, JR. (3) 59 1990 1996 - DIRECTOR

SIDNEY R. FRENCH 69 1989 1997 - DIRECTOR

MARVIN D. GENTRY* (4) 61 1993 1996 - DIRECTOR

ALEXANDER H. GRAHAM, JR. (5) 78 1989 1997 - DIRECTOR

ROBERT W. GRIFFIN* 44 1996 1996 - DIRECTOR

M. REX HARRIS* 62 1993 1997 - DIRECTOR

WILLIAM H. KINCHELOE* (6) 59 1987 1996 - DIRECTOR

JACK A. MOODY* (7) 69 1993 1996 - DIRECTOR

JOHN S. RUSSELL* 42 1993 1996 - DIRECTOR

DAVID T. WOODARD* 48 1993 1997 - DIRECTOR

* DIRECTOR ELECTED BY THE STATE OF NORTH CAROLINA

(1) MR. MCNAIR SERVES AS A DIRECTOR OF PIEDMONT NATURAL GAS
COMPANY INC.

(2) MR. ALEXANDER SERVES AS A DIRECTOR OF FIRST CITIZENS
BANCSHARES, INC.

(3) MR. BARWICK SERVES AS A DIRECTOR OF STATE UNIVERSITY
RAILROAD COMPANY. NCRR OWNS A MINORITY POSITION IN STATE
UNIVERSITY RAILROAD COMPANY, A MAJORITY OF WHOSE STOCK IS
OWNED BY NORFOLK SOUTHERN RAILWAY COMPANY.

(4) MR. GENTRY SERVES AS A DIRECTOR OF OLD NORTH STATE BANK,
KING, NC.

(5) MR. GRAHAM SERVES AS A DIRECTOR OF ROCKY MOUNT MILLS.

(6) MR. KINCHELOE SERVES AS A DIRECTOR OF CENTURA BANK, INC.

(7) MR. MOODY SERVES AS A DIRECTOR OF CENTURA BANK OF NORTH
CAROLINA.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934

SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT"), REQUIRES THAT THE NCRR'S DIRECTORS AND EXECUTIVE OFFICERS,
AND PERSONS WHO OWN MORE THAN TEN PERCENT (10%) OF A REGISTERED CLASS OF THE
NCRR'S EQUITY SECURITIES, FILE WITH THE COMMISSION INITIAL REPORTS OF OWNERSHIP
AND REPORTS OF CHANGES IN OWNERSHIP OF COMMON STOCK AND OTHER EQUITY SECURITIES
OF THE NCRR. OFFICERS, DIRECTORS AND GREATER THAN TEN-PERCENT BENEFICIAL OWNERS
ARE REQUIRED BY COMMISSION REGULATIONS TO FURNISH NCRR WITH COPIES OF ALL
REPORTS THEY FILE UNDER SECTION 16(A). TO NCRR'S KNOWLEDGE, BASED SOLELY ON ITS
REVIEW OF THE COPIES OF SUCH REPORTS FURNISHED TO NCRR AND WRITTEN
REPRESENTATIONS THAT NO OTHER REPORTS WERE REQUIRED, FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995, JOHN S. RUSSELL, DIRECTOR, FILED A LATE REPORT FOR ONE
ACQUISITION TRANSACTION.

MEETINGS AND COMMITTEES OF THE BOARD

THE BOARD OF DIRECTORS HELD 13 MEETINGS DURING THE YEAR ENDED
DECEMBER 31, 1995.

THE BOARD OF DIRECTORS HAS AN EXECUTIVE COMMITTEE COMPRISED OF
MS. MCCONNELL, AND MESSRS. MCNAIR, BROUGHTON, BARWICK, AND SAYLOR (AD HOC
MEMBER), AND IS RESPONSIBLE FOR GENERAL MANAGEMENT OF ROUTINE BUSINESS AFFAIRS
OF THE NCRR. UNDER THE BYLAWS OF THE NCRR, THE EXECUTIVE COMMITTEE HAS ALL THE
POWERS AND AUTHORITY OF THE BOARD OF DIRECTORS, EXCEPT THAT THE EXECUTIVE
COMMITTEE MAY NOT, WITHOUT PRIOR BOARD APPROVAL, (A) AMEND THE BYLAWS, (B)
REMOVE ANY DIRECTOR OR OFFICER, (C) FILL ANY DIRECTOR OR OFFICER VACANCY, (D)
SELL, LEASE, OR DISPOSE OF ANY CORPORATE ASSET, (E) INCUR ANY OBLIGATION OR
AUTHORIZE ANY EXPENDITURE IN EXCESS OF $10,000, OR (F) CHANGE THE COMPENSATION
OF ANY OFFICER OF THE NCRR. THE EXECUTIVE COMMITTEE WAS ORGANIZED IN SEPTEMBER
OF 1989, AND MET TWICE DURING 1995 OTHER THAN IN CONNECTION WITH MEETINGS OF THE
BOARD OF DIRECTORS.

THE BOARD OF DIRECTORS HAS AN AUDIT COMMITTEE COMPRISED OF
MESSRS. LEVER, GENTRY, GRAHAM AND WOODARD. THE AUDIT COMMITTEE IS RESPONSIBLE
FOR MAKING RECOMMENDATIONS TO THE BOARD OF DIRECTORS REGARDING SELECTION AND
APPOINTMENT OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTS, REVIEWING THEIR FEES,
ENSURING THAT FINANCIAL INFORMATION IS DISSEMINATED PROPERLY, AND MEETING WITH
THE INDEPENDENT PUBIC ACCOUNTS PERIODICALLY. THE AUDIT COMMITTEE MET TWICE
DURING 1995.

THE BOARD OF DIRECTORS HAS A BUDGET AND COMPENSATION COMMITTEE
RESPONSIBLE FOR THE COMPENSATION OF OFFICERS, DIRECTORS AND EMPLOYEES. AT 1995
YEAR END, THE COMMITTEE WAS COMPRISED OF MS. MCCONNELL AND MESSRS. LEVER,
RUSSELL AND HARRIS. THE COMMITTEE MET TWICE DURING 1995.

THE BOARD OF DIRECTORS HAS A NOMINATING COMMITTEE RESPONSIBLE FOR
RECOMMENDING NOMINATIONS FOR DIRECTORS TO BE NOMINATED AND ELECTED BY THE
"PRIVATELY-OWNED" SHARES. FOR 1996, THE NOMINATING COMMITTEE WAS COMPRISED OF
MESSRS. BARWICK, GENTRY, AND BROUGHTON. THE NOMINATING COMMITTEE MET TWICE
DURING 1996. THE NOMINATING COMMITTEE WILL CONSIDER NOMINEES RECOMMENDED BY
SECURITY HOLDERS. SECURITY HOLDERS SHOULD SUBMIT NAMES AND QUALIFICATIONS OF

RECOMMENDED NOMINEES WITHIN A REASONABLE TIME PRIOR TO PREPARATION FOR ANNUAL
MEETINGS OF SHAREHOLDERS.

ON AUGUST 22, 1996, THE BOARD OF DIRECTORS APPOINTED A SPECIAL
COMMITTEE OF FIVE DIRECTORS RESPONSIBLE FOR NEGOTIATING WITH THE STATE, AFTER
THE STATE NOTIFIED NCRR THAT THE STATE RETAINED NATIONSBANK AS A FINANCIAL
ADVISOR TO EVALUATE THE ACQUISITION OF NCRR'S SHARES NOT ALREADY OWNED BY THE
STATE. THE COMMITTEE CONSISTS OF THE FIVE "PRIVATE" DIRECTORS ELECTED TO THE
BOARD OF NCRR BY THE SHAREHOLDERS OTHER THAN THE STATE. THE COMMITTEE HAS
AUTHORITY TO MAKE RECOMMENDATIONS TO THE ENTIRE BOARD REGARDING ANY OFFER MADE
BY THE STATE, FORMULATE OFFERS OR COUNTER OFFERS, AND CONSIDER ALTERNATIVES TO A
TRANSACTION WITH THE STATE.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

OF THE 10,000,000 SHARES AUTHORIZED TO BE ISSUED, 4,283,470
SHARES ARE CURRENTLY OUTSTANDING. THE FOLLOWING TABLE SETS FORTH AS OF OCTOBER
3, 1996, THE PARTIES KNOWN TO NCRR TO BE BENEFICIAL OWNERS OF MORE THAN FIVE
PERCENT OF THE NCRR'S VOTING SECURITIES:

NAME & ADDRESS OF AMOUNT & NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS

COMMON SHARES STATE OF NORTH 3,207,173 SHARES, 74.82%
CAROLINA C/O OWNED DIRECTLY *
GOVERNOR JAMES
B. HUNT, THE STATE
CAPITOL, RALEIGH, NC 2761

* THE STATE OF NORTH CAROLINA ALSO HOLDS SHARES IN ESCHEAT SUBJECT TO THE
CLAIMS OF UNKNOWN OWNERS. THE STATE OF NORTH CAROLINA HAS ADVISED THAT IT DOES
NOT CUSTOMARILY VOTE SHARES HELD IN ESCHEAT. PURSUANT TO AGREEMENTS WITH SOME OF
THE DIRECTORS ELECTED BY THE STATE OF NORTH CAROLINA, THE STATE IS ENTITLED TO
DIVIDENDS AND RETAINS A RIGHT OF REACQUISITION OF AN ADDITIONAL 1,400 SHARES.

THE FOLLOWING TABLE SETS FORTH AS OF OCTOBER 3, 1996, THE SHARES
BENEFICIALLY OWNED BY ALL DIRECTORS AND NOMINEES AND ALL DIRECTORS AND OFFICERS
AS A GROUP:

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS

COMMON SHARES JOHN MCKNITT 700 SHARES OWNED *
ALEXANDER, JR. DIRECTLY, 550 SHARES
SECRETARY AND DIRECTOR OWNED BY MINOR
1526 S. BLOUNT ST. DAUGHTERS, 50 SHARES
RALEIGH, NC 27603 OWNED BY SPOUSE

P.C. BARWICK, JR. 600 SHARES, OWNED *
DIRECTOR DIRECTLY
P.O. BOX 3557
KINSTON, NC 28502

J. MELVILLE BROUGHTON, 705 SHARES *
JR., VICE-PRESIDENT OWNED DIRECTLY
AND DIRECTOR
P.O. BOX 2387
RALEIGH, NC 27602

SIDNEY R. FRENCH 500 SHARES OWNED *
DIRECTOR DIRECTLY (1)
105 WETHERINGTON FARM
COVE CITY, NC 28523

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS

COMMON SHARES MARVIN D. GENTRY 500 SHARES OWNED *
DIRECTOR DIRECTLY
P.O. BOX 485
KING, NC 27021

ALEXANDER H. GRAHAM 5,500 SHARES *
JR., DIRECTOR OWNED DIRECTLY
P.O. BOX 51579
DURHAM, NC 27717

ROBERT W. GRIFFIN 526 SHARES *
DIRECTOR OWNED DIRECTLY (2)
P.O. BOX 3062
KINSTON, NC 28502-3062

M. REX HARRIS 500 SHARES *
DIRECTOR OWNED DIRECTLY
4511 BRAGG BOULEVARD
FAYETTEVILLE, NC 28303

WILLIAM H. KINCHELOE 500 SHARES *
DIRECTOR OWNED DIRECTLY
P.O. BOX 671
ROCKY MOUNT, NC 27802

CHAUNCEY W. LEVER 2,000 SHARES OWNED *
DIRECTOR WITH WIFE AS JOINT
P.O. BOX 4108 TENANTS WITH RIGHT
GREENSBORO, NC 27404 OF SURVIVORSHIP

LYNN T. MCCONNELL 100 SHARES OWNED *
DIRECTOR AND TREASURER DIRECTLY; 500 SHARES
138 CHEROKEE ROAD OWNED DIRECTLY (3)
UNIT 11
CHARLOTTE, NC 28207

JOHN F. MCNAIR, III 500 SHARES *
DIRECTOR AND PRESIDENT OWNED DIRECTLY
P.O. BOX 3099
WINSTON-SALEM, NC 27150

JACK A. MOODY 3,300 SHARES *
DIRECTOR OWNED DIRECTLY
P.O. BOX 249
SILER CITY, NC 27344

JOHN S. RUSSELL 100 SHARES OWNED *
DIRECTOR DIRECTLY; 500 SHARES
ONE HANNOVER SQUARE OWNED DIRECTLY (3)
SUITE 1700
RALEIGH, NC 27611

SCOTT M. SAYLOR 100 SHARES OWNED *
EXEC. V.P./GEN. COUNSEL WITH WIFE AS JOINT
3200 ATLANTIC AVE. TENANTS WITH RIGHT
SUITE 110 OF SURVIVORSHIP
RALEIGH, NC 27604

PORTER B. THOMPSON 4,000 SHARES, *
230 NORTH ELM STREET OWNED BY SPOUSE
SUITE 1650
GREENSBORO, NC 27401

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS

COMMON SHARES DAVID T. WOODARD 100 SHARES OWNED *
DIRECTOR DIRECTLY; 400 SHARES
P.O. BOX 27647 OWNED DIRECTLY (3)
RALEIGH, NC 27619-7647

* LESS THAN 1% OF THE CLASS.

(1) MR. FRENCH'S SHARES ARE HELD SUBJECT TO A TRANSFER AGREEMENT WITH A.J.
BALLARD TIRE & OIL PENSION AND PROFIT SHARING PLAN.

(2) MR. GRIFFIN'S SHARES ARE HELD SUBJECT TO A TRANSFER AGREEMENT WITH
THOMAS B. GRIFFIN.

(3) SHARES ACQUIRED WITHOUT CASH CONSIDERATION FROM THE STATE OF NORTH
CAROLINA PURSUANT TO AN AGREEMENT WHICH ENTITLES THE STATE TO RECEIVE
ALL DIVIDENDS AND TO REACQUIRE THE STOCK.

ALL OFFICERS AND DIRECTORS AS A GROUP (16 PERSONS) BENEFICIALLY OWN 18,231
COMMON SHARES OF THE NCRR, OR APPROXIMATELY 0.42% OF THE TOTAL SHARES ISSUED AND
OUTSTANDING.

EXECUTIVE COMPENSATION

THE FOLLOWING TABLE AND NARRATIVE TEXT DISCUSS THE COMPENSATION PAID DURING
1993, 1994, AND 1995 TO THE NCRR'S PRESIDENT AND CHIEF EXECUTIVE OFFICER, WHO
WAS ELECTED TO THAT POSITION IN JULY OF 1993. NO EXECUTIVE OFFICER OF THE NCRR
HAD AN ANNUAL SALARY OF AND BONUSES IN EXCESS OF $100,000 DURING 1995.

LONG-TERM COMPENSATION
AWARDS PAYOUTS
RESTRICTED
NAME AND ANNUAL COMPENSATION OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) AWARDS(1)(2) PAYOUTS COMPENSATION

JOHN F. MCNAIR III 1995 $12,000 $0 0 0 0 $0 $0
PRESIDENT AND CHIEF 1994 12,000 $0 0 0 0 $0 $0
EXECUTIVE OFFICER 1993 5,799* $0 0 0 0 $0 $0

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

*PARTIAL YEAR'S COMPENSATION

(1) OTHER ANNUAL COMPENSATION FOR EXECUTIVE OFFICERS IS NOT REPORTED AS
IT IS LESS THAN THE REQUIRED REPORTING THRESHOLD OF THE SECURITIES
AND EXCHANGE COMMISSION.

(2) THE REGISTRANT DID NOT GRANT ANY STOCK OPTIONS OR STOCK APPRECIATION
RIGHTS DURING THE YEARS COVERED BY THE TABLE.

(3) UNDER SECURITIES AND EXCHANGE COMMISSION RULES ON EXECUTIVE COMPENSATION
DISCLOSURE, NO DISCLOSURE REGARDING OTHER COMPENSATION IS REQUIRED FOR
FISCAL YEARS PRIOR TO 1993.

STOCK OPTION AND STOCK APPRECIATION RIGHTS PLANS, LONG-TERM INCENTIVE PLANS
AND PENSION PLANS

NO STOCK OPTIONS OR STOCK APPRECIATION RIGHTS WERE OUTSTANDING AT THE END
OF 1995 AND NONE WERE EITHER GRANTED OR EXERCISED DURING 1995. THE NCRR HAS NO
STOCK OPTION PLANS OR STOCK APPRECIATION RIGHTS PLANS. FOR 1995, THE NCRR MADE
CASH IRA-SEP CONTRIBUTIONS TO EMPLOYEE ACCOUNTS IN THE AMOUNT OF 10% OF THE
EMPLOYEES' 1995 COMPENSATION, OR $14,639.14. THE NCRR AND ITS EMPLOYEES
PARTICIPATE IN THE RETIREMENT/BENEFIT PROGRAM UNDER THE RAILROAD RETIREMENT ACT,
ADMINISTERED BY THE U.S. RAILROAD RETIREMENT BOARD.

COMPENSATION OF DIRECTORS

DIRECTORS ARE COMPENSATED $600 PER DAY, PLUS TRAVEL EXPENSES, FOR EACH DAY
OF ATTENDANCE AT DIRECTORS' MEETINGS. DIRECTOR'S ARE COMPENSATED $600 PER DAY OR
$300 PER HALF DAY, PLUS TRAVEL EXPENSES, FOR ATTENDING MEETINGS OF COMMITTEES
HELD OTHER THAN IN CONJUNCTION WITH MEETINGS OF THE BOARD OF DIRECTORS.

EMPLOYMENT CONTRACTS

MR. MCNAIR, THE PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE NCRR, HAS NO
EMPLOYMENT CONTRACT WITH THE REGISTRANT.

COMPENSATION COMMITTEE AND DECISION MAKING

THE BUDGET AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS IS
RESPONSIBLE FOR DECISIONS CONCERNING THE COMPENSATION OF OFFICERS, DIRECTORS AND
EMPLOYEES OF THE NCRR. THE COMMITTEE CONSISTS OF THE FOLLOWING FOUR MEMBERS OF
THE BOARD OF DIRECTORS OF THE NCRR: LYNN MCCONNELL, CHAUNCEY LEVER, REX HARRIS,
AND JOHN RUSSELL.

PERFORMANCE GRAPH

THE GRAPH SHOWN BELOW IS A LINE PRESENTATION COMPARING THE NCRR'S
CUMULATIVE FIVE-YEAR SHAREHOLDER RETURNS ON AN INDEXED BASIS WITH THE STANDARD &
POOR'S INDEX AND A RAILROAD COMPANY INDEX COMPILED FOR THE NCRR BY STANDARD &
POORS COMPUSTAT FOR THE FIVE-YEAR PERIOD COMMENCING ON DECEMBER 31, 1990 AND
ENDING ON DECEMBER 31, 1995. THE TOTAL RETURN ASSUMES THAT DIVIDENDS WERE
REINVESTED QUARTERLY AND IS BASED ON A $100 INVESTMENT ON DECEMBER 31, 1990. THE
NCRR NOTES THAT THE RAILROAD COMPANY INDEX WAS USED TO COMPLY WITH RULES OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, AS THE RAILROADS IN SUCH INDEX ARE
ALL MUCH LARGER THAN THE NCRR'S AND CONDUCT ACTIVE RAILROAD BUSINESS, RATHER
THAN LEASING SUBSTANTIALLY ALL THEIR ASSETS AS THE NCRR DOES, THE NCRR DOES NOT
REPRESENT THE RAILROADS COMPRISING THIS INDEX OR ANY OTHER INDUSTRY GROUP
REPRESENT MEANINGFUL COMPARISONS FOR INVESTORS.

TOTAL SHAREHOLDER RETURNS

[Total shareholder returns chart appears here. Plot points are below.]

Fiscal Year: December

Annual Return Percentage
Years Ending
Company\Index Name Dec91 Dec92 Dec93 Dec94 Dec95
Noth Carolina Railroad Company -4.04 52.30 2.94 -29.78 8.37
S&P 500 Index 30.47 7.62 10.08 1.32 37.58
Railroads-500 63.22 12.29 23.93 -13.61 46.30

Index Returns

Base
Period Return Return Return Return Return
Company\Index Name Dec90 Dec91 Dec92 Dec93 Dec94 Dec95
North Carolina Railroad Company 100 95.96 146.15 150.44 105.64 114.49
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
Railroads-500 100 163.22 183.27 227.13 196.22 287.07

2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

THE NCRR'S BOARD OF DIRECTORS HAS APPROVED AND SELECTED ERNST & YOUNG AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO MAKE AN EXAMINATION OF THE NCRR'S
ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1996. THE FIRM HAS EXAMINED THE NCRR'S
ACCOUNTS SINCE 1932. THE BOARD OF DIRECTORS ASKS THAT THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS BE APPROVED BY AN AFFIRMATIVE VOTE OF A MAJORITY
OF THE SHARES REPRESENTED AND VOTED AT THE MEETING. IF SUCH AFFIRMATIVE VOTE IS
NOT OBTAINED, MANAGEMENT WILL RECONSIDER THE MATTER.

THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
SELECTION OF ERNST & YOUNG AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE
YEAR ENDED DECEMBER 31, 1996.

A REPRESENTATIVE OF ERNST & YOUNG WILL ATTEND THE 1996 ANNUAL MEETING WITH
THE OPPORTUNITY TO MAKE A STATEMENT IF HE DESIRES TO DO SO AND TO RESPOND TO
APPROPRIATE QUESTIONS.

AVAILABLE INFORMATION

THE NCRR IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT") AND IN ACCORDANCE THEREWITH FILES
REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH THE SECURITIES EXCHANGE
COMMISSION (THE "COMMISSION"). REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
FILED BY THE NCRR CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES
MAINTAINED BY THE COMMISSION AT JUDICIARY PLAZA, 450 FIFTH STREET, N.W.,
WASHINGTON, D.C. 20549 AND AT ITS REGIONAL OFFICES LOCATED AT 75 PARK PLACE, NEW
YORK, NEW YORK 10007, AND THE JOHN C. KLUEZYNSKI FEDERAL BUILDING, 230 SOUTH
DEARBORN STREET, CHICAGO, ILLINOIS 60604. COPIES OF SUCH MATERIAL CAN BE
OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION AT JUDICIARY PLAZA,
450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549 UPON REQUEST AND PAYMENT OF THE
PRESCRIBED FEES.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

THE FOLLOWING DOCUMENTS, EACH OF WHICH WAS PREVIOUSLY FILED BY THE NCRR
WITH THE COMMISSION PURSUANT TO SECTION 13 OF THE EXCHANGE ACT, ARE INCORPORATED
HEREIN BY REFERENCE:

(A) ANNUAL REPORT ON FORM 10-K AND 10-K/A FOR THE YEAR ENDED DECEMBER 31,
1995.

(B) QUARTERLY REPORT ON FORM 10-Q AND 10-Q/A FOR THE QUARTER ENDED MARCH
31, 1996.

(D) REPORT ON FORM 8-K DATED DECEMBER 22, 1995.

(E) REPORT ON FORM 8-K DATED AUGUST 26, 1996.

(F) REPORT ON FORM 8-K DATED SEPTEMBER 16, 1996.

ALL DOCUMENTS FILED BY THE NCRR PURSUANT TO SECTIONS 13(A), 13(C), 14 AND
15(D) OF THE EXCHANGE ACT SUBSEQUENT TO THE DATE OF THIS PROXY STATEMENT AND
PRIOR TO THE ANNUAL MEETING OF SHAREHOLDERS TO WHICH THIS PROXY STATEMENT
RELATES SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE HEREIN AND TO BE A PART
HEREOF FROM THE DATE OF THE FILING OF SUCH REPORTS AND DOCUMENTS. ANY STATEMENT
CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE
HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED FOR PURPOSES OF THIS PROXY
STATEMENT TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER
SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY
REFERENCE HEREIN OR IN ANY ACCOMPANYING PROXY STATEMENT SUPPLEMENT MODIFIES OR
SUPERSEDES SUCH STATEMENT. ANY SUCH STATEMENT SO MODIFIED OR SUPERSEDED SHALL
NOT BE DEEMED, EXCEPT AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE A PART OF THIS
PROXY STATEMENT.

THE NCRR WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A PROXY
STATEMENT IS DELIVERED UPON WRITTEN OR ORAL REQUEST OF EACH PERSON, A COPY OF
ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE DOCUMENTS THAT THIS PROXY STATEMENT) INCORPORATES. REQUESTS FOR SUCH COPIES
SHOULD BE DIRECTED TO THE NCRR'S SECRETARY, 3200 ATLANTIC AVENUE, SUITE 110,
RALEIGH, NORTH CAROLINA 27604.

OTHER BUSINESS

MANAGEMENT DOES NOT INTEND TO BRING ANY BUSINESS BEFORE THE MEETING OTHER
THAN THE MATTERS REFERRED TO IN THE ACCOMPANYING NOTICE AND AT THIS DATE HAS NOT
BEEN INFORMED OF ANY MATTERS THAT MAY BE PRESENTED TO THE MEETING BY OTHERS. IF,
HOWEVER, ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING, IT IS INTENDED THAT
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE, PURSUANT TO THE PROXY, IN
ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH MATTERS.

PROPOSALS OF SHAREHOLDERS FOR 1997 ANNUAL MEETING

ANY PROPOSALS OF SHAREHOLDERS INTENDED TO BE PRESENTED AT THE 1997 ANNUAL
MEETING MUST BE RECEIVED BY THE NCRR FOR INCLUSION IN THE ISSUER'S PROXY
STATEMENT NO LATER THAN JANUARY 31, 1997. SHAREHOLDERS SHOULD SEND THEIR
PROPOSALS FOR THE NCRR'S 1997 ANNUAL MEETING TO THE ATTENTION OF THE NCRR'S
SECRETARY AT ITS PRINCIPAL OFFICE, 3200 ATLANTIC AVENUE, SUITE 110, RALEIGH, NC
27604.

*******************************************************************************

APPENDIX

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NORTH CAROLINA
RAILROAD COMPANY

The undersigned shareholder of North Carolina Railroad Company hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and the
accompanying Proxy Statement and hereby constitutes and appoints Chauncey W.
Lever; Alexander H. Graham, Jr.; and Sidney R. French and each of them,
attorneys and proxies with full power of substitution, to act and vote the
shares of the undersigned at the Annual Meeting of Shareholders of the said
corporation to be held Tuesday, November 12, 1996, at 9:00 a.m. and at any
adjournment or adjournments thereof. The undersigned hereby directs this proxy
to be voted as follows:

1. Electing the following as Directors to serve for the terms as
indicated;

[ ]FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR NOMINEES LISTED BELOW
(except as marked to the contrary below)
(Instruction: To withhold Authority to vote for any individual
nominee, strike a line through the nominee's name in the list below)

Two-Year Term: J. Melville Broughton, Jr. Three-Year Terms: P. C. Barwick, Porter B. Thompson

2. Ratifying the selection of Ernst & Young as independent public
accountants for the year ended December 31, 1996.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion to vote upon any other business as may
properly come before the meeting or any adjournment or
adjournment thereof.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

[ ]PLEASE CHECK BOX IF YOU INTEND TO ATTEND THE ANNUAL MEETING IN PERSON. PLEASE
COMPLETE, SIGN AND RETURN PROXY WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING.

Any proxy heretofore given by the undersigned is hereby revoked.

THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IN THE ABSENCE OF
ANY DIRECTION TO THE CONTRARY, THE PROXYHOLDERS WILL VOTE THIS PROXY FOR THE
ELECTION OF THE NOMINEES LISTED ABOVE AS DIRECTORS, FOR APPROVAL OF THE
SELECTION OF ERNST & YOUNG, AND IN THEIR DISCRETION WITH RESPECT TO ANY OTHER
MATTERS WHICH PROPERLY COME BEFORE THE MEETING. IF, AT OR BEFORE THE TIME OF THE
MEETING, THE NOMINEE LISTED ABOVE HAS BECOME UNAVAILABLE FOR ANY REASON, THE
PROXYHOLDERS HAVE THE DISCRETION TO VOTE FOR A SUBSTITUTE NOMINEE.

- ----------------------- ------------- --------------------------------------
Number of Shares Date Signature of Shareholder

IMPORTANT: Please sign your name
exactly as it appears on your
certificate. Please add your full
title to your signature. Executors,
administrators, trustees, and other
fiduciaries should so indicate when
signing and furnish proof of such
fiduciary capacity. All persons
signing on behalf of corporations
and/or partnerships should so
indicate when signing.

NOTE: If you receive more than one
proxy, please date and sign each one
and return all proxies in the same
envelope.

PLEASE RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.