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                 TUSCOLA & SAGINAW BAY RAILWAY

July 11, 1977 Supplement to Prospectus dated September 27, 1976

      NOTICE:   This is a "risk" investment.   Although  Federal law makes available payments for some return on equity  through 1981,   no return is assumed past 1981 when the Rail Reorganization Act of 1973 expires.    While management fully  intends for this company to ultimately be profitable, bear in mind the risk to all stockholders.

                                 Charles J.  Lapp
                                 36 East Lynwood Blvd.
                                 Hillsdale, Michigan    49242

Cover page

Introduction

On June 22,  1977 the State of Michigan formally notified the Tuscola and Saginaw Bay Railway that the State Highway Commission authorized the State to erter into a contract with the T & SB Ry to operate the Vassar area* rail service now being operated by ConRail for the State, starting October 1, 1977.  This culminated a year of detailed work by the incorporators of the Tuscola and Saginaw Bay Railway, a locally owned and controlled short line railroad, starting with a Proposal to area shippers in August of 1976, and a Prospectus dated September 27,  1976.   The State analyzed the proposal, evaluated the proposed operators, held public hearings, and discussed the proposal with shippers and community leaders before making its determination.

The Tuscola and Saginaw Bay Railway has the support of online shippers,  civic leaders,  and the Tuscola County Commissioners.  Many shippers are investing in this railroad.  Michigan Sugar and Blount Agriculture (J P Burroughs)  are investing several thousand dollars in the Tuscola and Saginaw Bay Railway.   The Grand Trunk Western has expressed its support of the T & SB Ry.     For a detailed description of the background and operating details, please read the Prospectus dated September 27,   1976.   This supplement to the prospectus has additional information about investing, and contains a five year "pro forma" or estimate of revenues and expenses.

*This railroad will serve Vassar, Caro, Millington, Denmark  Junction,  Reese, Munger, and Colling.

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Michigan requires the Tuscola and Saginaw Bay Railway to have sufficient cash to cover start-up and on-going expenses for at Least a six-month period, in addition, since many excellent companies have  failed as a result ol   rulifl ing out of cash as un-anti. ipated expenses occurred or rapid growth used up capital,  the Tuscola and Saginaw Bay Railway wants to insure  that sufficient funds are available to cover possible contingencies.  Funds will be invested by the board of directors at a good return unless or until needed.  The capitalization plan calls for 20,000 shares of stock to be sold at $10 per share; in addition,  an incorporator's fee of ten percent worth of stock will be issued rather than reimbursing organizers with cash for the hundreds of work hours required to organize the T & SB Ry.  Thus, the incorporators will be taking the same risk as other stockholders.  In addition,  they are purchasing stock.    Additional stock will be authorized in order to be used later at the discretion of the board for employee bonuses or other uses.

Prospective investors should note the fact that no return on their investment is assured past 1981, when the law authorizing State aid expires, and that like any other new corporation, risk is involved.    The Tuscola and Saginaw Bay is a bit unique in that State aid is available to minimize down-side risk during the initial years of the company, but bear in mind the ultimate investment risk to all stockholders.

The reason Federal and State funds are available to assist the T & SB Ry is that it is believed that locally owned and controlled short line railroads are the best way to preserve branch lines  in the long run.    If a shortline were to be purchased and started up without assistance to repair tracks, etc., several times    this capital would be required.

The management believes that the greatest return of all to he generated by the Tuscola and Saginaw Bay Railway will be to the communities, the farmers and the economic arena in the area served by this locally owned and managed, short line railroad.

Stock Purchases

Mr.  L. James White,  President of the People's State Bank and Tuscola and Saginaw Bay Railway     Incorporator, will be the trustee for the T & SB Ry account in the People's State Bank.  Investors will be asked to deposit funds in this account at the People's State Bank.   Funds will be released when stock certificates are  issued.  The Tuscola and Saginaw Bay Railway plans to have a seven member board composed of  the President, Vice President Operations, and five other members.

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Certain disbursements  will he required as this Company  gears up for its operation.  These costs will  include advance  Lease payments for a locomotive, advance insurance, repayments of out-of-pocket "expenses  (but not for time incurred)  for incorporators, legal and incorporating fees, and costs of tariffs and inter-railroad divisions of revenue agreement negotiations.  Total costs are estimated to be $30,000  to $35,000.   The seven incorporators of  the Tuscola and Saginaw Bay Railway are as follows:                  

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 TUSCOLA AND SAGINAW BAY   RAILWAY
 PRO FORMA INCOME STATEMENT FOR FIVE YEARS [1]

EXPENSES

[1]   Pre Operating expenses are not all included herein.  These are normal operational revenues and expenses.
[2]   In order to be conservative, loss of carloads is assumed in year 2 since an on-line customer may move off-line.
[3]   All dollar figures are in constant 1977 dollars.
[4]   Federal terminology for this Return on Equity is "Management Fee."

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TUSCOLA AND SAGINAW BAY RAILWAY
ESTIMATE:D DISBURSEMENTS TO BE REQUIRED
BEFORE OCTOBER 1,  l977

*Vice President-Operations will be employed prior to September 1,  1977.

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