OREANDA-NEWS. September 1, 2010. In accordance with the Russian Joint Stock Company Law, on July 31 2010 FESCO sent out preemptive rights notices in connection with the additional shares issue approved by FESCO Board of Directors in April 2010. Quite a few of our shareholders had questions regarding the purpose of this capital increase, especially in light of the sale of FESCO shares in NCC assets, the company makes the following statement:

 1) This capital increase was planned and approved long before the NCC deal came into final stage. At that time, this share issue was a much-needed source of equity to resolve financial challenges. Obviously, today FESCO Transportation Group has no need in additional capital. FESCO has a positive net cash position and debt reduced to 440 mln USD.

 2) Sending of the preemptive rights notices is a mandatory step that the company was obliged to make immediately after the state registration of the new issue, which we did in full compliance with the law.

 3) In accordance with the law, the company has one year after the state registration of the share issue , or until end of July 2011, to make the actual placement of additional shares

 4) According to the law, shareholders having the preemptive rights are entitled to file preemptive rights applications within 20 calendar days from the sending out the preemptive rights notices, i.e. until August 20, 2010 inclusive.

 5) All preemptive rights applications filed by shareholders now, are non-binding, and do not impose any obligation to buy shares after the announcement of the placement price and date. After the announcement of placement price and date the shareholders will be entitled to make decision on the purchase of new shares.

Dear shareholders!

FESCO has no immediate plans to launch the placement of new shares and to announce the price. At the same time, we do not exclude, that during one year an attractive large-scale investment project might emerge, requiring a substantial amount of capital. Shall such project appear, FESCO will present it to the market and its shareholders and might proceed with the placement of the new shares at some point in the future.

Let us repeat that all preemptive rights applications, filed by shareholders now, will remain valid. Shareholders will have the possibility to make the final decision on the purchase of the new shares under preemptive rights after the announcement of placement price and date, if any.