Lake State Railway Company (″LSRC″ or ″Lake State″) has acquired, certain CSX Transportation (″CSXT″) rail properties in the Saginaw, Michigan area, totaling approximately 67 miles (the ″Saginaw Cluster″). These lines run northward from Mt. Morris to Saginaw, with branches to Bay City, Midland and Paines. (See Figure 1) Lake State plans to operate the Saginaw Cluster under the name Saginaw Bay Southern (SBS). SBS will commence operations on October 29, 2005.

       As shown on this map, Lake State currently operates significant rail properties immediately adjacent to these lines, particularly in the Bay City area. Therefore, this acquisition will benefit both Saginaw Bay Southern and Lake State customers. As a Lake State property, the SBS customers will benefit from the presence of Lake State′s local management, marketing, financial and administrative support.

       Lake State brings a history of successfully building a profitable and disciplined shortline railroad operation. Lake State gives Saginaw Bay Southern customers the best opportunity to build a growing and diversified base of carload business through a long-term symbiotic relationship.