2016-03-21T11:42:35-05:00 2015-05-31 135565207 KPMG LLP 1676 INTERNATIONAL DRIVE MCLEAN VA 22102 990 2014-06-01 520891669 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION NATI 7034671800 20701 COOPERATIVE WAY DULLES VA 20166 SHELDON PETERSEN GOVERNOR AND CEO 7034671800 1920-03-17 0 JOCELYNE C MILLER P00634378 7032868000 2014 2016-08-17 19:52:53Z SHELDON PETERSEN 20701 COOPERATIVE WAY DULLES VA 20166 1129065630 0 X WWW.NRUCFC.COOP X 1969 VA TAX EXEMPT COOPERATIVE ORGANIZATION PROVIDING FINANCING TO RURAL ELECTRIC COOPERATIVES 22 22 272 0 0 0 0 0 1084153256 1116024363 5376265 7906316 5304455 5091249 1094833976 1129021928 1424338 3018563 0 0 40382966 44083522 0 0 0 898996843 989305939 940804147 1036408024 154029829 92613904 22179066737 22836360828 21229385922 21945902386 949680815 890458442 X SEE SCHEDULE OTO BRIDGE THE FINANCIAL NEEDS OF THE RURAL ELECTRIC NETWORK WITH THE EXPECTATIONS OF THE GLOBAL CAPITAL MARKETS, ONE COOPERATIVE AT A TIME. NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION ("CFC") IS A MEMBER-OWNED COOPERATIVE ASSOCIATION INCORPORATED UNDER THE LAWS OF THE DISTRICT OF COLUMBIA IN APRIL 1969. CFC'S PRINCIPAL PURPOSE IS TO PROVIDE ITS MEMBERS WITH FINANCING TO SUPPLEMENT THE LOAN PROGRAMS OF THE RURAL UTILITIES SERVICE ("RUS") OF THE UNITED STATES DEPARTMENT OF AGRICULTURE. CFC MAKES LOANS PRIMARILY TO ITS RURAL ELECTRIC MEMBERS SO THEY CAN ACQUIRE, CONSTRUCT AND OPERATE ELECTRIC DISTRIBUTION, GENERATION, TRANSMISSION AND RELATED FACILITIES. CFC ALSO PROVIDES ITS MEMBERS WITH CREDIT ENHANCEMENTS IN THE FORM OF LETTERS OF CREDIT AND GUARANTEES OF DEBT OBLIGATIONS. 0 0 960381245 3018563 1128662463 LENDING SERVICESCFC PROVIDES LOANS TO ITS MEMBERS, RURAL ELECTRIC COOPERATIVES AND THEIR RELATED ORGANIZATIONS AND GENERATES INTEREST INCOME FROM THESE LOANS. TO FUND CFC'S LENDING SERVICES, IT RAISES FUNDS IN THE CAPITAL MARKETS AND PAYS A RATE OF RETURN COMMENSURATE WITH CURRENT ECONOMIC CONDITIONS FOR THE USE OF THOSE FUNDS. THESE BORROWED FUNDS PERMIT CFC TO MEET THE BORROWING NEEDS OF ITS MEMBERS SO THEY CAN CONTINUE TO PROVIDE ELECTRIC AND POWER SERVICE TO THE CONSUMERS AND BUSINESSES IN THE RURAL TERRITORIES SERVICED BY THOSE MEMBERS/BORROWERS. CFC OPERATES IN SUCH MANNER TO ACHIEVE THE LOWEST COST OF FUNDING AVAILABLE TO IT AND PASSES THE COSTS AND RESULTING SAVINGS ALONG TO ITS BORROWERS.AS CFC IS A COOPERATIVE FORMED UNDER THE LAWS OF THE DISTRICT OF COLUMBIA, IT IS REQUIRED TO ALLOCATE A MINIMUM OF 1/4 OF 1% OF ITS NET EARNINGS TO AN EDUCATIONAL FUND. UNDER THE LAWS OF THE DISTRICT OF COLUMBIA, COOPERATIVES ARE REQUIRED TO MAKE GRANTS IN SUPPORT OF EDUCATING THE PUBLIC ABOUT COOPERATIVE PRINCIPLES. THE EDUCATIONAL FUND GRANTS MADE BY CFC ARE MAINLY TO STATEWIDE MEMBERSHIP ORGANIZATIONS THAT USE THESE GRANTS TO EDUCATE CUSTOMERS AND CITIZENS ABOUT COOPERATIVE PRINCIPLES. ADDITIONALLY, CFC MANAGES A VOLUNTARY FUND ESTABLISHED FOR THE PURPOSE OF ASSISTING COOPERATIVES IN DEFENDING THEIR COOPERATIVE TERRITORIES AND PROTECTING COOPERATIVE PRINCIPLES.AS PART OF OUR NORMAL OPERATING ACTIVITIES AS A LENDER, WE MAY BE REQUIRED TO FORECLOSE ON ASSETS OR BUSINESS OPERATIONS OF BORROWERS WHO DEFAULT ON THEIR LOANS DUE TO US. OUR OBJECTIVE IS TO REHABILITATE THE FORECLOSED ASSETS OR BUSINESS OPERATIONS IN ORDER TO SELL THEM AT A PRICE THAT MAXIMIZES OUR RECOVERY ON THOSE DEFAULTED LOANS. THE INVESTMENT IN FORECLOSED ASSETS OR BUSINESS OPERATIONS DOES NOT REPRESENT A NEW OR SEPARATE LINE OF BUSINESS FOR CFC. THE RESULTS OF OPERATIONS OF FORECLOSED ASSETS REPRESENTS THE COMBINED OPERATING LOSSES OF CFC'S WHOLLY OWNED SUBSIDIARY CARIBBEAN ASSET HOLDINGS ("CAH") AND DENTON REALTY PARTNERS LP, RESPECTIVELY FOR THE FISCAL YEAR ENDED MAY 31, 2015. DURING FISCAL YEAR 2015, THE OPERATING COMPANIES OF CFC'S WHOLLY OWNED SUBSIDIARY CAH, HAD A $120,391,883 LOSS FROM OPERATIONS AND IMPAIRMENT. OPERATIONS INCLUDE TELECOMMUNICATIONS AND CABLE TELEVISION SERVICES IN THE U.S. VIRGIN ISLANDS, BRITISH VIRGIN ISLANDS AND ST. MAARTEN. DENTON REALTY PARTNERS ("DRP") HELD ASSETS INCLUDING A LAND DEVELOPMENT LOAN, LIMITED PARTNERSHIP INTERESTS IN CERTAIN REAL ESTATE DEVELOPMENTS AND DEVELOPED LOTS AND LAND, RAW LAND AND UNDERGROUND MINERAL RIGHTS IN TEXAS. DRP AND THESE FORECLOSED ASSETS WERE HELD BY TWO WHOLLY OWNED SUBSIDIARIES OF CFC. DURING THE YEAR, DRP WAS DISSOLVED AND EXPERIENCED A FINAL LOSS FROM OPERATIONS OF $244,207. 960381245 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 1 0 1 1 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0 1 60 0 1 272 1 0 1 VI RN 0 0 0 0 X 22 22 0 0 0 0 1 1 1 1 1 0 0 1 1 1 1 1 1 1 0 0 AZ GA X ROBERT GEIER 7034671800 20701 COOPERATIVE WAY DULLES VA 20166 KIRK A THOMPSON DIRECTOR 8.00 X 50000 0 0 CURTIS NOLAN UNTIL 32015 DIRECTOR 2.00 X 50000 0 0 FRED BROG UNTIL 32015 DIRECTOR 4.00 X 50000 0 0 PATRICK L BRIDGES DIRECTOR 3.00 X 50000 0 0 MEL COLEMAN DIRECTOR 6.00 X 50150 0 0 GLENN WMILLER UNTIL 32015 DIRECTOR 7.30 X 50150 0 0 ROMAN EGILLEN DIRECTOR 8.00 X 50300 0 0 CHRISTOPHER LHAMON UNTIL 32015 DIRECTOR 9.00 X 50150 0 0 ROBERT MHILL DIRECTOR 12.00 X 50150 0 0 JIM LDOERSTLER UNTIL 32014 DIRECTOR 4.00 X 10150 0 30000 BURNS EMERCER UNTIL 32014 DIRECTOR 4.00 X 11000 0 0 DANIEL MIKE CAMPBELL DIRECTOR 10.00 X 50150 0 0 DWIGHT ROSSOW UNTIL 32014 DIRECTOR 4.00 X 10150 0 0 HARRY NPARK DIRECTOR 15.00 X 50000 0 0 CURTIN RRAKESTRAW II DIRECTOR 15.00 X 50000 0 0 SCOTT W HANDY UNTIL 32015 DIRECTOR 7.30 X 50300 0 0 WALTER KCROOK UNTIL 102014 DIRECTOR 25.00 X 42150 0 0 RANDY D RENTH UNTIL 32015 DIRECTOR 9.00 X 50150 0 0 JOEL CUNNINGHAM UNTIL 32015 PRESIDENT-DIRECTOR 10.00 X X 56000 0 0 RAY BEAVERS PRESIDENT-DIRECTOR 10.00 X X 56150 0 0 RGRANT CLAWSON VP & DIRECTOR 9.50 X X 55150 0 0 KENT FARMER DIRECTOR 8.00 X 40000 0 0 THOMAS L HAYES DIRECTOR 10.00 X 40000 0 0 LYLE KORVER DIRECTOR 6.00 X 50000 0 0 RW MATHENY UNTIL 32015 DIRECTOR 5.00 X 40000 0 0 STEPHEN VAIL DIRECTOR 7.00 X 40000 0 0 PHILLIP CARSON BEGIN 32015 DIRECTOR 0.00 X 0 0 0 DOYLE JAY HANSON BEGIN 32015 DIRECTOR 0.00 X 0 0 0 JIMMY A LAFOY BEGIN 32015 DIRECTOR 0.00 X 0 0 0 BRADLEY J SCHARDIN BEGIN 32015 DIRECTOR 0.00 X 0 0 0 MARK D SNOWDEN BEGIN 32015 DIRECTOR 0.00 X 0 0 0 DEAN R TESCH BEGIN 32015 DIRECTOR 0.00 X 0 0 0 TODD P WARE BEGIN 32015 DIRECTOR 0.00 X 0 0 0 GREGORY D WILLIAMS BEGIN 32015 DIRECTOR 0.00 X 0 0 0 SHELDON C PETERSEN GOVERNOR AND CEO 65.00 X 1317196 0 90637 JOHN T EVANS EVP AND COO 58.00 X 666202 0 118963 JOHN J LIST SVP & CHIEF LENDING OFFICE 55.00 X 546578 0 89805 STEVEN L LILLY SVP & SPECIAL ASSET MANAGE 55.00 X 552947 0 66333 JONATHON ANDREW DON SVP AND CFO 60.00 X 500529 0 185379 JOHN M BORAK SVP, CREDIT RISK MANAGEMEN 60.00 X 331338 0 90883 ROBERTA B ARONSON SVP AND GENERAL COUNSEL 55.00 X 406780 0 137950 STEVEN M KETTLER SVP, STRATEGIC BUSINESS DE 65.00 X 289400 0 95461 JOEL ALLEN SVP, MEMBER SERVICES GROUP 50.00 X 288519 0 93052 ROBIN C REED SVP, MEMBER SERVICES GROUP 60.00 X 295338 0 83723 GRACEANN CLENDENEN SVP,CORPORATE SERVICES 48.00 X 279273 0 134802 BRAD CAPTAIN SVP, CORPORATE RELATIONS 55.00 X 275218 0 49948 BRUCE E MACNEIL VP,CAPITAL MARKETS FUNDING 50.00 X 229826 0 43791 LAWRENCE SAUNDERS VP, PORTFOLIO MANAGEMENT 55.00 X 267849 0 50708 AMY S LUONGO VP, PORTFOLIO MANAGEMENT 45.00 X 229437 0 40731 JOHN F SUTER VP,CAPITAL MARKETS RESEARC 40.00 X 284187 0 117118 KRISHNA MURTHY VP,ELECTRIC AND ENERGY IND 45.00 X 287835 0 107074 ROBERT E GEIER JR VP & CONTROLLER 53.00 X 292022 0 92972 ALLYN JAMATO VP & DEPUTY GENERAL COUNSE 48.00 X 305652 0 82552 GARY A BRADBURY VP,INTERNAL AUDIT 44.00 X 262392 0 48923 FREDERICK CANDERSON UNTIL 32014 DIRECTOR 4.00 X 10300 0 0 RICHARD E LAROCHELLE FORMER SVP,CORPORATE RELATIONS UNTIL 12/31/13 52.00 X 140279 0 0 LAWRENCE ZAWALICK UNTIL 4142014 FORMER SVP, AFFILIATE ORGANIZATION 55.00 X 235833 0 28502 9447180 0 1879307 134 1 1 0 SAPIENT PO BOX 4886 BOSTON MA 02212 IT CONSULTANTS 5830767 CASSIOPAE 224 MAIN STREET STE 3A SALEM NH 03079 IT CONSULTANTS 1969334 NRECA PO BOX 775670 ST LOUIS MO 631798000 ADMIN FEES 1966911 KPMG LLP DEPT 0970 PO BOX 120970 DALLAS TX 753120970 AUDITOR 1279600 HOGAN LOVELLS US LLP 555 THIRTEENTH STREET NW WASHINGTON DC 200041109 ATTORNEY FEES 1103177 52 INTEREST FROM PSA 522200 932608457 932608457 DERIVATIVE CASH SETTLEMENTS 522200 124703250 124703250 OTHER INCOME-LOAN FEES 522200 36241779 36241779 RECOVERY FOR LOSSES 522200 22470877 22470877 1116024363 7933018 7933018 17000 43702 -26702 -26702 -26702 MANAGEMENT FEES 522200 5091249 5091249 5091249 1129021928 1121115612 0 7906316 3018563 3018563 8175004 8175004 27253153 27253153 3561374 3561374 2768372 2768372 2325619 2325619 1702668 1702668 1329910 1329910 5444556 5444556 784428 784428 2020116 2020116 2081942 2081942 2573695 2573695 3829395 3829395 3560856 3560856 836481266 836481266 6497251 6497251 696673 696673 FORECLOSED ASSETS 120147677 120147677 BANK FEES 722219 722219 LOSS ON EARLY EXTINGUIS 702771 702771 WHOLE LOAN SALE 30968 30968 699548 699548 1036408024 960381245 76026779 0 106333921 60261568 220846872 173756977 199068670 193423588 20386356645 21408033881 4682098 5468975 141808201 31268379 107069978 110539822 29677320 32321875 575500000 537150000 245651494 116507001 303879739 198897141 22179066737 22836360828 4025012867 3266801643 78039547 75579597 7771660135 8708727153 8952044600 9470256315 402628773 424537678 21229385922 21945902386 X 973000 976000 0 0 948707815 889482442 949680815 890458442 22179066737 22836360828 X 92613904 4294555 -156130832 X X 0 1 X 1 0 14051198 23795972 37847170 55422429 9037981 46384448 143880 143880 0 48394722 22086518 26308204 110539822 GUARANTEE LIABILITY 19915964 OTHER ACCRUED EXPENSES 10796442 CREDIT LOSSES ALLOWANCE 126000 MEMB APP FEES-MEMBERSHIP APPL 16600 DERIVATIVE LIABILITY 393682672 424537678 CENTRAL AMERICA AND THE CARIBBEAN - 1 5 INVESTMENTS 116507000 1 5 0 0 1 5 116507000 0 116507000 0 0 1 0 0 0 PART I, LINES 3 COLUMN (F) CFC FOLLOWS U.S. GAAP ACCOUNTING. AMOUNTS REPORTED IN PART I, COLUMN (F) REPRESENTS THE CARRYING VALUE, NET OF EARNINGS AND/OR IMPAIRMENT CHARGES OF CFC'S INVESTMENT IN ORGANIZATIONS IN FOREIGN COUNTRIES AS OF THE END OF THE TAX YEAR AND DO NOT REFLECT EXPENDITURES MADE BY CFC INTO THESE COUNTRIES. 1 BALDWIN COUNTY ELECTRIC MEMBERSHIP CORPORATION PO BOX 220 SUMMERDALE AL 365800220 630014658 501(C)(12) 32221 INTEGRITY FUND - TERRITORY THREAT CAPITAL ELECTRIC COOPERATIVE INC PO BOX 730 BISMARCK ND 585020730 450217628 501(C)(12) 23438 INTEGRITY FUND - TERRITORY THREAT CHIPPEWA VALLEY ELECTRIC COOPERATIVE PO BOX 575 CORNELL WI 54732 390207312 501(C)(12) 11102 INTEGRITY FUND - TERRITORY THREAT COLUMBIA BASIN ELECTRIC COOPERATIVE INC PO BOX 398 HEPPNER OR 978360398 930337164 501(C)(12) 77146 INTEGRITY FUND - TERRITORY THREAT DELTA-MONTROSE ELECTRIC ASSOCIATION PO BOX 910 MONTROSE CO 814020910 840185658 501(C)(12) 52573 INTEGRITY FUND - TERRITORY THREAT EGYPTIAN ELECTRIC COOPERATIVE ASSOCIATION PO BOX 38 STEELEVILLE IL 62288 370259803 501(C)(12) 35131 INTEGRITY FUND - TERRITORY THREAT FLORIDA ELECTRIC COOPERATIVE ASSOCIATION 2916 APALACHEE PARKWAY TALLAHASSEE FL 32301 590633990 501 (C)(6) 12771 INTEGRITY FUND - TERRITORY THREAT GEORGIA TRANSMISSION CORPORATION PO BOX 2088 TUCKER GA 30084 582231201 501(C)(12) 335730 INTEGRITY FUND - TERRITORY THREAT INDIANA STATEWIDE ASSOCIATION OF RURAL ELECTRIC COOPERATIVES INC 720 N HIGH SCHOOL ROAD INDIANAPOLIS IN 46214 351499808 501(C)(6) 39172 INTEGRITY FUND - TERRITORY THREAT JACKSON ELECTRIC MEMBERSHIP CORPORATION TOTAL PO BOX 38 JEFFERSON GA 30549 580301470 501(C)(12) 261086 INTEGRITY FUND - TERRITORY THREAT JEFFERSON DAVIS ELECTRIC COOPERATIVE INC PO BOX 1229 JENNINGS LA 70546 720362325 501(C)(12) 35030 INTEGRITY FUND - TERRITORY THREAT MIDLAND POWER COOPERATIVE PO BOX 420 JEFFERSON IA 501290420 421378565 501(C)(12) 75000 INTEGRITY FUND - TERRITORY THREAT NORTH CENTRAL ELECTRIC COOPERATIVE INCORPORATED 538 11TH STREET WEST BOTTINEAU ND 583181916 450173086 501(C)(12) 37980 INTEGRITY FUND - TERRITORY THREAT NORTHERN RIO ARRIBA ELECTRIC COOPERATIVE INC 1135 CAMINO ESCONDIDO CHAMA NM 87520 850098999 501(C)(12) 73472 INTEGRITY FUND - TERRITORY THREAT OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) 2100 EAST EXCHANGE PLACE TUCKER GA 30084 581211925 335730 INTEGRITY FUND - TERRITORY THREAT PKM ELECTRIC CO-OPERATIVE INC PO BOX 108 WARREN MN 56762 410484875 501(C)(12) 13121 INTEGRITY FUND - TERRITORY THREAT THE CARROLL ELECTRIC MEMBERSHIP CORPORATION 155 NORTH HWY 113 CARROLLTON GA 301177501 580184715 501(C)(12) 81686 INTEGRITY FUND - TERRITORY THREAT THE NORTHWESTERN RURAL ELECTRIC COOPERATIVE ASSOCIATION INC PO BOX 207 CAMBRIDGE SPRINGS PA 164030207 250696880 501(C)(12) 240459 INTEGRITY FUND - TERRITORY THREAT VIRGINIA MARYLAND & DELAWARE ASSOCIATION OF ELECTRIC COOPERATIVES 4201 DOMINION BLVD SUITE 101 GLEN ALLEN VA 23060 540553861 501(C)(6) 113700 INGEGRITY FUND - TERRITORY THREAT WAYNE-WHITE COUNTIES ELECTRIC COOPERATIVE PO DRAWER E FAIRFIELD IL 62837 370574965 501(C)(12) 176000 INGEGRITY FUND - TERRITORY THREAT WHEATLAND ELECTRIC COOPERATIVE INC PO BOX 1078 GARDEN CITY KS 67846 480532188 501(C)(12) 12821 INGEGRITY FUND - TERRITORY THREAT ALASKA POWER ASSOCIATION 703 WEST TUDOR ROAD SUITE 200 ANCHORAGE AK 995036650 920069880 501 (C)(6) 14200 EDUCATION FUND - NRECA YOUTH TOUR OF WASHINGTON, DC ARKANSAS ELECTRIC COOPERATIVES INC PO BOX 194208 LITTLE ROCK AR 72219 710219756 501 (C)(12) 12800 EDUCATION FUND - ORIENTATION TO CO-OP PRINCIPLES & LEADERSHIP ALABAMA RURAL ELECTRIC ASSOCIATION OF COOPERATIVES PO BOX 244014 MONTGOMERY AL 361244014 630264081 501 (C)(6) 15200 EDUCATION FUND - 2015 AREA SUMMER CONFERENCE ASSOCIATION OF ILLINOIS ELECTRIC COOPERATIVES PO BOX 3787 SPRINGFIELD IL 627083787 370159736 502 (C)(6) 23200 EDUCATION FUND - STATEWIDE SURVEY PROJECT ASSOCIATION OF MISSOURI ELECTRIC COOPERATIVES PO BOX 1645 JEFFERSON CITY MO 65102 430631824 502 (C)(6) 29000 EDUCATION FUND - MO COOPERATIVE YOUTH CONFERENCE & YOUTH TOUR COLORADO RURAL ELECTRIC ASSOCIATION 5400 NORTH WASHINGTON STREET DENVER CO 80216 840411220 502 (C)(6) 15000 EDUCATION FUND - DIRECTOR COURSES; WASHINGTON YOUTH TOUR ELECTRIC POWER ASSOCIATIONS OF MISSISSIPPI PO BOX 3300 RIDGELAND MS 391583300 640200697 502 (C)(6) 16200 EDUCATION FUND - ELECTRIC COOPERATIVE YOUTH TOUR FLORIDA ELECTRIC COOPERATIVES ASSOCIATION INC 2916 APALACHEE PARKWAY TALLAHASSEE FL 32301 590633990 501(C)(6) 11000 EDUCATION FUND - FECA'S 2015 SUMMER LEADERSHIP CONFERENCE GEORGIA ELECTRIC MEMBERSHIP CORPORATION PO BOX 1707 TUCKER GA 300851707 580530279 501 (C)(6) 25400 EDUCATION FUND - ELECTRIC CO-OPS OF GEORGIA EXHIBIT GOLDEN STATE POWER COOPERATIVE 14619 HAMLIN STREET VAN NUYS CA 91411 680441905 501 (C)(6) 5600 EDUCATION FUND - ENERGY COOPERATIVE DEVELOPMENT & EDUCATION GRAND CANYON STATE ELECTRIC COOPERATIVE ASSOCIATION 120 NORTH 44TH STREET PHOENIX AZ 85034 866056759 501 (C)(6) 13000 EDUCATION FUND - AZ/CA WASHINGTON YOUTH TOUR IDAHO CONSUMER OWNED UTILITIES ASSOCIATION 407 WEST JEFFERSON ST BOISE ID 83702 820502739 501(C)(6) 11600 EDUCATION FUND - ICUA YOUTH RALLY & ICUA MEMBERS CONFERENCE INDIANA STATEWIDE ASSOCIATION OF RURAL ELECTRIC COOPERATIVES INC PO BOX 24517 INDIANAPOLIS IN 46224 351499808 501 (C)(6) 26200 EDUCATION FUND - EMPLOYEE TRAINING, BOARD DEVELOPMENT & MEMBER EDUCATION IOWA ASSOCIATION OF ELECTRIC COOPERATIVES 8525 DOUGLAS AVENUE STE 48 URBANDALE IA 503222992 420662488 501(C)(6) 25000 EDUCATION FUND - LIVING WITH ENERGY IN IOWA, ARTICLES KANSAS ELECTRIC COOPERATIVES INC PO BOX 4267 TOPEKA KS 666044267 480541902 501 (C)(12) 18600 EDUCATION FUND - BACK TO BASICS EDUCATIONAL PROGRAM MICHIGAN ELECTRIC COOPERATIVE ASSOCIATION 2859 W JOLLY ROAD OKEMOS MI 488641182 382214287 501 (C)(6) 9600 EDUCATION FUND - RURAL ELECTRIC YOUTH TOUR TO WASHGTON, D.C. MINNESOTA RURAL ELECTRIC ASSOCIATION 11640 - 73RD AVENUE NORTH MAPLE GROVE MN 55369 410417193 501 (C)(6) 24400 EDUCATION FUND - 2015 BOARD LEADERSHIP CERTIFICATION (BLC) COURSES MONTANA ELECTRIC COOPERATIVES' ASSOCIATION PO BOX 1306 GREAT FALLS MT 59403 810229220 501 (C)(6) 16200 EDUCATION FUND - THE TODAY'S MEMBERS PROGRAM NEBRASKA RURAL ELECTRIC ASSOCIATION PO BOX 82048 LINCOLN NE 68501 470394033 501 (C)(6) 18800 EDUCATION FUND - NEBRASKA RURAL ELECTRIC WASHINGTON YOUTH TOUR STATEWIDE SMART ENERGY PROGRAM NEVADA RURAL ELECTRIC ASSOCIATION PO BOX 365 WELLS NV 89835 880237046 501 (C)(6) 8800 EDUCATION FUND - STATEWIDE SMART ENERGY PROGRAM NEW MEXICO RURAL ELECTRIC COOPERATIVE ASSOCIATION INC 614 DON GASPAR AVENUE SANTA FE NM 87501 850155370 501 (C)(6) 10400 EDUCATION FUND - NRECA CREDENTIALED COOPERATIVE DIRECTOR COURSES NEW YORK STATE RURAL ELECTRIC COOPERATIVE ASSOCIATION INC 9 WILSON AVENUE HARTWICK NY 14810 161264464 501 (C)(6) 6200 EDUCATION FUND - STUDENT PARTICIPATION - NRECA LEGISLATIVE CONFERENCE NORTH CAROLINA ASSOCIATION OF ELECTRIC COOPERATIVES INC PO BOX 27306 RALEIGH NC 27611 561189186 501(C)(6) 16000 EDUCATION FUND - BRIGHT IDEAS EDUCATION GRANT PROGRAM NORTH DAKOTA ASSOCIATION OF RURAL ELECTRIC COOPERATIVES PO BOX 727 MANDAN ND 585540727 450231058 501(C)(6) 12600 EDUCATION FUND - NDAREC MENU OF EDUCATION PROGRAMS NORTHEAST ASSOCIATION OF ELECTRIC COOPERATIVES INC 9 WILSON AVENUE BATH NY 148101633 222153529 501 (C)(12) 15400 EDUCATION FUND - CONTINUING EDUCATION FOR DIRECTORS AND EMPLOYEES OHIO RURAL ELECTRIC COOPERATIVES PO BOX 26036 COLUMBUS OH 432260036 510174617 501 (C)(6) 21400 EDUCATION FUND - NRECA COURSES, PRINT "THE COOPERATIVE DIFFERENCE" BOOK OKLAHOMA ASSOCIATION OF ELECTRIC COOPERATIVES INC PO BOX 54309 OKLAHOMA CITY OK 731541309 730556236 501 (C)(6) 18400 EDUCATION FUND - YOUTH TOUR PROMOTIONAL MATERIALS AND T-SHIRTS OREGON RURAL ELECTRIC COOPERATIVE ASSOCIATION 1750 LIBERTY ST SE SALEM OR 97302 930593238 501 (C)(6) 18000 EDUCATION FUND - LEGISLATOR OUTREACH PROGRAM PENNSYLVANIA RURAL ELECTRIC ASSOCIATION PO BOX 1266 HARRISBURG PA 171081266 236291530 501 (C)(6) 19800 EDUCATION FUND - PREA COMMUNICATIONS WORKSHOP SOUTH DAKOTA RURAL ELECTRIC ASSOCIATION INC PO BOX 1138 PIERRE SD 57501 460231254 501 (C)(12) 15600 EDUCATION FUND - YOUTH EXCURSION TENNESSEE ELECTRIC COOPERATIVE ASSOCIATION PO BOX 100912 NASHVILLE TN 37224 620461379 501 (C)(6) 13200 EDUCATION GRANT - YOUTH LEADERSHIP SUMMIT TEXAS ELECTRIC COOPERATIVES INC 1122 COLORADO ST STE 2400 AUSTIN TX 787012167 741007829 277 45600 EDUCATION GRANT - EDUCATION AND TRAINING CATALOG THE ASSOCIATION OF LOUISIANA ELECTRIC COOPERATIVES INC 10725 AIRLINE HIGHWAY BATON ROUGE LA 708164299 720400467 501 (C)(6) 9800 EDUCATION GRANT - LOUISIANA ELECTRIC COOPERATIVES YOUTH TOUR THE ELECTRIC COOPERATIVES OF SOUTH CAROLINA INC 808 KNOX ABBOTT DRIVE CAYCE SC 29033 570308664 502 (C)(6) 14000 EDUCATION GRANT - NRECA TRAINING COURSES (STATEWIDE BASIS) UTAH RURAL ELECTRIC ASSOCIATION 10714 SOUTH JORDAN GATEWAY SOUTH JORDAN UT 84095 870402010 501 (C)(6) 9000 EDUCATION GRANT - LEGISLATOR EDUCATION/UREA YOUTH PROGRAM VA MD & DE ASSOCIATION OF ELECTRIC COOPERATIVES 4201 DOMINION BLVD SUITE 101 GLEN ALLEN VA 23060 540553861 501(C)(6) 19000 EDUCATION FUND - MEMBER COOPERATIVE DIRECTOR TRAINING WASHINGTON RURAL ELECTRIC COOPERATIVE ASSOCIATION PO BOX 7219 OLYMPIA WA 985077219 911236389 501 (C)(6) 13000 EDUCATION FUND - WRECA ANNUAL MEMBERSHIP MEETING COOPERATIVE NETWORK ELECTRIC DIVISION 1 SOUTH PINCKNEY STREET MADISON WI 537032869 391128018 501 (C)(6) 20200 EDUCATION FUND - WECA YOUTH LEADERSHIP CONGRESS WYOMING RURAL ELECTRIC ASSOCIATION 2312 CAREY AVENUE CHEYENNE WY 820013627 830207211 501 (C)(12) 9600 EDUCATION FUND - SPONSOR YOUTH TOUR & AG IN THE CLASSROOM NRECA 4301 WILSON BLVD FIN8-110 ARLINGTON VA 22203 530116145 501 (C)(6) 290841 EDUCATION FUND GRANT - CO-OP.COM 0 60 PART I, LINE 2: INTEGRITY FUND IN ORDER TO BE CONSIDERED FOR A GRANT FROM THE INTEGRITY FUND, A RURAL ELECTRIC SYSTEM MUST ESTABLISH THAT THERE IS AT LEAST ONE OF THE FOLLOWING THREE THREATS TO THE INTEGRITY OF ITS SYSTEM: (I) ALL, OR A SIGNIFICANT PORTION, OF ITS GEOGRAPHICALLY DEFINED TERRITORY OR SPECIFICALLY IDENTIFIED PRESENT OR ANTICIPATED CONSUMERS AND/OR ELECTRIC FACILITIES FACE A THREAT OF ACQUISITION BY A COMPETING ENTITY, (II) THE COOPERATIVE FACES A THREAT OF ITS RIGHT TO OFFER NON-ELECTRIC ENERGY SERVICES TO CONSUMERS, OR (III) THE COOPERATIVE IS FACING REGULATORY, JUDICIAL OR LEGISLATIVE CHALLENGES THAT HAVE THE POTENTIAL TO MATERIALLY AFFECT THE SYSTEM INTEGRITY OF OTHER COOPERATIVES IN A STATE, REGION OR NATION. EDUCATION FUND EACH STATEWIDE ASSOCIATION AND ELIGIBLE REGIONAL ASSOCIATIONS WILL SUBMIT AN APPLICATION FORM DESCRIBING THE PROGRAM FOR WHICH THE GRANT WILL BE USED. EARLIER IN THE YEAR, THEY SUBMIT A MEMBERSHIP LIST OF THE ASSOCIATION VERIFIED BY ITS GENERAL MANAGER. CFC USES THAT LIST AS WELL AS ITS OWN MEMBERSHIP LIST TO CALCULATE HOW MUCH EACH ASSOCIATION IS ALLOTTED DURING THE FISCAL YEAR. OUR FORMULA IS BASED UPON THE NUMBER OF SYSTEMS WITHIN AN ASSOCIATION, THE TOTAL NUMBER OF CO-OPS WHICH ARE MEMBERS OF CFC AND OF THE ASSOCIATION, AND THE NUMBER OF CO-OPS THAT ARE 100% CFC BORROWERS. THE SENIOR VICE PRESIDENT OF CFC'S CORPORATE RELATIONS GROUP APPROVES THE APPLICATIONS MADE BY THE ASSOCIATIONS. X X 0 0 X X X X X 0 1 0 0 0 0 0 1 0 SHELDON C PETERSEN GOVERNOR AND CEO 1046417 0 192675 0 78104 0 90838 0 26840 0 1434874 0 0 0 JOHN T EVANS EVP AND COO 489626 0 109311 0 67265 0 80199 0 29158 0 775559 0 0 0 JOHN J LIST SVP & CHIEF LENDING OFFICE 389792 0 104536 0 52250 0 92905 0 27288 0 666771 0 0 0 STEVEN L LILLY SVP & SPECIAL ASSET MANAGE 443356 0 97536 0 12055 0 103886 0 2373 0 659206 0 0 0 JONATHON ANDREW DON SVP AND CFO 370899 0 102510 0 27120 0 168636 0 29252 0 698417 0 0 0 JOHN M BORAK SVP, CREDIT RISK MANAGEMEN 215176 0 65321 0 50841 0 91481 0 12819 0 435638 0 0 0 ROBERTA B ARONSON SVP AND GENERAL COUNSEL 290556 0 72311 0 43913 0 119957 0 4636 0 531373 0 0 0 STEVEN M KETTLER SVP, STRATEGIC BUSINESS DE 217699 0 46251 0 25450 0 78719 0 29793 0 397912 0 0 0 JOEL ALLEN SVP, MEMBER SERVICES GROUP 223895 0 46251 0 18373 0 77088 0 28284 0 393891 0 0 0 ROBIN C REED SVP, MEMBER SERVICES GROUP 225016 0 46066 0 24256 0 75975 0 13609 0 384922 0 0 0 GRACEANN CLENDENEN SVP,CORPORATE SERVICES 209599 0 44300 0 25374 0 128654 0 28160 0 436087 0 0 0 BRAD CAPTAIN SVP, CORPORATE RELATIONS 203310 0 40789 0 31119 0 68232 0 5225 0 348675 0 0 0 BRUCE E MACNEIL VP,CAPITAL MARKETS FUNDING 187686 0 33378 0 8762 0 27049 0 28551 0 285426 0 0 0 LAWRENCE SAUNDERS VP, PORTFOLIO MANAGEMENT 224770 0 36005 0 7074 0 38697 0 18799 0 325345 0 0 0 AMY S LUONGO VP, PORTFOLIO MANAGEMENT 175196 0 36319 0 17922 0 34797 0 9913 0 274147 0 0 0 JOHN F SUTER VP,CAPITAL MARKETS RESEARC 205202 0 53663 0 25322 0 100376 0 24989 0 409552 0 0 0 KRISHNA MURTHY VP,ELECTRIC AND ENERGY IND 176095 0 50311 0 61429 0 96473 0 9343 0 393651 0 0 0 ROBERT E GEIER JR VP & CONTROLLER 216343 0 51481 0 24198 0 109615 0 8814 0 410451 0 0 0 ALLYN JAMATO VP & DEPUTY GENERAL COUNSE 236557 0 43612 0 25483 0 73803 0 14806 0 394261 0 0 0 GARY A BRADBURY VP,INTERNAL AUDIT 201934 0 42429 0 18029 0 33554 0 27636 0 323582 0 0 0 FREDERICK CANDERSON UNTIL 32014 DIRECTOR 10300 0 0 0 0 0 0 0 0 0 10300 0 0 0 RICHARD E LAROCHELLE FORMER SVP,CORPORATE RELATIONS UNTIL 78201 0 62078 0 0 0 3846 0 0 0 144125 0 78201 0 LAWRENCE ZAWALICK UNTIL 4142014 FORMER SVP, AFFILIATE ORGANIZATION 157788 0 64961 0 13084 0 50896 0 5444 0 292173 0 0 0 PART I, LINE 1A THE PERQUISITES PROVIDED TO THE CEO ARE LIMITED TO AN ANNUAL AUTOMOBILE ALLOWANCE AS WELL AS AN ANNUAL SPOUSAL AIR TRAVEL ALLOWANCE. ADDITIONALLY, THE CEO MAY RECEIVE AN ANNUAL EXECUTIVE PHYSICAL PAID FOR BY CFC. BECAUSE THE CEO IS FREQUENTLY REQUIRED TO TRAVEL TO MEMBER SITES IN RURAL PARTS OF THE COUNTRY, THE BOARD OF DIRECTORS HAS AUTHORIZED HIM TO OCCASIONALLY UTILIZE A PRIVATE PLANE SERVICE TO FACILITATE HIS EXTENSIVE BUSINESS TRAVEL. THIS SERVICE HAS BEEN USED INFREQUENTLY AND IS SOLELY FOR BUSINESS PURPOSES. PART I, LINE 1B THESE PAYMENTS WERE TREATED AS TAXABLE COMPENSATION. TO PROVIDE THE ANNUAL AUTOMOBILE AND SPOUSAL AIR TRAVEL PERQUISITES IN AN EFFICIENT FASHION, THE BOARD AUTHORIZES AN ANNUAL ALLOWANCE RATHER THAN PROVIDING UNLIMITED REIMBURSEMENT OR USE OF A COMPANY-OWNED VEHICLE. THE AMOUNT OF EACH ALLOWANCE IS AUTHORIZED ANNUALLY BY THE BOARD AND IS DETERMINED BASED ON THE ESTIMATED COST FOR OPERATION AND MAINTENANCE OF AN AUTOMOBILE AND THE ANTICIPATED COST OF AIR TRAVEL BY THE CEO'S SPOUSE. THESE PAYMENTS WERE TREATED AS TAXABLE COMPENSATION. CFC DOES NOT HAVE A FORMAL POLICY REGARDING PAYMENTS OR REIMBURSMENT OF THESE EXPENSES. PART I, LINE 4B CFC OFFERS A PENSION RESTORATION PLAN WHICH IS A COMPONENT OF THE RETIREMENT SECURITY PLAN TO EXECUTIVE OFFICERS OF THE COMPANY. THE PENSION RESTORATION PLAN, WHICH IS A 457(F) PLAN, RESTORES THE VALUE OF THE RETIREMENT SECURITY PLAN FOR EACH OFFICER TO THE LEVEL IT WOULD BE IF THE IRS LIMITS ON ANNUAL PAY AND ANNUAL ANNUITY BENEFITS WERE NOT IN PLACE. THE BENEFIT AND PAYOUT FORMULA UNDER THIS RESTORATION COMPONENT OF THE RETIREMENT SECURITY PLAN IS SIMILAR TO THAT UNDER THE QUALIFIED PLAN COMPONENT. HOWEVER, FIVE OF THE EXECUTIVE OFFICERS HAVE SATISFIED THE PROVISIONS ESTABLISHED TO RECEIVE THE BENEFIT FROM THIS PLAN. SINCE THESE OFFICERS NO LONGER HAVE A RISK OF FORFEITURE OF THE BENEFITS UNDER THE PENSION RESTORATION PLAN, DISTRIBUTIONS ARE MADE FROM THE PLAN TO EACH EXECUTIVE OFFICER ANNUALLY SHOULD THEY HAVE AN ACCRUED BENEFIT. FOR 2014 THE FOLLOWING DISTRIBUTIONS WERE MADE: JOHN EVANS $ 60,972 STEVEN LILLY $ 37,706 JOHN LIST $ 36,138 SHELDON PETERSEN $172,447 CFC OFFERS A DEFERRED COMPENSATION PLAN WHICH IS A NONQUALIFIED 457(B) PLAN FOR A SELECT GROUP OF MANAGEMENT INCLUDING THE EXECUTIVE OFFICERS. PARTICIPANTS MAY ELECT TO DEFER A PORTION OF THEIR COMPENSATION UP TO THE IRS STATUTORY DOLLAR LIMIT IN EFFECT FOR THAT CALENDAR YEAR. WHEN AN EMPLOYEE CEASES TO BE AN EMPLOYEE FOR ANY REASON, DISTRIBUTION OF THE ACCOUNT WILL GENERALLY BE MADE IN ANNUAL PAYMENTS OR IN A LUMP SUM WHICHEVER THE PARTICIPANT CHOOSES. THE AMOUNT PAID IS BASED ON THE ACCUMULATED VALUE OF THE ACCOUNT AND THEIR ELECTION. FOR 2014 THE FOLLOWING DISTRIBUTIONS WERE MADE: RICHARD LAROCHELLE $78,201. PART I, LINE 7 WE PROVIDED ONE-TIME CASH PAYMENTS TO EACH OF THE EXECUTIVE OFFICERS AS PART OF OUR SHORT-TERM AND LONG-TERM INCENTIVE PROGRAMS. CFC'S SHORT-TERM CASH INCENTIVE PROGRAM IS A ONE-YEAR CASH INCENTIVE THAT IS TIED TO THE ANNUAL PERFORMANCE OF THE ORGANIZATION AS A WHOLE. WE BELIEVE THAT BY PAYING A SHORT-TERM INCENTIVE TIED TO THE ACHIEVEMENT OF ANNUAL OPERATING GOALS, ALL EMPLOYEES, INCLUDING EXECUTIVE OFFICERS, WILL FOCUS THEIR EFFORTS ON THE MOST IMPORTANT STRATEGIC OBJECTIVES WHICH HELP US TO FULFILL OUR MISSION TO OUR MEMBERS AND OUR OBLIGATIONS TO THE FINANCIAL MARKETS. THE SHORT-TERM INCENTIVE PROGRAM PROVIDES ANNUAL CASH INCENTIVE OPPORTUNITIES BASED UPON THE LEVEL OF THE POSITION WITHIN OUR BASE PAY STRUCTURE, RANGING FROM 15 PERCENT - 25 PERCENT OF BASE PAY. EXECUTIVE OFFICERS ARE ELIGIBLE TO RECEIVE SHORT-TERM CASH INCENTIVE COMPENSATION UP TO 25 PERCENT OF THEIR BASE PAY. KEY EMPLOYEES AND HIGHLY COMPENSATED EMPLOYEES ARE ELIGIBLE TO RECEIVE SHORT-TERM CASH INCENTIVE COMPENSATION UP TO 20 PERCENT OF THEIR BASE PAY. THE LONG-TERM INCENTIVE PROGRAM IS A THREE-YEAR PLAN THAT IS TIED TO CFC'S LONG-TERM STRATEGIC OBJECTIVES. THE LONG-TERM INCENTIVE PROGRAM WAS IMPLEMENTED TO CREATE DYNAMIC TENSION BETWEEN SHORT-TERM OBJECTIVES AND LONG-TERM GOALS. EXECUTIVE OFFICERS, KEY EMPLOYEES AND HIGHLY COMPENSATED EMPLOYEES ARE ELIGIBLE TO PARTICIPATE IN THE PLAN AND RECEIVE PERFORMANCE UNITS THAT ARE CALCULATED AT 20% - 25% OF BASE PAY. THE VALUE OF THE PERFORMANCE UNITS WILL RANGE FROM $0 TO $150 PER PERFORMANCE UNIT ACCORDING TO THE LEVEL OF NATIONAL RURAL'S SECURED DEBT RATINGS BY THE RATING AGENCIES. FORM 990, PART VI, SECTION A, LINE 6 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION IS A NON-STOCK, MEMBERSHIP ORGANIZATION. AS OF MAY 31, 2015, THERE WERE 1,026 MEMBERS AND ASSOCIATES. MEMBERSHIP INCLUDED: CLASS A. THERE WERE 839 CLASS A MEMBERS - COOPERATIVE OR NONPROFIT CORPORATIONS, PUBLIC CORPORATIONS, UTILITY DISTRICTS, AND OTHER PUBLIC BODIES, WHICH HAVE RECEIVED OR ARE ELIGIBLE TO RECEIVE A LOAN OR COMMITMENT FOR A LOAN FROM THE RURAL UTILITIES SERVICE OR ANY SUCCESSOR AGENCY, AND WHICH ARE ENGAGED OR PLANNING TO ENGAGE IN THE FURNISHING OF UTILITY SERVICES TO THEIR MEMBERS AND PATRONS FOR THEIR USE AS ULTIMATE CONSUMERS. CLASS B. THERE WERE 72 CLASS B MEMBERS - COOPERATIVE OR NONPROFIT CORPORATIONS WHICH ARE FEDERATIONS OF CLASS A MEMBERS OR OF OTHER CLASS B MEMBERS, OR BOTH, OR WHICH ARE OWNED AND CONTROLLED BY CLASS A MEMBERS OR BY OTHER CLASS B MEMBERS, OR BOTH, AND WHICH ARE ENGAGED OR PLANNING TO ENGAGE IN THE FURNISHING OF UTILITY SERVICES PRIMARILY TO CLASS A MEMBERS OR OTHER CLASS B MEMBERS. CLASS C. THERE WERE 66 CLASS C MEMBERS - STATEWIDE AND REGIONAL ASSOCIATIONS WHICH ARE WHOLLY-OWNED OR CONTROLLED BY CLASS A MEMBERS OR CLASS B MEMBERS, OR BOTH, OR WHICH ARE WHOLLY-OWNED SUBSIDIARIES OF A CFC MEMBER, AND WHICH DO NOT FURNISH UTILITY SERVICES BUT WHICH SUPPLY OTHER FORMS OF SERVICE TO THEIR MEMBERS. CLASS D THERE WAS 1 CLASS D MEMBER. CLASS D MEMBERS ARE NATIONAL ASSOCIATIONS OF COOPERATIVES COMPRISED OF CLASS A, CLASS B AND CLASS C MEMBERS. IN ORDER TO BE ELIGIBLE FOR MEMBERSHIP TO CFC, A NATIONAL ASSOCIATION MUST HAVE, AT THE TIME OF ADMISSION TO CFC, MEMBER COOPERATIVES DOMICILED IN AT LEAST 80% OF THE STATES OF THE UNITED STATES. IN ADDITION TO MEMBERS, ASSOCIATES (NUMBERING 48) ARE NOT-FOR-PROFIT ENTITIES ORGANIZED ON A COOPERATIVE BASIS WHICH ARE OWNED, CONTROLLED OR OPERATED BY CLASS A, B OR C MEMBERS AND WHICH PROVIDE NON-ELECTRIC SERVICES PRIMARILY FOR THE BENEFIT OF CONSUMERS. ASSOCIATES ARE NOT ENTITLED TO VOTE AT ANY MEETING OF THE MEMBERS AND ARE NOT ELIGIBLE TO BE REPRESENTED ON OUR BOARD OF DIRECTORS. FORM 990, PART VI, SECTION A, LINE 7A CFC'S MEMBERS ARE DIVIDED INTO ELEVEN DISTRICTS. EACH DISTRICT APPOINTS TWO DIRECTORS. FOR DISTRICTS 1 THROUGH 10, THE TWO DIRECTORS MUST INCLUDE ONE DIRECTOR, WHO IS A TRUSTEE OR DIRECTOR OF A MEMBER ORGANIZED WITHIN THE DISTRICT, AND ONE, WHO IS A MANAGER OF A MEMBER ORGANIZATION WITHIN THE DISTRICT; PROVIDED THAT, EXCEPT FOR DISTRICT 11 AND IN THE CASE WHERE ONLY ONE STATE IS LOCATED IN A DISTRICT, NO TWO DIRECTORS CAN REPRESENT MEMBERS WITH THEIR HEADQUARTERS IN THE SAME STATE. EACH DIRECTOR SERVES FOR A TERM OF THREE YEARS. UPON EXPIRATION OF THE TERM OF A DIRECTOR, MEMBERS FROM THAT DISTRICT ELECT A DIRECTOR MEETING THE QUALIFICATIONS OUTLINED ABOVE TO REPRESENT THEM ON CFC'S BOARD. A DIRECTOR,OTHER THAN THE DIRECTORS FROM DISTRICT 11, MAY NOT BE ELECTED TO SERVE MORE THAN TWO CONSECUTIVE THREE YEAR TERMS ON THE CFC BOARD. IF THE BOARD OF DIRECTORS IN ITS DISCRETION SO DETERMINES, THEN THERE MAY BE ONE ADDITIONAL DIRECTOR ELECTED BY THE MEMBERS TO SERVE ON THE BOARD OF DIRECTORS FROM TIME TO TIME WHO MEETS THE QUALIFICATIONS AS MAY BE REQUIRED BY THE SECURITIES AND EXCHANGE COMMISSION, GOVERNMENTAL AGENCY OR AUTHORITY, OR NATIONAL STOCK EXCHANGE TO SERVE AS AN AUDIT COMMITTEE FINANCIAL EXPERT. FORM 990, PART VI, SECTION A, LINE 7B PURSUANT TO THE BUSINESS ORGANIZATIONS CODE OF THE DISTRICT OF COLUMBIA, CFC MEMBERS MUST APPROVE THE SALE OR DISPOSITION OF MORE THAN 75% OF THE COMPANY'S ASSETS, MERGERS FOR WHICH THE COMPANY WILL NOT BE THE SURVIVING ENTITY, AND THE DISSOLUTION OF THE COMPANY. FORM 990, PART VI, SECTION B, LINE 11 THE BOARD OF DIRECTORS OF CFC REVIEWED THE 2014 FORM 990 FOR FISCAL YEAR ENDED MAY 31, 2015 AT A REGULARLY SCHEDULED BOARD MEETING PRIOR TO FILING THE FORM 990 WITH THE INTERNAL REVENUE SERVICE. A DRAFT OF THE FORM 990 WAS PREPARED BY CFC STAFF, REVIEWED BY INTERNAL COUNSEL AND SENIOR MANAGEMENT, REVIEWED BY EXTERNAL TAX ADVISORS, KPMG LLP, AND PRESENTED TO THE BOARD FOR REVIEW. A DETAILED PRESENTATION ABOUT THE FORM 990 WAS MADE BY CFC STAFF TO THE BOARD AT A REGULARLY SCHEDULED BOARD MEETING. FORM 990, PART VI, SECTION B, LINE 12C CONFLICTS OF INTERESTS ARE ADDRESSED BY CFC THROUGH ITS RELATED PERSON TRANSACTIONS AND RELATED CREDITS POLICY (THE "POLICY"). CFC ESTABLISHED THE POLICY IN MAY 2007, AS AMENDED FROM TIME TO TIME, TO FACILITATE DISCLOSURE WITH RESPECT TO TRANSACTIONS IN WHICH ITS EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES AND THEIR IMMEDIATE FAMILY MEMBERS ("RELATED PERSON") HAVE A SUBSTANTIAL INTEREST. A RELATED PERSONS TRANSACTION IS DEFINED AS ANY TRANSACTION IN WHICH (I) CFC WAS, IS, OR PROPOSES TO BE A PARTICIPANT, (II) THE AMOUNT INVOLVED EXCEEDS $120,000 AND (III) A RELATED PERSON HAS OR WILL HAVE A DIRECT OR INDIRECT MATERIAL INTEREST IN THE TRANSACTION IN QUESTION. THE POLICY APPLIES TO ALL EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES OF CFC ("COVERED EMPLOYEES") AND REQUIRES SIMILAR DISCLOSURE TO THAT REQUIRED BY ITEM 404 OF REGULATION S-K OF THE SECURITIES ACT OF 1933, AS AMENDED. ON A QUARTERLY BASIS, EACH COVERED EMPLOYEE IS REQUIRED TO REVIEW THE POLICY AND COMPLETE A RELATED PERSON DISCLOSURE IF HE OR SHE OR AN IMMEDIATE FAMILY MEMBER IS INVOLVED IN A TRANSACTION WITH CFC. OUTSIDE OF REGULARLY SCHEDULED BOARD MEETINGS, COVERED EMPLOYEES ARE REQUIRED TO COMPLETE RELATED PERSON DISCLOSURE NOTICES WHENEVER THEY BECOME AWARE OF A POTENTIAL CONFLICT OF INTEREST. THE RELATED PERSON DISCLOSURE NOTICE REQUIRES A DESCRIPTION OF THE PARTIES INVOLVED IN THE TRANSACTION, THE APPROXIMATE DOLLAR AMOUNT OF THE TRANSACTION, AND ANY OTHER MATERIAL FACTS AND CIRCUMSTANCES, AS WELL AS AN UPDATE WITH RESPECT TO THE TIMING AND STATUS OF THE TRANSACTION. UPON RECEIPT OF A RELATED PERSON DISCLOSURE NOTICE, CFC'S GENERAL COUNSEL IS RESPONSIBLE FOR THE REVIEW, APPROVAL AND RATIFICATION OF ANY RELATED PERSON TRANSACTION IF IT MEETS THE CRITERIA BELOW. THOSE RELATED PERSON TRANSACTIONS INVOLVING A SUBSTANTIAL INTEREST OF CFC'S GENERAL COUNSEL ARE REQUIRED TO BE REFERRED TO THE BOARD FOR REVIEW, APPROVAL AND RATIFICATION. IN REVIEWING A RELATED PERSON TRANSACTION, THE GENERAL COUNSEL, AND WHEN APPLICABLE, THE BOARD, MUST REASONABLY DETERMINE, BASED ON A REVIEW OF THE AVAILABLE INFORMATION, THAT THE TRANSACTION IS FAIR AND REASONABLE TO CFC AND CONSISTENT WITH THE BEST INTERESTS OF CFC. IN THE EVENT THE GENERAL COUNSEL BECOMES AWARE OF A RELATED PERSON TRANSACTION THAT HAS NOT BEEN APPROVED UNDER THE POLICY PRIOR TO CONSUMMATION, THE GENERAL COUNSEL SHALL NOTIFY THE BOARD OF DIRECTORS AND TAKE SUCH OTHER ACTIONS AS MAY BE NECESSARY TO SUSPEND THE CONSUMMATION OF THE TRANSACTION PENDING BOARD OF DIRECTORS' REVIEW. RELATED PERSON TRANSACTIONS DO NOT INCLUDE COMPENSATION OR EXPENSE REIMBURSEMENT ARRANGEMENTS WITH DIRECTORS, OFFICERS OR KEY EMPLOYEES (NOTWITHSTANDING THAT OFFICER COMPENSATION MAY BE DISCLOSED IN "ITEM 13. RELATED-PERSON TRANSACTION" IN OUR ANNUAL REPORT ON FORM 10-K, ELSEWHERE IN THE CFC'S PERIODIC REPORTS FILED WITH THE SEC OR OTHERWISE DISCLOSED PUBLICLY AS A RELATED PERSON TRANSACTION); TRANSACTIONS WHERE THE RELATED PERSON'S INTEREST ARISES ONLY FROM THE PERSON'S POSITION AS A DIRECTOR OF ANOTHER ENTITY THAT IS A PARTY TO THE TRANSACTION, AND TRANSACTIONS DEEMED TO BE RELATED CREDITS. A RELATED CREDIT IS DEFINED AS THE EXTENSION OF CREDIT TO OR FOR THE BENEFIT OF COVERED EMPLOYEES OR RELATED ENTITIES THAT ARE MADE ON SUBSTANTIALLY THE SAME TERMS AND FOLLOW THE UNDERWRITING PROCEDURES THAT ARE NO LESS STRINGENT THAN THOSE PREVAILING AT THE TIME FOR COMPARABLE TRANSACTIONS GENERALLY OFFERED BY CFC. THE POLICY PROHIBITS CFC FROM EXTENDING CREDIT IN THE FORM OF A PERSONAL LOAN TO A COVERED EMPLOYEE. RELATED ENTITIES INCLUDE CFC'S MEMBER COOPERATIVES AS WELL AS ANY ENTITY FOR WHICH A RELATED PERSON (I) SERVES AS AN OFFICER, DIRECTOR, TRUSTEE, ALTERNATIVE DIRECTOR OR TRUSTEE OR EMPLOYEE (INCLUDING PART TIME EMPLOYEE), (II) CONTROLS THE ENTITY, OR (III) HAS A SUBSTANTIAL BENEFICIAL INTEREST IN THE ENTITY. THE BOARD HAS DELEGATED TO THE CEO, WITH AUTHORITY TO REDELEGATE TO SUCH OFFICER OF CFC AS THE CEO DEEMS APPROPRIATE, THE AUTHORITY TO APPROVE ALL RELATED CREDITS IN AN AMOUNT EQUAL TO OR LESS THAN $250,000 AND EMERGENCY AND CERTAIN OTHER LINES OF CREDIT. RELATED CREDITS IN EXCESS OF $250,000 MUST BE APPROVED BY THE BOARD. ALL RELATED PERSONS ARE REQUIRED TO ABSTAIN FROM PARTICIPATING, DIRECTLY OR INDIRECTLY, IN THE CREDIT APPROVAL PROCESS INVOLVING A RELATED CREDIT. ADDITIONALLY, ALL RELATED PERSONS ARE REQUIRED TO LEAVE THE BOARD MEETING OR DISCONNECT FROM THE CONFERENCE CALL WHILE THE RELATED CREDIT IS BEING CONSIDERED AND DISCUSSED AND RELATED PERSONS ARE NOT PROVIDED WITH ANY WRITTEN MATERIALS PERTAINING TO SUCH RELATED CREDIT. FORM 990, PART VI, SECTION B, LINE 15A CFC'S COMPENSATION COMMITTEE (THE "COMMITTEE"), WHICH IS COMPRISED OF CFC EXECUTIVE COMMITTEE BOARD MEMBERS, DETERMINES AND APPROVES THE COMPENSATION OF CFC'S CEO. THE COMMITTEE ANNUALLY REVIEWS AND APPROVES APPROPRIATE CORPORATE GOALS AND OBJECTIVES RELATED TO THE CEO'S COMPENSATION AND EVALUATES PERFORMANCE IN LIGHT OF THOSE GOALS AND OBJECTIVES. THE CEO'S COMPENSATION IS COMPRISED OF BASE PAY, SHORT AND LONG TERM INCENTIVE COMPENSATION AND PERQUISITES. IN FISCAL YEAR 2015,AN INDEPENDENT CONSULTANT WAS ENGAGED BY THE COMMITTEE TO CONDUCT A COMPENSATION SURVEY AND PROVIDE COMPENSATION DATA FOR THE CEO POSITION USING PEER ORGANIZATIONS IDENTIFIED BY THE INDEPENDENT CONSULTANT THROUGH DISCUSSIONS WITH THE COMMITTEE. THE INDEPENDENT CONSULTANT INCLUDED COMPANIES IN THE COMPENSATION COMPARISON GROUP THAT WERE SIMILAR TO CFC IN ASSET SIZE, INDUSTRY AND BUSINESS DESCRIPTION. THE GROUP INCLUDED FINANCIAL INSTITUTIONS THAT ARE PRIVATE MARKET, COMMERCIAL AND/OR MISSION-DRIVEN LENDERS, OFFERING FULL SERVICE FINANCING, INVESTMENT AND RELATED SERVICES. THE COMPANIES TARGETED AS PEER COMPANIES INCLUDED TWO MEMBERS OF THE FARM CREDIT SYSTEM AND 12 REGIONAL BANKS OR FINANCIAL SERVICES COMPANIES. THESE COMPANIES WERE CHOSEN BECAUSE THEIR BUSINESSES ARE SIMILAR TO CFC'S. ALTHOUGH CFC IS NOT FOCUSED ON PROFITS LIKE THE INSTITUTIONS IN THE PEER GROUP, THE COMMITTEE BELIEVES THAT THESE COMPANIES EMPLOY EXECUTIVES THAT HAVE SKILLS AND EXPERTISE CONSISTENT WITH WHAT CFC WOULD SEEK IF IT HAD TO REPLACE THE CEO. THE TARGETED COMPANIES HAD ASSETS RANGING FROM APPROXIMATELY 50 PERCENT TO 200 PERCENT OF CFC'S FEBRUARY 2014 TOTAL ASSETS OF $23.1 BILLION, AND INCLUDED SIX COMPANIES WITH GREATER TOTAL ASSETS THAN CFC'S. THE COMPARATOR GROUP CONSISTED OF THE FOLLOWING FINANCIAL SERVICES ORGANIZATIONS: NEW YORK COMMUNITY BANCORP, INC., ASTORIA FINANCIAL CORP., NELNET, INC., WEBSTER FINANCIAL CORP., FLAGSTAR BANCORP, PEOPLE'S UNITED FINANCIAL CORP., WASHINGTON FEDERAL INC., HUDSON CITY BANCORP INC., FIRST NIAGARA FINANCIAL GROUP, TFS FINANCIAL CORPORATION, EVERBANK FINANCIAL CORPORATION AND FEDERAL AGRICULTURAL MORTGAGE CORPORATION, AS WELL AS TWO FARM CREDIT SYSTEM PEERS. HUDSON CITY BANCORP INC. HAS AGREED TO A MERGER WITH M&T BANK CORP. THE INDEPENDENT CONSULTANT RECOMMENDED THAT THIS COMPANY REMAIN IN THE PEER GROUP FOR THIS YEAR AND WILL REEVALUATE THE PEER GROUP FOR NEXT YEAR'S ANALYSIS. THE INDEPENDENT CONSULTANT LED THE COMMITTEE THROUGH AN ASSESSMENT OF CEO COMPENSATION DATA AT THE COMPARISON GROUP COMPANIES USING BOTH A ONE-YEAR AND A THREE-YEAR COMPENSATION ANALYSIS. THE INDEPENDENT CONSULTANT'S DATA INCLUDED BOTH ACTUAL COMPENSATION AND TARGET COMPENSATION BASED ON INFORMATION OBTAINED FROM EACH COMPARATOR GROUP COMPANY'S MOST RECENT ANNUAL REPORT OR PROXY STATEMENT. THE ELEMENTS OF COMPENSATION REVIEWED INCLUDE CURRENT BASE SALARY AS WELL AS ANY ADDITIONAL BONUS,INCENTIVES OR SPECIAL AWARDS. THE COMMITTEE REVIEWED TOTAL COMPENSATION DATA FOR THE COMPARATOR GROUP FOR INFORMATIONAL PURPOSES AND USED THIS DATA SOLELY TO DETERMINE THE COMPETITIVENESS OF OUR CEO BASE PAY. CFC'S SHORT-TERM CASH INCENTIVE PROGRAM IS A ONE-YEAR CASH INCENTIVE THAT IS TIED TO THE ANNUAL PERFORMANCE OF THE ORGANIZATION AS A WHOLE. CORPORATE PERFORMANCE IS MEASURED USING A BALANCED SCORECARD APPROVED BY THE BOARD OF DIRECTORS PRIOR TO THE START OF THE FISCAL YEAR. THE BALANCED SCORECARD IS A PERFORMANCE MANAGEMENT TOOL THAT ARTICULATES THE CORPORATE STRATEGY INTO SPECIFIC, QUANTIFIABLE, MEASURABLE GOALS. THE SCORECARD IS DIVIDED INTO FOUR QUADRANTS, REFLECTING CRUCIAL AREAS OF BUSINESS PERFORMANCE. SPECIFIC GOALS ARE ESTABLISHED WITHIN THOSE QUADRANTS TO FOCUS ALL EMPLOYEES ON THE TARGET RESULTS AND MEASURES THAT MUST BE ACHIEVED IF CFC IS TO SUCCEED AT REALIZING ITS STRATEGIC PLAN. THE INTENT IS TO ALIGN ORGANIZATIONAL, DEPARTMENTAL AND INDIVIDUAL INITIATIVES TO ACHIEVE A COMMON SET OF GOALS. EVERY EMPLOYEE PARTICIPATES IN THE SHORT-TERM INCENTIVE PROGRAM, AND THE CORPORATE STRATEGIC GOALS ARE THE SAME FOR ALL EMPLOYEES,INCLUDING THE EXECUTIVE OFFICERS. THE BOARD OF DIRECTORS ESTABLISHES CORPORATE GOALS AND MEASURES THAT THEY BELIEVE ARE ACHIEVABLE ONLY IF EACH INDIVIDUAL PERFORMS WELL IN HIS OR HER ROLE AND CFC MEETS ITS INTERNAL BUSINESS PLAN GOALS. THE SHORT-TERM INCENTIVE PROGRAM PROVIDES ANNUAL CASH INCENTIVE OPPORTUNITIES BASED UPON THE LEVEL OF THE POSITION WITHIN CFC'S BASE PAY STRUCTURE, RANGING FROM 15% - 25% OF BASE PAY. THE CEO IS ELIGIBLE FOR AN ANNUAL INCENTIVE OPPORTUNITY AT 25% OF HIS BASE PAY. THE LONG-TERM INCENTIVE PROGRAM IS A THREE-YEAR PLAN THAT IS TIED TO CFC'S LONG-TERM STRATEGIC OBJECTIVES. THE MEASURE FOR ALL ACTIVE LONG-TERM INCENTIVE PLANS IS THE ACHIEVEMENT OF BOND RATING TARGETS FOR CFC'S SENIOR SECURED DEBT BY RATING AGENCIES: STANDARD & POOR'S CORPORATION AND MOODY'S INVESTORS SERVICE. ELIGIBLE PARTICIPANTS IN THE PLAN CYCLE WILL RECEIVE PERFORMANCE UNITS THAT ARE CALCULATED AT 15% - 25% OF BASE PAY, DIVIDED BY THE TARGET OBJECTIVE, CURRENTLY $100. THE CEO'S PERFORMANCE UNITS ARE CALCULATED AT 25% OF HIS BASE PAY DIVIDED BY THE TARGET OBJECTIVE. THE COMMITTEE ALSO CONSIDERS PERQUISITES FOR THE CEO IN CONNECTION WITH ITS ANNUAL REVIEW OF THE CEO'S TOTAL COMPENSATION PACKAGE DESCRIBED ABOVE. THE PERQUISITES PROVIDED TO CFC'S CEO ARE LIMITED TO AN ANNUAL AUTOMOBILE ALLOWANCE AS WELL AS AN ANNUAL SPOUSAL AIR TRAVEL ALLOWANCE. TO PROVIDE THESE PERQUISITES IN AN EFFICIENT FASHION, THE BOARD AUTHORIZES AN ANNUAL ALLOWANCE RATHER THAN PROVIDING UNLIMITED REIMBURSEMENT OR USE OF A COMPANY-OWNED VEHICLE. THE AMOUNT OF EACH ALLOWANCE IS AUTHORIZED ANNUALLY BY THE BOARD AND IS DETERMINED BASED ON THE ESTIMATED COST FOR OPERATION AND MAINTENANCE OF AN AUTOMOBILE AND THE ANTICIPATED COST OF AIR TRAVEL BY THE CEO'S SPOUSE. ADDITIONALLY, CFC'S CEO MAY RECEIVE AN ANNUAL EXECUTIVE PHYSICAL PAID FOR BY CFC. THE COMMITTEE DELEGATES THE POWER TO REVIEW AND APPROVE ALL EMPLOYEE COMPENSATION TO THE CEO, WHO EXERCISES HIS JUDGMENT TO SET THE ANNUAL BASE PAY FOR THE OTHER EXECUTIVE OFFICERS AND KEY EMPLOYEES, AS WELL AS EACH EMPLOYEE BASED ON GENERAL MARKET DATA, OVERALL PERFORMANCE AND LEADERSHIP ACCOMPLISHMENTS. IN DETERMINING THE BASE COMPENSATION PAID TO CFC'S EXECUTIVE OFFICERS AND KEY EMPLOYEES, THE CEO REVIEWED NATIONAL,CREDIBLE COMPENSATION SURVEYS FOR FINANCIAL SERVICES ORGANIZATIONS OF SIMILAR ASSET SIZE TO OBTAIN A GENERAL UNDERSTANDING OF CURRENT COMPENSATION PRACTICES AND TO ENSURE THAT THE BASE PAY COMPONENT IS COMPETITIVE, MEANING GENERALLY WITHIN THE 50TH PERCENTILE OF COMPARATIVE PAY FOR SIMILAR POSITIONS. THE CEO DID NOT REVIEW OR CONSIDER THE UNDERLYING ORGANIZATIONS COMPRISING THE SURVEY INFORMATION, BUT INSTEAD CONSIDERED ONLY THE AGGREGATE COMPENSATION DATA.EACH EXECUTIVE OFFICER AND KEY EMPLOYEE IS ELIGIBLE TO PARTICIPATE IN CFC'S SHORT TERM AND LONG TERM INCENTIVE PLANS AS DESCRIBED ABOVE WITH RESPECT TO CFC'S CEO. CFC DOES NOT PROVIDE SIGNIFICANT PERQUISITES OR PERSONAL BENEFITS TO ITS EXECUTIVE OFFICERS OR KEY EMPLOYEES. FORM 990, PART VI, SECTION C, LINE 19 CFC'S ARTICLES OF INCORPORATION AND BYLAWS, AS AMENDED, AND ANNUAL AND PERIODIC FINANCIAL STATEMENTS ARE AVAILABLE TO THE PUBLIC THROUGH THE SECURITIES AND EXCHANGE COMMISSION'S "SEC'S" WEBSITE. CFC'S ARTICLES OF INCORPORATION AND BYLAWS, AS AMENDED, ARE ALSO AVAILABLE ON CFC'S WEBSITE AT WWW.NRUCFC.COOP. CFC'S CONFLICT OF INTEREST POLICY, TITLED THE RELATED PERSONS TRANSACTIONS AND RELATED CREDITS POLICY, IS AVAILABLE ON CFC'S WEBSITE AT WWW.NRUCFC.COOP. CFC'S ARTICLES OF INCORPORATION ARE FILED AS EXHIBIT 3.1 TO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MAY 31, 2014 (FILED AUGUST 28, 2014). CFC'S BYLAWS ARE FILED AS EXHIBIT 3.2 TO THE FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 28, 2011, FILED ON APRIL 13, 2011. CFC'S ANNUAL AND PERIODIC FINANCIAL STATEMENTS ARE PERIODICALLY FILED WITH THE SEC ON FORM 10-K AND FORM 10-Q. FORM 990, PART XI, LINE 9: PATRONAGE CAPITAL DISTRIBUTION -39,779,129. OTHER COMPREHENSIVE INCOME -3,862,796. DERIVATIVE FORWARD VALUE -114,664,756. INTEGRITY FUND 2,080,723. NET MEMBERSHIP FEES 3,000. DISSOLUTION OF SUBSIDARY 92,137. ROUNDING -11. FORM 990, PART XI, LINE 2C WHILE THERE IS NO SEPARATE AUDIT PERFORMED OF THE CFC FINANCIAL STATEMENTS, THE CFC FINANCIAL STATEMENTS ARE CONSOLIDATED WITH THE STATEMENTS OF NATIONAL COOPERATIVE SERVICES CORPORATION AND RURAL TELEPHONE FINANCE COOPERATIVE. THE CONSOLIDATED FINANCIAL STATEMENTS ARE AUDITED. CFC'S AUDIT COMMITTEE IS SOLELY RESPONSIBLE FOR THE NOMINATION, APPROVAL, COMPENSATION, EVALUATION AND DISCHARGE OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS REPORT DIRECTLY TO THE AUDIT COMMITTEE AND THE AUDIT COMMITTEE IS RESPONSIBLE FOR THE RESOLUTION OF DISAGREEMENTS BETWEEN MANAGEMENT AND THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. CONSISTENT WITH SEC REQUIREMENTS, THE AUDIT COMMITTEE HAS ADOPTED A POLICY TO PRE-APPROVE ALL AUDIT AND PERMISSIBLE NON-AUDIT SERVICES PROVIDED BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. THE POLICY PROVIDES THAT PRE-APPROVAL IS NOT REQUIRED FOR TAX COMPLIANCE AND TAX PLANNING AND ADVICE ENGAGEMENTS FOR CFC AND ITS AFFILIATES PROVIDED THE FEES OF EACH SUCH ENGAGEMENT ARE NOT MORE THAN FIVE PERCENT OF TOTAL REVENUES PAID TO THE INDEPENDENT PUBLIC ACCOUNTANTS AND DO NOT IMPAIR THEIR INDEPENDENCE. THE COMMITTEE MEETS WITH OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, INTERNAL AUDITORS, CHIEF EXECUTIVE OFFICER AND FINANCIAL MANAGEMENT EXECUTIVES TO REVIEW THE SCOPE AND RESULTS OF AUDITS AND RECOMMENDATIONS MADE BY THOSE PERSONS WITH RESPECT TO INTERNAL AND EXTERNAL ACCOUNTING CONTROLS AND SPECIFIC ACCOUNTING AND FINANCIAL REPORTING ISSUES AND TO ASSESS CORPORATE RISK. THE BOARD HAS ADOPTED A WRITTEN CHARTER FOR THE AUDIT COMMITTEE WHICH MAY BE FOUND ON OUR WEBSITE, WWW.NRUCFC.COOP. THE PROCESS HAS NOT CHANGED FROM THE PRIOR PERIOD. FORM 990, PART VI, QUESTION 16B AS A LENDER, CFC, FROM TIME TO TIME, MAY HAVE TO FORECLOSE ON THE ASSETS OF A BORROWER. AS PART OF SUCH ACTIONS, THE COMPANY MAY RECEIVE INTERESTS IN JOINT VENTURES WITH TAXABLE ENTITIES. CFC TAKES SUCH INTERESTS ONLY IN ORDER TO MAXIMIZE ITS RECOVERY ON THE LOAN RECEIVABLE. CFC DOES NOT ENTER INTO JOINT VENTURES WITH TAXABLE ENTITIES AS PART OF ITS CORE LENDING BUSINESS. TO DATE, THE COMPANY'S INVESTMENT IN THESE JOINT VENTURES HAS BEEN NOMINAL. CFC HAS DEVELOPED A WRITTEN POLICY THAT REQUIRES THE COMPANY TO EVALUATE ITS PARTICIPATION IN JOINT VENTURE ARRANGEMENTS AND TAKE STEPS TO SAFEGUARD THE COMPANY'S 501(C)(4) TAX EXEMPT STATUS. 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