2015-03-25T13:18:29-05:00 2014-05-31 135565207 KPMG LLP 1676 INTERNATIONAL DRIVE MCLEAN VA 22102 990 2013-06-01 520891669 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION NATI 7034671800 20701 COOPERATIVE WAY DULLES VA 20166 SHELDON PETERSEN GOVERNOR AND CEO 7034671800 2015-03-25 0 JOCELYNE C MILLER P00634378 7032868000 2013 2016-02-25 16:41:14Z SHELDON PETERSEN 20701 COOPERATIVE WAY DULLES VA 20166 1094861665 0 X WWW.NRUCFC.COOP X 1969 VA TAX EXEMPT COOPERATIVE ORGANIZATION PROVIDING FINANCING TO RURAL ELECTRIC COOPERATIVES 23 23 223 0 0 0 0 0 1234946454 1084153256 6372192 5376265 5128000 5304455 1246446646 1094833976 1290000 1424338 0 0 55593958 40382966 0 0 0 970787391 898996843 1027671349 940804147 218775297 154029829 22015161447 22179066737 21209554141 21229385922 805607306 949680815 X TO 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 853256481 1089457711 INTEREST EXPENSE - CFC PROVIDES LOANS TO ITS MEMBERS, RURAL ELECTRIC COOPERATIVES AND THEIR RELATED ORGANIZATIONS. CFC 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. 1419000 LOSS ON EARLY EXTINGUISHEMENT OF DEBT - AS PART OF OUR STRATEGY TO OFFER COMPETITIVELY PRICED CREDIT PRODUCTS TO OUR MEMBERS,WE REDEEM OUTSTANDING DEBT EARLY FROM TIME TO TIME TO MANAGE LIQUIDITY AND INTEREST RATE RISK. WHEN WE REDEEM OUTSTANDING DEBT EARLY, WE MAY RECOGNIZE A GAIN OR LOSS RELATED TO THE DIFFERENCE BETWEEN THE AMOUNT PAID TO REDEEM THE DEBT AND THE NET BOOK VALUE OF THE EXTINGUISHED DEBT AS A COMPONENT OF NON-INTEREST EXPENSE IN THE GAIN (LOSS) ON EARLY EXTINGUISHMENT OF DEBT LINE ITEM.ON DECEMBER 16, 2013, WE REDEEMED $150 MILLION OF OUR $600 MILLION, 4.75 PERCENT, COLLATERAL TRUST BONDS DUE MARCH 1, 2014 AT A PREMIUM. THE PREMIUM AND UNAMORTIZED ISSUANCE COSTS TOTALING $1.5 MILLION WERE RECORDED AS A LOSS ON EXTINGUISHMENT OF DEBT DURING THE THIRD QUARTER OF THE YEAR ENDED MAY 31, 2014. 1424338 1424338 GRANTS - AS A COOPERATIVE FORMED UNDER THE LAWS OF THE DISTRICT OF COLUMBIA, CFC 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. 15743119 OTHER PROGRAM SERVICES: LOSS ON WHOLE LOAN SALE: $75,250 BANK FEES: $2,174,273 RESULTS OF FORECLOSED ASSETS: $13,493,596 TOTAL OTHER PROGRAM SERVICES: $15,743,119 LOSS ON WHOLE LOAN SALE - CFC ACCOUNTS FOR THE SALE OF LOANS IN SECURITIZATION TRANSACTIONS BY DERECOGNIZING FINANCIAL ASSETS WHEN CONTROL HAS BEEN SURRENDERED. DEFERRED TRANSACTION COSTS AND UNAMORTIZED DEFERRED LOAN ORIGINATION COSTS RELATED TO THE LOANS SOLD ARE INCLUDED IN THE CALCULATION OF THE GAIN OR LOSS ON THE SALE.RESULTS OF FORECLOSED ASSETS - 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 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 YEAR ENDED MAY 31, 2014. DURING FISCAL YEAR 2014, THE OPERATING COMPANIES OF CFC'S WHOLLY OWNED SUBSIDIARY CAH, HAD A $11,853,000 LOSS FROM OPERATIONS. OPERATIONS INCLUDE TELECOMMUNICATIONS AND CABLE TELEVISION SERVICES IN THE U.S. VIRGIN ISLANDS, BRITISH VIRGIN ISLANDS AND ST. MAARTEN. DENTON REALTY PARTNERS ("DRP") HOLDS 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. THESE FORECLOSED ASSETS ARE HELD BY TWO WHOLLY OWNED SUBSIDIARIES OF CFC. DURING THE YEAR, DRP EXPERIENCED LOSS FROM OPERATIONS OF $1,641,000. 15743119 871842938 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 1 0 0 0 0 1 1 1 1 0 1 64 0 1 223 1 0 1 VI 0 0 0 0 0 0 0 0 X 23 23 0 0 0 0 1 1 0 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 4.30 X 34500 0 0 CURTIS NOLAN DIRECTOR 6.00 X 39800 0 0 FRED BROG DIRECTOR 11.20 X 44650 0 0 PATRICK L BRIDGES DIRECTOR 2.90 X 40300 0 0 MEL COLEMAN DIRECTOR 2.60 X 35300 0 0 FREDERICK CANDERSON DIRECTOR (UNTIL 3/2014) 9.20 X 46750 0 0 GLENN WMILLER DIRECTOR 7.30 X 46900 0 0 ROMAN EGILLEN DIRECTOR 8.30 X 40450 0 0 CHRISTOPHER LHAMON DIRECTOR 14.10 X 45400 0 0 ROBERT MHILL DIRECTOR 7.50 X 40450 0 0 JIM LDOERSTLER UNTIL 32014 DIRECTOR 8.80 X 45100 0 0 BURNS EMERCER UNTIL 32014 DIRECTOR 7.60 X 50950 0 0 MIKE CAMPBELL DIRECTOR 8.20 X 45250 0 0 DWIGHT ROSSOW UNTIL 32014 DIRECTOR 5.00 X 54550 0 0 HARRY NPARK DIRECTOR 8.70 X 40450 0 0 CURTIN RRAKESTRAW II DIRECTOR 5.60 X 40300 0 0 SCOTT W HANDY DIRECTOR 6.60 X 45250 0 0 WALTER K CROOK DIRECTOR 5.80 X 30750 0 0 RANDY D RENTH DIRECTOR 7.40 X 46600 0 0 JOEL CUNNINGHAM PRESIDENT-DIRECTOR 10.50 X X 50650 0 0 RAY BEAVERS VICE PRESIDENT-DIRECTOR 6.90 X X 49950 0 0 RGRANT CLAWSON DIRECTOR 10.30 X 45400 0 0 KENT FARMER DIRECTOR 0.00 X 0 0 0 THOMAS L HAYES DIRECTOR 0.00 X 0 0 0 LYLE KORVER DIRECTOR 7.70 X 45400 0 0 RW MATHENY DIRECTOR 0.00 X 0 0 0 STEPHEN VAIL DIRECTOR 0.00 X 0 0 0 SHELDON C PETERSEN GOVERNOR AND CEO 65.00 0.00 X 1518179 0 143350 RICHARD E LAROCHELLE SVP,CORPORATE RELATIONS UNTIL 12/31/13 60.00 X 896895 0 133837 JOHN T EVANS EVP AND COO 58.00 0.00 X 665225 0 103669 JOHN J LIST SVP & CHIEF LENDING OFFICER 60.00 0.00 X 592068 0 90684 STEVEN L LILLY SVP & SPECIAL ASSET MANAGEMENT 55.00 0.00 X 571860 0 84569 LAWRENCE ZAWALICKUNTIL 41714 SVP, AFFLIATE ORGANIZATIONS 55.00 X 583864 0 120564 JONATHON ANDREW DON SVP AND CFO 60.00 X 480203 0 183608 JOHN M BORAK SVP, CREDIT RISK MANAGEMENT 60.00 0.00 X 337597 0 102947 ROBERTA B ARONSON SVP AND GENERAL COUNSEL 57.00 0.00 X 379884 0 126119 LEIGH GRANTHAM UNTIL 412014 SVP, STRATEGY AND BUSINESS DEVELOPMENT 57.00 X 342397 0 84574 STEVEN M KETTLER SVP, STRATEGIC BUSINESS DEVELOPMENT AND SUPPORT 65.00 X 282983 0 101711 JOEL ALLEN SVP, MEMBER SERVICES 50.00 X 281956 0 120192 ROBIN C REED SVP, MEMBER SERVICES 55.00 X 287286 0 96272 GRACEANN CLENDENEN SVP,CORPORATE SERVICES 48.00 X 263097 0 143299 BRAD CAPTAIN SVP, CORPORATE RELATIONS 55.00 X 237207 0 53096 JOHN F SUTER VP,CAPITAL MARKETS RESEARCH & ANALYSIS 50.00 X 283922 0 134073 BRUCE E MACNEIL VP,CAPITAL MARKETS FUNDING 50.00 X 203599 0 42335 LAWRENCE SAUNDERS VP, PORTFOLIO MANAGEMENT 60.00 X 323055 0 52517 AMY S LUONGO VP, PORTFOLIO MANAGEMENT 50.00 X 222022 0 39852 KRISHNA MURTHY VP,ELECTRIC AND ENERGY INDUSTRY 45.00 X 293952 0 99087 MICHAEL H CARR UNTIL 10913 VP & CIO 50.00 X 313190 0 13265 ROBERT E GEIER JR VP & CONTROLLER 60.00 0.00 X 290227 0 128122 ALLYN JAMATO VP & DEPUTY GENERAL COUNSEL 50.00 0.00 X 289065 0 105541 FRANK E VAUGHN ASSISTANT GENERAL COUNSEL 48.00 0.00 X 261752 0 76391 11206585 0 2379674 138 0 1 0 SAPIENT PO BOX 4886 BOSTON MA 02212 IT CONSULTANTS 3964358 CASSIOPAE 224 MAIN STREET STE 3A SALEM NH 03079 IT CONSULTANTS 1817583 NRECA PO BOX 775670 ST LOUIS MO 631798000 ADMIN FEES 1502219 DELOITTE & TOUCHE LLP 4301 WILSON BLVD ARLINGTON VA 222031860 AUDITOR 1310800 HOGAN LOVELLS US LLP 555 THIRTEENTH STREET NW WASHINGTON DC 200041109 ATTORNEY FEES 1296495 12 INTEREST FROM PSA 522200 937214074 937214074 DERIVATVE CASH SETTLEMENTS 522200 133405570 133405570 OTHER INCOME-LOAN FEES 522200 17276265 17276265 RECOVERY FOR LOSSES 522200 -3742653 -3742653 1084153256 5397093 5397093 6861 27689 -20828 -20828 -20828 MANAGEMENT FEES 522200 5304455 5304455 5304455 1094833976 1089457711 0 5376265 1424338 1424338 9548302 9548302 22208108 22208108 4387556 4387556 2338265 2338265 1900735 1900735 1685537 1685537 1377535 1377535 3378421 3378421 609762 609762 2242938 2242938 2556882 2556882 2426762 2426762 4050874 4050874 2658172 2658172 853256481 853256481 5646470 5646470 702502 702502 FORECLOSED ASSETS 13493596 13493596 BANK FEES 2174273 2174273 LOSS ON EARLY EXTINGUIS 1419000 1419000 WHOLE LOAN SALE 75250 75250 1242388 1242388 940804147 871842938 68961209 0 32199515 106333921 139435477 220846872 174789132 199068670 20216670396 20386356645 5324416 4682098 131937465 24867487 104507559 107069978 31632425 29677320 700000000 575500000 261472115 245651494 349130412 303879739 22015161447 22179066737 4216006876 4025012867 25717236 78039547 7562218876 7771660135 8916952110 8952044600 488659043 402628773 21209554141 21229385922 X 973000 973000 0 0 804634306 948707815 805607306 949680815 22015161447 22179066737 X 154029829 -1455104 -8501216 X X 0 1 X 1 0 14054949 23792221 37847170 55079182 6585881 48493301 143880 125895 17985 38867233 18155711 20711522 107069978 GUARANTEE LIABILITY 21620807 OTHER ACCRUED EXPENSES 7889190 CREDIT LOSSES ALLOWANCE 123000 MEMB APP FEES-MEMBERSHIP APPL 5000 DERIVATIVE LIABILITY 372990776 402628773 CENTRAL AMERICA AND THE CARIBBEAN - 1 5 INVESTMENTS 239119227 1 5 0 0 1 5 239119227 0 239119227 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 ALASKA POWER ASSOCIATION 703 WEST TUDOR ROAD SUITE 200 ANCHORAGE AK 995036650 920069880 501 (C)(6) 13200 EDUCATION FUND GRANT - YOUTH LEADERSHIP PROGRAMS ELECTRIC POWER ASSOC OF MISSISSIPPI PO BOX 3300 RIDGELAND MS 391583300 640926385 501 (C)(9) 14400 EDUCATION FUND GRANT - 2014 AREA SUMMER CONFERENCE ARKANSAS ELECTRIC COOPERATIVES INC PO BOX 194208 LITTLE ROCK AR 72219 710219756 501 (C)(12) 12800 EDUCATION FUND GRANT - ORIENTATION TO CO-OP PRINCIPALS & LEADERSHIP GRAND CANYON STATE ELECTRIC COOPERATIVE ASSOCIATION 120 NORTH 44TH STREET PHOENIX AZ 85034 866056759 501 (C)(6) 12400 EDUCATION FUND GRANT - AZ/CA WASHINGTON YOUTH TOUR GOLDEN STATE POWER COOPERATIVE 14619 HAMLIN STREET VAN NUYS CA 91411 680441905 501 (C)(6) 5600 EDUCATION FUND GRANT - ENERGY COOPERATIVE DEVELOPMENT & EDUCATION WHEATLAND ELECTRIC CO-OP POBOX 230 SCOTT CITY KS 67861 480532188 501 (C)(12) 12821 INTEGRITY FUND GRANT - TERRITORY THREAT FLORIDA ELECTRIC COOPERATIVES ASSOCIATION INC 2916 APALACHEE PARKWAY TALLAHASSEE FL 32301 590633990 501 (C)(6) 19449 INTEGRITY FUND GRANT - TERRITORY THREAT GEORGIA ELECTRIC MEMBERSHIP CORPORATION PO BOX 1707 TUCKER GA 300851707 580530279 501 (C)(6) 25400 EDUCATION FUND GRANT - ELECTRIC COOPERATIVES OF GEORGIA EXHIBIT AT THE 2013 SUNBELT AGRICULTURAL EXPOSITION KAUAI ISLAND UTILITY CO-OP 4463 PAHEE STREET LIHUE HI 96766 990346113 501(C)(12) 4400 EDUCATION FUND GRANT - KIUC ZAPS ENERGY CLASSROOM ASSOCIATION OF ILLINOIS ELECTRIC COOPERATIVES PO BOX 3787 SPINGFIELD IL 62708 370159736 502 (C)(6) 20800 EDUCATION FUND GRANT- TOUCHSTONE ENERGY SERVICE EXCELLELNCE WORKSHOP CHOCTAWHATCHEE ELECTRIC CO-OP (CHELCO) 1350 WBALDWIN AVE DE FUNIAK SPRINGS FL 324350512 590192831 501 (C)(12) 37082 INTEGRITY FUND GRANT - TERRITORIAL DISPUTE INDIANA STATEWIDE ASSOCIATION OF RURAL ELECTRIC COOPERATIVES INC PO BOX 24517 INDIANAPOLIS IN 46224 351499808 501 (C)(6) 26200 EDUCATION FUND GRANT - EMPLOYEE TRAINING, BOARD DEVELOPMENT AND MEMBER EDUCATION KANSAS ELECTRIC COOPERATIVES INC PO BOX 4267 TOPEKA KS 666044267 480541902 501 (C)(12) 19200 EDUCATION FUND GRANT - "BACK TO BASICS" PROGRAM KENTUCKY ASSOCATION OF ELECTRIC COOPERATIVES PO BOX 32170 LOUISVILLE KY 40232 610420165 501(C)(6) 15200 EDUCATION FUND GRANT - KALP (INCORP. COOPERATIVE EDUCATION INTO THE KY AG LEADERSHIP PROGRAM) THE ASSOCIATION OF LOUISIANA ELECTRIC COOPERATIVES INC 10725 AIRLINE HIGHWAY BATON ROUGE LA 708164299 720400467 501 (C)(6) 9200 EDUCATION FUND GRANT - LOUISIANA ELECTRIC COOPERATIVES YOUTH TOUR MICHIGAN ELECTRIC COOPERATIVE ASSOCIATION 2859 W JOLLY ROAD OKEMOS MI 488641182 382214287 501 (C)(6) 9600 EDUCATION FUND GRANT - RURAL ELECTRIC YOUTH TOUR TO WASHGTON, D.C. MINNESOTA RURAL ELECTRIC ASSOCIATION 11640 - 73RD AVENUE NORTH MAPLE GROVE MN 55369 410417193 501 (C)(6) 24600 EDUCATION FUND GRANT - 2013 NRECA BOARD LEADERSHIP COURSES ASSOCIATION OF MISSOURI ELECTRIC COOPERATIVES PO BOX 1645 JEFFERSON CITY MO 65102 430631824 501 (C)(6) 29000 EDUCATION FUND GRANT - MO COOP. YOUTH CONFERENCE & LEADERSHIP EXPERIENCE & YOUTH TOUR ELECTRIC POWER ASSOCIATIONS OF MISSISSIPPI PO BOX 3300 RIDGELAND MS 391583300 640200697 501 (C)(6) 16200 EDUCATION FUND GRANT - ELECTRIC COOPERATIVE YOUTH TOUR MONTANA ELECTRIC COOPERATIVES' ASSOCIATION PO BOX 1306 GREAT FALLS MT 59403 810229220 501 (C)(6) 16200 EDUCATION FUND GRANT - THE TODAY'S MEMBERS PROGRAM DIVERSE POWER INC AN ELECTRIC MEMBERSHIP CORP 1400 SOUTH DAVIS ROAD LAGRANGE GA 302416112 580465897 501 (C)(12) 5226 INTEGRITY FUND GRANT - TERRITORY THREAT NORTH CAROLINA ASSOCIATION OF ELECTRIC COOPERATIVES INC PO BOX 27306 RALEIGH NC 27611 561189186 501 (C)(6) 16000 EDUCATION FUND GRANT - BRIGHT IDEAS EDUCATION GRANT PROGRAM SOUTHERN RIVERS ENERGYINC 1367 HIGHWAY 341 SOUTH BARNESVILLE GA 30204 580319365 501 (C)(12) 48228 INTEGRITY FUND GRANT - FACILITY TAKEOVER BY CITY OF BARNES NEBRASKA RURAL ELECTRIC ASSOCIATION PO BOX 82048 LINCOLN NE 68501 470394033 501 (C)(6) 18200 EDUCATION FUND GRANT - NEBRASKA RURAL ELECT. WASHINGTON YOUTH TOUR NEW MEXICO RURAL ELECTRIC COOPERATIVE ASSOCIATION INC 614 DON GASPAR AVENUE SANTA FE NM 87501 850155370 501 (C)(6) 10400 EDUCATION FUND GRANT - NRECA CREDENTIALED COOPERATIVE DIRECTOR COURSES NEVADA RURAL ELECTRIC ASSOCIATION PO BOX 365 WELLS NV 89835 880237046 501 (C)(6) 8800 EDUCATION FUND GRANT - STATEWIDE SMART ENERGY PROGRAM NEW YORK STATE RURAL ELECTRIC COOPERATIVE ASSOCIATION INC 9 WILSON AVENUE HARTWICK NY 14810 161264464 501 (C)(6) 5600 EDUCATION FUND GRANT - STUDENT PARTICIPATION - NRECA LEG. CONFERENCE NORTHEAST ASSOCIATION OF ELECTRIC COOPERATIVES INC 9 WILSON AVENUE BATH NY 148101633 222153529 501 (C)(12) 15400 EDUCATION FUND GRANT - CONTINUING EDUCATION-DIRECTORS AND EMPLOYEES OHIO RURAL ELECTRIC COOPERATIVES PO BOX 26036 COLUMBUS OH 432260036 510174617 501 (C)(6) 21400 EDUCATION FUND GRANT - TRUSTEES' NRECA COURSES; REVISE & PRINT "THE COOPERATIVE DIFFERENCE" AND NEW EMPLOYEE PROGRAM OKLAHOMA ASSOCIATION OF ELECTRIC COOPERATIVES INCORPORATED PO BOX 54309 OKLAHOMA CITY OK 731541309 730556236 501 (C)(6) 18400 EDUCATION FUND GRANT - CRISIS COMMUNICATIONS PLAN WORKSHOPS OREGON RURAL ELECTRIC COOPERATIVE ASSOCIATION 1750 LIBERTY ST SE SALEM OR 97302 930593238 501 (C)(6) 17600 EDUCATION FUND GRANT - LEGISLATOR OUTREACH PROGRAM PENNSYLVANIA RURAL ELECTRIC ASSOCIATION PO BOX 1266 HARRISBURG PA 171081266 236291530 501 (C)(6) 19200 EDUCATION FUND GRANT - PREA COMMUNICATIONS WORKSHOP THE ELECTRIC COOPERATIVES OF SOUTH CAROLINA INC 808 KNOX ABBOTT DRIVE CAYCE SC 29033 570308664 501 (C)(6) 14000 EDUCATION FUND GRANT - NRECA TRAINING COURSES SOUTH DAKOTA RURAL ELECTRIC ASSOCIATION INC PO BOX 1138 PIERRE SD 57501 460231254 501 (C)(12) 15600 EDUCATION FUND GRANT - YOUTH EXCURSION JO-CARROLL ENERGY INC 79793 W US HIGHWAY 20 ELIZABETH IL 610280390 361284865 501 (C)(12) 58090 INTEGRITY FUND GRANT - TERRITORY THREAT TENNESSEE ELECTRIC COOPERATIVE ASSOCIATION PO BOX 100912 NASHVILLE TN 37224 620461379 501 (C)(6) 13200 EDUCATION FUND GRANT - YOUTH LEADERSHIP SUMMIT TEXAS ELECTRIC COOPERATIVES INC 1122 COLORADO ST STE 2400 AUSTIN TX 787012167 741007829 501 (C)(6) 42800 EDUCATION FUND GRANT - EDUCATION AND TRAINING UTAH RURAL ELECTRIC ASSOCIATION 10714 SOUTH JORDAN GATEWAY SOUTH JORDAN UT 84095 870402010 501 (C)(6) 9000 EDUCATION FUND GRANT - UREA YOUTH LEADERSHIP CHALLENGE KENTUCKY ASSOCATION OF ELECTRIC COOPERATIVES 4515 BISHOP LANE LOUISVILLE KY 40218 610420165 14697 INTEGRITY FUND GRANT - REGULATORY THREAT WASHINGTON RURAL ELECTRIC COOPERATIVE ASSOCIATION PO BOX 7219 OLYMPIA WA 985077219 911236389 501 (C)(6) 12600 EDUCATION FUND GRANT - WRECA ANNUAL MEETING COOPERATIVE NETWORK ELECTRIC DIVISION 1 SOUTH PINCKNEY STREET MADISON WI 537032869 391128018 501(C)(6) 20200 EDUCATION FUND GRANT - 2014 WECA YOUTH LEADERSHIP CONGRESS WYOMING RURAL ELECTRIC ASSOCIATION 2312 CAREY AVENUE CHEYENNE WY 820013627 830207211 501 (C)(12) 9600 EDUCATION FUND GRANT - SPONSOR YOUTH TOUR & AG IN THE CLASSROOM KAY ELECTRIC COOPERATIVE 300 WEST DOOLIN BLACKWELL OK 74631 730308955 501 (C)(12) 141981 INTEGRITY FUND GRANT - TERRITORY THREAT COLUMBIA BASIN ELECTRIC COOPERATIVE 171 LINDEN WAY HEPPNER OR 97836 930337164 501 (C)(12) 31680 INTEGRITY FUND GRANT - TERRITORY THREAT AMICALOLA ELECTRIC MEMBERSHIP CORPORATION 544 HIGHWAY 515 SOUTH JASPER GA 30143 580140201 501 (C)(6) 16642 INTEGRITY FUND GRANT - TERRITORY THREAT CHARLES MIX ELECTRIC ASSOCIATION 440 LAKE STREET LAKE ANDES SD 57356 460212103 501 (C)(12) 3267 INTEGRITY FUND GRANT - TERRITORY THREAT NORTHERN RIO ARRIBA ELECTRIC COOPERATIVE PO BOX 217 CHAMA NM 87520 850098999 501 (C)(6) 83056 INTEGRITY FUND GRANT - TERRITORY THREAT HIGH WEST ENERGY 6270 COUNTRY ROAD PINE BLUFFS WY 82082 830143525 501 (C)(12) 110000 INTEGRITY FUND GRANT - TERRITORY THREAT NRECA 4301 WILSON BLVD FIN8-110 ARLINGTON VA 22203 530116145 501 (C)(6) 129824 EDUCATION FUND GRANT - CO-OP.COM GARKANE ENERGY CO-OP INC POBOX 465 LOA UT 84747 870133588 501 (C)(12) 137644 INTEGRITY FUND GRANT - REGULATORY PURPOSES 0 50 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 X X 0 0 X X X X X 1 1 0 0 0 0 0 1 0 SHELDON C PETERSEN GOVERNOR AND CEO 1208581 0 231494 0 78104 0 234730 0 23680 0 1776589 0 0 0 RICHARD E LAROCHELLE SVP,CORPORATE RELATIONS UNTIL 12/31/ 717895 0 133132 0 45868 0 112828 0 15580 0 1025303 0 0 0 JOHN T EVANS EVP AND COO 472058 0 145546 0 47621 0 99106 0 26688 0 791019 0 0 0 JOHN J LIST SVP & CHIEF LENDING OFFICER 413196 0 126622 0 52250 0 120199 0 26596 0 738863 0 0 0 STEVEN L LILLY SVP & SPECIAL ASSET MANAGEMENT 441473 0 124122 0 6265 0 139501 0 22591 0 733952 0 0 0 LAWRENCE ZAWALICKUNTIL 41714 SVP, AFFLIATE ORGANIZATIONS 441540 0 100780 0 41544 0 166275 0 14874 0 765013 0 0 0 JONATHON ANDREW DON SVP AND CFO 353680 0 101423 0 25100 0 167257 0 26859 0 674319 0 0 0 JOHN M BORAK SVP, CREDIT RISK MANAGEMENT 210402 0 79963 0 47232 0 90005 0 23259 0 450861 0 0 0 ROBERTA B ARONSON SVP AND GENERAL COUNSEL 283356 0 70446 0 26082 0 144978 0 16697 0 541559 0 0 0 LEIGH GRANTHAM UNTIL 412014 SVP, STRATEGY AND BUSINESS DEVELOPME 264860 0 28522 0 49015 0 78005 0 11990 0 432392 0 0 0 STEVEN M KETTLER SVP, STRATEGIC BUSINESS DEVELOPMENT 199563 0 58160 0 25260 0 85359 0 29026 0 397368 0 0 0 JOEL ALLEN SVP, MEMBER SERVICES 204358 0 59292 0 18306 0 104021 0 29541 0 415518 0 0 0 ROBIN C REED SVP, MEMBER SERVICES 204486 0 58680 0 24120 0 88512 0 13384 0 389182 0 0 0 GRACEANN CLENDENEN SVP,CORPORATE SERVICES 187084 0 50830 0 25183 0 145554 0 28925 0 437576 0 0 0 BRAD CAPTAIN SVP, CORPORATE RELATIONS 164678 0 44790 0 27739 0 134363 0 5689 0 377259 0 0 0 JOHN F SUTER VP,CAPITAL MARKETS RESEARCH & ANALYS 203934 0 56760 0 23228 0 117722 0 24066 0 425710 0 0 0 BRUCE E MACNEIL VP,CAPITAL MARKETS FUNDING 162954 0 36115 0 4530 0 25984 0 24887 0 254470 0 0 0 LAWRENCE SAUNDERS VP, PORTFOLIO MANAGEMENT 216442 0 43750 0 62863 0 37976 0 23860 0 384891 0 0 0 AMY S LUONGO VP, PORTFOLIO MANAGEMENT 164072 0 40062 0 17888 0 39671 0 1339 0 263032 0 0 0 KRISHNA MURTHY VP,ELECTRIC AND ENERGY INDUSTRY 186340 0 63683 0 43929 0 76596 0 24905 0 395453 0 0 0 MICHAEL H CARR UNTIL 10913 VP & CIO 197833 0 60240 0 55117 0 3916 0 14909 0 332015 0 0 0 ROBERT E GEIER JR VP & CONTROLLER 211366 0 54692 0 24169 0 169767 0 8105 0 468099 0 0 0 ALLYN JAMATO VP & DEPUTY GENERAL COUNSEL 204031 0 59903 0 25131 0 96999 0 14399 0 400463 0 0 0 FRANK E VAUGHN ASSISTANT GENERAL COUNSEL 183190 0 49754 0 28808 0 64729 0 17252 0 343733 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. ONE OFFICER AND ONE KEY EMPLOYEE LISTED IN PART VII, SECTION A RECEIVED A GROSS UP PAYMENT REPRESENTING A TEMPORARY HOUSING ALLOWANCE AND TAXABLE RELOCATION REIMBURSEMENT FOR PERSONAL USE DUE TO A RELOCATION TO HEADQUARTERS. THESE PAYMENTS WERE TREATED AS TAXABLE COMPENSATION. 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. DURING FY14, HE USED THIS SERVICE FOR ONE LEG OF HIS TRAVEL ON FIVE OCCASIONS. 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. EACH PAYMENT FOR THE GROSS-UP, TAXABLE HOUSING AND RELOCATION ALLOWANCE WAS MADE IN ACCORDANCE WITH A WRITTEN RELOCATION AGREEMENT. PART I, LINES 4A-B PART I, LINE 4A A LUMP SUM SEVERANCE PAYMENT OF $35,215.64 WAS PAID AT THE TIME OF TERMINATION TO MR.CARR. 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, SEVEN 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. FOR 2013 THE FOLLOWING DISTRIBUTIONS WERE MADE: JOHN BORAK $ 9 JOHN EVANS $ 53,636 RICHARD LAROCHELLE $ 255,761 STEVEN LILLY $ 42,310 JOHN LIST $ 59,278 SHELDON PETERSEN $444,684 LAWRENCE ZAWALICK $ 164,710 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. ARKANSAS ELECTRIC COOPERATIVE CORPORATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 1762280984 INTEREST AND PRINCIPAL PAID ON INVESTMENTS/ CERTIFICATES 0 ARKANSAS ELECTRIC COOPERATIVE CORPORATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 172313 SYNDICATION FEES COLLECTED 0 TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 27883638 INTEREST AND PRINCIPAL COLLECTED ON LOANS FROM BORROWER 0 TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 267523198 INTEREST AND PRINCIPAL PAID ON INVESTMENTS/ CERTIFICATES 0 TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 400099 PATRONAGE ALLOCATION RETIRED 0 TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 666435 SYNDACATION FEES COLLECTED 0 0 TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 323705587 AMOUNTS INVESTED IN CFC DEBT PRODUCTS 0 ARKANSAS ELECTRIC COOPERATIVE CORPORATION MEMBER/BORROWER W/ CFC'S BOARD MEMBER 1815500000 AMOUNTS INVESTED IN CFC DEBT PRODUCTS 0 FORM 990, PART VI, SECTION A, LINE 6 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION IS A NON-STOCK, MEMBERSHIP ORGANIZATION. AS OF MAY 31, 2014, THERE WERE 1,023 MEMBERS AND ASSOCIATES. MEMBERSHIP INCLUDED: CLASS A. THERE WERE 838 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 71 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 64 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 49) 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 WHO IS A TRUSTEE OR DIRECTOR OF A MEMBER ORGANIZED WITHIN THE DISTRICT, AND ONE WHO IS 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 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 B, LINE 11 THE BOARD OF DIRECTORS OF CFC REVIEWED THE 2013 FORM 990 FOR FISCAL YEAR ENDED MAY 31, 2014 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. DIRECTOR COMPENSATION ARRANGEMENTS, EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS AND KEY EMPLOYEE COMPENSATION ARRANGEMENTS ARE EACH EXCLUDED FROM THE DEFINITION OF RELATED PERSON TRANSACTIONS, AS WELL AS TRANSACTIONS IN WHICH THE RELATED PERSON'S INTEREST ARISES ONLY FROM THE PERSON'S POSITION AS A DIRECTOR OF ANOTHER ENTITY THAT IS A PARTY TO THE TRANSACTIONS. FINALLY, RELATED CREDITS ARE ALSO EXCLUDED FROM THE DEFINITION OF A RELATED PERSON TRANSACTION. 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 2014, THE 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 2013 TOTAL ASSETS OF $21.5 BILLION, AND INCLUDED FIVE 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.'S 2012 ASSETS ARE OUTSIDE OF THE NORMAL TARGETED ASSET RANGE, AND THEY HAVE 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 WE ARE TO SUCCEED AT REALIZING OUR 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 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 -40,564,180. OTHER COMPREHENSIVE INCOME -3,269,665. DERIVATIVE FORWARD VALUE 34,612,767. FUND 719,863. ROUNDING DIFFERENCE -1. 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 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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