“We Keep You Connected”

2011AnnuAl RepoRt

Makinglifei sweet!

Farmers Telecommunications Cooperative, Inc. was founded in 1952 by innovative pioneering citizens who embraced the cooperative ownership model as a means of providing themselves with reliable telephone service in an area that investor-owned telephone companies refused to serve.

Today, in an era of modern telecommunications, Farmers Telecommunications builds upon that proud tradition of self reliance and retains the principle of providing the best in service to its members as its one and only objective. By acting in their collective best interest, we believe that we will ultimately enrich the quality of life and/or the business experience for all.

Farmers Telecommunications will strive to meet its objective by being, in the areas we serve, the premier provider of reliable high quality telecommunications and telecommunications-related services to our members and, where appropriate, to other patrons on behalf of the membership. Farmers Telecommunications will provide its services in such a manner and at such a price that the products and services so provided will represent the best value attainable by our members.

In fulfilling our mission, Farmers Telecommunications shall operate with due regard to the general welfare and safety of those with whom we interact. These consist primarily of:

Our members and their communities Our employees and their families Our vendors, business partners, suppliers, and regulators

The principle values of honesty, integrity, and fairness shall be paramount and shall guide the actions of this cooperative. On these fundamental values, there shall be no compromise. We expect the same from all those who choose to do business with us.

Mission

● Report number of members present and proof of mailing notice of meeting by Secretary

● Devotional

● Introduction - Officers and Guests

● Reading of Minutes

● Presentation of Reports: (A) Financial (B) Manager’s (C) Reading and Certification of Ballots

● Election of Trustees - collection of ballots by distributing tellers

● Old Business

● New Business ● Prizes ● Adjourn

Order of Business

Board of Trustees

Randy WrightPresident

Flat Rock Exchange

Danny Richeysecretary

Geraldine Exchange

Lynn Weldontreasurer

Bryant Exchange

Gary SmithVice President

Fyffe Exchange

Greg GriffithHenagar Exchange

Randy TumlinRainsville Exchange

Pat TateGeneral Counsel

Kenneth GilbertPisgah Exchange

The cold taste of homemade ice cream on a hot summer day — it’s the perfect picture of Southern life and family traditions. Growing

up, ice cream always marked special occasions, like birthdays or family dinners when all the cousins and aunts and uncles would get together. The grandparents would laugh as all the kids fought over who got to turn the crank, then we’d all sit around and enjoy a cup of that homemade goodness. Life was sweet.

In a lot of ways, your cooperative is like that cup of cold ice cream. FTC represents a strong tradition in Northeast Alabama, dating back more than five decades when men and women across Sand Mountain worked hard to create a member-owned cooperative to bring reliable phone service to the entire region. They succeeded, and that legacy of community dedication

continues to drive the direction of this company.Regardless of what new technologies come along, or

how much the industry itself changes, we never forget that we are in the business of connecting people. In days past, family gatherings gave us an opportunity to reunite with our extended family members; today, FTC makes it possible for you to stay connected with family and friends no matter where they are. Keeping you connected is our core business.

You may not get to eat ice cream every meal, but you can enjoy the special treats FTC provides on a daily basis. We are proud that our customers have access to the same quality phone, broadband and video services as their family members in the big cities. And we are proud to be making life a little sweeter for the people of Northeast Alabama.

Did you know?It takes 12 lbs. of milk

to make one gallonof ice cream.

To say 2011 was not the best of years would be a bit of an understatement. I am sorely tempted to say I’d rather just forget it.

However, I am challenged to consider a rather differ-ent approach. Frankly, in all reality, there is no way anyone can forget the loss and devastation this area experienced. Surprisingly, in many ways, I hope I don’t. I don’t want to forget that in the span of just a few hours an entire landscape can be forever changed. Maybe I will appreciate it more the next time I drive through a wonderfully shaded neighborhood with houses that were homes to several generations of happy families. I don’t want to forget that people who are happy, healthy and vibrant today may be gone tomorrow. Perhaps the next time I meet an old friend in the hall or in the store, I will take just a few more moments to enjoy his company without feeling a rush to be on my way. Perhaps when I remember a com-munity brought to its knees, I will remember that on your knees is often the best position there is to gain strength. The wise writer of Ecclesiastes reminds us there is a time to remember and a time to forget. I choose to remember.

From a business perspective, 2011 was certainly one of, if not the most, challenging year in your cooperative’s history. Four severe electrical storms combined with the April tornadoes to inflict almost three million dollars in damages to your coopera-tive over a relatively short 90-day period. Recovery from all these storms pushed our normal work plans and objectives back about six months. Still, I choose to remember. There has never been a time when I counted working with our dedicated employees

more of an honor and a privilege. Not only did they respond to the challenges they faced but they did so with remarkable skill and dedication. Remarkable by any standard is the fact that in the face of these hurdles, FTC ended 2011 without a single lost time accident. No single accomplishment gave me greater satisfaction.

As we gather for this annual meeting, we are back to the task of finishing our world-class Broadband project. It is slated for initial completion by the end of 2013, with approximately 80% of our member-ship having access to the finest Broadband technol-ogy there is. Thus far we are under our budget and are presently planning to extend the project’s reach beyond its initial scope with these savings. Despite the fact we have experienced terrible uncertainty with respect to Federal government regulation and immense technological pressures within our industry, we remain absolutely committed to our mission of improving the quality of life in our served areas. If there comes a moment when I am tempted to worry whether or not we are up to the challenges we face, I choose to remember 2011. With the resolute and committed leadership of our Trustees and the dedica-tion of our employees, so aptly demonstrated, I am certain we will deliver on our promise to Keep You Connected.

Fred Johnsonexecutive Vice President& General Manager

GeneralManager

Serving upmore flflf lavor

Some people prefer vanilla, while others prefer chocolate or butter pecan. The point is, people don’t always want the same things. As your

local provider of many telecom services, FTC under-stands that. So whether it’s plain old telephone service, high-speed broadband, high-quality digital television service — or all of the above — we’ve got you covered.

We also understand that, even though you live in a rural community, you want access to the same services you would be able to enjoy in a larger city. Your coop-erative is committed to staying on top of new technol-ogy and making sure you are not deprived because of your choice to live in this beautiful area we call home.

Since we began our project to install fiber through-out our service area, FTC has installed more than 750 miles of fiber optic cables. We have passed some 15,000 homes and businesses.In the past year alone, FTC has run more than 170 miles of fiber and added nearly 3,000 homes or businesses to the list of those able to upgrade to our new fiber technology. These customers now have access to high-capacity broad-band, as well FTC’s digital television service, FTCtv.

Why are we working so hard to enhance our network with fiber? It’s simple, really — because our members want the bandwidth that only fiber can provide! Some households, with game systems, smartphones, multiple computers and Wi-Fi enabled televisions, can max out the capacity of traditional copper lines. Fiber provides the bandwidth needed to get the most from all your favorite devices.

Your cooperative also added a computer repair service last year to give you a professional resource for quickly responding to any computer problem you may

have. There’s no need to ship your computer off for service. We can help solve your computer troubles — and avoid such troubles in the future.

A new experience is on the horizon for FTCtv customers, too. FTC recently completed a conversion to Mediaroom, a new operating system developed by Microsoft. This upgrade will provide a better user ex-perience for customers with a faster loading guide and menu with search capabilities and a quicker channel change time. It will also bring enhanced features such as on-screen caller ID, Visual Voice Mail and Click to Call Back. The most exciting upgrade will be to the DVR. Customers will be able to record and play back shows from any room in their home, pause a recorded show in one room and pick it up in another and program the DVR remotely from a computer or smart phone. Look for more information on when you can experience the FTCtv upgrades.

We understand the needs of our members, and we have spent the past several months working on ways to improve our service and the products we offer. Because we know that not everyone wants or needs the same thing, our goal at FTC is to offer higher qual-ity, better service and more possibilities to the entire region.

Technology

Did you know?One of the major ingredients in ice cream is air. Without it, the stuff would be as hard as a rock.

Piling onthe extras

FTC is committed to providing world-class ser-vice to all its customers. This is evident by the many extras we deliver, such as the following

programs and sponsorships that bring more value to the communities we serve.

Our Customer Appreciation Day held last October is a prime example of that commitment. We gave away door prizes and served refreshments throughout the day. And we kept members informed about hot topics in the industry including Wi-Fi, smart homes, cloud computing and more.

We continue to bring advanced telecommunica-tions to communities that neighbor FTC’s traditional service area. This enables us to deliver quality services at competitive rates, while keeping rates affordable for our members. Everyone benefits.

FTC shows its commitment to the communities we live in and serve through the many programs we sponsor or participate in.

FTC Scholarship Program – Each year, FTC awards one $1,500 scholarship to a high school senior and another $1,500 scholarship to a college student. This year, those scholarships went to Vanessa Trotman of Ider (Excalibur Christian School) and Karen Shelley of Henagar (NACC).

Foundation for Rural Service (FRS) - When a local student earns a national FRS Scholarship of $2,000, FTC adds $500 to the award. This year, Natasha Workman of Bryant was awarded an FRS Scholarship.

Youth Tour - FRS also coordinates a Youth Tour to Washington, D.C., where students learn about the telecommunications industry and how government

functions. FTC sponsored Quincy Nance of Pisgah High School and Natalie Graham of Plainview High School to this year’s event.

FRS Grant - NACC was awarded a $5,000 grant through FRS. NACC will manage and maintain video equipment that local high school students can check out and use for classroom projects and training, in cooperation with FTC, to film high school sports and community events.

Career Enrichment Day - High school seniors from Jackson and DeKalb counties and Fort Payne City Schools attended this event sponsored by FTC on the campus of NACC. More than 40 professionals and community leaders donated their time to speak with students about what it is truly like on a day-to-day basis in their chosen professions.

Summer Reading Program - Each year, FTC hosts a cookout to reward the children who complete the summer reading program at the Rainsville Public Library.

There are many other programs FTC supports to improve the quality of life in the area:

Directory Recycling - This program kept 4,450 directories out of landfills while earning schools $929 from FTC.

Crossroads FreedomFest - FTC co-sponsored the fireworks show for this Independence Day celebra-tion.

Alabama Co-op Couples Conference - This year, FTC sponsored Scott and Susan Hall of Bryant to this educational conference.

Events - As always, FTC was present to support the county fairs in DeKalb and Jackson Counties.

Community

Income Statementfor the year ending 12/31/11

Operating Revenues regulated ....................................................................................................................................16,263,582

nonregulated .................................................................................................................................7,684,497

Total Operating Revenues ..............................................................................23,948,079

Operating Expenses regulated ....................................................................................................................................12,476,482

nonregulated .................................................................................................................................8,893,343

Total Operating Expenses .............................................................................$21,369,825

Operating taxes ............................................................................................................................................481,806

Other Operating expenses ................................................................................................................................9,160

Net Income from Operations ..........................................................................$2,087,288

Non-Operating Income (Expense) investment and Other income ..........................................................................................................495,048 Gain/(Loss) on sale of Marketable securities ....................................................................................411,482 allowance for Funds used during construction .................................................................................223,137 Other expense .................................................................................................................................. (11,297)

Total Non-Operating Income ..............................................................................................1,118,370

Fixed Charges interest on Long-term debt ..............................................................................................................852,888 Other interest ........................................................................................................................................6,398

Total Fixed Charges ............................................................................................................... 859,286

Net Margin Before Income Taxes ..................................................................... 2,346,372

Provision for Income Taxes ................................................................................................................... 182,565 Net Margin ........................................................................................................$2,163,807

capital credits

refunded to

members in 2011

$619,872

capital credits refunded tomembers since formation$16,289,894

Grossannual

revenues(approx.)

$24 Million

Balance Sheetas of 12/31/11

The financial information is summarized from the Consolidated Financial Statements of Farmers Telecommunications Cooperative, Inc., and its Subsidiaries as of December 31, 2011. Those statements were audited by the independent accounting firm of Gant, Croft, and Associates, PC, Certified Public Accountants and are on file at the cooperative’s headquarters in Rainsville, Alabama.

Assetscurrent assets .......................................................................................................................................... 7,043,438non-current assets .................................................................................................................................11,699,329telecommunications and Plant-in-service (net of depreciation) ............................................................................................................................49,815,207

Total Assets ............................................................................................ $68,557,974

Liabilitiescurrent Liabilities ..................................................................................................................................... 7,370,336Long-term debt ......................................................................................................................................12,434,692Other non-current Liabilities ................................................................................................................... 9,774,902

Total Liabilities ...................................................................................... $29,579,930

EquitiesPatronage capital assigned .....................................................................................................................40,091,988retained earnings and Patronage capital assignable............................................................................... 4,961,657unclaimed Patronage capital ................................................................................................................... 2,128,512Other capital ................................................................................................................................................... 2,852accumulated Other comprehensive income ...........................................................................................(8,206,965)

Total Equities ......................................................................................... $38,978,044

Total Liabilities and Equities .............................................................. $68,557,974

consolidatedsubscriber lines

(as of 12/31/11) 14,344

number

of

member

s

12,427

number of employees

97

number of broadband customers

7,813

P.O. Box 217 / 144 McCurdy Avenue N / Rainsville, Alabama 35986 / 256-638-2144 / www.farmerstel.com PhoToGRaPhy by LoGan InGLe ImaGeS

Connor and Reagan, sons of Lee and Carla Davis.

miley, daughter of Kerry and amanda Westbrook.

Jacob, son of Carla

Johnson.

Jake and John Thomas, sons of Paul and Kristi higdon.

halle and Katie, daughters of benny and Casey Roberts.

Cooper, son of Ken and allison mitchell.

hallie and emma, daughters of Joey and Crystal Graham.

“We Keep You Connected”

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