CEO's Report - West River Telecommunications Cooperative

59th Annual Membership MeetingJune 3, 2011Luncheon....................................................................................................10:30 a.m. - 1:00 p.m.Registration.................................................................................................11:00 a.m. - 1:00 p.m.Entertainment by Michael Grimm, Hazen.................................................12:00 p.m. - 12:45 p.m.Presentation of Colors.................................................. American Legion Clark Grosz Post 189The National Anthem...................................................................... Taylor Hougum-Carr, HazenCall to Order........................................................................................................ Matt Erhardt, Jr.Invocation............................................................... Pastor Walt Wolff, Peace Lutheran, HazenWelcome .................................................................................... Mark Nygard, Mayor of HazenAppoint Parliamentarian.................................................................................... Matt Erhardt, Jr.Report of Credentials Committee.................................Credentials Committee ChairpersonReading of Meeting Notice and Proof of Mailing....................................................Theo ReichApproval of Minutes........................................................................................... Matt Erhardt, Jr.Michael Grimm2011AnnualMeetingEntertainerDrawing for PrizesReport on Voting Procedure........................................................................Patrick A. DonovanElection of Directors............................................................................................ Matt Erhardt, Jr.President’s Report............................................................................................... Matt Erhardt, Jr.Report on By-law change (s).......................................................................Patrick A. DonovanDrawing for PrizesCOO/Financial Manager’s Report...................................................................... Bonnie KrauseRecognition of Guests & Introduction of Board.............................................. Matt Erhardt, Jr.Drawing for PrizesCEO’s Report................................................................................................................ Mick GroszService Awards............................................................................................................. Mick GroszMatt Erhardt, Jr.Drawing for PrizesUnfinished Business.............................................................................................. Matt Erhardt, Jr.New Business........................................................................................................ Matt Erhardt, Jr.Election Results.................................................................Credentials Committee ChairpersonAdjournment........................................................................................................ Matt Erhardt, Jr.Grand Prize Drawing1 WEST RIVER TELECOM

Minutes of58th Annual Meeting of West River Telecommunications CooperativeJune 4, 2010The 58th Annual Meeting of the members of West River Telecommunications Cooperative wascalled to order by President Erhardt at the Hazen High School Auditorium in Hazen, North Dakota,at 1:10 o’clock p.m. MDT on June 4, 2010, pursuant to Notice duly given.Pastor John Fanella gave the invocation, which was followed by a welcome from DelmarSchramm, President of the Board of Commissioners of the City of Hazen.Patrick A. Donovan, West River Telecommunications Cooperative’s attorney, was appointed asparliamentarian for the meeting by President Erhardt.Mel Beckler, a member of the Credentials Committee, reported that 386 members had registeredfor the meeting, and a quorum was declared present. He also informed the members that theCredentials Committee had met earlier to consider and had approved all proceedings relatedto the Director nominee petitions and election to be conducted at today’s meeting.The reading of the Notice of Meeting and Proof of Mailing was dispensed with upon motion dulymade, seconded and carried.The reading of the minutes of the last meeting was dispensed with, and such minutes wereapproved upon motion duly made, seconded and carried.The election of directors was the next topic on the agenda. Attorney Donovan explained thevoting procedures. The members were told that two of the seven Director positions were open.In District One, Brittany Lelm is the sole petitioner and nominee for election. In District Three,Matt Erhardt, Jr. is the only candidate. Both are incumbent Directors. The chair was vacated byPresident Erhardt and Vice President Vollmuth continued with the election procedures.A motion was made, seconded and carried declaring that Brittany Lelm, as the sole candidate forher position, be elected to a three year term on the Board of Directors representing District One.A motion was made, seconded and carried declaring that Matt Erhardt, Jr., as the solecandidate for his position, be elected to a three year term on the Board of Directors representingDistrict Three.President Erhardt then presented his report to the members.Attorney Donovan reported on Bylaw changes.COO/Financial Manager Bonnie Krause presented the financial report and this report wasapproved upon motion duly made, seconded and carried.CEO/General Manager Grosz then presented his report to the members.Service awards were presented.President Erhardt then called for unfinished business and there was none. Next, he called for newbusiness. No new business was brought before the assembly.There being no other or further business, the meeting was duly adjourned upon motion made,seconded and carried at 2:09 p.m.2011 ANNUAL REPORT2

President’s ReportOn behalf of the Board of Directors, Management and the Employees at WestRiver Telecommunications, welcome to our 59th Annual Membership meeting.Matt Erhardt, Jr.PresidentWest River had another successful year in 2010. During the construction season,we finished the upgrades to our outside plant. Now virtually every subscriber hashigh quality digital phone service and access to high speed internet. This hastaken several years to complete and several millions of dollars to achieve. Thiswas all done without borrowing any money. With our strong financial condition,we were able to complete these projects with our own cash. Which leads meto the next order of business; this was our best year for margins in West River’shistory. This allows us to retire capital credits to you, the members, approximately$2.5 million.It is mixed emotions to have CEO Grosz announce his intentions to retire. It will besad to see him leave West River as he has been very dedicated to this industryHis knowledge and work ethic have been greatly appreciated by not just theBoard but also by his peers. We wish him all the best in whatever he decides todo, whether it is getting back in the political arena, just going golfing or travelingthe globe. He will be missed.Even though West River faces many challenges, I am confident of the future.With your support and the dedication, ability and hard work of managementand the employees, West River will continue to provide state of the art highquality services it enjoys today well into the future.On behalf of the Board of Directors, the CEO/Manager, Staff and Employees,once again welcome, thank you for your patronage and hope to see you againnext year.Thank you for attending our 59th Annual Meeting.Matt Erhardt, Jr.“this was our best year for margins in West River’shistory. This allows us to retire capital credits to you,the members, approximately $2.5 million.”3 WEST RIVER TELECOM

CEO’s ReportGreetings and welcome to the 59th Annual Membership Meeting of West RiverTelecommunications Cooperative.The past year was a successful one for WRT. We pretty much finished our upgrades toenable us to provide terrestrial broadband to all but a small handful of customers. Weincreased the capacity of our ring to accommodate the growth of internet usage. Wewill continue to do so again this year. It is a major effort and expense to stay ahead ofthe capacity needs of our customers.We had a successful year financially. Our net margins were the highest in history. Most ofthe net margins are due to our participation in cellular partnerships. The foresight of WRTto participate in these partnerships to the fullest is paying huge dividends.The FCC began the process of transitioning from supporting voice based networks tosupporting broadband based networks. The cost for us to provide broadband is greaterthan it is to provide voice only networks. WRT, and other rural telecommunicationscompanies, rely on support from the Universal Service Fund and other high cost funds toprovide services at reasonable rates. All of those support mechanisms are being lookedat by the FCC.Mick GroszCEOIf those support mechanisms are reduced or eliminated the ability for WRT to provideservice at affordable prices in rural areas will be jeopardized. The Board andmanagement, in conjunction with other telcos, are working hard to ensure that the FCCdoes not leave rural America behind.This will be my last report to the membership of WRT. I have announced my intentions toretire sometime prior to the next Annual Membership meeting. It has been a privilegeand honor to have the opportunity to manage a great company.Working for the member-owners of WRT has been a pleasure. Working with the members,Board and employees of WRT has been one of the best experiences of my life.The member-owners of WRT have been loyal customers of WRT throughout the years.The member support I have enjoyed throughout my years as manager is greatlyappreciated. Our number one goal at WRT is to provide for the telecommunicationsneeds of our members with quality service at affordable rates.The Board of Directors is a very dedicated group of individuals. They work hard tounderstand and provide for the telecommunications needs of our members. It takesmuch study and research to anticipate the future needs of customers and then providefor those needs in a timely manner. I very much appreciate the guidance and supportthe Board has provided me through the years.The employees of WRT are second to none. The heart and soul of any company are theemployees. WRT employees are well educated in their fields. WRT employees arededicated to providing our customers with the best service possible. I have neverworked with a better group of people.My time has come to move on. I am confident that WRT will be here far into the futureto provide for all of your telecommunication needs. The people that make WRT work willstill be here for you.Mick Grosz2011 ANNUAL REPORT4

Board of Directors/CEO/AttorneyWRT Directorsare electedto 3 year termsMatt Erhardt, Jr.President - District 3Nick VollmuthVice President - District 5Theo ReichSecretary/Treasurer - Dist. 2Brittany LelmDirector - District 1Ray CarlsonDirector - District 4WRT Service MapHarley OversethDirector - District 6Randy ChristmannDirector - District 7Mick GroszCEOPatrick A. DonovanAttorney5 WEST RIVER TELECOM

Board of Director CandidatesDistrict 4Ray CarlsonDistrict 7RandalChristmannDistrict 7David J.LundstromDistrict 7LeeReiser, Jr.2011 ANNUAL REPORT6

Balance SheetsDECEMBER 31, 2010 AND 20092010 2009ASSETSCurrent AssetsCash and cash equivalents $ 8,612,331 $ 5,353,507Temporary investments in certificates of deposits 1,902,523 4,740,843Investments in held-to-maturity securities - current 20,849,864 9,022,447Telecommunications receivable, net 254,540 199,128Other accounts receivable 1,356,535 1,623,415Interest receivable 82,581 102,786Materials and supplies 1,728,213 1,582,522Other prepayments 168,440 196,933Total current assets 34,955,027 22,821,581Investments and Noncurrent AssetsTemporary investments in certificates of deposits 878,000 1,382,642Investments in held-to-maturity securities 3,740,461 6,699,310Investments in equity method investments 15,618,528 15,301,458Other investments 2,154,030 2,425,057Nonregulated investments 377,398 280,540Other noncurrent assets 75,311 98,509Total investments and noncurrent assets 22,843,728 26,187,516Telecommunications PlantIn service 106,795,661 102,975,915Under construction 52,764 872,800Plant adjustment 7,383,187 7,383,187Total investment in plant 114,231,612 111,231,902Less accumulated depreciation and amortization 75,684,593 71,754,496Net plant 38,547,019 39,477,406$ 96,345,774 $ 88,486,50310% CASHBACK for every dollar spent in 20107 WEST RIVER TELECOM

Balance SheetsDECEMBER 31, 2010 AND 2009LIABILITIES AND EQUITIES2010 2009Current LiabilitiesCurrent maturities of long-term debt $ 1,463,000 $ 1,390,000Accounts payable 682,883 979,507Customer deposits 123,729 113,864Advanced billing and payments 9,276 7,942Accrued income taxes 116,857 28,960Accrued taxes - other 468,657 484,571Other current liabilities 731,537 705,483Total current liabilities 3,595,939 3,710,327Long-Term Debt, LessCurrent Maturities 1,828,436 3,749,783Other LiabilitiesDeferred compensation reserve 74,382 95,495Deferred income taxes 2,283,487 2,220,661Total other liabilities 2,357,869 2,316,156EquitiesPatronage capital 53,526,311 50,899,268Other equities 35,037,219 27,810,969Total equities 88,563,530 78,710,237$ 96,345,774 $ 88,486,503Over 7000 Customers are saving moneywith WRT Bundles2011 ANNUAL REPORT8

Statements of OperationsDECEMBER 31, 2010 AND 20092010 2009OPERATING REVENUESLocal network services $ 4,306,660 $ 4,531,797Network access services 12,392,555 11,122,611Long distance network services 1,022,664 1,078,406Miscellaneous 1,194,293 1,188,698Telecom operating revenue 18,916,172 17,921,512Internet revenue 1,842,055 1,751,581Nonregulated sale and lease revenue 1,127,009 1,038,990Total operating revenues 21,885,236 20,712,083Operating ExpensesPlant specific operations 4,400,125 4,485,880Plant nonspecific operations 1,853,496 1,690,009Depreciation 4,645,896 4,456,386Customer operations 1,278,055 1,311,895Corporate operations 2,045,702 2,080,804Operating taxes, other 244,588 237,200Telecom operating expenses 14,467,862 14,262,174Internet expenses 1,046,192 1,078,581Nonregulated sale and lease expense 1,485,410 1,403,481Total operating expense 16,999,464 16,744,236Net Operating Margin 4,885,772 3,967,847Nonoperating MarginInterest income 683,713 894,558Dividend income 2,317,005 1,568,432Amortization of plant adjustment (492,213) (492,213)AFUDC 33,660 53,078Equity earnings 8,913,276 7,897,971Other nonoperating expense (53,540) (62,298)Net nonoperating margin 11,401,901 9,859,528Net Margin Before Interest and Income Taxes 16,287,673 13,827,375Interest Expense and Related Items 491,030 584,435Net Margin Before Income Taxes 15,796,643 13,242,940Provision for Income Taxes 2,751,423 2,581,783Net Margin $ 13,045,220 $ 10,661,1579WEST RIVER TELECOM

Revenue StatsRevenue 20103% Nonreg. Sales & Lease4% Misc.5% Internet & DSL3% Long Distance37% Network Access& Federal Support35% Dividends, Interestand Equity Earnings13% Local NetworkRevenue Distribution 201019% Plant Expense4% Nonreg. Sales & Lease3% Internet Expense15% Depreciation & Amortization9% Taxes4% Customer Operations1% InterestExpense6% Corporate OperationsAudit ReportEideBailly LLPCertified Public Accountants & ConsultantsThe MembersWest River Telecommunications CooperativeHazen, ND 58545We have audited, in accordance withauditing standards generally accepted inthe United States of America, the balancesheets of West River TelecommunicationsCooperative as of December 31, 2010and 2009, and the related statements ofoperations, equities and cash flows for the39% Net Marginyears then ended, and in our report, dated April4, 2011, we expressed an unqualified opinionon those financial statements. In our opinion,the information set forth in the accompanyingcondensed financial statements is fairly statedin all material respects in relation to the financialstatements from which it has been derived.Completed financial statements are on file at theCooperative’s office.April 4, 2011Sioux Falls, South Dakota2011 ANNUAL REPORT 10

WRT EmployeesMick Grosz25 yearsLasy Bosch5 yearsBonnie KrauseCOO/ Financial ManagerMick GroszCEOBruce MohlPlant AccountantCorey LeintzPayroll/ Plant AccountantWRT has approximately13,000 subscribersOver 16,600 access linesLoretta BeckmanExecutive AssistantBev HuberOffice AccountantShirley BreimeierCABS CoordinatorBeth KrauseMarketing ManagerLasy BoschPersonnel Dir/Safety CoordinatorTani GoodwinAccountant/ APJane SchrammAccounting ClerkLinda TerfehrMember Services CoordinatorJerry LangBuilding Maint. Rep.ADMINISTRATION ACCOUNTING ACCOUNTING MARKETING BUILDING MAINTENANCE11 WEST RIVER TELECOM

WRT EmployeesCUSTOMER SERVICERanae SchmidtCustomer Service Mgr.Jeff HaydenComputer ProgrammerWRT has offices in Hazen,Beulah & MobridgeCUSTOMER SERVICEDebbie MorastCSR-BeulahJodi AipperspachCustomer Service RepShannon SilbernagelCSR-MobridgeLanet DuncanCSR-MobridgeRanae Schmidt15 yearsCUSTOMER SERVICERoxanne GeurtsCustomer Service RepKim GragerCSR-Accts ReceivableLisa RottCustomer Service RepTrista DeWittCustomer Service RepI N T E R N E T CUSTOMER SERVICEMarsha SwansonCashier/ ReceptionistRiley EideInternet/ Data TechSharon SchmaltzCashier/ ReceptionistTyson GrinsteinnerInternet/ Data TechTrent LeapaldtInternet/ Data TechSheldon DacarInternet/ Data Tech2011 ANNUAL REPORT12

WRT EmployeesJody Murschel15 yearsAllan Mautz15 yearsAaron Wick10 yearsBob Fitzgerald5 yearsShannon Rask5 yearsBlaine LemerPlant ManagerPhil QuastC.O./ Network TechBlair MeierOutside Plant Facilities Mgr.P L A N TJody MurschelC.O./ Network TechAllen HaiderOutside Plant Facilities Ass’t Mgr.Bob FitzgeraldConstructionCraig SmithC.O./ Network ManagerGene WolfC.O./ Network TechAaron WickC.O./ Network TechSteven KnudsonRight-of-Way AgentStacy HintzOSP ClerkLarry WiegeC.O./ Network ForemanKip HammargrenC.O./ Network TechShannon RaskPlant ClerkJacob ReinhardtConstructionFrankie BuchertOSP ClerkRobert MettlerC.O./ Network TechDarroll AasC.O./ Network TechRockne BonsnessSales RepresentativeAllan MautzConstructionCheryl LazierOSP ClerkN E T W O R KN E T W O R K N E T W O R KP L A N T P L A N T13 WEST RIVER TELECOM

WRT EmployeesINSTALL & REPAIRTim JohnsonI & R ManagerPatrick O’NeilComb. Tech. – BeulahLaMar GoetzComb. Tech. – WashburnDuane EllweinComb. Tech. – HazenDave FisherComb. Tech. – CenterINSTALL & REPAIRTom BeeryComb. Tech. – HazenDale HeidComb. Tech. – BeulahTom HierComb. Tech. – Glen UllinDarrell BelisleComb. Tech. – Turtle LakeKelly MaasComb. Tech. - HazenLyle Walth15 yearsRandy Davis15 yearsINSTALL & REPAIRTom IversonComb. Tech. – ElginMike DegensteinComb. Tech. – HazenRandy DavisComb. Tech. – New SalemLyle WalthComb. Tech. – MobridgeJoe BauerInstaller – McLaughlinINSTALL & REPAIRJerry GraffComb. Tech. – McLaughlinRod SilvaInstaller – Fort YatesJackson HagenInstaller – McCluskyDevon MittleiderInstaller – McLaughlinJeff HansonInstaller – HazenINSTALL & REPAIRCasey BlohmInstaller – HazenDarren LeierInstaller – HazenJulie HochsprungCustomer Service Rep.Donna QuastCustomer Service Rep.2011 ANNUAL REPORT14

West River Telecomwww.westriv.com101 W Main • Hazen ND 58545701.748.2211... great People... great Service... great Results