University of Wisconsin Center for Cooperatives March 30, 2006 Capital & Equity Management Survey Iowa, Minnesota & Wisconsin Agricultural Cooperatives University of Wisconsin Center for Cooperatives March 30, 2006

Survey was planned and prepared by the planning committee. Thank you for survey mailing assistance to: Wisconsin Federation of Cooperatives Minnesota Association of Cooperatives Iowa Institute of Cooperatives

73% were farm supply/grain handling Survey mailing 651 cooperatives 147 returned 22.6% response rate 73% were farm supply/grain handling

Annual gross income 10 surveys did not indicate whether they were from MN or WI

Merger in the last five years

Reasons for merger: Top Four Reasons: Improve profitability Reduce operating costs Avoid or reduce duplication of facilities, equipment, services Strengthen balance sheet

Other reasons for merger: Access additional products or services Expand economic development Expand trade territory

Did the merger achieve these goals? See comments in handout

Average local net margin last 5 years by size of cooperative: Annual gross revenue:

Average local margin compared to 5-years ago by size of cooperative: Annual gross revenue:

Number of years with negative local net margin by size of cooperative. Annual gross revenue:

Capitalization: Percent of total assets locally owned (member equity):

Percentage of total assets locally owned (member equity) 5-years ago:

Member Equity Allocation Type of equity # Co-ops having type % Co-ops having type Average % equity held by type Qualified allocated 138 94% 71% Non-qualified allocated 41 28% 38% Un-allocated 114 78% 33%

Co-ops having preferred stock: 28 co-ops (21%) had equity held as preferred stock. For these co-ops, the average percent of equity held as preferred stock was 47%.

Changes in equity structure past 5=years: See handout for comments.

Current active members 75% Percentage of equity held by active and past members and outside investors Equity held by: Average percent held Current active members 75% Past members 27% Outside investors 10%

% Co-ops with higher percentage % Co-ops with lower percentage In past 10-years, has there been changes in percentage of equity held by active and past members and outside investors? Equity held by: % Co-ops with higher percentage % Co-ops with lower percentage % Co-ops with no change Current active members 29% 26% 44% Past members 24% 28% 47% Outside investors 3% 1% 96%

Is non-member business an important source for building un-allocated or permanent equity? Co-op Type : (Gross revenue $ in millions) No. Yes % No Less than 25 30 37% 52 63% 25 to 74.99 19 53% 14 42% 75 and above 7 50% No info on revenue 4 All co-ops 60 44% 77 56%

See handout for comments on equity from non-members.

Who receives distribution of earnings Who receives distribution of earnings? By size of co-op (Million $ gross revenue) Gross revenue Number Members only % members only Number members & non-members % members & non-members Less than 25 68 78% 19 22% 25 to 74.99 28 80% 7 20% 75 and above 12 3 No info 88% 1 13% All co-ops 115 79% 30

Gross revenue No. Yes % Yes No. No No Less than 25 73 84% 14 16% Does the co-op have an equity redemption policy? By size of co-op (million $ gross revenue) Gross revenue No. Yes % Yes No. No No Less than 25 73 84% 14 16% 25 to 74.99 25 76% 8 24% 75 and above 13 87% 2 13% No info 7 88% 1 All co-ops 118 83% 17%

Equity redemption practices by size of co-op: Annual gross revenue (million $)

See handout for comments on equity redemption practices.

Years of revolvement & ability to consistently maintain that period Gross revenue (million $) Range in years Average years No. Able to maintain % Able to maintain Less than 25 1 to 30 17.9 31 62% 25 to 74.99 5 to 31 8 47% 75 and above 10 to 25 14.4 4 33% No info 15 to 29 22.3 0% All co-ops 1 to 31 18.2 43 52%

With current equity practices, will the co-op be able to fully fund redemption obligations?

With current equity practices, will the co-op be able to maintain adequate equity capital for business growth?

Do the co-op’s equity redemption practices provide a positive image of the co-op to members?

Have active/past members expressed concern with the co-op’s equity redemption practices?

See handout for member concerns about equity practices.

Were there changes to equity redemption practices in the last 5-years?

See handout for comments on changes in equity redemption practices.

Cooperatives currently considering changes in equity redemption practices.

Change in equity redemption practice being Considered.

See handout on discount equity practice being considered

See handout on other concerns about equity and equity redemption issues.