ANNUAL MEMBERSHIP MEETING T hur sd ay, May 19, :00 p.m. CST Fer dinand Community Center, Fer dinand, IN

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1 PERRY-SPENCER RURAL TELEPHONE COOPERATIVE, INC. ANNUAL REPORT 63 rd 2015 ANNUAL MEMBERSHIP MEETING T hur sd ay, May 19, :00 p.m. CST Fer dinand Community Center, Fer dinand, IN

CONTENTS Minutes of 2015 PSC Annual Meeting 4 2016 Board Candidates 5 Financial Statements 2014/2015 6 PSC Board of Directors 7 A LETTER to Our Cooperative Members On behalf of PSC s employees and

Tim Denu Chairman of the Board James M. Dauby President & CEO As you will see in the enclosed financials, 2015 was a good year for the cooperative!

Continued positive trends and the diligent efforts characterized by management and staff allow your cooperative to build upon the solid foundations laid long ago.

Broadband services such as high-speed Internet and IPTV, have greatly increased the quality of life for families throughout our serving area.

2 CONTENTS Minutes of 2015 PSC Annual Meeting Board Candidates 5 Financial Statements 2014/ PSC Board of Directors 7 A LETTER to Our Cooperative Members On behalf of PSC s employees and Board of Directors, we are pleased to present to you PSC s Annual Report and extend an invitation to join us at this year s annual meeting on May 19 th at the Ferdinand Community Center. Tim Denu Chairman of the Board James M. Dauby President & CEO As you will see in the enclosed financials, 2015 was a good year for the cooperative! The acceptance of our product line and services, along with well-defined growth strategies, contributed significantly to our bottom line and asset growth. Continued positive trends and the diligent efforts characterized by management and staff allow your cooperative to build upon the solid foundations laid long ago. Our high-speed fiber optic broadband networks provide great value to the communities we serve, both within our cooperative territory and in neighboring communities of interest. Broadband services such as high-speed Internet and IPTV, have greatly increased the quality of life for families throughout our serving area. In addition to residential, these networks have a tremendous impact on local businesses and enterprises, healthcare facilities, schools and libraries and governmental bodies. Broadband has been coined the electricity of the 21 st century due to its importance of everyday living. PSC s mission is to ensure each and every cooperative member has access to our high-speed fiber broadband network. It s that important and we look for every opportunity to make it a reality! The value we bring to the communities we serve isn t all due to our fiber optic broadband networks, however. PSC believes in giving back to our communities. We are a major contributor to our schools, charitable organizations, not-for-profits, 63 rd Annual Membership Meeting 2

etc. We take pride in being known as a great community partner, who can be counted on, when called upon.

It extends to our dedicated employees who truly desire to bring good to the communities we serve and those who

Helping others is key to enjoying a rewarding and fulfilling life, and PSC s employees are known for their

They have much to offer and their contributions have brought happiness and success to many.

value to the communities we serve. We hope to see you there!

Time 5:00-7:00 p.m. Refreshments & Registration of Members 5:15-6:45 p.m. Entertainment by Perry Central s Coffee & Conversation Student Performers 7:00 p.

Olberding Lilly Dale Church of Christ, Gatchel Pledge of Allegiance by Tim Denu Notice of Mailing by Chris

Candidates by Chris Goffinet Director Election - Districts 3, 4, At-Large by Chris Goffinet President/CEO s Report

3 etc. We take pride in being known as a great community partner, who can be counted on, when called upon. Adding value to others is just not an organizational priority. It extends to our dedicated employees who truly desire to bring good to the communities we serve and those who reside there. Helping others is key to enjoying a rewarding and fulfilling life, and PSC s employees are known for their willingness to help our communities in whatever capacity necessary. They have much to offer and their contributions have brought happiness and success to many. We invite you to come to this year s annual meeting and learn more about how your cooperative continues to add value to the communities we serve. We hope to see you there! AGE NDA 63 rd Annual Membership Meeting Thursday, May 19, 2016 Ferdinand Community Center Times listed are Central Time 5:00-7:00 p.m. Refreshments & Registration of Members 5:15-6:45 p.m. Entertainment by Perry Central s Coffee & Conversation Student Performers 7:00 p.m. Meeting Begins Declaration of Quorum & Call to Order by Tim Denu, Chairman of Board Invocation by Minister Eddie Olberding Lilly Dale Church of Christ, Gatchel Pledge of Allegiance by Tim Denu Notice of Mailing by Chris Goffinet, Cooperative Attorney 2015 Annual Meeting Minutes by Lynn Kahle, Secretary/Treasurer Introduction of Candidates by Chris Goffinet Director Election - Districts 3, 4, At-Large by Chris Goffinet President/CEO s Report by Jim Dauby Attendance Prize Drawings by Jim Dauby Closing Remarks and Adjournment by Jim Dauby EMPLOYEE RECOGNITION RETIREMENT DONNA LAMAR Retired 3/31/ years of service MARTHA NIEHAUS Retired 11/30/ years of service COLLEEN SMITH Retired 3/31/ years of service 25 YEARS MURPHY NOLAN (JR) Central Office Tech MIKE FLEMING Outside Plant Tech 3 63 rd Annual Membership Meeting

4 MINUTES Minutes of the 2015 Perry-Spencer Rural Telephone Cooperative, Inc. d/b/a PSC ANNUAL MEMBERSHIP MEETING The 62nd Annual Meeting of the membership of PSC was held May 21, 2015 at 7:00 PM CT at the Ferdinand Community Center, Ferdinand, Indiana. Chairman Richard Roos called the meeting to order and announced that a quorum was present. Chairman Roos thanked Stan LaGrange for providing the pre-meeting entertainment and then called on Pastor Ben Hartwig to give the invocation. Following the invocation, the Pledge of Allegiance was recited by the membership. Chairman Richard Roos called on Attorney Chris Goffinet for the reading of the Notice of Mailing. Attorney Goffinet read the Notice of Mailing and acknowledged proper and due notice was given to PSC s membership. The next item of business was approving the minutes of the 61st Annual Membership Meeting (May 15, 2014). Secretary/Treasurer Lynn Kahle entertained a motion to dispense with the reading of the minutes if the membership found the minutes to be acceptable as mailed. A motion was made by Calvin Puertzer and seconded by Peg Fairbanks to dispense with the reading of the minutes and approve as mailed. Motion carried by voice acclamation. Mr. Kahle also recognized President/CEO Dauby as being recently elected as the President of the NTCA and mentioned that this is a great honor for PSC. Attorney Chris Goffinet introduced the following candidates vying for the directors seat to serve on the Board for the 3-year term ( ): District #2 St Meinrad; Randall Denning and Nick Dilger. Ballots were then collected from the membership with results being tabulated by Rosemary LaGrange, Becky Hubert, Linda Ziegelgruber, Martha DeMuth, Romilda Pund, and Linda Hassfurther. President/CEO Dauby welcomed everyone to the 62nd annual meeting. He commented that both candidates, Randy Denning and Nick Dilger are unique individuals who want the best for their cooperative and thanked them for helping out the cooperative, in its challenging environment. President/CEO Dauby discussed the 2014 Financial Statements which were included in the Annual Meeting program. President/CEO Dauby stated that our balance sheet has been solid for some time and continued to grow in Current and Noncurrent Assets which mainly consist of Cash and Investments did decrease by $3.2 million in 2014 due to our first draw on a RUS loan in 2013 being applied to our FTTH project in Property and equipment In Service and Under Construction increased over $8.2 million during the year, primarily due to the FTTH construction in St Marks, St Meinrad and Tell City. Total Assets increased from $45.3 million in 2013 to $47.4 million in Regarding liabilities, he noted current and long-term liabilities stayed in check compared to last year. In the Member s Equity section, PSC grew by over $2.4 million and at the end of 2014 we had Members Equity of $29,496,365. Discussing the Statement of Operations, he noted 2014 s Net Margin was $2,498,473 compared to 2013 s Net Margin of $2,092,585. Operating Revenues increased from $15.6 million to $17.1 million, with increases seen in most of our lines of service. The largest increase was in Network Access services of over $781,233. This increase was due to increases in USF funds and cost recovery dollars PSC received to help pay for PSC s cooperative FTTH projects already completed. He mentioned that 2014 operating expenses increased from $13.8 million in 2013 to $15.1 million in 2014 mainly due to plant operations and depreciation expense due to FTTH and new plant and equipment installed over the past few years. President/CEO Dauby stated that 2014 s bottom-line profit of $2,498,473 is the best operating margin in our coop s history. A motion was made by Tom Zuzzio and seconded by Joe LaGrange to approve the Balance Sheet and Statement of Operations as presented. Motion carried unanimously. President/CEO Dauby gave his annual presentation, with this year s theme being Roadmap Through The Maze. He mentioned that fiber optic deployment in the St Marks exchange is complete and customers are being moved over to the new fiber network. The St Meinrad exchange project is scheduled to have mainline construction and drops completed in the next few months with customer installs to the new fiber network beginning in the near future. Our Bandon exchange is tentatively set to begin mainline construction later this summer, with this timeline subject to change depending on the timing of the St Meinrad project completion and the processing, approval, and execution of certain government environmental requirements and special permits. Continuing with our competitive fiber network builds outside our cooperative territory, Tell City mainline construction for the entire town is complete. Customer drops and installs are continuing and will continue throughout the year and by year-end PSC will have over 1,000 residences and businesses signed on to PSC services. Also this year, PSC will begin engineering plans to offer all of its services in Huntingburg, where PSC already has a fiber network presence, complete with a commercial building and central office. PSC will soon be starting construction of a fiber network down to southern Spencer County into Rockport. This fiber will immediately be subscribed to by local government, healthcare facilities and businesses which have been asking for access to a high-speed broadband network for years. Lastly, PSC will be making a substantial upgrade and investment in our regional backbone transport network this year. The planned new transport network will give us growth capabilities of upwards to 400 Gigabit and serve us well into the future. In 2016, the plans are to complete the Bandon FTTH project and cutting customers over to the new fiber network. We have plans to begin the Santa Claus and Lamar exchanges FTTH construction in In the end, our $29 million cooperative-wide fiber network build will cover approximately 70% of all cooperative members upon completion. Beginning this year, PSC will begin design and engineering areas outside the 70% build and chip away at deploying our fiber network to all members. Completing the remaining 30% build will put pressure on cash reserves but PSC is doing a good job of controlling our current debt load. Even in this maze of industry regulation uncertainty we still find ourselves in, PSC s board has made a determination that we must reach each and every one of our cooperative members with our high-speed, fiber broadband network. President/CEO Dauby mentioned this mission will be a difficult task due to the cooperative challenges that PSC faces with continued federal government reforms with Universal Service Funds (USF) being capped, which are dollars the cooperative receives to help pay for FTTH construction. It is practically impossible to predict the amount 63 rd Annual Membership Meeting 4

of USF we will receive each year and has made projects such as the FTTH projects PSC is doing very risky.

tied to it. Over the past 10 years, PSC s landlines have decreased from 6,957 to 4,486 and the USF support tied to these lines also has disappeared with PSC s costs remaining the same.

5 of USF we will receive each year and has made projects such as the FTTH projects PSC is doing very risky. President Dauby often refers to it as if we are in a maze and are trying to navigate our way through all this regulatory uncertainty, with it being almost impossible to successfully navigate through this maze. USF is still a program that only covers costs to deploy telephone service and when we lose a landline and the telephone service that goes with it, we also lose the Universal Service Funds that are tied to it. Over the past 10 years, PSC s landlines have decreased from 6,957 to 4,486 and the USF support tied to these lines also has disappeared with PSC s costs remaining the same. PSC s network is set up that one line carries all our services but if that line is not being used for dial tone, then USF doesn t apply. He indicated that USF reform needs to recognize the fact that even if the line isn t used for dial tone, it is being used as a broadband connection for high-speed Internet and cable TV services and should receive USF support dollars. In addition, to attaching USF support to broadband connections, another approach to USF reform is to create a cost model that would assist carriers in making USF support more sufficient and predictable. Lastly, the size of the USF fund needs to be increased. The Universal Service Fund has been capped at $2 billion for many years and thousands of carriers have to share in this amount to build out their networks. President Dauby mentioned he was fortunate enough to be named the president of NTCA this year and he hopes to be an effective voice not just for PSC, but for all rural carriers when it comes to matters before Congress and the FCC. He said Broadband is so important it has been called the electricity of the 21st century. Attorney Chris Goffinet then reported the election results with Nick Dilger being chosen as the director for District 2. The next item on the agenda was the drawing of attendance prizes. President/CEO Dauby, along with Board of Director assistance, announced and presented the winners with their prizes. President/CEO Dauby concluded the Annual Meeting at 8:15 PM CT by thanking the membership for attending the annual meeting and also extended a thank you to the board and employees for their continued dedication to this cooperative. TIM DENU District 3 St. Marks Exchange Tim and his wife, Julie, reside in Perry County and are the parents of two daughters: Kelsi, 13, and Kayla, 8. Tim represents the St. Marks Exchange and has been a member of the Board since July, Tim is currently serving as Chairman of the Board. Tim is a full time farmer with a livestock and grain operation. He is also a past supervisor of the Perry County Soil and Water Conservation District. Tim enjoys spending time with his family and playing cards with friends when time allows. ALAN POLSTER District 4 Lamar Exchange Alan is the director representing the Lamar Exchange - District #4. He has been on the Board since September, He and his wife, Becky, reside near Evanston. They are the parents of three children: Allison, Kyle and Christopher. Alan is retired and a member of St. John Chrysostom Church in New Boston. He served in the U.S. Army stationed in Korea from 1969 to His hobbies include fishing and golf CANDIDATES MARVIN ROGIER District At-Large Marvin is the director for the District At-Large seat. He has been on the Board since August, He is a member of the Perry County Redevelopment Commission. He and his wife, Norma Jean, reside near St. Marks. They are the parents of two sons: Greg and Marty and have four grandchildren. Marvin is a retired Boilermaker. He is a member of St. Mark s Catholic Church and the Knights of Columbus. Marvin enjoys fishing, sports, spending time with his grandchildren and watching television. Lynn Kahle, Secretary-Treasurer Tim Denu, Chairman of the Board 5 63 rd Annual Membership Meeting

6 Financial Statements 2014/2015 ASSETS DECEMBER 31, 2015 DECEMBER 31, 2014 CURRENT ASSETS Cash and Cash Equivalents $ 2,994,484 $ 793,276 Investments in Marketable Securities 212, ,750 Accounts Receivable 535, ,685 Materials and Supplies 459, ,007 Income Taxes Receivable 32,320 42,840 Other Current Assets 57,910 89,665 TOTAL CURRENT ASSETS 4,291,249 2,136,223 NONCURRENT ASSETS Investments in Marketable Securities 5,974,144 6,200,191 Other Investments 2,011,963 1,836,863 Deferred Income Taxes 1,579,008 1,564,693 TOTAL NONCURRENT ASSETS 9,565,115 9,601,747 PROPERTY AND EQUIPMENT In Service 70,867,388 63,188,424 Under Construction 1,541,398 4,797,513 72,408,786 67,985,937 Less Accumulated Depreciation (34,010,764) (32,343,977) TOTAL PROPERTY AND EQUIPMENT 38,398,022 35,641,960 TOTAL ASSETS $ 52,254,386 $ 47,379,930 LIABILITIES AND MEMBERS EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $ 622,033 $ 358,040 Accounts Payable 1,032,083 1,325,518 Customer Deposits 64,824 61,219 Other Accrued Taxes 530, ,124 Accrued Wages 43, ,544 Accrued Expenses 342, ,506 Unearned Revenue 461, ,620 Post-retirement benefits 34,125 19,620 Patronage Capital Credits Payable 63, ,450 TOTAL CURRENT LIABILITIES 3,195,210 3,356,641 LONG-TERM LIABILITIES Mortgage Notes Payable 11,264,535 7,034,654 Post-Retirement Benefits 639, ,061 TOTAL LONG-TERM LIABILITIES 11,904,399 7,638,715 MEMBERS EQUITY Memberships 54,370 54,370 Patronage Capital 31,145,781 29,496,365 Retained Earnings 6,041,367 6,807,582 Accumulated Other Comprehensive Income (86,741) 26,257 TOTAL MEMBERS EQUITY 37,154,777 36,384,574 TOTAL LIABILITIES & MEMBERS EQUITY $ 52,254,386 $ 47,379, rd Annual Membership Meeting 6

STATEMENT OF OPERATIONS 2015 2014 OPERATING REVENUE Local Network Services $ 2,047,055 $ 1,904,911 Network Access Services 7,855,410 8,048,539 Video Services 2,128,310 1,530,181 Internet and

Revenues 195,173 345,689 Uncollectibles (5,411) (3,500) TOTAL OPERATING REVENUES 17,724,770 17,081,636 OPERATING EXPENSES Plant Specific Operations 7,650,520 6,392,017 Plant Nonspecific

440,265 TOTAL OPERATING EXPENSES 16,843,034 15,063,272 OPERATING MARGIN 881,736 2,018,364 OTHER MARGINS Interest and Dividends 256,349 275,221 Gain (Loss) on Sale of Investments (46,549)

BEFORE INCOME TAX 1,122,914 2,494,870 INCOME TAX 49,572 (3,603) NET MARGIN $ 1,073,342 $ 2,498,473 BOARD OF DIRECTORS Nick Dilger St.

7 STATEMENT OF OPERATIONS OPERATING REVENUE Local Network Services $ 2,047,055 $ 1,904,911 Network Access Services 7,855,410 8,048,539 Video Services 2,128,310 1,530,181 Internet and Data Access Services 4,382,484 4,089,177 Long Distance Services 616, ,388 Rent 279, ,943 Billing and Collection Services 5,527 5,539 Directory 220, ,769 Miscellaneous Revenues 195, ,689 Uncollectibles (5,411) (3,500) TOTAL OPERATING REVENUES 17,724,770 17,081,636 OPERATING EXPENSES Plant Specific Operations 7,650,520 6,392,017 Plant Nonspecific Operations 1,202,475 1,146,036 Depreciation and Amortization 3,654,378 3,288,750 Customer Operations 1,700,555 1,729,210 Corporate Operations 2,125,154 2,066,994 Operating Taxes 509, ,265 TOTAL OPERATING EXPENSES 16,843,034 15,063,272 OPERATING MARGIN 881,736 2,018,364 OTHER MARGINS Interest and Dividends 256, ,221 Gain (Loss) on Sale of Investments (46,549) 143,548 Equity Income on Jointly Owned Companies 199, ,698 Other 8,686 14,559 MARGIN BEFORE INTEREST AND INCOME TAX 1,299,361 2,585,390 INTEREST ON LONG-TERM DEBT 176,447 90,520 MARGIN BEFORE INCOME TAX 1,122,914 2,494,870 INCOME TAX 49,572 (3,603) NET MARGIN $ 1,073,342 $ 2,498,473 BOARD OF DIRECTORS Nick Dilger St. Meinrad Exchange Vice-Chairman Lynn Kahle Holland Exchange Secretary/Treasurer Tim Denu St. Marks Exchange Chairman Alan Polster Lamar Exchange Marvin Rogier District At-Large Richard Roos Santa Claus Exchange Hubert Harpenau Bandon Exchange 7 63 rd Annual Membership Meeting

PRSRT STD US POSTAGE PAID ST MEINRAD IN 47577 PERMIT NO 33 PO Box 126 11877 E State Road 62 Saint Meinrad, IN 47577-0126 Main Local: 812-357-2123 Alternate Local: 812-843-5951, 812-536-3344 Toll

net " Please check ONE for Top Prizes category: Ages 40 or under Ages 41-59 Ages 60+ Business/Organization Clip out and bring this with you on May 19th to register and be eligible for prizes A

Each of the first 400 members that register will receive an automatic $20 credit on their account (1 per membership).

8 PRSRT STD US POSTAGE PAID ST MEINRAD IN PERMIT NO 33 PO Box E State Road 62 Saint Meinrad, IN Main Local: Alternate Local: , Toll Free: " Please check ONE for Top Prizes category: Ages 40 or under Ages Ages 60+ Business/Organization Clip out and bring this with you on May 19th to register and be eligible for prizes A variety of attendance prizes will be given away. To be eligible, you must be a member or spouse on record, properly registered for the meeting, and in attendance. Each of the first 400 members that register will receive an automatic $20 credit on their account (1 per membership). You are invited to attend PSC s 63rd ANNUAL MEETING OF THE MEMBERS The 63rd Annual Meeting of the members of the Perry-Spencer Rural Telephone Cooperative, Inc. d/b/a PSC will be held at the Ferdinand Community Center located in Ferdinand, Indiana on Thursday, May 19, 2016, at 7:00 p.m. Central Time. TO TAKE ACTION ON THE FOLLOWING MATTERS: 1. Report of officers, directors, and committees; 2. The election of three (3) directors of said cooperative to fill the vacancies for the members of said Board of Directors whose terms expire during the year; and 3. Any other business that may come before the meeting on any adjournment or adjournments thereof. A MEMBER MUST BE PRESENT TO VOTE. The clip-mailing address on this report will be used for registration; be sure to present it at the registration desk. The Board of Directors encourages your attendance and participation at the 63rd Annual Meeting. Perry-Spencer RTC, Inc. d/b/a PSC w Lynn Kahle, Secretary/Treasurer + 40 PRIZES 3 TVS! You could take home more than knowledge from our Annual Meeting. You might walk away with a great prize. To be eligible, you must be a member or spouse on record, properly registered for the meeting, and in attendance. Each of the first 400 members that register will also receive an automatic $20 credit on their PSC account (one per membership). Top Prizes: Ages 40 or under FREE YMCA PROGRAM FOR KIDS 5-12 Drop your children off at the Tri-County YMCA, located next door to the Ferdinand Community Center, before joining us at the Annual Meeting. They will enjoy snacks and activities such as crafts, Parachute Games, Climbing Rock Wall, Air Hockey, Gym Sports and more. Children must be signed in at the door, and they will be walked back to the Community Center by the end of the meeting. To schedule your child(ren) for this program, please call by Noon on May 13th, INCLUDING 1st 2nd 3rd Flat Screen HDTV 4 Holiday World Tickets Fitness Activity Tracker Top Prizes: Ages 60+ 1st 2nd 3rd Flat Screen HDTV Rocking Chair Kindle Fire Top Prizes: Ages st 2nd 3rd Flat Screen HDTV Kindle Fire Fitness Activity Tracker Top Prizes: Business/Organization 1st 2nd 3rd $100 credit $75 credit $50 credit

Y EARS. Annual Report

Y EARS. Annual Report Y EARS 2018 Annual Report 2018 Board of Directors John A. Jones Chairman James E. Kidd Vice Chairman Jackie D. Cleghorn Treasurer Barry Brown Secretary Mary S. Edenfield-Gibbs Director Donald R. Hanson