National Rural Utilities Cooperative Finance Corporation

“National rural utilities cooperative finance corporation is a membership organization. As of may 31, 2025, there were 1,016 members and associates. Membership included: class a. There were 842 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 rus 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 68 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 62 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 43) 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.”

“Cfc's members are divided into eleven districts. Each district appoints two directors. The national rural electric cooperative association ("nreca"), as the sole class d member, appoints two directors for district 11. For districts 1 through 10, the two directors must include one director, who is a trustee or director of a member organized within the district, and one, who is a 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. All cfc directors other than the two directors designated by nreca are elected for a three year term and can serve a maximum of two consecutive terms. Upon expiration of the term of a director, members from that district elect a director that meets the qualifications outlined above to represent them on cfc's 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, a governmental agency or authority, or a national stock exchange to serve as an audit committee financial expert.”

“Pursuant to the business organizations code of the district of columbia, cfc members must approve the sale or disposition of more than 75% of the company's assets, mergers for which the company will not be the surviving entity, and the dissolution of the company.”

“A draft of the form 990 was prepared by external tax advisors, kpmg llp, and reviewed by internal counsel and senior management. A draft was also provided to the cfc board of directors through their electronic board portal for their review and comments in advance of the return being filed.”

“Our board of directors has established a written policy governing related-person transactions. The policy covers transactions between cfc and its directors, executive officers or key employees and their immediate family members and entities of which any of our directors, executive officers or key employees (i) is an officer, director, trustee, alternative director or trustee or employee, (ii) controls or (iii) has a substantial interest. Under this policy, a related-person transaction is any transaction in excess of $120,000 in which cfc was, is or is proposed to be a direct or indirect participant in which a related person had, has or will have a direct or indirect material interest in the transaction. Related-person transactions are subject to review by the executive committee of the board of directors (excluding any interested director), based on whether the transaction is fair and reasonable to cfc and consistent with the best interests of cfc and its members. Related credits are extensions of credit to, or for the benefit of, related persons and entities that are made on substantially the same terms as, and follow underwriting procedures that are no less stringent than, those prevailing at the time for comparable transactions generally offered by cfc. Related credits are not subject to the procedures for transactions with related persons because we were established for the very purpose of extending financing to our members. We, therefore, enter into loan and guarantee transactions with members of which our officers and directors are officers, directors, trustees, alternative directors or trustees, or employees in the ordinary course of our business. All related credits are reviewed from time to time by our internal corporate credit committee, which monitors our extensions of credit, and our independent third-party reviewer, which reviews our credit-extension policies on an annual basis. All loans, including related credits, are approved in accordance with an internal credit approval matrix, with each level of risk or exposure potentially escalating the required approval from our lending staff to management, a credit committee or the board of directors. To ensure compliance with this policy, no related persons may be present in person or by teleconference while a related credit is being considered. Under no circumstances may we extend credit to a related person or any other person in the form of a personal loan. As a cooperative, cfc was established for the very purpose of extending financing to its members, from which our directors must be drawn. Loans and guarantees to member systems of which directors of cfc are officers, directors, trustees, alternative directors or trustees, or employees, are made in the ordinary course of cfc business on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other members and that do not involve more than normal risk of uncollectibility or present other unfavorable features. It is anticipated that, consistent with its loan and guarantee policies in effect from time to time, additional loans and guarantees will be made by cfc to member systems and trade and service organizations of which directors of cfc or their immediate family members (i) are officers, directors, trustees, alternative directors or trustees or employees, (ii) control or (iii) have a substantial beneficial interest. Cfc has adopted a policy whereby substantially all extensions of credit to such entities are approved only by the disinterested directors. Additionally, current executive officers and directors, former executive officers and directors, and key employees are required to answer questions in an annual director and officer survey in order to identify any relationships or transactions that must be reported on cfc's form 990, including business transactions between cfc and an interested person involving more than $10,000.”

“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 term incentive compensation and perquisites. In fiscal year 2025, an 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 companies targeted as peer companies included six members of the farm credit system and 11 regional banks or financial services companies. The independent consultant led the committee through an assessment of ceo compensation data at the comparison group companies. 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 compensation. Our annual cash incentive program for fiscal year 2025 is a one-year cash incentive tied to both the annual performance of the organization and individual performance. We believe that by paying an incentive linked to the achievement of annual operating goals and individual performance, all employees, including named executive officers, will focus their efforts on the most important strategic objectives that will help us fulfill our mission to our members and our obligations to the financial markets, while also exhibiting high levels of performance. Additionally, the annual incentive pay enhances our ability to provide competitive compensation, while at the same time tying total compensation paid to the achievement of corporate goals. Every employee participates in the annual incentive program, and the corporate strategic goals are the same for all employees, including the named executive officers. The annual incentive program provides maximum annual cash incentive opportunities based upon the level of the position within our base pay structure, ranging from 26% to 40% of base pay. Executive officers are eligible to receive annual cash incentive compensation up to 40% of their base pay. The legacy long-term incentive program was a three-year plan that was 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 employed as of may 31, 2021 were eligible to participate in the plan and received performance units that were calculated at 20% - 25% of base pay. The value of the performance units was frozen at $20 per performance unit according to the level of national rural's issuer credit ratings by the rating agencies on may 31, 2022. The long-term incentive plan program ended effective may 31, 2022, and final payments were made on may 31, 2024. Despite ending the long-term incentive program, cfc maintained a payout contingency linked to its issuer credit ratings for the fiscal year 2025 annual incentive plan, underscoring the ongoing importance of these ratings in performance evaluations and compensation decisions. The committee delegates the power to review and approve all employee compensation to the ceo, who exercises hi”

“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 and 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 fiscal 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 august 31, 2020 (filed on october 15, 2020). Cfc's annual and periodic financial statements are periodically filed with the sec on form 10-k and form 10-q.”

“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.”

“Net patronage capital retirement -46,845,706. Derivative forward value change -104,551,989. Net change in other oci components -820,687. Net change in membership fees -2,000. Net change in integrity fund -192,875.”

“While there is no seperate audit performed of the cfc financial statements, the cfc financial statements are consolidated with the statements of national cooperative service corporation and audited as consolidated financial statements. 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.”