Rural Telephone Bank

Minutes of the 145th Board Meeting

**May 9, 2003**

[Time and Place of Meeting]{.underline}

The 145th meeting of the Board of Directors (Board) of the Rural
Telephone Bank (Bank) was held Friday, May 9, in Conference Room 104-A,
U.S. Department of Agriculture, Washington, D.C., pursuant to notice
published in the [Federal Register]{.underline} on May 1, 2003. Chairman
Thomas Dorr, called the meeting to order at 9:03 a.m.

[Attendants]{.underline}

Directors present were: Thomas Dorr; Gilbert Gozalez; Luis Luna; Roberto
Salazar; James House, Clay Davis; Curtis Sampson; John McAllister; David
Crothers; Larry Sevier; and John Dillard.

Directors absent were: Christine Olsen and Michael Jensen.

Among others present were Governor Hilda Gay Legg and staff members
Deputy Governor Curtis Anderson, Assistant Governor Roberta Purcell,
Deputy Assistant Governor and Assistant Secretary Jonathan Claffey and
Assistant Treasurer Kenneth Ackerman as well as Geoargann Gutteridge
from the Office of the General Counsel. Also present was David Combs,
Special Assistant to the Governor.

[Action on the Minutes]{.underline}

On motion duly made and seconded, the minutes of the February 14, 2003,
board meeting were adopted as prepared.

[Secretary\'s Report]{.underline}

Secretary Curtis Sampson reported that three Bank loans totaling \$5.2
million were approved in the second quarter of fiscal year 2003. Mr.
Sampson noted that those loans were made in conjunction with three RUS
loans, including one hardship loan and one loan from the Federal
Financing Bank. Mr. Sampson further noted that, while Treasury interest
rates for loans of a similar maturity were approximately four to four
and one half percent, the Bank is statutorily prohibited from making
loans at interest rates less than five percent.

# Treasurer\'s Report

Treasurer John McAllister reported on the finances of the Bank for the
second quarter of fiscal year 2003. Mr. McAllister reported, among other
things, that net revenue for the quarter totaled \$24 million, compared
to \$22 million one year ago; total class B stock, net of conversions to
C stock, amounted to \$677 million, compared to \$652 million for fiscal
year ended 2002, an increase of \$25 million, and total class C stock
increased from \$551 million to \$600 million. Advances on loan
commitments for the quarter totaled \$8 million, compared to the same
amount for last year, and unadvanced loan commitments totalled \$1,152
million, up from \$1,064 million one year ago.

[Discussion on Privatization]{.underline}

Chairman Dorr called on Governor Legg to lead off the discussion on
privatization. Governor Legg noted that at the staff briefing, an update
was provided regarding meetings with industry trade associations
concerning the issue of privatization. Chairman Dorr informed the Board
that he had held meetings with the Department of Treasury and the Office
of Management and Budget (OMB) on 'next steps' in analyzing the SAIC
privatization study. Chairman Dorr indicated that Treasury and OMB would
be willing to develop presentations for the Board on privatization at
the August Board meeting.

Several Board directors requested a clarification of a statement made by
Chairman Dorr at the February Board meeting regarding the value of Class
C stock and the potential for discounting Class C stock and the effect
this would have on the cash balance of the Bank at Treasury. The
statement seemed to indicate that Treasury had already had discussions
regarding the value of the Class C stock and the transfer of cash from
the Treasury to a private Bank. Chairman Dorr assured the Board that no
discussions regarding this specific topic had ensued with Treasury and
that this, from his perspective, was just one of many complex issues and
observations that will inevitably face the Board as it continues to
assess privatization.

[Governor\'s Remark\'s]{.underline}

Governor Legg relayed to the Board the status of a Bank borrower that is
currently in default due to the declaration of bankruptcy by the
borrower's parent organization. Noting that the Bank was expected to be
made whole, the matter was being handled by the Department of Justice
(DOJ) to re-establish debt service payments from the borrower.
Resumption of payments was expected soon. Several Board members
expressed concern regarding the pace at which DOJ was moving on this
issue, and inquired as to whether outside counsel could be hired for
similar instances. General Counsel responded that they were not aware of
any procedures other than the use of DOJ, since this is Federal debt.
They indicated, however, that they would look into the matter further.
Chairman Dorr assured the Board that swift action would be taken on this
issue.

[Next Meeting Date]{.underline}

On a motion duly made and seconded, the Board adopted a change in the
meeting dates for the August meeting. The Staff Briefing and Board
meeting, schedule for August 14 and 15, 2003, respectively, were
rescheduled for August 18 and 19, 2003.

[Adjournment]{.underline}

Whereupon motion to adjourn was made and the meeting was adjourned at
approximately 10:00 a.m.

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Secretary