This is a text version of the annual report for USDA Rural Development
in Illinois for the fiscal year of 2008.

The cover of the annual report is of the front of the Hillsboro Water
Treatment Plant.

Page 1 of the annual report

Final thoughts from the State Director. A photo of the Douglas Wilson,
State Director along with his statement, that is presented below, is on
the upper half of page one.

2008 was another banner year. The growth that USDA Rural Development has
experienced in recent years has been tremendous. I continue to be
gratified by the hard work and remarkable dedication of the people who
are our agency.

As you explore our report you will see the wide array of programs our
agency has utilized for rural Illinois. This past year, we invested more
than \$478 million in Illinois by utilizing all of our funding
allocation and capturing nearly an equal amount from other states'
unspent allocations.

We reached the \$2 billion mark after only 14 years of offering the
Guaranteed Housing program. Community programs had a record year and
made infrastructure improvements in more than 47 counties. Business
programs had an extremely successful year with nearly \$49 million
invested in 71 different projects.

In the past eight years, USDA Rural Development has invested more than
\$2.6 billion in Illinois. That amount is even more amazing when we
realize that our staff did it by financing one home, one business, one
hospital at a time, year after year.

It has been my privilege to be part of an agency that plays a vital role
in Illinois' rural economy.

Douglas Wilson, State Director

Lower half of page 1.

Grand total fiscal year 2008 \$478,255,814. A bar chart representing the
dollar amount obligated by Rural Development in Illinois from the fiscal
years 2002 to 2008 is also shown.

Page 2 of the annual report

2008 Highlights

Statewide

1.3 million dollars delivered each day to Illinois by Rural Development.

110% increase in funding delivered over 7 years.

Top five national rank in core funding for 4 consecutive years.

2.1 cents in administrative cost per dollar delivered.

Fourth consecutive record breaking year in core funding.

Business

1,899 Number of jobs created or saved.

Five times more funding to cooperatives for economic development.

35% growth in grants awarded for business development.

81% increase in grant dollars for energy applicants.

3.5 times more funding for community revolving loan programs.

71 business projects funded.

Housing

Two billion dollars in guaranteed home loans approved during the 16 year
program.

3,921 is a record for the number of homes purchased with guaranteed
loans.

25% increase in guaranteed home loans from the previous year.

4,851 families enjoying better homes in which to live.

90 lenders who guaranteed more than \$1 million in home loans.

360 million dollars obligated in support for rural housing in Illinois.

Community

69.5 million dollars, a record funding for community programs.

51, the number of counties benefitting from community funding.

10 times more guaranteed funding provided compared to 2007.

Ranked number two nationally for the number of guaranteed community
facility loans.

34% increase in dollars delivered for community projects.

33 projects funded to improve water and sanitary problems.

Page 3 of the annual report.

Serving rural Illinois with incomparable financing.

Loan Guarantees local lenders stretch the taxpayer's dollar and makes
financing far more accessible to rural borrowers. A guarantee costs
taxpayers only a nickel for every dollar invested in rural projects,
leverages investment by private lenders and multiplies the impact of
federal funding.

Photo 1 shows the front of the Eagle movie theater. Eagle Theater
Corporation used a business and industry (B&I) loan guarantee to finance
a five-screen, first run movie theater in Clinton, a community eager to
have a theater once again.

Photo 2 is a group shot in front of Lincoln College. A community
facilities (CF) guarantee helped Lincoln College obtain lower-cost
financing from the State Bank of Lincoln to build an athletic,
convocation and museum facility.

Photo 3 is of a two-story house. Nearly 4,000 Illinois homes were
purchased with guaranteed rural housing (GRH) loans. The fixed rate, 30
year term, no down payment or mortgage insurance make this the best
option for rural homebuyers.

Direct Loans are available when affordable rates and terms are not
available to qualified borrowers from the private sector.

Grants are available to help individuals, communities and organizations
that could not otherwise afford housing, community services or business
development. Grants can also be used to spur private investment.

A combination of grants, direct loans or loan guarantees is often the
solution to affordable financing.

Photo 5 is of numerous new and expecting mothers in front of Richland
Memorial Hospital. In March expectant mothers cut the ribbon for the
Women's Health Center at Olney's Richland Memorial Hospital, financed
with a CF loan guarantee and direct loan.

Photo 5 is an aerial view of Autumn Ridge. The Autumn Ridge supportive
living facility on a 7.6-acre site near Vienna was financed with a GRH
housing guarantee with People's National Bank and a direct loan.

Photo 6 is of a grain dryer at Pratt Farms. Pratt Farms near Dixon used
a REAP loan guarantee and grant to purchase a continuous flow grain
dryer that will cut energy use by 54%, paying back the cost in less than
four years.

Page 4 of the annual report

Serving rural Illinois with exceptional partners

Photo 1 is group shot of a poster presentation at Freeport. When
Freeport became eligible for housing funds, lenders and real estate
professionals immediately began working with us. In just eight months,
43 Freeport homebuyers had used RD financing,

Photo 2 is of a meet and greet between Natasha and Donna Lehrer and
Secretary Ed Schafer. Natasha and Donna Lehrer from Green Pastures
Cooperative, users of our business programs, shared their expertise at
the national USDA Partners and talked with Secretary Schafer.

Photo 3 is of Aaron Ridenour receiving his award. Aaron Ridenour was
honored for his help with REDLG applications. His expertise helped rural
electric co-ops access millions in no-interest money for economic
development.

Congressmen, employees, and even a U.S. Secretary of Agriculture have
signed our year-end checks. Because of the importance our partners in
helping deliver our programs, we asked some of them to sign this year's
check.

Photo 4 is a check signing for the Association of Illinois Electric
Cooperatives.

Photo 5 is a check signing for Kendall Grundy Community Action Agency.

Photo 6 is a scan of the thank you letter from North Central Illinois
Council of Governments Association of Illinois Electric Cooperatives.

Page 5 of the annual report

Business programs promote business development and job creation with
support for businesses, public bodies, non-profit organizations and
utility co-ops. Funds are also available for value added agriculture,
renewable energy and energy efficiency.

Photo 1 is of Ken Ropp of Ropp Jersey Cheese holding a sample of two of
the companies cheeses. Ropp Jersey Cheese, LLC in Normal (McLean County)
will double production capacity with a \$150,000 VAPG grant. Ken Ropp
and his family more than tripled the return on the dairy's milk after
they began producing cheese. The grant will help them expand the market
for their 60 flavors of cheese. Photo courtesy of 1st Farm Credit
Services

Photo 2 is an inside shot of the green house. H.M. Buckley Growers used
a REAP efficiency grant to heat their greenhouse. They purchased
equipment that could utilize waste heat to generate electricity using
landfill gas from a nearby power plant. The energy savings is nearly
\$300,000 a year.

Page 6 of the annual report

Photo 3 is a group shot of four employees from the Sapphire Restaurant
and Ruby Lounge in Macomb. Prairie Hills Resource Conservation &
Development, Inc is a tremendous resource for business development in
west central Illinois. Capitalized with an IRP, their revolving loan
program is helping scores of businesses like the new Sapphire Restaurant
and Ruby Lounge in Macomb.

Photo 4 shows a customer getting a beverage at Vincent Convenience
Stores. Vincent Convenience Stores used a B&I guarantee with Peoples
Bank & Trust to purchase an interest in a Pana convenience store and to
refinance their Cowden store. The lender benefited from access to the
secondary market and the borrower from better terms.

Photo 5 shows Director Doug Wilson and Area Specialist Lorali
Heintzelman on top of two scooters at Eastland Motor Sports. Eastland
Motor Sports started as a small repair shop for motorcycles and ATVs in
1988. With a thriving business and new AT franchise, the company used a
B&I with Citizens State Bank to financing a new facility in Lanark.

Photo 6 is a group shot in front of the historic Kraft Building. An RBEG
will help the Mt. Carroll Community Development Corporation restore the
historic Kraft Building as a small business incubator. The grant will
help revitalize the city's business district while capitalizing on the
character of the vintage community.

Photo 7 is a group shot at Country Health nursing home in Gifford.
Eastern Illini Electric Co-op was one of six electric co-ops to earn
REDLG funding for economic development in their service areas. They used
the funding to provide a grant and no interest loan for renovations to
Country Health, a nursing home in Gifford.

Photo 8 is of a check presentation at a power station owned by Adams
Electric Cooperative. Adams Electric Cooperative is using a REAP
renewable grant to help purchase a wind turbine. A check was presented
to the co-op at their substation where electricity for their members
will be uploaded from the wind turbine just down the road.

Photo 9 is of an inside shot of the city of Washburn's grocery store.
Illinois Institute for Rural Affairs at Western Illinois University is
using an RCDG to improve rural economic conditions by supporting
cooperative efforts. One client is a group of Washburn residents who
formed a cooperative to save the town's only grocery store.

Photo 10 is of a group of employees in front of two forklifts. The
Southern Illinois Stimulus Corporation used an RBEG to purchase two
forklifts for lease to Cairo Dry Kiln. The company didn't have to make a
capital outlay for the equipment, and SISCO can use the income from the
lease for other job-creating projects.

Page 7 of the annual report

Community programs provide funding for essential facilities that serve
the public. Public and non-profit organizations can use the funds for
health care, public safety, public service and education.

Photo 1 is of a police car recently purchased by the city of Hurst.
Public safety is critical to the quality of rural life and a priority
for Rural Development. Thirteen such projects were funded this year.
Hurst received a CF grant to purchase a squad car that will ensure
reliable protection to its 805 residents.

Photo 2 is of Kankakee Township Fire Protection District fire station.

Photo 3 is of a check presentation at Northwest St. Clair County Fire
Protection District fire station.

Photo 4 is of the new Pleasant Hill Fire Protection District's fire
engine.

Photo 5 is of Sadorus Fire Protection District fire station.

Page 8 of the annual report

Photo 1 is an inside shot of the Eldorado Memorial Public Library. CF
grants have made it much easier for patrons to access collections at two
Southern Illinois libraries. Eldorado Memorial Public Library serving
parts of three southeastern counties has new shelving. Mounds converted
a spare room for history and genealogy materials.

Photo 2 is an artist's rendition of the Lake Egypt Fire Station. With a
CF loan, Lake Egypt Fire Protection District is ramping up to serve the
district's 9800 residents with a new facility that will be able to house
all of their fire and ambulance vehicles and accommodate meeting,
training, living and servicing needs.

Photo 3 is a check signing for the Illinois Main Street program.
Illinois Main Street, administered by the Lt. Governor's Office,
received an RCDI grant to bolster resources for 18 communities and
nonprofit organizations. The RCDI program helps community based
organizations and economically challenged communities pursue economic
growth.

Photo 4 is of a backhoe. Communities struggling with high non-employment
may be eligible for CF grants through the Economic Impact Initiative.
Shawnee Township received grants for an office computer used for
financial reporting, a backhoe, and a road plane to repair roads.

Photo 5 is an inside shot of Eberhardt Village in Arthur. Eberhardt
Village in Arthur used a GCF with the State Bank of Arthur and a CF loan
to build and furnish an assisted living center with 36 apartments. It is
located on a scenic 27 acre campus that it shares with Arthur Home, a
skilled nursing center.

Photo 6 is a group shot in an examining room at Memorial Hospital in
Carthage. Memorial Hospital in Carthage used a CF loan to purchase
notebook computers that can instantaneously share patient information
with doctors and other health care facilities. The health care benefits
and operational savings are substantial.

Photo 7 is an outside shot of Happy Day Express. Happy Day Express is a
faith-based day care center in Fairfield. They used a GFC loan with
Fairfield National Bank to purchase the site and a CF grant with which
to purchase equipment for the center.

Photo 8 is of an Alexander County employee and their new dump truck.
Alexander County can maintain all of its roads more efficiently with the
addition of a 2007 International 7500 dump truck, to its fleet. A CF
grant helped them make the purchase affordable.

Page 9 of the annual report

Housing programs help eligible borrowers build, purchase and repair
their own homes. Public and non-profit organizations are eligible for
funds to help certain homeowners repair and improve their homes.
Financing is also available to developers for affordable rental housing.

Photo 1 is a group shot at Stanley Taylor's home. With the guarantee of
Stanley Taylor's home loan with Streator National Bank, Illinois marked
\$2 billion dollars in guaranteed home loans, just four years after
reaching the \$1 billion mark. The GRH program has proved to be the
rural homebuyer's best deal.

Photo 2 is of Raymond Parks and Area Specialist Trish Yeager. Thanks to
collaboration between Advocates for Access in Peoria Height and Rural
Development, Raymond Parks was able to move out of a nursing home and
live independently in his own home. Raymond was eligible for a Direct
home loan with subsidized payments.

Page 10 of the annual report

Photo 1 is of an award presentation at National City Mortgage in
Bloomington. National City Mortgage in Bloomington, one of our best
partners during the last five years, was the 2008 leading GRH lender in
Illinois. They helped 169 homebuyers with \$16.7 million of affordable
financing.

Photo 2 is a group photo of the Rowland family and Director Doug Wilson
in front of the Rowland's house. A January flood left the Rowland's home
in Pontiac ruined. Because Mid Central Community Action, Inc. had built
homes to meet the criteria for Direct home loans, the Rolands qualified
for a loan and moved from temporary housing into a new home.

Photo 3 is a group photo at the entrance to Canterbury House Apartments.
Canterbury House Apartments was built in Dixon to serve renters with
moderate and low incomes. P/R Mortgage & Investment Corp. used a GRRH
guarantee for construction and permanent financing. The Illinois Housing
Development Authority provided tax credits.

Photo 4 is an award presentation for Candy Cari. Candy Cari was named
Site Manager of the Year for a family property funded with RRH direct
financing. Tenants think Centralia Meadows Apartments is a wonderful
place to live because of her responsiveness to requests, respect for the
tenants and care for to the property.

Photo 5 is an award presentation for Karen Larke. Karen Larke was named
Site Manager of the Year for a RRH property serving senior citizens.
Karen manages Village Green in Byron. She has made the community room
into a place for fellowship and the complex into a community where the
tenants "do life together."

Photo 6 is of Pearl Karraker's home. Pearl Karraker's home in Pulaski
County was very drafty. She wanted to solve the problem, but she was
living on a fixed income. She qualified for a home Repair loan and grant
to replace the windows and siding, and now enjoys a air-tight, energy
efficient home.

Photo 7 is of the construction of a YouthBuild house. YouthBuild McLean
County received a Self Help housing grant to supervise homebuyers as
they help each other construct their homes in lieu of a down payment.
YouthBuild is overseeing its fourth series of homes in Carlock's
Stoneman Gardens.

Photo 8 is a group photo of a family helped by the Kendall Grundy
Community Action Agency. Kendall Grundy Community Action Agency, with a
history of helping families weatherize their homes, received their first
HPG grant in 2008. Now they are also able to help families with repairs
that make their homes safer and more energy efficient.

Page 11 of the annual report

Utility programs are available to public entities, non-profits and
for-profit organizations for water and waste disposal systems, solid
waste management, distance learning, telemedicine, telecommunications
including broadband, and electricity.

Photo 1 is of the front view of the Hillsboro Water Treatment Plant.
Hillsboro's water treatment plant had outlived its useful life,
jeopardizing the quality of the water it delivers to the city and
surrounding communities. With a direct Water and Waste loan, Hillsboro
built a 3.5 MGD treatment plant to ensure the health and economic
potential of the area.

Photo 2 is of an operator sitting at the control panel from Gateway
Regional Water Company. Gateway Regional Water Company went online in
August, culminating one of the largest and most complex water projects
ever undertaken in rural Illinois. Water and Waste loans and grants
helped finance the unique entity that supplies water to 12 member water
systems serving 25,000 people in Marion, Fayette, Clay and Wayne
counties.

Page 12 of the annual report

Photo 1 is of a welder working on an elevated water storage tank in
Astoria. Astoria purchased its new 200,000 gallon elevated water storage
tank with a Water and Waste loan to increase the village's water storage
capacity. The village's water pressure will no longer drop when demand
from their wholesale buyers is high.

Photo 2 is of the construction of the new water treatment plant in
Sparta. Sparta's 90 year old water treatment plant couldn't meet the
growing demand for water, especially with the opening of the World
Shooting and Recreational Complex. The new plant, financed with a Water
and Waste loan and grant, is helping to meet the needs of residential
and commercial development.

Photo 3 is of a breached weir near Wayne City. When an emergency
strikes, Water and Waste grants are available to eligible entities to
correct a significant decline in water quantity of quality. A breached
weir near Wayne City was repaired after flooding threatened to take the
water level below the intake for the town's water supply.

Photo 4 is of a check presentation at Spoon River College. Spoon River
College is using a DLT grant for an interactive video-conferencing
system. It will make more workforce training, continuing education,
certificates and degree programs available to residents at remote sites
in their five-county district.

Photo 5 is of workers laying water pipe in Shawneetown. Shawneetown's
water mains were old and leaked, generating problems and expensive
repairs. A Water and Waste loan and grant are being used to completely
replace the city's water distribution system and improve service to its
630 users.

Photo 6 is of representatives from EJ Water Company. Rural Development
has been the primary source of funding for EJ Water Company since its
first project in 1993. It now serves 20,000 users in eight counties. In
2008 it expanded service to 659 households through 182 miles of new
water main with Water and Waste guaranteed and direct loans and grants.

Photo 7 is of a check presentation for Clinton County East Public Water
District and Bond Madison Water Company. The 2008 Farm Bill made it
possible to fund the backlog of requests for rural water projects.
Clinton County East Public Water District and Bond Madison Water Company
were two of the five Illinois projects that received Water and Waste low
interest loans to improve or expand their service.

Photo 8 is of electric transmission lines. Menard Electric Cooperative
is using a guaranteed electric loan to extend service to new customers,
replace miles of existing lines and purchase electrical equipment to
ensure quality service to its 8,000 customers.

Page 13 of the annual report contains the program descriptions for
housing programs and business programs.

Rural Development housing programs. For Direct Loans and Grants apply to
Rural Development and for Loan Guarantees, apply to the intermediary
like approved banks and mortgage companies.

The 502 Program. Direct Single Family Housing Loans

Objective. Provide safe, well-built, affordable homes for rural
Americans

Applicant. Families and individuals

Uses. Buy, build, improve, repair or rehabilitate the applicant's
permanent residence

Rural population. 20,000 or less

Loan or grant. Direct loan

Terms and Conditions. Up to 100% of market value or cost, whichever is
less. 33 and 38 year fixed rate. Applicant may be eligible for payment
assistance (funded buy down) on the loan.

Program. GRH. Single Family Housing Guaranteed Loans (502)

Objective. Help applicants buy their homes by guaranteeing loans made by
private lenders.

Applicant. Families and individuals

Uses. Purchase new or existing home

Rural population. 20,000 or less

Loan or grant. Loan guarantee

Terms and Conditions. 30 year fixed rate. Interest rate negotiated
between lender and borrower. Loans to 100% of market value plus a 2%
fee.

Program. 504. Single Family Housing Direct Repair Loans and Grants

Objective. Help very-low-income homeowners remove health and safety
hazards or repair their homes

Applicant. Families and individuals who currently own their home

Uses. Repair or replace roof, winterizing, purchase or repair a heating
system, structural repair, and water and sewage connect fees

Rural population. 20,000 or less

Loan or grant. Direct loan, grant

Terms and Conditions. Up to 20 years at 1%. Loans cannot exceed
\$20,000. Grants up to \$7500 are only available to very-low-income
applicants 62 years or older who cannot afford to pay 1% loan.

Program. 523. Mutual Self-Help Housing Grants

Objective. Help lower income families build their own homes

Applicant. Non-profits and public bodies

Uses. Technical assistance to qualify and supervise small groups of
families who help build each other's homes

Rural population. 20,000 or less

Loan or grant. Grant

Terms and Conditions. Two year grant agreement; homeowners must provide
65% of the necessary labor.

Program. 515. Rural Rental Housing Direct Loans

Objective. Provide safe, well-built, affordable rental housing for
very-low, and low income individuals and families

Applicant. Individuals, limited profit and non-profit organizations.

Uses. New construction or rehabilitation of rental housing

Rural population. 20,000 or less

Loan or grant. Direct loan and rental

Terms and Conditions. Non-profit up to 102% of total development cost;
for-profit 97%. 30-year term with up to 50 year amortization; for-profit
with Low-Income Housing Tax Credits 95% of total development costs.

Program. 538. Rural Rental Housing Guaranteed Loans

Objective. Provide safe, well-built, affordable rental housing for
very-low, and low income individuals and families

Applicant. Guarantees available to partnerships, LLCs, trusts, state and
local agencies and Indian Tribes

Uses. New construction or rehabilitation of rental housing

Rural population. 20,000 or less

Loan or grant. Loan guarantee

Terms and Conditions. Non-profit up to 97% loan to value; for-profit up
to 90% loan to value. Repayment 25 to 40 year fixed rates.

Program. HPG. Housing Preservation Grants (533)

Objective. Repair and rehabilitate housing owned or occupied by
very-low. and low-income rural families

Applicant. Public bodies and non-profit organizations

Uses. Operation of a program which finances repair and rehabilitation
activities for single family and small rental properties

Rural population. 20,000 or less

Loan or grant. Grant

Terms and Conditions. Two year grant agreement

Program. FLH. Farm Labor Housing (515 & 516)

Objective. Provide safe, well-built affordable rental housing for farm
workers.

Applicant. Individuals, public and private non-profit organizations

Uses. New construction or substantial rehabilitation of rental housing

Rural population. No population restriction

Loan or grant. Direct loan, grant

Terms and Conditions. Loans up to 102% of total development cost; 1% at
up to 33 years; grants up to 90% of total development costs. Farm
workers must be permanent residents or U.S. citizens.

Rural Development business programs. For Direct Loans and Grants apply
to Rural Development and for Loan Guarantees, apply to the intermediary
like approved banks and mortgage companies

Program. BI. Business and Industry Guaranteed Loans

Objective. Create jobs and stimulate rural economies by providing
financial backing for rural businesses

Applicant. Eligible lenders

Uses. Most legal business purposes except production agriculture.
Includes acquisition, start-up and expansion of businesses that create
rural employment

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas

Loan or grant. Loan guarantee

Terms and Conditions. Lender and borrower negotiate terms. Interest rate
tied to published rate; changes allowed quarterly

Program. IRP. Intermediary Relending Program Loans

Objective. Finance business facilities and community development
projects

Applicant. Public bodies, non-profit corporations, Indian tribes, and
cooperatives

Uses. Community development projects and establishment or expansion of
businesses that create or save jobs

Rural population. Rural and incorporated areas with populations of less
than 25,000

Loan or grant. Direct loan

Terms and Conditions. The intermediary makes loans to businesses from
its revolving loan fund on terms consistent with security offered at a
rate of 1% for 30 years

Program. RBEG. Rural Business Enterprise Grants

Objective. Finance and facilitate the development of small and emerging
private business enterprises

Applicant. Public bodies, private non-profit corporations, and Indian
Tribes

Uses. Buy and develop land, establish a revolving loan fund, construct
buildings, plants, equipment, access streets, roads, parking areas,
utility and service extensions, and rural distance learning networks

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas

Loan or grant. Grant

Terms and Conditions. When grant funds are used for revolving loan
funds, the intermediary makes loans to businesses on terms consistent
with security offered

Program. REDLG. Rural Economic Development Loans and Grants

Objective. Finance economic development and job creation in rural areas

Applicant. Electric and telephone utilities eligible for financing from
the Rural Utilities Service

Uses. Projects that promote economic development and/or job creation
including feasibility studies, startup costs, and business expansion

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas

Loan or grant. Direct loans; grants for revolving loan programs

Terms and Conditions. Electric or telephone utilities make loans to
profit or non-profit businesses and public bodies for economic
development and/or job creation projects. Loans are 0% for 10 years.

Program. RCDG. Rural Cooperative Development Grants

Objective. Establish and operate centers for cooperative development to
improve rural economic conditions by developing new cooperatives and
improving existing ones.

Applicant. Non-profit corporations and institutions of higher education

Uses. Conduct feasibility studies, business plans, applied research, and
provide training and other technical assistance to new and existing
cooperatives and businesses

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas.

Loan or grant. Grant

Terms and Conditions. Selection criteria include matching funds of at
least 25%.

Program. VAPG. Value-Added Producer Grants

Objective. Assist independent agricultural producers to enter into
activities that add value to their commodities.

Applicant. Independent producers, farmer and rancher cooperatives,
agricultural producer groups, and majority-controlled producer-based
business ventures.

Uses. Planning (e.g., conducting feasibility studies or business plans)
or working capital for start-up operations

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas

Loan or grant. Grant

Terms and Conditions. Specific selection criteria. Funds must be matched
dollar-for-dollar and cannot be used to build facilities or purchase
equipment or produce raw commodity.

Program. REAP. Rural Energy for America Program

Objective. Finance the purchase of renewable energy systems, and make
efficiency improvements

Applicant. Agricultural producers and rural small businesses.

Uses. Construction or improvements, purchase and installation of
equipment, energy audits, permit fees, professional service fees,
business plans, feasibility studies.

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas.

Loan or grant. Loan guarantee, grant

Terms and Conditions. Specific selection criteria. Loans cannot exceed
50% of eligible project costs. Grants cannot exceed 25% of eligible
project costs.

Page 14 of the annual report contains the program descriptions for
business programs.

Rural Development community programs. For Direct Loans and Grants apply
to Rural Development and for Loan Guarantees, apply to the intermediary
like approved banks and mortgage companies

Program. CF. Loans, Grants and Guaranteed Loans (Faith-Based and First
Responder)

Objective. Provide essential community facilities for rural communities.

Applicant. Public bodies, non-profit organizations, and Indian Tribes

Uses. Build facilities and purchase equipment for fire and rescue, early
warning systems, police stations, health clinics, schools, libraries,
hospitals, etc.

Rural population. 20,000 or less

Loan or grant. Direct loan and loan guarantee

Terms and Conditions. [Direct:]{.underline} up to 100% of market value.
40 years or life of security. Maximum grant: 75% of project cost.
[Guaranteed]{.underline}: up to 90%; fixed or variable rate established
by lender; useful life not to exceed 40 years

Program. Water and Waste. Water and Waste Disposal Loans, Grants and
Guaranteed Loans

Objective. Provide water and waste financing to the most financially
needy applicants to keep user fees reasonable; provide guarantees to
lenders

Applicant. Public entities, Indian Tribes, and non-profit corporations

Uses. Build, repair, and improve public water systems, waste collection
and treatment systems and related costs.

Rural population. 10,000 or less.

Loan or grant. Direct loan, grant, loan guarantee

Terms and Conditions. Interest rates are set quarterly based on an index
of current market yields for municipal obligations. Repayment up to 40
years. Grant funds may be available. Up to 90% guarantee available to
eligible lenders.

Program. RCDI. Rural Community Development Initiative Grant

Objective. Develop recipients' capacity and ability to undertake
projects related to housing, community facilities, or community and
economic development

Applicant. Non-profit organizations and public bodies

Uses. Intermediary provides technical and financial assistance to
recipients, which include nonprofit community-based housing and/or
development organizations and low-income rural communities

Rural population. All areas except cities of more than 50,000 and their
contiguous and adjacent urbanized areas

Loan or grant. Grant

Terms and Conditions. Grants are awarded on a competitive basis. Three
year grant agreement with matching funds.

Program. PPG-Predevelopment Planning Grants (Water & Waste Disposal)

Objective. Pay costs associated with developing an application for a
proposed water or wastewater project

Applicant. Public entities and non-profit corporations

Uses. Predevelopment costs, such as preliminary engineering and
environmental reports, for entities intending to apply in the near
future for water and waste disposal loans and grants.

Rural population. 10,000 or less

Loan or grant. Grant

Terms and Conditions. Median household income of the service area must
be less than \$39,056. Applications accepted year round.

Program. SWMG. Solid Waste Management Grants

Objective. Reduce or eliminate water pollution and improve solid waste
sites.

Applicant. Non-profit organizations and public bodies

Uses. Provide technical assistance and training to communities. Improve
planning and management of solid waste facilities

Rural population. 10,000 or less.

Loan or grant. Grant

Terms and Conditions. Grants awarded on a competitive basis.
Applications accepted from October 1 to December 31 each year.

Program. DLT. Distance Learning and Telemedicine Loans and Grants

Objective. Develop and deploy advanced telecommunication services to
improve education and health care

Applicant. For-profit and non-profit incorporated entities that operate
rural schools, libraries, health care clinics, and educational
facilities etc.

Uses. Hardware and software for classrooms (cameras, monitors,
computers, LAN) and for healthcare facilities like medical records
programs and teleradiology

Rural population. 20,000 or less.

Loan or grant. Direct loan and/or grant

Terms and Conditions. Matching funds required

Program. Community Connect Broadband Grants

Objective. Provide access to broadband transmission service to residents
in a currently unserved community

Applicant. Legally organized entities such as incorporated
organizations, units of government, cooperatives, private corporations,
or limited liability companies organized on a for-profit or
not-for-profit basis

Uses. Construction, acquisition, or lease of facilities to deploy
broadband transmission services; and improvement, expansion,
construction or acquisition of a community center with at least ten
computer access points free from charges for two years

Rural population. 20,000 or less

Loan or grant. Grant

Terms and Conditions. Grants awarded on a competitive basis annually.15%
matching contribution required. \$50,000 minimum; no maximum amount.

Program. Rural Broadband Loans and Loan Guarantees

Objective. Deploy broadband service to eligible rural communities.

Applicant. Legally organized entities (except those serving more than 2%
of the telephone subscriber lines) providing or proposing to provide
broadband service in eligible rural communities

Uses. Construction, acquisition, and improvement of broadband
transmission facilities and equipment; land and buildings used for
broadband service; and the refinancing of Telecommunications Program
debt

Rural population. Eligible population of 20,000 or less.

Loan or grant. Direct loan, loan guarantee

Terms and Conditions. Treasury rate at the time of the advance for a
period equal to expected composite economic life of the assets financed.
Loans are guaranteed at lender's rate for no more than 80% of the
principal.

Program. Electric and Telecommunications Loans and Guarantees

Objective. Provide financial aid through direct and guaranteed loans for
electric and telecommunications services.

Applicant. For profit entities, non-profit and cooperative associations,
public bodies, and other utilities. Apply directly to Rural Development
National Office.

Uses. Generation, bulk transmission facilities and distribution of
electric power. Enhance 911 emergency service, digital switching
equipment, fiber optic cable and traditional main system
telecommunications service and broadband services.

Rural population. [Electric]{.underline}: Rural areas as defined by the
U.S. Census. [Telecommunication]{.underline}: 5,000 or less.

Loan or grant. Direct loan and loan guarantee

Terms and Conditions. Interest rates are established in accordance with
7 CFR 1745.

Offices for Rural Development in Illinois

State Office

USDA Rural Development

2118 West Part Court

Suite A

Champaign, IL 61821

Phone: 217-403-6200

Fax: 217-403-6243

TDD: 217-403-6240

Area 1 offices

Oregon Area Office

Phone: 815-732-6127 ext. 4

Fax: 815-732-3246

Ottawa Area Office

Phone: 815-433-0551 ext. 4

Fax: 815-433-0665

Princeton Area Office

Phone: 815-875-8732 ext. 5

Fax: 815-872-1175

Area 2 offices.

Champaign Area Office

Single Family Housing

Phone: 217-352-3536 ext. 4

Fax: 217-352-4781

Champaign Area Office

All other programs

Phone: 217-403-6236

Fax: 217-403-6237

Effingham Area Office

Phone: 217-347-7107 ext. 5

Fax: 217-342-4073

Pontiac Area Office

Phone: 815-844-6127 ext. 4

Fax: 815-844-6344

Area 3 offices.

Edwardsville Area Office

Phone: 618-656-7300 ext. 4

Fax: 618-656-914

Marion Area Office

Phone: 618-993-5396 ext. 4

Fax: 618-993-3014

Mt. Vernon Area Office

Phone: 618-244-0773 ext. 4, 5

Fax: 618-244-1786

Area 4 offices.

Galesburg Area Office

Phone: 309-342-5138 ext. 4, 5

Fax: 309-343-1182

Jacksonville Area Office

Phone: 217-243-1535 ext. 4, 6

Fax: 217-245-4875

Quincy Area Office

Phone: 217-224-9307 ext. 4

Fax: 217-224-4969

Page 15 of the annual report.

Our employees routinely demonstrate a genuine commitment to help our
customers. Some were chosen to be honored for their exemplary efforts.

Photo of Mike Wallace. Mike Wallace, area specialist in Mt. Vernon, was
selected as the inaugural winner of the Illinois Community Champion
award. The award was created by the national office to recognize
employees who excel at customer service, perform above expectations,
bring innovation to their work and demonstrate strong leadership skills.

Mike was a key figure in the 12-year development of the Gateway Regional
Water Company. He oversaw this extraordinarily complex project that
required \$19 million in funding from multiple sources and countless
contracts and agreements.

Mike was responsible for creating the innovative structure that brought
the diverse entities together to supply safe water to a water starved
area. He saved millions of dollars and years of construction time by
coordinating improvements to most of the member systems while the
system, intake and pump station, and treatment plant were being built.

Thanks in large part to Mike's ingenuity, coordination and commitment,
Gateway went online in August, solving the water problems of 25,000
people.

Photo of Nancy Bitto. Nancy Bitto, area specialist in Champaign,
coordinated the merging of employees from three different offices into
one. With her exceptional leadership during a difficult time of change,
the Champaign staff excelled, making more guaranteed loans than ever
before.

Photo of Lynn Armstrong. Lynn Armstrong, area technician in Galesburg,
devised a system that improved loan and grant processing during a
challenging time of personnel and service area changes. The system made
file location, application status and information needs readily
available to staff.

Photo of employees from the Oregon Area Office. Specialist Lorali
Heintzelman, Area Technician Sacha Pruett, and Area Assistant Kim
Brunner in the Oregon office were recognized for exceptional loan
production, very low default and foreclosure rates, quick and accurate
loan processing, outreach, training and work with minority borrowers.

Non-discrimination statement from the U.S. Department of Agriculture
(USDA).

The U.S. Department of Agriculture (USDA) prohibits discrimination in
all its programs and activities on the basis of race, color, national
origin, age, disability, and where applicable, sex, marital status,
familial status, parental status, religion, sexual orientation, genetic
information, political beliefs, reprisal, or because all or a part of an
individual\'s income is derived from any public assistance program.
 (Not all prohibited bases apply to all programs.)  Persons with
disabilities who require alternative means for communication of program
information (braille, large print, audiotape, etc.) should contact
USDA\'s TARGET Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination write to USDA, Director, Office of
Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C.
 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).
 USDA is an equal opportunity provider, employer, and lender.