# UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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# FORM 10-K

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x
Annual Report Pursuant to Section 13 or 15(d) ofThe Securities Exchange
Act of 1934

For the fiscal year
endedAUGUST 31, 2005

Or

o
Transition Report Pursuant to Section 13 or 15(d) ofThe Securities Exchange
Act of 1934

Commission FileNo. 33-94644

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MINN-DAK FARMERS
COOPERATIVE(Exact name of
registrant as specified in its charter)

|North Dakota             | 23-7222188                             
|------------------------ | ---------------------------------------
|(State of incorporation) | (I.R.S. Employer Identification Number)

|7525 Red River RoadWahpeton, North Dakota 58075 | (701) 642-8411                 
|----------------------------------------------- | -------------------------------
|(Address of principal executive offices)        | (Registrants telephone number)

SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:NONE

SECURITIES REGISTERED
PURSUANT TO SECTION 12(g) OF THE ACT:NONE

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YESx    
NOo

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in part
III of this Form 10-K or any amendment to this Form 10-K.x

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).YESo    
NOx

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).YESo    
NOx

Minn-Dak
Farmers Cooperative (the Company) has previously registered securities for offer and sale
pursuant to the Securities Act of 1933, as amended (the Securities Act). As a
result of that previous registration under the Securities Act, under Sections 15(d) and 13
of the Securities Exchange Act of 1934, as amended (the Exchange Act), the
Company is obligated to file quarterly reports on form 10-Q, annual reports on Form 10-K
and supplemental reports on Form 8-K. However, the Company has not registered any of its
securities under Section 12(g) of the Exchange Act. The Company is exempt from any
obligation to register its securities under the Exchange Act due to the provisions of
Section 12(g)(2)(E), which exempts from Exchange Act registration any security of an
issuer, such as the Company, which is a cooperative association as defined in
the Agricultural Marketing Act of 1929. As a result, those provisions of the Exchange Act,
which are applicable only to securities registered under Section 12 of that act, do not
apply to shares issued by the Company. The provisions, which do not apply to the
Companys shares, include the regulation of proxies under Section 14 of the Exchange
Act and the reporting and other obligations of directors, officers and principal
stockholders under Section 16 of the Exchange Act.

As
of November 15, 2005, 477 shares of the Companys Common Stock and 72,200
units of the Registrants Preferred Stock, each consisting of 1 share of
Class A Preferred Stock, 1 share of Class B Preferred Stock and 1 share of Class C
Preferred Stock, were outstanding. There is only a limited, private market for shares of
the Companys Common or Preferred Stock, as such shares may be held only by
farmer-producers who are eligible for membership in the Company. The Companys shares
are not listed for trading on any exchange or quotation system. A number of stock
transfers, representing approximately 3% of available stock, were not arms length (estate
settlements, estate planning from one generation to the next, etc.) and an accurate value
for that stock was not available. Management believes that less than 1% of the
Companys available stock was traded at arms length during the fiscal year
ended August 31, 2005. Of the stock transferred at arms length, the transfers were made
during the first, second and third quarters of the Companys fiscal year and ranged
in price from $2,700 to $3,000 per unit. The fourth quarter did not have any arms length
transactions.

Any
statements regarding future market prices, anticipated costs, agricultural results,
operating results and other statements that are not historical facts contained in this
annual report are forward-looking statements. The words expect,
project, estimate, believe, anticipate,
plan, intend, could, may,
predict, and similar expressions are also intended to identify forward-looking
statements. Such statements involve risks, uncertainties and assumptions, including,
without limitation, market factors, the effect of weather and economic conditions, farm
and trade policy, the available supply of sugar, available quantity and quality of
sugarbeets and other factors detailed elsewhere in this and other Company filings with the
Securities and Exchange Commission. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.

DOCUMENTS INCORPORATED
BY REFERENCE

None





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# PART I

|ITEM 1. |  | BUSINESS
|------- |  | --------

Minn-Dak
Farmers Cooperative is a North Dakota agricultural cooperative that was formed in 1972 and
currently has 477 members. Membership in the Company is limited to sugarbeet growers located in
those areas of North Dakota and Minnesota within an approximate fifty (50) mile radius of
the Companys offices and sugarbeet processing facilities in Wahpeton, North Dakota.
The Companys facilities allow the members to process their sugarbeets into sugar and
other products. The products are pooled and then marketed through the services of a
marketing agent under contract with the Company. The sugar-marketing agent, United Sugars
Corporation, is a cooperative association owned by its members, the Company, American
Crystal Sugar Company and United States Sugar Corporation. The Companys beet
molasses and beet pulp are also marketed through a marketing agent, Midwest
Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative association
owned by its members, the Company, American Crystal Sugar Company, Southern Minnesota Beet
Sugar Cooperative and Michigan Sugar Company.

Minn-Daks
corporate headquarters are located at 7525 Red River Road, Wahpeton, North Dakota 58075,
(telephone number (701) 642-8411). Its fiscal year ends August 31.

# PRODUCTS AND PRODUCTION

The
Company is engaged primarily in the production and marketing of sugar from sugarbeets. The
Company also produces and markets certain co-products of the sugar it produces, such as
beet molasses and beet pulp pellets. The Company also owns an 80% interest in Minn-Dak
Yeast Company, Inc., which has facilities located near the Companys sugar production
location. Minn-Dak Yeast Company, Inc. produces fresh bakers yeast and provided
revenues totaling approximately 4% of the Companys gross revenues for the fiscal
year ended August 31, 2005.

The
Company processes sugarbeets grown by its members at its sugarbeet processing facility
located in Wahpeton, North Dakota. The period during which the Companys plant is in
operation to process sugarbeets into sugar and co-products is referred to as the
campaign. The campaign is expected to begin in September of each year and
continues until the available supply of beets has been depleted, which generally occurs in
March or April of the following year, depending on the size of the crop. Based on current
processing capacity, an average campaign lasts approximately 210-225 days, assuming normal
crop yields.

Once
the sugarbeets are harvested, rapid processing is important to maximize sugar extraction
and minimize spoilage. Members transport their crop by truck to receiving stations
designated by the Company. Beets are then stored in the Companys factory yard and at
outlying piling stations until processed. Under the Companys growers
agreement with its members, the Company furnishes all loading equipment at sugarbeet
receiving stations and, after delivery of the beets to the Company, pays all freight and
mileage charges for hauling the sugarbeets from the piling stations to the factory for
processing.

The
Companys total sugar production is influenced by the amount and quality of
sugarbeets grown by its members, by the processing capacity of the Companys plant
and by the ability to store harvested beets. Most of the beet harvest is stored in piles.
Although piled sugarbeets that have been frozen by the winter temperatures may be stored
for extended periods, beets stored in unprotected piles at temperatures above freezing
must be processed within approximately 160 days.

Sugarbeets
deteriorate in storage due to the organic nature of their existence. Beets harvested prior
to obtaining a root temperature of fifty degrees or less must be processed as soon as
possible or sugar loss will occur and they will deteriorate. The plant start up in the
fall is timed to the anticipated end of processing in the spring. The plan of the Company
is to finish processing unprotected beets prior to early March, ventilated beets prior to
early April, and storage shed beets as soon thereafter as is possible.

Unprotected
sugarbeet piles are split by processing the center of the piles first. This
method allows the processing of the center beets, which do not freeze and therefore
deteriorate more rapidly, at the earliest possible date.

Ventilated
beets have culverts with air holes running every eleven feet into the pile. Prior to
freezing of the beets, air is blown into the piles to bring the pile temperature to an
average temperature of approximately thirty-five degrees Fahrenheit. When a week or more
of sub zero temperatures are forecast, the fans are turned on when the temperature reaches
zero degrees and continues to ventilate until the pile temperature reaches zero to five
degrees.

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Storage
shed beets are handled in the same manner as the ventilated beets. The difference between
the processes is the building itself, which insulates the beets from sun, wind, and warmer
spring temperatures. With the buildings, storage of the beets can run as late as mid May
of each year. If a campaign is not expected to extend beyond early April, all or some of
the buildings storing beets may be cooled down to a low thirty-degree temperature and
maintained at that temperature until the beets are processed. The decision to freeze or
cool the beets in a storage building is based upon the anticipated economic benefit that
year of each of the options.

In
addition, unprotected and ventilated beets will, in long campaigns, have extra steps taken
to extend their life. Beets can be sprayed with lime to create a reflectant and reduce the
harmful impact from the suns rays in the spring. Straw can also be applied to the
sides of some later processed piles to further insulate the beets from sun, wind, and
temperature.

Once
the sugarbeets arrive in the factory, the basic steps in producing sugar from them
include: washing; slicing into thin strips called cossettes; extracting the
sugar from the cossettes in a diffuser; purifying the resulting raw juice and
boiling it, first in an evaporator to thicken it and then in vacuum pans to crystallize
the sugar; separating the sugar crystals in a centrifuge; drying the sugar; and storing
sugar in bulk form for bulk and bag shipping.

The
Companys sugarbeet co-products include beet molasses, beet pulp pellets and pressed
pulp. After the extraction of raw juice from the cossettes, the remaining pulp is dried,
processed into pellets and sold as animal feed or not dried and sold as wet animal feed to
the local market. The beet molasses is the sugar juice left after all economical means
have been taken to extract the sugar from the sugar juice. The beet molasses is sold
primarily to yeast and pharmaceutical manufacturers and for use in animal feeds.

# RECENT CROPS

The
Companys members harvested 1.8 million tons of sugarbeets from the 2005 crop,
approximately 15% below long-term averages due to reduced yields per acre and lower than
average harvested acres. Sugar content of the 2005 crop at harvest was 7% below the
average of the five most recent years because of less than desirable crop growing
conditions. Due to the lower harvested tons and below average sugar content, the
Companys production of sugar from the 2005 crop sugarbeets is expected to be 21%
less than the average of the five most recent years of sugar production. Because of the
below average yields from the 2005 crop, the Company has purchased approximately 156,000
tons of sugarbeets from a neighboring sugarbeet cooperative that had experienced a record
harvest, and was interested in reducing its processing season risks associated with the
large crop. The purchase of additional tons of sugarbeets is expected to have a positive
impact to the operations of the Company. Due to a number of beet storage and operational
factors that are subject to change when a processing season is extended, the exact amount
of the positive impact is not known at this time. This forward-looking material is based
on the Companys expectations regarding the processing of the 2005 sugar beet crop
(excluding the impact of the purchase of additional tons of sugar beets by the Company);
the actual production results obtained by processing those sugarbeets could differ
materially from the Companys current estimate as a result of factors such as changes
in production efficiencies and storage conditions for the Companys sugarbeets. The
Companys initial beet payment estimate totals $36.00 per ton or $.130587 per
harvested / extractible pound of sugar, with the final beet payment determined in October
of 2006. This projected payment is slightly more than the final 2004 crop payment per ton
and per extractible pound. The higher projected 2005 crop payment results from higher
sugar and co-product prices versus the prior year but mostly offset by lower sugar and
co-product production and increased operating and fixed costs per ton.

3

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For
a discussion of the 2004, 2003 and 2002 crops and results of operations for fiscal years
2005, 2004 and 2003, see MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

# MARKETING, CUSTOMERS AND
PRICING

United
Sugars Corporation (United Sugars), a common marketing agency operating on a
cooperative basis, is the marketer for the Companys sugar. The Company owns United
Sugars along with two other sugar-producing companies (American Crystal Sugar Company and
United States Sugar Corporation) and exists to market sugar produced by the three member
owners.

As
of this writing the Company has an ownership interest in United Sugars (year to date
contributed capital) totaling $1.5 million, which represents approximately 13% of the
total.

The
Company, as well as the other members of United Sugars, has entered into a Uniform
Member Marketing Agreement with United Sugars. Under that agreement, the sugar
produced by the Company is pooled with sugar produced by the other sugar-producing member
owners and is then sold through the efforts of United Sugars. The Company receives payment
for its sugar by receiving its pro rata share of the net proceeds from the sale of the
pooled sugar. The net proceeds of such sales represent the gross proceeds of the sale of
the sugar, adjusted for the various costs and expenses of marketing the pooled sugar,
including the Companys pro rata share of the marketing and sales expenses incurred
by United Sugars. Any net proceeds from the operation of United Sugars are distributed to
the various members on a patronage basis.

Southern
Minnesota Beet Sugar Cooperative officially terminated its membership in United Sugars
Corporation as of August 31, 2004. The marketing or financial impact to United Sugars or
to the Company of the departure of this member was not substantial.

United
Sugars sells industrial bulk sugar, industrial bagged sugar, packaged sugar for retail and
specialty sugars. It distributes both cane sugar and beet sugar, and distributes sugar to
customers over a large geographical area. United Sugars markets the Companys sugar
primarily to industrial users such as confectioners, breakfast cereal manufacturers and
bakeries. The customer base of United Sugars includes most of the large domestic
industrial sugar users. The customer base also includes retail grocery companies and
wholesalers. The Company has no single customer, which accounts for more than ten percent
(10%) of its consolidated revenues. For the fiscal year ended August 31, 2005, 94% of the
Companys sugar was shipped in bulk form, mostly to industrial users, and 6% in
bagged powdered sugar.

The
prices at which United Sugars sells the Companys sugar fluctuate periodically based
on changes in domestic sugar supply and demand. Bulk sugar, the largest portion of the
Companys sales, is contracted one or more quarters in advance, with the effect of
stabilizing fluctuations in revenue from quarter to quarter. Retail (grocery) products are
sold mostly on a spot or quarterly basis. Current net selling prices for sugar are
forecast to be higher than the prior two years because of: (1) increased demand for sugar;
and (2) a reduced level of domestic supply, due to the effects of damage to cane crops in
Louisiana and Florida from recent hurricanes and lower than average yields and planted
acres in sugarbeets in the US.

4

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The
Company markets its co-products, dried beet pulp and beet molasses, through Midwest
Agri-Commodities Company (Midwest Agri), a cooperative whose members are the
Company, American Crystal Sugar Company, Southern Minnesota Beet Sugar Cooperative and
Michigan Sugar Company. Midwest Agri markets beet pulp, beet molasses and other liquid
livestock feed for its member owners as well as non-members. Beet pulp is marketed to
livestock feed mixers, livestock feeders and other animal feed sellers (pets, horses etc.)
in the United States and foreign markets.

As
of this writing the Company has a 25% ownership interest in Midwest Agri, and has
contributed capital that totals 13% of all capital from members.

A
Uniform Member Marketing Agreement evidences the sales and marketing
arrangement with Midwest Agri. Under that agreement, the beet pulp and beet molasses
produced by the Company is pooled with beet pulp and beet molasses produced by the other
producing member owners and is then sold through the efforts of Midwest Agri. The Company
receives payment for its beet pulp and beet molasses by receiving its pro rata share of
the net proceeds from the sale of the pooled beet pulp and beet molasses. The net proceeds
of such sales represent the gross proceeds of the sale of the beet pulp and beet molasses,
adjusted for the various costs and expenses of marketing the pooled beet pulp and beet
molasses, including the Companys pro rata share of the marketing and sales expenses
incurred by Midwest Agri. Any net proceeds from the operation of Midwest Agri are
distributed to the various members on a patronage basis.

For
the year ended August 31, 2005, approximately 56% of Midwest Agris beet pulp
production was exported to Asia, Europe, and Africa and the remaining 44% was sold in
North America. The market for beet pulp is affected by the availability and quality of
competitive feedstuffs and by the strength of the U.S. dollar relative to local
currencies in export markets. Dried beet pulp prices increased in FY 2005 due a
combination of several factors, including: the continuing reduction of competition in
Japan and Korea from China; the relative strength of both the European Euro and the
Japanese Yen against the U.S. dollar, making U.S. exports more attractive; and a
softening in the ocean freight rate market resulting in lower costs to move beet pulp
overseas. Beet molasses is marketed primarily to yeast manufacturers, pharmaceutical
companies, livestock feed mixers and livestock feeders. Beet molasses prices increased in
FY 2005 primarily due to the reduction in worldwide supplies of both cane and beet
molasses in the market. Poor crops in Asia have resulted in lower supplies of cane
molasses. Smaller United States production of sugar beets and the increased use
internally of beet molasses in de-sugaring processes have reduced the amount of beet
molasses available for sale domestically. The tightening supply situation has resulted in
higher prices in the market.

Co-product
sales accounted for approximately 15% of the Companys total consolidated net sales
revenue during FY 2005. This relationship is primarily a function of the average market
prices for sugar, beet pulp, beet molasses and fresh yeast and is not necessarily
indicative of future relationships between co-product, fresh yeast and sugar revenues,
because prices and production of these products fluctuate independently of each other.

The
Company is an eighty percent (80%) equity owner of Minn-Dak Yeast Company, Inc.
(Minn-Dak Yeast). Minn-Dak Yeast manufactures bagged and cream fresh
bakers yeast in a plant located adjacent to the Companys sugar plant in
Wahpeton, North Dakota. Beet molasses is the main ingredient (growth medium) in the
fermentation process used to grow fresh bakers yeast to commercial volumes. A
portion of the Companys beet molasses production is used in Minn-Dak Yeasts
process and is sold through a supply agreement between the two companies. Sensient
Technologies Corporation, Milwaukee, Wisconsin, (Sensient) holds the remaining
twenty percent (20%) equity stake. Minn-Dak Yeast Company, Inc. also has a long-term
marketing agreement whereby Sensient will buy all production of yeast produced by Minn-Dak
Yeast Company, Inc. in return for certain guaranteed sales volumes. That contract will
expire in June 2007.

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# GROWERS AGREEMENTS

The
Company purchases virtually all of its sugarbeets from members under contract with the
Company. All members have three-year contracts with the Company covering the growing
seasons of 2005 through 2007 (the Growers Agreements). At the end of
each year, the Growers Agreement automatically extends for an additional year, so that
such agreements always have a remaining term of three years, unless the Company, prior to
the automatic renewal, has given notice of termination. In that situation, the agreement
will not renew, but will continue in effect for the two-year period then remaining under
the agreement. Each Unit of Preferred Stock currently entitles a member to grow the
maximum number of acres per share authorized by the Board of Directors for each farming
year. The Companys Board of Directors has the discretion to adjust the acreage that
may be planted for each Unit of Preferred Stock held by the members. For the 2005 crop
year the Companys Board of Directors authorized members to plant 1.50 acres per
unit. For the 2006 crop year, the Companys Board of Directors has authorized members
to plant 1.62 acres per unit. The larger than anticipated acres authorized for planting
is due in part to the small 2005-crop resulting in more sugar allocations being available
for the 2006-crop production. (For a discussion of the current farm bill sugar
allocations, see Managements Discussion on Government Programs and Regulations.)

Under
the terms of the Growers Agreement, each member receives payment for his or her sugarbeets
based on a price per pound of extractable and bonus sugar. The price per pound of
extractable and bonus sugar is determined by dividing the total grower distribution of net
proceeds (less the amount credited to members investment from member patronage and
credited to retained earnings from non-member patronage) by the total of members
pounds of extractable and bonus sugar. Extractable pounds of sugar are obtained by the
processing of beet samples taken from members sugarbeets during harvest. Bonus sugar
is a premium for early delivery of sugarbeets during pre-harvest. Each members
grower payment is obtained by multiplying that members total pounds of extractable
and bonus sugar times the price per pound of extractable and bonus sugar as determined
above.

Under
the Growers Agreement, each member receives an initial installment of the payment for his
or her sugarbeets on or about November 15, soon after delivery of his or her crop to the
Company. That initial installment is subject to adjustment by the Companys Board of
Directors and management, but will not exceed 65% of the estimated price per pound of
extractable sugar. A second installment is paid in early February; that installment, in
combination with the first installment, will not exceed 70% of the estimated price per
pound of extractable sugar. A third installment is paid in early April, with the aggregate
of all installments paid to that date not to exceed 80% of the estimated price per pound
of extractable sugar. A fourth installment payment is paid in early July, with the total
of installment payments to that date not to exceed 95% of the estimated price per pound of
extractable sugar. The final payment is determined after the end of the Companys
fiscal year, ending on August 31, and is in an amount necessary to bring the total of all
payments to the price to be paid per pound of extractable sugar to all growers during the
applicable fiscal year. In addition, the Companys annual patronage net income, if
any, which is equal to the Companys sales less all expenditures and member beet
payments, is distributed to the members on the basis of the pounds of extractable sugar
obtained from each of the members sugarbeets; such amounts are distributed in either
cash payments or allocated in the form of patronage credits to the members patronage
account on the books of the Company.

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# COMPANY DISTRICTS

The
Companys by-laws provide that the Companys members are to be divided into
districts for the purposes of voting and the election of members of the Board of
Directors. Those districts do not have specific geographic boundaries but, instead,
contain a loosely defined area representing the area served by a particular piling station
to which members deliver their sugarbeets for storage until the sugarbeets are to be
processed. When a member joins the Company, he or she is assigned to a particular district
based upon criteria including: (i) the physical location of the shareholders
sugarbeet growing acres relative to a piling site; (ii) if the previous criteria do not
clearly indicate the district to which the shareholder should be assigned, then the
physical location of the shareholders base of farming operations relative to a
piling site (some members deliver sugarbeets to more than one piling site due to the
locations of their various fields, even though they are assigned to membership in only one
district); and (iii) if the first two criteria do not provide a clear indication of the
district to which the shareholder should be assigned, then the shareholder is given the
option of being assigned to the district which would best serve the needs of that
shareholder.

Given
that shareholders are assigned to districts based upon ease of delivery of harvested
sugarbeets and because shareholders own different numbers of Units of Preferred Stock,
each district includes a different number of acres of sugarbeet production and, therefore,
a different quantity of sugarbeets delivered to the Company. However, none of the
districts provides the Company with a materially disproportionate quantity of the
sugarbeets produced by the Companys members. While the allocation of members to the
various districts has a significant impact on the election of directors, the Company does
not believe that the districts represent a significant factor in the day-to-day business
operations of the Company.

# RESEARCH AND DEVELOPMENT

The
Company is involved in very little of its own research and development activities, but
does participate in some sugar industry research and development activities. Any research
findings are then shared by the entire sugar industry. Participatory research and
development is accomplished through such organizations as Beet Sugar Development
Foundation, Sugar Association, and North Dakota/Minnesota Research and Education Board.
The Company participates in the organizations listed above through the efforts of its
representatives to the boards of directors of those entities. The Companys
representatives, either a member of the Companys Board of Directors or a management
employee of the Company, allow the Company to participate in and help direct agricultural
and factory operations research and development activities carried out by the listed
organizations. Those organizations also have established various committees on which the
Company has placed certain of its employees. That practice is designed to provide the
company with direct access to any research and development information available from the
applicable committees. (Through its employees, the Beet Sugar Development Foundation also
provides some legislative and lobbying efforts on a national level. Those efforts are
directed at maintaining funding for the various federal sugarbeet research facilities.)
None of the Companys employees or directors devotes a significant portion of their
time and energies to the activities described in this section; instead, such efforts are a
minor portion of their continuing duties on behalf of the Company.

During
the fiscal year ended on August 31, 2005, the Company contributed approximately $89,000 to
the North Dakota/Minnesota Research and Education Board to fund that entitys
research and development activities. $20,000 was given to the Beet Sugar Development
Foundation in connection with their research activities, and $103,000 to the Sugar
Association for their research activities and membership dues.

7

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The
Company also has established a sugarbeet seed committee, which reviews the performance of
new and existing sugarbeet seed varieties. The committee then advises the Board of
Directors with regard to those sugarbeet seed varieties that should be approved for use by
the Companys shareholders.

# ENVIRONMENTAL MATTERS

The
Company is subject to a broad range of evolving environmental laws and regulations. These
laws and regulations include the Food Quality Protection Act of 1996, the Clean Air Act,
the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide,
Fungicide and Rodenticide Act and the Comprehensive Environmental Response, Compensation
and Liability Act. Other than what is provided herein, the Company is currently not aware
of any areas of non-compliance.

The
Company has been notified under new National Emission Standards for Hazardous Air
Pollutants for Industrial Commercial and Institutional Boilers and Process Heaters Rules
finalized on 9-13-04, that it is listed as a major source of certain hazardous air
pollutants and not in compliance with the new rules. The company has until 9-13-07 to come
into compliance with these regulations. At this time the Company believes that it will be
compliant within the time period required under the regulations and does not anticipate
the associated costs to become compliant will have a material impact on its cost
structure.

The
Company has $1.1 million of environmental capital improvements budgeted for FY 2006.

Compliance
with these laws and related regulations is an ongoing process that, at the current levels
of spending, is not expected to have a material effect on the Companys capital
expenditures, earnings or competitive position. Environmental concerns are, however,
inherent in most major agricultural operations, including those conducted by the Company,
and there can be no assurance that the cost of compliance with environmental laws and
regulations will not be material. Moreover, it is possible that future developments, such
as increasingly strict environmental laws and enforcement policies thereunder, and further
restrictions on the use of agricultural chemicals, could result in increased compliance
costs.

# MARKET AND COMPETITION

Current
U.S. Government statistics estimate total U.S. sugar deliveries for domestic food and
beverage consumption at 185.5 million cwt refined for the fiscal year beginning October 1,
2004 and ending September 30, 2005. For the same period ending in 2004, total deliveries
were 180.9 million cwt refined. Comparing the two years shows demand increased 2.5% for
U.S. sugar sellers. After experiencing strong and steady growth during the 1990s,
U.S. demand for sugar was relatively flat to down until FY year 2004. Sugar in imported
products has continued its growth and has displaced domestic deliveries in the process.
However, this rate of growth has slowed compared to the prior year. According to USDA
statistics, sugar in imported products grew 5.4% in the first 3 quarters of FY 2005 versus
the prior year. This rate contrasts with the 12.2% rate of increase in the first three
quarters of FY 2004 relative to FY 2003.

8

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Given
the size of the domestic market, the Companys sugar production and sales represent
approximately 3% of the total domestic market for refined sugar in 2005. United Sugars,
which sells the Companys production through a sugar marketing pool, represents
approximately 28% share of the U.S. sugar market.

The
U.S. refined sugar market has grown over the past twenty-five plus years, despite a loss
of demand to the substitution of high fructose corn syrups for sugar in beverages and
certain food products. Non-nutritive sweeteners such as aspartame and sucralose have also
been developed to substitute for sugar. The substitution of non-sugar sweeteners for sugar
not only reduced demand for sugar in the United States, but has also resulted in a high
degree of sugar industry contraction. Since 1996 more than one third of all U.S. beet and
cane mills and refineries have closed, 32 plants in total. Also, sugar companies have been
consolidating or closing as a result of marketplace conditions. Today there are seven
sugar sellers, with 90% of U.S. sugar market share concentrated in the top five sellers,
most of which are fully integrated beet and cane suppliers. The Companys main
competitors in the domestic market are Imperial Sugar Company, Domino, Amalgamated Sugar
Company and Cargill. Competition in the U.S. sugar industry, because sugar is a fungible
commodity, is primarily based upon price, customer service and reliability as a supplier.

# GOVERNMENT PROGRAMS AND
REGULATION

Domestic
sugar prices are supported under a program administered by the United States Department of
Agriculture (USDA). Under the current program, which was initiated in 1981 and
extended under the Food Security Act of 1985, the Food, Agriculture, Conservation and
Trade Act of 1990, the Federal Agriculture Improvement and Reform Act of 1996 and now The
Farm Security and Rural Investment Act of 2002 (the Farm Bill), the price of
sugar is required to be maintained above the price at which producers could forfeit sugar
to repay non-recourse loans obtained through the Commodity Credit Corporation
(CCC). The USDA maintains sugar prices without cost to the U.S. Treasury by
regulating the quantity of sugar imports. The U.S. currently imports approximately 19% of
its domestic needs. The Farm Bill maintains the basic 18-cent per pound loan rate for raw
sugar and puts in place a 22.90 cent per pound loan rate for refined beet sugar. Both loan
rates are effective for crop years 2002 through 2007. Price support loans are made on a
non-recourse basis, which means the sugar processor is able to forfeit sugar to CCC if
sugar prices the Company receives in the marketplace are below the loan rate.

However,
the Farm Bill also provides that, to the maximum extent possible, the Secretary of
Agriculture of the USDA (the Secretary) shall operate the sugar program at no
cost to the Federal Government by avoiding the forfeiture of sugar to CCC. The Farm Bill
further provides for the imposition of marketing allotments each crop year for the
marketing, by processors, of sugar processed from sugarbeets and domestically produced
sugarcane at a level that the Secretary estimates will be needed to avoid forfeitures of
sugar to the CCC. The Secretary only suspends allotments whenever the Secretary estimates
or re-estimates, or has reason to believe, that imports of sugar for human consumption
will exceed 1,532,000 short tons raw value.

Each
domestic processor of sugar, which includes the Company, is provided an allocation
whenever allotments are in effect, based upon a formula. The Company believes that the
amount of allocation it can expect to receive from the Secretary in each year of the Farm
Bill may not be sufficient to allow it to sell all of its production of sugar in the
domestic market for human consumption. Any amount of sugar produced by the Company within
an allotment year that does not have a corresponding allocation will have to be marketed
into alternative markets or held until such time that allotments are lifted or additional
allocations become available. The Company anticipates that it may have to adjust its
production of sugar each year to more closely match its anticipated allocation. Such is
the case with the production of sugar from the 2004 and the 2005 crop when planted acres
of sugarbeets by grower-members were reduced 7.5% and 4.5% respectively. To the extent
that the Company has to market any over-allocation sugar into alternative markets, or
reduce production to more closely match its anticipated allocation, it is not expected
that those decisions would have a material adverse effect on the operations of the
Company.

9

---

Under
the General Agreement on Tariffs and Trade Act of 1990 (GATT), tariff rate
quotas were implemented for certain sugar producing countries that provided for a fixed
quantity of sugar imports duty-free or subject to minimal duties. Unlimited additional
quantities may be imported upon payment of a tariff of 15.36 cents per pound of refined
sugar prior to shipment (to date, very little sugar has been imported under this higher
tariff level). Further, imports of sugar under the tariff rate quota are based upon the
difference between domestic sugar consumption and domestic sugar production, with one
exception. Under the terms of the GATT the minimum imports of sugar are established at
1,257,000 short tons, raw value. Therefore, even if the difference between domestic sugar
consumption and production are less than 1,257,000 short tons, raw value, GATT will
require that 1,257,000 short tons be imported into the United States from the quota
holding foreign countries.

The
World Trade Organization (WTO) met in November, 2001 in Doha, Qatar where members launched
new multilateral trade negotiations aimed at improving market access, reducing and
eventually phasing out all forms of export subsidies and substantial reductions in
trade-distorting domestic support. Any agreements reached during the Doha Round could
present a threat to the domestic sugar industry because sugar is one of the most highly
protected sectors within world agricultural trade and is thus a target for reform.

The
147 members of the WTO reached an agreement July 31, 2004, on a framework for the final
phase of the Doha Development Agenda of global trade talks. The original deadline to
complete talks by January 1, 2005, has been postponed, and the next WTO Ministerial
Conference will be held in Hong Kong in December 2005, at which point the talks could near
their conclusion. The effect of any final WTO agreement on United States farm programs and
the sugar program in particular will depend largely on the details of the agreement, which
have not yet been fully negotiated.

The
Company believes the North American Free Trade Agreement (NAFTA) currently
presents a serious public policy challenge to itself and the domestic sugar industry.
Under the terms of the original NAFTA text, Mexico would have been allowed to ship any
excess production of sugar into the United States if Mexico were to achieve net surplus
producer status two years in a row. Concerned that Mexicos productive capabilities
and possible conversion to the use of high fructose corn sweeteners could quickly change
Mexico from a net sugar importer to a net sugar exporter, the U.S. sugar industry insisted
that NAFTA be changed to delay Mexicos access to the U.S. market. To embody these
changes, a side agreement on sugar was reached prior to passage of NAFTA to give Mexico
incrementally larger but capped volumes of duty-free access, and an ability to send
additional quantities if it were to pay a gradually descending second tier tariff. The
side agreement establishes a common market between the United States and Mexico in sugar
by 2008. The side agreement has been contested by Mexico as invalid, contending that the
side agreement was not signed by Mexico. To date, the United States has contended that the
side agreement is valid and has dealt with sugar imports from Mexico accordingly. The two
countries continue to negotiate over this issue and the Company cannot predict the outcome
of those negotiations. However, should Mexico prevail on this issue with the United
States, the Company believes that imports from Mexico could increase dramatically and
therefore have a material adverse affect on the domestic price of sugar.

10

---

The
Company is concerned that low world sugar prices and a trade conflict between the U.S. and
Mexico over high fructose corn sweeteners could permit de facto acceleration of the side
agreement under NAFTA. Under the NAFTA tariff schedule, second tier sugar tariffs are set
at approximately 4.53 cents in 2005 but decline by approximately 1.5 cents per year until
reaching zero in 2008. The Company believes that current low world raw sugar prices make
it feasible for Mexican second tier sugar to enter the United States marketplace. In
contrast to Mexicos duty free access to the United States sugar market, which is at
250,000 metric tons per year, NAFTA contains no restrictions on second tier imports. To
date Mexico has exported some second-tier tariff sugar to the U.S. because their sugar
marketplace is in an excess supply position.

Under
the current terms of NAFTA and the side agreement, the Company is concerned that imports
from Mexico could oversupply the U.S. market forcing sugar prices significantly lower. Any
fluctuation in the price of sugar has a direct impact on any sugarbeet payments that are
made to members. The Company, along with the domestic sugar industry, is seeking
improvements to NAFTA. If the sugar industry is unsuccessful in these or any other
endeavors it pursues to prevent the influx of Mexican sugar into the U.S. market, there
could be adverse financial consequences to the Company and its members.

The
Company also believes that should the U.S. Congress approve certain proposed regional or
bi-lateral trade agreements that have been or are being negotiated with several countries,
then those trade agreements also will present a serious public policy challenge to itself
and the domestic sugar industry. Should these proposed regional or bi-lateral trade
agreements be approved by Congress with sugar access provisions similar to the access
provisions encompassed in the recently passed Central American Free Trade Agreement
(CAFTA) regional trade agreement, the Company believes that there could be adverse
financial consequences to itself and its members.

The
Farm Bill provides price support provisions for sugar. However, if the price support
program including the Tariff Rate Quota system described above were eliminated in its
entirety, or if the effectiveness that the United States price support program
provides from foreign competitors were materially reduced, the Company could be materially
and adversely affected. In such a situation if the Company were not able to adopt
strategies that would allow it to compete effectively in a greatly changed domestic market
for sugar, the adverse affects could impact the Companys continued viability and the
desirability of grower sugarbeets for delivery to the Company.

# EMPLOYEES

As
of November 9, 2005, the Company had 287 full-time employees, of whom 253 were hourly and
34 were salaried. It also employs approximately 339 additional hourly seasonal workers
during the sugar beet harvest and processing campaign. In June 2005 the Company concluded
the negotiations for a collective bargaining agreement with the Bakery, Confectionery,
Tobacco Workers and Grain Millers International Union (AFL-CIO, CLC) for its factory
employee group. The contract became effective June 1, 2005 and continues through May 31,
2011. Office, clerical, management and harvest employees are not unionized. Full time
employees are provided with health, dental and vision insurance, a defined benefit pension
retirement plan, a 401(k) retirement savings plan, a short and long-term disability plan,
term life insurance, and vacation and holiday pay plans. Seasonal workers are also
provided some of these same employee benefits. The Company considers its employee
relations to be excellent.

11

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|ITEM 2. |  | PROPERTIES
|------- |  | ----------

The
Company operates a single sugarbeet processing factory at Wahpeton, North Dakota that is
located in the Red River Valley area of Minnesota-North Dakota. The Company owns the
factory, receiving sites, and the land on which they are located.

The
properties are adequate to process normal and above normal crop sizes, and for the last
three years have averaged a slice rate of 9,300 tons per day. The 2005-crop was damaged by
excess rain in the months of May, June and July, producing approximately 1,810,000 tons of
sugarbeets. If the Company encounters normal weather patterns, which will in turn provide
normal beet storage conditions, then it does not anticipate having difficulty in
processing the 2005 crop and additional sugarbeets purchased.

Minn-Dak
Yeast Company, Inc, of which the Company is an 80% owner, operates a single yeast
manufacturing factory at Wahpeton, North Dakota. Minn-Dak Yeast Company, Inc. owns the
factory and the land on which it is located. During fiscal 2005, fresh yeast was produced
and sold into the domestic yeast marketplace.

All
properties are held subject to a mortgage by the Companys primary lender.

|ITEM 3. |  | LEGAL
PROCEEDINGS
|------- |  | -----------------

From
time to time and in the ordinary course of its business, the Company is named as a
defendant in legal proceedings related to various issues, including workers
compensation claims, tort claims and contractual disputes. Other than as provided herein,
the Company is not currently involved in legal proceedings that have arisen in the
ordinary course of its business, and the Company is also unaware of certain other
potential claims that could result in the commencement of legal proceedings. The Company
carries insurance that provides protection against certain types of claims.

In
February 2005, McNeil Nutritionals, LLC (plaintiff) of Fort Washington, PA,
sued the Company, other sugar manufacturers and the Sugar Association in U.S. District
Court for the District of Delaware. The plaintiff alleges that the Company and the other
defendants have committed acts that constitute false advertising, deceptive trade
practices and unfair competition under Delaware law. The plaintiff is asking for
unspecified dollar damages in the suit, including such other and further relief as the
Court may deem just and proper. A legal firm has been hired to represent and defend the
Company and the other defendants that are being sued in this case. The Company believes
that plaintiffs claims are without merit and has begun a vigorous defense. It is
unknown at this time when, or if, this matter will go to trial, or what the outcome of the
suit will be.

The
Company is subject to extensive federal and state environmental laws and regulations with
respect to water and air quality, solid waste disposal and odor and noise control. The
Company conducts an ongoing and expanding control program designed to meet these
environmental laws and regulations. As disclosed under ENVIRONMENTAL MATTERS
above, there currently are no pending regulatory enforcement actions and the Company
believes that it is in substantial compliance with applicable environmental laws and
regulations.

12

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|ITEM 4. |  | SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------

There
were no matters submitted to a vote of the Companys shareholders during the quarter
ended August 31, 2005.

At
the Annual Meeting of Shareholders which is to be held on December 6th, 2005,
the following seats on the board of directors will be up for election: District #4,
District #5, and District #7. A brief biography of each of the candidates for the open
seats follows.

# DISTRICT #4

MICHAEL
HASBARGEN has been a director since 1993 and is currently serving as board chairman; he
has also served as vice chairman. Mr. Hasbargen has been farming near Breckenridge, MN
since graduating from NDSU in Ag Economics in 1967. Mr. Hasbargen also serves on the board
of directors of United Sugars Corporation, Midwest Agri-Commodities Company, and Minn-Dak
Yeast Company. Mr. Hasbargen is the brother-in-law of Mr. Steven Caspers, Executive Vice
President & Chief Financial Officer.

# DISTRICT #5

BRENT
DAVISON has been a director since 2003 and is one of Minn-Daks representatives to
the American Sugarbeet Growers Association in Washington, DC. Mr. Davison earned his B.S.
degree in Education at Concordia College, Moorhead, MN, graduating in 1972. Mr. Davison
taught school in Warren, MN from 1972 until coming home to farm near Tintah, Minnesota
area in 1974. He is currently serving on the Tintah Township Board and is a former
volunteer fireman and first responder.

# DISTRICT #7

PAUL
SUMMER is the incumbent from this district and has declined to run for re-election to the
board of directors.

DALE
BLUMEgraduated from the NDSU with a degree in Ag Economics in 1973. He began
farming in 1971 and continues to farm today. Mr. Blume is one of Minn-Dak
Farmers Cooperatives original stockholders. Mr. Blume is a member of the Grant
County FSA Board, the Delaware Township Board, and is a director at the First State Bank
in Kensington, MN. He is also the co-chairman of the administrative council and on the
financial committee of the United Methodist Church in Herman.

TOM
MORGAN graduated from Tintah High school in 1973. After graduating he worked for a
telephone company laying lines.  He returned to the Tintah area in 1974 and began to
farm with his father.  In 1986 Mr. Morgan took over the entire operation and
currently raises sugarbeets, corn, wheat, and beans.

13

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# PART II

|ITEM 5. |  | MARKET
FOR COMPANYS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- |  | ------------------------------------------------------------------

There
is only a limited, private market for shares of the Companys Common or Preferred
Stock, as such shares may be held only by farmer-producers who are eligible for membership
in the Company. The Companys shares are not listed for trading on any exchange or
quotation system. A number of stock transfers, representing approximately 3% of available
stock, were not arms length (estate settlements, estate planning from one generation to
the next, etc.) and an accurate value for that stock was not available. Management
believes that less than 1% of the Companys available stock was traded at arms
length during the fiscal year ended August 31, 2005. Of the stock transferred at arms
length, the transfers were made during the first, second and third quarters of the
Companys fiscal year and ranged in price from $2,700 to $3,000 per unit. The fourth
quarter did not have any arms length transactions.

14

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|ITEM 6. |  | SELECTED
FINANCIAL DATA
|------- |  | -----------------------

The following table summarizes
selected financial data for each of the last five fiscal years. The selected financial
data of the Company should be read in conjunction with the financial statements and
related notes included elsewhere in this report.

|                                                                                                  |  | Fiscal Year Ended August 31,
|------------------------------------------------------------------------------------------------- |  | ----------------------------
|
|
|                                                                                                  |  |                             
|Revenues                                                                                          |  |                             
|Distribution of net proceeds (1)                                                                  |  |                             
|Total assets                                                                                      |  |                             
|Long-term debt, including current Maturities                                                      |  |                             
|Members investment (2)                                                                           |  |                             
|Property and equipment additions, Net of retirements                                              |  |                             
|Working capital                                                                                   |  |                             
|                                                                                                 
|RATIOS                                                                                            |  |                             
|Ratio of long-term debt to equity (3)                                                             |  |                             
|Ratio of net proceeds to fixed charges (4)                                                        |  |                             
|Current ratio                                                                                     |  |                             
|                                                                                                 
|PRODUCTION DATA (5)                                                                               |  |                             
|Acres harvested                                                                                   |  |                             
|PIK acres                                                                                         |  |                             
|Tons of sugarbeets purchased                                                                      |  |                             
|Tons purchased per acre harvested                                                                 |  |                             
|Payment to members per ton of sugarbeets delivered, plus allocated patronage and unit retains (6) |  |                             
|                                                                                                 
|Sugar (cwts):                                                                                     |  |                             
|Produced                                                                                          |  |                             
|Sold (includes purchased sugar)                                                                   |  |                             
|                                                                                                 
|Beet pulp pellets (tons):                                                                         |  |                             
|Produced                                                                                          |  |                             
|Sold                                                                                              |  |                             
|                                                                                                 
|Beet molasses (tons):                                                                             |  |                             
|Produced                                                                                          |  |                             
|Sold                                                                                              |  |                             
|Used for yeast production                                                                         |  |                             
|                                                                                                 
|Yeast (pounds, in thousands):                                                                     |  |                             
|Produced                                                                                          |  |                             
|Sold                                                                                              |  |                             
|* Includes PIK sugar                                                                              |  |                             

(1)    
          Net Proceeds are the Companys gross revenues, less the costs and expenses
          of producing, purchasing and marketing sugar, sugar co-products, and yeast, but
          before payments to members for sugarbeets. (For a more complete description of
          the calculation of Net Proceeds, see Description of Business-Growers
          Agreements.)

15

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(2)    
          Members investment includes preferred and common stock, unit retention
          capital, allocated patronage and retained earnings (deficit).

(3)    
          Calculated by dividing the Companys long-term debt, exclusive of the
          current maturities of such debt, by equity.

(4)    
          Computed by dividing (i) the sum of Net Proceeds plus fixed charges, plus
          amortization of capitalized interest by (ii) the sum of interest expense and
          interest capitalized. The Company does lease certain items, such as some office
          equipment. Due to the proportionately small amounts involved, an interest factor
          on lease payments has not been included in the total of the Companys fixed
          charges or the calculation of this ratio. See Exhibit 12.

(5)    
          Information for a fiscal year relates to the crop planted and harvested in the
          preceding calendar year (e.g., information for the fiscal year ended August 31,
          2005, relates to the 2004 crop).

(6)    
          Reflects the total amount paid in cash and allocated to individual grower equity
          accounts for each ton of beets delivered.

|ITEM 7. |  | MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
|------- |  | --------------------------------------------------------------------------------------

The
following discussion of the financial condition and results of operations of the Company
should be read in conjunction with the Companys financial statements and notes
included elsewhere in this Report. This discussion contains forward-looking statements
that involve risks and uncertainties. The Companys actual future results may differ
materially from those anticipated in the forward-looking statements contained in this
section; such differences could arise as a result of a variety of factors including, but
not limited to, the market and regulatory factors described elsewhere in this Report.

External Risk Factors That May Affect
the Company:

- Regulatory: The Companys ability to become more efficient through growth can be
adversely affected by the amount of product it is allowed to market in the United States.
- Imports and Quota Circumvention: To the extent that sugar imports and quota circumvention
cause the supply to increase in the United States, available markets and pricing could be
adversely affected. See management discussion on Government Programs and Regulations.
- Weather: Weather conditions affect the Companys operations. Weather impacts the size
and quality of the crop, which impacts the Companys ability to lessen per unit fixed
costs. Weather impacts the storage conditions, which in turn, may cause a decreased sugar
yield from sugarbeets as a result of poor storage conditions.
- Raw Material Costs: The costs of
raw materials may adversely impact the final net return to the growers.

# LIQUIDITY AND CAPITAL
RESOURCES

Because
the Company operates as a cooperative, payment for member-delivered sugarbeets, the
principal raw material used in producing the sugar and agri-products it sells, are
subordinated to all member business expenses. In addition, actual cash payments to members
are spread over a period of approximately one year following delivery of sugarbeet crops
to the Company and are net of unit retains and patronage allocated to them, both of which
remain available to meet the Companys capital requirements. This member financing
arrangement may result in an additional source of liquidity and reduced outside financing
requirements in comparison to a similar business operated on a non-cooperative basis.
However, because sugar is sold throughout the year (while sugarbeets are processed
primarily between September and April) and because substantial amounts of equipment are
required for its operations, the Company has utilized substantial outside financing on
both a seasonal and long-term basis to fund such operations. The short and long-term
financing has been primarily provided by Co-Bank (the Bank). The Company has a
short-term line of credit with the Bank totaling $45.0 million, and successfully completed
its annual renewal of this financing arrangement in June 2005 covering a one-year period
ending May 31, 2006. The Company anticipates using the USDA Sugar Loan Provisions
contained in the 2002 Farm Bill to provide an additional source of seasonal financing for
the 2005 and future crops. The Company has available $1 million of its $45 million
seasonal line of credit for a Letter of Credit if necessary.

16

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The
loan agreements between the Bank and the Company obligate the company to maintain the
following financial covenants, and in accordance with GAAP:

- Maintain working capital of not
less than $9.0 million as of August 31, 2005.
- Maintain a long-term debt and capitalized
leases to equity ratio of not greater than .8:1.
- Maintain available cash to current
long-term debt ratio as defined in the agreement of not less than 1.25:1.

As
of August 31, 2005 the Company was in compliance with its loan agreement covenants with
the Bank.

Working
capital decreased $2.1 million for fiscal year 2005. The Company funds its capital
expenditure and debt retirement needs primarily from operating activities. The Company has
approximately 5-years of Co-Bank long-term debt remaining and it has two tax exempt bond
issues, one with $7.0 million remaining and one with $14.0 million remaining. During the
year ended August 31, 2005, the Company began recording certain of the $14.0 million bonds
from long-term to short-term liabilities to reflect the bond amortization schedule. With a
combined bank long-term debt payment and two long-term bond payments, the Companys
working capital position has been decreasing, and as a result, has anticipated
re-structuring its remaining $19.9 million long term debt package with Co-Bank when
working capital requirements show a need for doing so. The Company has held preliminary
discussions with Co-Bank regarding the future restructuring of its long-term debt package
and does not anticipate difficulty in achieving debt restructuring in the future. As
of August 31, 2005, the Company achieved its targeted working capital position.

The
company has protected itself from interest rate fluctuations through a strategy of using
tax-exempt bond financing and a term debt portfolio that fixes rates and maturities into
the future on set amounts of debt. The current term debt portfolio is expected to provide
the company stable term debt interest rates over the next four years at approximately 100
basis points under current market rates for similar maturities. An increase or decrease in
the interest rate market of 100 basis points is expected to have little impact on the
profitability of the Company as a result of its interest rate strategy. Capital
expenditures for fiscal year 2003 were $9.4 million, for fiscal year 2004, $6.0 million
and for fiscal year 2005, $4.9 million. Capital expenditures for fiscal year 2006 are
currently estimated at $4.1 million.

17

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|                                   |  | **Payments Due by Period**
|---------------------------------- |  | --------------------------
|                                   |  |                           
|**ContractualObligations**         |  | **Total**                 
|                                   |  |                           
|Long-term debt                     |  | $23.5MM                   
|Bonds Payable                      |  | $21.0MM                   
|Operating leases                   |  | $ 2.2MM                   
|Unconditional Purchase obligations |  | 0                         
|Other long-term Obligations        |  | 0                         
|Total contractual cash Obligations |  | $46.7MM                   

As
of August 31, 2005, $1.5 million of the restricted bond investments remained for future
solid waste capital expenditure projects.

The
Bond Proceeds of $14.0 million were required to be sold in a single transaction. The
proceeds from these bonds are held in trust until the funds are spent on approved
projects. The bond transaction and restricted bond investments associated with the
transaction are subject to arbitrage compliance rules for solid waste tax-exempt bond
projects.

The
Bonds are secured by a letter of Credit from Wells Fargo Bank. The letter of credit is
ultimately secured by the plant and property of the Companys facility at Wahpeton,
ND.

The
Company is not aware of any known trends, demands, commitments, events or uncertainties
that will likely result in the Companys liquidity increasing or decreasing in any
material way.

Other
than those items described above, the Company is not aware of any known material trends,
either favorable or unfavorable, that would cause the mix of equity to debt or the cost of
debt to materially change.

# COMPARISON OF THE YEARS
ENDED AUGUST 31, 2005 AND 2004

Revenue
for the year ended August 31, 2005, decreased 5 percent or $9.3 million from 2004. Revenue
from total sugar sales decreased $11.4 million or 7 percent reflecting an 8 percent
decrease in cwt sold, and a 1 percent increase in the average net selling price per cwt.
Revenue from co-products increased 1 percent, reflecting a decrease of 14 percent in
volume, offset by a 15 percent increase in the average selling price per ton. The decrease
in volume of sugar and co-products sold is attributable to the lower sugar content, less
marc in the beets, and high purity in the 2004 crop of beets delivered by
shareholder/growers.

Revenues
from yeast sales increased 2 percent reflecting an increase in volume of 9 percent, and a
decrease in price of 7 percent.

The
value of finished product inventories in fiscal year 2005 decreased $2.9 million from
fiscal year 2004, a result of lower sugar and molasses inventories at fiscal year end.

18

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Cost
of product sold, exclusive of grower payments for sugarbeets, increased $3.3 million or
6.3 percent. Of the $3.3 million, $3.2 is attributed to the Minn-Dak Farmers Cooperative
(MDFC) operation and $0.1 million is attributed to the Minn-Dak Yeast Company (MDYC)
operation.

Of
the $3.2 million increase in the MDFC operation, the cost of operations and maintenance
increased as a result of wet harvest conditions when compared to a crop with normal
harvest conditions. Excess mud reduced pile storage effectiveness, total sugar available
for extraction, and reduced the daily factory throughput. As a result, less sugar was
extracted, while the Company encountered higher daily operating costs. Daily operating
costs were negatively impacted due to the use of more chemicals, coal, coke, and limerock,
which, in turn, were further compounded by a rise in energy costs associated with the
production and shipment of those operating materials.

Sales
and Distribution costs increased $7.1 million or 24 percent. Increases are mainly the
result of the cost of purchased sugar and the cost of marketing allocations. General and
Administrative expenses increased $.2 million or 3 percent. Employee costs and trade
association dues were the primary reasons for the increase. Interest expense decreased
less than $.1 million reflecting a lower level of debt and an increased rate of interest.

Overall,
the cost per cwt of sugar produced increased 16 percent versus the prior year due to a 7
percent increase in costs and a 9 percent reduction in sugar produced.

Other
business income increased $.4 million in fiscal year 2005 due primarily to patronage
dividends from other cooperatives.

Net
payments to members for sugarbeets delivered by the shareholder/growers, decreased by
$19.5 million or 19 percent in fiscal year 2005 and totaled $82.6 million. As of August
31, 2005, the board of directors authorized the payment of prior years member
patronage and per unit retains (including equity payments to estates of deceased
shareholders) totaling $4.6 million to shareholders compared to $4.5 million in the
previous year. The payment of $4.6 million will leave approximately 7.6 years of prior
years patronage and per unit retains still outstanding versus the prior year of 7.9
years outstanding.

# COMPARISON OF THE YEARS
ENDED AUGUST 31, 2004 AND 2003

Revenue
for the year ended August 31, 2004 increased 3% or $5.1 million from 2003. Revenue from
total sugar sales increased $10.6 million or 6% reflecting an 8% increase in cwt sold, and
a 2% decrease in the average selling price per cwt. Revenue from co-products, excluding
the newly developed local wet/pressed pulp feed initiative, increased 20%, reflecting an
increase of 21% in volume, offset by a 1% decrease in the average selling price per ton.
The increase in volume of sugar and co-products sold is directly attributable to the high
quality 2003 crop of beets delivered by shareholder-growers and the steam pulp dryer
addition to the plant operations.

Revenues
from yeast sales remained relatively unchanged reflecting an increase in volume of 3.7%,
and a decrease in price of 4.1%.

The
value of finished product inventories in fiscal year 2004 decreased $4.7 million, from
fiscal year 2003, a result of lower sugar and molasses inventories at fiscal year end.

Cost
of products sold, exclusive of grower payments for sugarbeets, increased $2.9 million or
5.7%. Of the $2.9 million increase, $2.7 million of the increase resulted from the
Minn-Dak Farmers Cooperative (MDFC) operation and $0.2 million from the Minn-Dak Yeast
operation. Of the $2.7 million increase in the MDFC operation, $1.5 million was due to
fixed costs such as employee benefits (health insurance & pension) and depreciation;
The balance of cost increases, or $1.2 million, resulted from higher factory maintenance
costs and beet trucking and beet handling costs, offset somewhat by lower operating costs,
mostly resulting from fewer tons of beets sliced. The cost per cwt of sugar produced only
increased 1%, primarily due to the high sugar content and quality of the beet delivered by
shareholders. The cost per ton of beets sliced increased 10% due to the higher costs
discussed above.

19

---

Sales
and Distribution costs increased $1.1 million or 4%. Increases are mainly the result of an
8% and 21% increase in the volume of sugar and co-products sold, respectively, for the
year. General and Administrative expenses increased $0.3 million or 6%. Employee salaries
and wages, association dues and profession fees were the primary reasons for the increase.
Interest expense decreased $0.4 million or 12% due to reduced rates of interest and lower
levels of debt.

Other
business income decreased $3.0 million in fiscal year 2004. The decrease resulted
primarily from the fiscal year 2003 gain (net of tax) on the sale of the Companys 5%
ownership interest in ProGold, LLC, located in Wahpeton, North Dakota vs. no comparable
activity in fiscal year 2004.

Net
payments to members for sugarbeets delivered by the shareholder-growers, increased by $1.2
million, or 1% in fiscal year 2004 and totaled $102.1 million. As of August 31, 2004, the
Board of Directors authorized the payment of prior years member patronage and per
unit retains (including equity payments to estates of deceased shareholders) totaling $4.5
million to shareholders of record, compared to $4.0 million in the prior year. The payment
of $4.5 million will leave approximately 7.9 years of prior years patronage and per
unit retains still outstanding. In addition, the Board of Directors authorized the payment
of $800,000 of crop year 2003 qualified patronage dividends to shareholders of record.

# ESTIMATED FISCAL YEAR
2006 INFORMATION

The
agreements between the Company and its members regarding the delivery of sugarbeets to the
Company require payment for members sugarbeets in several installments throughout
the year. As only the final payment is made after the close of the fiscal year in
question, the first payments to members for their sugarbeets are based upon the
Companys then-current estimates of the financial results to be obtained from
processing the crop in question and the subsequent sale of the products obtained from
processing those sugarbeets. This discussion contains a summary of the Companys
current estimates of the financial results to be obtained from the Companys
processing of the 2005 sugarbeet crop. Given the nature of the estimates required in
connection with the payments to members for their sugarbeets, this discussion includes
forward-looking statements regarding the quantity of sugar to be produced from the 2005
sugarbeet crop, the net selling price for the sugar and co-products produced by the
Company and the Companys operating costs. These forward-looking statements are based
largely upon the Companys expectations and estimates of future events; as a result,
they are subject to a variety of risks and uncertainties. Some of those estimates, such as
the selling price for the Companys products and the quantity of sugar produced from
the sugarbeet crop are beyond the Companys control. The actual results experienced
by the Company could differ materially from the forward-looking statements contained
herein.

20

---

The
Companys members harvested 1.8 million tons of sugarbeets from the 2005 crop, the
smallest harvested crop since the completion of the Companys expansion completion in
1998. Sugar content of the 2005 crop at harvest was 7% below the average of the five most
recent years and lower than any individual year. The Company is projecting the sugar
production from the 2005-crop at the lowest levels since the expansion. Unusually high
levels of rainfall from May through July caused significant tonnage and quality
reductions. Because of the below average yields from the 2005 crop, the Company has
purchased approximately 156,000 tons of sugarbeets from a neighboring sugarbeet
cooperative that had experienced a record harvest, and was interested in reducing its
processing season risks associated with the large crop. The purchase of additional tons of
sugarbeets is expected to have a positive impact to the operations of the Company. Due to
a number of beet storage and operational factors that are subject to change when a
processing season is extended, the exact amount of the positive impact is not known at
this time. This forward-looking material is based on the Companys expectations
regarding the processing of the 2005 sugar beet crop (excluding the impact of the purchase
of additional tons of sugar beets by the Company); the actual production results obtained
by processing those sugarbeets could differ materially from the Companys current
estimate as a result of factors such as changes in production efficiencies and storage
conditions for the Companys sugarbeets. The Companys initial beet payment
estimate totals $36.00 per ton or $.13050932 per harvested/bonus pound of sugar, with the
final beet payment determined in October of 2006. This projected payment per pound is 4%
more than the final 2004 crop payment per ton/pound, but 6% more than the original
projected 2004 crop payment per ton/pound. The higher projected 2005 crop payment results
from what management believes is a consistent approach to forecasting sugar production and
sugar production costs from a commodity, while harvested, is still at risk for adverse
storage conditions.

From
the revenues generated from the sale of products produced from each ton of sugarbeets must
be deducted the Companys operating and fixed costs. Revenues for the crop year 2005
are expected to be 13% below the 2004 crop year due to reduced sugar production, offset by
higher prices. The deduction of operating costs results in an estimated 2005 crop gross
payment to growers for sugarbeets of $65.2 million, which is less than that of the 2004
crop year of $82.6million. The 2005 crop beet payment decrease results from less harvested
tons, lower sugar per ton, higher operating costs and offset some by higher sugar and
co-product prices.

|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- |  | ----------------------------------------------------------

The
Companys long-term debt interest costs are stabilized through the use of multi-year
interest rate locks on various amounts and terms through its primary lender Co-Bank. This
strategy allows the Company to project future interest costs and cash flows with a
reasonable degree of accuracy.

The
Companys short-term debt will vary from year to year based on the short-term
interest rate market. Average short-term debt borrowing levels have been $26.3 million for
2005, $25.0 million for 2004 and $27.1 million for 2003. Because each years
short-term debt is closely associated with a crop year, the interest fluctuations will
have a direct impact on the final grower beet payment.

The
Company will from time to time have a purchase obligation in foreign currency as a result
of approved capital expenditure projects, and may reduce the risk of currency exchange by
forward purchasing the applicable currency required for the expenditure.

21

---

|ITEM 8. |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- |  | -------------------------------------------

INDEPENDENT
AUDITORS REPORT

The Audit CommitteeMinn Dak Farmers CooperativeWahpeton, North Dakota

We have audited the accompanying
consolidated balance sheets of Minn-Dak Farmers Cooperative (a North Dakota
cooperative association) as of August 31, 2005, 2004, and 2003, and the related
consolidated statements of operations, changes in members investments and cash flows
for the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). These
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Minn-Dak Farmers Cooperative as of August 31, 2005, 2004, and
2003, and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.

Eide Bailly

Fargo, North Dakota
September 29, 2005

22

---

MINN DAK FARMERS
COOPERATIVECONSOLIDATED BALANCE SHEETSAUGUST 31, 2005, 2004, AND 2003

|                                                          |  | 2005 |   | 2004        |  | 2003
|--------------------------------------------------------- |  | ---- | - | ----------- |  | ----
|                                                          |  |      |   |             |  |     
|ASSETS                                                    |  |      |   |             |  |     
|                                                         
|CURRENT ASSETS                                            |  |     
|Cash                                                      |  |      | $ | 651,141     |  | $   
|                                                          |  |      |   |             |  |     
|                                                         
|Receivables                                               |  |     
|Trade accounts                                            |  |      |   | 9,404,653   |  |     
|Growers                                                   |  |      |   | 4,102,800   |  |     
|Income tax                                                |  |      |   | 9,990       |  |     
|Other                                                     |  |      |   | 27,430      |  |     
|                                                          |  |      |   |             |  |     
|                                                          |  |      |   | 13,544,873  |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Advances to affiliates - Midwest Agri-Commodities         |  |     
|Co. and  United Sugars Corporation                        |  |      |   |            |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Inventories                                               |  |     
|Refined sugar, pulp and molasses                          |  |     
|to be sold on a pooled basis                              |  |      |   | 19,730,432  |  |     
|Nonmember refined sugar                                   |  |      |   | 200,633     |  |     
|Yeast                                                     |  |      |   | 114,845     |  |     
|Materials and supplies                                    |  |      |   | 7,037,784   |  |     
|                                                          |  |      |   |             |  |     
|                                                          |  |      |   | 27,083,694  |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Deferred charges                                          |  |      |   | 1,444,959   |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Prepaid expenses                                          |  |      |   | 1,632,888   |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Current deferred income tax asset                         |  |      |   | 541,000     |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|Total current assets                                      |  |      |   | 44,898,555  |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|PROPERTY, PLANT AND EQUIPMENT                             |  |     
|Land and land improvements                                |  |      |   | 22,959,208  |  |     
|Buildings                                                 |  |      |   | 37,263,990  |  |     
|Factory equipment                                         |  |      |   | 130,803,415 |  |     
|Other equipment                                           |  |      |   | 3,574,258   |  |     
|Construction in progress                                  |  |      |   | 2,315,654   |  |     
|                                                          |  |      |   |             |  |     
|                                                          |  |      |   | 196,916,525 |  |     
|Less accumulated depreciation                             |  |      |   | 97,088,389  |  |     
|                                                          |  |      |   |             |  |     
|                                                          |  |      |   | 99,828,136  |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|OTHER ASSETS                                              |  |     
|Investment in stock of other corporations, unconsolidated |  |     
|marketing subsidiaries and other cooperatives             |  |      |   | 11,038,556  |  |     
|Investment restricted for capital bond projects           |  |      |   | 1,491,930   |  |     
|Other                                                     |  |      |   | 1,738,881   |  |     
|                                                          |  |      |   |             |  |     
|                                                          |  |      |   | 14,269,367  |  |     
|                                                          |  |      |   |             |  |     
|                                                         
|                                                          |  |      | $ | 158,996,058 |  | $   
|                                                          |  |      |   |             |  |     

23

---

MINN DAK FARMERS COOPERATIVECONSOLIDATED
BALANCE SHEETSAUGUST 31, 2005, 2004, AND 2003

|                                                                |  | 2005 |   | 2004        |  | 2003
|--------------------------------------------------------------- |  | ---- | - | ----------- |  | ----
|                                                                |  |      |   |             |  |     
|LIABILITIES AND MEMBERS INVESTMENT                             |  |      |   |             |  |     
|                                                               
|CURRENT LIABILITIES                                             |  |     
|Short-term notes payable                                        |  |      | $ | 9,800,000   |  | $   
|                                                                |  |      |   |             |  |     
|                                                               
|Current portion of long-term debt                               |  |      |   | 3,600,000   |  |     
|Current portion of bonds payable                                |  |      |   | 1,725,000   |  |     
|                                                                |  |      |   |             |  |     
|                                                                |  |      |   | 5,325,000   |  |     
|                                                                |  |      |   |             |  |     
|Accounts payable                                                |  |     
|Trade                                                           |  |      |   | 2,219,896   |  |     
|Growers                                                         |  |      |   | 9,966,465   |  |     
|                                                                |  |      |   |             |  |     
|                                                                |  |      |   | 12,186,361  |  |     
|                                                                |  |      |   |             |  |     
|Payable to affiliates - Midwest Agri-Commodities                |  |     
|Co. and  United Sugars Corporation                              |  |      |   | 1,472,747   |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|Accrued liabilities                                             |  |      |   | 3,681,747   |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|Total current liabilities                                       |  |      |   | 32,465,855  |  |     
|                                                               
|LONG-TERM DEBT, NET OF CURRENT PORTION                          |  |      |   | 19,900,000  |  |     
|                                                               
|BONDS PAYABLE, NET OF CURRENT PORTION                           |  |      |   | 19,230,000  |  |     
|                                                               
|LONG-TERM DEFERRED INCOME TAX LIABILITY                         |  |      |   | 1,300,000   |  |     
|                                                               
|OTHER                                                           |  |      |   | 671,756     |  |     
|                                                               
|COMMITMENTS AND CONTINGENCIES (NOTE 11)                         |  |      |   |            |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|Total liabilities                                               |  |      |   | 73,567,611  |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|MINORITY INTEREST IN EQUITY OF MINN-DAK YEAST     COMPANY, INC. |  |      |   | 2,018,551   |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|MEMBERS INVESTMENT                                             |  |     
|Preferred stock                                                 |  |     
|Class A - 100,000 shares authorized,  $105 par value;           |  |     
|72,200 shares issued and outstanding                            |  |      |   | 7,581,000   |  |     
|Class B - 100,000 shares authorized  $75 par value;             |  |     
|72,200 shares issued and outstanding                            |  |      |   | 5,415,000   |  |     
|Class C - 100,000 shares authorized,  $76 par value;            |  |     
|72,200 shares issued and outstanding                            |  |      |   | 5,487,200   |  |     
|                                                                |  |      |   |             |  |     
|                                                                |  |      |   | 18,483,200  |  |     
|                                                               
|Common stock, 600 shares authorized, $250 par value;            |  |     
|477 shares issued and outstanding on 8-31-05,                   |  |      |   | 119,250     |  |     
|488 shares outstanding on 8-31-04 and 8-31-03                   |  |     
|Paid in capital in excess of par                                |  |      |   | 32,094,407  |  |     
|Unit retention capital                                          |  |      |   | 1,379,798   |  |     
|Qualified allocated patronage                                   |  |      |   | 722,691     |  |     
|Nonqualified allocated patronage                                |  |      |   | 23,694,526  |  |     
|Retained earnings                                               |  |      |   | 6,916,024   |  |     
|                                                                |  |      |   |             |  |     
|                                                                |  |      |   | 83,409,896  |  |     
|                                                                |  |      |   |             |  |     
|                                                               
|                                                                |  |      | $ | 158,996,058 |  | $   
|                                                                |  |      |   |             |  |     

24

---

MINN DAK FARMERS
COOPERATIVECONSOLIDATED STATEMENTS OF OPERATIONSYEARS ENDED AUGUST 31, 2005,
2004, AND 2003

|                                                       |  | 2005 |   | 2004        |   | 2003
|------------------------------------------------------ |  | ---- | - | ----------- | - | ----
|                                                       |  |      |   |             |   |     
|REVENUE                                                |  |      |   |             |   |     
|From sales of sugar, sugar co-products, and yeast,     |  |     
|net of discounts                                       |  |      | $ | 189,681,378 |   | $   
|                                                       |  |      |   |             |   |     
|                                                      
|EXPENSES                                               |  |     
|Production costs of sugar, co-products, and yeast sold |  |      |   | 55,940,415  |   |     
|Sales and distribution costs                           |  |      |   | 37,099,870  |   |     
|General and administrative                             |  |      |   | 6,260,416   |   |     
|Interest                                               |  |      |   | 2,899,283   |   |     
|                                                       |  |      |   |             |   |     
|                                                       |  |      |   | 102,199,984 |   |     
|                                                       |  |      |   |             |   |     
|                                                      
|OTHER INCOME (EXPENSE)                                 |  |      |   | 1,135,475   |   |     
|                                                       |  |      |   |             |   |     
|                                                      
|                                                       |  |     
|NET PROCEEDS RESULTING FROM MEMBER AND                 |  |     
|NON-MEMBER BUSINESS BEFORE MINORITY INTEREST           |  |      |   | 88,616,869  |   |     
|                                                       |  |      |   |             |   |     
|                                                      
|MINORITY INTEREST IN INCOME OF                         |  |     
|MINN-DAK YEAST COMPANY, INC.                           |  |      |   | (208,317    | ) |     
|                                                       |  |      |   |             |   |     
|                                                      
|NET PROCEEDS RESULTING FROM MEMBER AND                 |  |     
|NON-MEMBER BUSINESS                                    |  |      | $ | 88,408,552  |   | $   
|                                                       |  |      |   |             |   |     
|                                                      
|DISTRIBUTION OF NET PROCEEDS                           |  |     
|Credited to members investment                        |  |     
|Components of net income                               |  |     
|Income from non-member business                        |  |      | $ | 662,191     |   | $   
|Patronage income                                       |  |      |   | 5,191,808   |   |     
|                                                       |  |      |   |             |   |     
|                                                      
|Net income credited to members investment             |  |      |   | 5,853,999   |   |     
|                                                      
|Payments to members for sugarbeets, net of unit        |  |     
|retention capital                                      |  |      |   | 82,554,553  |   |     
|                                                       |  |      |   |             |   |     
|                                                      
|NET PROCEEDS RESULTING FROM MEMBER AND                 |  |     
|NONMEMBER BUSINESS                                     |  |      | $ | 88,408,552  |   | $   
|                                                       |  |      |   |             |   |     

25

---

MINN DAK FARMERS
COOPERATIVECONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS INVESTMENTS
YEARS ENDED AUGUST 31, 2005, 2004, AND 2003

|                                                |  | Preferred Stock |   | Common Stock |  | Paid in Capital in Excess of Par Value |         | Unit Retention Capital |   | Qualified Allocated Patronage |  | Non-Qualified Allocated Patronage |            | Retained Earnings (Deficit) |   | Total    
|----------------------------------------------- |  | --------------- | - | ------------ |  | -------------------------------------- | ------- | ---------------------- | - | ----------------------------- |  | --------------------------------- | ---------- | --------------------------- | - | ---------
|                                                |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                               
|BALANCE, AUGUST 31, 2002                        |  |                 | $ | 18,483,200   |  | $                                      | 122,000 |                        | $ | 32,094,407                    |  | $                                 | 5,867,806  |                             | $ | 2,910,983
|Stock                                           |  |                
|Sales - common (11 shares)                      |  |                 |   |              |  |                                        | 2,750   |                        |   |                               |  |                                   |            |                             |   |          
|Repurchases - common (11 shares)                |  |                 |   |              |  |                                        | (2,750  | )                      |   |                               |  |                                   |            |                             |   |          
|Revolvement of unit retention capital           |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   | (908,517   | )                           |   |          
|Revolvement of prior years allocated patronage |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   | (614,234 
|Net income for the year ended August 31, 2003   |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                                |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                               
|BALANCE, AUGUST 31, 2003                        |  |                 |   | 18,483,200   |  |                                        | 122,000 |                        |   | 32,094,407                    |  |                                   | 4,959,289  |                             |   | 2,296,749
|Stock                                           |  |                
|Sales - common (12 shares)                      |  |                 |   |              |  |                                        | 3,000   |                        |   |                               |  |                                   |            |                             |   |          
|Repurchases - common (12 shares)                |  |                 |   |              |  |                                        | (3,000  | )                      |   |                               |  |                                   |            |                             |   |          
|Revolvement of unit retention capital           |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   | (1,910,464 | )                           |   |          
|Revolvement of prior years allocated patronage |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   | (658,738 
|Net income for the year ended August 31, 2004   |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   | 800,000  
|Qualified dividends currently payable           |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   | (800,000 
|                                                |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                               
|BALANCE, AUGUST 31, 2004                        |  |                 |   | 18,483,200   |  |                                        | 122,000 |                        |   | 32,094,407                    |  |                                   | 3,048,825  |                             |   | 1,638,011
|Stock                                           |  |                
|Sales - common (4 shares)                       |  |                 |   |              |  |                                        | 1,000   |                        |   |                               |  |                                   |            |                             |   |          
|Repurchases - common (15 shares)                |  |                 |   |              |  |                                        | (3,750  | )                      |   |                               |  |                                   |            |                             |   |          
|Revolvement of unit retention capital           |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   | (1,669,027 | )                           |   |          
|Revolvement of prior years allocated patronage |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   | (915,320 
|Net income for the year ended August 31, 2005   |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                                |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          
|                                               
|BALANCE, AUGUST 31, 2005                        |  |                 | $ | 18,483,200   |  | $                                      | 119,250 |                        | $ | 32,094,407                    |  | $                                 | 1,379,798  |                             | $ | 722,691  
|                                                |  |                 |   |              |  |                                        |         |                        |   |                               |  |                                   |            |                             |   |          

26

---

MINN DAK FARMERS
COOPERATIVECONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED AUGUST 31, 2005,
2004, AND 2003

|                                                                                                        |  | 2005 |   | 2004        |   | 2003
|------------------------------------------------------------------------------------------------------- |  | ---- | - | ----------- | - | ----
|                                                                                                        |  |      |   |             |   |     
|OPERATING ACTIVITIES                                                                                    |  |      |   |             |   |     
|Income allocated to members investment                                                                 |  |      | $ | 5,853,999   |   | $   
|Add (deduct) noncash items                                                                              |  |     
|Depreciation and amortization                                                                           |  |      |   | 7,723,754   |   |     
|(Gain) Loss on disposal of equipment                                                                    |  |      |   | 3,655       |   |     
|Gain on sale of investments                                                                             |  |      |   |            |   |     
|Net (income) loss allocated from                                                                        |  |     
|unconsolidated marketing subsidiaries                                                                   |  |      |   | 30,299      |   |     
|Noncash portion of patronage capital credits                                                            |  |      |   | (964,916    | ) |     
|Deferred income taxes                                                                                   |  |      |   | 19,000      |   |     
|Increase in cash surrender of officer life insurance                                                    |  |      |   | (38,958     | ) |     
|Minority interest                                                                                       |  |      |   | 208,317     |   |     
|Changes in operating assets and liabilities:                                                            |  |     
|Accounts receivable and advances                                                                        |  |      |   | 5,106,392   |   |     
|Inventory and prepaid expenses                                                                          |  |      |   | 2,977,212   |   |     
|Deferred charges and other                                                                              |  |      |   | 131,178     |   |     
|Accounts payable, accrued liabilities, and other liabilities                                            |  |      |   | (5,686,591  | ) |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|NET CASH FROM OPERATING ACTIVITIES                                                                      |  |      |   | 15,363,341  |   |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|INVESTING ACTIVITIES                                                                                    |  |     
|Investments restricted for capital lease projects                                                       |  |      |   | 980,212     |   |     
|Proceeds from disposition of property, plant and equipment                                              |  |      |   | 1,571       |   |     
|Capital expenditures                                                                                    |  |      |   | (4,921,390  | ) |     
|Proceeds from sale of investments                                                                       |  |      |   |            |   |     
|Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives |  |      |   |             |   |     
|Capital adjustment of marketing subsidiary                                                              |  |      |   | (248,239    | ) |     
|Net proceeds from patronage refunds and equity revolvements                                             |  |      |   | 217,819     |   |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|NET CASH FROM (USED FOR) INVESTING ACTIVITIES                                                           |  |      |   | (3,970,027  | ) |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|FINANCING ACTIVITIES                                                                                    |  |     
|Sale and repurchase of common stock, net                                                                |  |      |   | (2,750      | ) |     
|Net proceeds from issuance of short-term debt                                                           |  |      |   | (345,000    | ) |     
|Proceeds from bond issuance                                                                             |  |      |   |            |   |     
|Dividends paid to minority shareholder                                                                  |  |      |   |            |   |     
|Payment of financing fees                                                                               |  |      |   | (313,097    | ) |     
|Payment of long-term debt                                                                               |  |      |   | (5,760,000  | ) |     
|Payment of unit retains and allocated patronage                                                         |  |      |   | (4,591,808  | ) |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|NET CASH USED FOR FINANCING ACTIVITIES                                                                  |  |      |   | (11,012,655 | ) |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|NET CHANGE IN CASH                                                                                      |  |      |   | 380,659     |   |     
|                                                                                                       
|CASH, BEGINNING OF YEAR                                                                                 |  |      |   | 270,482     |   |     
|                                                                                                        |  |      |   |             |   |     
|                                                                                                       
|CASH, END OF YEAR                                                                                       |  |      | $ | 651,141     |   | $   
|                                                                                                        |  |      |   |             |   |     

27

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MINN DAK FARMERS
COOPERATIVECONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED AUGUST 31, 2005, 2004,
AND 2003

|                                                  |  | 2005 |   | 2004      |   | 2003
|------------------------------------------------- |  | ---- | - | --------- | - | ----
|                                                  |  |      |   |           |   |     
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |      |   |           |   |     
|Cash payments for                                 |  |     
|Interest                                          |  |      | $ | 3,070,845 |   | $   
|                                                  |  |      |   |           |   |     
|Income taxes                                      |  |      | $ | (450,463  | ) | $   
|                                                  |  |      |   |           |   |     

28

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# NOTE 1    PRINCIPAL
ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Principal Business
Activity

Minn-Dak Farmers Cooperative is a
North Dakota cooperative association owned by its member-growers for the purpose of
processing sugar beets and marketing sugar and co-products. Minn-Dak Yeast Company, Inc.
(Minn-Dak Yeast) is a North Dakota corporation engaged primarily in the production and
marketing of bakers yeast.

The majority of the net proceeds from
the Company are from member business, whereas Minn-Dak Yeast is considered non-member
business.

Principles of
Consolidation

The financial statements include the
accounts of the Company and its subsidiary, Minn-Dak Yeast, which is 80% owned by the
Company.

Receivable and Credit
Policy

Trade receivables are
uncollateralized customer obligations due under normal trade terms requiring payment
within 15 to 90 days from the invoice date. Trade receivables are stated at the amount
billed to the customer. Customer account balances with invoices dated over 90 days old are
considered delinquent. Payments of trade receivables are allocated to the specific
invoices identified on the customers remittance advice or, if unspecified, are
applied to the earliest unpaid invoices. The carrying amount of trade receivables is
reduced by a valuation allowance that reflects managements best estimate of the
amounts that will not be collected. Management reviews all trade receivable balances that
exceed 90 days from the invoice date and based on an assessment of current
creditworthiness, estimates the portion, if any, of the balance that will not be
collected. Additionally, management estimates an allowance to apply to the aggregate trade
receivables to create a general allowance covering those amounts. The allowance is based
on an evaluation of the receivables account with particular attention paid to the largest
customer balances and the risk profile of the entire portfolio.

Credit Risk

The Company and subsidiary grant
credit to food processors located throughout the United States. In addition, the Company
grants credit to members for sugar beet seed, located in North Dakota and Minnesota.

Inventories

Inventories of refined sugar, pulp
and molasses to be sold on a pooled basis are valued at net realizable value, while
third-party purchased refined sugar to be sold on a pooled basis is valued at the lower of
cost or market. Inventory of yeast is valued at the lower of average cost or market.
Materials and supplies are valued at most recent purchase that approximates cost.

In valuing inventories at net
realizable value, the Company, in effect sells the remaining inventory to the subsequent
years sugar and co-product pool.

29

---

Deferred Charges

Agricultural development and labor
procurement costs incurred in connection with the beet crop to be harvested in September
and October are deferred and subsequently charged to expense during the ensuing processing
period.

Property, Plant,
Equipment and Depreciation

Property, plant and equipment are
stated at cost. Additions, renewals and betterments are capitalized, whereas expenditures
for maintenance and repairs are charged to expense. The cost and related accumulated
depreciation of assets retired or sold are removed from the appropriate asset and
depreciation accounts and the resulting gain or loss is reflected in income.

It is the policy of the Company to
provide depreciation based on methods designed to amortize the cost of the properties over
their estimated useful lives. Property, plant and equipment are depreciated for financial
reporting purposes, principally using declining balance methods, with estimated useful
lives ranging from 8 to 40 years. Statutory lives and methods are used for income tax
reporting purposes.

Indirect costs capitalized were
$112,067, $67,824, and $336,990 for the years ended August 31, 2005, 2004, and 2003. There
was no construction-period interest capitalized for the years end ended August 31, 2005
and 2004, and $61,200 for the year ended August 31, 2003.

Amortization

Bond financing costs incurred in
connection with the financing of the construction projects related to the processing
facility have been capitalized. The Company is amortizing the bond financing costs over
the terms of the financing obtained. The effective interest method of amortization is
used. Amortization expense totaled $36,938 for the years ended August 31, 2005, 2004 and
2003. Estimated future amortization of remaining bond financing costs are $36,938 in years
2006 through 2010 and $194,194 in years thereafter.

Equity Value Investments

The investments in United Sugars
Corporation and Midwest Agri-Commodities Company are accounted for using the equity
method, wherein the investment is recorded at the amount of the underlying equity in the
net assets of the investments and adjusted to recognize the Companys share of the
undistributed earnings or losses.

Investments in Other
Cooperatives

The investments in stocks and capital
credits of other cooperatives are stated at cost, plus the Companys share of
allocated patronage and capital credits.

30

---

Income Taxes

A consolidated federal income tax
return is filed for the Company and its subsidiary. Deferred income taxes are provided for
in the timing of certain temporary deductions/increases for financial and income tax
reporting purposes. Significant temporary differences are as follows:

|1. |  | When non-qualified unit retention capital and allocated patronage are elected by
                    the board of directors, the Company is not allowed an income tax deduction until
                    they are distributed in cash to the member-producers, whereas qualified unit
                    retention capital and allocated patronage are deducted when declared.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Depreciation - For financial reporting purposes, the companies use
                    straight-line and accelerated methods of depreciation with lives of 8 to 40
                    years, while, for income tax purposes, the companies use required statutory
                    depreciable lives and methods.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Non-qualified patronage credits from investments in other cooperatives -
                    for financial statement purposes, the companies recognize income when the
                    patronage credit notification is received while, for income tax purposes, the
                    companies recognize income when the patronage is received in cash.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | Inventory capitalization - For income tax reporting purposes, certain
                    overhead costs are included as a part of inventory costs in accordance with
                    inventory capitalization rules. These costs are charged to expense as incurred
                    for financial reporting purposes.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | Recognition
of vacation pay - For financial reporting  purposes,  vacation pay is charged to
expense as accrued, whereas, for income tax purposes, vacation
pay is deducted when paid.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue Recognition

During the 2005 fiscal year, the
Company modified its accounting policy from recognizing revenue at the point of shipment
to recognizing revenue at the point of customer receipt. Because the Company uses
accounting pooling principals, this change in accounting policy was immaterial to the
Statements of Operations.

Accounting Estimate

The preparation of financial
statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.

31

---

Uninsured Cash Balance

The Company maintains cash balances
at various financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. At times during the year, the Companys
balances exceeded this limit.

Impairment and Disposal
of Long-Lived Assets

The Company accounts for impairment
or disposal of long-lived assets in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to
be held and used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Long-lived assets to be
disposed of by sale are reported at the lower of the carrying amount or fair value less
costs to sell, and will cease to be depreciated. SFAS No. 144 also requires long-lived
assets to be disposed of other than by sale to be considered as held and used until
disposed of, requiring the depreciable life to be adjusted as an accounting change.

Shipping and Handling
Costs

Shipping and handling costs are included
in cost of product sold upon receipt of the Companys product to its customers as
well as the net realizable value of the inventory through allocations from the
Companys marketing Subsidiary.

Advertising

The Companys advertising costs
are expensed as incurred.

Reclassifications

Certain amounts have been
reclassified in the 2004 and 2003 financial statements to conform to the 2005
presentation. The reclassifications have no effect on the results of operations.

# NOTE 2    INVESTMENTS

The investment in stock of other
corporations, unconsolidated marketing subsidiaries and other cooperatives consists of the
following:

|                                   |  | 2005 |   | 2004       |  | 2003
|---------------------------------- |  | ---- | - | ---------- |  | ----
|                                   |  |      |   |            |  |     
|United Sugars Corporation          |  |      | $ | 1,457,058  |  | $   
|Midwest Agri-Commodities           |  |      |   | 41,198     |  |     
|CoBank                             |  |      |   | 4,998,416  |  |     
|Dakota Valley Electric Cooperative |  |      |   | 4,488,197  |  |     
|Other                              |  |      |   | 53,687     |  |     
|                                   |  |      |   |            |  |     
|                                  
|                                   |  |      | $ | 11,038,556 |  | $   
|                                   |  |      |   |            |  |     

32

---

# NOTE 3    SHORT-TERM
DEBT

Information regarding short-term debt
for the years ended August 31, is as follows:

|                                                                                   |  | 2005 |   | 2004      |  | 2003
|---------------------------------------------------------------------------------- |  | ---- | - | --------- |  | ----
|                                                                                   |  |      |   |           |  |     
|Seasonal loan with CoBank, due June 1, 2006, interest variable, currently at 4.58% |  |      | $ | 9,800,000 |  | $   
|                                                                                   |  |      |   |           |  |     

The Company has a $45,000,000
seasonal line of credit with CoBank. The line is secured with a first lien on
substantially all property and equipment and current assets of the Company. The Company
also utilizes the USDAs CCC Sugar Loan Program to provide an additional source of
seasonal financing.

Maximum borrowings, average borrowing
levels and average interest rates for short-term debt for the years ended August 31, is as
follows:

|                         |  | 2005 |   | 2004       |  | 2003
|------------------------ |  | ---- | - | ---------- |  | ----
|                         |  |      |   |            |  |     
|                        
|Maximum borrowings       |  |      | $ | 46,975,000 |  | $   
|                         |  |      |   |            |  |     
|                        
|Average borrowing levels |  |      | $ | 26,325,769 |  | $   
|                         |  |      |   |            |  |     
|                        
|Average interest rates   |  |      |   | 3.22%      |  |     
|                         |  |      |   |            |  |     

# NOTE 4    LONG-TERM
DEBT

Information regarding long-term debt
at August 31 is as follows:

|                                                                                                                                                                                                                                                                 |  | 2005 |   | 2004       |   | 2003
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---------- | - | ----
|                                                                                                                                                                                                                                                                 |  |      |   |            |   |     
|Term loan with CoBank, due in varying principal repayments through November 20, 2010, interest rate variable,
currently at 5.18%, with a first lien on substantially all property and equipment and current assets of Minn-Dak located in Wahpeton, North Dakota |  |      | $ | 23,500,000 |   | $   
|                                                                                                                                                                                                                                                                
|Less current maturities                                                                                                                                                                                                                                          |  |      |   | (3,600,000 | ) |     
|                                                                                                                                                                                                                                                                 |  |      |   |            |   |     
|                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                 |  |      | $ | 19,900,000 |   | $   
|                                                                                                                                                                                                                                                                 |  |      |   |            |   |     

33

---

The Company has complied with the
terms of its loan agreement for the years ended August 31, 2005, 2004, and 2003.

In addition, the Company can make special
advance payments on its term loans with CoBank after its seasonal loans have been paid in
full, with the understanding that the special advance payments will be readvanced subject
to the reinstatement provisions, prior to the granting of any new seasonal loans. Any such
advance payments are subject to a commitment fee of .25% of the daily unadvanced
commitment.

Interest expense totaled $2,849,311,
$2,919,624, and $3,326,163 for 2005, 2004 and 2003, respectively.

Principal amounts due on all the
Companys long-term debt are as follows:

|Years ending August 31, |  | 
|----------------------- |  | 
|                       
|2006                    |  | 
|2007                    |  | 
|2008                    |  | 
|2009                    |  | 
|2010                    |  | 
|Thereafter              |  | 
|                        |  | 
|                       
|                        |  | 
|                        |  | 

# NOTE 5    BONDS
PAYABLE

The Company financed construction
projects related to the processing facility through the sale of Solid Waste Disposal
Revenue and Industrial Development Revenue Bonds, Series 1996 and 2002, by Richland county
North Dakota. The Company has leased the property and equipment from the city for rental
equal to the sum of the annual principal and interest payments on the bonds. Under the
terms of the lease, the Company is responsible for the real estate taxes, insurance,
repairs and maintenance, and other costs incident to the ownership of the property. The
leased property is included with property and equipment in the financial statements and
the bonds have been recorded as a direct obligation of the Company. Ownership of the
property and equipment will transfer to the Company when the bonds are repaid in full. The
bonds are guaranteed by the Company. The Company has letter of credit arrangements with a
bank that provide security for obligations under the bonds payable totaling approximately
$21,588,000 at August 31, 2005. There were no outstanding advances under these letter of
credit arrangements at August 31, 2005. Details relative to the Companys obligations
under the lease agreement are as follows:

34

---

|                 |  | 2005
|---------------- |  | ----
|                 |  |     
|
|                 |  |     
|Richland County, |  |     
|North Dakota     |  |     
|                
|Richland County, |  |     
|North Dakota     |  |     
|                 |  |     
|                
|                 |  |     
|                 |  |     

Minimum future principal payments
required on the obligations under bonds payable are as follows:

|Years ending August 31, | 
|----------------------- | 
|                       
|2006                    | 
|2007                    | 
|2008                    | 
|2009                    | 
|2010                    | 
|Thereafter              | 
|                        | 
|                        | 
|                        | 

# NOTE 6    
MEMBERS INVESTMENT AND GROWER PAYMENTS

The ownership of nondividend bearing
common stock is restricted to a member-producer, as defined in the by-laws of
the Company. Each member-producer shall own only one share of common stock and is entitled
to one vote at any meeting of the members. Each member-producer is also required to
purchase units of preferred stock and is entitled to grow the maximum acres per unit of
preferred stock as is authorized by the Board of Directors each farming year. The
Companys board of directors authorized the members to plant 1.45, 1.57 and 1.57
acres per unit of preferred stock for the fiscal years 2005, 2004 and 2003 respectively. A
unit consists of one share each of Class A, Class B and Class C preferred stock. The
preferred shares are nonvoting and nondividend bearing. All transfers and sales of stock
must be approved by the board of directors.

35

---

The Companys net income,
determined in accordance with generally accepted accounting principles consistently
applied, shall be distributed annually on the basis of delivered pounds of sugar, in cash
or in the form of credits to each member-producers patronage credit account as
established on the books of the Company. In the event of a loss in any one year, the
Company shall act in such a manner as to first recoup the loss from those patrons who were
patrons in the year in which the loss occurred.

Under the terms of the Company beet
growing contracts with each of its member-producers, the Company is obligated to pay the
member-producers for beets delivered at a price per pound of extractable sugar. However,
if, in the opinion of CoBank, the working capital position of the Company is insufficient,
the Company shall retain from the price to be paid per pound of extractable sugar such
amounts as are deemed by the bank to be necessary for operations, the deductions to be
made at such time as the bank shall require. The amount so retained shall be evidenced in
the records of the Company by equity credits in favor of the growers. The board of
directors has the power to determine whether such retains shall be qualified
or nonqualified for income tax purposes.

For the year ended August 31, 2005,
the Company allocated patronage of $5,191,808 to the members. For the year ended August
31, 2004, the Company allocated patronage of $5,128,308 to the members. For the year ended
August 31, 2003, the Company allocated patronage of $4,767,872 to the members.

During the year ended August 31,
2005, the Company revolved the remaining 92% of the unit retains and allocated patronage
for the fiscal year ended August 31, 1996 and 45% of the unit retains and allocated
patronage for the fiscal year ended August 31, 1997, totaling $2,533,592 and $2,008,115 in
each respective year, for a total of $4,541,707. In addition, unit retains and allocated
patronage owned by certain estates were redeemed at a discount. The discount represented
the difference between the book value of these items, totaling $50,102, and the present
value of the estimated future redemptions.

During the year ended August 31,
2004, the Company revolved the remaining 25% of the unit retains and allocated patronage
for the fiscal year ended August 31, 1994, 100% of the unit retains and allocated
patronage for the fiscal year ended August 31, 1995, and 8% of the unit retains and
allocated patronage for the fiscal year ended August 31, 1996, totaling $828,628,
$3,475,806, and $213,271 in each respective year, for a total of $4,517,705. In addition,
unit retains and allocated patronage owned by certain estates were redeemed at a discount.
The discount represented the difference between the book value of these items, totaling
$10,605, and the present value of the estimated future redemptions.

During the year ended August 31,
2003, the Company revolved the remaining 20% of the unit retains and allocated patronage
for the fiscal year ended August 31, 1993 and 75% of the unit retains and allocated
patronage for the fiscal year ended August 31, 1994, totaling $1,280,562 and $2,514,889,
in each respective year, for a total of $3,795,451. In addition, unit retains and
allocated patronage owned by certain estates were redeemed at a discount. The discount
represented the difference between the book value of these items, totaling $212,018, and
the present value of the estimated future redemptions.

36

---

# NOTE 7    INVESTMENT
IN MARKETING COOPERATIVES

The Company has formed common
marketing agency agreements with United Sugars Corporation (United Sugars) and Midwest
Agri-Commodities (Midwest) to be the exclusive marketing agents for all products produced
by them and other member processors.

The Companys ownership
requirement in United Sugars is calculated periodically and is based on the average volume
of sugar produced during the five previous fiscal years. The investment is accounted for
on the equity method and the amount of sales and related costs recognized by each member
processor is allocated based on their pro-rata share of production for the year. The
Company provided United Sugars with cash advances on an ongoing basis for operating and
marketing expenses incurred. During the years ended August 31, 2005, 2004, and 2003, the
Company had advanced $23,769,970, $19,899,596, and $21,241,933 respectively. The Company
had outstanding advances due from United Sugars of $1,104,338, $364,698, and $88,582, for
the years ended August 31, 2005, 2004, and 2003, respectively.

The Company has a one-fourth
ownership interest in Midwest. The amount of the investment is accounted for using the
equity method. All beet pulp and a portion of the molasses produced are sold by Midwest as
an agent for the Company. The amount of sales and related costs to be recognized by each
owner is allocated based on their pro-rata share of production for the year. The owners
provide Midwest with cash advances on an ongoing basis for operating and marketing
expenses incurred by Midwest. The Company advanced Midwest $1,060,826, $1,887,774, and
$1,281,325, respectively, during the years ended August 31, 2005, 2004, and 2003. The
Company had outstanding advances due to Midwest of $368,409, $624,164, and $46,668, as of
August 31, 2005, 2004, and 2003, respectively. The owners are guarantors of the short-term
line of credit Midwest has with CoBank.

# NOTE 8    INCOME
TAXES

The Company is a nonexempt
cooperative as described under Section 1381(a)(2) of the Internal Revenue Code of 1986.
Accordingly, net margins from business done with member patrons, which are allocated and
paid as prescribed in Section 1382 of the Code, will be taxable to the members and not to
the Company. To the extent that net margins are not allocated and paid as stated above or
arise from business done with non-members, the Company shall have taxable income subject
to corporate income tax rates.

37

---

The significant components of
deferred tax assets and liabilities included on the balance sheet at August 31, is as
follows:

|                                                                  |  | 2005 |   | 2004       |   | 2003
|----------------------------------------------------------------- |  | ---- | - | ---------- | - | ----
|                                                                  |  |      |   |            |   |     
|Deferred tax assets                                               |  |      |   |            |   |     
|Non-qualified unit retains and allocated patronage due to members |  |      | $ | 10,030,000 |   | $   
|Net operating loss carryforwards                                  |  |      |   | 4,543,000  |   |     
|Other                                                             |  |      |   | 945,000    |   |     
|                                                                  |  |      |   |            |   |     
|                                                                 
|Total deferred tax assets                                         |  |      |   | 15,518,000 |   |     
|                                                                  |  |      |   |            |   |     
|                                                                 
|Deferred tax liabilities                                          |  |     
|Depreciation                                                      |  |      |   | 14,234,000 |   |     
|Other                                                             |  |      |   | 2,043,000  |   |     
|                                                                  |  |      |   |            |   |     
|                                                                 
|Total deferred tax liabilities                                    |  |      |   | 16,277,000 |   |     
|                                                                  |  |      |   |            |   |     
|                                                                 
|Net deferred tax liability                                        |  |      | $ | (759,000   | ) | $   
|                                                                  |  |      |   |            |   |     
|                                                                 
|Classified as follows                                             |  |     
|Current asset                                                     |  |      | $ | 541,000    |   | $   
|Long-term liability                                               |  |      |   | (1,300,000 | ) |     
|                                                                  |  |      |   |            |   |     
|                                                                 
|Net deferred tax liability                                        |  |      | $ | (759,000   | ) | $   
|                                                                  |  |      |   |            |   |     

The state and federal operating loss
carryforwards totaling approximately $19,700,000 will expire in 2019 through 2025.

The provision for income taxes is as follows:

|                                    |  | 2005 |   | 2004   |  | 2003
|----------------------------------- |  | ---- | - | ------ |  | ----
|                                    |  |      |   |        |  |     
|Current expense (benefit)           |  |      | $ | 56,000 |  | $   
|Net change in temporary differences |  |      |   | 19,000 |  |     
|                                    |  |      |   |        |  |     
|                                   
|Provision for income taxes          |  |      | $ | 75,000 |  | $   
|                                    |  |      |   |        |  |     

As a Cooperative, the provision for
income taxes will not specifically follow the amount of the tax liability due to temporary
timing differences as described in Note 1.

38

---

# NOTE 9    
ENVIRONMENTAL MATTERS

The Company is subject to extensive federal
and state environmental laws and regulations with respect to water and air quality, solid
waste disposal and odor and noise control. The Company conducts an ongoing and expanding
control program designed to meet these environmental laws and regulations. While the
Company will continue to have ongoing environmental compliance issues, currently there are
no pending regulatory enforcement actions and the Company believes that it is in
substantial compliance with applicable environmental laws and regulations.

The Company cannot predict whether
future changes in environmental laws or regulations might increase the cost of operating
its facilities and conducting its business. Any such changes could have financial
consequences for the Company and its members.

# NOTE 10    
COMMITMENTS AND CONTINGENCIES

During 2000, the Company sold certain
notes receivable with recourse. The Companys contingent liability related to these
notes totaled $456,973 as of August 31, 2005.

Subsequent to year end, the
Companys marketing agent, United Sugars Corporation, declared force majure under
terms of its sales contracts. This action allowed United Sugars Corporation to delay
performance under the terms of the contracts. The Company anticipates no material
liability from this action.

# NOTE 11    OPERATING
LEASES

The Company is a party to various
operating leases for vehicles and equipment. Future minimum payments for the years ending
August 31, under these obligations, are approximately as follows:

|Years ending August 31, | 
|----------------------- | 
|                       
|2006                    | 
|2007                    | 
|2008                    | 
|2009                    | 
|                        | 
|                       
|                        | 
|                        | 

Operating lease and contract expenses
for the years ended August 31, 2005, 2004, and 2003, totaled approximately $1,005,937,
$972,504, and $919,000, respectively.

39

---

# NOTE 12    EMPLOYEE
BENEFIT PLANS

401(k) PlanThe Company has a qualified 401(k)
employee benefit plan that covers all employees meeting eligibility requirements. The
Companys contribution to the plan was at a level of 100 percent of employee
contributions, up to 4 percent of compensation for the years ended August 31, 2005 and
2004, and 75 percent of employee contributions, up to 4 percent of compensation for the
year ended August 31, 2003. Employer contributions to the plan totaled $499,862, $466,114,
and $320,724 for the years ended August 31, 2005, 2004, and 2003, respectively.

Pension PlanThe Company has a non-contributory
defined benefit plan which covers substantially all employees who meet certain
requirements of age, length of service and hours worked per year.

The following table sets forth the
plans funded status at August 31:

|                                                  |  | 2005 |   | 2004       |   | 2003
|------------------------------------------------- |  | ---- | - | ---------- | - | ----
|                                                  |  |      |   |            |   |     
|Change in benefit obligation                      |  |      |   |            |   |     
|Benefit obligation at beginning of year           |  |      | $ | 18,713,083 |   | $   
|Service cost                                      |  |      |   | 810,489    |   |     
|Interest cost                                     |  |      |   | 1,316,496  |   |     
|Experience (gain)/loss due to participant changes |  |      |   | 1,498,023  |   |     
|Benefits paid                                     |  |      |   | (605,632   | ) |     
|                                                  |  |      |   |            |   |     
|                                                 
|Benefit obligation at end of year                 |  |      |   | 21,732,459 |   |     
|                                                  |  |      |   |            |   |     
|                                                 
|Change in plan assets                             |  |     
|Fair value of plan assets at beginning of year    |  |      |   | 13,632,176 |   |     
|Actual return on plan assets                      |  |      |   | 1,232,678  |   |     
|Employer contribution                             |  |      |   | 1,210,000  |   |     
|Benefits paid                                     |  |      |   | (605,632   | ) |     
|                                                  |  |      |   |            |   |     
|                                                 
|Fair value of plan assets at end of year          |  |      |   | 15,469,222 |   |     
|                                                  |  |      |   |            |   |     
|                                                 
|Funded status                                     |  |      |   | (6,263,237 | ) |     
|Unrecognized net actuarial loss                   |  |      |   | 4,977,404  |   |     
|Unrecognized prior service cost                   |  |      |   | 345,642    |   |     
|Unrecognized transition (asset) obligation        |  |      |   | 175        |   |     
|                                                  |  |      |   |            |   |     
|                                                 
|Accrued benefit cost liability                    |  |      | $ | (940,016   | ) | $   
|                                                  |  |      |   |            |   |     

40

---

|                                             |  |  | 
|-------------------------------------------- |  |  | 
|Weighted-average assumptions as of August 31 |  |  | 
|Discount rate                                |  |  | 
|Expected return on plan assets               |  |  | 
|Rate of compensation increase                |  |  | 

The net periodic pension cost for the
years ended August 31, includes the following components:

|                                                |  |  |  
|----------------------------------------------- |  |  | -
|Components on net periodic benefit cost         |  |  |  
|Service cost                                    |  |  | $
|Interest cost                                   |  |  |  
|Expected return on plan assets                  |  |  |  
|Amortization of prior service cost              |  |  |  
|Amortization of transition amount               |  |  |  
|Amortization of unrecognized net actuarial loss |  |  |  
|                                                |  |  |  
|                                               
|Net periodic benefit cost                       |  |  | $
|                                                |  |  |  

The Companys pension plan
 weighted-average asset allocation at August 31, 2005, by asset category is as follows:

|                  | 
|----------------- | 
|Equity securities | 
|Debt securities   | 
|Other             | 
|                  | 
|                 
|Total             | 
|                  | 

Contributions

The Company expects to contribute
$1,077,000 to its pension plan in 2006.

The following benefit payments, which
reflect expected future service, as appropriate, are expected to be paid:

|                         | 
|------------------------ | 
|2006                     | 
|2007                     | 
|2008                     | 
|2009                     | 
|2010                     | 
|Thereafter, through 2015 | 

41

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# NOTE 13    STOCK
TRANSFER RESTRICTION

The Company has entered into an
agreement with Minn-Dak Yeasts minority shareholder, whereby neither party shall
sell, option or transfer its interest in Minn-Dak Yeast to any person, firm or corporation
(third party) without first offering, in writing, the other party the right to acquire
such interest on the same terms. If the offer is not accepted by the offeree within 30
days, the offeror may sell, option or transfer its interest to the third party within 120
days after expiration of the 30-day period.

# NOTE 14    FAIR
VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial
instrument is generally defined as the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced liquidation sale.
Quoted market prices are generally not available for the Companys financial
instruments. Accordingly, fair values are based on judgments regarding anticipated cash
flows, future expected loss experience, current economic conditions, risk characteristics
of various financial instruments and other factors. Changes in the assumptions could
significantly affect the estimates.

The following methods and assumptions
were used by the Company to estimate fair value of the financial instruments, and the
estimated fair values of the Companys financial instruments as of August 31, 2005,
2004, and 2003, are as follows:

| | Investments - The
investments in CoBank, Dakota Valley Electric Cooperative, Inc. and all other
cooperatives are stated at cost, plus the Companys share of allocated patronage and
capital credits. The investments in United Sugars Corporation and Midwest
Agri-Commodities are accounted for using the equity method, wherein the investments are
recorded at the amount of the underlying equity in the net assets of the investments and
adjusted to recognize the Companys share of the undistributed earnings or losses.
The Company believes it is not practicable to estimate the fair value without incurring
excessive costs because there is no established market for this stock and it is
inappropriate to estimate future cash flows which are largely dependent on future
patronage earnings of the investment.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Long-term
debt and bonds payable - The fair value of obligations under long-term debt and
bonds payable are estimated based on the quoted market prices for the same or similar
issues or on the current rates offered for debt of similar maturities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 9. |  | CHANGES IN OR DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- |  | --------------------------------------------------------------------------------

There
have been no changes in or disagreements with accountants on accounting and financial
disclosure.

42

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|ITEM 9A. |  | CONTROLS AND PROCEDURES
|-------- |  | -----------------------

Sarbanes-Oxley Act:The
Sarbanes-Oxley Act continues to have the interpretation of its rules reviewed and changed.
The Company is making every reasonable effort to be in compliance with the rules and
interpretations of these rules as they are promulgated. As of this writing, compliance
with all applicable Sarbanes-Oxley rules for the Company has been deferred until August
31, 2006. The below listed areas of activity are not to be considered an all inclusive
list, rather an indication of how the Companys Board of Directors and Management are
approaching future compliance requirements.

Audit Committee:The audit
committee is active in the oversight of the Companys accounting, auditing, and key
risk management areas. The Companys bylaws require any board member to be actively
engaged in the production of sugarbeets, therefore, the financial expert requirement for
the audit committee is restricted to the pool of available directors who are eligible to
serve on the audit committee. Therefore there is no financial expert, as defined within
the provisions contained in the Sarbanes-Oxley law, that serves on the Audit Committee.
The Audit Committee has formulated a confidential and anonymous employee system to allow
employees to report concerns regarding questionable accounting or auditing matters. The
Audit Committee has adopted a code of ethics policy for top management.

The Audit Committee has reviewed and
discussed separately with management, the independent auditors, and within the Audit
Committee the financial statements and the quality of accounting principles and
significant judgments affecting the financial statements contained in this 10-k report. As
a result of these reviews and discussions, the Audit Committee considers the financial
statements contained in this 10-k report to be fairly presented.

Internal Controls:The
Companys payments to growers are derived from crop pools with each years
harvest creating a Crop Pool. It is the Companys practice to make every
reasonable effort to allocate revenues and costs in such a manner the revenues and
expenses associated with each pool are materially correct and accounting methods are
consistently applied on a year-to-year and a pool-to-pool basis. The Company has
formalized a process where-by the material risks associated with the Company are
determined, documented as to how these risks are to be managed and, where appropriate,
reviewed by the Audit Committee.

The Companys chief executive
officer and chief financial officer have reviewed and evaluated the effectiveness of the
Companys disclosure controls and procedures (as defined in Rules 240.13a-14(c) and
15d-14(c) promulgated under the Securities Exchange Act of 1934) as of a date within
ninety days before the filing date of this annual report. Based on that review and
evaluation, which included inquiries made to certain other employees of the Company, the
chief executive officer and chief financial officer have concluded that the Companys
current disclosure controls and procedures, as designed and implemented, are reasonably
adequate to ensure that they are provided with material information relating to the
Company required to be disclosed in the reports the Company files or submits under the
Securities Exchange Act of 1934.

43

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|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
|-------- |  | -----------------------------------------------

# IDENTIFICATION OF
DIRECTORS

The
table below lists the current directors of Minn-Dak Farmers Cooperative. The board of
directors consists of one director from each district. Directors must be common
shareholders or representatives of common shareholders belonging to the district they
represent and are elected by the members of that district. In the case of a common
shareholder who is other than a natural person, a duly appointed or elected representative
of such common shareholder may serve as a director. The directors have been elected to
serve three-year terms expiring in December of the years indicated in the table below. One
director is elected each year from three selected districts. Brief biographies for each of
the directors are included after the table.

|Name and Address       |  | Age |  | District                   |  | Director Since |  | Term Expiresin December
|---------------------- |  | --- |  | -------------------------- |  | -------------- |  | -----------------------
|Brent Davison          |  | 55  |  | District #5  Hawes        |  | 2003           |  | 2005(1)                
|7950 770th AV          |  |     |  |                            |  |                |  |                        
|Tintah, MN 56583       | 
|                      
|Dennis Butenhoff       |  | 59  |  | District #9  Peet         |  | 2004           |  | 2007                   
|12254 118th ST S       | 
|Baker, MN 56580        |  |     |  |                            |  |                |  |                        
|                      
|Douglas Etten          |  | 54  |  | District #8  Lyngaas      |  | 1997           |  | 2006                   
|3138 370th ST          | 
|Foxhome, MN 56543      |  |     |  |                            |  |                |  |                        
|                      
|Michael Hasbargen      |  | 60  |  | District #4  Factory East |  | 1993           |  | 2005(2)                
|2553 360th ST          |  |     |  |                            |  |                |  |                        
|Breckenridge, MN 56520 |  |     |  |                            |  |                |  |                        
|                      
|Dennis Klosterman      |  | 45  |  | District #3  Gorder       |  | 2004           |  | 2007                   
|7942 CTY RD 1          |  |     |  |                            |  |                |  |                        
|Mooreton, ND 58061     |  |     |  |                            |  |                |  |                        
|                      
|Russell Mauch          |  | 50  |  | District #2  Factory West |  | 1998           |  | 2007                   
|16305 Hwy 13           |  |     |  |                            |  |                |  |                        
|Barney, ND 58008       | 
|                      
|Charles Steiner        |  | 55  |  | District #6  Yaggie       |  | 2000           |  | 2006                   
|2851 310th AV          | 
|Foxhome, MN 56543-9312 |  |     |  |                            |  |                |  |                        

44

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|Name and Address     |  | Age |  | District             |  | Director Since |  | Term Expiresin December
|-------------------- |  | --- |  | -------------------- |  | -------------- |  | -----------------------
|Paul Summer          |  | 62  |  | District #7  Lehman |  | 1993           |  | 2005(3)                
|1509 Lakeside Drive  | 
|Alexandria, MN 56308 | 
|                    
|Alton Theede         |  | 61  |  | District #1  Tyler  |  | 2003           |  | 2006                   
|609 3rd AV SE        | 
|Hankinson, ND 58041  | 

|1) | Mr.
Davisons term as a director of the Company from District #5-Hawes           expires
on December 6, 2005.
|-- | -------------------------------------------------------------------------------------------------------------

|2) | Mr.
Hasbargens term as a director of the Company from District #4-Factory
East expires on December 6, 2005.
|-- | ------------------------------------------------------------------------------------------------------------

|3) | Mr.
Summers term as director of the Company from District #7-Lehman expires
on December 6, 2005.
|-- | -------------------------------------------------------------------------------------------------

Dennis
Butenhoff has been a director since 2004 and serves on the board of directors of
Minn-Dak Yeast Company. Mr. Butenhoff graduated from Barnesville High School, Barnesville,
MN in 1965. Prior to serving his country in the military, Mr. Butenhoff attended North
Dakota State University for 4 years, focusing on ag economics. He has been farming in the
Baker/Barnesville area since 1967. Mr. Butenhoff has served Trinity Lutheran Church as a
Sunday school teacher and church elder.

Brent
Davison has been a director since 2003 and is one of Minn-Daks representatives
to the American Sugarbeet Growers Association in Washington, DC. Mr. Davison earned his
B.S. degree in Education at Concordia College, Moorhead, MN, graduating in 1972. Mr.
Davison taught school in Warren, MN from 1972 until coming home to farm near Tintah,
Minnesota area in 1974. He is currently serving on the Tintah Township Board and is a
former volunteer fireman and first responder.

Douglas
Etten has been a director since 1997 and is currently serving as the board vice
chairman. Mr. Etten has been farming near Foxhome, MN since graduating from Concordia
College in Business and Math in 1974. Etten also serves on the board of directors for
United Sugars Corporation. He is also one of Minn-Daks representatives to the
American Sugarbeet Growers Association in Washington, DC.

Michael
Hasbargen has been a director since 1993 and is currently serving as board chairman.
He has also served as vice chairman. Mr. Hasbargen has been farming near Breckenridge, MN
since graduating from NDSU in Ag Economics in 1967. Mr. Hasbargen also serves on the board
of directors of United Sugars Corporation, Midwest Agri-Commodities Company, and Minn-Dak
Yeast Company. Mr. Hasbargen is the brother-in-law of Mr. Steven Caspers, Executive Vice
President & Chief Financial Officer.

Dennis
Klostermanhas been a director since 2004. Mr. Klosterman graduated from Wahpeton High
School in Wahpeton in 1978. He began farming with his father and brother in the Mooreton,
ND area in 1979 while attending North Dakota State College of Science and North Dakota
State University. Mr. Klosterman has, and continues to, serve his community and church in
several areas. He was a member and chairman of the Minn-Dak Farmers Cooperative Political
Action Committee and is currently a member of the Companys Leadership and Education
Committee. Mr. Klosterman is a member of various farm and commodity organizations.

45

---

Russell
Mauch has been a director since 1998 and currently serving as board treasurer. Mr.
Mauch graduated from North Dakota State University in 1977 with a B.S. in agriculture.
From 1979 to 1981 Mr. Mauch was a commercial and agriculture loan officer for First Bank
Corporation in Valley City, ND. Mr. Mauch has been farming near Barney, ND since 1981. Mr.
Mauch also serves on the board of directors for United Sugars Corporation.

Charles
Steinerhas been a director since 2000. Mr. Steiner has been farming near Foxhome, MN
since 1969. Mr. Steiner graduated from the Northwest School of Agriculture, University of
Minnesota at Crookston, MN. He also serves on the board of directors for Midwest
Agri-Commodities Company and Minn-Dak Yeast Company.

Paul
Summerhas been a director since 1993 and is currently serving as board secretary.
Mr. Summer has been farming near Herman, MN since 1963.

Alton
Theede has been a director since 2003. Mr. Theede has been farming in the Fairmount,
North Dakota area since 1966. He earned his B.S. degree in Business Administration from
the University of North Dakota, Grand Forks, ND. Mr. Theede currently serves on the board
of directors for the local CHS (Cenex Harvest States) and is very involved in community
service. Mr. Theede has been and continues to be active in serving the congregation of St.
Phillips Catholic Church in Hankinson, ND. He serves on the board of directors for
Minn-Dak Yeast Company.

The
Board of Directors meets monthly. The Company provides its directors with minimal
compensation, consisting of (i) a payment of $225.00 per meeting for regular and special
board meetings, (ii) the greater (a) $112.50 for any day in which directors partake in
activities on the Companys behalf that take less than five hours or (b) $225.00 for
any day in which directors partake in activities on the Companys behalf that take
five hours or more. The Chairman of the Board of Directors also receives a flat $400.00
per month to compensate for the extra duties associated with that position.

# Executive Officers

The
table below lists the senior management employees of the Company, neither of whom owns any
common or preferred shares. Brief biographies for each of these officers are included
after the table.

|Name              |  | Age |  | Position                                            
|----------------- |  | --- |  | ----------------------------------------------------
|David H. Roche    |  | 58  |  | President and Chief Executive Officer               
|Steven M. Caspers |  | 55  |  | Executive Vice President and Chief Financial Officer

David
H. Roche is Minn-Dak Farmers Cooperatives third president and CEO. He joined the
Wahpeton, ND based sugar cooperative on March 1, 2001. He serves on the boards of United
Sugars Corporation and Midwest Agri-Commodities. In addition, he is a trustee of the
United States Beet Sugar Association, and a member of the board of directors of the Sugar
Association, Washington, D.C. Mr. Roche began his sugar industry career as a controller
for Michigan Sugar Company in 1976. He progressed through the ranks until he was named
president in 1994. In 1996 he became president of Savannah Foods Industrial and was
appointed senior vice president of Savannah Foods & Industries. Imperial Sugar Company
acquired controlling interest in Savannah in 1998. He was named as a managing director and
senior vice president. Mr. Roche holds an MBA in Accounting from Michigan State University
and became a Certified Public Accountant in 1974.

46

---

Steven
M. Caspers is a graduate of the University of North Dakota with a Bachelor of Science
in Business Administration and a major in Accounting. He has been employed with the
Company since May 5, 1974. Mr. Caspers is president of Minn-Dak Yeast Company. He is
active in national industry related boards and committees. Mr. Caspers is the
brother-in-law of Mr. Michael Hasbargen, Director and Chairman.

|ITEM 11. |  | EXECUTIVE COMPENSATION
|-------- |  | ----------------------

The
following table summarizes the amount of compensation paid for services rendered to the
Company during the fiscal year ended August 31, 2005 and the two prior fiscal years to
those persons serving as the Companys Chief Executive Officer and Chief Financial
Officer of the Company whose cash compensation exceeded $100,000 per annum.

# Summary Compensation
Table

|Name andPrincipal Position |  | Year |      | Salary |  | Bonus |         | Other AnnualCompensation(1) |   | All OtherCompensation(2) |  | TotalCompensation
|-------------------------- |  | ---- | ---- | ------ |  | ----- | ------- | --------------------------- | - | ------------------------ |  | -----------------
|
|David Roche                |  |      | 2005 |        |  | $     | 303,585 |                             | $ | 80,000                   |  | $                
|President & CEO            |  |      | 2004 |        |  | $     | 294,616 |                             | $ | 105,000                  |  | $                
|                           |  |      | 2003 |        |  | $     | 284,232 |                             | $ | 100,000                  |  | $                
|                          
|Steven Caspers             |  |      | 2005 |        |  | $     | 155,958 |                             | $ | 40,500                   |  | $                
|Executive Vice             |  |      | 2004 |        |  | $     | 151,002 |                             | $ | 48,500                   |  | $                
|President / CFO            |  |      | 2003 |        |  | $     | 145,255 |                             | $ | 45,000                   |  | $                

1)    
          In addition to the salary and bonus described above, Mr. Roche and Mr. Caspers
          are provided with Other Annual Compensation, which includes the
          value of the excess life insurance cost, individual LTD plan, sold vacation, and
          Company match of the 401(k) plan. The company has a policy whereby Supervisory,
          Professional and Management employees are required to maintain their vacation
          and floating holiday hour combined balance at two hundred and forty (240) hours
          or less. While not encouraged, the cash optioning of vacation and floating
          holiday accrued hours is allowable. Employees with account balances in excess of
          240 hours may elect to cash option up to fifty percent (50%) of the number of
          hours exceeding 240. Employees at or below the 240 hour limit may elect to cash
          option fifty percent (50%) of their combined vacation and floating holiday
          annually accrued hours.

47

---

Management
employees are eligible for performance bonuses, which are partially based upon on the
performance of the Company and partially on achievement of certain management performance
objectives. The President/CEO determines those performance objectives for officers and
significant other management employees of the Company and the Board of Directors
determines performance objectives for the President/CEO. If minimum Company performance is
not achieved in any given year (that performance based upon returns to the Companys
shareholders), performance bonuses are not paid to employees.

On
a periodic basis, the Company undertakes a compensation review study to determine that its
employees compensation is commensurate with responsibilities of the various Company
positions, and that the compensation is equitable between jobs within the Company and
externally competitive with other comparable jobs and responsibilities within the
Companys geographic region. A national compensation consultant, Hay Management
Consultants, performs the compensation review study. This study is made of all management
employees, including the president, and non-union employees. In June of 2005 the company
instituted a salary range shift. From time to time individual employees have had a restudy
based upon changes in their areas of responsibilities.

2)    
          Mr. Roche became eligible for payments into a supplemental executive retirement
          plan upon his completion of one year of service. The Company recorded
          obligations of $32,000, $15,731, and $16,278 for the fiscal years ended August
          31 2005, 2004, and 2003, respectively. No obligation was recorded in his first
          year of eligibility, which was the fiscal year ended August 31, 2002. See the
          section below on Retirement Plans for further details on the supplemental
          executive retirement plan.

# Retirement Plans

Management
employees are also eligible to participate in the Companys defined benefit
retirement plan as well as its 401(k) retirement savings plan, each of which are described
below.

The
Company has established a noncontributory, defined benefit retirement plan, which is
available to all eligible employees of the Company. The benefits of the plan are funded by
periodic contributions by the Company to a retirement trust that invests the contributions
and earnings from such contributions to pay benefits to employees. The plan provides for
the payment of a monthly retirement benefit determined under a formula based on years of
service and each employees compensation level. See Executive Compensation
 Qualified Benefits Table. Benefits are paid to the employees upon reaching
early (age 55 or older) or normal (age 65) retirement age. The plan also provides for the
payment of certain disability and death benefits.

48

---

The
Company maintains a Section 401(k) retirement savings plan that permits employees to elect
to set aside, on a pre-tax basis, a portion of their gross compensation in trust to pay
future retirement benefits. The Company provides a matching contribution of 100% of each
employees first 4% of compensation that is set aside under the plan. The amounts set
aside by each employee and the Company vests immediately and are paid to each employee
upon the happening of certain events, all as more fully described in the master plan
document. Federal law limited employee pre-tax income contributions to $14,000 in calendar
year 2005 ($15,000 for 2006) for each participating employee age 49 and under, and $18,000
for each participating employee age 50 and older ($20,000 for 2006). Benefits under the
401(k) plan begin to be paid to the employee: (i) upon the attainment of normal retirement
age (65), or if the employee chooses, any time after attaining early retirement date (age
55); (ii) the date the employee terminates employment with the Company; or (iii) a
pre-retirement distribution equal to the value of the employees 401(k) account, provided
the employee has attained age 59 1/2 and provided a written consent of the spouse (if
married). Effective September 1, 1996 certain executive employees of the Company became
eligible to participate in a Supplemental Executive Retirement Plan. The
Companys Board of Directors adopted that plan on January 21, 1997. Subject to the
discretion of the Board of Directors, the plan provides for the Company to credit to the
account of each executive eligible to participate in the Supplemental Plan amounts equal
to the difference between the benefits actually payable to the executive under the
provisions of the defined benefit retirement plan and the amounts which would have been
payable under the defined benefit retirement plan if certain provisions of the Internal
Revenue Code did not prohibit the payment of such benefits.

# Qualified Benefits Table

The
following table reflects the estimated annual benefits payable to a fully-vested executive
officer of the Company under the defined benefit retirement plan upon retirement at age
65, after 15, 20, 25, 30, and 35 years of annual service at the compensation levels set
forth hereon:

| 
|-
|
| 
|
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 
|$
| 

| | Mr. Roche has 4 years of service under the plan.Mr. Caspers has 31 years of
service under the plan.
| | ---------------------------------------------------------------------------------------------------

49

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|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- |  | --------------------------------------------------------------

The
following table presents certain information with respect to the ownership of shares of
preferred stock as of November 3, 2005, by each director. Each shareholder has direct
ownership with respect to the share shown as beneficially owned, except as otherwise
indicated in a footnote. To the Companys knowledge, as of November 3, 2005, no
person owned beneficially more than 5% of the Companys outstanding shares and none
of the principal officers listed above owned any such shares.

|Name                  |  | Position with Company |  | No. of Shares |  | % of Shares 
|--------------------- |  | --------------------- |  | ------------- |  | ------------
|Brent Davison (4)     |  | Director              |  | 1,200         |  | 1.7%        
|Douglas Etten         |  | Director              |  | 450           |  | less than 1%
|Michael Hasbargen     |  | Director              |  | 375           |  | less than 1%
|Dennis Butenhoff (5)  |  | Director              |  | 185           |  | less than 1%
|Russell Mauch (1)     |  | Director              |  | 474           |  | less than 1%
|Dennis Klosterman (6) |  | Director              |  | 235           |  | less than 1%
|Charles Steiner (3)   |  | Director              |  | 380.5         |  | less than 1%
|Paul Summer (2)       |  | Director              |  | 222           |  | less than 1%
|Alton Theede          |  | Director              |  | 325           |  | less than 1%
|All Directors         |  |                       |  | 3,846.5       |  | 5.33%       

|1) |  | Mr.
Mauchs shares are held and grown under the name of RCM Limited Partnership.
|-- |  | --------------------------------------------------------------------------------

|2) |  | Mr.
Summers shares are grown under the name of P V Unlimited Corp.
|-- |  | -------------------------------------------------------------------

50

---

|3) |  | Mr.
Steiners shares are held and grown under the name of Steiner and Sons
          Limited Partnership.
|-- |  | ---------------------------------------------------------------------------------------------------------

|4) |  | Mr.
Davisons shares are held and grown under the name of Agassiz Sugarbeet
          Limited Partnership.
|-- |  | ----------------------------------------------------------------------------------------------------------

|5) |  | Mr.
Butenhoff also has partial ownership of Butenhoff Potato Co. which owns an
          additional 370 shares.
|-- |  | ---------------------------------------------------------------------------------------------------------------

|6) |  | Mr.
Klostermans shares are grown under the name of Klosterman Bros, LLP.
|-- |  | -------------------------------------------------------------------------

|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- |  | ----------------------------------------------

Each
of the Companys directors is also a sugarbeet grower or a shareholder member or
representative of a shareholder member. By virtue of their status as such members of the
Company, each director or the member he represents sells sugarbeets to the Company and
receives payments for those sugarbeets. Such payments for sugarbeets often exceed $60,000.
However, such payments are received by the directors, or the entities they represent, on
exactly the same basis as payments are received by other members of the Company for the
delivery of their sugarbeets. Except for the sugarbeet sales described in the preceding
sentences, none of the directors or executive officers of the Company have engaged in any
other transactions with the Company involving amounts in excess of $60,000.

|ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- |  | --------------------------------------

| | 1.    Audit
Fees  paid to the Companys principal accountant for the audit of annual
financial statements and review of financial statements included in Forms 10-Q during the
fiscal year ended August 31, 2005 totaled $78,184 (including a $5,000 progress billing
for the 2005 audit) and $70,875 for the fiscal year ended August 31, 2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.    Audit Related Fees  none
| | -------------------------------

| | 3.    Tax Fees  paid to the Companys principal
accountant for professional services rendered for tax compliance, tax advice,
and tax planning totaled $18,660 for fiscal year ended August 31, 2005 and
$12,850 for the fiscal year ended August 31, 2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.    All Other Fees  paid to the Companys
principal accountant for services other than detailed in Items 1 thru 3 above
total $13,200 for the fiscal year ended August 31, 2005 and $11,150 for the
fiscal year ended August 31, 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.    It is part of the audit committees duties to
appoint, compensate, and oversee the engagement of, retention, or replacement
of, the independent auditors who audit the financial statements of the Company
and its subsidiaries. The audit committee approves all audit services to be
performed by the independent auditor. The committee ensures that the independent
auditor is not engaged to perform any non-audit services that are considered
prohibited activities by the Sarbanes-Oxley Act.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

51

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| | The audit committee approves 100% of the services described in items 1 thru 4 above.
| | ------------------------------------------------------------------------------------

| | 6.    The percentage of hours expended on the principal
accountants engagement to audit the Companys financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountants full-time, permanent
employees is zero.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# PART IV.

|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
|-------- |  | ---------------------------------------------------------------

|ITEM 15(a) |  | FINANCIAL STATEMENT SCHEDULES
|---------- |  | -----------------------------

| | None
| | ----

|ITEM 15(b) |  | REPORTS ON FORM 8-K
|---------- |  | -------------------

The Company filed the following
reports on form 8-K:

October 27, 2005: Minn-Dak
Farmers Cooperative (the Company) has announced that its board of directors has reviewed
and approved the 2005-crop business plan. The 2005-crop business plan, based upon 99.5% of
the 2005-crop harvest being completed, provided a beet payment to shareholder / growers of
approximately $35.75 per ton of harvested beets (13.0350 cents per pound of extractible
sugar). Upon completion of the harvest the Company anticipates that the business plan will
yield a beet payment to shareholder / growers of approximately $36.00 per ton (13.0587
cents per pound of extractible sugar), based upon the current estimated yield of 1,810,000
tons of beets.

October 14, 2005: Minn-Dak
Farmers Cooperative has announced that the board of directors, following the completion of
the 2005 fiscal year audit, has approved the final payment for the 2004 crop of $35.96 per
ton of beets harvested (12.598566 cents per pound of sugar). The Board of Directors has
also declared and allocated to shareholders of record, for the 2004 crop, non-qualified
allocated patronage totaling $5,191,808 or $2.26 per ton of beets harvested.

July 22, 2005: During a series
of shop meetings held during the week of July 18, 2005 Minn-Dak Farmers
Cooperative announced to the growers and shareholders in attendance its disappointment in
the development of the 2005 crop of sugarbeets. It has become clear the excessive rainfall
during May and June, 2005 has damaged the crop significantly. Although difficult to
accurately estimate at this time, it is possible the total tonnage of sugarbeets harvested
from the 2005 crop could be 30-40% less versus last years sugarbeet tonnage of 2.29
million tons. If this reduced level of volume is realized it will be difficult for the
Company to achieve a per ton payment, for the 2005 crop, equal to or exceeding the
estimated 2004 crop payment of $35.02 per ton of sugarbeets delivered.

52

---

June 28, 2005: On June
28th the Company renewed, through 5-31-06, the seasonal and term lines of
credit with its primary lender Co-Bank. This renewal contained substantially the same
terms and conditions as the expiring seasonal and term lines of credit agreement with
Co-Bank.

May 17, 2005: On May 16, 2005,
Minn-Dak Farmers Cooperatives Board of Directors modified the planting level for the
2005 crop to 148% of base acres plus a 2% measuring tolerance for a total planting of 150%
of base acres. The Board had first established plantings for the 2005 crop at 143% of base
acres plus 2% measuring tolerance in February 2005.

May 17, 2005: The
Companys Primary Lender has administratively extended the Companys loan
agreements, which were due to be renewed on 6-1-05, for a period of 30 days. This
extension is not the result of difficulties with the Companys loan renewal, rather
it was requested by the Lender in order to allow it to more efficiently direct its
resources to objectives of a more immediate nature. No action by the Companys
management or its Board of Directors was required by the Lender for this extension. Other
than a new loan maturity date, all terms and conditions of the extended loan agreements
remained the same.

October 29, 2004: Minn-Dak
Farmers Cooperative has announced that the board of directors, following the review and
approval of the 2004-crop business plan, has determined that the beet payment estimate for
the 2004-crop will be $35.02 per ton of harvested beets (12.338768 cents per pound of
sugar).

October 15, 2004: Minn-Dak
Farmers Cooperative has announced that the board of directors, following the completion of
the 2004 fiscal year audit, has approved the final payment for the 2003 crop of $45.08 per
ton of beets harvested (13.918882 cents per pound of sugar). The Board of Directors has
also declared and allocated to shareholders of record, for the 2003 crop, non-qualified
allocated patronage totaling $5,128,308 or $2.26 per ton of beets harvested.

53

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|ITEM 15(c) |  | EXHIBITS
|---------- |  | --------

|Index |  | 
|----- |  | 

|** 3 | (i) |  | Articles
of Amendment to the Articles of Incorporation of Minn-Dak Farmers Cooperative
|---- | --- |  | --------------------------------------------------------------------------------------

|* 3 | (ii) |  | Articles
of Incorporation of Minn-Dak Farmers Cooperative
|--- | ---- |  | ---------------------------------------------------------

|*** 3 | (iii) |  | Amended Bylaws of Minn-Dak Farmers Cooperative
|----- | ----- |  | ----------------------------------------------

|*****10 | (a) |  | Growers Agreement
(three-year Agreement) (example of agreement which each Shareholder is required to sign)
|------- | --- |  | -----------------------------------------------------------------------------------------------------------

|****10 | (b) |  | Uniform
Member Marketing Agreement by and between United Sugars Corporation
and Minn-Dak Farmers Cooperative
|------ | --- |  | ------------------------------------------------------------------------------------------------------------

|*10 | (d) |  | Capitalization
Agreement by and among Southern Minnesota Beet Sugar Cooperative, Minn-Dak
Farmers Cooperative, American Crystal Sugar Company, and United Sugars
Corporation
|--- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*10 | (e) |  | Memorandum
of Understanding and Uniform Member Agreement by and between Midwest
Agri-Commodities Company and Minn-Dak Farmers Cooperative
|--- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|*10 | (f) |  | Molasses
Purchase Contract by and between Minn-Dak Farmers Cooperative and Universal
Foods Corporation (Confidential Treatment for certain sections)
|--- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

|*10 | (g) |  | Yeast
Purchase Contract by and between Universal Foods Corporation and Minn-Dak Yeast
Company, Inc. (Confidential Treatment for certain sections)
|--- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|*10 | (k) |  | Agreement
for Electrical Service
|--- | --- |  | --------------------------------

|**10 | (l) |  | Agreements
for Coal Supply, Transportation, and Oiling Service (Confidential Treatment
Requested as to certain provisions)
|---- | --- |  | --------------------------------------------------------------------------------------------------------------------------

|*10 | (m) |  | Minn-Dak
Farmers Cooperative Pension Plan
|--- | --- |  | -----------------------------------------

|*10 | (o) |  | Management
Consulting Agreement between Minn-Dak Yeast Company and Universal Foods
Corporation, (Confidential Treatment for certain sections)
|--- | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

|***10 | (p) |  | Amendment
to Minn-Dak Farmers Cooperative Pension Plan
|----- | --- |  | ------------------------------------------------------

|****10 | (q) |  | Amendment
to Minn-Dak Farmers Cooperative Pension Plan
|------ | --- |  | ------------------------------------------------------

|****10 | (r) |  | David
H. Roche Employment Agreement
|------ | --- |  | -----------------------------------

|12 |  |  | Statement
re Computation of Ratio of Net Proceeds to Fixed Charges
|-- |  |  | ------------------------------------------------------------------

|*21 |  |  | Subsidiaries
of the Registrant
|--- |  |  | ------------------------------

|31.1 |  |  | Certification
of the President/Chief Executive Officer in accordance with Section 302 of the
                  Sarbanes-Oxley Act.
|---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------

|31.2 |  |  | Certification of the Executive Vice President/Chief Financial Officer in accordance with
Section 302 of the Sarbanes-Oxley Act.
|---- |  |  | -------------------------------------------------------------------------------------------------------------------------------

|31.3 |  |  | Certification
of the Controller/Chief Accounting Officer in accordance with Section 302 of the Sarbanes-Oxley
Act.
|---- |  |  | ------------------------------------------------------------------------------------------------------------------

|32 |  |  | Certification
of the President/Chief Executive Officer and the Executive Vice President/Chief Financial
Officer in accordance with Section 906 of the Sarbanes-Oxley Act.
|-- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*****99.1 |  |  | Audit
Committee Charter.
|--------- |  |  | ------------------------

54

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*         Incorporated by reference from the
Companys Registration Statement on Form S-1 (File No. 33-94644), declared effective
September 11, 1995.

**       Incorporated by reference from the
Companys Annual Report on Form 10-K for the fiscal year ended August 31, 1996 as
filed on November 21, 1996.

***     Incorporated by reference from
the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 1997 as
filed on November 25, 1997.

****   Incorporated by reference from
the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 1998 as
filed on November 24, 1998.

***** Incorporated by reference from
the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2003 as
filed on November 26, 2003.

55

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# SIGNATURES

PURSUANT
TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.

| | MINN-DAK FARMERS COOPERATIVE
| | ----------------------------
|
|
| |                             
| | DAVID H. ROCHE, PRESIDENT   
| | AND CHIEF EXECUTIVE OFFICER 

PURSUANT
TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON
THE DUTIES INDICATED.

|SIGNATURE               |  | TITLE                        |  | REPORT DATE
|----------------------- |  | ---------------------------- |  | -----------
|                       
|/s/   David H. Roche    |  | President and                |  | 11-29-05   
|                        |  | Chief Executive Officer      |  |            
|David H. Roche          | 
|                       
|/s/   Steven M. Caspers |  | Executive Vice President and |  | 11-29-05   
|                        |  | Chief Financial Officer      |  |            
|Steven M. Caspers       | 
|                       
|/s/   Allen E. Larson   |  | Controller and               |  | 11-29-05   
|                        |  | Chief Accounting Officer     |  |            
|Allen E. Larson         | 
|                       
|/s/   Dennis Butenhoff  |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Dennis Butenhoff        | 
|                       
|/s/   Brent Davison     |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Brent Davison           | 
|                       
|/s/   Doug Etten        |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Doug Etten              | 
|                       
|/s/   Michael Hasbargen |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Michael Hasbargen       | 
|                       
|/s/   Dennis Klosterman |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Dennis Klosterman       | 
|                       
|/s/   Russell Mauch     |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Russell Mauch           | 
|                       
|/s/   Charles Steiner   |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Charles Steiner         | 
|                       
|/s/   Paul Summer       |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Paul Summer             | 
|                       
|/s/   Alton Theede      |  | Director                     |  | 11-29-05   
|                        |  |                              |  |            
|Alton Theede            | 

56

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