U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: December 31, 2000.

             [_] Transition Report Under Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
         For the transition period from ______________ to ______________

                         Commission file number: 0-26525

                              BREDA TELEPHONE CORP.
                 (Name of small business issuer in its charter)

                Iowa                                        42-0895882
   (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                       Identification No.)

 Highway 217 East, P.O. Box 190, Breda, Iowa                    51436
   (Address of principal executive offices)                   (Zip Code)
Registrant's telephone number: (712) 673-2311

Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, no par value
                                (Title of class)

     Check whether the registrant (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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.  Yes [X] No
[_]

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  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-KSB
or any amendment to this Form 10-KSB. [X]

     State registrant's revenues for its most recent fiscal year: $6,052,154

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates:  $8,610,165, as of March 1, 2001. The registrant's stock
is not listed on any exchange or otherwise publicly traded, and the value of the
registrant's  stock for this  purpose has been based upon the  current  $235 per
share redemption  price of the registrant's  stock as determined by its board of
directors.  In determining  this figure,  the registrant has assumed that all of
its directors and officers and its chief operations  officer and chief financial
officer are affiliates,  but this assumption shall not apply to or be conclusive
for any other purpose.

     State the number of shares outstanding of each of the registrant's  classes
of common equity,  as of the latest  practicable  date:  37,029 shares of common
stock, no par value, at March 1, 2001.

     Transitional Small Business Disclosure Format: Yes [_] No [X]


<PAGE>

Cautionary Statement on Forward Looking Statements.

     Certain  statements in this annual report,  including  statements in Item 1
and Item 6, contain forward  looking  statements that involve and are subject to
various  risks,  uncertainties  and  assumptions.   Forward  looking  statements
include,  but are not limited to, statements with respect to anticipated  future
trends in revenues and net income,  projections  concerning  operations and cash
flow, growth and acquisition  opportunities,  management's  plans and intentions
for the future, and other similar forecasts and statements of expectation. Words
such  as  "expects,"   "estimates,"  "plans,"   "anticipates,"   "contemplates,"
"predicts," "intends," "believes," "seeks," "should," "thinks," "objectives" and
other similar expressions or variations thereof are intended to identify forward
looking statements.  Forward looking statements made by Breda and its management
are based on estimates,  projections,  views,  beliefs and  assumptions  made or
existing at the time of such statements and are not guarantees of future results
or  performance.  Breda disclaims any obligation to update or revise any forward
looking  statements based on the occurrence of future events, the receipt of new
information, or otherwise.

     Actual future performance,  outcomes and results may differ materially from
those expressed in forward looking statements as a result of numerous and varied
risks, uncertainties and assumptions, nearly all of which are beyond the control
of Breda and its management.  The risks, uncertainties and assumptions affecting
forward looking statements include, but are not limited to:

     o    the possible adverse effects to Breda and its  subsidiaries  which may
          arise  under  the  regulations  which  will be  promulgated  under the
          Telecommunications Act of 1996, including increased competition;

     o    adverse changes by the Federal Communications  Commission in the rates
          of  the  access   charges  that  can  be  charged  by  Breda  and  its
          subsidiaries to long distance carriers;

     o    technological  advances in the telecommunications and cable industries
          which may replace or otherwise  adversely affect in a material way the
          existing technologies utilized by Breda and its subsidiaries;

     o    employee relations;

     o    management's business strategies;

     o    general  industry   conditions,   including   consolidations   in  the
          telecommunications and cable industries;

     o    general  economic  conditions  at the  national,  regional  and  local
          levels;

     o    acts or omissions of competitors and other third parties;

     o    changes in or more governmental laws, rules, regulations or policies;

     o    reductions in or other changes to governmental  programs  assisting or
          affecting  the  telecommunications   and  cable  industries,   and  in
          particular  programs  which aid  providers of those  services to rural
          areas; and

     o    continued availability of financing, and on favorable terms.


                                       (i)

<PAGE>

                                     PART I

Item 1. Description of Business.

     General.

     Breda Telephone Corp. is an Iowa corporation with its principal  offices in
     Breda,  Iowa.  Breda was  incorporated  in 1964 to provide local  telephone
     services to Breda, Iowa and the surrounding rural area.

     Breda's principal business is still providing telephone services. Telephone
     services are also now provided by two of Breda's wholly owned subsidiaries,
     Prairie Telephone Company, Inc. and Westside Independent Telephone Company.
     A total of seven Iowa towns and their  surrounding  rural  areas  currently
     receive  telephone  services  from  Breda,  Prairie  Telephone  or Westside
     Independent.

     Prairie Telephone is an Iowa corporation that was incorporated in 1968.

     Westside  Independent is an Iowa corporation that was incorporated in 1957.
     Breda  acquired the stock of Westside  Independent in June,  1998.  Breda's
     acquisition of Westside Independent is discussed below.

     Another of Breda's wholly owned subsidiaries, Tele-Services, Ltd., provides
     cable  television  services  to  eighteen  towns  in Iowa  and one  town in
     Nebraska.  Tele-Services  is an Iowa  corporation.  It was  incorporated in
     1983.

     Westside   Communications,   Inc.   was  a  wholly  owned   subsidiary   of
     Tele-Services  that provided cable  television  services to two Iowa towns.
     Westside  Communications was dissolved  effective December 2, 1999, and all
     of its assets were  transferred to, and all of its liabilities were assumed
     by, Tele-Services at that time. The dissolution of Westside  Communications
     and the transfer of its assets to  Tele-Services  and the assumption of its
     liabilities by  Tele-Services  did not have any material  adverse effect on
     the operations or financial condition of Tele-Services. The dissolution was
     effectuated  primarily for  administrative  convenience.  Tele-Services had
     acquired the stock of Westside Communications in June, 1998. Tele-Services'
     acquisition of Westside Communications is discussed below.

     Breda's and its subsidiaries' telephone and cable television businesses are
     discussed in more detail below.  Some of the other  miscellaneous  business
     operations of Breda and its subsidiaries are also briefly discussed below.

<PAGE>

     Local Exchange Carrier Services.

     Breda,   Prairie  Telephone  and  Westside  Independent  provide  telephone
     services  to the  following  seven Iowa towns and their  surrounding  rural
     areas:

          o    Breda, Iowa                   o    Pacific Junction, Iowa
          o    Lidderdale, Iowa              o    Yale, Iowa
          o    Macedonia, Iowa               o    Westside, Iowa.
          o    Farragut, Iowa

     Breda  provides  services  to  Breda,  Lidderdale  and  Macedonia.  Prairie
     Telephone  provides  services  to  Farragut,  Pacific  Junction  and  Yale.
     Westside Independent  provides services to Westside.  The surrounding rural
     areas that are served are those within  approximately a ten mile to fifteen
     mile radius of each of the towns.

     All of the towns are in central and southern Iowa.

     The primary  services  provided by Breda,  Prairie  Telephone  and Westside
     Independent  are providing  their  subscribers  with basic local  telephone
     service  and access  services  for long  distance  calls  outside the local
     calling  area.  As of December  31, 2000,  they were serving  approximately
     2,714 telephone numbers and related access lines. Breda,  Prairie Telephone
     and Westside  Independent  derive their  principal  revenues from providing
     these services.

     They also provide other telephone related services.  For example, they sell
     and lease telephone  equipment to their subscribers,  provide inside wiring
     and  other   installation,   maintenance   and  repair  services  to  their
     subscribers, and provide custom calling services to their subscribers. They
     also derive  revenues from providing  billing and  collection  services for
     some long  distance  carriers  for the long  distance  calls  made by their
     subscribers.

     Breda,  Prairie  Telephone  and  Westside  Independent  are all  subject to
     regulation by the Iowa Utilities Board (IUB).  They operate their telephone
     businesses  pursuant  to  certificates  and various  rules and  regulations
     promulgated by the IUB.  Although not  anticipated to occur,  the IUB could
     terminate their right to provide services if they fail to comply with those
     rules and regulations.

     As indicated above, the IUB regulates or has the authority to regulate many
     aspects  of  Breda's,   Prairie  Telephone's  and  Westside   Independent's
     telephone businesses. The material areas of regulation are as follows:

     o    Breda,  Prairie  Telephone  and  Westside  Independent  are treated as
          "service  regulated"  telephone companies by the IUB, which means that
          they must comply with the IUB's rules and  regulations  regarding  the
          quality of the services and facilities  provided to


                                       2
<PAGE>

          subscribers.  The regulations  establish  minimum standards of quality
          for the services and facilities  provided by Breda,  Prairie Telephone
          and Westside Independent.  Their existing services and facilities meet
          those  standards.  The  regulations  also require them to maintain and
          repair their existing  facilities as necessary in order to continue to
          meet at least those minimum standards.  The regulations also establish
          time  frames  within  which  Breda,  Prairie  Telephone  and  Westside
          Independent   must  respond  to  requests  for  services   from  their
          subscribers.  The  regulations  can be amended to increase the minimum
          standards or to require that additional  services be made available to
          subscribers.  Past amendments have not,  however,  caused any material
          difficulties for Breda, Prairie Telephone or Westside Independent.

     o    The IUB must approve of any expansion in the  telephone  service areas
          currently served by Breda, Prairie Telephone and Westside Independent.
          The primary factors that will be considered by the IUB in the event of
          a request  for an  expansion  will be the  managerial,  financial  and
          technical   abilities   of  Breda,   Prairie   Telephone  or  Westside
          Independent,  as the  case  may be.  Although  they do not  anticipate
          material difficulties in the event of any proposed expansion, there is
          no assurance that any future  proposed  expansion in the service areas
          of Breda,  Prairie Telephone or Westside  Independent will be approved
          by the IUB.  (FCC  approval  for any proposed  expansion  will also be
          necessary, as discussed below.)

     o    The  IUB  has  designated   Breda,   Prairie  Telephone  and  Westside
          Independent   as   "eligible   telecommunications    carriers."   This
          designation  allows them to receive  the  universal  services  funding
          component of the support payment  funding program  administered by the
          Federal  Communications  Commission.   Breda,  Prairie  Telephone  and
          Westside  Independent were able to obtain the designation because they
          are rural  telephone  providers.  Although not  anticipated  to occur,
          their designation as an eligible  telecommunications  carrier could be
          lost if they fail to provide the services  supported by the  universal
          services program, and the loss of the designation would result in them
          no longer  being able to receive  universal  services  funding.  Those
          services  are,  however,  currently  only the  basic  local  telephone
          services   provided  by  Breda,   Prairie   Telephone   and   Westside
          Independent. This designation therefore does not materially affect the
          operation of their businesses, and the designation was obtained solely
          because it was necessary in order to be eligible to receive  universal
          services  funding.  They  received,  in the  aggregate,  approximately
          $83,814 in universal  services  funding in 1998,  $79,680 in 1999, and
          $85,223  in  2000.  Breda  anticipates  receiving  universal  services
          funding in 2001 in an amount comparable to that received in 2000.

     o    Breda,  Prairie  Telephone  and  Westside  Independent  are  currently
          treated as rural telephone companies under the  Telecommunications Act
          of 1996,  which generally means that they may be exempted from some of
          the duties  imposed on other  telephone  companies  that might make it
          easier for potential competitors to compete with those companies.  The
          IUB may withhold this exemption,  however,  if it finds that a request
          by a potential  competitor for interconnection  with Breda's,  Prairie
          Telephone's   or  Westside   Independent's   networks  is  not  unduly
          economically


                                       3
<PAGE>

          burdensome,  is not technically  unfeasible,  and would not affect the
          provision  of  universal  service.  It is not  possible to  accurately
          predict  whether a  competitor  will ever request  interconnection  or
          whether the request  would be granted by the IUB. If a request is made
          and  the  IUB  withholds  this  exemption,   however,  Breda,  Prairie
          Telephone and Westside Independent would face competition in providing
          telephone services that they have not faced in the past.

     Breda,  Prairie  Telephone  and  Westside  Independent  are also subject to
     regulation by the Federal Communications  Commission. The material areas of
     regulation by the FCC are as follows:

     o    The FCC  regulates  the amount of the access  charge rates that can be
          charged by Breda,  Prairie  Telephone  and  Westside  Independent  for
          interstate  long  distance  calls.   The  National   Exchange  Carrier
          Association has been delegated some authority by the FCC regarding the
          regulation  of access charge  rates,  but all changes  proposed by the
          National Exchange Carrier Association must be approved by the FCC. The
          regulation of access charge rates is an area of particular  concern to
          Breda,  Prairie Telephone and Westside  Independent,  and is discussed
          below and in the "Overview" section in Item 6 of this annual report.

     o    The FCC must approve of any expansion in the  telephone  service areas
          currently served by Breda, Prairie Telephone and Westside Independent.
          The primary factors that will be considered by the FCC in the event of
          a request  for an  expansion  will be the  managerial,  financial  and
          technical   abilities   of  Breda,   Prairie   Telephone  or  Westside
          Independent, as the case may be, and the antitrust implications of the
          expansion.  Although they do not anticipate any material  difficulties
          in the event of any proposed expansion, there is no guarantee that any
          future  proposed  expansion  in the  service  areas of Breda,  Prairie
          Telephone or Westside Independent will be approved by the FCC.

     o    The FCC regulates the amount of support  payment  funding that will be
          received by Breda, Prairie Telephone and Westside Independent. The FCC
          does so  primarily  by  targeting  how  the  support  payment  funding
          received  from the  National  Exchange  Carriers  Association  and the
          Universal Service  Administrative  Company will be allocated among the
          various  possible  recipients of the funding.  The allocation may vary
          from  year to year  depending  on the FCC's  determination.  It is not
          possible to  accurately  predict how the FCC will allocate the support
          payment funding in any year, but the amount of support payment funding
          received by Breda,  Prairie  Telephone and Westside  Independent  will
          vary from year to year. For example,  Breda,  Prairie  Telephone,  and
          Westside Independent received,  in the aggregate,  $538,818 in support
          payment funding in 1998, $404,136 in 1999, and $410,279 in 2000. Those
          amounts include the amount of the universal services funding


                                       4
<PAGE>

          component which is listed in the above  discussion  regarding the IUB.
          Various  aspects  of  support  payment  funding  may be  redefined  or
          otherwise  affected if the Multi-Association Group Plan is adopted  by
          the FCC. The proposed plan is discussed  below in Item 6 in Part II of
          this annual report.

     The  regulation of access charge rates is an area of particular  concern to
     Breda,  Prairie  Telephone and Westside  Independent  because they derive a
     substantial  amount of their overall  revenues from access charge revenues.
     They receive access charge revenues from long distance carriers  (sometimes
     referred to in the  telephone  industry  as  "inter-exchange  carriers"  or
     "IXCs") for providing  intrastate and interstate exchange services to those
     long distance  carriers.  In more basic terms,  they receive  access charge
     revenues for originating and terminating  long distance calls made by their
     subscribers.  The access  charge  rates that can be charged for  interstate
     long  distance  calls is  determined  by the FCC.  The FCC can change those
     rates at any time,  and recent  changes have lowered  access  charge rates.
     Breda  anticipates  that there may be further  reductions  in access charge
     rates over the next several years. Since access charge revenues  constitute
     a  substantial  portion  of  Breda's,   Prairie  Telephone's  and  Westside
     Independent's  total revenues,  this is an area of material risk to them. A
     further discussion of this issue is found in the "Overview" section in Item
     6 of this annual report.

     Breda, Prairie Telephone and Westside Independent each have agreements with
     Iowa  Network  Services.  Under those  agreements,  Iowa  Network  Services
     provides Breda,  Prairie Telephone and Westside  Independent with the lines
     and services  necessary  for them to provide  their  telephone  subscribers
     with, among other things, caller ID services


                                       5
<PAGE>

     and what is sometimes referred to in the telephone industry as "centralized
     equal  access." As a  practical  matter,  that access is what allows  their
     subscribers to choose long distance carriers.  Breda's, Prairie Telephone's
     and  Westside  Independent's  telephone  systems are tied into Iowa Network
     Services' fiber optic network and switches.  Although it is not anticipated
     to occur, if their  agreements with Iowa Network  Services were terminated,
     it  would be  difficult  for them to find a  replacement  for Iowa  Network
     Services,  and it would be  costly  for  them to  internalize  all of those
     services.  Prairie Telephone and Westside Independent are each shareholders
     of Iowa Network Services.  Prairie Telephone and Westside  Independent each
     currently own less than 1% of Iowa Network Services' outstanding stock.

     Telephone  services  providers like Breda,  Prairie  Telephone and Westside
     Independent are subject to competition from other providers. As a result of
     the  Telecommunications  Act of 1996,  telephone  companies  are no  longer
     afforded exclusive franchise service areas. Under that Act, competitors can
     now offer telephone services to Breda's,  Prairie  Telephone's and Westside
     Independent's  subscribers,  and also  request  access  to their  lines and
     network  facilities  in  order to offer  any  type of  service  that can be
     provided  through those lines and  facilities.  The Act  contemplates  that
     various  regulations  will be promulgated  by the FCC and state  regulatory
     agencies to implement various parts of the Act, such as regulations setting
     out  the  procedures  and  methodologies  for  implementing  and  promoting
     competition in the telephone industry.  Some of those regulations had still
     not been  finalized at the time of the  preparation  of this annual report,
     and some legal and court  actions  have been taken by some  regulators  and
     others in the telephone  industry  challenging  some aspects of some of the
     proposed regulations and procedures. Until those regulations are finalized,
     it is not  possible to predict how the  Telecommunications  Act of 1996 may
     affect Breda,  Prairie Telephone,  Westside Independent and their telephone
     businesses. The regulations could, however, have a material adverse effect,
     and the Act does open up Breda,  Prairie Telephone and Westside Independent
     to competition that they were not subject to in the past.

     There  are  numerous  telephone  companies  which  have  filed  to  provide
     telephone services throughout all of Iowa. If any of those companies choose
     to provide  service in any of  Breda's,  Prairie  Telephone's  or  Westside
     Independent's  service  areas,  there would be a reduction  in revenue.  To
     date, however, no company has chosen to compete in any of Breda's,  Prairie
     Telephone's or Westside  Independent's  service areas.  Breda does not know
     the plans of any companies, but Breda currently believes the possibility of
     any  company  entering  any of those  service  areas in the near  future is
     small.

     Although  competition is permitted,  Breda,  Prairie Telephone and Westside
     Independent  currently do not, as indicated above, have direct  competition
     in providing basic local telephone service in their existing service areas.
     They do, however,  experience  competition in providing access services and
     other  services to long distance  carriers.  For example,  they  experience
     competition  in  providing  access  services for long  distance  when their
     subscribers use private line  transport,  switched voice and data services,
     microwave,  or cellular or personal communications service. In those cases,
     the


                                       6
<PAGE>

     subscriber  is  not  using   Breda's,   Prairie   Telephone's  or  Westside
     Independent's networks or switches, so they cannot charge access charges to
     the  long  distance  carrier.   Various  other  competitors  and  forms  of
     competition  are  also  likely  to  arise in the  future  as  technological
     advances occur in the telecommunications and cable industries.

     Some of the  cellular  ventures  in  which  Breda,  Prairie  Telephone  and
     Westside  Independent  have  invested  provide  cellular  services  in  the
     telephone  exchange  areas  serviced by them. As indicated in the preceding
     paragraph,  cellular  services are competitive with the telephone  services
     provided by Breda, Prairie Telephone and Westside  Independent.  Breda does
     not  believe,   however,   that   investments  in  cellular   ventures  are
     inconsistent or in conflict with Breda's,  Prairie  Telephone's or Westside
     Independent's  overall business.  Breda also believes those investments are
     one method of attempting to diversify across the various telecommunications
     technologies  which were  available at the time of the  preparation of this
     annual report.

     Revenues  are also  generated  from sales of  cellular  phones and  related
     service  packages.  For example,  Breda has an agency  agreement  with U.S.
     Cellular  which allows Breda to sell cellular  phones to the public.  Breda
     receives  commission  revenues on those sales.  U.S.  Cellular has recently
     notified Breda that it wishes to terminate the agreement  effective May 31,
     2001. U.S. Cellular is, however, also proposing a new agreement.  Breda has
     not yet determined the impact, either positive or negative, of the proposed
     new agreement.  Breda does, however,  currently desire to continue to be an
     agent for U.S. Cellular.

     Breda,   Prairie   Telephone  and  Westside   Independent  also  experience
     competition in providing  billing and collection  services to long distance
     carriers.  The  competition  is from  third  parties  who  provide  similar
     services. The long distance carriers are also starting to provide their own
     billing and collection services, rather than contracting for those services
     with  others  like  Breda,  Prairie  Telephone  and  Westside  Independent.
     Directory  advertising  is also now  subject  to  competition  because  the
     Telecommunications  Act of 1996  prohibits  Breda,  Prairie  Telephone  and
     Westside  Independent  from  requiring  exclusive  listings  in their phone
     books.  Breda,  Prairie  Telephone,   Westside  Independent  and  BTC  face
     competition  in the  sale and  lease of  telephone,  cellular  and  related
     equipment  because there are numerous  competitors  who sell and lease that
     equipment.  (BTC is a  subsidiary  of Prairie  Telephone,  and is discussed
     below.) Breda,  Prairie Telephone,  Westside  Independent and BTC also face
     competition in providing  internet access,  and Breda contemplates that the
     competition in that area will increase.

     For  example,  Breda  has been  experiencing  price-point  competition  for
     Internet  services from Iowa Telecom in three communities since late fourth
     quarter  2000.  Breda had been the sole  provider of  Internet  services in
     those  communities  until that time.  Iowa Telecom  purchased the telephone
     exchanges for those communities in 1999 and began operating them on June 1,
     2000.  In late 2000,  Iowa Telecom  expanded the services  offered in those
     communities  to  include  Internet  services  and at a lower  price than is
     offered  by  Breda.   Breda  has  investigated  and  continues  to  explore
     re-engineering  options and other help-desk and underlying Internet service
     provider options that would reduce Breda's costs in order to allow Breda to
     compete at a lower price point for  Internet  services,  but Breda has lost
     Internet  customers  in  the  three  communities.  Breda's  recent  overall
     Internet  growth has,  however,  remained strong as discussed later in this
     annual report.  Breda is presently also  negotiating,  along with two other
     telecommunication  providers, to purchase an equity interest in an internet
     service provider in order to attempt to lower Breda's  underlying  Internet
     costs.


                                       7
<PAGE>

     The  cellular  ventures in which  Breda,  Prairie  Telephone  and  Westside
     Independent have invested face competition in providing  cellular  services
     and equipment from the various  competitors  offering cellular and personal
     communication services.

     The  competition  in all of the  areas  mentioned  in the  three  preceding
     paragraphs is based primarily on cost, service and experience.

     Broadcast Services.

     Tele-Services  owns  and  operates  the  cable  television  systems  in the
     following eighteen Iowa towns:

     o   Arcadia              o   Grand                o   Oakland
     o   Auburn                   Junction             o   Riverton
     o   Bayard               o   Hamburg              o   Sidney
     o   Breda                o   Lohrville            o   Tabor
     o   Churdan              o   Malvern              o   Thurman
     o   Farragut             o   Neola                o   Treynor
                                                       o   Westside

     Tele-Services  also owns and operates the cable  television  system for the
     town of Beaver Lake, Nebraska.

     As of December 31,  2000,  Tele-Services  was  providing  cable  television
     services to approximately 3,448 subscribers.

     Tele-Services  derives its  principal  revenues from monthly fees which are
     charged  to its cable  subscribers  for basic and  premium  cable  services
     provided to those subscribers.

     Tele-Services  provides  cable  services  to each of the towns  pursuant to
     franchises or agreements with each of those towns. Those various franchises
     or agreements will expire by their terms in the following months:

     o   Arcadia - June, 2009                o   Lohrville - March, 2008
     o   Auburn - January, 2004              o   Malvern - October, 2001
     o   Bayard - May, 2008                  o   Oakland - July, 2001
     o   Beaverlake - December, 2008         o   Riverton - February, 2013
     o   Breda - Year-to-Year Basis          o   Sidney - February, 2005
     o   Churdan - June, 2008                o   Tabor - September, 2001
     o   Farragut - January, 2009            o   Thurman - February, 2013
     o   Grand Junction - May, 2008          o   Treynor - October, 2022
     o   Hamburg-Year-to-Year Basis          o   Westside - June, 2009


                                       8
<PAGE>

     Tele-Services  does not anticipate that any of its franchises or agreements
     will be terminated before the above normal expiration dates.  Tele-Services
     also  hopes to be able to renew or  extend  the  franchises  or  agreements
     before they expire,  but no assurance  can be given that any  franchises or
     agreements can or will be renewed or extended.

     The  termination of a franchise or agreement  would allow that town to deny
     Tele-Services  access to its cables for maintenance and services  purposes.
     This would create  difficulties  for  Tele-Services in properly serving its
     subscribers, and, in general, providing cable services to that town.

     The franchises or agreements with the towns require the giving of notice to
     the towns before  Tele-Services  can change their cable services rates, and
     some of those franchises or agreements may require the approval of the town
     for  any  increases  in  those  rates.  Although   Tele-Services  does  not
     anticipate  any  material   difficulties  with  any  future  proposed  rate
     increases,  there can be no guarantee that future proposed increases can be
     implemented in all of the towns.

     The  Telecommunications Act of 1996 also applies to cable services provided
     by local  exchange  carriers.  The Act  eliminates  the  prohibition on LEC
     provision  of video  programming in its service  area.  LECs and others may
     offer video  programming  under regulations that vary according to the type
     of video service being provided  (radio-based,  common  carriage,  cable TV
     systems,  or open video systems).  With the Act's enactment,  regulation is
     lifted for cable  programming,  for a basic  service tier that was the only
     service  subject to regulation on December 31, 1994, in any franchise  area
     in which the operator services 50,000 or fewer subscribers.

     The Act provides  several  exceptions for  acquisitions  and joint ventures
     (which  to a large  extent  are  prohibited)  for  certain  small and rural
     systems.  These exceptions are  based on annual operating revenues,  number
     of cable subscribers served,  location of the cable subscribers served, and
     common  ownership  or control  issues  with any of the 50 largest  cable TV
     system  operators  in  existence  on June 1, 1995,  and if the cable system
     operates in a television market not in the top 100 television markets as of
     June 1, 1995.

     A LEC may obtain,  upon agreement with a cable TV operator on rates, terms,
     and conditions,  the use of the  transmission  facilities of a cable system
     extending  from the last  multi-user  terminal  to the  premises of the end
     user,  if  such  use is  reasonably  limited  in  scope  and  duration,  as
     determined  by the FCC.  The Act also  permits  a LEC to  acquire  or joint
     venture  under  different  terms and  conditions in cases where the subject
     market meets the FCC's definition of  "competitive."  Finally,  the FCC may
     waive the acquisition  and joint venture  prohibitions if it determines the
     economic  viability  of the  market  merits  such or  that  to do so  would
     otherwise be in the public interest,  and the local  franchising  authority
     approves.

     Breda  currently  contemplates  that any  competition in the cable industry
     arising  as a result of the  Telecommunications  Act of 1996 may occur at a
     slower  pace than will be the case for  telephone  services  providers,  in
     particular in rural areas like those served by Tele-Services.

     Tele-Services'  franchises  or  agreements  with  the  towns  do not  grant
     Tele-Services  the exclusive  right to provide cable services in the towns,
     and other cable service  providers can provide cable services in the towns.
     There currently are not, however,  any other cable service providers in any
     of the towns. Although difficult to predict,  Tele-Services  currently does
     not  contemplate  any competitor  coming into the towns given,  among other
     things, the smaller size of the towns.

     As indicated,  although cable services  providers  like  Tele-Services  are
     subject to competition from other providers,  Tele-Services  currently does
     not have direct


                                       9
<PAGE>

     competition from other cable services providers in the towns  Tele-Services
     now services.  There is, however,  competition in other forms. For example,
     Tele-Services  experiences  strong  competition from wireless and satellite
     dish  providers.  As  discussed  in  Item 6 of  this  annual  report,  that
     competition has been increasing in recent years.  Various other competitors
     and  forms of  competition  are also  likely  to  arise  in the  future  as
     technological   advances   occur  in  the   telecommunications   and  cable
     industries.

     Tele-Services is regulated by the FCC. The rules and regulations of the FCC
     primarily relate to general  operational and technical issues,  and they do
     not affect  rates or  expansions  of service  areas.  As  discussed  above,
     Tele-Services'  cable  services are also  regulated in the sense that those
     services are provided pursuant to franchises or agreements with each of the
     towns in which Tele-Services currently provides cable services.

     Internet Service Provider.

     Breda,  Prairie  Telephone and Westside  Independent  also provide internet
     access through their telephone  lines to subscribers  desiring that access.
     They were providing  internet access to approximately 481 subscribers as of
     December 31, 2000.  Internet  access is also  provided by BTC, Inc. in some
     areas which are outside of the telephone exchange areas currently served by
     Breda, Prairie Telephone and Westside  Independent.  The area served by BTC
     is currently limited to Carroll,  Iowa and various communities  surrounding
     Carroll,   Iowa.  BTC  provided  internet  access  to  approximately  1,864
     subscribers  as of December 31, 2000.  BTC is a wholly owned  subsidiary of
     Prairie  Telephone.  BTC is an Iowa  corporation  that was  incorporated in
     1997.

     Breda, Prairie Telephone and Westside Independent are providing dial-up and
     high speed Internet access to their customers. Breda anticipates that there
     will continue to be competitive  pressure to lower the dial-up rates. Breda
     also  anticipates  that the number of potential  customers will continue to
     increase  and that  Internet  customers  will  continue  to  demand  higher
     Internet speed.  Breda is leasing trunks from Qwest and Iowa Telecom and is
     exploring  ways to reduce its monthly  Internet  costs.  This may result in
     some  additional  capital  expense,  but it is  hoped  that  those  capital
     expenses  will be offset by lower  monthly  costs to provide  the  Internet
     services.  Breda  is also  considering  changing  its  underlying  internet
     service provider,  with the hope being that such a change could also result
     in cost  savings.  Breda has also been in contact with the  National  Rural
     Telephone  Cooperative  to provide  wireless  two-way  Internet  access via
     satellite.

     BTC was  organized  primarily  to explore  the  possibility  of  becoming a
     competitive  local exchange carrier in some Iowa communities  which are not
     served  by  Breda,  Prairie  Telephone  or  Westside  Independent.  No firm
     decision  has been made as to  whether  BTC will ever  attempt  to  provide
     telephone services,  however, and BTC cannot provide any telephone services
     in the  state of Iowa  without  first  receiving  a  certificate  of public


                                       10
<PAGE>

     convenience and necessity from the IUB and filing the necessary tariffs and
     providing  required  notices.  BTC  would  also  need to raise  significant
     additional  capital and/or obtain third party financing before BTC would be
     able to finance the construction and start up of a new telephone business.

     BTC does provide internet access,  as discussed above. BTC also leases part
     of its business  location in Carroll,  Iowa to Breda for a retail store for
     the sale  and  lease of  telephone,  cellular  and  related  equipment  and
     merchandise. The store opened for business in April, 2000.

     Other.

     Pacific Junction Telemarketing Center, Inc. is a wholly owned subsidiary of
     Prairie  Telephone.  Pacific  Junction  is an  Iowa  corporation  that  was
     incorporated in 1987. Pacific Junction provides telemarketing services, and
     the telemarketing  calls made by Pacific Junction are intended to provide a
     major source of access charges revenue for Breda. Any difficulties  with or
     reductions in the number of  telemarketing  calls made by Pacific  Junction
     therefore  adversely  affect the access charges  revenue of Breda,  Prairie
     Telephone and Westside Independent.

     It is common in the  industry  for small  telemarketing  firms like Pacific
     Junction to contract with a vendor who solicits  calling lists and programs
     from major  companies.  Pacific  Junction's  vendor was Aegis,  but Pacific
     Junction terminated its relationship with Aegis in May, 1999, because Aegis
     began  operating  its own  calling  centers  and did not have a surplus  of
     numbers to contract out to smaller  telemarketing  firms.  Pacific Junction
     then contracted with Results  Telemarketing,  Inc. to provide telemarketing
     calling  leads.  Results  Telemarketing,  Inc.,  however,  also has its own
     telemarketing  centers, and has struggled to provide a continuous supply of
     telemarketing numbers to Pacific Junction. Also, the telemarketing industry
     as a whole has  experienced  a downturn in  companies  using  telemarketing
     services in their  telemarketing  programs.  Pacific  Junction is therefore
     soliciting free-lance work and new vendor contracts.  Pacific Junction does
     not,  however,  expect the next twelve  months to show any  increase in the
     number of telemarketing calls or in telemarketing revenue.

     Miscellaneous Business.

     Breda and some of its subsidiaries are also engaged in other  miscellaneous
     businesses.

     Breda and Prairie Telephone have purchased spectrum from Iowa Wireless Inc.
     for providing personal communications services in the Breda, Lidderdale and
     Yale telephone  exchange areas.  Iowa Wireless Inc. is a subsidiary of Iowa
     Network  Services,  Inc.  Spectrum  is  bandwidth  allocated  by the FCC to
     provide  data and  voice  communication.  The  bandwidth  of a  transmitted
     communications  signal is a measure of the range of frequencies  the signal
     occupies. In the communications  industry,  this measurement is referred to
     as  "megahertz".  Iowa Wireless Inc. held the 30 MHz license for the Breda,
     Lidderdale  and Yale  telephone  exchange  areas,  and  Breda  and  Prairie
     Telephone purchased 10 MHz licenses for those areas from Iowa Wireless Inc.
     on March 26, 1999. They purchased 10 MHz licenses because that was the only
     license being offered by Iowa Wireless Inc. at that time.

     Each  independent  telephone  company  in Iowa  had  first  opportunity  to
     purchase  the  spectrum  in its  local  exchange  areas  for  $3.50 per pop
     (population).  Prairie Telephone  purchased its Yale exchange pops at $3.50
     each,   for  a  total  of  $2,051.   Breda  also   purchased  the  personal
     communications service licenses for its Breda and Lidderdale exchange areas
     for $3.50 per pop, totaling $5,383.

     A limited  liability company was formed on October 21, 1999, by some of the
     independent  telephone  companies  who were  eligible  and  desired  to own
     spectrum to provide personal communications services in the areas that were
     close to their own local exchange  areas.  The companies  included  Prairie
     Telephone and the telephone  companies  for the Casey,  Menlo,  and Panora,
     Iowa areas. The limited liability company was named Guthrie Group,  L.L.C.,
     and Prairie  Telephone  purchased 100 units in Guthrie  Group,  L.L.C.  for
     $10,000.  The personal  communications  services  licenses owned by Prairie
     Telephone  and the  other  independent  telephone  companies  which  became
     members of Guthrie Group, L.L.C. will not be included in the Guthrie Group,
     L.L.C.  Guthrie Group,  L.L.C.  has,  however,  acquired  spectrum for some
     telephone  exchange areas located in Guthrie County,  Iowa.  Guthrie Group,
     L.L.C. does not, however,  contemplate offering any personal communications
     services in any of the areas where it has acquired  spectrum for at least 1
     to 3 years.

     A limited  liability  company was formed by Breda and two other independent
     telephone  companies  in August  of 2000,  under  the name  Carroll  County
     Wireless,  L.L.C. Breda and the two other independent  telephone  companies
     who are  members  of  Carroll  County  Wireless,  L.L.C.  have  sold  their
     respective personal communications


                                       11
<PAGE>

     services  licenses to Carroll County  Wireless,  L.L.C.  at their cost. The
     transfer of those  licenses  will occur after all  necessary  FCC approvals
     have been obtained. Breda anticipates that those approvals will be obtained
     within the next 6 months. Breda and the other two members of Carroll County
     Wireless, L.L.C. have also each made capital contributions of approximately
     $26,391 to Carroll County Wireless,  L.L.C. Carroll County Wireless, L.L.C.
     utilized those capital  contributions to purchase  personal  communications
     services  licenses that were available for various areas in Carroll County,
     Iowa and to pay various  organizational  and start-up costs.  Some of those
     funds  were also used to  purchase  the  personal  communications  services
     licenses from Breda and the other two members, as discussed above. Once the
     transfer of Breda's and the two other  members'  licenses to Carroll County
     Wireless,  L.L.C. are completed,  Carroll County Wireless,  L.L.C. will own
     personal communications services licenses for nearly all of Carroll County,
     Iowa. It is not contemplated, however, that Carroll County Wireless, L.L.C.
     will begin to offer  personal  communications  services for at least 1 to 3
     years.

     Personal  communications  service  ("PCS") is a relatively  new area in the
     telecommunications  industry.  It is a  wireless  voice  and  data  service
     somewhat similar to cellular  telephone service,  but emphasizing  personal
     service  and  extended  mobility.  It is  sometimes  referred to as digital
     cellular  (although  cellular systems can also be digital).  Like cellular,
     PCS is for mobile  users and  requires a number of  antennas  to blanket an
     area of coverage.  As a user moves through and between  service areas,  the
     user's phone signal is picked up by the nearest  antenna and then forwarded
     to a base station that connects to the wired  network.  The phone itself is
     slightly  smaller than a cellular phone.  PCS is being  introduced first in
     highly urban areas for large  numbers of users.  The  "personal"  in PCS is
     intended to evidence a  distinction  between  this  service and cellular by
     emphasizing that PCS is designed to provide greater user mobility. Cellular
     service,  on the other hand, was designed  primarily for car phone use with
     transmitters emphasizing coverage of highways and roads.

     PCS generally  requires more cell  transmitters  for coverage,  but has the
     advantage of fewer blind spots. Technically, cellular systems in the United
     States operate in the 824-849  megahertz (MHz) frequency  bands;  while PCS
     operates in the 1850-1990 MHz bands.  Several technologies are used for PCS
     in the United  States,  including  Cellular  Digital Packet Data and Global
     System for Mobile communication.  Global System for Mobile is more commonly
     used in Europe and elsewhere,  and is the technology that is being employed
     by Iowa Wireless Inc.

     Although difficult to predict,  personal communications services may become
     very  important  in the future and may be highly  competitive  with current
     cellular  services.  Breda  and  Prairie  Telephone  have not made any firm
     decision  on  whether  they will ever  offer  any  personal  communications
     services,   and,  as  indicated  above,   Breda  transferred  the  personal
     communications  services  licenses  it holds for its  Breda and  Lidderdale
     exchange  areas  to  Carroll  County  Wireless,  L.L.C.  Breda  itself  may
     therefore never directly offer any personal communications  services. Breda
     and  Prairie  Telephone  do not,  in any event,  contemplate  offering  any
     personal communications services for at


                                       12
<PAGE>

     least  1 to 3  years,  primarily  because  those  services  must  first  be
     available  in  surrounding  areas before  Breda and Prairie  Telephone  can
     provide those services.

     Breda,  Prairie  Telephone  and Westside  Independent  do not currently own
     spectrum for all of the telephone exchange service areas currently serviced
     by them,  and  there is no  guarantee  that  they  will be able to  acquire
     spectrum  for all of  those  areas.  Also,  Breda,  Prairie  Telephone  and
     Westside   Independent   will  face   competition  in  providing   personal
     communications  services  because no exclusive  rights can be acquired with
     respect to that technology.

     Revenues may also arise from  investments  in other  entities which provide
     cellular  phone  services  or  which  invest  in  other  cellular  phone or
     telecommunications  ventures.  For  example,  Prairie  Telephone  has  made
     investments  in RSA #1,  Ltd.  and RSA #7,  Ltd.  Those  entities  are Iowa
     limited  partnerships  which  provide  cellular  services in rural areas in
     central and southern Iowa. Prairie Telephone also owns .67% of Iowa Network
     Services' outstanding stock. Westside Independent owns .45% of Iowa Network
     Services' outstanding stock.

     Breda has made an  investment  in RSA #9, Ltd.  and RSA #8,  Ltd.  Westside
     Independent  has also made an  investment  in RSA #8, Ltd. RSA #8, Ltd. and
     RSA #9, Ltd.  provide  cellular  services  in rural  areas in southern  and
     central Iowa.

     Breda   also  owns   15.77%   of  the   membership   interests   in  Alpine
     Communications,     L.C.    Alpine     Communications,     L.C.    provides
     telecommunications  exchange  and  local  access  services,  long  distance
     service, and cable television service in service areas located primarily in
     Clayton County in northeastern Iowa.


                                       13
<PAGE>

     Some of the above investments may be a source of revenue for Breda, Prairie
     Telephone and Westside Independent through  distributions which may be made
     by the entities.  None of Breda,  Prairie Telephone or Westside Independent
     controls any distribution decisions,  however, so no distributions are ever
     guaranteed, and the timing and amount of any distributions will likely vary
     greatly from year to year.

     Breda,  Prairie  Telephone and Westside  Independent have also from time to
     time received settlement payments from some of their cellular  investments.
     Settlement  payments are unusual items which are generally received for not
     exercising a right of first refusal to purchase  additional  units or other
     interests  during a merger or buyout by  another  company.  Breda,  Prairie
     Telephone and Westside  Independent do not control any settlement payments,
     and settlement  payments are in any event usually  one-time  events,  so no
     settlement  payments  are  guaranteed  and the  timing  and  amount  of any
     settlement  payments will vary greatly from year to year.  For example,  no
     settlement payments were received in 2000.

     The  distributions  and  settlement  payments  received in the past have at
     times been a material  component of Breda's  revenues.  As indicated above,
     however,  Breda has no control over any distribution or settlement  payment
     decisions or the amount of any  distributions  or payments,  so no reliance
     can  be  placed  on  those  types  of   distributions   or  payments.   Any
     distributions  or  settlement  payments  received  by  Breda  in  2000  are
     reflected in the financial statements in Item 7 of this annual report.

     Breda received its first distribution from Alpine  Communications,  L.C. in
     March,  2000.  The  distribution  was in the amount of $23,508.  Breda also
     received an annual fee of $6,000 from Alpine Communications,  L.C. in 2000,
     in consideration for Breda's chief operations officer serving as an officer
     of the management committee of Alpine Communications, L.C.

     Westside  Independent  has a  33.33%  ownership  interest  in  Quad  County
     Communications.  Quad County Communications owns and operates a fiber optic
     network. Quad County Communications does not charge its members for the use
     of its fiber.

     The  value of  Breda's,  Prairie  Telephone's  and  Westside  Independent's
     underlying investments in the above ventures and in their other investments
     may  also  vary  significantly  from  year to  year.  They  may  also  face
     difficulties in realizing upon some of their  investments  because there is
     no public or other active market for those  investments and because some of
     the entities in which they have  invested  have  agreements  in place which
     place  limitations  or  restrictions  on Breda's,  Prairie  Telephone's  or
     Westside Independent's right to transfer their ownership interests in those
     entities to third parties.  Some of those  limitations and restrictions are
     in the form of a right of first refusal under which the entity is given the
     right to match any offer received by Breda,  Prairie  Telephone or Westside
     Independent.

     In October of 2000, Breda,  Prairie Telephone and Westside Independent each
     purchased 10,000 shares of common stock in NECA Services, Inc. The purchase
     price was $10 per share,  resulting in a total  consolidated  investment of
     $300,000.


                                       14
<PAGE>

     NECA Services,  Inc. ("NSI") is a for-profit corporation that was organized
     to carry on and expand various business  opportunities  which may from time
     to time be presented to the National  Exchange  Carrier  Association,  Inc.
     ("NECA").  NSI's initial  officers are also the officers of NECA,  and they
     have  extensive  experience  in  the  telecommunications  industry.  It  is
     currently  contemplated that non-regulated  business  opportunities will be
     conducted  by NSI so that  NECA can  concentrate  on its  traditional  core
     tariff and pooling services. For example, the NECA board has authorized the
     assignment of certain  National Rural  Telephone  Cooperative  contracts to
     NSI, which include the contract with the Universal  Service  Administrative
     Company  (USAC) for support of the federal  schools and libraries and rural
     health care universal service programs.

     Only NECA  members or  affiliates  were given the  opportunity  to purchase
     shares of stock in NECA.

     There is no  assurance  that any of Breda,  Prairie  Telephone  or Westside
     Independent  will ever  receive  any  returns on or other  value from their
     investment in NECA,  whether by  distributions or increases in the value of
     NECA's common stock. Also, there are substantial  restrictions imposed upon
     any transfer of shares in NECA, all of which  potentially  adversely affect
     the value and marketability of the NECA stock.

     Breda  and  its   subsidiaries   also  have  various  other   miscellaneous
     investments.  Some of those  investments  are  described  in the  financial
     statements included in Item 7 of this annual report.

     Neither Breda nor any of its subsidiaries  engage in any material  research
     and development activities.

     Service Marks.

     Breda has filed an  application  to register the mark "W.I.N.  Western Iowa
     Networks" with the United States Patent and Trademark Office. Breda intends
     to utilize the mark and some related logos in the general  advertising  and
     promotion of its business,  including on trucks and other equipment.  Breda
     is also planning an  advertising  campaign to create  awareness of the mark
     and to promote its general business and services.  Breda  contemplates that
     the  advertising  campaign will occur in the second quarter of 2001.  Breda
     hopes that the use of the mark and logos will allow an integrated,  unified
     marketing  approach  for all of the  products and services of Breda and its
     subsidiaries and increase  awareness of those products and services.  Breda
     does not contemplate any change in the scope or nature of its or any of its
     subsidiaries'  business in connection with the adoption and use of the mark
     and logos.  Although there are no guarantees,  Breda  anticipates  that the
     mark will be registered with the United States Patent and Trademark  office
     by the end of July, 2001.


                                       15
<PAGE>

     Employees.

     As of December 31, 2000,  Breda had 28 full time  employees.  Breda employs
     all of those  employees,  but those  employees  also  provide the labor and
     services for Prairie  Telephone,  Westside  Independent,  Tele-Services and
     BTC.  The  salaries  and other  costs and  expenses  of the  employees  are
     allocated among Breda and its subsidiaries based on time sheet allocations.
     There currently are not any collective bargaining or other labor agreements
     with any of  Breda's  employees,  and only two of  Breda's  employees  have
     written  employment  agreements.  Those employment  agreements are with the
     chief  operations  officer  and the chief  financial  officer of Breda.  In
     December,  2000,  Breda had three  full-time  personnel  contracted from an
     employment  agency.  It is anticipated that these three individuals will be
     hired as full time employees of Breda some time in 2001.

     Pacific Junction had 3 full-time employees as of December 31, 2000. Pacific
     Junction  currently has no collective  bargaining or labor  agreements with
     any of its employees.

     Breda and Pacific Junction also utilize part-time employees on an as needed
     basis.  Pacific Junction  utilizes up to approximately  seventeen part time
     employees  at a time,  primarily  for the  purpose of making  telemarketing
     calls.

     Acquisitions.

     As indicated above,  Breda acquired all of the issued and outstanding stock
     of Westside  Independent on June 1, 1998. Westside  Independent was serving
     approximately  342 telephone numbers and related access lines at that time.
     The total purchase price paid by Breda was $2,010,038. Westside Independent
     also  redeemed  some of its  shares  of  outstanding  stock  as part of the
     transaction.  The aggregate  redemption price paid by Westside  Independent
     for those  shares  was  $918,875.17.  The  purchase  price  (excluding  the
     redemption amount paid by Westside  Independent) exceeded the fair value of
     the net assets of Westside Independent,  as shown on Westside Independent's
     financial  statements,  by $1,178,472.  The excess was recorded as goodwill
     and is being  amortized on a  straight-line  basis over a period of fifteen
     years. As discussed above, Westside Independent provides telephone services
     to subscribers in Westside, Iowa and its surrounding rural areas.

     In a related  transaction,  Tele-Services  acquired  all of the  issued and
     outstanding  stock  of  Westside  Communications,  Inc.  on June  1,  1998.
     Westside  Communications,  Inc.  owned and  operated  the cable  television
     systems in Westside, Iowa, and Arcadia, Iowa. The number of subscribers for
     cable  television  services in those  towns at that time was  approximately
     297. The total cost of the  acquisition  was $254,289,  which  exceeded the
     fair value of the net assets of Westside Communications,  Inc., as shown on
     its financial statements,  by $157,611. The excess was recorded as goodwill
     and is being  amortized on a  straight-line  basis over a period of fifteen
     years.  As discussed  above,  Westside  Communications,  Inc. was held as a
     wholly owned subsidiary of  Tele-Services  until December 2, 1999, at which
     time Westside Communications, Inc. was dissolved.


                                       16
<PAGE>

     Westside  Communications,  Inc.'s cable  operations are now operated by and
     through Tele-Services.

     On  October  31,  1998,  Tele-Services  purchased  the  Auburn,  Iowa cable
     television  system from  NewPath  Communications,  L.C. The number of cable
     subscribers in Auburn, Iowa at that time was approximately 91. The purchase
     price  was  $64,610.   Tele-Services   also  assumed  the  obligations  and
     liabilities of NewPath  Communications,  L.C. which were to arise after the
     closing:

          o    under its  franchise  with the city of Auburn  and under  certain
               leases; and

          o    for the  performance  and delivery of services to  subscribers to
               the cable system.

     Each of the  above  transactions  was  treated  as a  business  combination
     accounted for as a purchase.

     Sale of Direct Broadcast Satellite Operation.

     On January 11, 1999, Breda sold  substantially all of its assets comprising
     its direct broadcast  satellite  operation.  The purchase price received by
     Breda was  $8,274,689.  The sale resulted in a pre-tax gain of  $7,436,415,
     which was included in Breda's  operations during the first quarter of 1999.
     The buyer also assumed:

          o    Breda's  obligations to its direct broadcast  satellite  services
               subscribers for refundable  deposits and advance payments made by
               those subscribers; and

          o    Breda's  obligations  otherwise arising after the closing date of
               the sale under Breda's various licenses and contracts  related to
               its direct broadcast satellite business and assets.

     Breda also executed a noncompetition agreement as part of the transaction.

     Breda's  direct  broadcast  satellite  operation  included  its licenses to
     provide direct broadcast  satellite services in five Iowa counties and four
     counties in Nebraska.  At the time of the sale,  Breda was providing direct
     broadcast satellite services to approximately 4,048 subscribers.

     One  factor  which  caused  Breda to sell the  direct  broadcast  satellite
     operation was Breda's  determination that the purchase price offered by the
     buyer  was  quite  favorable.  Breda  had  also  determined  that  the cash
     available   from  the  sale  would  provide  it  with  funds  for  possible
     acquisition of additional telephone lines in areas that Breda believed were
     going to become  available  from GTE and US West  after the  closing of the
     sale.  Breda  believed  that the  sale of the  direct  broadcast  satellite
     operation would also be beneficial to Breda because it would allow Breda to
     focus on its core business of providing telephone


                                       17
<PAGE>

     services.  Another factor  contributing  to the sale was the  consolidation
     occurring in the direct broadcast satellite industry,  which Breda believed
     would  make it more  difficult  for  Breda to  efficiently  compete  in the
     industry.  Breda's  original  contract for its direct  broadcast  satellite
     operation  was  also  nearing  renewal,  and  there  was  some  uncertainty
     concerning its renewal.  This  uncertainty also contributed to the decision
     to sell the operation.

     Sale of Shares of Stock in Central Iowa Cellular, Inc.

     On May 12, 2000,  Prairie  Telephone sold all of its 3,000 shares of common
     stock in Central Iowa Cellular,  Inc. to AirTouch Iowa,  LLC.  Central Iowa
     Cellular, Inc. is an Iowa corporation that was organized in 1983 by Prairie
     Telephone  and some other Iowa based  independent  telephone  companies for
     purposes of becoming a partner in Des Moines MSA General  Partnership.  Des
     Moines  MSA  General  Partnership  is an Iowa  partnership  which  provides
     cellular  telephone  services  to  customers  within the Des  Moines,  Iowa
     metropolitan  area.  Prairie  Telephone's 3,000 shares of stock constituted
     20% of the total  issued and  outstanding  shares of stock of Central  Iowa
     Cellular, Inc.

     The aggregate  purchase price  received by Prairie  Telephone for the 3,000
     shares of stock was  $5,226,034.  The sale  resulted  in a pre-tax  gain of
     $5,018,714,  with  $4,900,959 of that gain  included in Breda's  operations
     during the second quarter of 2000,  and the remaining  $117,755 of the gain
     included in Breda's operations during the third quarter of 2000.

     Some of the various  representations,  warranties  and covenants  given and
     made by Central Iowa Cellular,  Inc. and the  shareholders  of Central Iowa
     Cellular,  Inc. in the stock  purchase  agreement  that was entered into as
     part of the  transaction  were  made  jointly  and  severally,  so  Prairie
     Telephone would have liability for a breach of the stock purchase agreement
     by Central Iowa Cellular, Inc. or any one or more of the other shareholders
     of Central Iowa Cellular, Inc.

     Prairie  Telephone  also  entered  into  a  tower  proceeds   agreement  in
     connection  with the sale of its shares of stock in Central Iowa  Cellular,
     Inc.  The two primary  purposes  of the tower  proceeds  agreement  were to
     address  certain  sublease  payments  payable  to Des  Moines  MSA  General
     Partnership  and to  repurchase  certain  warrants  held by Des  Moines MSA
     General  Partnership.  The amounts received by Prairie  Telephone under the
     tower proceeds agreement, which was finalized in the third quarter of 2000,
     are included in the purchase price amount set forth above.

     The  negotiations  for the sale of the  shares  of stock  in  Central  Iowa
     Cellular, Inc. initially began and arose out of the proposed assignment and
     transfer by AirTouch  Iowa,  LLC of its  interest in Des Moines MSA General
     Partnership to another entity. Prairie Telephone and the other shareholders
     of  Central  Iowa  Cellular,  Inc.  took the  position  that  the  proposed
     assignment  granted them a right of first refusal and possibly other rights
     under their  agreement with AirTouch Iowa, LLC.  Prairie  Telephone and the
     other  shareholders  of Central Iowa Cellular,  Inc.  determined,  however,
     after negotiations, to sell their shares


                                       18
<PAGE>

     of stock in Central Iowa  Cellular,  Inc. to AirTouch Iowa, LLC rather than
     attempting to enforce  their rights of first  refusal.  The primary  factor
     which  caused  Prairie  Telephone to reach this  determination  was Prairie
     Telephone's  and Breda's  determination  that the purchase price offered by
     AirTouch Iowa, LLC was favorable. The purchase price was a negotiated price
     that Prairie  Telephone  believed was  representative  of the fair value of
     Prairie  Telephone's  shares of stock in Central  Iowa  Cellular,  Inc.  No
     formula  or  other  fixed  or  identifiable  principles  were  utilized  in
     establishing the purchase price.

Item 2. Description of Property.

     Breda and some of its  subsidiaries  own or lease various real estate.  The
     following  paragraphs  briefly  describe  that real estate and how the real
     estate is currently used.

     Breda owns or leases the following real estate:

     o    Breda's corporate  offices are located at 103 East Main, Breda,  Iowa.
          The real estate and building are leased by Breda and Prairie Telephone
          from  Tele-Services.  The monthly  rental payable by each of Breda and
          Prairie  Telephone under the lease is $1,000.  They also pay utilities
          and insurance. The lease has a one-year term, and automatically renews
          for additional  one-year terms. The building has  approximately  4,560
          square feet. Breda and Prairie Telephone utilize the entire building.

     o    Breda owns  certain  real estate and a  warehouse  which is located at
          Highway 217 East, Breda,  Iowa. The warehouse has approximately  6,720
          square  feet,  and is used  primarily  for  storage of  inventory  and
          various equipment (trucks, generators, trailers, plows, etc.).

     o    Breda owns  certain  real estate and a building  located  just east of
          Breda, Iowa. The building houses equipment used to switch,  record and
          transmit telephone calls. This type of equipment is sometimes referred
          to in the industry as "central  office  equipment."  The  equipment is
          used in  providing  telephone  services  to Breda and the  surrounding
          rural area. The building has approximately 960 square feet.

     o    Breda owns the real  estate and  building  located at 109 West  Second
          Street,  Lidderdale,  Iowa.  The  building  houses  equipment  used to
          switch,  record and transmit telephone calls. The equipment is used in
          providing  telephone  services to Lidderdale and the surrounding rural
          area. The building has approximately 600 square feet.

     o    Breda owns the real estate and  building  located at 310 Main  Street,
          Macedonia,  Iowa. The building houses equipment used to switch, record
          and  transmit  telephone  calls.  The  equipment  is used in providing
          telephone  services to Macedonia and the  surrounding  rural area. The
          building has approximately 600


                                       19
<PAGE>

          square feet.

     o    Breda leases a major  portion of the  building  owned by BTC at 526 N.
          Carroll Street, Carroll, Iowa. This portion of the building is used as
          a retail store and as a marketing  center for the various products and
          services offered by Breda and its subsidiaries.  Breda pays BTC $1,000
          per month for the lease.

     Prairie Telephone owns or leases the following real estate:

     o    Prairie  Telephone's  corporate  offices are located at 103 East Main,
          Breda,  Iowa.  The real  estate  and  building  are  leased by Prairie
          Telephone and Breda from Tele-Services, as described above.

     o    Prairie  Telephone  owns the real estate and  building  located at 508
          Dupont Street,  Farragut,  Iowa. The building houses equipment used to
          switch,  record and transmit telephone calls. The equipment is used in
          providing  telephone  services to Farragut and the  surrounding  rural
          area. The building has approximately 2,400 square feet.

     o    Prairie Telephone owns a warehouse which is also located at 508 Dupont
          Street,  Farragut,  Iowa. The warehouse has approximately 2,600 square
          feet,  and is used for storage of  inventory  and  equipment  (trucks,
          generators, trailers, plows, etc.).

     o    Prairie  Telephone  owns the real estate and  building  located at 707
          Phillips  Street,  Farragut,  Iowa.  The building was formerly used to
          house equipment used in providing telephone services, but is currently
          vacant.

     o    Prairie  Telephone  owns the real estate and  building  located at 804
          Washington  Avenue,  Pacific  Junction,   Iowa.  The  building  houses
          equipment used to switch,  record and transmit  telephone  calls.  The
          equipment is used in providing  telephone services to Pacific Junction
          and the surrounding rural area. The building has  approximately  2,000
          square feet.

     o    Prairie  Telephone  owns the real estate and  building  located at 600
          Washington Street,  Pacific Junction,  Iowa. The building was formerly
          used to house equipment used in providing telephone  services,  but is
          currently vacant.

     o    Prairie  Telephone  owns the real estate and  building  located at 226
          Main, Yale, Iowa. The building houses equipment used to switch, record
          and  transmit  telephone  calls.  The  equipment  is used in providing
          telephone  services  to  Yale  and the  surrounding  rural  area.  The
          building has approximately 1,125 square feet.

     Pacific Junction's (Prairie  Telephone's  wholly-owned  subsidiary) offices
     are located at 120 Main,  Breda,  Iowa.  The real estate and  building  are
     leased by Pacific Junction. The aggregate monthly rental payable by Pacific
     Junction  under the lease is $500.  Pacific  Junction also pays real estate
     taxes,  utilities and all other expenses.  The term of the lease runs until
     March 31, 2001. The building has approximately  1,679 square feet.  Pacific
     Junction utilizes all of the building.


                                       20
<PAGE>

     BTC owns the real estate and  building  located at 526 N.  Carroll  Street,
     Carroll,  Iowa. The building houses some equipment used by BTC in providing
     internet  access.  A portion of the  building is also  utilized as a retail
     store by Breda for the sale and lease of  telephone,  cellular  and related
     equipment and  merchandise.  The store opened for business in April,  2000.
     BTC's building  has  approximately  1,804 square feet. BTC receives  $1,000
     per month in rental from Breda.

     Westside Independent owns the real estate and building located at 131 South
     Main Street,  Westside, Iowa. The building is used for Westside's corporate
     offices,  and also houses  equipment  used to switch,  record and  transmit
     telephone calls. The equipment is used in providing  telephone  services to
     Westside and the  surrounding  rural area.  The  building  also houses some
     equipment used by  Tele-Services  in its cable  business.  The building has
     approximately 1,600 square feet.

     Tele-Services owns the following real estate:

          o    Tele-Services  owns certain real estate and a building located at
               103 East Main, Breda, Iowa. This property serves as the corporate
               offices of Breda and Prairie Telephone,  and is leased to them by
               Tele-Services.  The  lease  is  briefly  described  above  in the
               description of Breda's properties.

          o    Tele-Services  also owns buildings located in eighteen  different
               towns which house some equipment used to receive,  descramble and
               transmit television signals.  This type of equipment is sometimes
               referred  to  in  the  industry  as  "head-end   equipment."  The
               buildings each have  approximately 150 square feet. The buildings
               are located on real estate in each of the eighteen  towns,  which
               is generally made available to Tele-Services  under its franchise
               agreement  with those  towns.  Tele-Services'  use of some of the
               real estate is pursuant  to an oral  agreement.  Some of the real
               estate is owned by the towns.  Tele-Services  pays a very nominal
               consideration for the use of some of the real estate, and in some
               cases is not  required  to pay any  consideration.  Tele-Services
               does not  believe it will be  difficult  or cost  prohibitive  to
               obtain other real estate for the buildings or the  equipment,  if
               that became necessary for some reason.

     All of the real estate and  substantially all of the other assets of Breda,
     Prairie  Telephone and  Tele-Services are subject to mortgages and security
     agreements  given by those  corporations  to the  Rural  Telephone  Finance
     Cooperative  to stand as security and  collateral  for the loan made by the
     Rural Telephone Finance Cooperative to Breda, which is described below.

     Breda's   existing  loan  agreement  with  the  Rural   Telephone   Finance
     Cooperative  allowed  Breda to borrow funds for purposes of the purchase of
     Westside Independent by Breda and the purchase of Westside  Communications,
     Inc. by  Tele-Services.  The aggregate amount  outstanding  under that loan
     agreement as of March 1, 2001 was $2,157,290.  Prairie  Telephone and Breda
     also have lines of credit available from the Rural Telephone


                                       21
<PAGE>

     Finance  Cooperative  in  the  amounts  of,   respectively,   $500,000  and
     $1,500,000.  Those lines of credit will  currently  expire on November  30,
     2005 and  December  1,  2005,  respectively.  The lines of credit  are also
     secured by the mortgages and security interests noted above.

     The Rural Telephone Finance  Cooperative  required Westside  Independent to
     execute  a  guaranty  of the  loan  made  by the  Rural  Telephone  Finance
     Cooperative  to Breda to finance the  purchase of Westside  Independent  by
     Breda  and  the  purchase  of  Westside  Communications  by  Tele-Services.
     Westside  Independent's  guaranty  is secured by a  mortgage  and  security
     agreement which covers its real estate and  substantially  all of its other
     assets.

     Breda,  Prairie  Telephone and Tele-Services had other loans from the Rural
     Telephone Finance  Cooperative which were also secured by the mortgages and
     security  interests  described  above, but those loans were all paid off at
     various times during 2000.

     Breda believes that its and its  subsidiaries'  real estate,  buildings and
     other improvements are adequate to conduct their businesses as conducted or
     proposed to be  conducted  on the date of the filing of this annual  report
     with the SEC. Breda also believes that its and its subsidiaries'  buildings
     and  improvements  have  been  maintained  in good  repair  and  condition,
     ordinary wear and tear and depreciation  excepted.  Breda also believes the
     buildings and improvements are adequately insured.

     Breda,  Prairie  Telephone and Westside  Independent  also each own various
     equipment used to switch,  record and transmit telephone calls in the areas
     serviced by them.  BTC also owns certain  equipment.  This equipment is all
     housed in  buildings  owned or leased by them,  as discussed  above.  Breda
     believes that the normal and ordinary useful life of this type of equipment
     is approximately 5-12 years. The current equipment was purchased at various
     times over the period of 1998 to 1999.  Breda believes the equipment is now
     in good operating condition and repair,  considering ordinary wear and tear
     and depreciation.  Breda,  Prairie Telephone,  Westside Independent and BTC
     also own  miscellaneous  lines,  cables and other equipment used to provide
     telephone services and internet access.

     Tele-Services  owns  various  equipment  used to  receive,  descramble  and
     transmit cable signals,  including various electronic  receiving  equipment
     and electronic  conductors and devices.  The equipment is sometimes  called
     "head  end"  equipment.  The  equipment  is  located  in  various  towns as
     discussed above.  Tele-Services  also owns other  miscellaneous  cables and
     equipment used in its business.


     Breda, Prairie Telephone, Westside Independent, Tele-Services, and BTC also
     hold various  easements  for their  various  telephone  and cable lines and
     other property. Some


                                       22
<PAGE>

     of those  easements  are on or across  real  estate of the  cities or other
     governmental authorities whose areas are being served, and others are on or
     across private property.

Item 3. Legal Proceedings.

     Breda currently is not aware of any pending legal proceeding to which Breda
     is a party or to which any of  Breda's  property  is  subject,  other  than
     routine  litigation that is incidental to its business.  Breda currently is
     not  aware  that any  governmental  authority  is  contemplating  any legal
     proceeding against Breda or any of its property.

Item 4. Submission of Matters to a Vote of Security Holders.

     No matters were submitted to a vote of the  shareholders of Breda,  through
     the  solicitation  of proxies or  otherwise,  during the three months ended
     December 31, 2000.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

     Breda is authorized to issue  5,000,000  shares of common stock.  Breda had
     37,241 shares of its common stock issued and outstanding as of December 31,
     2000. Those shares were held by approximately 607 different shareholders.

     Breda's common stock is not listed on any exchange,  and there is no public
     trading  market  for  Breda's  common  stock.  Breda has also not agreed to
     register  any  shares  of its  common  stock  under  any  federal  or state
     securities laws. An investment in Breda's common stock is also not a liquid
     investment   because  the  Restated  Articles  of  Incorporation  of  Breda
     establish various  conditions on the issuance of, and various  restrictions
     on the  transfer  of,  shares of its common  stock.  Those  conditions  and
     restrictions are summarized in the following paragraphs.

     The common stock can only be issued to:

          o    residents of the Breda or  Lidderdale  telephone  exchange  areas
               served by Breda who subscribe to Breda's telephone services, and

          o    entities  which have their  principal  place of  business  in the
               Breda or Lidderdale  telephone exchange areas served by Breda and
               which subscribe to Breda's telephone services.

     As indicated, only residents of the Breda and Lidderdale telephone exchange
     service  areas  served by Breda are  eligible to purchase  stock.  Although
     Breda  also  provides  telephone  services  to  Macedonia,   Iowa  and  the
     surrounding  area,  residents of Macedonia,  Iowa and the surrounding rural
     area cannot acquire any shares of common stock of Breda


                                       23
<PAGE>

     even if they are receiving  telephone  services from Breda.  Subscribers to
     any services from any of Breda's  subsidiaries also cannot buy common stock
     of Breda unless they otherwise  meet the  requirements  discussed  above in
     this paragraph.

     Since approximately January 1, 1996, no person has been allowed to purchase
     more than thirty shares of common stock from Breda.  A shareholder  can own
     more than thirty  shares,  subject to the 1%  limitation  discussed  in the
     following  paragraph,  but  only  thirty  shares  can be  acquired  through
     issuance of the shares by Breda.

     No  shareholder  may own more than 1% of the total  issued and  outstanding
     common stock of Breda, unless:

          o    the shareholder  already exceeded that percentage on February 28,
               1995, or

          o    the  shareholder  goes  over 1% as a result  of  Breda  redeeming
               shares of its common stock from other shareholders.

     In either of those cases,  the  shareholder may not increase the percentage
     of shares owned by the shareholder. If a shareholder owns 5% or more of the
     ownership interests of an entity which owns shares of Breda's common stock,
     the  shares  of  Breda's  common  stock  held  by  that  entity  and by the
     shareholder  will  be  added  together  for  determining   whether  the  1%
     limitation is exceeded.

     There can  generally  only be one  shareholder  for each  telephone  number
     served by Breda.  There can also generally only be one shareholder for each
     household  receiving  telephone  services from Breda, even if the household
     has more than one telephone number.

     Breda's  board of  directors  determines  the  purchase  price  payable for
     newly-issued  shares of Breda's  common  stock.  Breda's board of directors
     also  determines  the  redemption  price  that  will be paid by Breda if it
     elects to redeem a  shareholder's  shares  in any of the  circumstances  in
     which Breda has the right to purchase  those  shares.  Breda has that right
     if:

          o    the  shareholder  is no longer  receiving  services  from  Breda,
               unless the  shareholder  already was not receiving  services from
               Breda on February 28, 1995;

          o    the  shareholder  no longer  resides  in the Breda or  Lidderdale
               telephone exchange areas served by Breda,  unless the shareholder
               already resided outside those areas on February 28, 1995; or

          o    the  shareholder  dies,  unless the heir of the shares of Breda's
               stock meets the eligibility requirements for ownership of Breda's
               stock.

     The board of directors has historically  established the issuance price and
     the redemption


                                       24
<PAGE>

     price  at  approximately  75% of the  book  value of  Breda.  The  board of
     directors has  historically  made this  determination  in March or April of
     each year, based upon Breda's then most recent year-end  audited  financial
     statements.  Breda's  fiscal  year ends on  December  31. The price is then
     generally  announced  and  becomes  effective  at the  annual  shareholders
     meeting for that year. The issuance  price and the  redemption  price as so
     determined by the board of directors then generally applies until the board
     of directors makes a new  determination  and announces the new price at the
     next annual shareholders meeting.

     Under this approach, the issuance price and redemption price in 1995, 1996,
     1997, 1998 and 1999 was, respectively, $27, $31, $41, $64 and $82.

     The board of directors departed from its historical  practice,  however, on
     November 2, 1999,  by adopting a resolution  fixing the issuance  price for
     newly-issued shares and the redemption price to be $149 per share. The $149
     amount was not based on Breda's  book value,  but rather was roughly  based
     upon the average  sales price of $150.58 per share in the auction  that was
     held in  October of 1999.  The  auction is  discussed  below.  The board of
     directors took that action because it believed the above-referenced auction
     provided  it with a  basis  to make a more  current  determination  on this
     issue. The board of directors also believed that it was appropriate to make
     a new determination of the issuance price and redemption price at that time
     given the sale of Breda's direct broadcast satellite operation. The sale of
     that operation  resulted in a pre-tax gain of $7,436,415.  The sale was not
     included in Breda's books until the first quarter of 1999, however, and was
     therefore not included in the 1998 year-end financial  statements  utilized
     by the board of directors in  establishing  the $82 purchase price in early
     1999.

     The board of directors returned to its historical  practices at its meeting
     on  March  13,  2000,  at which  time the  board  of  directors  adopted  a
     resolution  fixing the  issuance  price and  redemption  price for  Breda's
     shares of common stock to be $180 per share. The $180 amount was determined
     based upon Breda's 1999 audited  financial  statements.  The $180 per share
     price was  announced  at, and became  effective at, the May 17, 2000 annual
     meeting of the  shareholders of Breda.  If the above  described  historical
     practices  were  followed,  the $180 per share amount would have  continued
     until the next annual  determination was made by the board of directors and
     announced at the next annual shareholders meeting.

     The board of directors  determined to depart from its historical  practices
     on this issue, however, at a meeting of the board of directors held on June
     12, 2000. At that meeting,  the directors  adopted a resolution  fixing the
     issuance  price for newly  issued  shares of Breda's  common  stock and the
     redemption  price for Breda's shares of common stock at $235 per share. The
     board of  directors  took  this  action  because  it  believed  that it was
     appropriate  to make a new  determination  of the  issuance  price  and the
     redemption price to reflect the receipt by Prairie Telephone of most of the
     net  after-tax  proceeds of the sale by Prairie  Telephone of its shares of
     stock  in  Central  Iowa  Cellular,  Inc.  The $235 per  share  amount  was
     determined by taking  approximately 75% of the then net after-tax


                                       25
<PAGE>

     proceeds  of the sale on a per share  basis and adding  that  figure to the
     previously  determined issuance and redemption price of $180 per share. The
     shareholders  of Breda were notified of the increase in the issuance  price
     and the  redemption  price for Breda's  shares of common stock from $180 to
     $235 per share by letter dated June 14, 2000.

     Prairie  Telephone's  sale of its shares of stock in Central Iowa Cellular,
     Inc. is discussed  above in Item 1 of this annual  report.  At the time the
     board  made its  determination  on June 12,  2000,  Prairie  Telephone  had
     received, in the aggregate,  approximately $5,108,280, before taxes, and it
     was estimated that Prairie Telephone would retain approximately  $3,147,676
     of that amount,  after taxes.  For purposes of determining the new issuance
     price and redemption price discussed above,  Prairie  Telephone's  basis in
     its  3,000  shares  of common  stock of  Central  Iowa  Cellular,  Inc.  of
     approximately   $206,770  was  deducted  from  the   after-tax   amount  of
     $3,147,676.  As  indicated,  the  board of  directors  believed  this was a
     material event which made it appropriate to make a new determination of the
     issuance price and redemption price for shares of Breda's common stock.

     The board of directors currently intends to otherwise address this issue on
     an annual basis,  however,  consistent with the above described  historical
     practices of the board of directors, except that the board of directors may
     determine to depart from those historical  practices again in the future in
     the event of the  occurrence  of what the board of  directors  believes are
     other  material  or  significant  events.   Accordingly,  it  is  presently
     contemplated  that the board of  directors  will  establish a new  issuance
     price and redemption  price  effective at or around the 2001 annual meeting
     of the shareholders, and that the price will be set at approximately 75% of
     the book value of Breda as of December 31, 2000.  Breda  estimates that the
     issuance price and redemption  price that will be set at or around the 2001
     annual meeting of the shareholders will be approximately $258.

     The issuance and  redemption  price as determined by the board of directors
     has  increased  from $27 per  share  in 1995  (based  on the 1994  year-end
     audited  financial  statements of Breda) to $235 per share  pursuant to the
     June 12, 2000 action of the board of directors as  described  above.  Breda
     does  not  believe  that the  amount  of this  increase  is  indicative  of
     potential future increases, however, in particular given that:

     o    The referenced  increase was due primarily to two "one-time"  material
          events,  those being the sale of Breda's  direct  broadcast  satellite
          operation  and the sale of Prairie  Telephone's  stock in Central Iowa
          Cellular, Inc., and

     o    Breda does not  currently  foresee any  material  increase in revenues
          from  its or  any of its  subsidiaries'  normal  and  ordinary  course
          business  operations,  and, in fact, sees continuing downside pressure
          on those revenues.

     Since there is no public trading market or any other  principal  market for
     Breda's common stock, repurchases of common stock by Breda currently is the
     primary method for a


                                       26
<PAGE>

     shareholder  to be able to sell  the  shareholder's  shares.  As  discussed
     below, an auction was held in October, 1999, at which shareholders desiring
     to sell their shares of Breda's common stock were given the  opportunity to
     sell those  shares to other  Breda  shareholders,  but there are no current
     plans to arrange any other  auctions in the future.  Breda also maintains a
     list  of  shareholders   desiring  to  sell  their  shares,  and  of  other
     shareholders desiring to purchase those shares, as discussed below.

     In  any of the  circumstances  where  Breda  has  the  right  to  redeem  a
     shareholder's  shares, a shareholder may, with the consent of Breda's board
     of directors,  transfer the  shareholder's  shares to another person who is
     eligible  to be a  shareholder  by reason  of the fact  that the  person is
     receiving  services  from Breda and is residing in the Breda or  Lidderdale
     telephone exchange areas served by Breda.

     No  shareholder  can sell or transfer  any of his or her shares of Breda to
     any person who is not  eligible to be a  shareholder  in Breda by reason of
     the fact that the person is receiving  services  from Breda and is residing
     in the Breda or Lidderdale  telephone  exchange areas served by Breda, with
     one exception. The exception is that a person who was a shareholder on July
     20, 1995,  may make a one time transfer of the shares held by the person on
     that date to a family  member  of the  shareholder  (which  means a spouse,
     natural born or adopted child, grandchild, parent, grandparent, or sibling)
     even if the family member is not  receiving  services from Breda and is not
     residing in the Breda or  Lidderdale  telephone  exchange  areas  served by
     Breda.  These  transfers  are not subject to Breda's right of first refusal
     described in the following paragraph. Any family member receiving shares by
     this  process does not have the same right,  however,  and can only sell or
     transfer the shares in accordance with the Amended and Restated Articles of
     Incorporation of Breda.

     Any shareholder who wants to sell or transfer his or her shares in Breda to
     another  shareholder  or person who is  eligible to be a  shareholder  must
     first give  Breda the right to  purchase  the  shares.  In this  case,  the
     shareholder must give Breda at least sixty days prior written notice of the
     proposed  sale,  including  a copy of the  written  offer to  purchase  the
     shares.  Breda may elect to purchase the shares for the same price  offered
     to the  shareholder  at any time within  sixty days after it  receives  the
     notice from the shareholder. If Breda elects to buy the shares, it must pay
     the  purchase  price in full upon the  shareholder  surrendering  the stock
     certificates for the shares to Breda.

     Breda's  bylaws may also  contain  provisions  restricting  the transfer of
     shares. The current bylaws do not contain any restrictions, other than some
     of those described in this annual report,  but the bylaws can be amended by
     the directors or shareholders at any time.

     Over the period of January 1, 1996 through June 24, 1996, Breda repurchased
     four  hundred  and  twenty-four   shares  of  its  common  stock  from  two
     shareholders, at a purchase price of $27 per share. Over the period of June
     25, 1996 through  February 20, 1997,  Breda  repurchased  seven hundred and
     eighty-nine shares from nine different shareholders, at a purchase price of
     $31 per share.  Over the period of February 21, 1997


                                       27
<PAGE>

     through  March 1, 1998,  Breda  repurchased  one thousand  nine hundred and
     ninety-six shares of its common stock from fourteen different shareholders,
     at a  purchase  price of $41 per  share.  Over the  period of March 2, 1998
     through December 31, 1998, Breda  repurchased three hundred and fifty-eight
     shares of its common stock from five different shareholders,  at a purchase
     price of $64 per share.

     No shares were  repurchased by Breda during the period of December 31, 1998
     through  December  31,  1999,  except  that in  November,  1999,  Breda did
     effectuate a repurchase  of forty shares by depositing  the purchase  price
     for those forty shares with the appropriate Iowa  authorities  under Iowa's
     escheat  laws.  The forty  shares  were held of record by twenty  different
     shareholders  that Breda had been  unable to  locate.  The  purchase  price
     utilized  for this  purpose was $149 per share.  Breda also  deposited  the
     amount of the April 21, 1999  dividend  that was  otherwise  payable on the
     forty shares. The total amount deposited by Breda was $6,080,  with $120 of
     that amount being for the April 21, 1999 dividend.

     Over the  period of  January  1, 2000  through  December  31,  2000,  Breda
     repurchased four hundred forty-one shares of its common stock from fourteen
     different shareholders, at a purchase price of $235 per share.

     There may have been transfers  among the  shareholders  of Breda during the
     above periods for which Breda did not exercise its right of first refusal.

     Breda's  ability  to  repurchase  any of its  shares is  subject to certain
     restrictions in its loan agreements with the RFTC.  Those  restrictions are
     discussed below in this Item.

     Breda has no plans to and has not agreed to  register  any of its shares of
     common stock under any federal or state  securities  laws.  Since Breda has
     been subject to the reporting  requirements of the Securities  Exchange Act
     of 1934 for a period of ninety days,  Rule 144 under the  Securities Act of
     1933 would be  available  to permit the resale of shares of common stock by
     shareholders,  subject  to  certain  restrictions  contained  in Rule  144,
     including the  requirement  that the shareholder has held his or her shares
     for a period of one year  prior to the date of resale.  Once a  shareholder
     (other than a shareholder  who is an officer or director of Breda) has held
     his or  her  shares  of  common  stock  for a  period  of  two  years,  the
     shareholder  would be able to resell the shares without  restriction  under
     Rule 144. As discussed  above,  however,  the governing  documents of Breda
     impose numerous  material  limitations and  restrictions on a shareholder's
     ability to sell or transfer any shares of Breda's common stock.

     The  marketability  and value of Breda's shares of common stock may also be
     limited by some of the other terms of the common stock.  For example,  each
     shareholder  is entitled to only one vote on each matter  presented  to the
     shareholders,  regardless  of the number of shares of common  stock held by
     the shareholder,  with one exception regarding  shareholders who previously
     held  Class A stock of  Breda.  Those  shareholders  have one vote for each
     share of former Class A stock previously held by them on February 28,


                                       28
<PAGE>

     1995, until one of the following occurs:

          o    the shareholder no longer receives service from Breda,

          o    the  shareholder  no longer  resides  in the Breda or  Lidderdale
               telephone exchange area served by Breda,

          o    the shareholder dies, or

          o    the  shareholder  transfers the  shareholder's  shares to someone
               else.

     As of March 1, 2001, there were 21 shareholders with multiple voting rights
     arising from their prior ownership of Class A stock, and they have one vote
     for each share of the former Class A stock previously held by them.

     An auction was held on October 24,  1999,  where  shareholders  desiring to
     sell their  shares of Breda's  common stock were given the  opportunity  to
     sell  those  shares  to  other  Breda  shareholders  desiring  to  purchase
     additional  shares of  Breda's  common  stock.  Breda paid the costs of the
     auction,  except that the sellers paid the auction  fees and clerking  fees
     related to their shares.  The auction was provided for the  convenience  of
     Breda's  shareholders,  and no shares were  repurchased  or issued by Breda
     pursuant to the auction.  A total of 1,924 shares of common stock were sold
     by 32  different  shareholders  to 25  other  shareholders  of  Breda,  for
     purchase prices ranging from $145 per share to $180 per share. As discussed
     above,  Breda had a right of first  refusal to  purchase  all of the shares
     sold in the  auction,  but elected not to  exercise  its right.  Breda did,
     however, offer to purchase shares in the auction for $142 per share, but no
     shareholder chose to sell the shareholder's  shares to Breda at that price.
     The $142 figure was approximately 60% of Breda's book value per share as of
     the close of the second  quarter in 1999. No officers or directors of Breda
     sold or purchased any shares in the auction.  Breda does not have any plans
     to arrange any other auctions in the future.

     The board of directors of Breda has also  determined to allow  shareholders
     to advise  Breda of the fact  that they  desire to sell any or all of their
     shares  of  Breda's  common  stock  to any  qualified  buyer,  and to allow
     qualified  buyers to advise  Breda of the fact that they desire to purchase
     shares of Breda's common stock from other shareholders of Breda. Breda will
     keep a list of those  shareholders and qualified buyers,  and make the list
     available to all of the  shareholders  and qualified  buyers on the list. A
     qualified  buyer is a person who is a resident  of the Breda or  Lidderdale
     telephone  exchange  areas  served  by  Breda  who  subscribes  to  Breda's
     telephone services,  or an entity which has its principal place of business
     in the Breda or  Lidderdale  telephone  exchange  areas served by Breda and
     which subscribes to Breda's telephone services.  A person or entity cannot,
     however,  be a qualified  buyer if the person or entity  already  owns more
     than 1% of the total  issued  and  outstanding  shares  of common  stock of
     Breda.  Also, a qualified buyer cannot purchase shares from any shareholder
     of Breda to the extent that the shares  purchased  by the  qualified  buyer
     would cause the qualified buyer to own more than 1% of the total issued and
     outstanding shares of common stock of Breda. If a person owns 5% or more of
     the  ownership  interests of an entity which owns shares of Breda's  common
     stock,  the shares of Breda's  common  stock held by that entity and by the
     person will be


                                       29
<PAGE>

     added together for determining  whether the 1% limitation is exceeded.  The
     1%  limitation  is set  forth  in the  Amended  and  Restated  Articles  of
     Incorporation  of Breda.  The terms of any sale between a shareholder and a
     qualified  buyer will be negotiated by them, and no one will be required to
     sell or buy any  shares  because  their  name is on the  list.  Breda  also
     retains its right to purchase any shares being sold by any  shareholder  to
     any qualified  buyer under the right of first  refusal  granted to Breda in
     its Amended and Restated Articles of Incorporation.

     During the calendar year 2000,  five separate sales of shares have occurred
     between shareholders on the list. Two sales each involved two shares, which
     were sold for $235 per share. One sale involved  fifty-three shares,  which
     were sold for $235 per share. One sale involved  thirty-one  shares,  which
     were sold for $155 per share. One sale involved two shares, which were sold
     for $149 per  share.  Breda  elected  not to  exercise  its  right of first
     refusal on these sales.

     Breda does not participate in, and has no responsibility  for,  negotiating
     the terms and conditions of any sale of shares between anyone on the list.

     Through  December 31, 2000,  Breda had only declared and paid two dividends
     to its  shareholders  since Breda was  incorporated  in 1964.  One of those
     dividends was declared on April 21, 1999. It was in the amount of $3.00 per
     share,  for an  aggregate  dividend of  $113,166.  The other  dividend  was
     declared on March 13,  2000.  It was also in the amount of $3.00 per share,
     for an aggregate  dividend of  $113,046.  Breda's  board of directors  also
     declared a $3.00 per share  dividend at a meeting  held on March 12,  2001.
     The  dividend  is  payable  on or before  the 2001  annual  meeting  of the
     shareholders, which is currently scheduled to be held on May 16, 2001.

     Payment  of  dividends  is  within  the  discretion  of  Breda's  board  of
     directors,  and out of funds legally available therefore as provided in the
     Iowa Business Corporation Act. Breda's ability to declare and pay dividends
     is also restricted by some of the covenants in its loan agreements with the
     RFTC. Under those  agreements,  Breda may not pay any dividends without the
     prior written approval of the RFTC unless,  after the payment,  Breda is in
     compliance with the various ratios,  net worth and margin  requirements set
     forth in the loan agreements. Breda also may not pay any dividends if Breda
     is in default under the loan  agreements or if the payment of the dividends
     would cause Breda to be in breach of the loan agreements.

     Those  restrictions  in the RFTC  loan  agreements  also  apply to  Breda's
     purchase or redemption  of any of its stock and to any other  distributions
     to its shareholders, so the restrictions may preclude Breda from being able
     to repurchase its shares of stock as otherwise discussed in this Item.


     Breda does not currently  believe,  however,  that the  restrictions in the
     RFTC loan  agreements  will  preclude  Breda from paying any  dividends  or
     distributions or from


                                       30
<PAGE>

     repurchasing  any of its shares of common  stock,  should  Breda  otherwise
     determine to do so.

     No shares of stock were issued by Breda in all of 2000. There are currently
     no outstanding warrants,  options or other rights to purchase any shares of
     common  stock of  Breda,  and  there  are  also  currently  no  outstanding
     securities  which are convertible or exchangeable  into or for common stock
     of Breda. Breda's shares of common stock are not convertible into any other
     securities.

Item 6. Management's Discussion and Analysis or Plan of Operation.

     Overview.

     This Item 6 should be read in conjunction with the financial statements and
     related notes included in Item 7 of this annual report.

     Breda's  primary  source  of  revenues  on a  consolidated  basis  with its
     subsidiaries  is from the  telephone  services  provided by Breda,  Prairie
     Telephone  and Westside  Independent.

     The operating  revenues from their telephone services are primarily derived
     from the following types of fees and charges:

     o    Flat  monthly fees charged to  subscribers  for basic local  telephone
          services.  As of March 1, 2001,  those fees varied from  approximately
          $11.50 to $35.00 per month.  The monthly fee is higher for subscribers
          who elect to have  additional  services and  features,  such as custom
          features.

     o    Access  charge  revenues   payable  by  long  distance   carriers  for
          intrastate and  interstate  exchange  services  provided to those long
          distance carriers. Access charge rates may be at a flat, fixed rate or
          may depend upon  usage.  As  discussed  above in Item 1 of this annual
          report,  access  charge  rates are subject to  regulation  by the FCC.
          Access  charge  revenues  constitute  a  substantial  part of Breda's,
          Prairie  Telephone's  and  Westside  Independent's   revenues,  and  a
          material  risk to them arises  from the  regulation  of access  charge
          rates  by the  FCC.  Breda  anticipates  continuing  pressure  for the
          lowering of access charge rates, so future reductions in access charge
          rates are likely.

          The access  charge rate  payable to  telephone  companies  like Breda,
          Prairie  Telephone and Westside  Independent  who utilize the "average
          schedule"  basis for  receiving  access  charge  revenues is based on,
          among other things, the number of miles of their cable over which they
          transfer long distance calls made by their subscribers.  Breda's total
          access charge revenues have been increasing in recent years, but Breda
          believes  those  increases are  attributable  to increased  numbers of
          subscribers,  increased calling patterns and  technological  advances.
          There is no assurance  that those trends will  continue,  and it is in
          fact unlikely that there will be any further material increases in the
          number of subscribers  without the  acquisition of additional  calling
          areas by


                                       31
<PAGE>

          Breda, Prairie Telephone or Westside Independent.

          As indicated above, Breda,  Prairie Telephone and Westside Independent
          utilize the  "average  schedule"  basis for  receiving  access  charge
          revenues.  This  is the  approach  taken  by  most  smaller  telephone
          companies.  Another approach currently  available for receiving access
          charge  revenues  is the "cost"  approach.  Telephone  companies  make
          filings  with the FCC which set forth  their costs of  providing  long
          distance services. Under the average schedule approach,  access charge
          rates are based upon,  in  general,  the average of all of those costs
          and certain  other  factors  intended to take into account the size of
          the particular telephone company in question.

          On October 20, 2000,  a  comprehensive  access  charge rate reform and
          deregulation plan for non-price cap, incumbent local exchange carriers
          ("LECs")  was  submitted  to the  FCC by the  Multi-Association  Group
          ("MAG").  LECs include most of the small and mid-sized  local exchange
          carriers  that  serve  rural and  insular  areas in the U.S.,  such as
          Breda, Prairie Telephone and Westside Independent.  MAG is a coalition
          of the National  Rural  Telecom  Association,  the National  Telephone
          Cooperative  Association,  the  Organization  for  the  Promotion  and
          Advancement  of  Small  Telecommunications  Companies  and the  United
          States  Telecom  Association.  MAG has been  working  to  formulate  a
          comprehensive plan to settle major proceedings  pending at the FCC and
          complete reforms required by the  Telecommunications  Act of 1996. The
          following  discussion  of the plan was  taken  substantially  from the
          petition  filed  by  MAG  with  the  FCC  regarding  the  plan,   and,
          accordingly,  states MAG's view of the plan.  Although Breda was still
          evaluating  the plan at the  time of the  preparation  of this  annual
          report,  Breda believes that it concurs in all material  respects with
          the  following  discussion of the plan.  As with any  compromise  type
          situation,  however,  there are  various  aspects of the plan which do
          concern Breda and, as indicated,  Breda will be further evaluating and
          considering the plan.  Breda's current views of the plan may therefore
          change.

          The plan submitted by MAG seeks to address in a  comprehensive  manner
          some of the  numerous  issues that face LECs.  The plan is intended to
          create more  efficient  cost  recovery  under the FCC's access  charge
          system  while  making  universal  service  support  more  explicit and
          enforcing   the    geographic    averaging    requirements    of   the
          Telecommunications  Act of  1996.  The plan is also  intended  to help
          ensure that up-to-date broadband  infrastructure and advanced services
          will be widely available to all Americans, consistent with section 706
          of the  Telecommunications  Act of 1996. The plan would take effect on
          July 1, 2001. The FCC must,  however,  approve of the plan so there is
          no guaranty that the plan, or any modified  version of the plan,  will
          be effective by that date.

          The  plan  moves  in  the  same   policy   direction   as  the  recent
          recommendation  of the Rural Task Force  ("RTF") to the  Federal-State
          Joint Board,  although there are differences  between the plan and the
          RTF  recommendation.  The  plan  also  is  compatible  with,  but  not
          identical to, one for price cap local exchange carriers


                                       32
<PAGE>

          and interexchange  carriers ("IXCs") that the FCC adopted based on the
          proposal  of the  Coalition  for  Affordable  Local and Long  Distance
          Service ("CALLS").

          The plan consists of two regulatory regimes or "paths," referred to as
          Path A and Path B. The plan's  features,  and the two regulatory paths
          it adopts,  are  intended to reflect the great  diversity of non-price
          cap LECs.  Non-price  cap LECs range in size from those  serving a few
          hundred customers to multiple thousands.  Non-price cap LECs serve the
          most rural areas of the United States as well as some growing suburban
          areas.

          Each  operating  company of the  non-price  cap LECs will elect either
          Path A or Path B before the start of the plan.  Both paths of the plan
          are intended to reform the access charge structure to provide for more
          efficient  cost recovery.  They do so by raising the  subscriber  line
          charges  ("SLCs") of the  non-price  cap LECs.  The plan also mandates
          lower long distance rates for residential consumers in the territories
          of LECs  subject  to it.  The idea is that with the more  economically
          efficient  access charges that will result from the plan, IXCs will be
          more  readily   able  to  satisfy  the   geographic   rate   averaging
          requirements of the Telecommunications Act of 1996, and that IXCs will
          flow through to consumers the savings from decreases in such charges.

          For both paths of the plan,  Lifeline  support will be increased to be
          consistent   with  the  FCC's  recent   CALLS  order.   Like  the  RTF
          recommendation,  the plan  recognizes  that the FCC's current rules do
          not fully address universal  service concerns.  The plan moves further
          than the RTF  recommendation by removing the current caps on high cost
          loop support and other  universal  service support for both Path A and
          Path B.

          LECs  electing  Path A will have a period of up to five years from the
          start of the plan to transition on a  per-study-area  basis from their
          existing forms of rate-of-return regulation to a new form of incentive
          regulation.  The  length  of this  period  is  intended  to  permit  a
          reasonable,  but flexible,  transition to incentive regulation. At the
          end of the transition period, all study areas of Path A LECs that have
          not already  converted to incentive  regulation will be required to do
          so.

          In the plan's form of incentive regulation,  a LEC's interstate access
          revenue per line ("RPL") is fixed but adjusted annually for inflation.
          Under  this  type  of  incentive  regulation,  a Path A  LEC's  annual
          interstate  access  revenues  will be calculated as the product of its
          annual RPL and its line count for that  year.  This type of  incentive
          regulation is intended to incorporate  major incentives for maximizing
          efficiency,  thus  complementing  the FCC's  price cap  regime for the
          largest  LECs.  Similar to that  regime,  the plan  includes a low end
          adjustment mechanism for Path A LECs. This RPL-based form of incentive
          regulation  is  designed  to be  compatible  with the  pooling  system
          administered  by NECA. The plan replaces the current  two-pool  system
          that NECA administers with a single pool.

          The plan creates a new form of explicit  interstate  universal service
          support,  known as rate averaging support ("RAS"),  to be available to
          Path A LECs in the NECA pool.


                                       33
<PAGE>

          The RAS will  function  similarly  to long term  support  in  lowering
          access    charges.    The   RAS   will   be   portable   to   eligible
          telecommunications carriers. The RAS is intended to be a major step in
          moving  universal  service  support for LECs  subject to the plan away
          from implicit mechanisms in a competitively  neutral way. By providing
          for more explicit  universal service support,  Path A is also intended
          to promote equitable and efficient competition.

          LECs that elect Path B  initially  will remain  under  their  existing
          forms  of  rate-of-return  regulation  as  average  schedule  or  cost
          companies.  Path B is thought to serve the public interest  because it
          recognizes the diverse  conditions faced by non-price cap LECs. Path B
          implements  most of the  same  access  charge  and  universal  service
          reforms as Path A, with the same types of benefits to consumers.  Path
          B LECs do not receive the RAS.  The  currently  authorized  interstate
          rate of  return  will  remain in place for Path B LECs and Path A LECs
          with study areas not yet subject to incentive regulation.

          The  plan  encourages  Path B LECs  to  move  to the  plan's  form  of
          incentive  regulation  by  permitting  them to choose to become Path A
          LECs prior to the end of the  five-year  transition  period.  From the
          time  that  such  LECs  become  Path A  LECs  through  the  end of the
          transition period, they will be able to elect incentive  regulation on
          a per-study area basis,  like other Path A LECs.  After the end of the
          transition period, like other Path A LECs, all Path B study areas that
          have  moved to Path A within the  transition  period  must  convert to
          incentive regulation.

          As indicated  above,  Breda is still  evaluating the plan. There is no
          guarantee  of adoption of the plan in its  entirety by the FCC.  Breda
          believes  that if the plan is not  adopted in its  entirety,  it could
          have a severe negative impact on revenues.

     o    Revenue  from the  sale  and  lease  of  customer  premises  telephone
          equipment  and other similar  items and other  miscellaneous  customer
          services, such as custom calling services. Since the completion of the
          upgrading of their telephone switches in 1998 and 1999, Breda, Prairie
          Telephone and Westside  Independent  have had the  capability to offer
          many more custom calling features to their subscribers. Breda, Prairie
          Telephone  and  Westside  Independent  have  been  marketing  extended
          packages and custom calling features to their  subscribers in the hope
          that may increase and maximize subscriber usage of the newly available
          packages and features.  Revenues from custom calling services are not,
          however, ever anticipated to be a major or material source of revenue.

     o    Fees from long distance providers for billing and collection  services
          for long distance calls made by subscribers.  Breda, Prairie Telephone
          and Westside  Independent are  experiencing  increased  competition in
          this area. As discussed in Item 1 of this annual


                                       34
<PAGE>

          report,  their competitors include other third parties providing these
          services,  and competition from the long distance providers themselves
          since some  providers  have  decided to handle  their own  billing and
          collection.

     Breda,  Prairie  Telephone,  Westside  Independent  and BTC  each  generate
     revenues from providing  internet access and from sales and leases of other
     equipment and facilities for private line data transmission,  such as local
     area networks,  virtual  private  networks and wide area  networks.  During
     1999, there was an increase of approximately  65% in the combined  internet
     customer base of Breda,  Prairie Telephone,  Westside  Independent and BTC.
     BTC itself  experienced  an increase of  approximately  68% in its internet
     customer base in 1999.

     The increase in the combined  internet  customer  base of the  companies in
     2000 was only 39.7%,  however,  even though BTC itself  experienced a 55.7%
     increase in its customer base.  Future increases in BTC's internet customer
     base  could be lower,  however,  because  BTC's  current  customer  base is
     limited  to  Carroll,  Iowa  and  the  surrounding  communities.  Also,  as
     discussed  in  Item  1  above,   Breda  is  now  experiencing   price-point
     competition  in  three  of  the  communities  where  it  provides  Internet
     services.  Breda also  believes  that Breda,  Prairie  Telephone,  Westside
     Independent and BTC will face increasing  competition in providing internet
     services through,  among possibly other things, the increased  provision of
     internet access and services through cable; technological advances that may
     allow cable  access and services to be provided  through new  methods;  and
     mergers and consolidations within the telecommunications industry which may
     create new competitors  with expanded  resources and the ability to provide
     expanded services.  Similar percentages  increases in the internet customer
     base in the future are therefore not anticipated.

     Breda's other primary  source of revenue on a  consolidated  basis with its
     subsidiaries   is   generated   from    Tele-Services'    cable   business.
     Tele-Services'  operating  revenues  arise  primarily from monthly fees for
     basic  and  premium  cable  services  provided  to its  cable  subscribers.
     Tele-Services'  main  competition  at the time of the  preparation  of this
     annual report was from satellite dish providers.  Recent actions by the FCC
     have allowed satellite dish providers to provide local channels, which will
     have an adverse effect on Tele-Services,  given that its ability to provide
     local  channels  was,  in the past,  one reason  subscribers  might  choose
     Tele-Services'  cable  services  over a satellite  dish.  Other rulings and
     decisions  by  the  FCC  are  possible,  and  may  provide  satellite  dish
     providers,  or other  providers  as changes in the  telecommunications  and
     cable industry occur, with equal or greater  advantages than  Tele-Services
     can offer to its subscribers,  which could obviously have an adverse effect
     on Tele-Services'  business.  Breda currently believes,  however,  that the
     cable services provided by Tele-Services  will continue to be desirable for
     at least those  subscribers  who desire a lower priced  product that allows
     local channel options.

     Tele-Services is working on consolidating  its head-end  equipment with the
     goal  being  that the  equipment  will  then be able to  serve  two or more
     communities,  instead of just one community as is currently the case. It is
     hoped that this consolidation will reduce


                                       35
<PAGE>

     Tele-Services' maintenance costs for that equipment.

     Another  difficulty  being  faced  by  Tele-Services  at  the  time  of the
     preparation  of this  annual  report was the trend of the  companies  which
     provide  programming  licensing to cable services  providers to require the
     cable services providers to include particular channels on their systems as
     a condition of receiving a programming license.  Tele-Services  anticipates
     that it will continue to need to upgrade its plant, equipment and cables in
     order to add more  channel  line-ups  so that it can stay  competitive  and
     continue to be able to obtain programming licenses.

     The cost of those  upgrades in 2001, and of any head-end  consolidation  as
     discussed above, are estimated to be less than $100,000.

     Other revenues arise from the telemarketing  activities of Pacific Junction
     and  investments  in various  cellular  limited  partnerships  and cellular
     corporations.  Those sources of revenue are briefly noted in Item 1 of this
     annual report. Other miscellaneous sources of revenue are also discussed in
     the financial statements found at Section 7 of this annual report.

     The following  table  reflects,  on a consolidated  basis for Breda and its
     subsidiaries,  the  percentage  of revenue  derived  from  Breda's  and its
     subsidiaries'  various  businesses  and  investments as of the close of the
     past two fiscal years:

                                       1999       2000
                                       ----       ----
           Local Exchange
             Carrier(1)               65.1%      67.4%
           Broadcast(2)               19.8%      17.3%
           Internet Service
             Provider(3)               7.6%      10.7%
           Other(4)                    7.5%       4.6%
                                      ----       ----
                    Total              100%       100%


     (1)  Includes  (i) flat  monthly  fees  charged  to  subscribers  by Breda,
          Prairie  Telephone and Westside  Independent for basic local telephone
          services,  (ii) universal  services funding amounts and access charges
          payable  by long  distance  carriers  for  intrastate  and  interstate
          exchange services provided to those long distance carriers, (iii) fees
          from long distance  providers for billing and collection  services for
          long distance  calls made by  subscribers,  and (iv) monthly  cellular
          commissions, advertising fees, and miscellaneous revenues.

     (2)  Includes  monthly fees charged for basic and premium  cable  services,
          and  direct  broadcast  satellite   services.   The  direct  broadcast
          satellite operation was sold in January, 1999.

     (3)  Includes monthly fees charged for internet services.

     (4)  Includes revenues from telemarketing services.

                                       36
<PAGE>

     Year Ended December 31, 1999 to Year Ended December 31, 2000.

     There was an increase in net  operating  income for the twelve month period
     ended  December  31,  2000,  when  compared to the same period in 1999,  of
     $72,725,  or 9.3%.  While there were  significant  swings in the components
     making up gross operating revenue and gross operating expense, the main two
     net revenue  streams  causing the $72,725 net operating  revenues  increase
     were increased access revenue and increased cellular service revenue.

     Overall  operating   revenues  increased   $761,608,   or  14.4%,  for  the
     twelve-month   period  ended   December  31,  2000  when  compared  to  the
     twelve-month period ended December 31, 1999. Local exchange carrier revenue
     includes  local network  services,  network  access  services,  billing and
     collection  services  and  miscellaneous  income.  Local  exchange  carrier
     revenue  increased  $639,128,  or 18.6%,  for the twelve month period ended
     December 31, 2000, when compared to the same period in 1999.

     Local network  services  revenue  increased by $52,339,  or 10.2%,  for the
     twelve-month  period ended  December 31,  2000,  when  compared to the same
     twelve-month  period in 1999.  Approximately  $18,603 of the  increase  was
     attributable to the fact that the remaining four of six switch  conversions
     were completed in 1999, which allowed a full year of custom calling feature
     revenue to be recorded in 2000. The remaining  $33,736 of the local network
     service  revenue  increase for the twelve  month period ended  December 31,
     2000  resulted  from  having a full  year of the rate  increase  which  was
     implemented on April 1, 1999.

     Network access revenue  increased  $292,676,  or 13.2%,  when comparing the
     twelve  month period  ended  December 31, 2000,  to the twelve month period
     ended  December 31, 1999.  This  increase was due to  additional  lines and
     facilities in the Yale telephone  exchange now being eligible for NECA pool
     reimbursements,   and  because  Breda,   Prairie   Telephone  and  Westside
     Independent  had  a  retroactive   one-time  adjustment  to  estimated  SS7
     connectivity  revenues. The SS7 connectivity revenues and the Yale exchange
     NECA pool revenues will be ongoing access revenue in the future.

     Bill and collection  services comprise a small component of gross operating
     revenues  and varies  dependent  on the amount of  billing  and  collection
     services provided by Breda to other carriers, such as AT&T. The billing and
     collection   services  revenues  increased  $15,058,   or  19.8%,  for  the
     twelve-month   period  ended  December  31,  2000,  when  compared  to  the
     twelve-month period ended December 31, 1999.

     A significant  component of the overall  operating  revenue increase was an
     increase of $279,055, or 44.5%, in miscellaneous revenue when comparing the
     twelve month period ended  December 31, 2000,  with the twelve month period
     ended  December  31,  1999.  The  increase  in  miscellaneous  revenue  was
     primarily  the result of increased  cellular  service  commissions.  Breda
     opened a retail outlet in Carroll, Iowa in early April 2000, which has


                                       37
<PAGE>

     significantly  expanded its market penetration in cellular services in that
     area.

     Broadcast  services  revenues were static when  comparing the  twelve-month
     period ended December 31, 2000, to the  twelve-month  period ended December
     31, 1999.

     There was an  increase in Internet  services  revenue for the twelve  month
     period ended  December 31, 2000,  when compared to the same period in 1999,
     of $245,465,  or 61%.  This increase was due to an increase in the customer
     base of an  additional  667 Internet  lines when  comparing  the two twelve
     month periods. There was also an increase in the associated expenditures to
     provide  those  services to the  additional  Internet  customers,  however,
     resulting in a less than positive impact on net operating revenue.

     Other revenues  include  telemarketing  services  revenue,  which decreased
     $122,086,  or 30.6%,  when comparing the period ended December 31, 2000, to
     the same period in 1999. The decrease is attributable to the decline in the
     volume of telemarketing calls made by Pacific Junction.  The decline in the
     volume of telemarketing calls is attributable to Pacific Junction receiving
     less  telemarketing  leads from Results  Telemarketing,  Inc., which is the
     company   Pacific   Junction  has  contracted   with  to  provide  it  with
     telemarketing  leads.  Pacific Junction is continuing to seek  supplemental
     programs  to  augment   the   telemarketing   leads   provided  by  Results
     Telemarketing,   Inc.  and  is  also  evaluating   other   alternatives  to
     nation-wide licensing of its telemarketing service representatives.

     There was an increase in total  operating  expenses of $688,883,  or 15.3%,
     for the twelve month period ended  December 31, 2000,  when compared to the
     twelve-month  period ended December 31, 1999. All but two of the components
     of the operating  expenses  increased during the twelve-month  period ended
     December 31, 2000.

     Cost of services  expenses  increased  $553,093,  or 32.9%,  for the twelve
     month period ended  December 31, 2000,  when  compared to the  twelve-month
     period ended December 31, 1999. The cost of services components,  which are
     plant specific operations, plant non-specific operations,  programming, and
     Internet costs are explained below.

     There was a  $424,240,  or 36.9%,  increase  in plant  specific  operations
     expense when  comparing the twelve month period ended December 31, 2000, to
     the twelve month period ended December 31, 1999. Of this $424,240 increase,
     approximately  $181,821 was increased  cellular operating expense for items
     such as inventory,  personnel costs and advertising  expense to support the
     increased  cellular  service  revenue  generated at Breda's retail outlet.
     Other areas of increased  expenditures were education and training expense,
     subscriber carrier charges, and repairs and maintenance.

     Plant  nonspecific  operating  expense  decreased  $5,833, or 5.9%, for the
     twelve  month  period  ended  December  31,  2000,  when  compared  to  the
     twelve-month  period ended December 31, 1999. This expense  category change
     is mainly accounted for by the difference in timing of such expenditures as
     postage for mass mailing of statements to customers.


                                       38
<PAGE>

     There was a $29,643,  or 11%, increase in programming expense for broadcast
     services when  comparing  the twelve month period ended  December 31, 2000,
     with the twelve  month period ended  December  31,  1999.  The  programming
     increase  was the  result  of  programming  fee  increases  and the  timing
     differences  of free  programming  promotion  offers between the two twelve
     month time periods.

     Because of its growth,  Internet  revenue and expense are now reported as a
     separate segment.  The cost of Internet services increased by $105,043,  or
     64.5%, for the  twelve-month  period ended December 31, 2000, when compared
     to the twelve  month  period ended  December  31,  1999.  This  increase is
     directly  attributable  to  the  additional  costs  of  providing  Internet
     services to the increased  customer  base.  These costs include  additional
     rental  of fiber  lines,  help  desk and  customer  services  fees from the
     underlying  internet  service  provider,  and  internal  costs  to  provide
     customer service and billing service to the additional customers.

     Depreciation and amortization  expense  increased by $88,058,  or 8.7%, for
     the twelve month period ended December 31, 2000,  when compared to the same
     period in 1999. The switches in Breda's,  Prairie  Telephone's and Westside
     Independent's seven telephone exchanges were replaced during 1998 and 1999.
     The twelve month period ended  December 31, 2000,  reflected a full year of
     depreciation on all seven new switches, while the twelve month period ended
     December 31, 1999,  only  reflected  partial year  depreciation  on the new
     switches that had been installed in 1999.  Depreciation rates in the twelve
     month period ended  December 31, 2000 also reflect  increased  depreciation
     rates on depreciable equipment associated with new technology services such
     as high-speed  internet to match the actual  estimated life of these assets
     before obsolescence.

     Selling,  general and administrative  expenses increased $47,732,  or 2.6%,
     for the twelve month period ended  December 31, 2000,  when compared to the
     same period in 1999. Customer  operations  increased $63,782, or 9.1%, when
     comparing  these two twelve month time  periods,  and mainly  resulted from
     increased  labor and benefit costs.  Breda  experienced a 9.38% increase in
     its health plan premiums for the year 2000.  Corporate operations decreased
     $24,765,  or 2.6%,  during the twelve month period ended  December 31, 2000
     when  compared to the twelve  month period  ended  December  31, 1999.  The
     decrease mainly  resulted from a decrease in outside legal,  accounting and
     consultant fees. General taxes paid by Breda increased $8,715, or 5.8%, for
     the twelve  month period ended  December  31,  2000,  when  compared to the
     twelve month period ended  December 31, 1999,  and resulted from  increased
     tax rates levied by the taxing authorities in the various counties.

     Non-operating  income  decreased  by  $1,717,627,   or  23.2%,  during  the
     twelve-month  period ended  December 31,  2000,  when  compared to the same
     period in 1999. The main factor in this decrease was the difference between
     the  $7,436,415  gain on  Breda's  sale of the direct  broadcast  satellite
     operation in January 1999, versus the $5,018,714 gain on the May, 2000 sale
     of Prairie Telephone's shares of stock in Central Iowa Cellular,  Inc. Part
     of the $2,417,701  decrease in the gain when comparing the direct broadcast
     satellite


                                       39
<PAGE>

     operation sale with the Central Iowa  Cellular,  Inc. stock sale was offset
     by a  $55l,095,  or 447.6%,  increase in  proceeds  generated  in 2000 from
     cellular  investments.  There was a $13,455,  or 2.8%, decrease in interest
     and  dividend  income,  and a $80,741  decrease  in interest  expense  when
     comparing  the twelve month  period  ended  December 31, 2000 with the same
     period in 1999. While the decrease in interest and dividend income caused a
     corresponding  decrease in  non-operating  income,  the $80,741 decrease in
     interest expense  indirectly  caused an increase in  non-operating  income.
     Both the interest and dividend income decrease and the decrease in interest
     expense  were the  result of Breda,  Prairie  Telephone  and  Tele-Services
     paying  off  approximately  $4,999,053  in  long  term  debt  to the  Rural
     Telephone Finance Cooperative during the twelve-month period ended December
     31, 2000. Investments were redeemed to pay approximately $2,100,000 of this
     $4,999,053 debt,  which resulted in less investment  income being generated
     for the remainder of the year. There was a $96,624, or 112.1%,  increase in
     other income  (net) for the  twelve-month  period ended  December 31, 2000,
     when compared to the twelve-month  period ended December 31, 1999. In 1999,
     there was a $73,996 loss on the disposal of switches for which there was no
     corresponding entry in 2000. In 2000, a first-time distribution from Alpine
     Communications, L.C. of $23,508 was included in other income. Both of those
     entries  caused a positive  increase  in other  income when  comparing  the
     twelve-month  period ended  December 31, 2000, to the  twelve-month  period
     ended December 31, 1999.

     Income taxes decreased by $569,034,  or 18.3%,  for the twelve month period
     ended  December 31,  2000,  when  compared to the same period in 1999.  The
     decrease resulted primarily from the difference in taxable gain on the sale
     of the Central Iowa  Cellular,  Inc.  stock in May 2000,  versus the direct
     broadcast satellite operation taxable gain in January 1999.

     Net income decreased  $1,075,868,  or 21.2%,  for the  twelve-month  period
     ended  December 31, 2000,  when  compared to the same period in 1999.  Even
     though net operating income  increased by $72,725,  the main reason for the
     net income  decrease was the  difference  in taxable gains after income tax
     computations  between  the direct  broadcast  satellite  operation  sale in
     January 1999 and the sale of the Central Iowa  Cellular,  Inc. stock in May
     2000.

     Liquidity and Capital Resources at Twelve Months Ended December 31, 2000.

     Breda's net working  capital was a positive  $1,774,778  as of the close of
     December  2000.  This  represents  an  increase  of $889,136 in net working
     capital from year-end 1999. The positive  working  capital at year-end 2000
     was due mainly to three  factors.  Two of those  factors were that cash and
     cash equivalents  increased $693,236,  and temporary  investments increased
     $175,030,  during the twelve  month  period  ended  December  31, 2000 when
     compared to the twelve  month period  ended  December  31, 1999.  The third
     factor is that the current portion of long-term debt decreased by $490,112.
     These net working  capital changes  resulted  primarily from the receipt of
     $5,226,034 in cash from the sale of the Central Iowa  Cellular,  Inc. stock
     in May, 2000, and the subsequent payoff


                                       40
<PAGE>

     of the variable  rate (8.05% - 8.4% at December 31, 2000) long term debt of
     $4,695,968 to the Rural  Telephone  Finance  Cooperative  on June 30, 2000,
     September 30, 2000, and October 16, 2000.  Other expenses  associated  with
     the payoff of the Rural Telephone  Finance  Cooperative  variable rate debt
     were interest costs of $54,289, and prepayment  penalties of $17,262.  Long
     term  investments  totaling  $2,100,000  were  liquidated  and used for the
     payment of a portion of this  long-term  debt.  The Central Iowa  Cellular,
     Inc.  stock sale  proceeds  were also used to make  federal  estimated  tax
     payments of $2,435,069 during the year ended December 31, 2000.

     The other current assets  category  decreased by $72,144 when comparing the
     year-end 2000 with year-end 1999. The difference resulted from a difference
     in  timing  of the  payment  of  employee  benefits  premiums  for  health,
     life/AD&D, and retirement for the first quarter of 2000.

     Long  term  investments  decreased  by  $1,529,121  from  year-end  1999 to
     year-end  2000. As noted  previously,  $2,100,000 in long term  investments
     were  redeemed to pay off  variable  rate debt owed to the Rural  Telephone
     Finance  Cooperative.   The  difference  between  the  $2,100,000  and  the
     $1,529,121  decrease  in  long-term  investment  resulted  from  additional
     long-term investments made by Breda.

     Accounts payable increased by $124,445 from year-end 1999 to year-end 2000.
     While there were  increased  cellular  inventory  payables at year-end 2000
     because of the holiday season demand for cell phones, the overall change is
     due to timing differences in the payment of invoices.

     The  long-term  debt  decrease  of  $4,508,940  is the result of  scheduled
     quarterly  principal  payments  being paid in 2000 as well as the payoff of
     the Rural Telephone Finance Cooperative long term debt as noted above.

     Other.

     Breda's primary ongoing capital investment activity will currently continue
     to be additions  to  property,  plant and  equipment.  For  example,  Breda
     continues to make  investments in  state-of-the-art  technology in order to
     try to offer  subscribers the best possible service.  Capital  expenditures
     for 1999 and 2000 were,  respectively,  $1,249,414  and  $726,922,  and are
     currently expected to be approximately $777,151 in 2001.

     Breda does anticipate that  substantial  expenditures  will need to be made
     for  software  upgrades  that will  become  necessary  in order for  Breda,
     Prairie  Telephone and Westside  Independent  to become  compliant with the
     requirements  of the  Communications  Assistance  for Law  Enforcement  Act
     ("CALEA").  CALEA  was  passed in 1994 in  response  to rapid  advances  in
     telecommunications  technology,  such  as  the  implementation  of  digital
     technology and wireless  services,  that have threatened the ability of law
     enforcement officials to conduct authorized electronic surveillance.  CALEA
     requires telecommunications carriers to modify their equipment, facilities,
     and


                                       41
<PAGE>

     services to ensure that they are able to comply with authorized  electronic
     surveillance. These modifications were originally scheduled to be completed
     by October 25, 1998,  but in accord with an  extension  granted by the FCC,
     were  generally to be completed by June 30, 2000.  However,  for  wireline,
     cellular,   and  broadband  personal   communications   services  carriers,
     implementation   of  a  packet-mode   capability   and  six  Department  of
     Justice/Federal  Bureau of Investigation  "punch list" capabilities must be
     completed by June 30, 2001.  Breda is currently  seeking  estimates for the
     cost to upgrade  Breda's,  Prairie  Telephone's and Westside  Independent's
     software as necessary to become  compliant with the Act, but, as indicated,
     Breda  anticipates  substantial  expenditures  will be necessary,  and that
     those  expenditures may be as much as approximately  $200,000.  Breda does,
     however, intend to attempt to seek an extension of the time period in which
     Breda,  Prairie  Telephone and Westside  Independent  must become compliant
     with the Act, so that the software  upgrades  necessary to become compliant
     with the Act can be made over an extended basis and as part of the software
     enhancements that will be necessary as part of Breda's, Prairie Telephone's
     and Westside  Independent's  normal operations.  If Breda were granted that
     extension,  it is  estimated  that the  extension  would be for a  one-year
     period.

     As of December  31, 2000,  Breda had  approximately  $2,157,290  on its one
     outstanding loan with the Rural Telephone Finance Cooperative.  The loan is
     also  discussed in Item 2 of this annual  report.  The interest rate on the
     loan was fixed on July 17,  1998,  at 7.35% per annum.  Prior to that date,
     the loan had a variable  interest  rate.  The loan has a fifteen  year term
     that matures in September, 2013.

     Breda also plans to  continue to consider  expanding  its core  business of
     providing  telephone  services  by looking at any  opportunities  which may
     arise to  acquire  additional  telephone  lines.  There are no  assurances,
     however,   that  any  such  opportunities  will  arise  or  that  any  such
     opportunities will fit into Breda's strategic plan.

     Breda also has an interest in Alpine Communications, L.C., which was formed
     by several independent telephone companies. Alpine Communications, L.C. has
     purchased US West telephone properties in northeastern Iowa.

     Breda,  Prairie  Telephone  and  Westside  Independent  currently  have  no
     definite plans to provide any material  additional or improved  services to
     their subscribers.  This determination may change quickly,  however,  given
     the  rapidly  changing  technology  in  the  telecommunications  and  cable
     industries.

     As discussed in Item 1 of this annual report,  Breda and Prairie  Telephone
     have purchased spectrum for providing personal  communications  services in
     the Breda,  Lidderdale and Yale telephone exchange areas. Prairie Telephone
     has also  become a member  in  Guthrie  Group,  L.L.C.,  which is a limited
     liability  company  which has  purchased  spectrum for  providing  personal
     communications  services in some areas in Guthrie County,  Iowa.  Breda has
     also become a member in Carroll County Wireless, L.L.C., which is a limited
     liability  company  which has  purchased  spectrum for  providing  personal
     communications


                                       42
<PAGE>

     services in Carroll  County,  Iowa.  Breda  contemplates  transferring  its
     personal  communications  services  licenses  for its Breda and  Lidderdale
     exchange areas to Carroll County Wireless, L.L.C. upon FCC approval of that
     transfer.

     Personal   communications   services  is  a  relatively  new  area  in  the
     telecommunications   industry   and  includes   wireless   voice  and  data
     communication.  Although  difficult  to  predict,  personal  communications
     services  may  become  very  important  in the  future  and  may be  highly
     competitive with current  cellular  services.  Breda and Prairie  Telephone
     have not made any firm  decision  on  whether  they  will  ever  offer  any
     personal   communications   services,   and,  as  indicated  above,   Breda
     contemplates  transferring the personal communications services licenses it
     holds  for its  Breda  and  Lidderdale  exchange  areas to  Carroll  County
     Wireless,  L.L.C.  Breda itself may therefore never directly offer personal
     communications  services. Breda and Prairie Telephone do not, in any event,
     contemplate offering any personal communications services for at least 1 to
     3 years,  primarily  because  those  services  must first be  available  in
     surrounding  areas before  Breda and Prairie  Telephone  can provide  those
     services.  Guthrie Group, L.L.C. and Carroll County Wireless, L.L.C. do not
     contemplate offering personal  communications  services for at least 1 to 3
     years,  for the same reasons.  Breda estimates that it will take at least 1
     to  3  years  for  the  surrounding  areas  to  build  out  their  personal
     communications systems to the point where Breda, Prairie Telephone, Guthrie
     Group,  L.L.C. or Carroll County  Wireless,  L.L.C.  could connect to those
     systems.

     Breda,  Prairie  Telephone  and Westside  Independent  do not currently own
     spectrum for all of the telephone  exchange service areas serviced by them,
     and there is no  guarantee  that they will be able to acquire  spectrum for
     all of those areas.  The spectrum they do own is also limited to 10 MHz. As
     noted   above,   Breda  also   contemplates   transferring   its   personal
     communications  services  licenses  for its Breda and  Lidderdale  exchange
     areas to Carroll County  Wireless,  L.L.C.  There is also no assurance that
     Guthrie Group, L.L.C. or Carroll County Wireless,  L.L.C. will ever acquire
     any  additional  spectrum.   Also,  Breda,   Prairie  Telephone,   Westside
     Independent, Guthrie Group, L.L.C. and Carroll County Wireless, L.L.C. will
     face competition in providing personal  communications  services because no
     exclusive  rights can be acquired  with respect to personal  communications
     services.

     The area of personal communications services is therefore an uncertain area
     for Breda, Prairie Telephone and Westside Independent.

     Personal   communications  services  are  competitive  with  telephone  and
     cellular  services.  Breda does not believe,  however,  that investments in
     personal  communications  services or in ventures  which may be involved in
     personal  communications  services  are  inconsistent  or in conflict  with
     Breda's,  Prairie Telephone's or Westside  Independent's  overall business.
     Breda  also  believes  positioning  itself  to be  able to  offer  personal
     communications  services or  investing  in other  ventures  which may offer
     personal  communications  services are methods of  attempting  to diversify
     across the various  telecommunications methods which are available today or
     may become important in the


                                       43
<PAGE>

     future.

     There are no current  plans to expand the cable  services  areas of, or the
     cable services provided by, Tele-Services.

     Breda  and its  subsidiaries  have  and  will  continue  to  incur  capital
     expenditures in connection with upgrading their telephone,  cable and other
     equipment and systems.

     Breda will be upgrading its financial  system software in the third quarter
     of  2001.  Breda  needs  to  upgrade  the  software  in order to be able to
     continue  to receive  support  for the  software  from the  provider of the
     software.   Breda  also  contemplates  converting  the  financial  software
     utilized by Westside  Independent to the same financial system software now
     utilized by Breda and its other  subsidiaries,  with that  conversion to be
     effectuated  in either the fourth  quarter of 2001 or the first  quarter of
     2002.  The costs of the  upgrades and  conversions  will not be material to
     Breda.

     Breda  believes  that  the  funds  from the  sale of its  direct  broadcast
     satellite  division and from the sale by Prairie Telephone of its shares of
     stock in Central Iowa Cellular,  Inc.,  along with its  anticipated  normal
     operating revenues,  will generate sufficient working capital for Breda and
     its  subsidiaries  to meet  their  current  operating  needs  and  maintain
     historical fixed asset addition levels.

Item 7. Financial Statements.


                                       44
<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED FINANCIAL STATEMENTS
                        WITH INDEPENDENT AUDITORS' REPORT
                     Years Ended December 31, 2000 and 1999

                                       45


<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                                    CONTENTS

                                                                        Page
                                                                        ----

Independent Auditors' Report                                              47

Consolidated Financial Statements:

     Consolidated Balance Sheets                                     48 - 49

     Consolidated Statements of Income                                    50

     Consolidated Statements of Stockholders' Equity                      51

     Consolidated Statements of Cash Flows                                52

     Notes to Consolidated Financial Statements                      53 - 64


                                       46

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Breda Telephone Corporation and Subsidiaries
Breda, Iowa

We have audited the accompanying  consolidated balance sheets of Breda Telephone
Corporation (an Iowa  corporation)  and subsidiaries as of December 31, 2000 and
1999, and the related  consolidated  statements of income,  stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

We conducted our audits in accordance with generally accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits 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 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 Breda  Telephone
Corporation  and  subsidiaries as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles in the United States of America.


Kiesling Associates LLP
Emmetsburg, Iowa
February 1, 2001

                                       47

<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999

                                                           2000          1999
                                                           ----          ----
                      ASSETS

CURRENT ASSETS
   Cash and cash equivalents                           $ 1,104,577   $   411,341
   Temporary investments                                   269,840        94,810
   Accounts receivable                                     703,468       681,675
   Interest receivable                                      50,800        67,580
   Prepaid income taxes                                    336,465       542,330
   Inventories                                              92,058        88,479
   Other                                                     5,383        77,527
                                                       -----------   -----------
                                                         2,562,591     1,963,742
                                                       -----------   -----------

OTHER NONCURRENT ASSETS
   Long-term investments                                 2,888,500     4,417,624
   Other investments                                     2,806,107     2,725,488
   Intangibles, net of accumulated amortization          1,107,625     1,222,372
   Deferred income taxes                                   113,595        11,360
                                                       -----------   -----------
                                                         6,915,827     8,376,844
                                                       -----------   -----------

PROPERTY AND EQUIPMENT                                   6,176,434     6,340,193
                                                       -----------   -----------

        TOTAL ASSETS                                   $15,654,852   $16,680,779
                                                       ===========   ===========













              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       48


<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999



                                                            2000          1999
                                                            ----         ----
     LIABILITIES AND STOCKHOLDERS' EOUITY

CURRENT LIABILITIES
   Current portion of long-term debt                   $   118,300   $   608,412
   Accounts payable                                        364,232       239,787
   Accrued taxes                                           134,611       125,643
   Other                                                   170,670       104,258
                                                       -----------   -----------
                                                           787,813     1,078,100
                                                       -----------   -----------

LONG-TERM DEBT, less current portion                     2,038,990     6,547,930
                                                       -----------   -----------


STOCKHOLDERS' EQUITY
   Common stock - no par value,  5,000,000
     shares authorized, 37,241 and 37,682 shares
     issued and outstanding at $235 and
     $149 stated values, respectively                    8,751,635     5,614,618
   Retained earnings                                     4,076,414     3,440,131
                                                       -----------   -----------
                                                        12,828,049     9,054,749
                                                       -----------   -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $15,654,852   $16,680,779
                                                       ===========   ===========













              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       49
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>


                                                          2000          1999
                                                      -----------    ----------
<S>                                                   <C>            <C>
OPERATING REVENUES                                    $ 6,052,154    $ 5,290,546
                                                      -----------    -----------
OPERATING EXPENSES
Cost of services                                        2,234,958      1,681,865
Depreciation and amortization                           1,101,022      1,012,964
Selling, general, and administration                    1,861,516      1,813,784
                                                      -----------    -----------
                                                        5,197,496      4,508,613
                                                      -----------    -----------
OPERATING INCOME                                          854,658        781,933
                                                      -----------    -----------

OTHER INCOME (EXPENSES)
   Interest and dividend income                           460,509        473,964
   Interest expense                                      (422,561)      (503,302)
   Interest during construction                                --         26,441
   Loss on sale of investments                            (67,261)       (78,771)
   Gains on sales of cellular and DBS investments       5,018,714      7,436,415
   Income from cellular investments                       674,204        123,109
   Other, net                                              10,418        (86,206)
                                                      -----------    -----------
                                                        5,674,023      7,391,650
                                                      -----------    -----------

INCOME BEFORE INCOME TAXES                              6,528,681      8,173,583
                                                      -----------    -----------

INCOME TAXES                                            2,538,700      3,107,734
                                                      -----------    -----------

NET INCOME                                            $ 3,989,981    $ 5,065,849
                                                      ===========    ===========

NET INCOME PER COMMON SHARE                           $    106.39    $    134.44
                                                      ===========    ===========
</TABLE>





              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      50
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                           December 31, 2000 and 1999


<TABLE>
<CAPTION>

                                        Common Stock           Retained
                                   Shares        Amount        Earnings         Total
                                   ------        ------        --------         -----
<S>                                <C>       <C>            <C>             <C>
Balance at December 31, 1998       37,722    $ 2,414,208    $ 1,693,818     $  4,108,026

  Comprehensive Income:
    Net income                                                5,065,849        5,065,849

  Dividends paid                                               (113,166)        (113,166)

  Common stock redeemed, net          (40)        (5,960)                         (5,960)

  Stated value stock adjustment                3,206,370     (3,206,370)
                                   ------    -----------    -----------     ------------

Balance at December 31, 1999       37,682      5,614,618      3,440,131        9,054,749

  Comprehensive Income:
     Net income                                               3,989,981        3,989,981

  Dividends paid                                               (113,046)        (113,046)

  Common stock redeemed, net         (441)      (103,635)                       (103,635)

  Stated value stock adjustment                3,240,652     (3,240,652)
                                   ------    -----------    -----------     ------------

Balance at December 31, 2000       37,241    $ 8,751,635    $ 4,076,414     $ 12,828,049
                                   ======    ===========    ===========     ============

</TABLE>











              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       51
<PAGE>
                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                  2000           1999
                                                                  ----           ----
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                    $ 3,989,981    $ 5,065,849
Adjustments to reconcile net income to net
    cash provided by operating activities:
        Depreciation and amortization                           1,101,022      1,012,964
        Amortization of investment tax credits                     (9,769)        (9,769)
        Deferred income taxes                                     (92,466)      (270,479)
        Gains on sales of cellular and DBS investments         (5,018,714)    (7,436,415)
        Loss on disposal of assets                                                73,996
        Loss on joint venture, net                                 12,868         15,864
        Changes in operating assets and liabilities:
          (Increase) decrease in assets                           269,417       (656,382)
          Increase (decrease) in liabilities                       78,795       (268,312)
                                                              -----------    -----------
        Net cash provided by (used in) operating activities       331,134     (2,472,684)
                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                        (726,922)    (1,249,414)
     Cost of removing plant, net of salvage                            --          6,475
     Purchase of investments                                   (1,201,867)    (6,018,790)
     Proceeds from sale of investments                          2,555,960      3,150,951
     Increase in other investments                               (300,806)      (273,330)
     (Increase) decrease in intangibles                            25,436        (28,825)
     Proceeds from sale of DBS investment                              --      8,038,197
     Proceeds from sale of cellular investment                  5,226,034             --
                                                              -----------    -----------
      Net cash provided by investing activities                 5,577,835      3,625,264
                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Common stock redeemed                                       (103,635)        (5,960)
     Repayment of long-term debt                               (4,999,052)      (655,072)
     Repayment of line of credit                                       --       (750,000)
     Dividends paid                                              (113,046)      (113,166)
                                                              -----------    -----------
      Net cash used in financing activities                    (5,215,733)    (1,524,198)
                                                              -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                    693,236       (371,618)
                                                              -----------    -----------

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                    411,341        782,959
                                                              -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                      $ 1,104,577    $   411,341
                                                              ===========    ===========

</TABLE>





              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       52
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The  Breda  Telephone  Corporation  is  a  provider  of  telecommunications
     exchange   and  local   access   services,   cable   television   services,
     telemarketing   services,   internet  services  and  telecommuni-   cations
     equipment in a service area located primarily in western Iowa.

     The  accounting  policies of the Company  and its  subsidiaries  conform to
     generally  accepted  accounting  principles in the United States of America
     and reflect  practices  appropriate  to the telephone and cable  television
     industries.  Management  uses  estimates and  assumptions  in preparing its
     consolidated  financial statements.  Those estimates and assumptions affect
     the reported amounts of assets and liabilities,  revenues and expenses, and
     the disclosure of contingent  revenues and expenses.  Telephone  operations
     reflect  practices  appropriate to the telephone  industry.  The accounting
     records of the Company's telephone  operations are maintained in accordance
     with the Uniform  System of Accounts for Class A and B Telephone  Companies
     prescribed by the Federal Communications Commission as modified by the Iowa
     State Utilities Division (ISUD).

     The accounting  records of the Company's  cable  television  operations are
     maintained  in accordance  with the Uniform  System of Accounts for Class A
     CATV  Companies as  prescribed  by the National  Association  of Regulatory
     Utility Commissioners.

     Principles of Consolidation

     The  consolidated  financial  statements  include  the  accounts  of  Breda
     Telephone Corporation and its wholly-owned subsidiaries,  Prairie Telephone
     Company,  Inc., Westside Independent  Telephone Company, and Tele-Services,
     Ltd.  (herein  referred to as "the  Company").  All  material  intercompany
     transactions have been eliminated in consolidation.

     Cash and Cash Equivalents

     All highly  liquid  investments  with a maturity of three months or less at
     the time of purchase are considered cash equivalents.

     Investments

     Certificates  of deposit  bought and held by the Company until maturity are
     carried at cost, which approximates market.

     Debt and  marketable  equity  securities  bought and held  principally  for
     selling in the near future are classified as trading securities and carried
     at fair value.  Unrealized  holding gains and losses on trading  securities
     are reported in earnings.  Debt and marketable equity securities classified
     as  available-for-sale  are carried at fair value with  unrealized  holding
     gains and losses recorded as a separate component of stockholders'  equity.
     Debt  securities  for which the  Company has both the  positive  intent and
     ability to hold to maturity  are  classified  as  held-to-maturity  and are
     carried at  amortized  cost.  The Company used the FIFO method of computing
     realized gains and losses.

     Nonmarketable  equity  investments,  over which the Company has significant
     influence and/or a 20% ownership, are reflected on the equity method. Other
     nonmarketable equity investments are stated at cost.


                                       53
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)

     Inventories

     Inventories  include both  merchandise  held for resale and  materials  and
     supplies.  Merchandise  held for resale is recorded at the lower of cost or
     market with cost  determined  by the average  cost  method.  Materials  and
     supplies are recorded at average cost.

     Property and Equipment

     Property and  equipment are  capitalized  at original  cost,  including the
     capitalized cost of salaries and wages,  materials,  certain payroll taxes,
     employee benefits and interest incurred during the construction period.

     The Company provides for depreciation for financial  reporting  purposes on
     the straight-line method by the application of rates based on the estimated
     service  lives  of the  various  classes  of  depreciable  property.  These
     estimates are subject to change in the near term.

     Renewals  and  betterments  of units of property  are charged to  telephone
     plant in service. When telephone plant is retired, its cost is removed from
     the asset account and charged  against  accumulated  depreciation  together
     with  removal  cost  less any  salvage  realized.  No gains or  losses  are
     recognized in connection with routine retirements of depreciable  property.
     Repairs  and  renewals of minor  items of  property  are  included in plant
     specific operations expense.

     Repairs of other  property,  as well as renewals of minor items of property
     are  included  in  plant  specific  operations  expense.  A gain or loss is
     recognized when other property is sold or retired.

     Long-Lived Assets, Including Intangibles

     The Company  would  provide for  impairment  losses on  long-lived  assets,
     including intangibles used in operations, when indicators of impairment are
     present and the undiscounted  cash flows estimated to be generated by those
     assets  are less  than  the  assets'  carrying  amount.  Based  on  current
     conditions,  management  does not believe any of its long-lived  assets are
     impaired.

     Income Taxes

     Income taxes are accounted for using a liability method and provide for the
     tax  effects  of  transactions  reported  in  the  consolidated   financial
     statements including both taxes currently due and deferred.  Deferred taxes
     are adjusted to reflect  deferred tax  consequences  at current enacted tax
     rates.  Deferred  income  taxes  reflect the net tax  effects of  temporary
     differences  between the  carrying  amounts of assets and  liabilities  for
     financial  reporting purposes and the amounts used for income tax purposes.
     Significant components of the Company's deferred tax assets and liabilities
     arise from  differences  between the basis of property  and  equipment  and
     partnership  profits and losses.  The deferred  tax assets and  liabilities
     represent the future tax return  consequences of those  differences,  which
     will either be taxable or deductible  when the assets and  liabilities  are
     recovered or settled.

     Investment tax credits  (ITC),  which were deferred prior to the Tax Reform
     Act of 1986, are being  amortized over the life of the plant which produced
     the ITC.


                                       54


<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)

     Revenue Recognition

     The Company  recognizes  revenues  when earned  regardless of the period in
     which they are billed. The Company is required to provide telephone service
     to subscribers within its defined service territory.

     Local  network  service,  cable  television  service and  internet  service
     revenues are  recognized  over the period a subscriber  is connected to the
     telephone and cable television networks.

     Network access and long distance  service revenues are derived from charges
     for access to the Company's local exchange network.  The interstate portion
     of access  revenues  is based,  in part,  on an  average  schedule  company
     settlement   formula   administered  by  the  National   Exchange   Carrier
     Association  (NECA) which is  regulated  by the FCC. The traffic  sensitive
     portion of interstate  access  revenues is billed on an individual  company
     access charge  structure as approved by the FCC. The intrastate  portion of
     access  revenues is billed on an  individual  company  tariff access charge
     structure based on expense and plant  investment of the Company as approved
     by the  state  regulatory  authority.  The  tariffs  developed  from  these
     formulas are used to charge the connecting  carrier and recognize  revenues
     in the period the  traffic is  transported  based on the minutes of traffic
     carried. Long distance revenues are recognized at the time a call is placed
     based on the minutes of traffic processed at tariffed and contracted rates.

     Other revenues include telemarketing services and contractually  determined
     arrangements  for the provision of billing and collecting  services and are
     recognized in the period when the services are performed.

     The Company uses the reserve  method to recognized  uncollectible  customer
     accounts.

     Reclassifications

     Certain  reclassifications  have been made to the 1999 financial statements
     to conform with the 2000 presentation.

NOTE 2. TEMPORARY AND LONG-TERM INVESTMENTS

     The  amortized  cost  and  fair  value  of   certificates  of  deposit  and
     investments  classified as held-to-maturity and  available-for-sale  are as
     follows:

<TABLE>
<CAPTION>
                                                              Gross             Gross
                                           Amortized       Unrealized         Unrealized            Fair
         December 31, 2000                   Cost             Gains             Losses              Value
         -----------------                ----------        --------         -----------         ----------
<S>                                        <C>              <C>              <C>                 <C>
     Certificates of deposit              $  350,000        $                $                   $  350,000

     Held-to-Maturity:
        Municipal bonds                    2,497,186          22,772             (23,003)         2,496,955
        U.S. Treasury notes                    5,000                                (139)             4,861
        Government securities                266,745           1,249              (1,543)           266,451

     Available-for-Sale:
        Marketable equity securities          39,409                                                 39,409
                                          ----------        --------         -----------         ----------
                                          $3,158,340        $ 24,021         $   (24,685)        $3,157,676
                                          ==========        ========         ===========         ==========
</TABLE>


                                       55
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 2. TEMPORARY AND LONG-TERM INVESTMENTS, (Continued)

<TABLE>
<CAPTION>
                                                            Gross           Gross
                                           Amortized     Unrealized       Unrealized         Fair
         December 31, 1999                   Cost           Gains           Losses           Value
         -----------------                 ----------     ---------      -----------      ----------
<S>                                         <C>           <C>            <C>              <C>
     Held-to-Maturity:
        Municipal bonds                    $4,361,468     $   2,050      $  (141,995)     $4,221,523
        U.S. Treasury notes                    59,894                         (5,908)         53,986
        Government securities                  51,663                         (3,506)         48,157

     Available-for-Sale:
        Marketable equity securities           39,409                                         39,409
                                           ----------     ---------      -----------      ----------
                                           $4,512,434     $   2,050      $  (151,409)     $4,363,075
                                           ==========     =========      ===========      ==========
</TABLE>

                                              2000           1999
                                           ----------     ----------
     Amounts classified as:
          Current                          $  269,840     $   94,810
          Noncurrent                        2,888,500      4,417,624
                                           ----------     ----------
                                           $3,158,340     $4,512,434
                                           ==========     ==========

     There were no sales of  available-for-sale  securities  during 2000 or 1999
     and;  therefore,  no proceeds nor any  realized  gains or losses for either
     year.

     Certificates of deposit and investments  classified as  held-to-maturity at
     December 31, 2000, are summarized below by contractual maturity date:

     Due in one year or less                       $  230,431
     Due after one year through five years          1,635,125
     Due after five years                           1,253,375
                                                   ----------
                                                   $3,118,931
                                                   ==========

NOTE 3. OTHER INVESTMENTS

     Other investments include nonmarketable equity securities and certificates,
     along with investments in  partnerships,  limited  liability  companies and
     joint ventures as follows:

<TABLE>
<CAPTION>
                                                              2000            1999
                                                           ----------      ----------
<S>                                                        <C>             <C>
       Alpine Communications, L.C                          $  781,579      $  781,579
       Rural Telephone Finance Cooperative - certificates     502,889         533,319
       RSA #1, Ltd.                                           348,542         348,542
       RSA #7, Ltd.                                           144,049         144,049
       RSA #8, Ltd.                                           310,491         310,491
       Central Iowa Cellular, Inc.                                 --         206,770
       NECA Services, Inc. - stock                            300,000              --
       Rural Telephone Bank - stock                           165,789         164,841
       Quad County Communications                             123,327         136,192
       Iowa Network Services - stock                           78,705          78,705
       Carroll County Wireless, L.L.C                          30,599              --
       Guthrie Group, L.L.C                                     9,137          10,000
       Other                                                   11,000          11,000
                                                           ----------      ----------
                                                           $2,806,107      $2,725,488
                                                           ==========      ==========
</TABLE>


                                     56
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 3. OTHER INVESTMENTS, (Continued)

     The Company  continues to have a 15.77% interest in Alpine  Communications,
     L.C.  (Alpine).  The Alpine group operates several  telephone  exchanges in
     eastern Iowa.

     The Company's  percentage  interests in RSA #1, Ltd.,  RSA #7, Ltd. and RSA
     #8, Ltd. are 9.1%, 7.1% and 11.7%,  respectively,  at December 31, 2000. In
     addition,  the Company owns a 16.7% interest in RSA #9, Ltd. partnership of
     which they have no original cash investment.

     Additionally,   Westside  Independent  Telephone  Company,  a  wholly-owned
     subsidiary of Breda Telephone Corporation,  has a 33.33% ownership interest
     in Quad County Communications.  This entity owns and operates a fiber optic
     network.  Condensed  financial  data for Quad County  Communications  is as
     follows:

                                                2000           1999
                                             ---------      ---------

          Ordinary net loss                  $ (38,604)     $ (47,593)
                                             =========      =========

          Current assets                     $  10,832      $   5,924
          Non-current assets                   368,988        415,109
          Current liabilities                    9,846         12,456
          Non-current liabilities                    0              0


     The Company's percentage  interests in Carroll County Wireless,  L.L.C. and
     Guthrie Group,  L.L.C.  are 33.33% and 25%,  respectively.  These companies
     have been formed to provide PCS services.  The operations of these entities
     are immaterial to the consolidated financial statements.

     The  investments in Quad County  Communications,  Carroll County  Wireless,
     L.L.C.  and Guthrie  Group,  L.L.C.  are being  accounted for on the equity
     method. The remaining investments are accounted for on the cost method.

NOTE 4. INTANGIBLES

     On  June  1,  1998,  the  Company   acquired  100%  ownership  of  Westside
     Independent  Telephone Company.  The total cost of the acquisition exceeded
     the fair value of the net assets of Westside Independent  Telephone Company
     by $1,178,472.  This excess was recorded as goodwill and is being amortized
     on  the  straight-line  basis  over  fifteen  years.  Amortization  expense
     recorded for both 2000 and 1999 was $78,604. Accumulated amortization as of
     December 31, 2000 and 1999 was $203,056 and $124,452, respectively.

     Additionally  on  June  1,  1998,   Tele-Services,   Ltd.,  a  wholly-owned
     subsidiary  of Breda  Telephone  Corporation,  acquired  100%  ownership of
     Westside  Communications,  Inc. The total cost of the acquisition  exceeded
     the fair  value of the net  assets  of  Westside  Communications,  Inc.  by
     $157,611.  This excess was also recorded as goodwill and is being amortized
     on  the  straight-line  basis  over  fifteen  years.  Amortization  expense
     recorded for both 2000 and 1999 was $10,512. Accumulated amortization as of
     December 31, 2000 and 1999 was $27,154 and $16,642, respectively.

     During 2000, the Company transferred the PCS licenses, originally purchased
     for $28,825 and recorded in intangibles, to Carroll County Wireless, L.L.C.
     The net value transferred  amounted to $25,631 and was recorded as a equity
     contribution  to the  new  entity.  No gain or  loss  was  recorded  on the
     transaction.


                                       57
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 5. PROPERTY AND EQUIPMENT

     Property and equipment includes the following:

<TABLE>
<CAPTION>
                                                                     2000                  1999
                                                                 -----------           -----------
<S>                                                              <C>                   <C>
          Telephone Plant in Service :
               Land                                              $    39,008           $    39,008
               Buildings                                             729,372               694,945
               Other general support assets                        1,295,196               988,906
               Central office assets                               2,167,819             2,098,570
               Cable and wire facilities                           4,091,520             3,651,397
               Other plant and equipment                             691,000               588,439
                                                                 -----------           -----------
                                                                   9,013,915             8,061,265
                                                                 -----------           -----------

          Cable Television Plant in Service:
               Franchise                                              32,992                32,992
               Land                                                    8,586                 8,586
               Buildings                                             248,855               237,557
               Towers, antennas and head end equipment             1,500,538             1,473,562
               Cable and wire facilities                           1,567,952             1,558,797
               Other plant and equipment                             189,320               189,320
                                                                 -----------           -----------
                                                                   3,548,243             3,500,814
                                                                 -----------           -----------

          Telemarketing Plant in Service                             281,538               279,817
                                                                 -----------           -----------

                        Total property and equipment              12,843,696            11,841,896
                        Less accumulated depreciation              6,825,834             5,862,295
                                                                 -----------           -----------
                                                                   6,017,862             5,979,601
                        Plant under construction                     158,572               360,592
                                                                 -----------           -----------
                                                                 $ 6,176,434           $ 6,340,193
                                                                 ===========           ===========
</TABLE>

     Depreciation  on depreciable  property  resulted in composite rates of 8.0%
     and 8.8% for the years ended December 31, 2000 and 1999, respectively.


                                       58
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 6. LONG-TERM DEBT

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                              2000             1999
                                                          -----------      -----------
<S>                                                       <C>              <C>
          Rural Telephone Finance Cooperative
              7.25% (Variable Rate)                       $        --      $   328,864
              7.00% (Variable Rate)                                --          994,264
              6.95% (Variable Rate)                                --        1,353,248
              6.95% (Variable Rate)                                --        2,211,926
              7.35% (Fixed Rate)                            2,157,290        2,268,040
                                                          -----------      -----------
                   Total long-term debt                     2,157,290        7,156,342
                   Less current portion                      (118,300)        (608,412)
                                                          -----------      -----------
                                                          $ 2,038,990      $ 6,547,930
                                                          ===========      ===========
</TABLE>

     The annual  requirements  for principal  payments on long-term debt for the
     next five years are as follows:

                                         Principal
                                        -----------

                     2001               $   118,300
                     2002                   126,365
                     2003                   134,981
                     2004                   144,183
                     2005                   154,013

     Substantially  all assets of the Company  are  pledged as security  for the
     long-term  debt under  certain  loan  agreements  with the Rural  Telephone
     Finance Cooperative (RTFC).  These mortgage notes are to be repaid in equal
     quarterly  installments  covering  principal and interest  beginning two to
     three years after date of issue and expiring by the year 2013.

     The security and loan agreements  underlying the RTFC notes contain certain
     restrictions on distributions  to stockholders,  investment in, or loans to
     others,  and payment of management fees or an increase in management  fees.
     The Company is restricted from making any distributions, except as might be
     specifically  authorized  in writing  in  advance by the RTFC  noteholders,
     unless  minimum  net worth  exceeds  40% and  distributions  are limited to
     certain  levels of prior year cash  margins.  In  addition,  the Company is
     required to achieve a debt service coverage ratio of not less than 1.25 and
     a times interest earned ratio of not less than 1.5.

     The Company has a line of credit with the RTFC for $1,500,000. The approved
     line of credit is available  until  December 1, 2005 at a rate of 9.1%.  No
     funds were advanced under the line at December 31, 2000.

     In addition,  Prairie Telephone Company, Inc. a wholly-owned  subsidiary of
     Breda  Telephone  Corporation,  has a line of  credit  with  the  RTFC  for
     $500,000. This approved line of credit is available until November 30, 2005
     at a rate of 9.1%.  No funds were  advanced  under the line at December 31,
     2000.


                                       59
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 7. INCOME TAXES

     Income taxes reflected in the Consolidated  Statements of Income consist of
     the following:

<TABLE>
<CAPTION>
                                                              2000           1999
                                                          -----------    -----------
<S>                                                       <C>            <C>
          Federal income taxes:
               Current tax expense                        $ 1,971,403    $ 2,584,444
               Deferred tax benefit                           (69,350)      (205,564)
               Amortization of investment tax credits          (9,769)        (9,769)
          State income taxes:
               Current tax expense                            669,532        803,538
               Deferred tax benefit                           (23,116)       (64,915)
                                                          -----------    -----------
          Total income tax expense                        $ 2,538,700    $ 3,107,734
                                                          ===========    ===========
</TABLE>

         Deferred  federal and state tax liabilities and assets reflected in the
Consolidated Balance Sheets are summarized as follows:

<TABLE>
<CAPTION>
                                                              2000           1999
                                                          -----------    -----------
<S>                                                       <C>            <C>
          Deferred Tax Liabilities
               Federal                                    $   242,951    $   296,855
               State                                           80,983         93,744
                                                          -----------    -----------
                   Total Deferred Tax Liabilities             323,934        390,599
                                                          -----------    -----------

          Deferred Tax Assets
               Federal                                        360,981        346,185
               State                                          120,327        109,322
                                                          -----------    -----------
                   Total Deferred Tax Assets                  481,308        455,507
                                                          -----------    -----------

               Net Deferred Tax Asset                     $   157,374    $    64,908
                                                          ===========    ===========

          Current portion                                 $        --    $        --
          Long-term portion                                   157,374         64,908
                                                          -----------    -----------
               Net Deferred Tax Asset                     $   157,374    $    64,908
                                                          ===========    ===========
</TABLE>

     The tax provision  differs from the expense that would result from applying
     the federal  statutory  rates to income before taxes as the result of state
     income taxes and the amortization of investment tax credits.

     The following is a reconciliation  of the statutory federal income tax rate
     of 34% to the Company's effective income tax rate:

<TABLE>
<CAPTION>
                                                              2000           1999
                                                          -----------    -----------
<S>                                                       <C>            <C>
          Statutory federal income tax rate               $      34.0%   $      34.0%
          State income taxes, net of federal benefit              5.0            4.1
          Amortization of investment tax credits                  (.1)           (.1)
                                                          -----------    -----------
               Effective income tax rate                  $      38.9%   $      38.0%
                                                          ===========    ===========
</TABLE>

     The Company files a consolidated tax return  including their  subsidiaries,
     Prairie Telephone Company, Inc., Westside Independent Telephone Company and
     Tele-Services, Ltd.


                                       60
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 8. OPERATING SEGMENTS INFORMATION

     The Company  organizes its business into three reportable  segments:  local
     exchange  carrier (LEC) services,  broadcast  services and internet service
     provider (ISP) services. The LEC services segment provides telephone,  data
     and other services to customers in local exchanges.  The broadcast services
     segment  provides  cable  television  services  to  customers  in Iowa  and
     Nebraska.  The ISP services provide internet access to customers within the
     local   exchanges  and  the  surrounding   areas.   The  Company  also  has
     telemarketing  services that do not meet the  quantitative  threshold for a
     reportable segment.

     The Company's  reportable  business  segments are strategic  business units
     that offer  different  products and services.  Each  reportable  segment is
     managed separately  primarily because of different  products,  services and
     regulatory environments. LEC segments have been aggregated because of their
     similar characteristics.

     The segment's  accounting  policies are the same as those  described in the
     summary of significant accounting policies.

<TABLE>
<CAPTION>
                                                Local                              Internet
                                              Exchange                             Service
             2000                              Carrier          Broadcast          Provider          Other              Total
             ----                            -----------       -----------        ---------        ---------        -----------
<S>                                          <C>               <C>                <C>              <C>              <C>
     Revenues and sales                      $ 4,080,514       $ 1,046,768        $ 648,195        $ 276,677        $ 6,052,154
     Intersegment income
         and sales                                    --                --               --               --                 --
     Interest income                             439,389            21,120               --               --            460,509
     Interest expense                            386,345            36,216               --               --            422,561
     Depreciation and
         amortization                            683,574           344,643           60,333           12,472          1,101,022
     Income tax expense
         (benefit)                             2,691,227           (72,155)         (56,547)         (23,825)         2,538,700
     Segment profit (loss)                     4,156,729          (103,833)         (28,630)         (34,285)         3,989,981
     Segment assets                           14,328,128         1,808,935          754,682           80,699         16,972,444
     Expenditures for
         segment assets                          515,655            47,429          162,116            1,722            726,922

             1999
             ----

     Revenues and sales                      $ 3,441,386       $ 1,047,667        $ 402,730        $ 398,763        $ 5,290,546
     Intersegment income
         and sales                                    --                --               --               --                 --
     Interest income                             458,901            15,063               --               --            473,964
     Interest expense                            429,750            73,552               --               --            503,302
     Depreciation and
         amortization                            634,664           344,195           26,852            7,253          1,012,964
     Income tax expense
         (benefit)                               363,435         2,786,595          (28,280)         (14,016)         3,107,734
     Segment profit (loss)                       552,861         4,578,358          (44,297)         (21,073)         5,065,849
     Segment assets                           14,346,890         1,845,056          643,728           92,191         16,927,865
     Expenditures for
         segment assets                        1,071,365            37,512           93,287           47,250          1,249,414
</TABLE>


                                       61
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 8. OPERATING SEGMENTS INFORMATION, (Continued)

<TABLE>
<CAPTION>
     Reconciliation of Segment Information                 2000            1999
                                                       ------------    ------------
<S>                                                    <C>             <C>
     REVENUES:
          Total revenues for reportable segments       $  5,775,477    $  4,891,783
          Other revenues                                    276,677         398,763
                                                       ------------    ------------
              Consolidated Revenues                    $  6,052,154    $  5,290,546
                                                       ============    ============

     PROFIT:
          Total profit for reportable segments         $  4,024,266    $  5,086,922
          Other profit (loss)                               (34,285)        (21,073)
                                                       ------------    ------------
              Net Income                               $  3,989,981    $  5,065,849
                                                       ============    ============

     ASSETS:
          Total assets for reportable segments         $ 16,891,745    $ 16,835,674
          Other assets                                       80,699          92,191
          Elimination of intercompany receivables        (1,317,592)       (247,086)
                                                       ------------    ------------
              Consolidated assets                      $ 15,654,852    $ 16,680,779
                                                       ============    ============
</TABLE>

NOTE 9. SUPPLEMENTAL CASH FLOW INFORMATION

     Noncash  investing and financing  activities  included  $121,030 during the
     year ended  December 31, 2000,  relating to plant and  equipment  additions
     placed in service during 2000,  which are reflected in accounts  payable at
     year end.

     Cash  paid for  interest,  net of  amounts  capitalized  for 2000 and 1999,
     totaled $422,561 and $476,861, respectively.

     Cash  paid for  income  taxes  for 2000 and  1999  totaled  $2,435,069  and
     $3,990,528, respectively.

NOTE 10. NET INCOME PER COMMON SHARE

     Net income per common  share for 2000 and 1999 was computed by dividing the
     weighted average number of shares of common stock  outstanding into the net
     income.  The weighted average number of shares of common stock  outstanding
     for the years  ended  December  31,  2000 and 1999 were  37,503 and 37,682,
     respectively.

NOTE 11. STOCK VALUE ADJUSTMENT

     In May 2000, the board of directors authorized a $31 increase in the stated
     value of each share of common  stock from $149 to $180.  There were  37,682
     shares  outstanding  at the time of the  value  adjustment,  which  reduced
     retained earnings by $1,168,142.

     During June 2000,  the board of  directors  authorized  an  additional  $55
     increase  in the stated  value of each  share of common  stock from $180 to
     $235.  There  were  37,682  shares  outstanding  at the  time of the  value
     adjustment, which reduced retained earnings by $2,072,510.


                                     62
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 12. STOCK RESTRICTIONS

     The Company has one class of common stock.  Each stockholder is entitled to
     one vote  regardless  of the number of shares  owned.  Restrictions  on the
     stock include the following:

     o    Individuals  purchasing  new shares of stock must be living within the
          service areas of the Breda Telephone  Corporation and subscribe to its
          telephone  services.  In  addition,  new  stockholders  are limited to
          purchasing no more than thirty shares of stock directly from the Breda
          Telephone Corporation.

     o    Stockholders  are limited to ownership of not more than one percent of
          the  outstanding  shares of stock  unless  ownership  was prior to the
          restated Articles of Incorporation.

     o    Stockholders  shall not sell any  shares  of stock  owned  unless  the
          Company has been given first right of refusal.

     o    In  households  with  multiple  individuals,  only one person  must be
          deemed the subscriber of Company services.

     o    A  one-time  stock  transfer  to  a  family  member  (spouse,   child,
          grandchild,  parent,  grandparent, or sibling) is allowed even if such
          transferee  resides outside of the telephone exchange service area and
          is not a subscriber  of the Breda  Telephone  Corporation's  telephone
          services.

     o    Stock transfers require the consent of the board of directors.

     The Company may adopt  bylaws,  which may further  restrict the transfer or
     ownership of capital stock of the Company.

NOTE 13. EMPLOYEE BENEFIT PLAN

     The Company  adopted  for its  employees  who have met certain  eligibility
     requirements,  a defined benefit  retirement and security program sponsored
     by the National Telephone  Cooperative  Association  (NTCA). The plan calls
     for the Company to contribute 8.6% of each enrolled employees' annual gross
     salary. As a condition of participation,  each participating  employee must
     also  contribute a minimum 3% of their annual gross  salary.  Contributions
     made by the  Company  totaled  $84,797  and  $80,483  for the  years  ended
     December 31, 2000 and 1999, respectively.

NOTE 14. CONCENTRATIONS OF CREDIT RISK

     The Company grants credit to local telephone  service and cable  television
     service customers, all of whom are located in the franchised service areas,
     internet customers and to telecommunications intrastate and interstate long
     distance carriers.

     The Company received 42% of its operating revenues from access revenues and
     assistance  provided by the Federal  Universal  Service Fund. The manner in
     which access  revenues are  determined by  regulatory  bodies and universal
     service  funding is determined  for qualifying  organizations  is currently
     being modified as a result of the Telecommunications Act of 1996.

     Financial   instruments   that   potentially   subject   the   Company   to
     concentrations  of  credit  risk  consist  principally  of  cash  and  cash
     equivalents,  along with both  temporary  and  long-term  investments.  The
     Company  places  its cash,  cash  equivalents  and  investments  in several
     financial  institutions,  which limits the amount of credit exposure in any
     one financial institution.


                                       63
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


NOTE 14. CONCENTRATIONS OF CREDIT RISK, (Continued)

     The Company maintains its cash in bank deposit  accounts,  which, at times,
     may exceed  federally  insured limits.  The Company has not experienced any
     losses in such  accounts.  The  Company  believes  it is not exposed to any
     significant credit risk on cash and cash equivalents.

     Additionally,  Pacific Junction  Telemarketing  Center,  Inc.  wholly-owned
     subsidiary of Prairie Telephone Company,  Inc.,  received nearly all of its
     telemarketing service revenues from one customer during both 2000 and 1999.
     For the years ended December 31, 2000 and 1999, the  telemarketing  service
     revenues from the major customer were $275,177 and $226,243,  respectively.
     At  December  31,  2000 and  1999,  the  amount  due from  each  respective
     customer, included in accounts receivable on the balance sheet, was $30,890
     and $46,305, respectively.

NOTE 15. DISPOSITION OF CELLULAR AND DBS INVESTMENTS

     On May 12,  2000,  the  Company  sold all of their  outstanding  shares  of
     Central Iowa Cellular, Inc. (CIC). The Company received cash of $5,108,279,
     which  included  the  majority  of the  Company's  share of the  Tower  Net
     Proceeds.  The  transaction  resulted  in a gain of  $4,900,959,  which was
     included in  operations  during the second  quarter of 2000.  During  third
     quarter 2000, certain events occurred which made final certain terms of the
     sale  resulting  in the receipt of  $117,755,  which was  classified  as an
     additional  gain on the sale of the  cellular  investment.  In  total,  the
     completed  transaction  amounted  to  cash  received  of  $5,226,034  and a
     recorded gain on the sale of $5,018,714.

     On January 11, 1999, the Company sold  substantially  all of its assets and
     liabilities related to the Direct Broadcast Satellite (DBS) investment. The
     Company received cash of $8,038,197 and the transaction  resulted in a gain
     of $7,436,415, which was included in operations during the first quarter of
     1999.


                                       64
<PAGE>

Item  8.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
          Financial Disclosure.

     Breda has not had any change in its accountants  during the last two years,
     or any disagreements  with its accountants  during that period which are of
     the type required to be disclosed under this Item.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons.

     Directors and Officers.

     The directors and executive officers of Breda are as follows:

         Name                     Age                 Position(s)
         ----                     ---                 -----------

     Dean Schettler               48                  President and
                                                      Director

     Clifford Neumayer            52                  Vice-President and
                                                      Director

     Larry Daniel                 58                  Secretary and
                                                      Director

     Scott Bailey                 38                  Treasurer and
                                                      Director

     Roger Nieland                65                  Director

     John Wenck                   62                  Director

     Dave Grabner                 52                  Director

     Dean  Schettler  has been a director of Breda since  April,  1997,  and the
     President of Breda


                                       65
<PAGE>

     since April,  1998.  His current term as a director  will end at the annual
     shareholders  meeting which is held in 2003. He has also been a director of
     each of Breda's  subsidiaries  since April,  1997, and the president of the
     subsidiaries  since April,  1998. Mr.  Schettler has been employed by Pella
     Corporation,  Pella, Iowa, since August,  1986. He was a moulder technician
     until August,  1997. Since that time he has been a production  coordinator.
     Pella Corporation is a window and door manufacturer.

     Clifford Neumayer has been the Vice-President and a director of Breda since
     April, 1996. His current term as a director of Breda will end at the annual
     shareholders  meeting which is held in 2002. He has also held each of those
     positions with each of Breda's subsidiaries since April, 1996. Mr. Neumayer
     has been self employed as a farmer since 1970.

     Larry  Daniel has been the  Secretary  and a director of Breda since April,
     1995.  His  current  term as a  director  of Breda  will end at the  annual
     shareholders  meeting which is held in 2001. He has also held each of those
     positions with each of Breda's  subsidiaries  since April, 1995. Mr. Daniel
     is a self-employed farmer, and has been for at least the last five years.

     Scott  Bailey has been a director of Breda since April,  1998.  His current
     term as a director  of Breda will end at the  annual  shareholders  meeting
     which is held in 2001.  He has also served as a director of each of Breda's
     subsidiaries  since April,  1998.  He has been Breda's  treasurer,  and the
     treasurer of Breda's  subsidiaries  since April,  1999.  Mr. Bailey was the
     finance manager of marketing and sales for Pella Corporation,  Pella, Iowa,
     from August,  1993, to September,  1995. He has been a controller for Pella
     Corporation  since September,  1995 to the present.  Pella Corporation is a
     window and door manufacturer.

     Roger Nieland was elected as a director of Breda at the annual shareholders
     meeting which was held in May,  2000, and his current term as a director of
     Breda will end at the annual shareholders meeting which is held in 2003. He
     has also  served as a director of each of Breda's  subsidiaries  since May,
     2000. Mr. Nieland is currently  self-employed as a farmer, and has been for
     at least the last five  years.  Mr.  Nieland  has been a  director  of Iowa
     Ethanol  Coop since  September,  1994.  Iowa  Ethanol  Coop  organized  the
     start-up of a corn milling plant in Glidden,  Iowa.  The corn milling plant
     operates under the name Iowa Corn  Processors.  Mr. Nieland has also served
     as a trustee for Wheatland Township, in Carroll County, Iowa.

     John Wenck has been a director of Breda since April, 1997. His current term
     as a director of Breda will end at the annual shareholders meeting which is
     held in  2003.  He has  also  served  as a  director  of  each  of  Breda's
     subsidiaries  since April,  1997. Mr. Wenck is currently self employed as a
     farmer.  He was also previously  employed by the United Parcel Service as a
     delivery driver.

     Dave  Grabner has been a director of Breda since April,  1999.  His current
     term as a


                                       66
<PAGE>

     director of Breda will end at the annual shareholders meeting which is held
     in 2002.  He has also served as a director of each of Breda's  subsidiaries
     since  April,   1999.   Mr.  Grabner  is  currently  self  employed  as  an
     electrician,  and has been for at least  the last five  years.  He was also
     previously self-employed as a farmer.

     The number of  directors  for Breda is  currently  fixed at seven.  Each of
     Breda's  directors  is  elected  to a three  year term and until his or her
     successor is elected. The terms of the directors of Breda are staggered, so
     that  approximately  one-third of the directors are elected each year. If a
     person has served for three  consecutive  terms as a director,  that person
     must be off the board for at least one year  before the person can again be
     elected as a director. Each director of Breda must also be a shareholder of
     Breda, and a director shall  automatically  cease to be a director if he or
     she sells or  transfers  all of his or her shares of common stock in Breda.
     Each director must also be at least 18 years of age.

     The officers of Breda are elected annually by the board of directors at its
     annual meeting,  and hold office until the next annual meeting of the board
     of  directors  and until their  successor  is chosen.  Officers may also be
     removed by the board of directors at any time, with or without cause.  Each
     officer must also be a director and a shareholder of Breda.

     Breda  believes  that two of its  employees are and will continue to make a
     significant contribution to its business. Those employees are as follows:

                Name                   Age         Position
                ----                   ---         --------

          Robert J. Boeckman            39         Chief Operations Officer and
                                                   Co-Chief Executive Officer

          Jane A. Morlok                47         Chief Financial Officer and
                                                   Co-Chief Executive Officer

     Both Mr.  Boeckman  and Ms.  Morlok are  employed  pursuant  to  employment
     agreements with Breda. Those employment agreements are discussed in Item 10
     of this annual report.

     Mr.  Boeckman has been employed by Breda in various  capacities  since May,
     1982. Prior to January, 1995, he was Breda's assistant manager. He has been
     the  manager  since  January,  1995,  and he was  given  the title of chief
     operating  officer in March,  1998. His current titles are chief operations
     officer and co-chief executive officer.

     Ms. Morlok has been the  co-manager of Breda since March 30, 1998,  and her
     current titles are chief financial officer and co-chief  executive officer.
     Ms.  Morlok  was  the  assistant   administrator/CFO  of  Manning  Regional
     Healthcare Center in Manning,  Iowa from July of 1987 until March 20, 1998.
     Her responsibilities in that position included budgeting, reimbursement and
     rate setting for the hospital and nursing home run by the Manning  Regional
     Healthcare  Center,  as well as daily  general  ledger  operations  and IRS


                                       67
<PAGE>

     filings.  She also provided  similar  services to several other  affiliated
     corporations.

Item 10. Executive Compensation.

     Summary Compensation Table.

     The following  summary  compensation  table shows the compensation  paid by
     Breda to Robert J. Boeckman, Breda's chief operations officer, in the 2000,
     1999 and 1998 fiscal years. Mr. Boeckman's services as the chief operations
     officer  of Breda  are  similar  to those  normally  provided  by the chief
     executive officer of an Iowa corporation.

<TABLE>
<CAPTION>
                                Summary Compensation Table
                                --------------------------

     Name and                                                    Other Annual       All Other
     Position                 Year     Salary(1)        Bonus   Compensation(2)   Compensation(3)
     --------                 ----     ---------        -----   ---------------   ---------------
<S>                           <C>       <C>            <C>           <C>             <C>
     Robert J. Boeckman,      2000      $80,000        $2,000        $1,890          $15,703
       Chief Operating        1999      $74,159        $  -0-        $  617          $14,568
       Officer                1998      $70,700        $2,000        $4,737          $13,951
</TABLE>

     (1) This amount includes a contribution by Mr. Boeckman of 3% of his annual
     gross salary pursuant to Breda's  defined  benefit  retirement and security
     program,   which  is  sponsored  by  the  National  Telephone   Cooperative
     Association.  As a condition of participation in that program, Mr. Boeckman
     must  contribute a minimum of 3% of his annual gross  salary.  See also the
     "All Other Compensation" column above.

     (2) This  amount  includes  payments  to Mr.  Boeckman by Breda from a fund
     established by Breda based upon sales of cell phones. The fund is allocated
     equally among the employees employed at Breda's and Westside  Independent's
     offices.  All employees  share in the fund even if they are not involved in
     the sale of cell phones.  Mr. Boeckman is not involved in those sales.  The
     amount also includes a yearly clothing  allowance and the estimated  yearly
     value of services  provided to Mr. Boeckman by Breda or its subsidiaries at
     no cost. Those services are local telephone  service,  basic cable service,
     internet access, and cellular phone service.

     (3) This amount represents contributions by Breda on behalf of Mr. Boeckman
     to Breda's  defined  benefit  retirement  and  security  program,  which is
     sponsored by the National Telephone  Cooperative  Association.  The program
     requires  Breda to  contribute  an amount  equal to 8.6% of Mr.  Boeckman's
     annual gross  salary.  See also footnote 1 above  regarding Mr.  Boeckman's
     contributions  to the  program.  This  amount  also  includes  a long  term
     disability  contribution of 1.12% of salary and  employer-paid  premiums on
     health, life and accidental death and dismemberment insurance.

     Dean  Schettler is the president of Breda.  No  information is provided for
     Mr. Schettler in the summary compensation table because he does not receive
     compensation in his capacity as the president of Breda.  Mr. Schettler does
     receive  compensation  for  his  services  as  a  director  of  Breda.  The
     compensation payable to directors is discussed below.

     No officer's or  employee's  total  annual  salary,  bonus and other annual
     compensation  exceeded $100,000 during any of the 1998, 1999 or 2000 fiscal
     years.


                                       68
<PAGE>

     Director Compensation.

     All of Breda's directors  currently receive $100 for each regular,  special
     and conference call meeting of the board of directors.  The vice-president,
     secretary and treasurer of Breda also  currently  receive an additional $25
     for each  regular,  special  and  conference  call  meeting of the board of
     directors,  and the  president  of Breda  receives  an  additional  $50 per
     meeting.  Those payments are made to those  individuals in their capacities
     as directors, and are based upon their additional duties at the meetings of
     the board of directors. Breda's directors received the same amounts in 1999
     and 2000.

     All of  Breda's  directors  currently  receive  $125  per  day  for all day
     meetings of the board of directors.  The  directors  also received $125 per
     day for all day meetings of the board of directors in 1999 and 1998.

     All of Breda's  directors  also  currently  receive  $125 for each  outside
     meeting  attended  by a director  and which  lasts over  three  hours.  The
     directors  receive  one-half of their regular meeting rate for each outside
     meeting which lasts less than three hours.  Outside meetings are not formal
     meetings of the board of directors.  Examples of outside  meetings  include
     conventions and city council meetings.

     Breda's directors are also reimbursed for mileage and for any expenses paid
     by them on account of  attendance  at any meeting of the board of directors
     or other  meetings  attended  by them in their  capacity  as a director  of
     Breda.

     Breda's  directors  may also  receive  internet  access  from  Breda or its
     subsidiaries  at no cost.  The current  estimated  yearly value of internet
     access is $300. They were also entitled to receive  internet access in 1999
     and 1998.

     Employment Agreements.

     Breda entered into a new employment  agreement  with both Mr.  Boeckman and
     Ms. Morlok on April 1, 2000. Ms. Morlok's prior  employment  agreement with
     Breda had terminated on March 30, 2000.  Mr.  Boeckman's  prior  employment
     agreement with Breda would not have terminated until December 31, 2001, but
     the board of directors of Breda believed it was appropriate to enter into a
     new employment agreement with Mr. Boeckman at that time. Breda is currently
     negotiating  a new  employment  agreement  with both Mr.  Boeckman  and Ms.
     Morlok.  No break in service is anticipated  for either Mr. Boeckman or Ms.
     Morlok.

     Mr. Boeckman. Under the terms of Mr. Boeckman's employment agreement, he is
     employed in the capacity of chief operations officer and co-chief executive
     officer of Breda. Mr. Boeckman is responsible for the day-to-day operations
     of Breda under his employment agreement.


                                       69
<PAGE>

     Mr. Boeckman's  employment  agreement will terminate on March 31, 2001. The
     employment  agreement  will also  terminate 13 weeks after Mr.  Boeckman is
     determined to be totally  disabled.  The  employment  agreement may also be
     terminated  by Breda at any time,  without  cause,  by giving 30 days prior
     written notice to Mr. Boeckman, but in that circumstance Mr. Boeckman shall
     be paid on the  date of  termination  a  severance  allowance  equal to the
     amount  remaining  to be paid to him under the  employment  agreement.  Mr.
     Boeckman may also terminate the employment agreement at any time, by giving
     60 days notice to Breda. The employment agreement may also be terminated by
     Breda, for cause, upon five days written notice to Mr. Boeckman.

     Mr. Boeckman's annual salary under the employment agreement is $80,000. Mr.
     Boeckman will also receive  various  other  benefits  under the  employment
     agreement,   including  health   insurance,   life  insurance,   disability
     insurance,  a clothing  allowance,  free local  telephone  service and free
     basic cable service.  Breda will also contribute an amount equal to 8.6% of
     Mr.  Boeckman's  annual gross salary to the defined benefit  retirement and
     security program which is sponsored by the National  Telephone  Cooperative
     Association.  Breda will also provide Mr. Boeckman with the  pre-retirement
     death benefit that is available through the National Telephone  Cooperative
     Association.  Mr.  Boeckman  is  also  reimbursed  for all  reasonable  and
     necessary expenses incurred in carrying out his duties under the employment
     agreement. The employment agreement also contemplates that Mr. Boeckman may
     receive  bonuses  based upon his  performance  rating as  determined by the
     board of directors of Breda.

     Ms. Morlok. Ms. Morlok's employment  agreement is similar to Mr. Boeckman's
     employment   agreement.   The  primary  differences  between  Ms.  Morlok's
     employment  agreement  and  Mr.  Boeckman's  employment  agreement  are  as
     follows:

          o    Ms. Morlok's capacities under her employment  agreement are chief
               financial officer and co-chief executive officer.

          o    Ms.  Morlok's  annual  salary under her  employment  agreement is
               $70,500.

          o    Ms. Morlok is not entitled to receive a severance  payment in the
               event her employment under the employment agreement is terminated
               by Breda without cause.

          o    Ms. Morlok's  employment  agreement does not provide that she may
               terminate the employment agreement at any time, by giving 60 days
               notice to Breda.

     Breda does not have any written employment  agreements with any officers or
     any other employees.


                                       70
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

     Breda is only authorized to issue common stock.

     The following table sets forth some information on the percentage ownership
     of Breda's common stock as of March 1, 2001 by:

          o    each of Breda's directors;

          o    each of Breda's officers;

          o    the person employed by Breda as its chief operations officer; and

          o    all  directors  and  officers  of Breda and the chief  operations
               officer of Breda as a group.

                            Security Ownership Table
                            ------------------------

          Name and Address of
          Beneficial Owner          Number of Shares       Percentage Ownership
          ----------------          ----------------       --------------------

          Dean Schettler                   30                      .08%
          16326 120th St.
          Breda, Iowa 51436

          Clifford Neumayer               181                      .49%
          11846 Ivy Avenue
          Breda, Iowa 51436

          Larry Daniel                      2                     .013%
          15731 Robin Avenue
          Glidden, Iowa 51433

          Roger Nieland                    67                      .18%
          13312 Eagle Avenue
          Breda, Iowa 51436

          John Wenck                        6                      .02%
          23909 140th St.
          Carroll, Iowa 51401

          Scott Bailey                     20                      .05%
          12424 120th Street
          Breda, Iowa 51436


                                       71
<PAGE>

          Dave Grabner                     55*                     .15%
          11098 130th Street
          Breda, Iowa 51436

          Robert Boeckman                  30                      .08%
          23678 150th Street
          Carroll, Iowa 51401

          All directors and officers      391                     1.06%
          and the chief operations
          officer as a group (8 persons)

          * One of these shares is held by Mr. Grabner's spouse.

     To Breda's knowledge,  no person is the beneficial owner of more than 5% of
     Breda's common stock.

Item 12. Certain Relationships and Related Transactions.

     Breda has not been a party to any transaction during the last two years, or
     proposed transaction, of the type required to be disclosed under this Item.
     The  transactions  to which this Item  applies are  transactions  involving
     Breda and in which any of the following  types of persons had or is to have
     a direct or indirect material interest:

          o    any director or officer of Breda,

          o    any nominee for election as a director of Breda,

          o    any beneficial owner of more than 5% of Breda's common stock, or

          o    any  member of the  immediate  family of any person  referred  to
               above.

Item 13. Exhibits and Reports on Form 8-K.

     (a)  A list of the exhibits  included as part of this annual  report is set
          forth in the Exhibit  Index which  immediately  precedes such exhibits
          and is incorporated herein by this reference.

     (b)  Breda did not file any  reports on Form 8-K  during  the three  months
          ended December 31, 2000.


                                       72
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                            BREDA TELEPHONE CORP.


Date: March 30, 2001                        By: /s/ Dean Schettler
                                                ---------------------------
                                                Dean Schettler, President


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


By: /s/ Clifford Neumayer
    --------------------------------------
    Clifford Neumayer, Vice-President
    and Director

Date: March 30, 2001


By: /s/ Roger Nieland
    --------------------------------------
    Roger Nieland, Director

Date: March 30, 2001


By: /s/ Dean Schettler
    --------------------------------------
    Dean Schettler, President and Director

Date: March 30, 2001


By: /s/ Scott Bailey
    --------------------------------------
    Scott Bailey, Treasurer and Director

Date: March 30, 2001


By: /s/ Larry Daniel
    --------------------------------------
    Larry Daniel, Secretary and Director

Date: March 30, 2001


By: /s/ John Wenck
    --------------------------------------
    John Wenck, Director

Date: March 30, 2001


By: /s/ Dave Grabner
    --------------------------------------
    Dave Grabner, Director

Date: March 30, 2001


/s/ Robert J. Boeckman
    --------------------------------------
    Robert J. Boeckman, Chief Operations
    Officer

Date: March 30, 2001


/s/ Jane Morlok
    --------------------------------------
    Jane Morlok, Chief Financial Officer

Date: March 30, 2001


                                       73
<PAGE>

                                  EXHIBIT INDEX
                Exhibits to Form 10-KSB of Breda Telephone Corp.
                   for the Fiscal Year Ended December 31, 2000

Description of Exhibit.

     2.   Plan of Acquisition, Disposition, Reorganization
          Arrangement, Liquidation or Succession

          (a)  Stock  Purchase  Agreement  dated May 22,  1998,  by and  between
               Arthur  Zerwas and Mary Zerwas,  Westside  Independent  Telephone
               Company,  and  Breda  Telephone   Corporation,   along  with  the
               Amendment  to the Stock  Purchase  Agreement  dated May 22, 1998.
               (Filed as Exhibit 2.1 to Breda's  Registration  Statement on Form
               10-SB, and incorporated herein by this reference.)

          (b)  Stock  Purchase  Agreement  dated May 22,  1998,  by and  between
               Arthur  Zerwas and Mary Zerwas,  and Breda  Tele-Services,  Ltd.,
               along with the Amendment to the Stock  Purchase  Agreement  dated
               May 22,  1998.  (Filed as  Exhibit  2.2 to  Breda's  Registration
               Statement  on  Form  10-SB,  and  incorporated   herein  by  this
               reference.)

          (c)  Asset  Purchase  Agreement  dated October 6, 1998, by and between
               NewPath  Communications,  L.C. and Tele-Services,  Ltd. (Filed as
               Exhibit 2.3 to Breda's Registration  Statement on Form 10-SB, and
               incorporated herein by this reference.)

          (d)  Asset Purchase Agreement by and between Golden Sky Systems,  Inc.
               and Breda  Telephone  Corporation  dated as of November 30, 1998,
               along with the Amendment of Asset Purchase  Agreement dated as of
               January 11, 1999.  (Filed as Exhibit 2.4 to Breda's  Registration
               Statement  on  Form  10-SB,  and  incorporated   herein  by  this
               reference.)

          (e)  Stock  Purchase  Agreement  dated  March 29,  2000,  by and among
               AirTouch  Iowa,  LLC,  Central  Iowa  Cellular,   Inc.,   Prairie
               Telephone  Company,  Inc.,  Panora  Tele-communications,  Inc.,
               Walnut Creek Communications, Inc.,


                                       74
<PAGE>

               Minburn  Telephone  Company,  and  Interstate  Enterprises,  Ltd.
               (Filed as Exhibit 2.1 to Breda's Form 8-K dated March 29,2000 and
               filed April 12, 2000, and incorporated herein by this reference.)

          (f)  Des Moines Tower Proceeds  Agreement  dated as of March 29, 2000,
               by   and   among   AirTouch    Communications,    Inc.,    Panora
               Telecommunications,  Inc.,  Walnut  Creek  Communications,  Inc.,
               Minburn  Telephone  Company,  Interstate  Enterprises,  Ltd.  and
               Prairie  Telephone  Company,  Inc.,  along with  Exhibits A and B
               thereto.  (Filed as Exhibit  2.2 to Breda's  Form 8-K dated March
               29, 2000 and filed April 12,  2000,  and  incorporated  herein by
               this reference.)

     3.   Articles of Incorporation and Bylaws

          (a)  Amended and Restated Articles of Incorporation of Breda Telephone
               Corp. (Filed as Exhibit 3.1 to Breda's Registration  Statement on
               Form 10-SB, and incorporated herein by this reference.)

          (b)  Amended and Restated Bylaws of Breda  Telephone  Corp.  (Filed as
               Exhibit 3.2 to Amendment No. 1 to Breda's Registration  Statement
               on Form 10-SB, and incorporated herein by this reference.)

     10.  Material Contracts.

          (a)  Employment  Agreement  effective  April 1, 2000 between Breda and
               Robert  Boeckman.  (Filed as Exhibit  10.1 to Breda's Form 10-QSB
               for the quarterly  period ended March 31, 2000, and  incorporated
               herein by this reference.)

          (b)  Employment  Agreement  effective  April 1, 2000 between Breda and
               Jane  Morlok.  (Filed as Exhibit  10.2 to Breda's Form 10-QSB for
               the  quarterly  period  ended March 31,  2000,  and  incorporated
               herein by this reference.)



                                       75
<PAGE>

     21.  Subsidiaries of the Registrant.

          (a)  List  of   Subsidiaries.   (Filed  as   Exhibit   21  to  Breda's
               Registration  Statement on Form 10-SB, and incorporated herein by
               this reference.)


                                       76