2012-10-22T13:31:57-05:00 2011-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2011-01-01 830143525 HIGH WEST ENERGY INC HIGH 3072453261 PO BOX 519 PINE BLUFFS WY 82082 BRIAN HEITHOFF 3072453261 2012-10-05 1 Matt R Willis P00419741 8067473806 2012-10-05 2011 2016-02-24 21:20:13Z X BRIAN HEITHOFF PO BOX 519 PINE BLUFFS WY 82082 27610526 0 X WWW.HIGHWEST-ENERGY.COM X 1936 WY TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS AT COST ON A COOPERATIVE BASIS. 7 5 52 0 0 0 0 0 26258433 27452358 6752 29021 42593 111346 26307778 27592725 0 0 2559574 1583767 2951427 3130228 0 0 0 20853734 23048404 26364735 27762399 -56957 -169674 63853282 69657844 34542816 40681371 29310466 28976473 THE MISSION OF HIGH WEST ENERGY, A MEMBER-OWNED, NOT-FOR-PROFIT COOPERATIVE, IS TO SERVE OUR MEMBERS BY PROVIDING SAFE, RELIABLE, AND COMPETITIVELY PRICED ENERGY AND SERVICES FOCUSING ON THE NEEDS OF THE MEMBERSHIP. 0 0 PROVIDING ELECTRIC ENERGY TO OUR MEMBERS - 9,192 CONSUMERS AT YEAR END WERE PROVIDED ELECTRICITY ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. 0 0 0 0 0 0 0 0 0 1 0 1 0 1 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 1 1 0 1 40 0 52 1 0 0 0 0 0 27067117 1014200 0 X 7 5 0 0 0 0 1 1 1 1 1 0 0 1 1 1 1 1 1 1 1 0 X BRIAN HEITHOFF 3072453261 6270 CO ROAD 212 PINE BLUFFS WY 820820519 X RUSSELL NIELSEN 11.50 X X 24000 0 0 TROY FREEBURG 10.50 X X 24646 0 0 DONALD WISROTH 10.50 X X 24000 0 0 B CLINTON FARRAR 9.50 X X 24181 0 0 WAYNE CHILD 10.00 X 24000 0 0 DANIEL ACHESON 10.50 X 24428 0 0 JERRY BURNETT 9.50 X 24374 0 0 DON D BRUNNER 40.00 X 93260 0 16456 BRIAN D HEITHOFF 55.00 X 78887 0 16330 CAROL MACY 50.00 X 74239 0 28192 416015 0 60978 0 0 0 0 WARD ELECTRIC 3690 STAGECOACH ROAD LONGMONT CO 80504 CONSTRUCTION, RETIREMENT OF POWER LINES 1212451 WARD TRENCHING PO BOX 159 LAGRANGE WY 82221 UNDERGROUND TRENCHING 159512 UTILIBIZ SOLUTIONS 2437 CATTLE DRIVE CROWLEY TX 76036 ACCOUNTING CONSULTANT 139516 3 ELECTRICITY SALES 221000 26136175 26136175 PATRONAGE DIVIDENDS 221000 1316183 1316183 27452358 33959 33959 850 11067 0 0 850 11067 11917 3024 8893 12863 17801 -4938 -4938 -4938 99429 0 99429 99429 27592725 27554811 0 37914 X 1583767 476993 1589869 138109 769526 155731 1112172 2481949 PURCHASED POWER 17164167 ADMIN. & GENERAL EXP. 891151 DISTRIBUTION EXPENSE 774756 CUSTOMER SERVICE EXP. 186199 438010 27762399 2767065 473731 1501093 101912 812987 1438172 2076 2500000 1487711 1677784 141100 135033 71244525 27755019 39810510 43489506 1568788 1738462 15761952 16202307 0 1900937 63853282 69657844 1726112 2358799 28625455 29805739 4191249 8516833 34542816 40681371 X 27440 0 0 0 29283026 28976473 29310466 28976473 63853282 69657844 X -169674 -164319 X X 0 1 0 X 0 798677 798677 1361259 571895 789364 66657169 27183124 39474045 2427420 2427420 43489506 PATRONAGE CAPITAL - COBANK 212062 C PATRONAGE CAPITAL - TRI-STATE GENERATION & TRANSMISSION 15701825 C PATRONAGE CAPITAL - NISC 45020 C PATRONAGE CAPITAL - FEDERATED 89576 C PATRONAGE CAPITAL - WESTERN UNITED UTILITY SUPPLY 127283 C PATRONAGE CAPITAL - FRENCHMAN VALLEY FARMERS COOPERATIVE 12161 C PATRONAGE CAPITAL - NEBRASKA RURAL ELECTRIC ASSOCIATION 8101 C PATRONAGE CAPITAL - OTHER 5083 C MEMBERSHIP - TRI-STATE GENERATION & TRANSMISSION 25 C MEMBERSHIP - NRTC 1000 C MEMBERSHIP - OTHER 171 C 16202307 ACCUMULATED POSTRETIREMENT LIABILITLY 1162100 CONSUMER DEPOSITS 130190 ACCRUED TAXES 149655 ACCRUED INTEREST 14074 PATRONAGE CAPITAL PAYABLE 526581 ACCRUED EMPLOYEE COMPENSATED ABSENCES 198766 DEFERRED CREDITS 6335467 8516833 Description of Uncertain Tax Positions Under FIN 48: Part X: ON JANUARY 1, 2009, THE COOPERATIVE ADOPTED THE "UNCERTAIN TAX POSITIONS" PROVISIONS OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. THE PRIMARY TAX POSITION OF THE COOPERATIVE IS ITS FILING STATUS AS A TAX EXEMPT ENTITY. THE COOPERATIVE DETERMINED THAT IT IS MORE LIKELY THAN NOT THAT ITS TAX POSITION WILL BE SUSTAINED UPON EXAMINATION BY THE INTERNAL REVENUE SERVICE, AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. Part VII THE AMOUNT OF INVESTMENTS - OTHER SECURITIES ON FORM 990, PAGE 11, PART X, LINE 12 DOES NOT EQUAL OR EXCEED 5 PERCENT OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY IN ACCORDANCE WITH IRS INSTRUCTIONS SCHEDULE D, PART VII HAS BEEN LEFT BLANK. Part IX THE AMOUNT OF OTHER ASSETS ON FORM 990, PAGE 11, PART X, LINE 15 DOES NOT EQUAL OR EXCEED 5 PERCENT OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY IN ACCORDANCE WITH IRS INSTRUCTIONS SCHEDULE D, PART IX HAS BEEN LEFT BLANK. TRI-STATE GENERATION AND TRANSMISSION COOPERATIVE INC DIRECTOR WAYNE CHILD IS A BOARD MEMBER ON TRI-STATE'S BOARD 17164167 THE COOPERATIVE PURCHASES ELECTRIC POWER FROM TRI-STATE GENERATION AND TRANSMISSION COOPERATIVE, INC. 0 WESTERN UNITED ELECTRIC SUPPLY CORPORATION DIRECTOR DONALD WISROTH IS A BOARD MEMBER ON WESTERN UNITED'S BOARD 3107325 THE COOPERATIVE PURCHASES ELECTRIC SUPPLIES FROM WESTERN UNITED ELECTRIC SUPPLY CORPORATION. 0 RECLASSIFICATION OF BENEFITS PAID TO MEMBERS Form 990, Part I, Line 14 THE INSTRUCTIONS FOR THE 2011 FORM 990 CLARIFY THAT "BENEFITS PAID TO MEMBERS" SHOULD INCLUDE THE AMOUNT OF PATRONAGE DIVIDENDS PAID TO THE MEMBERS OF SECTION 501(C)(12) COOPERATIVES. CONSISTENT WITH THIS CLARIFICATION IN THE INSTRUCTIONS, THE COOPERATIVE HAS REPORTED ON PART I, LINE 14 FOR THE CURRENT YEAR THE AMOUNT OF PATRONAGE DIVIDENDS PAID AND/OR ALLOCATED TO THE COOPERATIVE'S MEMBERS FOR THE 2011 CALENDAR YEAR. THE ACTUAL ALLOCATION INCLUDES EQUITY EARNINGS OF THE SUBSIDIARY, BUT FOR THE PURPOSE OF THE FORM 990, EQUITY EARNINGS OF THE SUBSIDIARY ARE REPORTED AS A OTHER CHANGE IN NET ASSETS. SINCE PART I SUMMARIZES BOTH PRIOR AND CURRENT YEAR DATA, THE COOPERATIVE HAS CHOSEN TO ALSO REPORT ON PART I, LINE 14 FOR THE PRIOR YEAR THE AMOUNT OF PATRONAGE DIVIDENDS PAID AND/OR ALLOCATED TO THE MEMBERS FOR THE 2010 CALENDAR YEAR. BECAUSE THE INSTRUCTIONS FOR THE 2010 FORM 990 DID NOT PROVIDE FOR SUCH A CLARIFICATION, THE 2010 FORM 990 WAS NOT PREPARED IN THIS MANNER. HOWEVER, SINCE THE COOPERATIVE DID IN FACT ALLOCATE PATRONAGE DIVIDENDS TO ITS MEMBERS FOR THE 2010 CALENDAR YEAR, IT BELIEVES THAT BOTH THE PRIOR YEAR AND CURRENT YEAR COLUMNS OF PART I SHOULD BE PREPARED CONSISTENTLY IN ORDER TO REFLECT THAT THE COOPERATIVE HAS A PRE-EXISTING OBLIGATION TO ALLOCATE, AND DOES ALLOCATE, PATRONAGE DIVIDENDS TO ITS MEMBERS FOR EACH YEAR THAT IT OPERATES FOR THE BENEFIT OF THE MEMBERS. REVENUE LESS EXPENSES Form 990, Part I, Line 19 THE LOSS REPORTED ON PAGE 1, PART I, LINE 19 DIFFERS FROM THE TOTAL NET MARGINS REPORTED ON THE COOPERATIVE'S AUDITED FINANCIAL STATEMENTS DUE TO BOOK TO TAX ADJUSTMENTS REQUIRED TO CONFORM TO THE FORM 990 INSTRUCTIONS. THE FIRST ADJUSTMENT IS FOR THE EQUITY METHOD INCOME RECORDED ON THE COOPERATIVE'S BOOKS AND INCLUDED IN TOTAL NET MARGINS. U.S. GAAP REQUIRES THE COOPERATIVE TO RECORD ON ITS BOOKS THE EQUITY METHOD INCOME FROM ITS WHOLLY OWNED SUBSIDIARY. EQUITY METHOD INCOME IS NOT INCOME FOR IRS FORM 990 PURPOSES AND AS SUCH HAS BEEN REPORTED AS AN OTHER CHANGE IN NET ASSETS. THE SECOND ADJUSTMENT IS FOR THE PATRONAGE DIVIDENDS ALLOCATED OR TO BE ALLOCATED BY THE COOPERATIVE TO MEMBERS. WHEREAS THE FORM 990 REQUIRES SUCH AMOUNTS TO BE REPORTED AS AN EXPENSE, PATRONAGE DIVIDENDS ALLOCATED OR TO BE ALLOCATED ARE AN INCREASE IN CAPITAL AND EQUITY, SPECIFICALLY PATRONAGE CAPITAL, ON U.S. GAAP BASIS FINANCIAL STATEMENTS. BECAUSE THE COOPERATIVE ALLOCATES ITS TOTAL NET MARGINS TO ITS MEMBERS THROUGH PATRONAGE CAPITAL, THE NET EFFECT OF THESE BOOK TO TAX ADJUSTMENTS IS TO SHOW A NET LOSS ON THE FORM 990 EQUAL TO THE EQUTIY METHOD INCOME FROM ITS WHOLLY OWNED SUBSIDIARY. Form 990, Part VI, Section A, line 6 THE COOPERATIVE WAS FORMED BY THE MEMBERS TO PROVIDE ELECTRIC SERVICE AT COST ON A COOPERATIVE BASIS. Form 990, Part VI, Section A, line 7a THE MEMBERS OF THE COOPERATIVE VOTE ON THE BOARD OF DIRECTORS. ELECTIONS ARE DONE ON A ONE MEMBER ONE VOTE BASIS PER DISTRICT. Form 990, Part VI, Section A, line 7b THE FOLLOWING ACTS REQUIRE APPROVAL OF THE MEMBERS OF THE COOPERATIVE. 1. DISSOLUTION/LIQUIDATION OF THE COOPERATIVE; 2. MERGER OR CONSOLIDATION OF THE COOPERATIVE WITH ANOTHER ORGANIZATION; 3. THE DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS; AND 4. AMENDMENT OF THE COOPERATIVES' BYLAWS. Form 990, Part VI, Section B, line 11 MANAGEMENT PRESENTED A COPY OF THE FORM 990 TO THE BOARD FOR DISCUSSION, REVIEW AND APPROVAL PRIOR TO FILING. THE DISCUSSION AND REVIEW WAS PERFORMED AT THE BOARD MEETING IMMEDIATELY BEFORE FILING THE FORM 990. Form 990, Part VI, Section B, line 12c THE BOARD OF DIRECTORS AND OFFICERS ARE REQUIRED TO REVIEW AND BE FAMILIAR WITH THE POLICIES OUTLINED IN THE COOPERATIVE'S CONFLICT OF INTEREST POLICY. THE BOARD OF DIRECTORS AND OFFICERS ARE REQUIRED TO DISCLOSE ANY ACTION OR SITUATION THAT MIGHT VIOLATE THE POLICY TO THE FULL BOARD OF DIRECTORS AS SOON AS POSSIBLE. THE CONFLICT OF INTEREST POLICY IS REVIEWED ON AN ANNUAL BASIS. Form 990, Part VI, Section B, line 15 THE BOARD OF DIRECTORS USE COMPARATIVE INDUSTRY DATA FROM EACH STATE IN THE COOPERATIVE'S NRECA REGION AND SUPPLEMENTAL NATIONAL DATA PROVIDED BY NRECA WHEN DETERMINING THE COMPENSATION OF THE GENERAL MANAGER. THIS DATA SHOWS COMPARATIVE SALARIES FOR GENERAL MANAGERS FROM SIMILARLY SITUATED COOPERATIVES LOCATED IN WYOMING, NEBRASKA, COLORADO, AND THE NATION. THE BOARD AND THE GENERAL MANAGER USE COMPARATIVE INDUSTRY DATA FROM EACH STATE IN THE COOPERATIVE'S NRECA REGION AND SUPPLEMENTAL NATIONAL DATA PROVIDED BY NRECA WHEN DETERMINING THE COMPENSATION OF THE COOPERATIVE'S OTHER EMPLOYEES MEETING THE DEFINITION OF OFFICER AND KEY EMPLOYEES, IF ANY. THIS DATA SHOWS COMPARATIVE SALARIES FROM SIMILARLY SITUATED COOPERATIVES LOCATED IN WYOMING, NEBRASKA, COLORADO, AND THE NATION. Form 990, Part VI, Section C, line 19 THE COOPERATIVE PROVIDES A SUMMARIZED COPY OF THE AUDITED FINANCIAL STATEMENTS TO THE MEMBERS OF THE COOPERATIVE AT THE ANNUAL MEETING. THE COOPERATIVE WILL PROVIDE A COMPLETE COPY OF THE AUDITED FINANCIAL STATEMENTS OR GOVERNING DOCUMENTS TO ANY MEMBER WHO REQUESTS A COPY. ADDITIONALLY, A COPY OF THE COOPERATIVE BYLAWS CAN BE FOUND ON THE COOPERATIVE'S WEBSITE. INDEPENDENT DIRECTORS Form 990, Part VI, Line 1b WAYNE CHILD PER IRS FORM 990 INSTRUCTIONS IS NOT AN INDEPENDENT DIRECTOR BECAUSE HE IS ON THE BOARD OF TRI-STATE G&T ASSOCIATION, INC. THE COOPERATIVE PURCHASES ITS ELECTRIC ENERGY FROM TRI-STATE. THE COOPERATIVE IS A MEMBER OF TRI-STATE. AS SUCH, MR. CHILD IS THE COOPERATIVE'S REPRESENTATIVE ON TRI-STATE'S BOARD. MR. CHILD HAS NO OWNERSHIP INTEREST IN TRI-STATE AND RECEIVES NO DIRECT OR INDIRECT BENEFIT FROM THE COOPERATIVE DOING BUSINESS WITH TRI-STATE. DONALD WISROTH PER IRS FORM 990 INSTRUCTIONS IS NOT AN INDEPENDENT DIRECTOR BECAUSE HE IS ON THE BOARD OF WESTERN UNITED ELECTRIC SUPPLY COMPANY. THE COOPERATIVE PURCHASES ELECTRIC SUPPLIES FROM WESTERN UNITED. THE COOPERATIVE IS A MEMBER OF WESTERN UNITED. AS SUCH, MR. WISROTH IS THE COOPERATIVE'S REPRESENTATIVE ON WESTERN UNITED'S BOARD. MR. WISROTH HAS NO OWNERSHIP INTEREST IN WESTERN UNITED AND RECEIVES NO DIRECT OR INDIRECT BENEFIT FROM THE COOPERATIVE DOING BUSINESS WITH WESTERN UNITED. TO PROVIDE DETAIL REGARDING OFFICER BENEFITS Form 990, Part VII, Column F IN ORDER TO PROVIDE RETIREMENT BENEFITS TO ITS EMPLOYEES, THE COOPERATIVE HAS ESTABLISHED A DEFINED CONTRIBUTION PLAN UNDER SECTION 401(K) OF THE INTERNAL REVENUE CODE. AS PART OF THE PLAN DOCUMENT, THE COOPERATIVE PROVIDES CONTRIBUTIONS BASED UPON A PERCENTAGE OF A PARTICIPATING EMPLOYEE'S ANNUAL COMPENSATION. EMPLOYER CONTRIBUTIONS ARE AVAILABLE TO PARTICIPATING EMPLOYEES, INCLUDING OFFICERS, MEETING THE ELIGIBILITY REQUIREMENTS OF THE PLAN. THE COOPERATIVE ALSO PROVIDES HEALTH AND LIFE INSURANCE TO ALL EMPLOYEES, INCLUDING OFFICERS, THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICER IS COMPRISED OF THE TOTAL AMOUNT CONTRIBUTED TO THE 401(K) PLAN AND THE INSURANCE PREMIUMS PAID FOR THE BENEFIT OF THE OFFICER. IN ADDITION TO THE ABOVE PENSION PLAN, THE COOPERATIVE ALSO PROVIDES POST-RETIREMENT HEALTH INSURANCE BENEFITS THROUGH AN UNFUNDED WELFARE BENEFIT PLAN. THE VALUE OF THESE BENEFITS HAS NOT BEEN ESTIMATED. PATRONAGE DIVIDENDS Form 990, Part VIII, Line 2 PATRONAGE DIVIDENDS RESULT FROM THE PURCHASE OF WHOLESALE POWER FROM A GENERATION & TRANSMISSION COOPERATIVE. PATRONAGE DIVIDENDS ALSO RESULT FROM THE PAYMENT OF INTEREST FROM COOPERATIVE BANKS AND THE PURCHASE OF SUPPLIES AND SERVICES FROM OTHER COOPERATIVE ORGANIZATIONS. THE EXPENSES ASSOCIATED WITH PURCHASES FROM AND PAYMENTS TO SUCH COOPERATIVE ORGANIZATIONS ARE A DIRECT COMPONENT OF COST OF THE ELECTRIC SERVICE PROVIDED BY THE COOPERATIVE TO ITS MEMBERS. ACCOUNTING SYSTEM Form 990, Part IX THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE UNIFORM SYSTEM OF ACCOUNTS AS PRESCRIBED BY THE FEDERAL ENERGY REGULATORY COMMISSION FOR CLASS A AND B ELECTRIC UTILITIES MODIFIED FOR ELECTRIC BORROWERS OF THE RURAL UTILITIES SERVICE (RUS). THE UNIFORM SYSTEM OF ACCOUNTS DOES NOT RECORD EXPENSES IN THE GENERAL EXPENSE CATEGORIES PROVIDED ON PART IX LINES 1 - 23. THE COOPERATIVE WILL BREAK OUT SALARIES AND WAGES, EMPLOYEE BENEFITS AND PAYROLL TAXES THAT ARE ALLOCATED IN ACCORDANCE WITH THEIR ACCOUNTING SYSTEM, BUT OTHER EXPENSES THAT ARE DESCRIBED IN LINES 1 - 23 WILL BE REPORTED ON LINE 24 UNDER THE EXPENSE CATEGORIES REQUIRED BY THE UNIFORM SYSTEM OF ACCOUNTS. BREAKDOWN OF EXPENSES INCLUDED IN ADMINISTRATIVE AND GENERAL Form 990, Part IX, Line 24 THE FOLLOWING IS A BREAKDOWN OF THE EXPENSES REPORTED AS ADMINISTRATIVE AND GENERAL EXPENSE ON FORM 990, PART IX, LINE 24. OUTSIDE SERVICES EMPLOYED $202,644 OFFICE SUPPLIES EXPENSE 244,667 GENERAL ADVERTISING EXPENSE 30,038 OTHER INSURANCE 62,469 REGULATORY COMMISSION EXPENSE 31,679 DUES TO ASSOCIATED ORGANIZATIONS 73,225 DIRECTORS EXPENSES 197,614 DUPLICATE (CREDIT) (31,898) MAINTENANCE OF GENERAL PLANT 23,666 MISCELLANEOUS GENERAL EXPENSE 57,047 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $891,151 RECONCILIATION OF WAGES PER RETURN TO FORM W-3 Form 990, Part IX, Lines 5-7 SALARIES AND WAGES ARE ALLOCATED TO ASSET, LIABILITY, AND EXPENSE ACCOUNTS BASED ON THE ACCOUNTING SYSTEM DESCRIBED ABOVE. IN AN EFFORT TO EXPLAIN WHY THE AMOUNTS REPORTED ON LINES 5-7 DO NOT AGREE TO THE W-3 THE FOLLOWING RECONCILIATION IS PROVIDED. TOTAL PER LINES 5-7 $2,066,862 LESS DIRECTORS FEES REPORTED ON 1099-MISC (169,629) LESS EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (60,978) PLUS SALARIES AND WAGES ALLOCATED TO NONOPERATING MARGIN 23,366 PLUS SALARIES AND WAGES ALLOCATED TO ASSET ACCOUNTS 1,030,518 RECONCILIATION TO W-3 $2,890,139 TO PROVIDE DETAIL REGARDING OTHER EXPENSES Form 990, Part IX, Line 24E THE FOLLOWING IS A BREAKDOWN OF THE EXPENSES REPORTED AS OTHER EXPENSES ON FORM 990, PART IX, LINE 24E OTHER ELECTRIC EXPENSE - LINE DAMAGE REPAIR $152,971 TRANSMISSION EXPENSE 22,174 TAXES 262,865 TOTAL OTHER EXPENSES PER FORM 990, LINE 24E $438,010 BENEFITS PAID TO MEMBERS Form 990, Part IX, Line 4 THE FORM 990 INSTRUCTIONS FOR THE CURRENT YEAR CLARIFIES THAT THE AMOUNT OF PATRONAGE DIVIDENDS PAID TO THE MEMBERS SHOULD BE REPORTED ON PART IX, LINE 4. THE PHRASE "PATRONAGE DIVIDENDS PAID" REFERS TO THE PROCESS, SUBSEQUENT TO YEAR-END, BY WHICH THE COOPERATIVE ALLOCATES PATRONAGE CAPITAL TO AND, THEREFORE, OPERATES AT COST WITH ITS MEMBERS. THE COOPERATIVE'S TAX EXEMPT PURPOSE IS TO PROVIDE ELECTRICITY TO ITS MEMBERS AND TO DO SO ON A COOPERATIVE BASIS. TAX LAW DEFINES "OPERATING ON A COOPERATIVE BASIS" AS SUBORDINATION OF CAPITAL, DEMOCRATIC CONTROL, AND OPERATION AT COST. THE COOPERATIVE OPERATES AT COST THROUGH THE ALLOCATION OF TRUE PATRONAGE DIVIDENDS (ALSO REFERRED TO AS ALLOCATIONS OF PATRONAGE CAPITAL) TO ITS MEMBERS. PATRONAGE DIVIDENDS ARE CONSIDERED PAID IF THE ALLOCATION IS MADE (1) PURSUANT TO A PRE-EXISTING OBLIGATION, (2) FROM THE MARGINS PRODUCED FROM THE TRANSACTIONS DONE WITH OR FOR MEMBERS, AND (3) IN A FAIR AND EQUITABLE BASIS ON THE BASIS OF PATRONAGE (I.E. PURCHASES). ADDITIONALLY, THE ALLOCATION OF PATRONAGE DIVIDENDS SHOULD BE MADE WITHIN A REASONABLE TIME PERIOD AFTER THE CLOSE OF THE COOPERATIVE'S YEAR-END OF DECEMBER 31. EACH ONE OF THESE REQUIREMENTS FOR A TRUE PATRONAGE DIVIDEND IS PROVIDED FOR IN THE NON-PROFIT OPERATION ARTICLE OF THE COOPERATIVE'S BYLAWS AND IS SUMMARIZED AS FOLLOWS: (A) IN ORDER TO INDUCE PATRONAGE AND TO ASSURE THAT THE COOPERATIVE WILL OPERATE ON A NONPROFIT BASIS, THE COOPERATIVE IS OBLIGATED TO ACCOUNT ON A PATRONAGE BASIS TO ALL ITS MEMBERS FOR ALL AMOUNTS RECEIVED AND RECEIVABLE FROM THE FURNISHING OF ELECTRIC ENERGY IN EXCESS OF OPERATING COSTS AND EXPENSES PROPERLY CHARGEABLE AGAINST SUCH SERVICES (I.E. MARGINS FROM THE PROVISION OF ELECTRIC ENERGY). (B) THE MARGINS FROM THE PROVISION OF ELECTRIC ENERGY ARE RECEIVED WITH THE UNDERSTANDING THAT THEY ARE FURNISHED BY THE MEMBERS AS CAPITAL. (C) THE COOPERATIVE IS OBLIGATED TO PAY BY CREDITS TO A CAPITAL ACCOUNT FOR EACH MEMBER FOR ALL SUCH MARGINS. AND (D) ALL SUCH AMOUNTS CREDITED TO THE CAPITAL ACCOUNT OF ANY MEMBER SHALL HAVE THE SAME STATUS AS THOUGH THEY HAD BEEN PAID TO THE MEMBER IN CASH IN PURSUANCE OF A LEGAL OBLIGATION TO DO SO AND THE MEMBER HAD THEN FURNISHED TO THE COOPERATIVE CORRESPONDING AMOUNTS OF CAPITAL. THE AMOUNT REPORTED ON PART IX, LINE 4 REPRESENTS THE AMOUNT OF PATRONAGE CAPITAL THAT IS EITHER ALLOCATED OR TO BE ALLOCATED TO THE MEMBERS RESULTING FROM THEIR PURCHASE OF ELECTRICITY FROM THE COOPERATIVE FOR THE 2011 CALENDAR YEAR. THE ACTUAL ALLOCATION INCLUDES EQUITY EARNINGS OF THE SUBSIDIARY, BUT FOR THE PURPOSE OF THE FORM 990, EQUITY EARNINGS OF THE SUBSIDIARY ARE REPORTED AS A OTHER CHANGE IN NET ASSETS. AS NOTED ABOVE, SUCH AMOUNTS ARE ALLOCATED SUBSEQUENT TO YEAR-END IN A FAIR AND EQUITABLE MANNER ON THE BASIS OF PATRONAGE (I.E. PURCHASES). THE AMOUNTS ALLOCATED ARE REPRESENTATIVE OF THE MARGINS FROM THE PROVISION OF ELECTRIC ENERGY TO THE MEMBERS AND ARE DONE PURSUANT TO THE OLBIGATION THAT EXISTED IN THE BYLAWS PRIOR TO THE COOPERATIVE PROVIDING ELECTRICITY TO ITS MEMBERS. THEREFORE, THESE AMOUNTS MEET THE DEFINITION OF THE TERM "PATRONAGE DIVIDENDS PAID". PLEASE NOTE, HOWEVER, THAT BECAUSE PATRONAGE DIVIDENDS IS THE PROCESS BY WHICH THE COOPERATIVE OPERATES AT COST WITH ITS MEMBERS AND THEREBY A KEY COMPONENT TO ACCOMPLISHING ITS EXEMPT PURPOSE, THE COOPERATIVE HAS REPORTED THE AMOUNT OF ITS 2011 MARGIN THAT HAS BEEN OR IS TO BE ALLOCATED TO THE MEMBERS SUBSEQUENT TO YEAR-END. SUCH AMOUNTS ARE AN EXPENSE FOR FORM 990 REPORTING AND IS NOT AN EXPENSE FOR FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. AS A RESULT, THE DIFFERENCE BETWEEN THE COOPERATIVE'S GAAP BASIS FINANCIAL STATEMENTS AND THE REVENUE LESS EXPENSES REPORTED ON PART I, LINE 19 IS THE AMOUNT OF PATRONAGE DIVIDENDS REPORTED AS BENEFITS PAID TO MEMBERS. Changes in Net Assets or Fund Balances: Form 990, Part XI, line 5: EQUITY METHOD INCOME OF SUBSIDIARY 169,674. PATRONAGE CAPITAL RETIREMENTS -1,788,389. NET CHANGE IN MEMBERSHIPS -27,440. GAIN ON RETIRED CAPITAL CREDITS 75,169. OTHER COMPREHENSIVE INCOME ADJUSTMENT FOR POSTRETIREMENT BENEFITS -177,100. PATRONAGE CAPITAL ASSIGNABLE 1,583,767. Total to Form 990, Part XI, Line 5: -164,319. AUDIT COMMITTEE Form 990, Part XII, Line 2c THE BOARD AS A WHOLE IS RESPONSIBLE FOR OVERSEEING THE FINANCIAL STATEMENT AUDIT AND SELECTING THE INDEPENDENT FINANCIAL STATEMENT AUDITOR. HIGH WEST COMMUNICATIONS INC PO BOX 519 PINE BLUFFS WY 820820518 830316111 INVESTMENTS WY N/A C 101781 1738460 1.00000 1 0 0 0 0 1 0 0 0 0 0 0 0 1 0 1 0 0 HIGH WEST COMMUNICATIONS INC - AMOUNT NA AS LESS THAN 50000 N HOURS X EMPLOYEE COMPENSATION HIGH WEST COMMUNICATIONS INC - AMOUNT NA AS LESS THAN 50000 P CASH HIGH WEST COMMUNICATIONS INC A 850 CASH HIGH WEST COMMUNICATIONS INC - AMOUNT NA AS LESS THAN 50000 F CASH