On June 29, 2000 your local Farm Credit association took another step forward in our structural evolution. Our board of directors voted to recommend to you, our shareholders, the restructuring of the association. After receiving approval for the change from our regulator, we will invite you to attend a special meeting so you can ask questions and also vote on the matter in October.

Why are we making this change? The answer is simple — tax benefits.

We would like to charter two new corporations — Yankee Farm Credit, PCA and Yankee Farm Credit, FLCA — as of January 1, 2001. You, our stockholders, will continue to own Yankee Farm Credit, ACA. The agricultural credit association (ACA) will be the parent company and the two new corporations will be wholly owned subsidiaries of the ACA.

"This proposed new corporate structure is just another in the long line of restructuring actions that we have undertaken for one purpose — to enhance the member value in this association."

If your loan is a short-term loan, we will keep it in the ACA, or have the ability to move it to the PCA. If it is a long term, first mortgage loan, it will be housed in the FLCA. Both subsidiaries will contract for employee services, as needed, from the ACA.

Our recent negotiations with the IRS allowed us to be taxed at each individual corporation, a decision that translates into significant tax savings for your ACA. The ACA and the PCA will be taxable entities and the FLCA will be nontaxable. The tax savings flowing through to the parent ACA will be significant and we will pass these savings on to you.

What does this change mean to you?

Beginning with 2002 patronage — distributed in 2003), higher after-tax unallocated surplus from the FLCA subsidiary will allow Yankee ACA’s patronage program to be 100 percent cash to members, as compared to our current 50 percent cash/50 percent allocated surplus program. In addition, the ACA will begin revolving existing allocated surplus certificates into cash for you, starting September 2002.

The cumulative impact of these actions will be higher cash returns each year to ACA members. If future ACA credit and financial conditions are good, the board could decide to accelerate the six-year revolvement on your allocated retained earnings and further improve the cash payback. As customers of Yankee Farm Credit, ACA, you won’t even notice these reorganizations. We will continue to make and service loans just as we have in the past and you will continue to work with your current loan officer or financial services representative.

This proposed new corporate structure is just another in the long line of restructuring actions dating back to 1988 that we have undertaken for one purpose — to enhance the member value in this association.

This letter appeared in a recent issue of Financial Partner (F.P.) magazine, Yankee Farm Credit's customer publication. Click here if you would like to start receiving F.P. magazine in the mail.

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