Annual Meeting of MembersSaturday, February 1, 202084th

The 84th Annual Membership Meeting of Callaway Electric Cooperative, hereinafter referred to as “cooperative”, will be held at the cooperative’s office located at 1313 Coopera-tive Drive in Fulton, Missouri, on February 1, 2020, beginning at 12:30 p.m., for the purpose of acting upon the following:

1. The election of three (3) directors for a term of three (3) years each. 2. The reports of officers, directors and manager.

All other business which may properly come before the meeting or any adjournment thereof.In accordance with the bylaws of the cooperative, a duly appointed committee has nom-

inated the following members as candidates for directors to be voted upon at the February 1, 2020 Annual Membership Meeting as stated above: District 1 - District 2 - District 3 - Brent Loutzenhiser Randy Gastineau David Boessen Scott Sullivan Phillip Allen Rick WoltersThe official report of the nominating committee is posted at the office of the cooperative, as directed by the cooperative’s bylaws.

Members must attend the meeting in person to register, cast their vote, and be eligible for the registration gift and attendance awards.

Official NoticeCallaway Electric Cooperative’s84th Annual Membership Meeting

Saturday, February 1 at Callaway Electric CooperativeRegistration opens at 10:30 a.m.

Please accept our invitation to attend the 84th Annual Meeting of Callaway Electric Coopera-tive. The meeting is open for cooperative mem-bers and will be held Saturday, Feb. 1, at the coop-erative’s headquarters.

Registration will begin at 10:30 a.m., lunch will be served from 11 a.m. to 12:15 p.m., and the busi-ness meeting will convene at 12:30 p.m. Before the official start of the meeting, there will be an oppor-tunity for you to visit with the cooperative’s board of directors and employees. We will have information available about energy efficiency, electric vehicles and Callabyte. Again this year, we will have the pop-ular virtual tour of Associated Electric’s Thomas Hill Energy Center. Plus, we will be offering free blood pressure screenings and hearing tests.

The business session will include voting to ap-prove of the 2019 annual meeting minutes and the 2018 audited financials for Callaway Electric Co-operative and our subsidiaries. The minutes and a condensed 2018 consolidated audit report are included in this annual meeting notice. As part of your cooperative’s locally owned and democrati-cally controlled business structure, members will elect three directors, each for a three-year term. The cooperative’s members who have been nom-inated to serve on the board of directors appear in the Official Notice at the top of this page. Addi-tionally, we will each give a report of various co-operative activities as Callaway Electric Coopera-tive’s board president and CEO/general manager.

A Strong Year in 2019Callaway Electric Cooperative ended 2019 in

sound financial condition, meeting or exceeding the financial expectations of our lenders. In doing so, the board of directors authorized a capital credit refund totaling about $520,000, which appeared as a credit on our members’ December 2019 electric bills. The cooperative experienced growth in 2019, ending the year with 13,000 active accounts. Al-

though the growth was minimal, it is still positive for the cooperative, and we are optimistic about the future growth potential. Callabyte, the wholly owned subsidiary of Callaway Electric Coopera-tive, which offers broadband, VoIP and television service grew by 1,522 subscribers, ending 2019 with 4,204 active subscribers.

Throughout 2019, we maintained our pro-active and aggressive right-of-way maintenance program that was initiated when the fiber build began. The efforts to replace old poles with tall-er, stronger poles continued in 2019, which is an essential component of our reliability efforts. Via Callabyte, fiber was extended into communities, such as Holts Summit, New Bloomfield, Hermann and Jonesburg. The number of homes passed for every dollar of investment has enhanced Calla-byte’s business plan. As it has been in Callaway Electric’s service area, Callabyte also has been well received in these communities.

Looking forward, 2020 is already shaping up to be a successful year for your cooperative. First, there will be no rate increase in 2020. A slight re-duction in wholesale power costs, constant scruti-ny of expenses along with an increasingly positive performance of Callabyte are contributing factors allowing 2020 rates to remain unchanged.

We anticipate the fiber build to continue into 2020; however, not as aggressively as the past two years. With our continuous commitment to strong electric reliability, we will maintain a focus on pole and conductor replacements. From a finan-cial strength perspective, efforts will continue to increase sales for Callaway Electric Cooperative and Callabyte.

Whether it is adding a security light, installing a ground source heat pump or investing in an elec-tric car, these are a few examples of how electricity can add value to your life. Likewise, if Callabyte is available at your home and you desire internet ser-

A Word to Our Member/Owners

Thomas W. HowardCEO/General Manager

David J. MeansPresident

vice, we encourage you to utilize our service. It is reliable, affordable, and we have a local office and employees to assist you with ques-tions or service needs. And, by choosing to do business with Callaway Electric Cooperative and Callabyte, you strengthen the finances of the organization and provide value to the over-all member base.

Throughout 2020, we will remain steadfast in our priorities. We will strive to offer quality customer service, maintain a local office and employ quality individuals. We have a great team who are always looking for opportuni-ties to better serve our cooperative members. Likewise, our dedicated board of directors are focused on continual training and education to effectively govern the cooperative in an ever-changing industry while working to en-hance the quality of life for the members.

As we enter a new decade, your cooper-ative exists to provide safe, quality and reli-able electric service at the lowest cost con-sistent with sound business practices. It is a mission we have embraced since our found-ing. We hope you can join us for this year’s annual meeting!

Garnett G. Garrett, Secretary

Thank you for your support of Callaway Electric Cooperative,

Financial Report

Independent Auditor’s Report

We are always looking for opportuni-ties to make changes which benefit Calla-way Electric’s membership both now and in the future. For 2019, one area we selected to adjust was the presentation of the annu-al consolidated financial report. Our goal for this particular change includes: 1) pro-viding more insight into the Electric and Subsidiary revenues and the direct costs associated to produce that revenue; and 2) presenting the financial information in a format which greater represents a tradi-tional financial statement and is consistent with our peers in the industry. In whole, the consolidated financial report is comparable to years past but provides additional details to the members. Financially, 2019 was a good year for Callaway Electric Cooperative and its sub-sidiaries. We saw an increase of $1,063,266 in electric revenues, up 3.8% from 2018. Our subsidiaries continue to show prom-ising growth with increased revenues of $1,739,329, up 58.5% from 2018. With this

growth, also comes an increase in direct costs associated with producing this reve-nue and this can be seen in the financials presented. The combined increases in reve-nue associated with management’s diligent review of overhead costs resulted in an in-crease in consolidated operating margins of $1,345,848 in 2019. Along with growth comes the need for capital improvements. The coopera-tive incurred an increase in long term debt from 2018 to 2019. This is a result of the additional capital requirements for enhanc-ing quality and reliable electric service to the membership and the continued invest-ment into the fiber optic network. During 2019, total debt increased $6,643,009 or 7.7% from 2018. This includes new debt of approximately $9,600,000 while nearly $3,000,000 of outstanding debt was retired in 2019. Lastly, in early 2019 we chose to take an additional step to ensure the precision and reliability of the financials for Cal-

laway Electric and its subsidiary, Calla-byte. BKD, our independent accounting firm, conducted a Transfer Pricing study. The purpose of this study is to provide analysis regarding financial transactions which take place between two related companies (Callaway Electric and Calla-byte) to ensure these transactions meet the current economic standards of a fair market value transaction in the industry. The result of this study was very positive and any minor adjustments were imple-mented during 2019. Please review the Consolidated Financial Report. This is our op-portunity to share the Cooperative’s financial information with our members. We hope to see positive trends con-tinuing into 2020 and look forward to the year to come.

Board of DirectorsCallaway Electric Cooperative and SubsidiaryFulton, Missouri

We have audited the accompanying con-solidated financial statements of Callaway Electric Cooperative (the Cooperative) and its subsidiary, which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income, chang-es in equity and cash flows for the years then ended, and the related notes to the consolidat-ed financial statements.

Management’s Responsibility for the Finan-cial Statements

Management is responsible for the prepa-ration and fair presentation of these consoli-dated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material mis-statement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opin-

ion on these consolidated financial statements

based on our audits. We conducted our audits in accordance with auditing standards gener-ally accepted in the United States of America. Those standards require that we plan and per-form the audit to obtain reasonable assurance about whether the consolidated financial state-ments are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the as-sessment of the risks of material misstate-ment of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant account-ing estimates made by management, as well as evaluating the overall presentation of the con-solidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Callaway Electric Cooperative and its subsid-iary as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.Other Supplemental Information

Our audit was conducted for the purpose of forming an opinion on the basic consolidat-ed financial statements as a whole. The Sup-plemental Consolidating Information listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, accordingly, we do not express an opinion or provide any assurance on it.BKD, LLPKansas City, MissouriApril 5, 2019

Jason R. Vann, CPAManager of Finance & Accounting

Financial Report cont’dAUDITED AUDITED UNAUDITED

Operating Revenue 2017 2018 2019Electric Sales Revenue 26,343,645$ 28,075,792$ 29,139,058$ Subsidiary Revenue 1,186,957$ 2,973,453$ 4,712,782$ Other Revenue 40,234$ 37,460$ 37,042$

Total Operating Revenue 27,570,836$ 31,086,705$ 33,888,882$

Operating ExpensesCost of Purchased Power 12,981,213$ 14,427,166$ 13,909,436$ Cost of Subsidiary Revenue 405,237$ 1,096,674$ 1,788,772$ Operating, Maintenance, & Other Expenses 8,101,728$ 9,237,086$ 9,354,409$ Depreciation of Plant 2,712,778$ 3,212,846$ 3,828,869$ Interest on LT Debt (CoBank & CFC) 2,507,072$ 3,371,642$ 3,920,258$

Total Operating Expenses 26,708,028$ 31,345,414$ 32,801,744$

Operating Margins 862,808$ (258,709)$ 1,087,139$

Non-Operating MarginsInterest and Dividend Income 142,296$ 144,225$ 71,488$ Patronage Capital Allocations -$ (Central Electric Power Coop, CoBank, CFC, etc.) 941,550$ 1,476,675$ 1,191,291$ Gain on Sale of Subsidiary -$ 1,179,217$ -$

Total Net Operating Margins 1,946,654$ 2,541,408$ 2,349,918$

Total Taxable Allocation 558,032$ 561,830$

AUDITED AUDITED UNAUDITED

Assets (What We Own) 2017 2018 2019Current AssetsCash 2,167,922$ 3,625,990$ 1,947,586$ Accounts Receivable 3,532,307$ 3,548,807$ 3,603,201$ Note Receivable -$ 750,000$ -$ Materials on Hand 60,897$ 84,835$ 75,677$ Prepayments 42,166$ 93,931$ 200,793$ Total Current Assets 5,803,292$ 8,103,563$ 5,827,257$ Other AssetsTotal Plant in Service 111,471,953$ 125,114,723$ 136,736,195$ Less Accumulated Depreciation (21,196,923)$ (21,034,880)$ (23,310,052)$ Investments in Associated Companies (Central Electric Power Coop, CoBank, CFC, etc.) 12,354,073$ 12,612,051$ 12,788,397$ Deferred Expenses 932,515$ 1,899,432$ 2,546,924$ Other Assets 125,000$ 800,000$ 1,200,000$

Total Assets 109,489,910$ 127,494,889$ 135,788,721$

Liabilities (What We Owe)Current LiabilitiesCurrent Portion of Long-Term Debt 2,419,947$ 2,889,712$ 3,122,450$ Accounts Payable 2,235,862$ 1,858,409$ 1,718,241$ Customer Deposits 679,657$ 702,807$ 726,422$ Other Current Liabilities 897,611$ 913,971$ 540,839$ Total Current Liabilities 6,233,077$ 6,364,899$ 6,107,952$ Other LiabilitiesLong Term Debt 68,239,854$ 83,209,756$ 89,620,027$ Deferred Revenues & Other Liabilities 1,339,889$ 2,144,333$ 2,861,084$

Total Liabilities 75,812,820$ 91,718,988$ 98,589,063$

Member's Equity (Our Net Worth)Memberships 53,675$ 54,015$ 54,005$ Patronage Capital 33,452,236$ 35,222,297$ 36,702,381$ Other Equities 296,179$ 499,589$ 443,273$

Total Liabilites & Member's Equity 109,614,910$ 127,494,889$ 135,788,721$

Minutes of the 2019 Annual MeetingThe 83rd Annual Meeting of Callaway Electric Cooperative,

hereinafter referred to as “Cooperative”, was held at the Cooperative’s headquarter facilities in Fulton, Missouri on Saturday, February 2, 2019.

Registration of members began at 10:30 a.m. Starting at 11:00 a.m. lunch was served by Lee’s Famous Recipe Chicken.

David J. Means, President of the Cooperative called the meeting to order at 12:30 p.m.

The invocation was given by Bruce Williamson. At this time, the members said in unison the Pledge of Allegiance followed by a presen-tation of the National Anthem.

President Means introduced the Board of Directors, which were all present except Charles R. Schmid. He also introduced CEO/General Manager Thomas Howard and Cooperative Attorney Andrew Sporleder.

The Cooperative has a total of 10,803 members and 128 members are required to meet a quorum. President Means reported that 435 mem-bers were reported present in person, there were no proxies, and that a quorum was present for the transaction of business.

President Means noted that the members’ presence indicated re-ceipt of the Annual Meeting notice and proof of due publication thereof.

President Means then asked Secretary Garnett Garrett to come for-ward and review the unapproved minutes of the 2018 Annual Meeting.

Secretary Garrett called for the reading of the unapproved minutes of the meeting held February 3, 2018. A motion was made and second-ed to dispense with the reading of the minutes and to approve them as mailed. Motion carried.

President Means asked Treasurer Randy Gastineau to come for-ward and give the Treasurer’s Report. Treasurer Gastineau called for the reading of the unapproved Treasurer’s report. A motion was made and seconded to dispense with reading and to accept the Treasurer’s report as mailed in the official notice of the meeting. Motion carried.

CEO/General Manager Thomas Howard introduced U.S. Congress-man Blaine Luetkemeyer who came forward and addressed the crowd.

President Means then asked Cooperative Attorney Sporleder to conduct the election of directors.

Attorney Sporleder explained that in accordance with the bylaws, a committee on nominations had been selected, had met and made its report. Attorney Sporleder read the nominating committee report, which indicated the following had been nominated as directors, and if elected, serve for a term of three years:

District 1 - Wesley Zerr Benjamin T. Maddox

District 2 - David Guerrant Aaron Conner

District 3 - Henry C. Lindemann Jr. Anita L. Ruga

Attorney Sporleder announced the Secretary had informed him that one written petition for nomination had been submitted from District 1 by Donald C. Hanson.

Attorney Sporleder directed the members to cast their ballots for directors.

The following persons were appointed to serve as inspectors of the election: Mary Ann Shafer, Rocky Maddox, Maureen Long, Pat Braun-er, Darlene Keeling, Darlene Gloss, Debra Odell, Sheila McClintock, Christina Weirick, and Marty Scheall.

Ballots were then collected and the inspectors and Attorney

Sporleder retired to count the ballots.President Means then gave a brief President’s Report which includ-

ed a review of Snowstorm Gia, the Cooperative’s safety achievement of 3,250 days with only 1 accident, the dedication of the employees and the progress of Callabyte.

He then asked Mr. Howard to introduce guests and to give the CEO/General Manager’s Report.

CEO/General Manager Thomas Howard again thanked Congress-man Luetkemeyer for attending the meeting. He then introduced special guests in attendance, beginning with 43rd District State Representative Kent Haden, Callaway County Presiding Commissioner Gary Junger-man, Callaway County Sheriff Clay Chism, Callaway County Investi-gations Lieutenant Matt Palmer and Callaway County Treasurer Debbie Zerr. Guests from cooperative related organizations included Associat-ed Electric Cooperative’s Senior Member Services Specialist, Associ-ated Electric Cooperative’s Economic Development Specialist Lynn Shea, Association of Missouri Electric Cooperative’s Executive Vice President & CEO Caleb Jones, Association of Missouri Electric Cooper-ative’s Director of Government Relations Zach Pollock, Association of Missouri Electric Cooperative’s Vice President, Member Services Chris Massman, Association of Missouri Electric Cooperative’s Legislative and Regulatory Counsel Brent Stewart, Central Electric Power Coopera-tive’s CEO/General Manager Chris Turner, Three Rivers Electric Coop-erative’s CEO/General Manager Roger Kloeppel, Consolidated Electric Cooperative’s CEO/General Manager Lynn Thompson and Howard Electric Cooperative’s General Manager/CEO Richard Fowler. Former board members John Hall and Linus Rothermich and retired employees Jerry Murphy, Danny Rose, Dennis Wease and Chris Daro were also introduced and current employees of the Cooperative were recognized.

Mr. Howard then thanked Linus Rothermich and Charlie Schmid for their years of service as Callaway Electric Board Members. Mr. Howard also recognized the recent retirement of six employees and thanked them for their dedication to the cooperative.

Next, Mr. Howard gave a brief CEO/General Manager’s report. Key topics included a 2019 rate increase, an all-time peak set just over 69 megawatts, an update on Callabyte Technology and Snowstorm Gia.

Cooperative Attorney Sporleder returned and announced that Wesley Zerr, David Guerrant and Anita L. Ruga had been duly elected to serve as directors for a term of three years and until successors were duly elected and qualified, with the report of inspectors of election as follows:

District 1 - Wesley Zerr 249 Benjamin T. Maddox 86 Donald C. Hanson 50

District 2 - David Guerrant 303 Aaron Conner 83

District 3 - Henry C. Lindemann Jr. 125 Anita L. Ruga 266

Attorney Sporleder called for unfinished business. There was none.Attorney Sporleder called for new business. There was none.After receiving a motion and a second to adjourn the meeting,

and an affirmative majority vote on such motion, Attorney Sporleder adjourned the meeting at 1:25 p.m.

Member Service Advisor Jeremiah Strode then held a drawing of registered members to award fourteen certificates for free electricity.

OVERVIEW of ANNUAL MEETING | Saturday, February 1 at Callaway Electric

10:30 a.m. Registration Be sure to bring your green registration card enclosed with this mailing.

11 a.m.-12:15 p.m. Lunch of Lee’s Famous Recipe Chicken is served Enjoy lunch, view displays, visit with employees regarding electric and Callabyte

services, have your hearing tested and/or blood pressure checked.

12:30 p.m. Business Meeting Convenes