CORPORATE GOVERNANCE

The Funding Corporation is governed by a highly qualified management team responsible for our day-to-day operations, and a Board of Directors responsible for strategic planning. Together they represent decades of senior level experience in the fields of finance and banking, accounting, risk management and agriculture.

Board of Directors

The Funding Corporation Board of Directors is defined by statute and is comprised of nine voting members and one nonvoting member. Seven board members are elected by the Farm Credit System Banks (three members are elected from among the chief executive officers or presidents of the Banks and four members are elected from among the current or former directors of the Banks). These seven board members, after receiving recommendations from and consulting with the Secretary of Treasury and the Chairman of the Board of Governors of the Federal Reserve System, appoint two members from outside the System. The president of the Funding Corporation serves as a nonvoting member on the Board of Directors.

Leadership Team

The leadership team implements our strategy and is an integral part of our success. Working together, these professionals draw upon decades of experience in financial markets, banking, accounting and governance to assure that the Funding Corporation effectively carries out its mission.

Code of Ethics for Funding Corporation

The Funding Corporation has adopted a Code of Ethics applicable to the chief executive officer and finance and accounting professionals who prepare financial statements and maintain financial records supporting the financial statements. The Funding Corporation's Code of Ethics relates to the preparation of the System's quarterly and annual information statements.

As the System's financial spokesperson, the Funding Corporation is responsible for financial disclosure and the release of public information concerning the financial condition and performance of the System as a whole. To that end, the Funding Corporation has established the System Audit Committee and the System Disclosure Committee.

System Audit Committee

The System Audit Committee is comprised of five members, all of whom are appointed by the Board of Directors of the Funding Corporation. The System Audit Committee Charter sets forth the Committee's composition and responsibilities.

System Disclosure Committee

The System Disclosure Committee is responsible for ensuring that the financial and non-financial information disclosed in the System's quarterly and annual information statements are complete, properly summarized and accurately reported on a timely basis. The Disclosure Committee Charter sets forth the Committee's composition and responsibilities.

Agreements Among Certain System Institutions

In order to provide for mutual protection between the Banks with respect to their debt obligations, the Banks have voluntarily entered into agreements that contain certain financial covenants. These mutual agreements include the Second Amended and Restated Market Access Agreement and the Amended and Restated Contractual Interbank Performance Agreement.

Second Amended and Restated Market Access Agreement

The Funding Corporation and the Banks have entered into the Market Access Agreement. The Market Access Agreement establishes criteria and procedures for the Banks that provide oversight and control over a Bank's access to System funding if the creditworthiness of the Bank declines below certain agreed-upon levels. If the criteria are not met, the Market Access Agreement may require the Bank to provide certain additional information and, under specified circumstances, restrict or prohibit an individual Bank's participation in issuances of Farm Credit Debt Securities. The Market Access Agreement promotes the identification and resolution of individual Bank financial problems in a timely manner and discharges the Funding Corporation's statutory responsibility for determining conditions for each Bank's participation in each issuance of Farm Credit Debt Securities.

Under the Market Access Agreement, if certain financial criteria are not met, a Bank may be placed in one of three categories, each of which imposes certain requirements and/or restrictions on the affected Bank. The criteria under the Market Access Agreement are the Contractual Interbank Performance Agreement (CIPA) scores, the net collateral ratio, and the permanent capital ratio of a Bank. The Bank net collateral ratio is net collateral (primarily earning assets) divided by total liabilities and the Bank permanent capital ratio is primarily the Bank's common and preferred stock and surplus divided by risk-adjusted assets. The criteria standards for the net collateral ratio and the permanent capital ratio are:

 *Represents the current minimum requirement

The categories are progressively more restrictive: a "Category I" Bank is subject to additional monitoring and reporting requirements; a "Category II" Bank's ability to participate in issuances of Farm Credit Debt Securities may be curtailed; and a "Category III" Bank may not be permitted to participate in issuances of Farm Credit Debt Securities.

Amended and Restated Contractual Interbank Performance Agreement

The Banks and the Funding Corporation have also entered into the Contractual Interbank Performance Agreement, or the CIPA. Under provisions of the CIPA, a CIPA score is calculated that measures the financial condition and performance of each District using various ratios taking into account the District's and Bank's capital, asset quality, earnings, interest-rate risk and liquidity. The CIPA score is compared against the agreed-upon standard of financial condition and performance that each District must achieve and maintain. The measurement standard established under the CIPA is intended to provide an early-warning mechanism to assist in monitoring the financial condition of each District.