KINGDOM TELEPHONE COMPANY

KINGDOM TECHNOLOGY SOLUTIONS

ANNUALREPORT

2020

Due to Covid-19 and the uncertainty of widely available vaccines, Kingdom’s Annual Meeting will be held virtually. For more information please read this report and/or visit the link below.

The Annual Meeting of the Shareholders of Kingdom Telephone Company, a corporation with its principal office in Auxvasse, Missouri, will be live streamed via YouTube on March 13, 2021 beginning at 1:00 p.m. Go to: kingdomtelco.com/annual-meeting to view live or see the recorded event.

1:00 p.m.

Meeting Called to Order and Introductions; Verification of QuorumDoug Lensing, President

Notice of Meeting and Proof of PublicationBennie Young, Secretary

Verify electronic approval of the minutes of the 2020 Annual MeetingDoug Lensing, President

Verify electronic approval of the 2020 Financial ReportsRenée Reeter, General Manager

Election Results, Old & New BusinessBrydon, Swearengen & England, General Counsel

Mokane Exchange: David Horstman Williamsburg Exchange: Jake Anderson vs. Craig TimmerbergAt-Large Southern Exchanges: Adam Elley vs. Teresa Farley*These shareholders have been nominated by the Committee on Nominations appointed by the Board ofDirectors pursuant to the bylaws. No additional nominations can be made at the meeting.

General Manager’s ReportRenée Reeter, General Manager

QuestionsEmail to questions@kingdomtelco.com or call 386-2021 and leave your question in the voice mailbox. All questions received prior to the end of the meeting will be addressed during the meeting. We will follow up with any questions not addressed during the meeting.

Prize DrawingsAll members who vote electronically are eligible.See back of report for details.

AdjournDoug Lensing, President

NOTICE OF 2021 ANNUAL MEETING

Kingdom Telephone Company 573.386.2241 www.kingdomtelco.com

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BOARD OF DIRECTORS

OFFICERS(FRONT ROW, FROM LEFT TO RIGHT)

Eugene “Butch” Richards, Vice-President, Tebbetts Exchange

Doug Lensing, President, Rhineland Exchange

Bennie Young, Secretary-Treasurer, Hatton Exchange

BOARD MEMBERS(BACK ROW, FROM LEFT TO RIGHT)

GeneEldringhoff,Big Spring Exchange

Adam Elley, At-Large Southern Exchanges

Scott Whalen, At-Large Northern Exchanges

Jake Baumgartner, Auxvasse Exchange

Jake Anderson, Williamsburg Exchange

JimBuffington, Mokane Exchange

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Last year I shared how our company had morphed from a telephone company to a communications company. 2020 has certainly been a year to prove the importance of that fact. Technology is constantly changing and must, in order to keep up with consumer demand. Kingdom has been fortunate through the years to have received support to bring new technologies to our members. In the 1950’s when small groups were forming to-gether to bring telephone services to rural America, it was because the big Bell companies didn’t want to burden the extreme cost of doing so.

In 2020, especially when Covid hit, the importance of technology proved to be one of the most talked about problems in the nation. As the country shut down, families were forced to work from home, if they were lucky enough to have a job that allowed it. Students were sent home and expected to learn via the Internet. All governments began to scramble to figure out how we were going to make Internet available to all. They had already begun to work on the problem by making billions of dollars available through broadband auctions for communication companies to bid on, but Covid put a big spotlight on how far behind our nation was on the problem. Grant dollars have been made available both at the state and national levels, but building internet access takes time and money. At a minimum of about $20-$25,000 per mile to bury main line fiber, the money has been the bigger issue in the rural areas. In rocky areas, the cost climbs much higher. These prices don’t include the cost of taking the service into the home, which is an additional expense. Like in the 1950s when Bell didn’t want to spend money for telephone, they don’t want to spend money for internet in the rural areas where they still serve. But, this time, the definition of rural has changed. Now, if an area doesn’t have a population of at least 100,000, the big guys have no interest in upgrading the area. Why, because it makes more financial sense to upgrade in the big cities where they have thousands of customers per square mile. In those areas, they prefer to focus on the cellular upgrades like the big hype over 5g that everyone hears about. But that is a subject for another day, suffices to say, 5g isn’t what it is marketed to be in the rural areas.

These new government dollars are not for areas like Kingdom Telephone, but rural areas that belong to the big companies like AT&T and CenturyLink. Those areas are auctioned off to the lowest bidder. For example, a couple of years back the FCC held what was referred to as a CAF II auction. In this auction, they auctioned $1.6 billion to the lowest bidders for some rural areas. In Missouri, some of the small telcos and rural electrics went after the money. If they already had planned to build in these areas, the CAF money helped pay for it. But, if it wasn’t an area of interest, the CAF money didn’t give a company enough to justify building. More recently, the FCC announced the Rural Digital Opportunity Fund (RDOF) auctions. These auctions will have a budget of $20.4 billion dollars going to the lowest bidders. That amount of money definitely warrants participation. The RDOF money will be in two different auctions. The first was designed to give away $16 billion dollars and the second will give the remaining $4.4 billion over a ten year period. The first RDOF auction began late Octo-ber 2020 and ended in late November. The winners of the auction were released in early December. These winners still have a hill to climb, in that they have to complete all the necessary paperwork for final FCC approval. Kingdom participated in this RDOF round but the areas of in-terest went for less money than would support a viable business case to build. The auction ended assigning only $9.2 billion of the planned $16 billion as the bidders competed with each other for less money after the budget amount level. Kingdom will have to see if areas in round two will be of enough interest to participate in a second round.

As our General Manager has already shared in the past, Kingdom sup-port is scheduled to end, hence the Phynx projects in Mexico, Moberly, and Centralia. Kingdom will continue to look at these new government dollars as they will help further the expansion of reliable internet to a rural nation that is greatly lacking. In addition, we will continue to seek opportunities that will further assist in replacing the existing support received.

REPORT: DOUG LENSING, BOARD PRESIDENT

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REPORT: RENÉE REETER, GENERAL MANAGER

2020 will definitely go down in the history books thanks to Covid. Lifestyles changed dramatically as families worked and schooled from home. Many companies left employees working from home while others were con-sidered essential and had to find ways to keep their employees as safe as possible. Kingdom is among the last group. For a while most of our office employees worked from home while our outside technicians continued to repair and install services. They were separated from each other in case one contracted Covid so not all would be at risk. We had a range of customer contacts from some who didn’t want us to enter their home to those that welcomed us in as they were quarantined due to exposure. Obviously, we couldn’t risk our employees so those quarantined homes got re-scheduled. As time goes on, we still have situations related to Covid, but like everyone else, we find a way to deal with them and we keep moving forward.

Aside from all the bad, Covid has made us realize that we rely on the Internet as much as we do water, electrici-ty or telephones. Image what this year would have been like if there was no internet. No ordering groceries or supplies online for delivery, no working from home, so no job, no way to teach our children. No telemedicine, no banking, no entertainment, no social media; that last one would offend a lot of people! Internet is vital and everyone has come to that realization. The government is giving away more and more dollars in an effort to get internet to every American. Elon Musk’s company is launching low orbit satellites that hope to provide internet to areas of the world that lack the service. Billions of dollars are being spent on Internet services. Although there are still some homes in the world that don’t think it is important, the number that need it is by far the majority. As I write this report, Kingdom members without internet is less than 8% compared to just one year earlier where it was 18%. Not only has the need for internet increased but the size of the pipe to the house has increased as well. With more home time for all members of the family, comes more devices wanting to connect to the internet. More online entertainment, like streaming TV or online gaming or social media or shopping. All of this data trying to squeeze itself into a low speed service is like trying to push a watermelon into a straw. Kingdom provides service up to gigabit and in this time in this century – a gigabit should handle any family’s capacity needs.

Kingdom has had a banner year as it relates to construction. We had five main line crews working and as mentioned in the December newsletter should be finished with all planned upgrades by second quarter of 2021. We have retired over $3 million of copper and added fiber and other upgrades to the tune of about $5.2 million. All of this done without taking on debt.

Phynx has completed 71% of Moberly and 86% of Mexico. Internet cus-tomers in these areas have more than doubled in 2020. Mexico is at or close to neighborhood saturation as far as main line but still has a lot of

I have served on the Board of Directors for Kingdom Telephone since 1997 and the challenges we have faced in the past don’t compare to what our industry faces today. With that knowledge, the Board of Kingdom Tele-phone has every confidence that our company can continue to give you the latest technology for decades to come. We have a dedicated and experienced workforce to face any of the future challenges and provide the support you deserve. I am honored to serve as your Board President and very confident in our future together.

REPORT: DOUG LENSING, BOARD PRESIDENT, CONT.

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REPORT: RENÉE REETER, GENERAL MANAGER, CONT.

room for growth on customer connections. Moberly will likely be at that same point by late spring or early sum-mer. Once we build the main line in these neighborhoods, the sign ups really start growing from word of mouth advertising. 18% of our customers take gigabit speed, 63% take 500 mbps. And 19% take the lowest package of 200 mbps.

Kingdom speed package take rates are very different than Phynx, because Kingdom members started off years ago with just dial up. Over time they needed more but tried to get what they needed by paying for the cheapest package available. This might save money, but it leaves you with a bad experience if you are trying to watch a Netflix movie or get on social media. The first reaction is that Kingdom internet stinks, when the problem is not the service, the problem is the watermelon won’t push through the straw. 64% of Kingdom customer’s sub-scriber to 200 mbps or more. These speeds will ensure that school and work and play work smoothly.

The last area I wish to cover is the change in our Annual Meeting. Due to Covid and the availability of a vaccina-tion, the Board of Directors had to make a decision in December whether or not to hold a face to face meeting. There is much pre-planning that takes place for a meeting like this. This report is sent to the printer by January in order to be mailed in mid-February. In addition, the school location might close without notice because of Covid and leave us without a place to hold the meeting. Time will tell if a vaccination will be widely available by the day of our event, but without knowing that, the Board made the important decision to protect our members and have a virtual event. Although, we will not be having all the goodies as at the face to face meeting, we will be drawing for a lot of prizes for those members who make the effort to vote electronically. We want members to have the ability to ask questions just like they do at the normal meeting. So we plan to have a phone line available during the live stream and will have email set up where any member can email a question prior to the meeting. Details of how the voting process works will be sent to all members prior to the meeting. General information about voting can be found on the back page of this report.

It has been a strange and trying year for everyone. As for Kingdom, it has been another busy but successful year. I hope you join us on the live virtual meeting or at least watch it after the meeting. Until then, thank you for taking the time to read this report. As always, we are honored by the loyalty you give us and hope you stay healthy and safe.

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MINUTES FROM OUR ANNUAL MEETING

The annual meeting of stockholders of Kingdom Telephone Company (hereinafter the “Company”), was held on March 14, 2020 at the South Callaway R-II High School in Mokane, Missouri.

At 1:00 p.m., Doug Lensing, President of the Company, announced that the meeting would be called to order, as all shareholders had time to register and receive a ballot for the record number of proxies and assignments.

Mr. Lensing welcomed the stockholders to the 65th annual meeting of the Company.

Mr. Lensing stated that 248 stockholders were represented at the meeting, with 137 in person, 79 proxies and 32 assignments. He thereupon declared a quorum present for conducting of the Company’s business.

Bennie Young, Secretary of the Company then read the notice of the meeting and proof of publication. The notice and proof of publication were ordered attached to these minutes.

Mr. Lensing introduced The Varlet Hearts, who are from the Auxvasse Exchange, and thanked them for the entertainment.

The attendees recited the Pledge of Allegiance led by General Manager Renee’ Reeter, and Sierra Barker sang the Star-Spangled Banner, followed by a prayer by Mr. Buffington.

Mr. Lensing introduced the Board of Directors; Renee’ Reeter, General Manager of the Company; and Brian Mc-Cartney, the Company’s attorney.

On motion duly made, seconded and unanimously passed, reading of the Minutes of the March 9, 2019, meet-ing of stockholders was dispensed with and the Minutes were approved as reported in the 2019 Annual Report.

Mr. Lensing then referred the stockholders to the Financial Report that was printed in the 2019 Annual Report and Meeting Notice.

On motion duly made, seconded and unanimously passed, reading of the 2018 Financial Reports was dispensed with and the 2019 Financial Reports were approved as reported in the 2019 Annual Report and Meeting Notice.

Ms. Reeter explained the proposed bylaw amendment to allow electronic voting and answered questions from the stockholders.

Mr. McCartney then announced that the meeting would turn to the election of directors. He explained the cu-mulative voting procedure that would be used for the election of directors. He also stated that three (3) direc-tors were to be elected at this meeting, one from the Auxvasse Exchange, one from the Big Spring Exchange and one from the Tebbetts Exchange. He reported that the Nominating Committee had met and nominated Jake Baumgartner, from the Auxvasse; Gene Eldringhoff from the Big Spring Exchange; and Eugene (Butch) Richards and James F Brune, both from the Tebbetts Exchange. Mr. McCartney then asked if there were any nominations from the floor. There being no further nominations, the stockholders were asked to mark their ballots and the inspectors collected the ballots and retired to count the ballots. The following served as the inspectors for the meeting: Daniel Jenkins, Bob Johnson, Ronald Sommer, Betty McDonald, Cindy Schrader, Rodney Garnett, Cheryl Anderson, Hadley Linnenbringer, Diane Barker, Elaine Humphrey, Kathy Huddleston, Karen Eskew, Shannon Slater, Kelli Teel, Kelly Polston, and Dana Myers.

Renee’ Reeter, General Manager of the Company, then gave a report on the operations of the Company during the past year and answered questions from the floor.

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MINUTES FROM OUR ANNUAL MEETING, CONT.

Mr. McCartney and the inspectors returned, and Mr. McCartney announced the following from the election of directors as recorded in the report of the inspectors:

EXCHANGE NOMINEE VOTES

Auxvasse Jake Baumgartner 164

BigSpring GeneEldringhoff 164

Tebbetts Eugene (Butch) Richards 207James F Brune 151

Mr. McCartney thereupon announced that Jake Baumgartner from the Auxvasse Exchange; Gene Eldringhoff from the Big Spring Exchange; and Eugene (Butch) Richards from the Tebbetts Exchange, having received the highest number of votes, had been elected directors of the Company for a term of three (3) years and until their successors are elected and qualified. Mr. McCartney also announced that the proposed bylaw amendment to allow electronic voting had passed.

The report of the inspectors of election was ordered attached to these minutes.

Mr. McCartney then called for old business. There being none, Mr. McCartney then called for new business. There was none.

Mr. Lensing then proceeded with the drawing for the attendance prizes. Thereafter, the meeting was ad-journed.

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BALANCE SHEET:YEARS ENDED DECEMBER 31, 2020 AND 2019

UNAUDITED 2020 AUDITED 2019ASSETS

Current AssetsCash & Cash EquivalentsTelecom Accounts ReceivableOther ReceivablesMaterials & SuppliesPrepaid Expenses

Total Current Assets

$ 8,272,542 20,774455,003681,144606,538

$ 10,036,001

$ 9,666,67546,641

577,342896,225701,555

$ 11,888,438Other Assets & Investments

Nonregulated Assets - NetOther InvestmentsDeferred Tax AssetDeferred Charges

Total Other Assets & Investments

$ 2,136,08314,077,735

- 6,142

$ 16,219,960

$ 2,362,8369,762,041

- -

$ 12,124,877Property, Plant & Equipment

In ServiceUnder ConstructionLess Accumulated Depreciation

Net Property, Plant & Equipment

Total Assets

$ 47,067,7671,316,434

23,076,693

$ 25,307,508

$ 51,563,469

$ 45,030,542 1,382,48723,911,565

$ 22,501,464

$ 46,514,779

LIABILITIES & MEMBERS’ EQUITYCurrent Liabilities

Accounts PayableCustomer DepositsAccrued ExpensesOther Current Liabilities

Total Current Liabilities

$ 327,710 13,495

(546,911) 40,788

$ (164,918)

$ 537,170 7,184

(3,153,736) 65,762

$ (2,543,620)

Long-Term Debt - -

Deferred Credits $ 354,132 $ 646,929

Members’ EquityMembershipsPatronage CapitalOther Equity

Total Members’ Equity

$ 29,450 50,899,194

445,611

$ 51,374,255

$ 29,58048,301,617

80,273

$ 48,411,470

Total Liabilities & Member Equity $ 51,563,469 $ 46,514,779

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STATEMENT OF OPERATIONS:YEARS ENDED DECEMBER 31, 2020 AND 2019

A complete copy of the Financial Statements audited by BKD, LLP may be seen during regular office hours at:

Kingdom Telephone Company211 South Main Street

Auxvasse, Missouri

UNAUDITED 2020 AUDITED 2019Operating Revenues

Local NetworkNetwork AccessMiscellaneousUncollectables

Total Operating Revenues

$ 677,0855,308,665

265,407 (13,973)

$ 6,237,184

$ 870,930 4,650,411

279,495 839

$ 5,801,675 Operating Expenses

Plant SpecificPlant Non-SpecificCustomerCorporateDepreciation/AmortizationOperating Taxes

Total Operating Expenses

Operating Margin

$ 652,760 300,033 291,186 821,424

2,097,799 343,384

$ 4,506,586

$ 1,730,598

$ 794,896 328,011 319,965 921,422

1,975,174 313,299

$ 4,652,767

$ 1,148,908

Other Income (Expense)Investment & Dividend IncomeNet Nonregulated Income/(Loss)Other Interest ExpensesMiscellaneous Income/(Loss)Non-Operating Taxes

Total Other Income (Expense)

Margin Available for Fixed Charges

$ 116,171 1,673,276

0 11,098

(114,000)

$ 1,686,545

$ 3,417,143

$ 143,629 11,713,270

0 11,411

(84,210)

$ 11,784,100

$ 12,933,008

Fixed Charges - Interest on Long-Term Debt - -

Net Margin $3,417,143 $12,933,008

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We have audited the accompanying consolidated financial statements of Kingdom Telephone Company and its subsidiary, which comprise the consolidated balance sheets as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, members’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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 misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the 2019 and 2018 financial statements of Missouri RSA 8 Limited Partnership, the investment in which, as discussed in Note 3 to the financial statements, is accounted for by the equity method of accounting. The investment in Missouri RSA 8 Limited Partnership was $1,069,600 and $965,616 as of December 31, 2019 and 2018, respectively, and the equity in its net income was $834,493 and $849,251 for the years then ended. The financial statements of Missouri RSA 8 Limited Partnership were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Missouri RSA 8. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements 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 misstatement 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 accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

REPORT: BKD, CPAS AND ADVISORS

West Des Moines, IowaDecember 16, 2020

1 0

REPORT: BKD, CPAS AND ADVISORS

Opinion

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kingdom Telephone Company and subsidiary as of December 31, 2019 and 2018, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of Amer-ica.

Other Matter

In our report dated April 9, 2020, we expressed a qualified opinion on the 2019 and 2018 consolidated finan-cial statements. The basis for a qualified opinion was limited to an inability to perform audit procedures on the Company’s investment in Missouri RSA 8 Limited Partnership, or its equity in earnings in such partnership which is included in net margins. Subsequent to April 9, 2020, audited financial statements of the investee were obtained and audit procedures were performed on the investments and equity in earnings. Accordingly, our present opinion on the 2019 and 2018 consolidated financial statements, as presented herein, is different from that expressed in our previous report.

PRIZES!

One (1) year of Free Internetvalued at $65 per month

All members who voted electronically will be eligible for drawings.

One (1) year ofTelephone bill credit

valued at $26.90 per month(excluding taxes and fees)

One hundred (100)$20 bill credits

In the past we have given away 50 turkeys and 50 hams at the meeting. Since we are not having a face

to face meeting we will be drawing for:

OR

Who is a shareholder?Only those named on your monthly billing or the label of the Annual Meeting Notice are recorded as sharehold-ers. No other person is eligible to vote, or to win a prize from the Annual Meeting. If a shareholder wants to add a person to their share, they must contact our office at 386-2241 and complete the proper document. This must be done before February 20 if it is to be effective for the Annual Meeting.

How do I vote electronically?All members will receive a unique login and will be able to cast vote via the internet beginning 8:00 a.m. on February 21, 2021 until 12:00 p.m. on Friday, March 12, 2021. The login information will be sent via mail from Survey & Ballot Systems on Kingdom letterhead. In addition, a reminder email will be sent to those members who have an email on file.

How do I vote if I do not have Internet service?All members can come to the headquarters at 211 S Main, Auxvasse during business hours beginning February 22, 2021 through 12:00 p.m., Friday, March 12, 2021 to cast their electronic vote.

211 S. Main Street, P.O. Box 97

Auxvasse, MO 65231-0097

ONLY THE INDIVIDUALS SHOWN ON THE MAILING LABEL ARE ELIGIBLE SHAREHOLDERS.

PRSRT STD AUTO

US POSTAGE PAID

COLUMBIA MO PERMIT #609

A GUIDE TO VOTING