Notes to Financial Statements for the period ending December 31, 2006

Note A – A fuel surcharge or credit is applied to each bill to reflect increases or decreases in the cost of fuel compared to the base price of fuel set in our tariff at $.90 per gallon. The weighted average cost of fuel was $2.4676 per gallon in Y2006.

Note B – Network Access revenue related to toll service is received under a system of access charges. Access charges represent a methodology by which local telephone companies charge the long distance carrier for access and interconnection to their local families. The revenues are placed into a common pooling arrangement with other exchange carriers for redistribution or kept by the Cooperative. The redistributions are made according to formulas established by the governing boards of the pools and are generally based upon expenses incurred and investment maintained by the individual exchange carriers (of which the Cooperative is one).

Note C – Universal Service Fund was set up by the Federal Communications Commission in 1985 to provide a support fund for rural companies whose average cost per line continues to be 115% above the national average. Since that time, the USF has grown to provide phone service discounts to consumers with qualifying low-incomes, to the nation's schools and libraries, and to link health care providers located in rural areas to urban medical centers.

Note D – Miscellaneous revenue includes connect fees, equipment rental, advertising income and installation fees.

Note E – Fuel consumption represents the cost of fuel consumed to generate electricity. Nushagak Cooperative purchased 1,267,321 gallons of #2 diesel fuel at $2.5852 per gallon for a total cost of $3,277,545.57.

Note F – Administrative and General includes: management, accounting, support staff and director expense; outside services, such as consultants, auditors, legal; insurances, including property, general liability, etc; office supplies; dues/memberships.

Note G – Non-regulated net loss includes phone and inside wire installs, repairs and maintenance of payphones.

Note H – Interdivision receivable and interdivision payable entries record the associated costs with cable tv/internet upgrade and the resultant transfer of funds between telephone and cable.

Note I – Investments in associated organizations consists of the following: National Rural Utilities Cooperative Finance Corporation (NRUCFC), capital term certificates and Alaska Rural Electric Cooperative Association (ARECA), patronage capital credits.

Note J – Deferred charges relate to the electric division and consist of costs associated with the preliminary study and investigation of future projects. Such costs are originally deferred and subsequently capitalized to resultant construction or amortized over five years if construction doesn't materialize. Also included are air quality permit study and major overhauls.

Note K – Work under construction at year end includes projects to be closed out and capitalized in the following divisions: Electric – Phase II Jacket water/cooling upgrade and supplemental heat pipe and meter replacement; Telephone – Phase II Clark's Point switch replacement and Aleknagik N.S. remote CO.

Note L – Other accrued liabilities include accruals for gross receipts tax, payroll taxes, city tax, certain insurances such as worker's compensation and general liability, audit accrual, and certain employee benefits (annual leave, sick leave, and holiday pay).