Adopted by the Board of Directors May 9, 2019

Revised by the Board of Directors May 8th, 2023

Pursuant to Article V of the Bylaws (the “Bylaws”) of Finland Cooperative Company (the “Cooperative”), the Board of Directors of the Cooperative (the “Board”) adopts the following Patronage Policy, effective May 9, 2019:

1. Determination of Patronage Income. 

The Board will annually determine net patronage income as soon as practical after each fiscal year’s third-party financial compilation or financial review is completed.  The Board will also determine the net income from non-patronage business.  (net patronage income is profit, not total revenue.) 

2. Allocation of Patronage Income. 

In accordance with Section 5.1 of the Bylaws, a portion of the net patronage income will be set aside in an unallocated capital reserve (i.e., as unallocated capital on the Cooperative’s balance sheet), if, before the last fiscal year’s taxes are filed, the Board declares a contribution to the unallocated capital reserve. If so declared, the Board will set the capital reserve allocation at a percentage of net patronage income not in excess of 40%.  

Net patronage income will be determined based on book rather than tax income.

As required by Section 5.1 of the Bylaws, patronage income (after the capital reserve allocation described in Paragraph 2) will be allocated to the Cooperative’s member-owners on the basis of the total dollars spent by such member-owner with the Cooperative.  

Non-patronage income will not be allocated to the member-owners but will be added to an unallocated capital reserve.  

3. Payment of Patronage Income. 

Net patronage income will be paid as equity credits, Class B Stock, and/or cash, as determined by the Board.  The Board will retain discretion to annually determine the actual cash distribution percentage based on the Cooperative’s financial condition and prospects at the time, credit agreement commitments, and other relevant factors.  

4. Redemption of Patronage Equity. 

Except for any annual redemption approved by the Board, redemption of patronage equity credits is not automatic. It is done only after the individual member-owner requests, in writing, redemption of patronage equity credits. This Patronage Policy is not a call or demand and member-owners who wish to hold their patronage equity credits and help preserve the net worth of this Cooperative as an ongoing business may continue to do so.

Patronage equity credits will be redeemed at the discretion of the Board and pursuant to the terms of this Patronage Policy. The decision to do so will be made by the Board only if and to the extent it is determined this capital retirement will not impair the financial condition or operations of the Cooperative.  

The Board will determine, in its discretion, the amount of patronage equity credits eligible in any year for equity redemption, if any, and whether such equities will be retired with cash or other property.

The Board, in its sole discretion, may establish an amount below which it will not issue a redemption payment, the age of patronage equity credits eligible for redemption and any other conditions or criteria for determining patronage equity credits which are eligible to be redeemed. The Board can establish a target period for retirement of previously allocated patronage equity credits but may not commit to a specific repayment period. 

5. Transfer of Patronage Equity. 

Patronage equity credits may be transferred (including, but not limited to, assignments and encumbrances) only with the consent and approval of the Board and such instruments of transfer as may be required or approved by the Cooperative. 

Transfers are only effective if recorded on the books and records of the Cooperative, and are subject to offset for debts of the transferor and transferee. 

6. Right to Offset. 

If any cash patronage is allocated to a member-owner which owes the Cooperative any past due amount, or any retirement of previously allocated patronage equity credits is held by a member-owner which owes the Cooperative any past due amount, the Cooperative will offset the amount payable to the member-owner against all or portion of the past due amount (whether or not the past due amount has been written off the Cooperative’s books).

7. Rights on Liquidation. 

If the Cooperative is dissolved, any patronage equity credits will be paid to the holders in accordance with the Articles of Incorporation and the Bylaws of the Cooperative and the applicable law, if funds are available. 

8. Amendment. 

The Board shall annually review this Patronage Policy and consider for prospective application changes which are consistent with the then-current financial condition and prospects of the Cooperative, the Bylaws, and any binding commitments contained in any of the Cooperative’s credit agreements. If this Patronage Policy is revised in the future, any patronage equity credits will be subject to any new redemption policy. This Patronage Policy may be terminated, amended, clarified, supplemented or restated by the Board at any time, with or without notice.