SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS is the intent of the Company to evaluate whether to hold or sell parts or all of each investment on an individual basis. At December 31, 2003, the Company had external investments totaling $7.5 million. In 2004, the Company anticipates taking advantage of a conversion feature on its Rural Telephone Bank stock. The Company will convert a portion of its holdings into a different class of stock that will pay cash dividends each year. The bank declares a dividend rate that varies, each year. The range of the dividend has been between 4.2% and 5.65% over the last 5 years. The rate in the two most recent years was 4.2%. This transaction is estimated to provide the Company with approximately $0.3 million in dividend income each year, based on the 2003 dividend rate of 4.2% and assuming we had converted the stock at the beginning of 2003. The Company has four principal sources of funds available to meet the financing needs of its operations, capital projects, debt service, investments and potential dividends. These sources include cash flows from operations, cash and cash equivalents, the liquidation of investments and borrowings. Management routinely considers the alternatives available to determine what mix of sources are best suited for the long-term benefit of the Company. During the 2003 year, with the closing of the sale of the Virginia 10 RSA Limited partnership interest, the Company evaluated its capital requirements, and as a result eliminated its $20.0 million revolving line of credit with CoBank in May 2003. The Company had paid off the outstanding balance in early 2003, and did not borrow on it during the remaining time the facility was in place. In light of the $27.9 million balance in cash equivalent investments, management determined additional debt capacity is not necessary for the near-term. The term debt loan agreements with CoBank have three financial covenants. These are measured on a trailing 12-month basis and are calculated on continuing operations. The first of the covenants is the total leverage ratio, which is total debt to operating cash flow. This ratio must remain below 3.5, and as of December 31, 2003 it was 1.2. The second measure is equity to total assets, which must be 35% or higher. At December 31, 2003 the ratio was 57.3%. The third measure is the debt service coverage ratio, which is operating cash flow to scheduled debt service, which must exceed 2.0. At December 31, 2003 this measure was 4.3. Management believes the Company will meet these covenant measures for the coming year. The Company has pledged all of its affiliates capital stock as collateral for the CoBank loans. The Company’s covenants on the RUS/RTB debt require the pledge of all current and future assets of the Telephone subsidiary until the debt is retired. Another external source of funding is a $0.5 million unsecured, variable rate revolving line of credit with SunTrust Bank. This facility is in place to allow the Company to better manage its daily cash balances. The facility expires May 31, 2004. Management anticipates renewing this facility with SunTrust Bank under similar terms and conditions. At December 31, 2003 there were no balances outstanding under this facility. Due to make-whole provisions in the Company’s debt agreements it is currently uneconomical for the Company to prepay any debt. The Company is obligated to make future payments under various contracts it has entered into, including amounts pursuant to its various long-term debt facilities, and non-cancelable operating lease agreements for retail space, tower space and cell sites. Expected future minimum contractual cash obligations for the next five years and in the aggregate at December 30, 2003, are as follows: Financial Condition, Liquidity and Capital Resources Payments due by periods (unaudited) (in thousands ) Total Less than 1 year 1-3 years 4-5 years After 5 years Long-term debt principal $ 43,346 $ 4,230 $ 8,898 $ 9,552 $ 20,666 Interest on long —term debt 15,429 3,019 5,099 3,778 3,533 Operating leases 12,592 3,216 4,616 2,229 2,531 Capital calls on investments 1,790 - 1,790 - - Purchase obligations 98 98 - - - Total obligations $ 73,255 $10,563 $ 20,403 $15,559 $ 26,730 (unaudited)  (in thousands) Less than 1 year After 5 years 52 SHENANDOAH TELECOMMUNICATIONS COMPANY