2009 - DocumentCloud
KONIAGone people , INC
Many faces, many stories,
2009 shareholderreport
2009 BOARD OF DIRECTORS
Chris A. Johnson
Michael Pestrikoff
Richard Frost
Ronald Unger
Chairman
Vice Chairman
Secretary
Treasurer
Lois Fields
M. Brent Parsons
Conrad Peterson
Linda Suydam
Director
Director
Director
Director
Perry Eaton Director
OUR VISION Cultural Pride, Corporate Excellence.
OUR MISSION To sustain growth and provide increasing dividends while celebrating community and culture.
2009 shareholderreport
KONIAG STAFF
Will Anderson
James Erikson
Charlie Powers
Debbie Lukin
Leon Backa
President & CEO
Senior Vice President & CFO
Vice President, Corporate Affairs
Vice President, Corporate & Shareholder Services
Director of Internal Audits
Sharon Beeson
Chuck Reft
Jacqueline Madsen
Gloria Bishop
Erin Whipple
Tax Director
Manager of Lands & Resources
Manager of Shareholder Communications
Manager of Shareholder Records
Project Director
Cheryl Christofferson
Melinda Cortez
April Mattheus
Administrative Assistant
GIS Technician
Executive Assistant
Not pictured: LaToya Lukin Administrative Assistant
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2009 shareholderreport Chairman’s Message
Chairman’s Message Thank you for taking the time to read the 2009 Shareholder Report. We created this report to present in a straightforward, reader-friendly way the results of our 2009 Annual Report, which compares this year’s financial results with results from previous years. As a Shareholder, it is your right to understand the finances of our company. One of Koniag’s top priorities has been to improve the quality and frequency of our communications efforts and the Shareholder Report functions as a tool for educating you, the Shareholder, about our financial performance. We have further augmented our communications efforts by: • Increasing the distribution of our Shareholder newsletter from quarterly to bi-monthly; • Making the results of our 2009 financial report available to our Shareholders; • And continuing to update and improve our company’s Web site. Our efforts have paid off. According to results from the 2009 Shareholder satisfaction survey, 87 percent of respondents reported they are “kept pretty well informed of the goings-on at Koniag.” A significant majority – 78 percent – think “Koniag listens to Shareholder opinions.” Though survey results indicate there are areas in which you’d like to see improvement, Koniag has made significant positive strides with regard to Shareholder satisfaction. Thanks again to all those who participated – your feedback tells us not only what we’re doing right but the ways in which we can improve our company to better serve you, our Shareholders. Our mission is to sustain growth and provide increasing dividends while celebrating community and culture, and Koniag is dedicated to continually improving our business in order to return maximum financial benefit to our Shareholders. Eighty-two percent of survey participants said they think “Koniag does a good job of managing its businesses.” On a scale of 1-5, when it comes to “paying a good dividend,” Shareholder satisfaction is up a full point, from 2.64 in 2006 to 3.64 in 2009. Overall Shareholder satisfaction continues to be influenced most strongly by Koniag’s financial performance. The variables with the strongest correlation to overall satisfaction are “Living up to your expectations” and “Managing assets wisely.” According to our survey, 76 percent of respondents are “Happy with the way my Koniag dividend has grown the last few years.” Seventythree percent think “Koniag’s long-term financial strategy is sound.” In order to increase Shareholder dividends, Koniag is committed to managing our lands and natural resources while balancing necessary development with preservation. We are continually looking for ways to generate profit from the lands that can sustain many generations of Shareholders with respect to preserving our lands to ensure our subsistence rights are protected. Seventy-two percent of Shareholders said they feel Koniag’s development policy and conservation efforts are well balanced; 74 percent feel that responsible development doesn’t threaten subsistence and the two can co-exist.
2009 shareholderreport Chairman’s Message
In 2002, Koniag signed a conservation easement agreement with the federal government to make certain that the Karluk lands are protected, preserved, and developed in order to sustain the subsistence lifestyle of the people in the area. The results of the survey showed we need to do a better job of educating shareholders on this important issue and the decisions surrounding land management practices in general. Over the coming year, land use practices will be a focus for our Shareholder newsletters and other communication efforts. Our Board goals remain the same. Though progress has been made, our priorities are: 1. Financial growth that supports profitability 2. Increased annual dividends 3. Increased awareness of Alutiiq culture 4. Promotion and support of regional unity 5. Investing in our future through education of our Shareholders and descendants 6. Comprehensive communication planning 7. Comprehensive lands and resources planning 8. Cultivation of a unified sense of shareholder identity and community 9. Continued development of skills throughout our organization at both the Board and staff level Despite uncertainty surrounding the U.S. economy, this has been another successful year for Koniag. I’d like to take the opportunity to thank our Shareholders for sharing Koniag’s optimism about the future. With your continued support we can achieve more, together. Sincerely,
Chris A. Johnson Board Chairman
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2009 shareholderreport The Bottom Line
The Bottom Line The Big Picture In 2009, Koniag reported lower net earnings of $6.1 million compared to 2008 earnings of $12 million. The lower earnings were driven primarily by three factors: significant losses in our stock market holdings; lower sales activity in the real estate sector; and a one-time charge related to the taxation of prior years’ payroll benefits at a Koniag Development (KDC) subsidiary. These reductions were partially offset by an increase in 7(i) natural resource revenues received from other regional corporations, and by a tax benefit which reflects the future likelihood of utilizing positive tax attributes of the Afognak Joint Venture. While net earnings were down, gross revenues increased in 2009 to $115.6 million, up 14 percent from 2008 gross revenues of $101.3 million. Reported revenues for all years prior to 2008 have been restated to reflect the sale of an operating subsidiary, Integrated Concepts and Research Corporation (ICRC). The sale of ICRC requires that revenues and expenses (including taxes) generated by this subsidiary be reclassified and reported as “discontinued operations”. This sale was finalized on June 4, 2007.
Total assets
$145,126 $120,290
$97,257
2 00 5
During 2009, Shareholders’ equity increased by $2.9 million or 4.1 percent. Equity per share as of March 31, 2009, 2008 and 2007 was $194.25, $186.56 and $161.19, respectively. Koniag’s operating subsidiaries provide services for a diverse range of government agencies in a variety of disciplines. In 2009, operations revenue generated $111 million in revenue. Seventy – five percent was a result of providing services to the federal government. In 2008, operating subsidiaries generated $96.4 million in revenue. Earnings net of related expenses from natural resources in 2009 totaled $6.9 million, an increase of $2.5 million from 2008. Continued high prices for oil and minerals extracted from lands held by other regional corporations led to an increase of 67.8 percent in 7(i) revenue in 2009.
Shareholders’ equity
$122,964
$59,913 $42,975
2007
2008
$72,203 $69,346
$98,354
20 06
At March 31, 2009, Koniag held assets (not including lands conveyed under the Alaska Native Claims Settlement Act) totaling $145 million compared to $123 million at March 31, 2008. This represents an increase of $22 million, or 17.9 percent, over the previous year.
2009
2005
$47,212
2006
2007
2008
2009
2009 shareholderreport The Bottom Line
In 2009, Koniag focused on rebuilding its real estate portfolio. The Company added significant new acquisitions in Texas and Virginia, where real estate markets have remained strong relative to other parts of the country. At March 31, 2009, Koniag had very little remaining real estate in California, Arizona and Nevada. The Company and its subsidiaries held diversified real estate investments in 16 properties across the U.S., with the most significant investments in Washington, Texas, Virginia and Alaska. Koniag’s investment securities segment lost $6.9 million in 2009 as compared to total portfolio losses of $1.6 million in 2008. The Company also reflected a before tax realized loss of $4.6 million in 2008, resulting in an overall return of -5.7 percent.
Highlights The management teams at Koniag, Inc. and KDC continued in 2009 to grow core business lines and improve operational and administrative effectiveness and efficiencies.
Dividends
$8.73 $6.00
$3.70
$3.00 $1.18
2005
2 00 6
2007
2008
20 0 9
The Company grew its manufacturing sector and established a presence in the Alaska natural resources industry with the acquisition of Dowland-Bach Corporation, a company that fabricates sophisticated control systems. The sale was finalized December 31, 2008. Despite the downturn in the U.S. economy and Koniag’s stock market investment losses, the Company realized a $22 million (or 17.9 percent) increase in overall assets and a modest gain of 4.1 percent, or approximately $2.9 million in Shareholders’ equity. The success of the Company over the years has allowed it to make significant donations to Alaska Native and other not for profit organizations. The most significant of these contributions has been to the Koniag Education Foundation (KEF). The company donated $166,000 to KEF in 2009. In just over a decade, KEF has awarded more than $2.2 million in educational scholarships.
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GroundCelebration Breaking Koniag, Inc. and Kodiak Area Native Association (KANA) broke ground in May on our new headquarters on Near Island. Establishing our headquarters in the region is possible due to our financial success in recent years. Our presence ensures Koniag will continue to be good stewards of the lands, waters and resources of the region.
2009 shareholderreport Ground Breaking Celebration
The spirit of the ceremony was marked by a traditional Alutiiq lamp-lighting ceremony and a performance by the Sun’aq Tribal Dancers of Kodiak. Koniag Board members, staff and community members spent the afternoon celebrating the construction of a new home that brings KANA and Koniag together to serve our people.
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2009 shareholderreport Corporate Governance
Corporate Governance Who We Are Koniag Inc. and our family of companies are structured to ensure we protect our holdings and deliver maximum benefit to our Shareholders while developing a business model that will sustain itself for future generations. Koniag Development Corporation (KDC) is a wholly-owned subsidiary of Koniag. In addition, KDC has several subsidiaries. KDC, its subsidiaries and Koniag’s other holdings make up the Koniag family of companies.
Koniag Each year, Shareholders vote to elect members of Koniag’s Board of Directors. The Board of Directors influences how the corporation is run from the top down. It is helpful to have an understanding of Koniag’s corporate structure, its companies and subsidiaries, and the role the Board and staff play in the day-to-day operations and future of the corporation. The Board of Directors establishes Koniag’s strategic direction and long-term goals. These are Shareholder-elected positions. Our Board has nine members who serve three-year terms. Three positions are elected each year. This ensures that even if three new people are elected, there are six members who are not up for re-election and can provide continuity from year to year. The Board of Directors of Koniag establishes the policies and objectives under which we operate, in addition to determining the levels of authority granted the President/CEO. There are some decisions that require Board approval, and others that can be made at the discretion of the President/CEO. The Board sets the direction of the company, while the Executive Management team develops and carries out the operating plan, after it is approved by the Board. It is the job of
the President/CEO to run the company based on the approved operating plan. Koniag, like any other Corporation, is governed by a set of bylaws. Bylaws specify the organizational structure of the Board and govern many areas including how internal affairs are structured, which officer positions are included on the Board (Secretary, Treasurer, etc.), the manner in which meetings are conducted, the number of members serving on the Board and length of the term Board members serve. It is also the role of the Board to approve and monitor the corporation’s profit plan. The profit plan is the budget and operational plan that is developed for each fiscal year. They oversee the Executive Management team to ensure not only that they are not exceeding the approved expenditures, but also that they are working to generate revenue. That revenue allows the Company to payout a dividend to Shareholders. The Board plays a significant role in the oversight of Koniag, making certain the goals and objectives and authority levels are adhered to, while Koniag’s Executive Management team and staff carry out the day-to-day operations of the operating plan.
Subsidiaries The Executive Management team, comprised of the President, Chief Financial Officer (CFO) and Vice Presidents, is responsible for overseeing companies owned by Koniag, including KDC. KDC was established to serve as the business arm of Koniag, managing the operating companies and real estate holdings. In addition to its oversight of KDC, Koniag is responsible for maintaining relations with Shareholders, other regional corporations and government entities and oversight of the stock portfolio.
2009 shareholderreport Corporate Governance
KDC, like Koniag, has its own Board of Directors and Executive Management team. In turn, KDC also owns a number of subsidiary companies, each of which has its own Board of Directors and Executive Management team. As the parent company to its subsidiaries, KDC receives seats on the boards of each of the subsidiary companies. The number of board seats is determined by the percentage of the business it owns. For example, if KDC owns 50 percent of a company, it receives half the board seats. KDC purchases subsidiary companies to become more involved in business sectors in an effort to execute the strategic direction set by the Koniag
Board. As a corporation, it is Koniag’s goal to provide maximum Shareholder benefit. KDC implements this strategy by purchasing interests in profitable companies and real estate from varying business sectors and regions of the country to ensure a broad array of investments. As Shareholders, it is important for you to understand not only the way our corporation and its subsidiaries are governed, but the goals of the corporation and why we function the way we do. Our overarching goal has been and always will be to provide maximum benefit to our Shareholders, to serve our people and preserve our culture.
Koniag Inc. Regional ANCSA Corp
Karluk Wilderness Adventures
Afognak Joint Venture
Cordata Parkway Holdings
Koniag Development Corp
100%
50%
100%
100%
Jillian Square 14.205%
KONA Construction
Near Island Building
100%
Pending
4545 Cordata Parkway
Frontier System Integrator
Washington Management Group
100%
100%
85%
Professional Computing Resources 80%
Angeles Composite Technologies
Nunat 100%
33.3% Mammoth Corona
Premas Global Leander I
Global Sugarland
Mammoth Chandler II
(Springhill Suites)
Block 13
Mammoth Chandler I
DBT Data
Shenandoah
Clarus Technologies
100%
90%
Mammoth Arrowhead
Mammoth San Juan
Radient Technologies
10%
5%
12.5%
Dowland-Bach
100%
100%
FSI Holdings
XMCO
Clarus Environmental Services
Koniag Services
Dowland-Bach Engineering
2320 Post Road 100%
Advanced Supply Chain Int’l
Koniag Technology Solutions
Angayuk Construction Enterprises
100%
100%
Global Building 35%
Mammoth Henderson 10%
The percentage below each company indicates the ownership of Koniag or Koniag Development Corporation.
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2009 shareholderreport Shareholder Committees
Shareholder Committees In late 1998 Koniag’s Shareholder Department organized three Shareholder advisory committees consisting of 15 members each and organized geographically in Kodiak, Anchorage and Washington State. The Board authorized the formation of the volunteer committees as a vehicle to network with Shareholders to review issues, projects & initiatives, and educate Shareholders on their corporation. Approximately 250 Shareholders have served on the committees during the past 10 years. The Committees have proved an extremely valuable means to review how Koniag communicates with Shareholders. Some of the projects the committees have worked on over the past 10 years include: board nomination process, the proxy form, Shareholder surveys, newsletter content and creation of the Shareholder report. Our thanks to these dedicated Shareholders for volunteering their time and energies to be involved with our corporation.
2009 11 shareholderreport Shareholder Committees
Anchorage, Alaska
Seattle, Washington
Kodiak, Alaska
SH COMMITTEE MEMBERS
SH COMMITTEE MEMBERS
SH COMMITTEE MEMBERS
Chad Abell Loren Anderson Jamie Antonson Brian Fields Natasha Hayden Amber Jenkins Jess Eggemeyer Wanda Katelnikoff Larita Laktonen Dayna Lester Don Poulos Katrina Nelson Vickie Novak Diana Velez Tina Waselie
Vivian Beukers Lorna Bolin Alex Brown, Jr Donna Cawley Jennifer Clampffer Forslin Jim Dunham Vickie Era Pankretz Betty Farnan
LYNWOOD
GIRDWOOD
Sharon Franklin
MOUNTLAKE TERRACE
ANCHORAGE
Tony Hayes Evie Russell Desiree Shaw Darla Sluder Sonny Vinberg, Jr Merry Whitten
CORVALLIS
ANCHORAGE ANCHORAGE WASILLA ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE
ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE
MILL CREEK SEATTLE CENTRALIA MUKILTEO LYNWOOD OLYMPIA RENTON
EDMONDS BONNEY LAKE MILL CREEK
Felecia McFarland Fred Coyle Irene Coyle Jonetta Cratty Robert Erickson Kimberly Holmes Tommy Johnson Darlene Johnson Kathy Johnson Roy Madsen Iver Malutin Johnny Reft Lisa Stoltenberg Geraldine Watson
KODIAK KODIAK KODIAK OLD HARBOR KODIAK KODIAK KODIAK LARSEN BAY KODIAK KODIAK KODIAK KODIAK KODIAK KODIAK
KIRKLAND YELM
AMENDMENT TO BYLAWS
Section 2.11 Section 2.11 of the Bylaws was amended. This section allows the Corporation to reimburse any successful candidate running for Board of Directors for actual expenses incurred by the candidate for up to $3,000, upon receipt of satisfactory proof of expenditures.
Bylaws
Under Section 8.4 of the Bylaws of Koniag, any changes made by the Board of Directors to the Bylaws are to be reported to the Shareholders. During the past year the following change was made:
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2009 shareholderreport In Memoriam
In Memoriam Thomas Allain, Jr. - Walla Walla, WA William (Billy) Charles Amason - Kodiak, AK Ella (Helena) Anderson - Kodiak, AK Marra Andrewvitch - Old Harbor, AK John Howard Bees - Coral Springs, FL Robert Clifford Berg, Sr. - Wasilla, AK Nina Berry - Everett, WA Dorothy Jean Blair - Adelanto, CA Charles Arthur Cantrell - Tacoma, WA Allen Dale Carlson - Anchorage, AK Victor (Unky) Carlson, Jr. - Eagle River, AK Nida Chya - Big Lake, AK Joan C. Coultas-Trujillo - Sun City, CA Virginia (Punky) Lee Deveau (Chya) Eagle River, AK David James Fadaoff - Juneau, AK Susan Girard - Port Lions, AK Charles John Hartman, Sr. - Longview, WA George Inga, Sr. - Old Harbor, AK John Karabelnikoff - Chubbuck, ID Rita Kleinman - Los Angeles, CA Sigurd Jerome Krogstad- Surprize, AK Ruth E. Laktonen - Tillamook, OR
Lars Laverne Larsen - Woodinville, WA John A. Dean Lively - Lake Havasu City, AZ Dan William Lukso, Sr. - Seattle, WA Charlene Ann Malutin - Kodiak, AK Herman Malutin, Jr. - Kodiak, AK Loren Howard Marshall - Seattle, WA Larry Joe Melovedoff - Anchorage, AK Dorothy C. Moonin - Port Graham, AK Matilda Mute - Bethel, AK George Colby Naughton - Kodiak, AK Milton Roy Pagano - Kodiak, AK Rika Petrina Pajoman - Edmonds, WA Helen A. Panamaroff - Edmonds, WA Jonna Christine Purcell (Chya) - Lebanan, OR Billy Richard Rastopsoff - Kodiak, AK Joyce Evelyn Reems - Seattle, WA John Edward Reft - Karluk, AK Marie Ann Skonberg - Ouzinkie, AK Barbara Joan Swensen - Ft Walton Beach, FL Norman Willfred Ursin, Sr. - Seattle, WA Todd Mathew von Scheele - Lakewood, WA Helen Sarah Wolkoff - Kodiak, AK
The Lord’s Prayer Agayutem Malitgua’ a/ Malifta’a Gwangkuta Atagpet, Pamani et’sqaq, Our Father, who is up there in Heaven, Our Father, who art in Heaven, Tanqigtuq Atren Your name is bright Hallowed be thy Name. Agayuin taiskiu, piugcicin piurciiquq, Your church come, your will will be done, Thy kingdom come, thy will be done, Nunami cestun Pamani. On earth how it is in Heaven. On earth as it is in Heaven. Minarkut guangkuta ernerpak gelipamek Give us bread this day Give us this day our daily bread Cali prastiirki kriigaapet, And forgive us our sins, And forgive us our trespasses, Cestun guangkuta prastiiyapet tamaita suuget. How we forgive all the people. As we forgive those who trespass against us.
Cali agutenillkut asilngurmen, anirturkut asilngurmek. And do not take us to the bad place, deliver us from the bad thing. And lead us not into temptation, but deliver us from evil/the evil one. Caqit tamaita pik’aten, cali tuknigtuten, cali tanqigtuten, Everything is yours, and You are strong, and You are the light, For thine is the kingdom, and the power, and the glory, Atra atam, cali Awaqutaa, cali Tan’qisqaq Anernera, In the name of the Father, and his son, and his Holy Spirit, In the name of the Father, and the Son, and the Holy Spirit, Ima’ut, tamaa’ut, iquinani. Very far, forever, without end. Now and ever, and unto ages of Ages of Ages / Forever and ever. Amin. Amen.
Photography: Chris Arend Photography Design: MSI Communications Printing: Pyramid Printing Company
Credits
Translated by Nick Alokli, Florence Pestrikoff, Dennis Knagin, the late Nadia Mullan, April Laktonen Counceller, Shauna Hegna, and members of the Qik’rtatrmiut Alutiit Program and the Alutiiq Language Club, 2003-2005.
104 Center Ave, Suite 205 Kodiak, Alaska 99615 t. 907-486-2530 1-800-658-3818 f. 907-486-3325 www.koniag.com
Many faces, many stories,
2009 shareholderreport
2009 BOARD OF DIRECTORS
Chris A. Johnson
Michael Pestrikoff
Richard Frost
Ronald Unger
Chairman
Vice Chairman
Secretary
Treasurer
Lois Fields
M. Brent Parsons
Conrad Peterson
Linda Suydam
Director
Director
Director
Director
Perry Eaton Director
OUR VISION Cultural Pride, Corporate Excellence.
OUR MISSION To sustain growth and provide increasing dividends while celebrating community and culture.
2009 shareholderreport
KONIAG STAFF
Will Anderson
James Erikson
Charlie Powers
Debbie Lukin
Leon Backa
President & CEO
Senior Vice President & CFO
Vice President, Corporate Affairs
Vice President, Corporate & Shareholder Services
Director of Internal Audits
Sharon Beeson
Chuck Reft
Jacqueline Madsen
Gloria Bishop
Erin Whipple
Tax Director
Manager of Lands & Resources
Manager of Shareholder Communications
Manager of Shareholder Records
Project Director
Cheryl Christofferson
Melinda Cortez
April Mattheus
Administrative Assistant
GIS Technician
Executive Assistant
Not pictured: LaToya Lukin Administrative Assistant
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2009 shareholderreport Chairman’s Message
Chairman’s Message Thank you for taking the time to read the 2009 Shareholder Report. We created this report to present in a straightforward, reader-friendly way the results of our 2009 Annual Report, which compares this year’s financial results with results from previous years. As a Shareholder, it is your right to understand the finances of our company. One of Koniag’s top priorities has been to improve the quality and frequency of our communications efforts and the Shareholder Report functions as a tool for educating you, the Shareholder, about our financial performance. We have further augmented our communications efforts by: • Increasing the distribution of our Shareholder newsletter from quarterly to bi-monthly; • Making the results of our 2009 financial report available to our Shareholders; • And continuing to update and improve our company’s Web site. Our efforts have paid off. According to results from the 2009 Shareholder satisfaction survey, 87 percent of respondents reported they are “kept pretty well informed of the goings-on at Koniag.” A significant majority – 78 percent – think “Koniag listens to Shareholder opinions.” Though survey results indicate there are areas in which you’d like to see improvement, Koniag has made significant positive strides with regard to Shareholder satisfaction. Thanks again to all those who participated – your feedback tells us not only what we’re doing right but the ways in which we can improve our company to better serve you, our Shareholders. Our mission is to sustain growth and provide increasing dividends while celebrating community and culture, and Koniag is dedicated to continually improving our business in order to return maximum financial benefit to our Shareholders. Eighty-two percent of survey participants said they think “Koniag does a good job of managing its businesses.” On a scale of 1-5, when it comes to “paying a good dividend,” Shareholder satisfaction is up a full point, from 2.64 in 2006 to 3.64 in 2009. Overall Shareholder satisfaction continues to be influenced most strongly by Koniag’s financial performance. The variables with the strongest correlation to overall satisfaction are “Living up to your expectations” and “Managing assets wisely.” According to our survey, 76 percent of respondents are “Happy with the way my Koniag dividend has grown the last few years.” Seventythree percent think “Koniag’s long-term financial strategy is sound.” In order to increase Shareholder dividends, Koniag is committed to managing our lands and natural resources while balancing necessary development with preservation. We are continually looking for ways to generate profit from the lands that can sustain many generations of Shareholders with respect to preserving our lands to ensure our subsistence rights are protected. Seventy-two percent of Shareholders said they feel Koniag’s development policy and conservation efforts are well balanced; 74 percent feel that responsible development doesn’t threaten subsistence and the two can co-exist.
2009 shareholderreport Chairman’s Message
In 2002, Koniag signed a conservation easement agreement with the federal government to make certain that the Karluk lands are protected, preserved, and developed in order to sustain the subsistence lifestyle of the people in the area. The results of the survey showed we need to do a better job of educating shareholders on this important issue and the decisions surrounding land management practices in general. Over the coming year, land use practices will be a focus for our Shareholder newsletters and other communication efforts. Our Board goals remain the same. Though progress has been made, our priorities are: 1. Financial growth that supports profitability 2. Increased annual dividends 3. Increased awareness of Alutiiq culture 4. Promotion and support of regional unity 5. Investing in our future through education of our Shareholders and descendants 6. Comprehensive communication planning 7. Comprehensive lands and resources planning 8. Cultivation of a unified sense of shareholder identity and community 9. Continued development of skills throughout our organization at both the Board and staff level Despite uncertainty surrounding the U.S. economy, this has been another successful year for Koniag. I’d like to take the opportunity to thank our Shareholders for sharing Koniag’s optimism about the future. With your continued support we can achieve more, together. Sincerely,
Chris A. Johnson Board Chairman
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2009 shareholderreport The Bottom Line
The Bottom Line The Big Picture In 2009, Koniag reported lower net earnings of $6.1 million compared to 2008 earnings of $12 million. The lower earnings were driven primarily by three factors: significant losses in our stock market holdings; lower sales activity in the real estate sector; and a one-time charge related to the taxation of prior years’ payroll benefits at a Koniag Development (KDC) subsidiary. These reductions were partially offset by an increase in 7(i) natural resource revenues received from other regional corporations, and by a tax benefit which reflects the future likelihood of utilizing positive tax attributes of the Afognak Joint Venture. While net earnings were down, gross revenues increased in 2009 to $115.6 million, up 14 percent from 2008 gross revenues of $101.3 million. Reported revenues for all years prior to 2008 have been restated to reflect the sale of an operating subsidiary, Integrated Concepts and Research Corporation (ICRC). The sale of ICRC requires that revenues and expenses (including taxes) generated by this subsidiary be reclassified and reported as “discontinued operations”. This sale was finalized on June 4, 2007.
Total assets
$145,126 $120,290
$97,257
2 00 5
During 2009, Shareholders’ equity increased by $2.9 million or 4.1 percent. Equity per share as of March 31, 2009, 2008 and 2007 was $194.25, $186.56 and $161.19, respectively. Koniag’s operating subsidiaries provide services for a diverse range of government agencies in a variety of disciplines. In 2009, operations revenue generated $111 million in revenue. Seventy – five percent was a result of providing services to the federal government. In 2008, operating subsidiaries generated $96.4 million in revenue. Earnings net of related expenses from natural resources in 2009 totaled $6.9 million, an increase of $2.5 million from 2008. Continued high prices for oil and minerals extracted from lands held by other regional corporations led to an increase of 67.8 percent in 7(i) revenue in 2009.
Shareholders’ equity
$122,964
$59,913 $42,975
2007
2008
$72,203 $69,346
$98,354
20 06
At March 31, 2009, Koniag held assets (not including lands conveyed under the Alaska Native Claims Settlement Act) totaling $145 million compared to $123 million at March 31, 2008. This represents an increase of $22 million, or 17.9 percent, over the previous year.
2009
2005
$47,212
2006
2007
2008
2009
2009 shareholderreport The Bottom Line
In 2009, Koniag focused on rebuilding its real estate portfolio. The Company added significant new acquisitions in Texas and Virginia, where real estate markets have remained strong relative to other parts of the country. At March 31, 2009, Koniag had very little remaining real estate in California, Arizona and Nevada. The Company and its subsidiaries held diversified real estate investments in 16 properties across the U.S., with the most significant investments in Washington, Texas, Virginia and Alaska. Koniag’s investment securities segment lost $6.9 million in 2009 as compared to total portfolio losses of $1.6 million in 2008. The Company also reflected a before tax realized loss of $4.6 million in 2008, resulting in an overall return of -5.7 percent.
Highlights The management teams at Koniag, Inc. and KDC continued in 2009 to grow core business lines and improve operational and administrative effectiveness and efficiencies.
Dividends
$8.73 $6.00
$3.70
$3.00 $1.18
2005
2 00 6
2007
2008
20 0 9
The Company grew its manufacturing sector and established a presence in the Alaska natural resources industry with the acquisition of Dowland-Bach Corporation, a company that fabricates sophisticated control systems. The sale was finalized December 31, 2008. Despite the downturn in the U.S. economy and Koniag’s stock market investment losses, the Company realized a $22 million (or 17.9 percent) increase in overall assets and a modest gain of 4.1 percent, or approximately $2.9 million in Shareholders’ equity. The success of the Company over the years has allowed it to make significant donations to Alaska Native and other not for profit organizations. The most significant of these contributions has been to the Koniag Education Foundation (KEF). The company donated $166,000 to KEF in 2009. In just over a decade, KEF has awarded more than $2.2 million in educational scholarships.
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GroundCelebration Breaking Koniag, Inc. and Kodiak Area Native Association (KANA) broke ground in May on our new headquarters on Near Island. Establishing our headquarters in the region is possible due to our financial success in recent years. Our presence ensures Koniag will continue to be good stewards of the lands, waters and resources of the region.
2009 shareholderreport Ground Breaking Celebration
The spirit of the ceremony was marked by a traditional Alutiiq lamp-lighting ceremony and a performance by the Sun’aq Tribal Dancers of Kodiak. Koniag Board members, staff and community members spent the afternoon celebrating the construction of a new home that brings KANA and Koniag together to serve our people.
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2009 shareholderreport Corporate Governance
Corporate Governance Who We Are Koniag Inc. and our family of companies are structured to ensure we protect our holdings and deliver maximum benefit to our Shareholders while developing a business model that will sustain itself for future generations. Koniag Development Corporation (KDC) is a wholly-owned subsidiary of Koniag. In addition, KDC has several subsidiaries. KDC, its subsidiaries and Koniag’s other holdings make up the Koniag family of companies.
Koniag Each year, Shareholders vote to elect members of Koniag’s Board of Directors. The Board of Directors influences how the corporation is run from the top down. It is helpful to have an understanding of Koniag’s corporate structure, its companies and subsidiaries, and the role the Board and staff play in the day-to-day operations and future of the corporation. The Board of Directors establishes Koniag’s strategic direction and long-term goals. These are Shareholder-elected positions. Our Board has nine members who serve three-year terms. Three positions are elected each year. This ensures that even if three new people are elected, there are six members who are not up for re-election and can provide continuity from year to year. The Board of Directors of Koniag establishes the policies and objectives under which we operate, in addition to determining the levels of authority granted the President/CEO. There are some decisions that require Board approval, and others that can be made at the discretion of the President/CEO. The Board sets the direction of the company, while the Executive Management team develops and carries out the operating plan, after it is approved by the Board. It is the job of
the President/CEO to run the company based on the approved operating plan. Koniag, like any other Corporation, is governed by a set of bylaws. Bylaws specify the organizational structure of the Board and govern many areas including how internal affairs are structured, which officer positions are included on the Board (Secretary, Treasurer, etc.), the manner in which meetings are conducted, the number of members serving on the Board and length of the term Board members serve. It is also the role of the Board to approve and monitor the corporation’s profit plan. The profit plan is the budget and operational plan that is developed for each fiscal year. They oversee the Executive Management team to ensure not only that they are not exceeding the approved expenditures, but also that they are working to generate revenue. That revenue allows the Company to payout a dividend to Shareholders. The Board plays a significant role in the oversight of Koniag, making certain the goals and objectives and authority levels are adhered to, while Koniag’s Executive Management team and staff carry out the day-to-day operations of the operating plan.
Subsidiaries The Executive Management team, comprised of the President, Chief Financial Officer (CFO) and Vice Presidents, is responsible for overseeing companies owned by Koniag, including KDC. KDC was established to serve as the business arm of Koniag, managing the operating companies and real estate holdings. In addition to its oversight of KDC, Koniag is responsible for maintaining relations with Shareholders, other regional corporations and government entities and oversight of the stock portfolio.
2009 shareholderreport Corporate Governance
KDC, like Koniag, has its own Board of Directors and Executive Management team. In turn, KDC also owns a number of subsidiary companies, each of which has its own Board of Directors and Executive Management team. As the parent company to its subsidiaries, KDC receives seats on the boards of each of the subsidiary companies. The number of board seats is determined by the percentage of the business it owns. For example, if KDC owns 50 percent of a company, it receives half the board seats. KDC purchases subsidiary companies to become more involved in business sectors in an effort to execute the strategic direction set by the Koniag
Board. As a corporation, it is Koniag’s goal to provide maximum Shareholder benefit. KDC implements this strategy by purchasing interests in profitable companies and real estate from varying business sectors and regions of the country to ensure a broad array of investments. As Shareholders, it is important for you to understand not only the way our corporation and its subsidiaries are governed, but the goals of the corporation and why we function the way we do. Our overarching goal has been and always will be to provide maximum benefit to our Shareholders, to serve our people and preserve our culture.
Koniag Inc. Regional ANCSA Corp
Karluk Wilderness Adventures
Afognak Joint Venture
Cordata Parkway Holdings
Koniag Development Corp
100%
50%
100%
100%
Jillian Square 14.205%
KONA Construction
Near Island Building
100%
Pending
4545 Cordata Parkway
Frontier System Integrator
Washington Management Group
100%
100%
85%
Professional Computing Resources 80%
Angeles Composite Technologies
Nunat 100%
33.3% Mammoth Corona
Premas Global Leander I
Global Sugarland
Mammoth Chandler II
(Springhill Suites)
Block 13
Mammoth Chandler I
DBT Data
Shenandoah
Clarus Technologies
100%
90%
Mammoth Arrowhead
Mammoth San Juan
Radient Technologies
10%
5%
12.5%
Dowland-Bach
100%
100%
FSI Holdings
XMCO
Clarus Environmental Services
Koniag Services
Dowland-Bach Engineering
2320 Post Road 100%
Advanced Supply Chain Int’l
Koniag Technology Solutions
Angayuk Construction Enterprises
100%
100%
Global Building 35%
Mammoth Henderson 10%
The percentage below each company indicates the ownership of Koniag or Koniag Development Corporation.
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2009 shareholderreport Shareholder Committees
Shareholder Committees In late 1998 Koniag’s Shareholder Department organized three Shareholder advisory committees consisting of 15 members each and organized geographically in Kodiak, Anchorage and Washington State. The Board authorized the formation of the volunteer committees as a vehicle to network with Shareholders to review issues, projects & initiatives, and educate Shareholders on their corporation. Approximately 250 Shareholders have served on the committees during the past 10 years. The Committees have proved an extremely valuable means to review how Koniag communicates with Shareholders. Some of the projects the committees have worked on over the past 10 years include: board nomination process, the proxy form, Shareholder surveys, newsletter content and creation of the Shareholder report. Our thanks to these dedicated Shareholders for volunteering their time and energies to be involved with our corporation.
2009 11 shareholderreport Shareholder Committees
Anchorage, Alaska
Seattle, Washington
Kodiak, Alaska
SH COMMITTEE MEMBERS
SH COMMITTEE MEMBERS
SH COMMITTEE MEMBERS
Chad Abell Loren Anderson Jamie Antonson Brian Fields Natasha Hayden Amber Jenkins Jess Eggemeyer Wanda Katelnikoff Larita Laktonen Dayna Lester Don Poulos Katrina Nelson Vickie Novak Diana Velez Tina Waselie
Vivian Beukers Lorna Bolin Alex Brown, Jr Donna Cawley Jennifer Clampffer Forslin Jim Dunham Vickie Era Pankretz Betty Farnan
LYNWOOD
GIRDWOOD
Sharon Franklin
MOUNTLAKE TERRACE
ANCHORAGE
Tony Hayes Evie Russell Desiree Shaw Darla Sluder Sonny Vinberg, Jr Merry Whitten
CORVALLIS
ANCHORAGE ANCHORAGE WASILLA ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE
ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE
MILL CREEK SEATTLE CENTRALIA MUKILTEO LYNWOOD OLYMPIA RENTON
EDMONDS BONNEY LAKE MILL CREEK
Felecia McFarland Fred Coyle Irene Coyle Jonetta Cratty Robert Erickson Kimberly Holmes Tommy Johnson Darlene Johnson Kathy Johnson Roy Madsen Iver Malutin Johnny Reft Lisa Stoltenberg Geraldine Watson
KODIAK KODIAK KODIAK OLD HARBOR KODIAK KODIAK KODIAK LARSEN BAY KODIAK KODIAK KODIAK KODIAK KODIAK KODIAK
KIRKLAND YELM
AMENDMENT TO BYLAWS
Section 2.11 Section 2.11 of the Bylaws was amended. This section allows the Corporation to reimburse any successful candidate running for Board of Directors for actual expenses incurred by the candidate for up to $3,000, upon receipt of satisfactory proof of expenditures.
Bylaws
Under Section 8.4 of the Bylaws of Koniag, any changes made by the Board of Directors to the Bylaws are to be reported to the Shareholders. During the past year the following change was made:
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2009 shareholderreport In Memoriam
In Memoriam Thomas Allain, Jr. - Walla Walla, WA William (Billy) Charles Amason - Kodiak, AK Ella (Helena) Anderson - Kodiak, AK Marra Andrewvitch - Old Harbor, AK John Howard Bees - Coral Springs, FL Robert Clifford Berg, Sr. - Wasilla, AK Nina Berry - Everett, WA Dorothy Jean Blair - Adelanto, CA Charles Arthur Cantrell - Tacoma, WA Allen Dale Carlson - Anchorage, AK Victor (Unky) Carlson, Jr. - Eagle River, AK Nida Chya - Big Lake, AK Joan C. Coultas-Trujillo - Sun City, CA Virginia (Punky) Lee Deveau (Chya) Eagle River, AK David James Fadaoff - Juneau, AK Susan Girard - Port Lions, AK Charles John Hartman, Sr. - Longview, WA George Inga, Sr. - Old Harbor, AK John Karabelnikoff - Chubbuck, ID Rita Kleinman - Los Angeles, CA Sigurd Jerome Krogstad- Surprize, AK Ruth E. Laktonen - Tillamook, OR
Lars Laverne Larsen - Woodinville, WA John A. Dean Lively - Lake Havasu City, AZ Dan William Lukso, Sr. - Seattle, WA Charlene Ann Malutin - Kodiak, AK Herman Malutin, Jr. - Kodiak, AK Loren Howard Marshall - Seattle, WA Larry Joe Melovedoff - Anchorage, AK Dorothy C. Moonin - Port Graham, AK Matilda Mute - Bethel, AK George Colby Naughton - Kodiak, AK Milton Roy Pagano - Kodiak, AK Rika Petrina Pajoman - Edmonds, WA Helen A. Panamaroff - Edmonds, WA Jonna Christine Purcell (Chya) - Lebanan, OR Billy Richard Rastopsoff - Kodiak, AK Joyce Evelyn Reems - Seattle, WA John Edward Reft - Karluk, AK Marie Ann Skonberg - Ouzinkie, AK Barbara Joan Swensen - Ft Walton Beach, FL Norman Willfred Ursin, Sr. - Seattle, WA Todd Mathew von Scheele - Lakewood, WA Helen Sarah Wolkoff - Kodiak, AK
The Lord’s Prayer Agayutem Malitgua’ a/ Malifta’a Gwangkuta Atagpet, Pamani et’sqaq, Our Father, who is up there in Heaven, Our Father, who art in Heaven, Tanqigtuq Atren Your name is bright Hallowed be thy Name. Agayuin taiskiu, piugcicin piurciiquq, Your church come, your will will be done, Thy kingdom come, thy will be done, Nunami cestun Pamani. On earth how it is in Heaven. On earth as it is in Heaven. Minarkut guangkuta ernerpak gelipamek Give us bread this day Give us this day our daily bread Cali prastiirki kriigaapet, And forgive us our sins, And forgive us our trespasses, Cestun guangkuta prastiiyapet tamaita suuget. How we forgive all the people. As we forgive those who trespass against us.
Cali agutenillkut asilngurmen, anirturkut asilngurmek. And do not take us to the bad place, deliver us from the bad thing. And lead us not into temptation, but deliver us from evil/the evil one. Caqit tamaita pik’aten, cali tuknigtuten, cali tanqigtuten, Everything is yours, and You are strong, and You are the light, For thine is the kingdom, and the power, and the glory, Atra atam, cali Awaqutaa, cali Tan’qisqaq Anernera, In the name of the Father, and his son, and his Holy Spirit, In the name of the Father, and the Son, and the Holy Spirit, Ima’ut, tamaa’ut, iquinani. Very far, forever, without end. Now and ever, and unto ages of Ages of Ages / Forever and ever. Amin. Amen.
Photography: Chris Arend Photography Design: MSI Communications Printing: Pyramid Printing Company
Credits
Translated by Nick Alokli, Florence Pestrikoff, Dennis Knagin, the late Nadia Mullan, April Laktonen Counceller, Shauna Hegna, and members of the Qik’rtatrmiut Alutiit Program and the Alutiiq Language Club, 2003-2005.
104 Center Ave, Suite 205 Kodiak, Alaska 99615 t. 907-486-2530 1-800-658-3818 f. 907-486-3325 www.koniag.com
