2005 Annual Report

Coastal Villages Region Fund

2005 Year in Review

StabilityandContinuity

Table of Contents CVRF Member Communities.......................................

Mission Statement..........................................................

2005 Board Members.....................................................

Message from the President.........................................

Message from the Executive Director...........................

1 2 3 4 5

2005 Highlights...............................................................

Onshore/Nearshore Infrastructure Development

Coastal Villages Seafoods, LLC.............................

CDQ Halibut............................................................

Salmon......................................................................

Herring.....................................................................

Marketing................................................................

Support....................................................................

Fisheries Support Centers.............................................

Magnuson-Stevens Act Report......................................

Blue Ribbon Committee Report....................................

Programs

Community Outreach.............................................

4-SITE......................................................................

Coastal Villages Youth Leadership .......................

Junior Achievment..................................................

Loan Program.........................................................

Tax and Permit Assistance.....................................

Projects

Alternative Energy..................................................

Crosswind Runway..................................................

High Speed Tender...................................................

Collaborative Fisheries Research...........................

Off-Shore Investments....................................................

Financial Overview.........................................................

Staff List..........................................................................

7 9 9 10 10 11 11 12 13 14 15 16 16 16 17 17 18 18 18 18 19 21 24

CVRF Member Communities

About Coastal Villages Region Fund Coastal Villages Region Fund (CVRF) is an Alaska non-profit corporation participating in the Western Alaska Community Development Quota (CDQ) program. CVRF is the managing organization for twenty coastal communities within fifty nautical miles of the Bering Sea. The CVRF region ranges from Scammon Bay south to Platinum and up the Kuskokwim River to Oscarville.

CVRF’s purpose is to build and expand our support of sustainable fisheriesrelated community and economic development in the twenty CVRF member communities. Our support is based on the renewable resources of the Bering Sea and our investments in fishing vessels operating in the North Pacific. We take the cash benefits of the Bering Sea and deliver them to our region in the form of local fisheries-related economic development projects and opportunities for cash wages.

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Mission Statement The purpose of CVRF:

“To maintain and expand on our strategic position in the fishing industry so that CVRF can provide support for sustainable community and economic development in the CVRF region.”

Our corporate vision:

“ From our position as a key player in the North Pacific, we can build and expand our support for sustainable community and economic development of local resources in the CVRF communities.”

Strategic Initiatives: · · · · · · 2

4-SITE and other direct programs Bering Sea ownership Maximizing returns from CDQ allocations Community development projects Return on invested capital Resources for strategic performance

2005 Board of Directors Executive Committee Oscar Evon Timothy Samson George Smith David Bill, Sr. Eric Olson, Sr. Jonathan Lewis Gabriel Olick Morgen Crow

President Vice President Secretary Treasurer Member Member Member Ex officio

Kwigillingok Kipnuk Scammon Bay Toksook Bay Hooper Bay Chefornak Tuntutuliak Anchorage

Top Left to Right: Morgen Crow, Jonathen Lewis, Gabriel Olick, George Smith, John Bright, Jimmy George, Jack Stewart, Felix Albert, Ralph Kiunya, Nicholas Paul, Hultman Kiokun, Eric Olson Sr., and John Mark Bottom Left to Right: Helen Kaganak, William Brown, Frank Berezkin, David Bill Sr., Oscar Evon, Peter John, and Timothy Samson

Directors Earl Atchak William Brown Jack Stewart Ralph Kiunya Hultman Kiokun Nicholas Paul Helen Kaganak Peter John Jimmy George Frank Berezkin John Bright John O. Mark Felix Albert

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Member Member Member Member Member Member Member Member Member Member Member Member Member

Chevak Eek Goodnews Bay Kongiganak Mekoryuk Napakiak Napaskiak Newtok Nightmute Oscarville Platinum Quinhagak Tununak

Message from the President Wishing everyone a safe and prosperous New Year!

As we embark on this New Year, we reflect on both the successes and challenges of the past year. With the goals of long term stability and viability, the hard working Coastal Villages Region Fund team put a lot of effort into building a sustainable, solid resource base in the form of a Community Development Quota company emerging from its formative years into a maturing entity that has great potential of providing economic growth assistance for our communities.

Although the growth of the company has been in the positive, the path has been by no means an easy one. Many factors are involved in the success of our company, which include the health of the Bering Sea ecosystem, the dynamics of the regulatory agencies involved, Congressional legislation, and a competent team that can work in a very competitive environment. Among these factors, the stability of fishery allocations has demanded the focus of our priorities.

The stability of CDQ allocations will allow us to better concentrate on our investments for long-term growth strategy, and devote quality time and energy for our 20 CDQ communities.

As we enter into this New Year, we continue on this path of work by our dedicated team and staff. We thank individuals and our communities for their assistance in these efforts through letters of support and resolutions passed, directed to our congressional delegation for the benefit of our CDQ program Again, we wish everyone a Safe and Wonderful New Year.

Thank you for your interest in our communities,

Oscar Evon, President 4

Message from the Executive Director

To the Residents of CVRF Communities: 2005 will prove to be one of those years where issues crucial to the future of the CDQ program for our 20 communities were set into play. Our company vision is already becoming a reality for our communities.

REGULATORY CHANGES • Non-Fisheries Related Economic Development (NFRED) We have patiently waited for the North Pacific Council and its process to implement the $2 million annual allowance (e.g. 20% of the previous year’s pollock revenue) for non-fisheries related economic development projects (NFRED) in our region. Amendment 71 has languished in the system since June 2002. Now we have worked with several other CDQ groups to find a fix for this issue at the federal level. In the meantime, the National Marine Fisheries Service (NMFS) overturned the State of Alaska’s recommendations on allowable projects. This development allows that smaller projects can actually go outside the restrictions set in place by the State. These projects are now technically allowable. This means that additional projects identified by our communities will begin to move forward.

• Community Eligibility The recently passed federal transportation bill included a permanent fix to the community eligibility issue. NMFS attorneys had interpret5

ed federal legislation and regulations to require a periodic reassessment of all 65 CDQ-eligible communities. This reassessment may have resulted in some communities getting kicked out of the program.

The 6 CDQ groups worked with the Alaska congressional delegation to find a solution to the problem.

• Allocation Stability Although we have done what is necessary to produce an effective Community Development Plan by incorporating information directly from our communities utilizing the Ciunerkam Tangruagutii (CT) process and presentation of our arguments for restoration of allocation, we also realize that energy focused on the application process is energy taken away from directly bringing CDQ benefits to communities. Stability in allocations has been granted to the inshore sector and to the Seattle owners of Bering Sea operations via the American Fisheries Act. CDQ is the only remaining sector that suffers from the competitive instability of variable quotas. Any energy focused on allocations can be refocused directly on community development.

• CDQ Oversight The State of Alaska must relinquish oversight of the program to the communities. The autonomy of the CDQ groups will provide for development of the communities that makes sense. CVRF is governed by the Board of Directors elected by our communities. Governance of the company should not be diluted by CDQ oversight.

PROJECTS & PROGRAMS • Royalty Contract Negotiations To maximize the value of our fish for our communities, we have spent considerable time in 2005 negotiating our royalty contracts for 2006 and beyond. We have held out with an eye for the future.

• Salmon Buying and Processing Quality is up! 60% of the Bethel and Kuskokwim deliveries had bleeding and icing compliance.

Unfortunately, our salmon harvest this year was below average, however all salmon harvested has been sold.

Message from the Executive Director Preliminary numbers indicate that we employed 365 region residents in our plants. We purchased salmon from 426 fishers who made 8,800 deliveries for a round volume of 2.6 million pounds. 57 fishers participated in our herring incentive program and a record number of halibut fishers landed the entire 4E quota except for 40,000 pounds, representing a record harvest of our local CDQ resource.

• Our plants have processed a record amount of CDQ halibut during 2005.

• Support for herring fishery including region crewmembers.

• Media initiatives this spring provided the region with a true picture of the Bering Sea fishery, the industry, the program, and our company working for our communities.

• Bylaw work The CVRF Board of Directors is recognized as a leading governing body in the region, in the CDQ program, and the industry. The Board moved forward with some revisions that updated our corporate bylaws to reflect our advancement as a company.

LOOKING TO 2006 One of the most important acts of 2005 will be the planning and setting direction for 2006 and beyond. We have the financial means to make a difference. Our consolidated net assets reached over $80 million at the end of 2004. Our existing investments are generating

over $40 million each year. Our communities know that we have the money. We are revaluating our presence in the salmon fishery. The limited processing capacity in Western Alaska has placed us at the mercy of south central Alaska’s ability to process both the Cook Inlet fish, but also our round “buy and fly” salmon. Water depth and clean processing water present a problem for the Quinhagak operation.

Fisherman have had trouble entering the river during low tide. Our water supply for processing has also raised concerns.

We have been cooperatively working with the Governor’s Blue Ribbon Committee on CDQ’s. We have provided them with all of the requested information and we hope that they will understand the importance of the program to our distressed communities. According to their report that uses 2004 numbers, we have moved into first place with the largest revenue, net assets, and net income. Our company is also the most effective in terms of general and administrative expenses relative to revenues. Our ratios are also best in the categories of professional and consulting, accounting, and top five compensated.

Our Board expenses are within 0.7% of first place. I am certain that our program expenses are at the top, when considered on a sustainable basis. Each community resident should be proud of the independent verification of our company and its effectiveness.

2005 has been a year of fulfillment of our vision. We are set to be able to build and expand our support for development of our communities by regulation, by means, and by motivation.

Morgen Crow, Executive Director 6

2005 Highlights Coastal Villages Seafoods • CVS salmon and halibut plants employed 368 individuals, paying $1,400,000 in wages.

• 209,000 pounds of halibut were harvested, for a total payment to fishermen of $452,000.

• 2.6 million pounds of salmon were harvested, for a total payment to fishermen of $910,000.

• The F/V KELLY MAE was put into service this year. The vessel tendered salmon on the Kuskokwim and hauled freight during breaks in fishing.

• CVS was awarded a $100,000 grant from the State of Alaska’s Targeted Fisheries Assistance Program for the purchase of ice machines for Eek, Goodnews Bay and Tuntutuliak.

• CVS was also awarded a $60,000 salmon marketing and brand development grant. The grant was used to rework packaging designs and the CVS logo, design the new web site, attend trade shows, and for sales.

4-SITE - Scholarships, Internships, Training, Employment • Seventy-nine region residents worked for partners and other seafood companies on-shore and at sea, earning over one million dollars in wages.

• CVRF placed 11 region residents as interns within the company, with various partners and with state agencies. All completed their internships and one was hired for a full-time position.

• Six residents were hired as Community Liaisons in member communities.

• The Louis Bunyan Memorial Scholarship Committee funded 59 students a total of $198,000 in scholarships for the 2005 spring and fall semesters.

• The Coastal Villages Youth Leadership Program (CVYLP) worked with region youth groups by assisting with fundraising for: trips to Juneau and Washington D.C. Close-Ups, a trip to Washington D.C. for the Ted Stevens internship, a trip to the Fairbanks AFN meeting, a summer camping trip, a UAF summer basketball camp, gathering supplies for Green Up Clean Up, and seasonal safety training.

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2005 Highlights Fisheries Support & Development • Construction was completed in February on the Eek Fisheries Support Center and the grand opening celebration was held on May 20, 2005.

• A 2004 John Deere 450H Low Ground Pressure dozer was purchased for the community of Tununak. The dozer was put into use this summer to haul boats out of the water in support of the local fishing fleet.

• The field research for the Kuskokwim Drainage Sockeye Telemetry pilot project was completed. Preliminary indications are that many of these fish spawn in the Holitna, Hoholitna and Stony Rivers.

• CVRF awarded fuel loans totaling $258,000 to the villages of Tuntutuliak, Nightmute and Napaskiak.

• The Tax & Permit Assistance Program sponsored the ABDC/UAA VITA Program for the tax season. Volunteers held tax preparation assistance sessions in each of the twenty member communities. Services were provided to 3,265 residents facilitating total tax refunds of $2,054,615.

Projects • Community liaisons completed the last mapping exercises in the community mapping project. Aerial photographs were used to identify areas of local usage and traditional cultural sites as well as utilities and other areas of interest.

• The Toksook Bay wind turbine project is nearing completion and should be formally commissioned in January 2006.

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On-Shore / Near-Shore Development Coastal Villages Seafoods

The CVRF Board established Coastal Villages Seafoods (CVS) in February 1999 to operate one salmon plant in Quinhagak, a salmon buying station in Bethel, and six halibut plants located in Chefornak, Hooper Bay, Kipnuk, Mekoryuk, Toksook Bay and Tununak. CVS continues to make efforts to develop, maintain and expand the fishery resources and improve the economic and community development of the Coastal Villages region.

Coastal Villages Seafoods created employment opportunities for 368 people in 2005. CVRF Region residents made up 75 percent of the total, while 98 percent were Alaska residents. CVS employees earned more than $1.4 million in wages in 2005.

CVS provided markets for 590 herring, halibut and salmon fishermen, purchasing 4.8 million pounds of fish for $1.5 million. Without our participation, there would be no buyers for most of these fisheries and there would be no processing jobs in our region.

CDQ Halibut

Our goal is to enhance accessibility to halibut markets and provide direct benefits to region residents by supporting the region’s local commercial halibut fishery. With six halibut plants ready to accept all that our fishermen could catch, CVS paid almost $452,000 for over 209,000 pounds of halibut from 141 fishermen. The grounds price was raised from $1.25 per pound in 2004 to $2.00 per pound in 2005.

The summer catch represented almost 84% of the 4E quota for 2005 and was the highest percentage of the quota caught by region fishermen since 2002. We lease the quota to our region’s halibut fishermen for free in order to maximize the benefit to the region.

Our participation in this local fishery also provides in-region employment, training, and on-the-job experience. Our halibut plants employed a total of 112 people during the season as processors, office workers and managers.

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On-Shore / Near-Shore Development Salmon

There are four salmon districts that correspond to three major spawning rivers in the CVRF region: W-1A and W-1B along the Kuskokwim River, W-4 for the Kanektok and W-5 for Goodnews Bay. The CVS salmon processing plant at Quinhagak is the only one in the region and receives salmon primarily from the Quinhagak and Goodnews Bay districts. The buying station in Bethel purchases salmon from the Kuskokwim River districts, using tenders to reach fishermen up and down the river.

Of the 780 registered permit owners, 418 sold a total of 2.6 million pounds of salmon to CVS in the 2005 season. Virtually all of these permit holders are Yupik Eskimo residents who depend heavily on fishing income to compliment their subsistence activities. Fishermen from Platinum in the south, Kwigillingok to the west, and as far upriver as Aniak made deliveries to CVS plants and tenders during the 2005 season.

The summer fishing season was severely affected by a small silver salmon return on the Kuskokwim River. The Bethel and Quinhagak operations purchased 1.4 million pounds less Coho in 2005 then they had the year before.

Herring

Over $79,000 was paid to 59 herring fishermen in bonuses and incentives in the 2005 herring season. Over 980 tons of herring was caught in the CVRF region. Unfortunately, the world market was down from last year, so there were not enough funds from sales to pay out additional bonuses. For the past four years, CVRF has contracted with Norquest to assure that a herring tender is available in the region. Without the cooperation between CVRF and Norquest, there would not be a tender available for herring fishermen to deliver their catch.

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On-Shore / Near-Shore Development Marketing

CVS was awarded a $60,000 marketing and brand development grant. The grant was used to design the new CVS web site, conduct icing/bleeding mandate training, and attend trade shows. The Kuskokwim Bay Region name is becoming known nationally and worldwide for quality wild salmon.

Support

CVRF continues to investigate ways to provide affordable fuel to the local fishermen. Throughout the 2005 fishing season, the F/V Kelly Mae hauled fuel from Bethel for resale to the local fishermen for a few cents above cost while tendering.

CVS was awarded a $100,000 grant from the State of Alaska’s Targeted Fisheries Assistance Program for the purchase of ice machines for Eek, Goodnews Bay and Tuntutuliak. These ice machines should be installed and operational for the 2006 season.

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Fisheries Support Centers

A new fisheries support center (FSC) was completed in Eek and opened for the summer season. A mechanic has been hired in Eek. Local fishermen can pay to have him fix their boats or motors, or they can rent shop space for a minimal fee and do the work themselves. A bunkroom is available for travelers needing to spend the night. To provide better service to the area, the local community liaison office is also in the building.

The FSC in Scammon Bay is in its second year of operation. Fishermen appreciate the local facility because they no longer have to take their boats 75 miles to Emmonak for repairs.

Coastal Villages plans to construct additional FSC’s in member communities in the near future. Most of the communities have submitted the required resolutions showing that the entire community is behind the project. Eight centers are planned for construction in the summer of 2006 and eight more are in the feasibility study phase. Our staff works with village leaders to ensure that the design fits with the needs of the community, adequate land and utilities are available for the construction, and there is a realistic operating plan.

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Magnuson-Stevens Act Report The United States Congress is in the process of reviewing and possibly changing the law that governs the federal fisheries between three and 200 miles off Alaska’s shores -- including the Western Alaska Community Development Quota (CDQ) Program. The Magnuson-Stevens Fishery Conservation and Management Act (MSA) was first enacted in 1976 to “Americanize” these fisheries which until then were fished only by foreign fishing vessels. The MSA has been updated a number of times since 1976, including most recently in 1996 when the Alaska Congressional delegation succeeded in adding amendments to give permanency to the CDQ program.

At the suggestion of U.S. Senator Ted Stevens, Coastal Villages Region Fund (CVRF) has been working with the other CDQ groups since the early part of 2005 to develop amendments that will strengthen the statutory basis for the CDQ program in the MSA. On October 7, 2005, following months of meetings, discussions, and negotiations, CVRF joined Bristol Bay Economic Development Corporation (BBEDC), Norton Sound Economic Development Corporation (NSEDC), and Yukon Delta Fisheries Development Association (YDFDA) in submitting a proposal to the Alaska Congressional delegation to improve and strengthen the CDQ section of the MSA for the benefit of Western Alaska communities and future generations of our residents. CVRF, BBEDC, NSEDC, and YDFDA collectively represent more than 96 percent of the participants in the CDQ program.

The joint proposal would incorporate into the MSA the framework recommended by the Blue Ribbon CDQ Committee (see separate article in this newsletter) relating to State and Federal oversight of the CDQ program. Under the framework, the allocations to each of the six CDQ groups would be evaluated every ten years instead of every three, and each CDQ group would have a greater role in setting priorities for the ten-year cycle. At Senator Stevens’ suggestion, the proposal would also create a CDQ Panel with one representative from each of the six CDQ groups. The CDQ Panel would have a role in the oversight of the CDQ program, and would also likely foster improved cooperation among the six CDQ groups. As with the Blue Ribbon recommendations, the CVRF/BBEDC/NSEDC/YDFDA proposal would increase the role of the State of Alaska in monitoring the CDQ groups to detect any fraud and in ensuring that the CDQ boards of directors and CDQ communities are fully informed about the activities of their CDQ groups. Related to the MSA reauthorization effort, the CDQ groups are also collectively reviewing whether measures are needed to protect the tax-exempt status of CDQ groups.

Senator Stevens, Congressman Young, and Senator Murkowski are reviewing our proposal for the MSA reauthorization legislation. Broad bills to improve and reauthorize the MSA are expected to be introduced in both the U.S. Senate and U.S. House of Representatives by the end of 2006. CVRF, BBEDC, NSEDC, and YDFDA remain hopeful that the U.S. Congress will take action to strengthen the CDQ program.

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Blue Ribbon Committee Report

members, staff, and community residents met with Blue Ribbon members a number of times during the process, both in the region and in Anchorage.

The Blue Ribbon Committee’s report was delivered to Governor Murkowski on September 14, 2005. The report could result in significant changes and improvements to the CDQ program if implemented. The four key recommendations in the Blue Ribbon Committee report are as follows: (1) Lengthen Allocation Cycle

In the spring of 2005, Governor Murkowski appointed a Blue Ribbon Committee to review the western Alaska CDQ program. The North Pacific Council recommended the creation of this Committee, and its primary purpose was to review the process by which the State of Alaska uses evaluation criteria in determining allocations of fish among the six CDQ groups.

The Committee was chaired by Ed Rasmuson (Chair, Rasmuson Foundation and North Pacific Council member) and facilitated by Carl Marrs (Marrs and Company). Committee members also included Tom Case (University of Alaska), Stephanie Madsen (Pacific Seafood Processors Association and North Pacific Council Chair), Dennis Metrokin (President, Koniag, Inc.), and Ron Miller (Executive Director, Alaska Industrial Development and Export Authority).

During its work in summer 2005, the CDQ Blue Ribbon panel traveled to communities throughout western Alaska, the Aleutian Islands, and the Pribilof Islands; including visits in the CVRF member communities of Hooper Bay, Toksook Bay, and a brief visit in Mekoryuk. CVRF board

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The Blue Ribbon Committee recommended extending the allocation cycle for CDQ groups to a 10-year cycle, rather than the current 3year cycle. This would provide greater stability to CDQ groups in setting their business plans, and would reduce tension among the six CDQ groups that has resulted from nearly constant competition for CDQ allocations.

(2) Change Role of State of Alaska

The Committee recommended reducing the State’s role in the investment planning of CDQ groups, but increasing the State’s role in the prevention of fraud and mismanagement, and in ensuring improved transparency and report to the communities represented by the CDQ groups.

(3) Reduce Role of NMFS

The Committee recommended eliminating the review of CDQ activities by the National Marine Fisheries Service (NMFS) which duplicates State review. Under the Blue Ribbon Report, the role of NMFS would be limited to fisheries management, as it is for other participants in the BSAI groundfish fisheries.

(4) Allow up to 20% Non-Fisheries Investments

The Committee recommended allowing CDQ groups to invest up to 20% of their earnings in non-fisheries investments in the region. This recommendation expands upon previous efforts to clarify and authorize non-fisheries investments by CDQ groups.

The Blue Ribbon Committee also collected financial data from the six CDQ groups, which showed, among other things, that CVRF had the highest net assets and revenue among the six CDQ groups for the year 2004. The data showed that CVRF spent the second highest amount on programs, and that CVRF’s net assets were 33% above the average of all the CDQ groups. In fact, CVRF’s revenue was $31,086,026 above the average of all the CDQ groups. Program expenses for 2004 were $11,582,914, with only 5 percent having been spent on general and administration costs.

Neither Governor Murkowski nor the Alaska Congressional Delegation has clearly indicated yet to what extent or how soon the Blue Ribbon recommendations will be implemented.

Community Outreach In 2005, CVRF community outreach was highlighted by media initiatives that took place in the spring, and provided the region with a true picture of the Bering Sea fishery, the industry, the programs, and our company working for our communities. We plan on expanding upon this idea in 2006 with a new campaign that further demonstrates the Western Alaska fishing industry, the achievements of our communities and company that were reached by working together, and the obstacles that had to be overcome to reach these accomplishments.

CVRF maintains open and continuous communication with our residents through our newsletters, annual reports, an internet website, local radio and newspapers. CVRF also relies on the direct link provided by board members and local community liaisons.

In addition to the continuous presence of our liaisons and local board members, CVRF provides opportunities for local residents to participate in meetings. During the summer, Oscar Evon, CVRF board president, George Smith, CVRF executive committee member, board members Gabriel Olick and William Brown, Morgen Crow, Patty Murphy, Fred Phillip, and Larson Hunter participated in local fishermen’s meetings in Tuntutuliak and Eek. The community liaisons, Stella Alexie and Nick David Jr. coordinated these meetings in their respective communities.

Staff members participated in local community meetings on issues such as the construction of fisheries support centers, and other current and planned projects in their villages. Another of these opportunities was the open forum for our fishermen that were held during the annual board meeting. Residents are encouraged to call our main office with any questions, concerns or to request an application for any of our programs or for employment opportunities.

In addition to local presence in the communities by community liaisons, community program managers and board members, many of our staff travel throughout the region to recruit for our company and our industry partners. During the recruiting process, 129 region residents were hired to work off-shore and on-shore processing. Recruiting in our communities is also utilized for the hiring of CVRF staff.

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4-SITE Scholarship - The Louis Bunyan Memorial Scholarship funded a

total of 59 students with $198,000 in scholarships. The students were enrolled in a variety of subjects, both in Alaska and elsewhere.

College students are required to be enrolled full-time and maintain at least a 2.0 GPA. The LBMS is also available for vocational and GED courses.

Internship - There were 11 interns who worked in 2005, both in

the region and in the corporate office. Interns are required to complete a project that provides some form of assistance to the communities and CVRF projects and programs.

Training - Several training programs were provided for region

residents, including HACCP and fillet/mince training, attended by CVS workers. Staff also conducts Orientation for Success classes for new processors in on-shore plants and offshore vessels. There were 64 residents who participated in fisheries-related training during the year.

Employment - Recruiting takes place in the spring and the fall for

processors to work for CVS, partners, and other seafood employers.

Priority is given to residents of CVRF villages. Word of our successful program has gotten out, and residents of the surrounding communities also apply. Many residents have worked over multiple seasons and have become highly valued crew.

Coastal Villages Youth Leadership Program (CVYLP) - CVRF has youth leadership groups in thirteen communi-

ties. These groups are designed to promote leadership, personal development, and citizenship among the young people in the village.

Youth involved in community clean-ups, energy saving initiatives, and fund-raising for various activities and elder community leaders not only build up the villages, but also the youth who participate and help run the programs.

Junior Achievement - Community liaisons held Junior

Achievement classes in13 CVRF communities during 2005. These classes are designed to educate and show young people how to use free enterprise, business, and economics to improve the quality of their lives.

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Loan Program and Tax Assistance Loan Program

The CVRF Loan Program helps resident fishermen to enter the commercial fishery or to replace unusable equipment. Loans are granted for boats, motors, gear, and the purchase of halibut or sablefish quota. In 2005, there were 75 residents and their families benefiting from the loan program.

Applicants to the loan program are individually assessed on their dependability, ability to make their loan payments, fishing history with CVS, and a variety of other factors. The goal of the program is to help the fishermen to be self-sufficient, and approved applicants are educated on the risks and responsibilities of borrowing before they receive the loans. Many current and former loan recipients are among the best of our CVS fishermen, continually bringing in some of the highest catches for their areas.

Tax and Permit Assistance Program

CVRF funds the Volunteer Income Tax Assistance Program (VITA) through the Alaska Small Business Development Center and the University of Alaska Anchorage. Accounting students and business professors travel to all of the CVRF member communities conducting free tax preparation sessions for residents. Most returns are electronically filed so refunds are received as soon as possible. This program assisted 3,265 region residents in receiving $2,054,615 in tax refunds and earned income tax credits. The VITA program is one of the most cost-efficient ways CVRF has of directly assisting residents, with a cost of less than 3.5 cents for every dollar in refunds.

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Projects Crosswind Runway

CVRF has submitted a formal letter of commitment to finance five percent of the anticipated cost for a crosswind runway at the Toksook Bay Airport. The new runway should alleviate the wind sheer problems that have caused aircraft accidents and loss of life during attempted landings at the airport. CVRF staff are working with the State Department of Transportation to secure the needed funding for this project. A final decision by the State is anticipated sometime in 2006.

High Speed Tender

CVRF has evaluated a vessel that was already built and determined that it did not have the carrying capacity to make it feasible. The vessel also burned more fuel than desired. CVRF is in the process of securing naval architect services to help create a full set of requirements for building a high-speed fish transport vessel.

Alternative Energy

With the ever-rising costs of fuel a major area of concern in rural Alaska, CVRF has been working with a number of different agencies on conservation efforts and to find alternative sources of power. The Toksook Bay wind turbine project has been several years in the making and is now ready to go online. This project should reduce the costs of electricity in Toksook and the nearby villages. On a smaller scale, CVRF is working with the Alaska Building Science Network on ways to improve electrical efficiency in homes and public places in our villages. Our community liaisons have received training and are finding ways that each family can save on electricity costs.

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Collaborative Fisheries Research

CVRF has been working with the Alaska Department of Fish and Game on several different salmon studies. CVRF has supplied funding and interns to work on where the salmon go to spawn, the conditions and characteristics of northern Pacific salmon, and the biological condition of the river and streams in the CVRF area. All of these projects help Fish and Game to determine when and how much salmon can be caught in commercial openers.

Off-Shore Investments In 2005, Coastal Villages Region Fund continued our active participation in the Bering Sea/Aleutian Island (BSAI) fisheries. We currently have investments in twenty-five vessels, up from two vessels in 1998. These investments have sustained our company’s involvement in the fisheries that provide us with opportunities to help our member communities through programs and infrastructure projects and programs. The investments also allow for us to provide direct employment opportunities for region residents with our industry partners.

Vessel

Coastal Villages Pollock, LLC (CVP)

CVP, a wholly owned subsidiary of CVRF, was established in 2000 as a holding company for investments in the BSAI Pollock fishery. At the end of 2005, CVP owned 36% of American Seafoods Company. American Seafoods owns and operates seven catcher-processors in this fishery.

Length

Crew

C/P American Dynasty C/P American Triumph C/P Katie Ann C/P Ocean Rover

272 285 296 256

120 130 80 140

C/P Northern Eagle C/P Northern Jaeger C/P Northern Hawk

341 336 341

108 112 108

Length

Crew

135 166 116 130 112 150 180

6 18 6 7 7 24 24

Vessel

Coastal Villages Crab, LLC (CVC)

CVC, a wholly owned subsidiary of CVRF was established in 1998 as a holding company for investments in the BSAI crab sectors. CVC owns 50 percent stakes in the following crab vessels:

Coastal Villages Longline, LLC (CVL)

CVL, a wholly owned subsidiary of CVRF was established in 1997 as a holding company for investments in the BSAI Pacific cod, black cod (sablefish) and turbot fisheries. CVL owns stakes in the following vessels participating in the Pacific Cod and black cod fisheries:

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Blue Aleutian Pavlof Silver Spray Sultan Tempest Alaskan Enterprise Blue Dutch

Vessel Ocean Harvester Bering Prowler Ocean Prowler Prowler Deep Pacific Lilli Ann North Cape

Ownership %

Length

Crew

45 20 20 20 36 36 36

72 124 155 124 124 141 123

7 19 18 19 20 22 20

Off-Shore Investments Coastal Villages Groundfish, LLC (CVG)

CVG, a wholly owned subsidiary of CVRF was established in 2001 as a holding company for investments in other groundfish sectors of the BSAI, including yellowfin sole, flathead sole, rock sole, Pacific Ocean perch, and Atka mackerel. CVG owns a 20 percent stake in the 146’ F/V Cape Horn, a factory trawler that harvests and processes ground fish.

Coastal Enterprises

Coastal Enterprises, a wholly owned subsidiary of CVS was established in 2004 as a holding company for investments in fishery support. Coastal Enterprises oversees fisheries projects, such as the high speed catamaran (high speed tender) project. The high speed catamaran project is funded in part with an EDA grant. Coastal Enterprises owns 100 percent of Kelly Mae, LLC.

Kelly Mae, LLC

Kelly Mae, LLC, a wholly owned subsidiary of Coastal Enterprises was established in 2004, as a holding company to own or manage vessels engaged in fishing or tendering of salmon and other species.

Kelly Mae, LLC owns and operates the tender vessel F/V Kelly Mae which is a 135-foot landing craft that is being used to tender salmon and halibut, and deliver fresh seafood products to market. During the 2005 season, the Kelly Mae tendered at Quinhagak and on the Kuskokwim River, as well as hauled freight from Seattle to Quinhagak.

20

Financial Overview 2005 was another successful year financially for CVRF. With a total revenue of $23.9 million and expenses of $17 million, net assets, a measure of a company’s net worth, equaled $84.1 million at the end of 2005 an increase of 8.8% from 2004. This growth is mostly attributed to our investments in the Bering Sea. In addition to the growth of CVRF’s net worth, company assets have also grown considerably, from $7.5 million in 1998 to $84.2 million in 2005. Our main goal continues to be to establish a solid financial footing so that we can deliver, on a sustainable basis, economic development projects to our twenty communities now and in the future.

$100

$60

$40

Community Development Quota Royalties

One of the largest sources of revenue for CVRF is CDQ royalties. CVRF receives higher royalty rates than the CDQ average in pollock, Pacific cod, Bristol Bay red king crab, and Tanner (Opilio) crab. CVRF continues to explore methods to maximize the value of its CDQ allocation. In 2005, our industry partners harvested 99.8 percent of our allocations.

$20

1995

2000

$0 2005

Growth in Net Assets Other 2% Red King Crab 7% Opilio Crab 2%

Harvesting partners in 2005: Pollock American Seafoods Company Crab Sanko Fisheries Pacific Cod Pacific Longline Company Groundfish U.S. Seafoods/Cape Horn Fisheries Halibut/Sablefish Kokopelli, LLC/Gunn Sea Ventures

Pacific Cod 5%

Royalties by Species

21

Pollock 84%

In Millions

$80

Financial Overview Sources of Revenue

Total revenue for CVRF for 2005 was $23.9 million. Of this revenue $13.8 million was received from royalties.

Royalties 57%

Seafood Sales 24%

Investment and Interest 16%

Other 3%

Revenue Sources

Program Expenses In 2005, CVRF CDQ projects were directly responsible for $16.8 million of economic activity. Of this, $16.7 million was injected into Alaska, with $11.7 million going directly into the CVRF region. As we continue to develop new infrastructure projects and expand existing programs, we expect to make even larger impacts in the future.

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2005 SEASON HIGHLINERS Local fishermen are the lifeblood of the CDQ program.

In 2005 highliners delivering to our local halibut and salmon operations were: Halibut Phillip Tulik Samuel Shavings Frank M. Chanar Phillip James Matthew Panruk

Nightmute Mekoryuk Toksook Bay Tununak Chefornak

Salmon Frank James Adolph Roberts Douglas Kernak Carlie Beebe

Quinhagak Goodnews Bay Tuntutuliak Eek Island Area

Financial Overview Coastal Villlages Region Fund Growth in Net Assets

Revenue

$

Expenses: Program General and administration Expenses Change in net assets Net assets at beginning of period Net assets at end of period

$

1996 1,749,462

1997 1,979,220

1998 6,429,834

1999 8,281,279

2000 10,121,348

2001 24,308,411

2002 7,274,753

2003 14,516,601

2004 53,888,930

2005 25,258,371

11,547 11,547

45,362 125,696 171,058

2,423,478 789,586 3,213,064

754,550 1,278,702 2,033,252

1,217,270 1,991,230 3,208,500

5,128,214 2,368,994 7,497,208

5,807,903 1,932,567 7,740,470

10,213,670 2,969,895 13,183,565

11,582,914 2,683,884 14,266,798

15,316,765 2,961,083 18,277,848

1,737,915

1,808,162

3,216,770

6,248,027

6,912,848

16,811,203

1,333,036

39,622,132

6,980,523

1,737,915

1,737,915 3,546,077

3,546,077 6,762,847

6,762,847 13,010,874

13,010,874 19,923,722

19,923,722 36,734,925

36,269,208 37,602,244

37,602,244 77,224,376

77,224,376 84,204,899

Financial Benefits to Communities 2005 Chefornak $ 531,300 $ Chevak 889,400 Eek 511,400 Goodnews Bay 372,100 Hooper Bay 956,300 Kipnuk 422,400 Kongiganak 284,100 Kwigillingok 290,500 Mekoryuk 891,800 Napakiak 355,900 Napaskiak 268,600 Newtok 539,500 Nightmute 289,800 Oscarville 41,700 Platinum 558,900 Quinhagak 2,734,000 Scammon Bay 366,200 Toksook Bay 741,400 Tuntutuliak 514,700 Tununak 494,800 $ 11,523,500 $

36,734,925 36,269,208

Net Assets

2004 303,000 487,400 1,468,800 341,000 843,100 397,500 219,300 240,400 645,200 389,000 207,000 416,100 290,700 78,500 58,500 2,714,000 491,400 917,900 969,000 206,200 11,381,000

$90,000,000

$80,000,000

$70,000,000

$60,000,000

$50,000,000

Net assets at beginning of period Net assets at end of period

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$1996

1997

1998

1999

2000

2001

Years

23

(465,717)

2002

2003

2004

2005

Staff List Executive Office Morgen Crow Robert Williams Patty Murphy Darla Graham

Fisheries Development Joe Hall Kevin Kennedy Rhonda Kelley Larson Hunter Peter Speaks Marlene Kiokun Theodore Brown

Fisheries Manager Vessel Manager Safety Manager Fisheries Coordinator IT Specialist Administrative Assistant FSC Mechanic

Projects/Infrastructure Development Ted Wittenberger Paul Varady Michael Lake

Project Director Sr. Project Manager Project Assistant

Executive Director Deputy Director Executive Assistant Receptionist

Programs/Human Resources Development Ronalda Olivera Jenny Koenig Dawson Hoover

Accounting Kimberly Good Nellie Kiunya Catherine Robeson Sandra Guest Gretchen Williams

Lloyd Black

Community Liaisons

24

Controller Staff Accountant Payroll Clerk Accounting Clerk Accounts Payable Clerk

Community Program Managers

Program Director Program Coordinator Outreach Coordinator

Stella Alexie Angela Chingliak Chris Dock Fred Phillip Grace Friendly Nick David

Napakiak

Eek

Goodnews Bay/Platinum Kipnuk Kwigillingok Quinhagak Tuntutuliak

Theodore Angaiak

Nellie Abraham Clifford Paniyak Amanda Hoelscher Abraham Rivers Vanessa Lincoln

Tununak Chefornak Chevak Hooper Bay Scammon Bay Toksook Bay

Coastal Villages Region Fund Toll Free: (888) 795-5151 711 H Street, Suite 200 Phone: (907) 278-5151 Anchorage, Alaska 99501 Fax: (907) 278-5150

www.coastalvillages.org