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HomeMy WebLinkAboutSHReport2008_finalChenega Corporation Annual Shareholders’ Report 2008 3 Chenega Corporation Annual Shareholders’ Report 2008 2 Mission/Purpose ...........................................................................................................................3 Message to Shareholders ..........................................................................................................4 Strategic Plan .............................................................................................................................5-7 Chenega Community Investment ......................................................................................8-9 Chenega Social Investment .............................................................................................10-14 Chenega Cultural Investment .........................................................................................15-16 Chenega Shareholder Distributions and Dividends ...............................................17-18 Chenega Shareholder Equity ................................................................................................19 Business Operations ...........................................................................................................20-25 Management Discussion and Analysis ........................................................................26-33 Executive Leadership and Board of Directors ..........................................................34-35 Chenega Corporation Annual Shareholders’ Report 2008 Our Foundation Our Mission Chenega Corporation has the dual mission of succeeding in business to assist its Shareholders, descendants and family members in their journey to eco- nomic and social self-determination and self-sufficiency; and to create and support comprehensive cultural, societal and community activities. Our Purpose v To earn a profit by delivering high-quality services to our customers; v To invest wisely so as to provide distributions for Chenega Corporation Shareholders in perpetuity; v To preserve and protect Chenega Corporation lands for future generations; v To preserve and protect the rights, livelihood, and cultural heritage of our Native people; v To ensure that Chenega Corporation engages in responsible business in an innovative, competitive, progressive and ethical manner to provide for long-term corporate growth and stability; v To provide services to current and future Chenega Corporation Shareholders, including education, training, career development, and employment, in order to foster individual growth and well-being; v To attract, develop, compensate, reward, and retain a world-class work- force that is guided by our value system and is focused on delighting our customers; v To acknowledge the many opportunities, successes, and blessings that have been bestowed on the Chenega people and this Corporation; v To assist the broader family of Native and disadvantaged small busi- nesses by promoting their development and engaging in responsible business pursuits with them; and, v To be good citizens within our communities by being responsible and contributing to good causes. Chenega Corporation Annual Shareholders’ Report 2008 Our Strength 4 Chenega Corporation Annual Shareholders’ Report 2008 5 Chenega Corporation Annual Shareholders’ Report 2008 Message to the Shareholders Dear Shareholders, I am pleased to present Chenega Corporation’s Annual Shareholders’ Report for fiscal year 2008. Through these pages you will come to understand the details of what was yet another successful year for us. In fact, it is our Corporation’s best year ever with $894 million in gross revenues and over $16 million in net profits! According to Alaska Business Monthly Magazine, we remained the number one, most successful Alaska Native Village Corporation and the 5th largest Alaskan owned company. We held our own for FY 2008 with Washington Technology Magazine’s ranking of the Top 100 Federal Prime Contractors for 2008, with a impressive 76th place showing. Shareholder equity also reached a milestone in FY 2008, exceeding $101 mil- lion by year-end. During FY 2008 we performed well in accordance with the goals established in our strategic plan and in the con- tinued fulfillment of our Corporation’s mission of “succeeding in business to assist Shareholders, descendants and family members in their journey to economic and social self-determination and self-sufficiency; and to create and support comprehensive cultural, societal and community activities.” Clearly, our success in business and the careful investments we have made over the years has worked to secure our community infrastructure, our social better- ment, our cultural preservation, our quality of life and the future for our children. These investments exemplify the vision that the Alaska Native Claims Settlement Act had for Native Corporations such as ours, when it was first enacted in 1971, and forms the cornerstone of our foundation. It is who we are. It is the place from which we derive our strength. In short, our foundation is our strength. Throughout the pages of this Annual Report, you will also see, that several other goals that we set for our Cor- poration at the beginning of the year, have been met. These include: 1) the continued certification of Chenega Corporation’s subsidiaries into ISO 9000 Quality Process Standards, 2) the diversification of our business operations to strategically position the Corporation’s business profile to align with the changing times, and, 3) to foster a pro- fessional environment in which our key Corporate executive leadership and Corporate Board of Directors remain as a consistent and productive force in our organization. They too, form an important foundation which fortifies our Corporation’s strength. There is no better time, in the history of our Corporation, for us to have the strong foundation that we do. Our business partners, looking to place their long-term contracts, seek corporations with stability in leadership and consistency in performance. Projecting a stable presence is all the more challenging in the fluid business climate we find ourselves in today. We continue to take steps to minimize the impacts of this changing environment with an aggressive program of outreach to decision-makers in the legislative and executive branches of Government. Ad- ditionally, the Corporation’s Board of Directors will undertake a new strategic planning cycle in the summer of 2009, to develop a vision for how we need to operate in the future and position our business plan for continued success. Already half-way into our fiscal year 2009, I am thankful that our Corporation began the year with a strong founda- tion to serve as ballast as we navigate the uncertain times in our world economy, the new administration in Wash- ington, DC and the changing landscape of Federal Government contracting. With a successful FY 2008 and the strength of our experience and our foundation, we are well equipped for the challenges ahead! As a People we can appreciate the value and importance of facing adversity from a position of strength. Our Chenega history shows we have what it takes to thrive and endure. For that, I am abundantly proud of who we are and who we have become. The respect we have garnered among our fellow Alaskan communities has been hard fought and earned. With this strength as our foundation, I am confident in our ability to continue making sound decisions for today and for our future. Very truly yours, Charles W. Totemoff President & CEO Chenega Corporation has made substantial progress in achieving the goals set out in our Strategic Plan under the guidance of the Board of Directors, and through the commitment and hard work of Corporate and Subsidiary leadership and staff. Because of this progress, and in light of changed condi- tions and the challenges ahead, the Board of Directors will develop an up- dated strategic planning cycle in the summer of 2009, with a new strategic plan to be implemented in FY 2010. Our major actions and accomplishments of FY 2008 are outlined below: Goal 1: Maintaining Native Affairs and Cultural Heritage Programs Chenega Corporation continued to support the Elders’ and Shareholders’ efforts to preserve its cul- ture and the Native Sugcestun Language. Programs developed in FY 2008, dedicated to preserv- ing Chenega’s culture and history, included: a dictionary and audio DVD of words spoken in Sug- cestun, the documenting of subsistence harvest areas, activities and lifestyle habits, the recording of Elder story telling of Life in Chenega in the 1940’s to coincide with a book including diary entries written by Chenega school children and photographs from the same time frame, and the teaching of Russian Orthodox religious holidays and traditions. A strong relationship has been forged with the Chenega IRA Council, and together we are making plans for Chenega Bay Village improvements, positively impacting both commercial and subsis- tence activities. Funds for this effort were secured by our strengthened group of staff grant writ- ers; and a campaign commenced to secure planning and implementation funds from State and Federal agencies and Legislators. The Corporation also supported the building of a new pavilion, enclosed altar and rest facilities at the original Chenega Village site, which will accommodate the memorial gathering each year. Ad- ditional projects will be undertaken as the need emerges and as resources permit. Goal 2: Efficient Management The Corporation’s success challenged daily cash needs and borrowing power in FY 2008. To ad- dress this growing pain, Chenega’s management negotiated a new credit facility with highly fa- vorable terms. It is now in place, allowing us to support our operating growth, and making funds available for other investment or asset purchases as needed. All mature Chenega Corporation subsidiaries received quality management certifications under ISO 9000. Almost two decades after the horrible tragedy, the Supreme Court ruled on the Exxon Valdez dam- ages settlement, and proceeds were distributed to Shareholders. The matter of interest on the damages remains to be decided by the 9th Circuit Court in California. Goal 3: Leading the Way in Providing Shareholder Services Chenega Corporation continues to lead the way in sup- porting and providing benefits to Shareholders’ fami- lies and their communities. We are particularly proud of our contribution to Shareholder education and training. Forty-one program participants shared almost $500,000 in funds provided by Chenega Corporation. Eight of these students received degrees or profession- al certifications. In all, twenty-nine programs shared $1.9 million dollars in funding and support from the Chenega Corporation in 2008. Shareholder employment remains a priority; sixty-six Chenega Corporation or subsidiary jobs, short and long-term, were filled by Shareholders in FY 2008. Strategic Plan 2007-2012 FY 2008 Report 6 Chenega Corporation Annual Shareholders’ Report 2008 7 Chenega Corporation Annual Shareholders’ Report 2008 Goal 4: Projecting a Strong Positive Image The Shareholder, Employee, Settlement Trust and Corporate newsletters showcased successes, in- dividual accomplishments and happenings in the life of the Corporation and the Chenega people this past year. Several Board Members, our CEO, Corporate Staff and Subsidiary Leadership have undertaken an in-depth outreach plan, intended to educate and inform our Congressional leadership, and to seek their active support for the continuation of Native American Contracting preferences. In FY 2008, we visited more than 110 Congressional members or their staffs in their home districts, in Juneau and on Capitol Hill. Our two-year plan is to reach all new members, appropriation and oversight committee members and professional staff. In these visits we provide details regarding the Corpo- ration’s contribution to achieving the ANCSA goals of social and economic self-determination and self-sufficiency. We have also worked diligently with Native American advocacy groups to get out the “message” about the ANCSA corporations’ contribution to the betterment of Native peoples. Goal 5: Enhancing Organizational and Governance Structures The Board of Directors has completed a professional de - velopment program; covering financial planning and man- agement, compensation planning and outcome analysis, as well as auditing and overall regulatory compliance. We consolidated our graduated 8(a) companies under the leadership and management of Chenega Technology Ser- vices Corporation(CTSC), to build mass for competing suc- cessfully in the open market. The Corporation began exam- ining our business processes in an effort to implement best practices. All employees have completed annual training on the Corporate Code of Conduct and Ethics—which, has become an increasingly prevalent com- ponent of doing business with the Federal Government. Goal 6: Encouraging Employee Growth and Development In FY 2008, we began focusing on further enhancing our employee introduction procedures. Great effort was taken to ensure the procedures are efficient and that each employee is welcomed into the Chenega Corporation family and given the tools they need to succeed. Improvements were also made in the compensation system, employee relations and wellness programs. Goal 7: Delivering Value and Performance to Customers Customer reports show Chenega continued to perform exem- plary contracted work through the efforts of our dedicated employees. Chenega is recognized throughout the Federal Government for delivery of quality services within cost and schedule requirements. Further, we consistently receive good to excellent scores on each of our sixty-five Federal contracts. Most notably, for our largest contract, we have achieved the Highest Award Fee possible, for each of the seven years we have held the contract with the National Geospatial-Intelli- gence Agency. Strategic Plan 2007-2012 FY 2008 Report Goal 8: Wisely Using Resources In keeping with our overall diversification strategy, we aggressively sought out long-term invest- ments, which led to the acquisition of an additional downtown Anchorage hotel and the purchase of a high-tech company in New Mexico, which does business with the Department of Energy. An additional contribution was made to the Settlement Trust to add to the principal. Chenega Cor- poration continues to lead the way with progressive and continuous dividend programs. Regular and special dividends, Settlement Trust distributions and Elder dividend programs all saw increas- es in 2008, with a total payout of almost $2.5 million. The Board of Directors has called for current rates to continue in 2009. Goal 9: Sustaining the Financial Posture and Profitability of the Corporation FY 2008, was a record year! The Chenega Corporation subsidiaries won over $551 million of new business and increased our backlog to $2.9 billion. Revenues nearly broke the $900 million mark and Shareholder equity exceeded $100 million by July 2008. Goal 10: Creating New 8(a) Companies Two new 8(a) companies, Chenega Global Services, LLC and Chenega Government Consulting, LLC were established in FY 2008. Additionally, planning and identification of leadership resources was undertaken for the start-up of two new 8(a) companies in FY 2009 to leverage markets in professional services and in support of non-Department of Defense Federal agencies. Goal 11: Utilizing Tourism Assets Continuing improvements in management, facilities and services resulted in increased occupancy and high satisfaction rates in all of our hotel properties. We are watching the effects of the new downtown Anchorage convention center on this element of our business and will continue to improve our offerings within our three properties. In summary, FY 2008 has been a very successful year for the Chenega Corporation, with achieve - ments in all of the goals detailed in the Strategic Plan. The Board of Directors continues to review the Strategic Plan quarterly to monitor progress. They also analyze market conditions and the leg- islative environment and make necessary goal or strategy adjustments accordingly. Currently, the Board and Corporate leadership deem our plan sound, but note there have been dramatic changes in the economy, markets and in government procurement. Further, many of our goals have been achieved. With that, we have decided to proactively enter a new strategic planning cycle in 2009, to purposefully change with the times, and create a plan to serve as our guidepost and improve our ability to provide for our children’s futures. Strategic Plan 2007-2012 A Status for FY 2008 8 Chenega Corporation Annual Shareholders’ Report 2008 9 Chenega Corporation Annual Shareholders’ Report 2008 Chenega Corporation made great strides in Community Development and realized success in grant procure- ment in FY 2008. Our community projects are in various stages of implementation. Current updates include: Chenega Heritage, Inc. (CHI) n The application for 501(c)(3) non-profit status was ac- cepted by the IRS. This gives donors to CHI the added benefit of claiming their dona- tion as a tax deduction. The 501(c) (3) status also enhances CHI’s eligibility in applying for grant funding. Community Quota Entity (CQE) n Chenega Corporation’s Shareholder Development Manager is working with the University of Alaska’s Marine Advisory Program to coordinate Chenega Bay Village training this spring to address the following issues: • National Marine Fisheries Services permit completion for fishing halibut/sablefish and fishing regulations • Boating safety • Fishing 101 n Low interest or no-interest funding is still being sought to purchase halibut/sablefish quota. US Forest Service Projects n Chenega Corporation, Chugach Alaska Corpo- ration and the US Forest Service are planning and carrying out a multi-year archeological survey of the original Chenega Village site. n The US Forest Service is working with Chen- ega Corporation to plan and implement the third year of a developing Baidarka Culture Camp, co- ordinated in conjunction with an archeological survey of the original Chenega Village site and surrounding area. Community Development and Grants Procurement Report FY 2008 Capital Projects n The State Legislature ap- proved a capital project funding request for the sewer line to the subsis- tence building in Chenega Bay, totalling $75,000. n The new power plant in- stalled in FY 2008, was fund- ed by grants from the State of ALaska and Congress. n The Federal Economic Development Administration granted $60,000 for the Marine Services Center proj- ect. The goal of this project is to produce business plans for proposed businesses, analyze the commu- nity’s infrastructure and make recommendations for infrastructure upgrades to support planned marine services development. n The Denali Commission funded the North Pacific Rim Housing Authority’s application for needed repairs to the harbor in Chenega Bay for $1 million. n Chenega Corporation received $100,000 in grant funding from The Alaska Energy Authority to conduct a hydroelectric feasibility study. Chenega Community Investment Chenega Community Investment VECHNAYA PAMYAT – Memory Eternal Chenega Shareholders traveled to the original Chenega Village site on June 6, 2008 for the Annual Chenega Memorial Day Ser- vice and Celebration. They commemorated the day under the cover of the new pavilion and gathered for the service at the newly enclosed altar. The Kuc Ka Laq Alutiiq Dancers and the Qutekcak Native Tribal Dancers performed in the afternoon. Other Projects n The State Department of Commerce, Community, and Economic Development granted CHI $10,000 to complete a tourism plan for the community. n The Chenega IRA Council and Chenega Corporation are working together with Prince William Sound Aquaculture Corporation to stock king salmon fry in Chenega Bay in 2011. n The National Park Service (NPS) also awarded CHI technical assistance to plan the extension of a trail from the Chenega Bay Village to Iktua Bay. n An oral history project with the community Elders is underway after a $29,000 grant was received from the NPS Historic Preservation Grant Program. Enclosed altar at original church site. 10 Chenega Corporation Annual Shareholders’ Report 2008 11 Chenega Corporation Annual Shareholders’ Report 2008 Shareholder Services Expands Into Education and Career Development The vision for expanded Shareholder Services, shared by Chenega Corporation’s President & CEO Charles W. Totemoff in his address to Shareholders at the FY 2007 Annual Meeting, came to fruition in FY 2008. The goal included a customized approach to education planning and career development whereby Shareholders inter- ested in improving themselves through higher learning or career advancement were able to receive personal counseling and guidance to reach their goals. To accom- modate this additional Shareholder benefit, the Share- holder Services Department was expanded to become the Shareholder Services & Development Department. The new Shareholder Development area now oversees the administration of scholarships, internships, the Stu- dent Computer Equipment Program, the Youth Out- reach and Endowment Programs as well as expanded training offerings in Chenega Bay. In FY 2008, a Shareholder Development Manager was hired, a Shareholder Development work plan was ap- proved, new, more progressive policies and procedures were established and by December 2008, over 50 Share- holders, spouses and descendants participated in career guidance plan development. Today they are on track, working towards their future educational and career ad- vancement goals, from short-term training to doctorate degrees! Student Equipment Program Chenega Future, Inc. continued its performance-based Student Equipment Program in FY 2008. In this pro- gram, Chenega’s full-time college students are granted the use of a computer and printer while they remain in good standing with their grades in school. Upon gradu- ation, the student is awarded ownership of the equip- ment. This provides the student with the necessary tools to be successful in their educational endeavors. Since the program began, five graduates have been awarded their computers. Chenega Corporation Educational Endowments During FY 2008 the Board of Directors of Chenega Cor- poration approved the continued funding of its two en- dowments, applying $100,000 to each of the University of Alaska system and the Alaska Pacific University’s edu- cation endowments. Chenega Social Investment Name Company Department Ian Angaiak Chenega Corporation Accounting Roberta Gordaoff Chenega Corporation Legal Cheryl Gordaoff-Johnson Chenega Federal Systems Administration Michael Paulsen Chenega Federal Systems Information Technology Beth Pipkin Chenega Corporation Shareholder Services & Development Tanya Pipkin Chenega Corporation Corporate Communications Timothy Jared Selanoff Chenega Corporation Shareholder Services & Development Angela Totemoff CTSC Project Management Rami Totemoff Chenega Corporation Information Technology Internships Chenega Corporation offers student internships for full-time college students at either the corporate office or one of the Chenega Corporation subsidiaries. Students are provided opportunities to work with Chenega staff in areas that are rel- evant to their degree plan. Interns receive hands-on experience that not only benefits their learning experience but pro- vides valuable resources to the organizations they are assigned to. Chenega Corporation College Interns Chenega Social Investment Recipient Educational Institution Donia Abbott Northern Dame Construction Justin Ahlers Matanuska-Susitna College Monica Ahlers Nat’l Center for Competency Testing Patricia Andrews Alaska Pacific University Ian Angaiak University of Alaska Anchorage Sandy Angaiak Ashford University Beverly Bartenetti PCA Advanced Skin Care Systems Shelly Bogenrife Paradise Valley Community Taylor Cree Portland State University Cheryl Gordaoff-Johnson Charter College Roberta Gordaoff University of Alaska Anchorage Angela Henderson Western Washington University Zachary Henderson Everett Community College Donna Henry Yakima Valley Community College Billie Hjort Western Washington University LaVon Johnson Alaska Pacific University Kyle Kirsch University of Alaska Anchorage Donald Kompkoff III COSSATOT Community College Nick Kompkoff, Jr. University of Alaska Anchorage Ashley Kompkoff Chugach School District Gerald Kompkoff Center of Employment Education Chenega Future, Inc. Chenega Future, Inc. (CFI) was founded by Chenega Corporation in 1989 to support Shareholders, their spouses and descendants, in achieving their goals of higher education with scholarships. The CFI Board of Directors oversees the approval of all scholarships and the policies and procedures that govern them. During FY 2008, the CFI Board updated its scholarship policies, increasing the scholar- ship size and expanding the criterion for eligibility, while introducing new requirements for continued eligibility based on progress made in a student’s approved education plan. This year’s scholarship recipients include: Scholarship Awards January through December 2008 Recipient Educational Institution Jamie Kompkoff AVTEC Janelle Kompkoff Prince William Sound Community College Lydia Kompkoff COSSATOT Community College Richard G. Kompkoff World’s Only Tattoo School Ronilyn Kompkoff South University Stephanie Kompkoff Nana Training Veronica Kompkoff Nat’l Center for Competency Testing Ron Leppanen Northwest Indian College Michael Paulsen University of Alaska Anchorage Beth Pipkin University of Alaska Anchorage Phyllis Pipkin Alaska Pacific University Tanya Pipkin University of Alaska Anchorage Keith Selanoff University of Alaska Anchorage Timothy Jared Selanoff University of Alaska Anchorage Angela Totemoff Alaska Pacific University Jason Totemoff University of Alaska Anchorage Rami Totemoff University of Alaska Anchorage Michael Vigil Community Training Association Jenette Vlasoff Prince William Sound Community College Foley Weems Temple University College 12 Chenega Corporation Annual Shareholders’ Report 2008 13 Chenega Corporation Annual Shareholders’ Report 2008 Chenega Social Investment Degree Name Description Master’s Charles W. Totemoff MBA Bachelor’s Sonya Selanoff BA - Education Sharon Signorelli - Vigil BA - Business Deanna Morrison BA - Business Angela Totemoff BA - Computer Science Kristi Rutman BA - Nursing Charles W. Totemoff BA - Organizational Management Associate’s Cheryl Gordaoff - Johnson AAS Angela Henderson AAS & AA-Education Jenette Vlasoff AAS Timothy Jared Selanoff AAS Jordon Kompkoff AVTEC - Diesel Mechanic Certificates Beverly Bartenetti Beauty Skin Certificate Jay Evanoff Cosmetology Richard G. Kompkoff Tattoo Artist Monica Ahlers Phlebotomy Technician Specialist Karra Paulsen Certified Nursing Assistant Patricia Andrews Legal Secretary & Travel Agent Phyllis Pipkin Travel Agent Charles Selanoff Welding Certificate, 24 Hr Hazwoper, NSTC Veronica Kompkoff Medical Assistant Specialist Melynda Merculief Travel Specialist Steve Eleshansky Travel Specialist Gerald Kompkoff Heavy /Construction Equipment Nick Kompkoff, Jr. Logistics William Jack Kompkoff Hazwoper Charles W. Totemoff Professional Management SHAREHOLDER EDUCATION ACHIEVEMENTS 1999 - 2008 College Degrees and Certificates Earned by Chenega Shareholders, Spouses and Descendants Youth Outreach Program With each year, Chenega Corporation’s Youth Outreach Program continues to grow in popularity and pro- ductivity. In FY 2008 we celebrated its fourth anniversary with a growing list of Chenega youth who con- tinue to benefit from the program. The involvement of returning participants, and their progress made in carrying out their education goals since the last meeting, confirmed that the work sessions truly do set the students on a course toward building their future! The sessions presented by fellow Shareholder youth continue to make a big impression on the students. It is rewarding to see the students, who just a few years ago hadn’t even thought about the possibilities of what they could accomplish beyond high school, are now graduating and going on to pursue vocational and college education. This is an impor- tant affirmation to the value of Chenega Corporation’s goal to educate our youth and prepare future gen- erations to become active participants in their communities and in the operations of the Corporation. During FY 2008, two sessions were offered as part of the Youth Outreach Program. One in the Spring for all High School Students and the other in the Fall for Chenega Interns and High School Seniors. In May of 2009 the Youth Outreach Spring meeting will be expanded to include students ranging in age from 11 – 18 years old. The expanded program, renamed Future Quest! is scheduled for May 27 & 28th in Anchorage. “At the beginning of the Youth Outreach Program many of us were not sure about the careers we should go into. By the end we had great ideas and began to work towards our goals. We filled out scholarship applications and began to write our goal letters. We really got a sense of direction toward our career goals and appreciated every minute of it.” Excerpt from letter to Chenega President Charles W. Totemoff from Shareholder youth Kayla Paulsen and Lloyd Kompkoff, Jr. expressing their thanks and appreciation for the Youth Out- reach Program. Chenega Social Investment Lloyd Kompkoff, Jr.Kayla Paulsen 14 Chenega Corporation Annual Shareholders’ Report 2008 15 Chenega Corporation Annual Shareholders’ Report 2008 Russian Orthodox Church Celebrating and preserving the religious traditions of its people is among the goals of the Chenega Cor- poration and its Culture Preservation Program. In FY 2008, donations were made toward improvements for Saint Tikhon and Saint Innocent churches in Anchorage. These contributions are part of an ongoing commitment of the Corporation to the Russian Orthodox Diocese of Alaska. Substance Abuse Program Chenega Corporation recognizes the important role that the health and well being of its Shareholders plays in fulfilling its commitment to promote self-sufficiency and self-determination. In recognition of this, the Corporation Board of Directors voted in favor of the continuation of its Substance Abuse Pro- gram. Through this program, Chenega Shareholders, descendants and spouses are provided the neces- sary support services and safe harbor to overcome the challenges of alcohol and drug addiction. Burial and Bereavement Fund A total of $5,500 was provided to Shareholders utilizing the Chenega Burial & Bereavement benefit during FY 2008. Established in 1998 for Shareholders only, and then expanded in 2006 to include descendants and spouses, this program has been successful in supporting the people of Chenega in their time of loss with emotional and financial support. In FY 2008, the Chenega Corporation Board of Directors voted to continue this program into FY 2009. Shareholder Life Insurance Investment First introduced in FY 2007, the Chenega Corporation Life Insurance Benefit was established to provide Shareholders with the peace of mind that comes from knowing our loved ones and dependants will be provided for in times of loss. In FY 2008, Chenega Corporation invested $77,000 into this benefit, which is based on each individual Shareholder’s number of shares. Chenega Social Investment Chenega Cultural Investment Chenega Culture Preservation Program In 2004 Chenega Corporation founded its Culture Preservation Program and named a committee of Elders to identify and carry out projects de- signed to preserve the language and heritage of the Chenega People. Much has been accomplished by the committee in the 4 years since it began its work, including: 1. Twelve Language Posters of Sugcestun words with English transla- tions and accompanying DVD’s with Elder pronunciations. 2. A collection of subsistence stories and over 60 documented recipes in a Book – We Are The Land, We Are The Sea. 3. A documentary of the 1964 earthquake as experienced by 20 Chenega Shareholders in the book – The Day That Cries Forever. 4. Assisted in the creation of a theatre production reading of The Day That Cries Forever, in Fairbanks, developed by Professor of Theatre and Dance at Wooster College in Ohio, Dale Seeds. 5. Two CD’s of Russian Orthodox Christmas songs, sung by Chenega Elders and an accompanying song book with English translations of the songs. 6. A Russian Orthodox Christmas songs hymnal with Alutiiq and English translations. 7. Conducted an archeological survey in and around the original Chenega Village site, revealing an initial discovery of over 30 historic artifacts currently being archived. Plans are un- derway for a second expedition to continue the discovery and archeological surveying. 8. Chenega cultural language teaching materials have been dis- tributed throughout Chugach Region Schools. 9. Continued development of the Chenega Baidarka Culture Camp event with support and funding from US Forest Service. This week-long expedition enables Shareholder youth to learn and live a subsistence lifestyle in and around Chenega Island and surround- ing subsistence harvest areas. Accompanied by US Forest Service Arche- ologists, participants learn about their culture, hunting, fishing and food preparation, wilderness survival and, archaeological survey techniques. The Sugcestun Language is spoken at various times throughout the trip. For the years 2007 – 2009 the program has been in development to create a learning curriculum that can be practiced during the week-long camp. 16 Chenega Corporation Annual Shareholders’ Report 2008 17 Chenega Corporation Annual Shareholders’ Report 2008 Chenega Cultural Investment Chenega Culture Preservation Program Projects in Progress Throughout FY 2008 1. The Chenega Diaries Project, a compilation of over 200 pages of Chenega Village school children diaries, 300 photographs and other correspondence from the 1940’s as preserved by the John Poling Trust. Plans are underway to record Elder stories from this time, capturing life in Chenega in the 40’s as seen from the eyes of school children and from their recollections of the same events 60 years later, as Elders. These recordings will be compiled into a DVD which will be a part of the book. 2. Chenega Dictionary of over 1,000 Sugcestun words and phrases. 3. The documenting of subsistence activities and places in Chenega and sur- rounding Prince William Sound area. 4. The creation of a 2009 Subsistence Calendar. 5. Oral history recordings of Elders and a written history in their “Life Story Journals.” 6. The oral documenting of Russian Orthodox religious ceremonies and traditions. 7. A CD recording of Elders singing Russian Orthodox Easter songs. Chenega Culture Preservation Program Strategic Goals The important work of the Chenega Culture Preservation Program supports the fulfillment of the committee’s strategic goals: 1. To record Elders knowledge of the Sugcestun Language and Chenega’s cul- tural history. 2. To create opportunities to revitalize and reinstate Alutiiq cultural practices of religion, subsistence, education and community values. 3. To develop a Sugcestun Language & Culture Preservation Program in the Chenega Bay Village school. The current Chenega Corporation Settlement Trust is irrevocable and is being managed with a goal to maintain sustainable quarterly distributions to each Shareholder. A total of $8,720 per 100 shares was distributed to Shareholders, by the Chenega Corporation Settlement Trust. The Trustees are pleased that despite the set-backs in the financial markets occurring at the end of calen- dar year 2008, they can sustain the Trust distributions at the FY 2008 level for FY 2009. 2008 Chenega Corporation Settlement Trust Distributions Chenega Shareholder Distributions and Dividends 2008 Chenega Corporation Settlement Trust Distributions Date Amount Per Share Amount Per 100 Shares February 29, 2008 $20.25 $2,025 March 17, 2008 $6.20 $620 Special Distribution May 15, 2008 $20.25 $2,025 August 15, 2008 $20.25 $2,025 November 14, 2008 $20.25 $2,025 18 Chenega Corporation Annual Shareholders’ Report 2008 19 Chenega Corporation Annual Shareholders’ Report 2008 Chenega Shareholder Distributions and Dividends 2008 Chenega Corporation Quarterly Dividends The Chenega Corporation Board of Directors voted unanimously to update the Shareholder annual divi- dend schedule and rates. This included a 16% increase from 2007. As a result, the regular and special dividends distributed in FY 2008, totaled $25,975 per 100 shares. This amount remains among the highest amounts in the State of Alaska for an Alaska Native Corporation. A one-time special distribution, totaling $23,651 per 100 shares was also made as a result of the Exxon Valdez lawsuit settlement. Additionally, a total of $6,000 was paid to each Elder. Chenega Corporation Special and Quarterly Dividends Date Amount Per Share Amount Per 100 Shares January 15, 2008 $19.25 $1,925 March 14, 2008 Special Dividend $40.50 $4,050 April 15, 2008 $19.25 $1,925 April 25, 2008 Special Dividend 2008 7(j) $9.03 $903 June 13, 2008 Special Dividend $40.50 $4,050 June 30, 2008 Special Dividend 2008 7(j) $11.72 $1,172 July 15, 2008 $19.25 $1,925 September 15, 2008 $19.25 $1,925 October 15, 2008 Special Dividend $40.50 $4,050 October 31, 2008 Special Dividend -Exxon $236.51 $23,651 December 15, 2008 $40.50 $4,050 7(j) distributed by Regional Corporation in September 2008 Chenega Corporation Elders Quarterly Dividends Date Amount March 14, 2008 $1,500 June 13, 2008 $1,500 October 15, 2008 $1,500 December 15, 2008 $1,500 During FY 2008, Chenega Corporation reached an important milestone for its Shareholders, topping $100 Million in Shareholder equity. Chenega Shareholder Equity A Corporation in Balance Reaching the $100 million Shareholder equity milestone while maintaining the ability of the Corporation to sustain Share- holder dividend levels, and invest in considerable Share- holder programs, while growing the Corporation’s busi- ness portfolio, is testimony to the Corporation Board’s experience in finding the right balance across all of its Shareholder investment decisions. Throughout FY 2008, these decisions: n Strengthened Chenega’s community infrastructure with capital improve- ments and additional grant resources procured. n Brought value to Chenega’s social invest- ments; supporting education, career devel- opment, the Russian Orthodox Archdiocese of Alaska, caring for Shareholders in times of need and protecting Shareholder loved ones and dependents with leading edge life insurance benefit. n Preserved Chenega’s cultural heritage by documenting the Sugcestun Lan- guage and subsistence ways, recording Chenega history as told through the stories of our Elders, and developing Russian Orthodox history and tradition training materials. Using all these resources developed to introduce new ways for Chenega Youth, to learn about their culture and a subsistence lifestyle. n Delivered Shareholder dividends and distributions in amounts suitable to promote self-sufficiency and self-determination, and n Responsibly and strategically managed corporate resources to reach the mile- stone of $100 Million in Shareholder equity. Whether the investments made by the Corporation go toward building Chenega’s com- munity, social programs, cultural preservation, dividends or equity, Chenega’s strength as a Corporation and as a People, is in the delicate balance of investment decisions which preserve our past, foster self-sufficiency today, and create a legacy for our future generations. 20 Chenega Corporation Annual Shareholders’ Report 2008 21 Chenega Corporation Annual Shareholders’ Report 2008 Business Operations Dear Shareholders, Fiscal Year 2008 was another exceptional year for Chenega Corporation! In FY 2008, we achieved our highest annual revenue ever, booking almost $900 million in sales and a solid $16.1 million in net income. Following the vision and direction set by the Chenega Corporation Board of Directors, we continue to fortify our financial assets with corporate equity now exceeding $100 million; thereby, ensuring the on-going well being of our Shareholders and their descendants. Our dedicated and talented management team and staff achieved exceptional business results and remain focused on growing the business profitably to again, ensure long- term stability and success. I am extremely proud to present below several of our major FY 2008 business highlights and achievements. Fiscal Year 2008 Business Highlights and Achievements n Consolidated Revenue of $894 million; n Net Income of $16.1 million; n Net cash provided by operating activities of $34.5 million; n Total assets of $315 million; n Total Shareholder equity of $101 million; n Our Corporation ended the fiscal year with operations in 37 states, the District of Columbia, 1 US Territory and 12 foreign countries; n Our Corporation ended the fiscal year with over 4,500 employees; n Five of Chenega Corporation’s subsidiaries obtained ISO 9000 Quality Certification, including: CTSC, CIS, CASE, CFS and CSPS; n Two new 8(a) companies were developed; Chenega Global Services, LLC with a primary business focus of environmental services, and Chenega Government Consulting, LLC with a primary business focus of computer facilities management; n Chenega Corporation added to its commercial business and asset base by acquiring the Voyager Hotel in downtown Anchorage; n Chenega Corporation added to and diversified its federal contracting capability by acquiring Time So- lutions, LLC, a New Mexico-based firm that provides nuclear related engineering services primarily to Department of Energy (DOE) and National Nuclear Security Administration (NNSA). In the federal contracting market, we are securing fewer large dollar sole-source contracts and are bidding mul- tiple, smaller contracts to achieve the same revenue success. FY 2008 saw a continued development and refine- ment of Chenega’s competitive proposal capability utilizing the Service Center in Ashburn, Virginia. This enhanced capability along with improved business development efforts allowed us to win several large contracts increasing our contract backlog from $2.2 billion at the end of FY 2007 to $2.9 billion at the end of FY 2008. This backlog growth positions us well for a strong FY 2009. Growing the backlog must continue and be a primary focus for FY 2010 and beyond as we must replace revenue on several large-scale programs. I am extremely encouraged by our continued business success in FY 2008, and I know Chenega Corporation is well positioned moving into the future. I look forward to the business opportunities and challenges ahead, and in ful- filling a mission that is broader and more important than simply improving the bottom line. What it all means for Chenega Shareholders is the continued security of a solid business base which serves as the platform to improve culture, community, social programs and the economic well-being of future generations. I am very proud to be part of this great Corporation! Sincerely yours, Jeff Hueners Senior Vice President & Chief Operating Officer Chenega Corporate and Regional Offices Chenega Corporation Charles W. Totemoff, President & CEO 3000 C Street, Suite 301 Anchorage, AK 99503 (907) 277-5706 Fax: (907) 277-5700 www.chenega.com Chenega Corporation Service Center Ryan Williams, Director 19980 Highland Vista Drive, Suite 100 Ashburn, VA 20147 (571) 291-7601 Fax: (571) 729-5035 www.chenega.com Chenega Corporation Southwest Asia Operations Darrell E. Crawford, General Manager 377 Souk al Dakhlyl 15254 Kuwait (907) 677-4991 International: (011) 965-609-0993 www.chenega.com Chenega Corporate Branch Offices* Chenega Aerospace, LLC Larry Runnalls, President 2690 Chandler Avenue Las Vegas, NV 89120 (702) 241-7271 www.ChenegaAerospace.com 100% owned by Chenega Corporation Chenega Federal Systems, LLC John Campagna, President 10505 Furnace Road, Suite 205 Lorton, VA 22079 (703) 493-9880 Fax: (703) 493-9881 www.chenegafederal.com 100% owned by Chenega Corporation Chenega Logistics, LLC Joe Collette, Sr. VP & GM 2329 N. Career Ave. #221 Sioux Falls, SD 57107 (605) 271-7900 Fax: (605) 275-4020 www.chenegalogistics.com 51% owned by Chenega Federal Systems, LLC Business Operations Chenega Global Services, LLC Leonard Karge, President 726 E. 9th Avenue Anchorage, AK 99501 (907) 263-6200 Fax: (907) 263-6262 www.chenega.com 100% owned by Chenega Corporation Chenega Commercial Holdings, LLC Dave Jensen, President 3000 C Street, Suite 304 Anchorage, AK 99503 (907) 277-5706 Fax: (907) 277-5700 www.chenega.com 100% owned by Chenega Corporation RPS, LLC d/b/a Voyager Hotel Barbara Swenson, General Manager 501 K Street Anchorage, AK 99501 (907) 277-9501 Fax: (907) 274-0333 www.voyagerhotel.com 100% owned by Chenega Commercial Holdings, LLC Chenega Lodging, LLC d/b/a Clarion Suites Hotel Barbara Swenson, General Manager 325 W. 8th Avenue Anchorage, AK 99501 (907) 274-1000 Fax: (907) 274-3016 www.clarionhotel.com 100% owned by Chenega Commercial Holdings, LLC Parkstrip Rose Garden Hotel, LLC d/b/a Hawthorn Suites Hotel Barbara Swenson, General Manager 1110 W. 8th Avenue Anchorage, AK 99501 (907) 222-5005 Fax: (907) 222-5215 www.hawthorn.com 100% owned by Chenega Commercial Holdings, LLC Chaaniqmuit Services, LTD. 3000 C Street, Suite 301 Anchorage, AK 99503 (907) 277-5706 Fax: (907) 277-5700 100% owned by Chenega Corporation * Current as of March 2009 22 Chenega Corporation Annual Shareholders’ Report 2008 23 Chenega Corporation Annual Shareholders’ Report 2008 Business Operations Chenega Corporate Branch Offices* (continued) Chenega Government Consulting, LLC Linda Cramer, President 609 Independence Pkwy, #210 Chesapeake, VA 23320 (757) 270-0819 Fax: (757) 222-0494 www.cgc-llc.com 100% owned by Chenega Corporation Chenega Operations Services, LLC Bob Westermann, President 6411 A Street Anchorage, AK 99518 (907) 771-5020 Fax: (907) 569-5042 www.chenegaoperations.com 100% owned by Chenega Corporation Chenega Security & Protection Services, LLC Paul Raggio, President 19980 Highland Vista Drive, Ste. 100 Ashburn, VA 20147 (571) 291-7617 Fax: (703) 729-5035 www.chenegasecurity.com 100% owned by Chenega Corporation Chenega Blackwater Solutions, LLC Tim Lamb, General Manager 19980 Highland Vista Drive, Ste. 100 Ashburn, VA 20147 (571) 291-7632 Fax: (703) 729-5035 51% owned by Chenega Security & Protection Services, LLC Nangwik Services, LLC David F. Young, President 4651 Salisbury Road, Quadrant 1 Bldg. Suite 251 Jacksonville, FL 32256 (904) 861-0400 Fax: (904) 861-0404 www.nangwik.com 100% owned by Chenega Corporation Time Solutions, LLC David Reed, President 3411 Candelaria Rd. Suite B Albuquerque, NM 87107 (571) 291-7607 Fax: (505) 291-5069 www.timesolutionscorp.com 100% owned by Chenega Corporation Chenega Technology Services Corporation Ken Ogden, President 5911 Kingstowne Village Parkway, #300 Alexandria, VA 22315 (703) 822-2872 Fax: (703) 822-2868 www.chenegatechnology.com 100% owned by Chenega Corporation Chenega Advanced Solutions & Engineering, LLC Griffin Macy, General Manager 645 Church Street, Suite 304 Norfolk, VA 23510 (757) 627-4404 Fax: (757) 627-4415 100% owned by Chenega Corporation Chenega Integrated Systems, LLC James Holloway, Sr. VP/Operations 5911 Kingstowne Village Pkwy, Suite 300 Alexandria, VA 22315 (703) 822-2763 Fax: (703) 822-2868 51% owned by Chenega Corporation Chenega Management, LLC Brian Pillars, General Manager 6411 A Street, Suite 200 Anchorage, AK 99518 (907) 771-5001 Fax: (907) 569-6939 100% owned by Chenega Corporation NJVC, LLC Jody Tedesco, General Manager 8614 Westwood Center Drive, Suite 200 Vienna, VA 22182 (703) 748-5028 Fax: (703) 556-0181 51% owned by Chenega Technology Services Corporation * Current as of March 2009 Current Project Locations Chenega Corporation Annual Shareholders’ Report 2008 Chenega Corporation’s business operations includes project locations in 37states, the District of Columbia, 1 US Territory and 12 foreign countries. 24 Chenega Corporation Annual Shareholders’ Report 2008 25 Chenega Corporation Annual Shareholders’ Report 2008 Business Aerospace Support Services n Aerospace Engineering n Aircraft Maintenance n Research and Development n Systems Engineering n Training Systems and Devices n Software and Hardware Development n Educational Services – Operation and Maintenance of Flight Simulators n Related Administrative and Facility Support Base Operations and Maintenance n Facilities Management and Operations n Facilities, Power/Heat Plants n Waste and Wastewater Systems n Property Management n Housing Maintenance n Roads and Grounds Maintenance n Transportation, Supply, Warehousing, Fuels Management Environmental Management n Pollution Prevention n Hazardous Materials Management n Recycling Program Establishment n National Environmental Policy Act Services n Life Cycle Assessment n Environmental Compliance Audits n Compliance Management n Contingency Planning n Permitting n Spill Prevention/Control and Countermeasures Plans n Environmental Management Systems n Environmental Impact Statements n Environmental Site Selection n Environmental Regulatory Training/Business Process n Solid Waste Collection and Management n Hazardous Waste Collection and Management n Exposure/Hazards Assessments n Feasibility Studies n Waste Characterization Studies n Waste Tracking Systems n Emergency Response Plans n Centralized Accumulation Point Management n Incident Prevention and Preparedness Training n RCRA/CERCLA Site Investigations n Water Conservation n Energy Efficiency and Resource Analysis n Environmentally Preferable Purchasing n Raw Materials Substitution n Inventory Control Programs Business Operations n Risk Analysis n Accident Analysis n Community Right-to-Know n Developmental Permit Applications n Threatened and Endangered Species Analysis n Site Diagrams and Process Mapping n Potentially Responsible Party Analysis and Investigations n Storm Water Management Plans n Emergency Response Equipment Maintenance and Warehousing Information Technology and Management n Organizational and Enterprise Transformation n Information Processing Systems and Services n Computer/Data Center Operations n Application Development n Software Development n LAN/WAN/Help Desk Support n Data Entry and Document Conversion n HW/SW Maintenance/License n Records and Library Management n Vital Records Program Development n Electronic Document Management System Design, Development and Implementation n Information Content Management n Document Delivery n Develop Graphical User Interfaces/Web Page Management n Enterprise and Systems Architecture n Business Process Improvement (LEAN Six Sigma) n Service Oriented Architecture Intel and Military Operations n Systems Engineering and Technical Assistance (SETA) n Remote Sensing Analysis/GIS n Operational Test and Evaluation n Science and Technology Research and Development n Enterprise Level IT n Support to Intelligence, Surveillance and Reconnaissance Operations n Systems Engineering and Technology Integration n Linguist and Cultural Operations Support n Support to Special Operations Light Manufacturing n Metal/Composites Fabrication n Electronic Assembly n Material Control System n Quality Assurance Logistics Support n Requisitioning n Receiving, Storage, and Issue Operations n Disposal and Cataloging n Data Conversion, Files Document Control, and Inventory and Adjustment n Classification, Shipping, and Transporting n Global Supply Chain Logistics n Ammunition Storage and Handling Services n Provide Furniture and Installation Services Security Services n Guard Services (Armed/Unarmed) n 911 Dispatching and Alarm Monitoring Services n Security Survey/Vulnerability n Security Personnel Services Assessment n Facility Security Systems n Information Security n Cyber Threat Analysis n Force Protection, Anti-Terrorism, and Law Enforcement Training n Site Surveys/Physical Security Vulnerability Assessments n Security Systems and Services Integration Telecommunications n 24/7 Network Operations Center, Tech Control, Dial Central Operations of World-Wide DoD Telecommunications System n Telecommunications Operational Support for Headquarters and Forward-Deployed Units Worldwide (1000+ Users) n Planning Implementation Support for System Modernization n Database Metrics on Communications Systems Performance n Installation/De-Installation and Maintenance of Telecommunications Equipment and Supporting Infrastructure n Develop Web-Based Test Plans, Operational Criterion, Documentation, Development of Major Reengineering Projects n Troubleshooting, Monitoring and Repairing of Hardware and Cabling for Local and Wide Area Systems Training Services n Distance Learning, E-classroom for World-Wide, Air Combat Operations Support System n Learning Management System and Knowledge Management Systems Selection and Integration n Curriculum and Interactive Courseware Development and Revision n Platform Instruction for Basic Initial Qualification Training (IQT), Mission Qualification Training (MQT) and Continuation Training (CT) n Design and Development for Emulation and Simulation for Combat Support Systems n Assistance in the Selection and Testing of Configuration for COTS HW/SW for Combat Scenario Development and Implementation n Training System Maintenance and Modernization Healthcare Solutions n Professional and Allied Healthcare Staffing Solutions n Information Technology Solutions for Healthcare n Medical Facilities Management Services and Solutions n Program Management and Management Support n Clinical/Medical Functional Expertise Business Operations Chenega Commercial Holdings, LLC New Business Ventures Chenega Commercial Holdings, LLC (CCH) is the immedi- ate holding company for all commercial and real estate investments for Chenega Corporation. CCH is focused on commercial diversification with emphasis on growing the Chenega Corporation asset base and seeking corporate tax advantages from owning tangible assets and hold- ing those assets for capital appreciation. In FY 2008, the Voyager Hotel was purchased as a logical addition to the Clarion Suites and the Hawthorn Suites properties. Icy Bay Leasing, LLC, was established as a commercial vehicle leasing company. CCH now owns 100% interest in three hotels, all located in Anchorage, Alaska, 100% interest in a large 80,000 square foot facility in Arnold, Missouri, 100% interest in a vehicle leasing company and CCH is a 50% owner with Akhiok-Kaguyak Corporation in a class A of- fice building located in Anchorage, Alaska. 26 Chenega Corporation Annual Shareholders’ Report 2008 27 Chenega Corporation Annual Shareholders’ Report 2008 Management Discussion and Analysis Consolidated Results of Operations Chenega Corporation and its subsidiaries (Chenega) posted strong business results in FY 2008 and achieved record revenues almost reaching $900 million. Chenega realized $894 million in revenue dur- ing FY 2008 representing a 16.4% increase over revenues earned in FY 2007. Growth to existing contracts and start-up of several new significant contracts fueled the revenue surge. Chenega’s net income de- creased 9% in comparison to FY 2007 and with current fiscal year profits coming in at $16.1 million. This represents a $1.5 million decrease in profitability from FY 2007. The sole reason for the decrease in net income is additional federal income tax expense. Federal income tax expense for FY 2008 of $12.8 million is $2.8 million higher than the previous fiscal year. FY 2008 saw a continuing tightening of profit margins as 70% of Chenega’s new work was won on a competitive basis. Our Corporation is competing for new business in an ever-changing, low margin environment and we are bidding lower profit margins in order to win new federal work. This financial pressure requires us to take an introspective review of the entire Chenega Corporation cost structure and gain cost efficiencies wherever we can. Chenega Corporation revenue increased substantially to $894 million representing a 16.4% increase in comparison to the previous fiscal year. Chenega Corporation finished the year with $16.1 million in net income for FY 2008 resulting in another solid financial performance year. Chenega Corporation did experience slight profit erosion in FY 2008 as a percentage of sales, due to a slow financial start with two of the new 8(a) companies and a large loss on the (DHS) Federal Protective Service Security Contract. The biggest negative effect on FY 2008 net income was the additional $2.8 million in federal income tax expense in comparison to FY 2007. Chenega Shareholder equity has increased to $101 million as of September 30, 2008 and this significant milestone represents consistent consolidated corporate earnings over the past five fiscal years. Chenega now owns a 100% interest in eleven professional contracting services firms, and a 51% interest in two additional contracting services firms: Chenega Technology Services Corporation (CTSC) branch office located in Alexandria, VA (100% owned); Chenega Management, LLC (CM) branch office located in Anchorage, AK (100% owned); Chenega Advanced Solutions & Engineering, LLC (CASE) branch office located in Norfolk, VA (100% owned); Chenega Operations Services, LLC (COS) branch office located in Anchorage, AK (100% owned); Chenega Security & Protection Services, LLC (CSPS) branch office located in Ashburn, VA (100% owned); Chenega Federal Systems, LLC (CFS) branch office located in Lorton, VA (100% owned); Nangwik Services, LLC (Nangwik) branch office located in Jacksonville, FL (100% owned); Chenega Global Services, LLC (CGS) branch office located in Anchorage, AK (100% owned); Chenega Government Consulting, LLC (CGC) branch office located in Chesapeake, VA (100% owned); Time Solu- tions, LLC (TS) branch office located in Albuquerque, NM (100% owned) ; Chenega Aerospace, LLC (CAero) branch office located in Las Vegas, NV (100% owned); Chenega Integrated Systems, LLC (CIS) branch office located in Alexandria, VA (51% owned) and NJVC, Vienna, VA (51% owned). Management Discussion and Analysis 28 Chenega Corporation Annual Shareholders’ Report 2008 29 Chenega Corporation Annual Shareholders’ Report 2008 Management Discussion and Analysis Because of exceptional growth, sustained profitability, and achieved business maturity, Chenega Tech- nology Services Corporation (CTSC), Chenega Management, LLC (CM), Chenega Integrated Systems, LLC (CIS) and Chenega Advanced Solutions & Engineering, LLC (CASE) have all been granted early graduation from the Small Business Administration’s 8(a) Program. CTSC, CM, CIS, and CASE have successfully com- pleted the 8(a) Business Development Program and now have the demonstrated ability to compete in the federal marketplace without assistance under the 8(a) program. Chenega Corporation completed an organization structural change vertically integrating Chenega Man- agement, LLC (CM) Chenega Integrated Systems, LLC (CIS) and Chenega Advanced Solutions & Engi- neering, LLC (CASE) into Chenega Technology Services Corporation (CTSC) as an intermediate holding company. Management believes this structural change will build business mass, enhance bidding rates, and improve the ability of our companies no longer in the 8(a) program to compete in full and open markets. Chenega Technology Services Corporation (CTSC), Chenega Management, LLC (CM), Chenega Advanced Solutions & Engineering, LLC (CASE), and Chenega Federal Systems, LLC (CFS) are profitable and stable with continued solid financial performance. Chenega Integrated Systems, LLC (CIS) booked a substantial FY 2008 loss as a direct result of an underbid (DHS) Federal Protective Service security contract. Chenega Operations Services, LLC (COS), Chenega Security and Protection Services, LLC (CSPS), Nangwik Services, LLC (Nangwik), and Chenega Global Services, LLC (CGS) are in a start-up growth phase and are focused on securing a sufficient revenue base to become more profitable and stable. Chenega Government Consult- ing, LLC (CGC) and Chenega Aerospace, LLC (CAero) are in the very beginning stages of development as completely new company start-ups. FY 2008 New Business Ventures Chenega Corporation continued to grow and diversify as outlined in our Strategic Plan, with the acquisi- tion of two new business interests: a new hotel, and an additional government services company. Chenega Commercial Holdings, LLC (CCH) is the immediate holding company for all commercial and real estate investments for Chenega Corporation. CCH is focused on commercial diversification with empha- sis on growing the Chenega Corporation asset base and seeking corporate tax advantages. In June 2008, CCH acquired the 40-room Voyager Hotel, Chenega’s third downtown Anchorage hotel property. This real estate provides an immediate tax benefit and adds tangible value to the corporate balance sheet, improv- ing our consolidated “hotels” bottom line. Management Discussion and Analysis A new government service company was added to the Chenega family in October 2008, with the acquisi- tion of Time Solutions, Inc. Time Solutions is based in Albuquerque, New Mexico and specializes in provid- ing nuclear related engineering services to the Department of Energy (DoE) and the National Nuclear Se- curity Administration (NNSA). With the expected growth of the nuclear industry in the coming years, Time Solutions gives Chenega the capacity to competitively meet emerging government needs in this area. We believe these new business interests will prove to be excellent long-term investments for Chenega Corporation. Chenega Corporation continues to broaden operational activities within the federal sector by winning several significant, large-scale contracts with new agencies including: n FAA Air Traffic Control Optimum Training – Chenega Technology Services Corporation as a subcontractor to Raytheon Technical Services Company will provide management services to the FAA’s Air traffic Control Optimum Training Solutions (ATCOTS) contract. This award was a full and open competitive win on this ten-year program with an estimated value of $90 to $120 million. n BIA Enterprise and Information Systems Support Services – Chenega Federal Systems, LLC as a prime contractor will provide technical services to the BIA in 12 functional areas including help desk support, desktop support, network services, mainframe support, systems engi- neering, and technical services in other areas. This award was an 8(a) competitive win on this five-year program with an estimated value of over $50 million. n Security Services Federal Law Enforcement Training Center (FLETC) – Chenega Security & Protection Services, LLC as a prime contractor will provide security enforcement, asset pro- tection, and related services at four FLETC facilities across the country. This award was an 8(a) competitive win on this eight-year program with an estimated value of over $93 mil- lion. Overall, Chenega Corporation FY 2008 revenue increased in nine of twelve business lines in comparison to FY 2007 revenue. Several significant large-scale contracts were won during the year and continued ex- pansion on existing programs resulted in our highest revenue ever, of $894 million and a 16.4% increase in revenue over the previous fiscal year. 30 Chenega Corporation Annual Shareholders’ Report 2008 31 Chenega Corporation Annual Shareholders’ Report 2008 Management Discussion and Analysis FY 2008 Revenue by General Line of Business Each line of contracted services is discussed below in descending order based on sales volume. INFORMATION TECHNOLOGY Information Technology contracts repre- sent, by far, the largest share of consoli- dated revenue (54% in FY 2008) of any of the general lines of contracted services. Total revenue increased by $48.9 million in FY 2008 in comparison to FY 2007, due primarily to several program issues within the Information Technology and Informa- tion Services IT/IS Contract provided by the NJVC, Joint Venture to the National Geospatial-Intelligence Agency (NGA). Ex- pected FY 2008 baseline reductions for the US Department of Defense Information Systems Agency (DISA) Pilot and BRAC did not happen because DISA Pilot was abandoned and because of major slippage in the the US Department of Defense Base Realignment and Closure Commission (BRAC), schedule. The Information Technology segment is still the largest contributor of revenue and profit for Chenega Corporation. INTEL AND MILITARY OPERATIONS Intelligence and military operations contracts pro- duced revenue of $113.8 million for FY 2008, in- creasing $50.6 million over the previous fiscal year and nearly doubling revenue volume. FY 2008 saw large volume increases on several newer programs including: n Expansion of task orders on the U.S. Army Topographic Engineering Center (TEC) Contract. n Expansion of task orders on the U.S. Air Force Headquarter Office of Special Investigations Contract. n A full-year of services in support of the U.S. Marine Corps Warfighting Laboratory Contract. n Expansion of task orders on the USSOCOM Program Management Office Psychological Op- eration (PSYOP) Contract. An additional key driver of the revenue surge was continued expansion of technical and intelligence ser- vices for USSOUTHCOM. Intel & Military Operations has been Chenega’s fastest growing line of business for the past two years and substantial growth is expected to continue in FY 2009 and beyond. LOGISTICS Logistics services were Chenega’s third largest line of business in FY 2008 and increased by 27% in comparison to FY 2007. Total revenue increased by $21.8 million during FY 2008, primarily as a result of continued growth and expansion of our Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP) Contract. Our Corporation continues to provide program management for the integrated logistics support of enforcement technology equipment and non- intrusive inspection equipment for CBP’s Enforce- ment Technology Center for over 60,000 techni- cally complex and high value inspection, detection, and surveillance devices in and between land border crossings, airports, and seaports throughout the United States and Internationally in support of the Con- tainer Security Initiative (CSI). SECURITY SERVICES Security Services took a slight dip in FY 2008 in comparison to FY 2007, decreasing by 4.2%. Chen- ega Corporation won $290 million in new security business in FY 2008, continuing to replace lost rev- enue from the large Chenega nation-wide Army Guard contract which ended at the beginning of FY 2007. New security contracts were awarded from several agencies including Army Space & Missile Defense Command, the Department of Management Discussion and Analysis 32 Chenega Corporation Annual Shareholders’ Report 2008 33 Chenega Corporation Annual Shareholders’ Report 2008 Homeland Security, Federal Law Enforcement Training Centers, and Missile Defense Agency. Chenega is now performing security services on thirty-nine federal installations including military bases, located in 32 states and one foreign country, and staffed with 1900 security personnel. The biggest challenge in this sector is the intense competition for new work resulting in low profit margins for the successful bidders. Chenega Corporation is experiencing improved financial performance on security work and Manage- ment intends to selectively continue to market this type of contract. MILITARY BASE OPERATIONS SUPPORT SERVICES (BOSS) Military Base Operations Support Services (BOSS) represents the fifth largest share of total revenue (5% of the general lines of business) earned dur- ing FY 2008. Total revenue from BOSS contracts re - mained relatively flat increasing by $394 thousand in comparison to the previous fiscal year. Revenue generated from Chenega’s largest BOSS Program, the U.S. Army Installment Support Services Con- tract at Fort Monmouth, New Jersey increased by seven percent in FY 2008 in comparison to FY 2007, even though the Installation is scheduled for Base Closure under BRAC. Management projects limited growth in the BOSS market for Chenega during FY 2009. TRAINING Chenega continues to perform training on major U.S. Air Force, and U.S. Navy Programs. Training revenue increased by 47% from FY 2007 to FY 2008. The largest contributor to the revenue in- crease was award of a two-year, $20 million U.S. Air Force Contract to provide linguists at multiple Air Force locations for training military personnel. Other major current training contracts include the following: n Training support services for the U.S. Navy’s Strategic Weapon System (SWS) Training Program (SP-205). n Support Headquarters, Military Surface De- ployment and Distribution Command (SDDC) with development of antiterrorism doctrine, policies and standards, and training plans. n Distributed Mission Operations Air & Space Operations training support for the U.S. Air Force in Alaska and Japan. n Distance Learning (Internet-based e-learning), courseware development, platform instruc- tion, and training simulations development for the U.S. Air Force. Management projects explosive growth in the Training line-of-business operations in FY 2009 and be- yond because of the large, recent FAA win for Air Traffic Controller Training (ATCOTS). Management Discussion and Analysis ENVIRONMENTAL SERVICES Environmental Services revenue increased $1.7 million in FY 2008 in comparison to FY 2007. The U.S. Air Force, and U.S. Army programs make-up the majority of the FY 2008 earned revenue and these programs are stable and will continue for the next few years. The renewal of the five-year U.S. Air Force multi-base Hazardous Material Phar- macy Contract was key to continued growth in the environmental services line. Substantial growth is expected in this sector in FY 2009 based on sev- eral new contracts and Management’s marketing in this sector. OTHER SERVICES: (TELECOMMUNICATIONS, LIGHT MANUFAC- TURING, HOTEL, MEDICAL & CONSTRUCTION) Chenega’s five smallest lines of general services comprised 2.4% of realized revenue in FY 2008. Light manufacturing saw a nine percent drop in revenue in FY 2008 in comparison to FY 2007 as work continued on fabrication and panel services on the U.S. Army Security Vehicle Program. Hotel revenue increased by 48% in FY 2008 and is a di- rect result of the positive financial effect of acquir- ing the Voyager Hotel in June of FY 2008. Telecom- munications revenue remained constant from FY 2007 to FY 2008 with continued work on several Department of Defense telecommunications contracts in Hawaii. Chenega made a concerted decision and investment in marketing medical services to the Federal Government. These efforts are beginning to show results and we expect modest revenue from medical staffing and patient administration for FY 2009 and beyond. Management Discussion and Analysis 34 Chenega Corporation Annual Shareholders’ Report 2008 35 Chenega Corporation Annual Shareholders’ Report 2008 Our Foundation Nathaniel Gates Chief Information Officer Kristina Woolston Director of Government Relations Karen Rogina Director of Corporate Communications David Jensen Director of Corporate Development Renee Hagen Director of Business Services Peter Nosek VP Legal & General Counsel Peter O’Neill Director of Strategic Initiatives & Legislative Relations Peggy O’Keefe VP Human Resources Jeff Hueners Senior VP & Chief Operating Officer Robb Milne Senior VP Finance & Chief Financial Officer Charles W. Totemoff President & CEO Chenega Corporation Executive Leadership Larry Runnalls President Chenega Aerospace, LLC John Campagna President Chenega Federal Systems, LLC Linda Cramer President Chenega Government Consulting, LLC Dave Jensen President Chenega Commercial Holdings, LLC Leonard Karge President Chenega Global Services, LLC Ken Ogden President Chenega Technology Services Corporation Paul Raggio President Chenega Security & Protection Services, LLC Dave Young President Nangwik Services, LLC Bob Westermann President Chenega Operation Services, LLC Ryan Williams Director Chenega Corporation Service Center Dave Reed President Time Solutions, LLC Charles W. Totemoff President & CEO Lloyd Kompkoff Vice President Joyce Kompkoff Board Member Paul Kompkoff, Jr. Board Member Paul T. Selanoff Secretary/Treasurer Board of Directors Our Strength