A word from the president: Excerpts from Letter to Shareholders, CIRI 2009 Annual Report

By: Margie Brown, CIRI president and CEO

Last year I wrote about the effects that economic turmoil had on CIRI’s businesses and its 2008 net income and I expressed confidence that we would work through the challenges. While 2009 brought continued challenges, I am pleased to report that CIRI returned to profitability and earned a net profit of $24.5 million, up dramatically from the $22.8 million loss it suffered in 2008. Total shareholders’ equity is $635.4 million at year-end 2009, up from $632.0 million in 2008.

In the face of this crisis and changed market conditions we refreshed the Company’s strategic plan to pursue acquisition opportunities that would provide strong cash flows in the near- and mid-term timeframe.

At year-end 2008, realizing that selling a portion of CIRI’s marketable securities would allow us to rebalance our investment allocations and replace underperforming fund managers, we liquidated a substantial portion of our marketable securities portfolio. By doing so, we gained a significant tax benefit in the form of an income tax refund, which was received in late 2009. We re-entered the stock market in early 2009. These investments gained significant value throughout the year as world financial markets stabilized and recovered.

In the tourism sector, we were not immune to the effects of the sharp business contraction and national recession that took place in late 2008 and 2009. At CIRI Alaska Tourism Corp., we aggressively managed business operations throughout the season to control costs so that it was net cash positive for the year, though not positive on a GAAP net income basis. We remain cautious about the levels of visitation to Alaska in 2010 and are continuing to work on improvements to our marketing program and cost control measures.

Not all that we are working on requires a cautionary note. Ever since I became CIRI’s president and chief executive officer, we have focused on energy-related investments, particularly opportunities in Southcentral Alaska where natural gas supplies are dwindling. We are tackling complex projects that, upon successful completion, will be transformational for the Company.

Late in 2009, we cleared and examined the geology of each of the sites where the Fire Island wind project towers will be located, and additional construction work on the island is slated for 2010. In August 2009, we announced CIRI’s underground coal gasification (UCG) project after having quietly but comprehensively examined the technology for nearly a year. Our project will be located on CIRI land on the west side of Cook Inlet and will produce syngas from coal, without mining, to fuel a 100 megawatt combined cycle power plant to supply electricity for Southcentral Alaska electricity consumers. Future UCG project phases could upgrade syngas into synthetic natural gas or clean liquid fuels. We are underway in the first of three drilling programs designed to assess the resource and locate a specific project site.

Our refreshed strategic plan guides us to look for new business developments with significant market trends in mind. One market trend we are observing is the widespread interest in “cleantech” businesses that provide knowledge-based products and services that enable sustainable energy development, energy conservation and pollution reduction.

Our Company invested in Codexis, a California-based biotech company that develops technologies that improve the efficiency of energy, pharmaceutical and environmental industries. We also committed capital to Westly Capital Partners Fund L.P. for cleantech investments in such companies as Tesla Motors, the high-performance electric car manufacturer.

I also am pleased to welcome a new business to the CIRI family of companies. In 2009, CIRI acquired North Wind Inc., an environmental management, engineering and construction services company that specializes in cleaning up hazardous materials sites. North Wind brings to us valuable experience in the fields of environmental cleanup and engineering and provides a good platform for growing our government contracting and other minority business enterprise initiatives.

Work proceeded in 2009 with the build-out of our Tikahtnu Commons retail and entertainment center in Anchorage. The new Regal Theaters, including Alaska’s only IMAX screen, will open in June 2010. We also are pleased to report that the construction of the Hyatt Place North Stone Oak at Sonterra in San Antonio, Texas, is nearing completion and is scheduled to open in mid-April 2010.

The past year was both challenging and exhilarating. CIRI’s new and ongoing business initiatives have positioned our Company prudently to benefit both current and future generations of shareholders. I feel privileged to lead a talented executive team and to work alongside the dedicated CIRI employees throughout the Company. We share a commitment to CIRI and we work hard to ensure that CIRI will continue to benefit shareholders and their descendants for generations to come.