A word from the president: Excerpts from Letter to Shareholders, CIRI 2008 Annual Report

Dear Fellow Shareholders,

The year 2008 was difficult for CIRI. It was also a difficult year for many other well managed businesses in our state and country. By the fourth quarter of 2008, the overwhelming problems within many global financial institutions and falling real estate and commodity prices created severe economic turmoil. The sharp business contraction and national recession that ensued impacted CIRI’s business interests and investments, but their performance varied widely. CIRI’s income from operations, natural resources, telecommunications and other noninvestment sources was generally strong in 2008 and in most cases improved from the previous year. However, these gains were dragged down by losses in the value of CIRI’s private equity fund placements and marketable securities.

Consequently, I must now report a net loss for 2008 of $22.8 million. While even unavoidable losses of any kind are unsatisfactory and difficult to report, be assured that CIRI remains a financially sound company. This is in part due to its cash reserves and the small amount of debt the Company carries. It is also a result of the profits it has earned over the years, including the years 2005, 2006 and 2007.

For many years now, CIRI has paid income taxes on its earnings. We realized that liquidating a portion of CIRI’s marketable securities portfolio would allow us to rebalance our investment allocations and replace underperforming fund managers while legitimately utilizing the federal tax code to get a sizable income tax refund. Consequently, we liquidated a substantial portion of our marketable securities portfolio at yearend. While I would rather have not experienced the loss in our marketable securities portfolio, the tax benefit, which will be realized in a cash refund of more than $20 million in 2009, is welcomed.

History shows that stock prices can fluctuate widely over the short term, but the underlying value of solid business assets is realized over longer periods. While it is impossible to say with any certainty when the economy and markets will stabilize, we continue to believe that a portfolio of investment securities is a good tool to manage financial assets over the long term and we have reentered the stock market.

That being said, the economic slowdown presents CIRI with unprecedented investment opportunities. Therefore, we must prudently but expeditiously invest in businesses, particularly those that exhibit innovation, produce good cash flows and create value. As I prepared this message, I read with interest the letter of Berkshire Hathaway’s CEO, Warren E. Buffett, to his shareholders on Berkshire’s performance in 2008. Like CIRI, Berkshire suffered financially in 2008. Buffet says that while he likes buying underpriced securities, he likes buying fairly priced businesses even more. Today’s challenging business environment signals that an opportunity to acquire businesses at fair prices exists once again.

Our nation is suffering through a difficult period, but I am confident that the United States will regain its economic footing and recover to enjoy a bright future. We are not sitting still awaiting an economic recovery. We are thoughtfully moving forward on projects that are already in the works. These projects include the development of Alaska’s first large-scale wind farm on CIRI’s land on Fire Island near Anchorage. Current plans call for infrastructure work to begin on the island this summer. Bucking the current national trend of stagnating development of retail shopping centers, work proceeds smoothly on the build-out and leasing of Tikahtnu Commons, with major retailers Target, Kohl’s and Lowe’s anchoring the retail and entertainment center. We look forward to the opening of additional stores this spring and summer and to the commencement of construction of the new Regal Theaters with much excitement. We are developing land in South Anchorage and construction has begun on the first major structure at Sonterra, a new Hyatt Place Hotel.

With the guidance of the CIRI Board of Directors, we are not limiting ourselves to those projects already in the works, but are exploring other opportunities that are equally exciting and perhaps transformational for the Company. These projects, in earlier stages of development, focus on potential opportunities utilizing exciting new technologies suited to CIRI’s strengths.

I am honored to have the opportunity to lead CIRI, and I feel great responsibility to my fellow shareholders, especially during these difficult economic times. I am grateful for the support shown by my fellow shareholders, the Board of Directors and my colleagues as we work together to ensure that CIRI will continue to benefit shareholders and their descendants for generations to come.

CIRI’s best days lie ahead.