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SHAREHOLDER SUMMER/FALL NEWSLETTER - 2007 2007 Annual Meeting The Thirty-third Annual Shareholders meeting was held on May 5, 2007, at the Yup’ik Cultural Center in Bethel. BNC Director, Mary Pavil, was elected Chairman of the meeting. At the meeting BNC auditor Jim Hasle, President of Mikunda, Cottrell & Company, presented a detailed analysis of the Corporation’s performance over the past year. The Corporation reported another profitable year and is in good financial condition. BNC President/CEO Ana Hoffman reported on the Corporation’s activities and highlighted a few of the significant transactions in 2006. Ana Hoffman talked about BNC’s successful execution of the Bivin Plaza sale and subsequent establishment of two wholly-owned limited liability companies to hold and manage BNC’s new replacement properties located at 4115 Lake Otis and 4200 Lake Otis in Anchorage. She informed shareholders that BNC froze the company’s age-old pension plan and created a new 401K retirement plan for employees. This action lowers corporate overhead costs and allows employees to be more involved in their retirement investments. Ana Hoffman also presented employee appreciation plaques to Nick Pollock for 30 years of service, Cindy LePore for 10 years of service and retiring employee Lydia Wheeler for eight years of service to BNC. ELECTION RESULTS At the meeting, there were over 83,064 votes cast or 50.95% of the total shares outstanding and entitled to vote. Of the five (5) people running for the three open Directors positions, the top three winners were as follows:
Board Officers On the May 24, 2007, Board of Directors meeting, the following Board Officers were elected; they are as follows:
THANK YOU to everyone that participated in the meeting. BNC Portfolio In 1994, BNC created a stock and bond investment portfolio with an initial investment of $600,000 today that investment is worth approximately $980,000. Last year the Board of Directors changed the portfolio account manager from a firm in New York City to Phil Younker and Associates based in Fairbanks, Alaska. This move resulted in positive returns for the portfolio account and the account grew an additional $100,000 under this new management. BNC International, Incorporated (BNCI) is a wholly-owned subsidiary of BNC and Secretary Gerald Demientieff, Jr. presented an update regarding BNCI activities. BNCI was incorporated in 1994 and was SBA Section 8(a) certified in 1997. Under this program BNCI successfully executed numerous environmental remediation contracts for the federal government. In 2006 BNCI graduated from the 8(a) program and Subsidiary Program Manager Tim Finnigan is in the process of transitioning existing BNCI contracts to Bethel Services, Inc. In 1997 BNCI also approved the formation of the BNCI Uniform Joint Venture. In this venture BNCI retained 51% equity interest and partner Unitec Distribution Systems retained 49% equity interest. In 2006, as BNCI graduated from the 8(a) program, BNCI’s interest in this Joint Venture was sold to Bethel Services, Inc. BNCI Uniform Joint Venture continues to be a stable venture performing services for Alcohol Tobacco and Firearm Division of the Department of Justice. BNCI Board members are Lyman Hoffman, Donna Lindsey and Gerald Demientieff, Jr. Bethel Services, Incorporated (BSI) is a wholly-owned subsidiary of BNC and Chairperson Mary Kenick reported on operations for BSI which was incorporated in 2001 and Section 8(a) certified in 2002. BSI is primarily a construction and environmental remediation company performing federal government contracting throughout Alaska and the lower 48. BSI activities are managed by Subsidiary Program Manager Tim Finnigan. BSI Board members are Mary Kenick, Gregory Hoffman, Sr., Mary Pavil and Louise Charles. Bethel Engineering & Technology Services, Inc. (BETSI) is a wholly-owned subsidiary of BNC and was incorporated in 2004. Chairperson Gerald Demientieff, Jr. reported on BETSI’s activities. The company was formed to pursue engineering and technology services work and was SBA Section 8(a) certified in 2006. In June 2006 BETSI implemented a business plan to target work within the gulf coast region of the United States. Offices in Louisiana and Anchorage were established and corporate teaming agreements were formed; however, the gulf coast market was very difficult to penetrate and the operations did not generate the revenues necessary to continue, so those offices were closed in December 2006. BETSI is a licensed engineering company with 8(a) status. Subsidiary Manager Tim Finnigan is pursuing government contract opportunities for BETSI. BETSI Board members are Gerald Demientieff, Jr., Mary Pavil, Michael Samuelson and Donna Lindsey. Settlement Trust A report was presented to BNC’s shareholders at the May 5, 2007 Annual Meeting about the advantages and disadvantages of establishing an ANCSA settlement trust. No action was taken at the meeting, although the shareholder comments about a possible BNC settlement trust were favorable. Before a settlement trust can be established, both BNC’s Board of Directors and BNC’s shareholders would have to vote in favor of having the trust. It is important to understand that if a BNC trust is established, it will not mean that BNC will go out of existence. BNC would remain as an ANCSA corporation, and would continue to conduct business operations. If BNC established a settlement trust, the trust would hold a portion of BNC’s assets and use the income generated by those assets to make distributions to BNC’s shareholders. BNC would continue to hold the rest of BNC’s assets and to continue to operate BNC’s businesses. What is a settlement trust? Settlement Trusts are a special type of trust authorized by ANCSA and Alaska law to provide benefits to shareholders of Native corporations. Several of these settlement trusts have already been established, and some of the larger ones have assets exceeding $50 million. Typically, these other trusts provide that shareholders automatically receive the same number of “trust units” to show their ownership in the settlement trust as they have shares of stock in the Native corporation. Assuming BNC follows this approach, if you have 100 shares of BNC stock, you would automatically receive 100 trust units if a settlement trust were established. Distributions from the trust would work the same way as distributions from BNC. For example, if you have 100 shares of stock, you would receive twice the distribution as someone who owns 50 shares. The trust units would be transferable in the same way that BNC stock is presently transferable, such as through gifts or when a shareholder dies. An important benefit to a settlement trust is that assets in the trust are protected from the creditors of both the Native Corporation and the Trust’s beneficiaries. Once assets are placed in a settlement trust, the assets cannot go back to the Native Corporation. ANCSA settlement trusts normally pay only a 10% income tax on its income. This compares with about a 40% rate that BNC must pay on its profits. Distributions from a BNC settlement trust would generally not be taxable to BNC’s shareholders, while future distributions from BNC are generally likely to be taxable to BNC’s shareholders. The net result is that having a settlement trust will probably save significant taxes and this will allow BNC shareholders, as the beneficiaries of that trust to keep more of the trust income that is distributed to them than if the same distributions were made by BNC. Based on the feedback from BNC’s shareholders your Board is excited about the advantages that will come from establishing a settlement trust. The next step that is planned is for BNC’s Board to develop the structure for a proposed settlement trust. Our plan is for the proposed trust to be presented to the shareholders for a vote at the May 2008 annual meeting. We hope to be able to report more to you about the possible trust following the Board’s November planning session. Shareholder
Relations: I would like to take this opportunity to thank all shareholders that have been sending copies of their marriage licenses, change of address forms and will forms. It is very helpful. BNC has been sending out dividends for about 18 years now and a lot of shareholders still haven’t cashed or received their dividend checks. We have several shareholders that we do not have current addresses for. If you have not received your check for 2006 or any year prior to that, contact our office. BNC accepts address changes in writing only and you can mail or fax in the change. It is also very important that you have a will on file for the shares you own at BNC. If you do not have a will or you are not sure if you have turned one in we will be more than happy to send you one. Once the wills are filled out they need to be signed in front of a notary and for your convenience we have one in our office. BNC also has a number of deceased shareholders estates, where BNC shares have not yet been transferred. If you are related to any BNC shareholder that is now deceased, and you’re unsure whether the shares have been transferred, please call, as we do not have addresses for some of the deceased shareholder’s heirs. Below is a list of surviving as well as missing shareholders that we do not have a current address for. If you know where any of these shareholders are, please give us a call at 1-888-770-2124 or write to Bethel Native Corporation, Shareholder Relations, P.O. Box 719, Bethel, AK 99559.
2007 ANNUAL MEETING DOOR PRIZE WINNERS
FLOWERS Proxy Winners
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