CEO Report
November 2007

The following is a transcript of the speech delivered by The Aleut Corporation's Chief Executive Officer, Troy Johnson, to approximately 350 shareholders during the 2007 Shareholders Meeting on October20th, 2007 in Anchorage.

My fellow shareholders, I am extremely happy to report that our fiscal year 2007 was the most successful in our 35-year history. It was another year of record financial performance and of unparalleled growth for our company. At every level in our company, our people collaborated and delivered to produce these results.

It was a year of great accomplishments by the corporation, and yet my focus is on the future and how we can continue to build TAC. Our sights are set squarely on being a profitable, growing, and viable company, competing at a level above any in our 35-year history.

Operating at the “Next Level”

As I stand here today, reporting to you about our company, TAC is preparing to operate at the next level - the next level of competition for business, of our ability to recruit and retain employees, and of expectations from you, our shareholders.

In competition, the larger our companies have become, so too has the degree of competition we face to maintain and grow. We see a high level of competition from sophisticated, multi-billion dollar corporations with abilities to work at high levels within our customers and within the government.

In attracting, recruiting and retaining our employees, as our company has grown and our workforce needs have continued to change, we must focus beyond mere competitive compensation and benefits to be successful. Just as we are at the next level competing for business, we are also at the next level in competing for talent--people with the intellectual capital and specialized skills we need to continue to grow our corporation.

And last, we are at the next level of expectations from you, our shareholders. As a company with a revenue base of nearly $160 Million and $21 Million in profits, we are at the next level of delivering on expectations greater than what we have seen in our 35-year history as a regional corporation.

We must succeed in meeting the challenges of the next level in each of these three areas if we are to continue to grow and reach the new goals we have set for our company. I believe we will be successful, and in the next few minutes I want to tell you why I believe.

FY’07 & Year-to-Date Achievements

Our accomplishments and results for fiscal year 2007 and the first quarter of fiscal year 2008 have brought us closer to the next level. Our financial strength provides us with a firm foundation for building our future. Let me give you a brief recap.

Financial Performance Achievements
Last fiscal year we reported record profi ts of over $21 million on record revenue of $157 million. Our revenue growth was driven by the continuing trend of increased demand from our federal government and military customers for the services of our Aleut Management Services, LLC subsidiary; strong fuel sales from Aleut Enterprise, LLC; and by four very successful joint ventures. TAC’s operating income was up 37.5% from fiscal year 2007 to over $21 million. This was a new record for us, and produced a strong operating margin of 13.8%. Mid-Year Review The momentum established during fiscal year 2007 continued into the first two quarters of the present fiscal year. Year-To-Date Net Income is above budget and ahead of last year. From the midyear results, I believe we are on our way to another very successful year.

Organizational Achievements

Challenges During FY ’07
As you can see, we had many successes during last fiscal year. But the corporation had challenges, too. Corporate senior management was undergoing a lot of change at our headquarters, there were legal issues to resolve, and one of our subsidiaries struggled with implementation of a new business system. I believe we have turned the corner on these challenges, and we are confident that the lessons learned resolving them will help us be successful in FY ’08 and beyond.

TAC’s Strategic Focus
I have spoken about our performance and accomplishments over the last year and a half. Now, let me address what we face in our businesses as we enter the next level.

Our strategic focus has not changed as we have grown to our present size. It is--and will remain--energy (including fuels), residential & commercial properties, and government contracting.

External Threats Expose Internal Needs
We face challenges from competition, local, state and federal agencies, as well as the influence of the Alaskan and overall US economies.

These threats will only heighten and increase the internal needs of our corporation. We need to evaluate each part of our corporation from a fresh perspective. That is why I have formed a management “core group,” where leaders from all of our businesses gather on a regular basis to explore areas of synergy, exchange best practices, and seek out opportunities where we can leverage our entire talent pool to better the whole corporation.

In addition to working together better, we will need to review our management talent at all levels and make changes when necessary. We will also need to question past assumptions and be open to change at an ever increasing pace.

Positioning TAC for the Next Level

It is one thing for TAC to continue to grow and get to the next level. It is an entirely different thing for us to thrive at the next level. While our basic growth strategy of maintaining our base of businesses, accelerating new business development in areas of faster growth and of executing profitable acquisitions has not changed, what we must do to continue to implement our strategies most surely have.

Honest Self-Evaluation – what we must consider
If we are to be a viable participant at the next level, we must not only look outward for the new opportunities that will fuel our growth, but also look inward at our entire organization. We need to honestly:
~ Assess our strengths and how they will help nourish us at the next level.
~ Assess our weaknesses and know what it will take to eliminate them so that they don’t inhibit our ability to operate at the next level.
~ Make certain that we have the right leaders at all levels who are driven with an unrelenting need to produce sustainable, unprecedented results.
~ Make certain that they are ambitious first and foremost for The Aleut Corporation and not only for themselves, that they are the right people for us, and
~ Ensure that we have the proper systems in place that will support these leaders to succeed at the next level.

We must consider all these factors not just once, but continuously through development of accountabilities and measures programs.

Challenges We Need To Answer
To succeed at the next level we must prepare for and answer these challenges:
· How do we motivate our people to confront the facts of reality head-on and to act decisively on the implications?
· Understand what TAC can and cannot be the best at so that we can continue to produce
unprecedented returns and enhance shareholder value.
· Hiring self-disciplined people who engage in disciplined thought and then take disciplined action.
· Make acquisitions that will help accelerate our progress.
· And finally, preserving our core values and purpose while our strategies and operating practices adapt to a changing environment.

We have begun to take the steps required to answer these challenges. We believe that doing so will help us identify the differentiators and attributes of what it takes to be successful at the next level. We believe that through this effort, we can compete at the next level, that we can recruit and retain the right employees, and that we will meet our own and our shareholders’ expectations. We must come to understand that getting to the next level and staying there involves more than just achieving a certain size or dollar value.

Setting Our Goals
As a result of our efforts in strategic and financial reviews, we will set new financial goals for the corporation. We want to achieve $250M in annual revenue by our fiscal year 2012 and reach net income of $25M by the same year. That means we want to continue to grow our top and bottom lines at double-digit rates.

In addition to setting financial goals, the core group is working
with our companies’ Boards of Directors to develop strategic and other non-fi nancial goals that will be equally as important to our long-term success. We believe we can achieve our goals using the strategies I mentioned a few minutes ago. It is the strength of our strategies that will propel us to the next level and keep us there.

In Conclusion
We are committed to keeping our company shareholder-oriented. We are committed to our employees - our most important asset. And we are committed to enhancing your shareholder value. We are committed to the principles that are the core of our corporate and Aleut culture. We remain true to our commitment to honesty, integrity, accountability, respect and perseverance. We believe that if we address the factors that can get us to the next level and can develop answers to the challenges to staying at the next level, then we will become a corporation that is not only been “built to last” but will be capable of moving from “good to great.”

Thank you.

Troy Johnson
CEO