N-CSR 1 shrhldrpt05.txt ANNUAL SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6027 KAVILCO INCORPORATED (Exact name of registrant as specified in charter) 600 UNIVERSITY STREET, SUITE 3010 SEATTLE, WASHINGTON 98101-1129 (Address of Principal executive offices) (Zip Code) Registrant's telephone number, including area code: (206) 624-6166 Date of fiscal year end: December 31, 2005 Date of reporting period: December 31, 2005 ITEM 1. REPORTS TO SHAREHOLDERS ------------------------------- DEAR SHAREHOLDERS, Enclosed are the annual audited financial statements for the year ended December 31, 2005. Our accountants, Anderson ZurMuehlen & Co., P.C conducted the audit. The financial statements are presented in a format that all investment companies must adhere to pursuant to Security and Exchange Commission requirements and Generally Accepted Accounting Principles. In an investment company, the primary objective of the financial statements is to show how the net asset value changed throughout the year (net asset value is defined as the value of securities owned, cash, receivables and other assets less liabilities). We realize the statements are esoteric to say the least. However, to make the financial information more meaningful, we have included a Glossary of Terms to assist you in interpreting the terminology in the financial statement. STATEMENT OF ASSETS AND LIABILITIES This statement reflects everything the corporation owns or is obligated to pay as of December 31, 2005. Assets and liabilities are stated in terms of current market value. SCHEDULE OF INVESTMENTS The majority of Kavilco's portfolio is primarily made up of debt instruments comprised of government securities and corporate obligations. Corporate obligation is another term for bonds. These bonds carry a stated interest rate and maturity date. The Federal, State and Municipal governments, along with corporations, can issue bonds. Kavilco has shifted its investments from Treasury notes to corporate bonds. STATEMENT OF OPERATIONS The Statement of Operations is an analysis of all income and expense that the corporation incurred during the year. We had a decrease in value of $756,272 in our portfolio. The decrease is related to bond sales, bonds that matured during the year, and reduction in value due to amortization, which is an accounting adjustment. However, valuation changes in the portfolio do not impact the dividends you receive. STATEMENT OF CHANGES IN NET ASSETS What happened to our assets during the year? This statement shows all increases and decreases in our assets. Except for the dividends to shareholder account, it is identical to the Statement of Operations. FINANCIAL HIGHLIGHTS This schedule is a comparative analysis that combines all previously discussed statements in terms of one share of stock. NOTES AND TAX INFORMATION TO THE FINANCIAL STATEMENTS The notes are an integral part of the financial statements and provide information that will give the shareholder a complete summary of the operation. Sincerely, KAVILCO INCORPORATED /s/Louis A. Thompson Louis A. Thompson President/Chief Executive Officer [ANDERSON ZURMUEHLEN & CO., P.C. LETTERHEAD] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Kavilco Incorporated (an investment company) We have audited the accompanying statement of assets and liabilities of Kavilco Incorporated (an investment company), including the schedule of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 2005 and 2004, and the financial highlights for the years ended December 31, 2005, 2004, and 2003. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2002, were audited by other auditors whose report dated February 15, 2003, expressed an unqualified opinion on those highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Kavilco Incorporated as of December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/Anderson ZurMuehlen & Co., P.C. Anderson ZurMuehlen & Co., P.C. Seattle, Washington February 22, 2006
KAVILCO INCORPORATED (an investment company) STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 ------------------------------------ ASSETS Investments in securities, at market value (identified cost $33,282,355) $ 33,684,535 Real estate at fair value 3,588,815 Cash and cash equivalents 178,020 Interest receivable 260,341 Premises and equipment, net 4,645 Prepaid expenses and other assets 13,300 ------------ Total assets 37,729,656 ------------ LIABILITIES Accounts payable and accrued expenses 23,302 Dividends payable 27,341 ------------ Total liabilities 50,643 ------------ COMMITMENTS AND CONTINGENCIES Net assets $ 37,679,013 ============ Net assets consist of: Undistributed net investment income $ 34,305 Unrealized appreciation on Investments 402,180 Real estate 2,534,726 Contributed capital 34,707,802 ------------ Net assets $ 37,679,013 ============ Net asset value per share of common stock ($37,679,013 divided by 12,000 shares outstanding) $ 3,139.92 ============ The Notes to Financial Statements are an integral part of this statement
KAVILCO INCORPORATED (an investment company) SCHEDULE OF INVESTMENTS December 31, 2005 ----------------------- Principal Market amount/ value shares INVESTMENTS IN SECURITIES - 89.4% ----------- ---------- OF NET ASSETS U.S. GOVERNMENT SECURITIES - 40.8% United States Treasury Notes, 1.500%, 3/31/06 1,000,000 $993,710 United States Treasury Bond, 7.250%, 5/15/16 2,000,000 2,455,780 Federal National Mortgage Association variable rates 6.210%,11/7/07 1,000,000 1,025,490 6.150%, 12/10/07 1,000,000 1,025,710 4.000%, 12/14/07 1,000,000 984,690 3.375%, 12/28/07 1,000,000 993,750 3.500%, 12/17/09 1,000,000 994,060 6.150%, 6/30/10 1,000,000 984,380 3.375%, 7/7/10 1,000,000 980,630 Federal Home Loan Bank - variable rates 3.250%, 6/6/06 1,000,000 997,810 3.350%, 7/11/06 1,000,000 997,810 3.760%, 9/29/06 1,000,000 993,130 4.000%, 6/29/07 2,000,000 1,977,500 ----------- Total U.S. government securities (cost $15,494,532) 15,404,450 ----------- CORPORATE OBLIGATIONS - 21.2% Banking - 2.7% Chase Manhattan Corp., 7.875%, 7/15/06 1,000,000 1,013,570 Beverage (soft drink) - 2.2% Coca-Cola Enterprises, 8.500%, 2/1/12 700,000 830,466 Diversified financial services - 2.9% General Electric Cap Corp., 8.500%, 7/24/08 1,000,000 1,084,480 Electric utility - 0.5% Potomac Electric Power Co., 6.500%, 3/15/08 190,000 196,168 Entertainment - 0.8% Walt Disney Company, 5.800%, 10/27/08 290,000 293,970 Food processing - 0.6% Heinz Corp., 6.000%, 3/15/08 229,000 233,607 Retail store - 3.1% Wal-Mart Stores, 6.875%, 8/10/09 1,000,000 1,064,280 Dayton Hudson, 8.600%, 1/15/12 100,000 118,473 Securities brokerage - 5.7% Merrill Lynch & Co., 6.375%, 10/15/08 1,000,000 1,090,900 Bear Stearns Co., 7.625%, 12/7/09 1,000,000 1,037,890 Telecommunication services - 2.7% Pacific Bell, 6.125%, 2/15/08 1,000,000 1,016,860 ---------- Total corporate obligations (cost $7,542,824) 7,980,664 ----------- COMMON STOCK - 0.3% Technology - 0.28%: Microsoft Corp. 3,640 95,186 Gold/Silver mining - 0.02% Coeur d'Alene Mines Corp. 2,000 8,000 ----------- Total common stock (cost $48,764) 103,186 ----------- SHORT-TERM INVESTMENTS - 27.1% Prime Obligation Funds 10,196,235 10,196,235 Total short-term investments (cost $10,196,235) ----------- Total investments in securities (identified cost $33,282,355) $33,684,535 =========== The Notes to Financial Statements are an integral part of this statement.
KAVILCO INCORPORATED (an investment company) STATEMENT OF OPERATIONS Year Ended December 31, 2005 ---------------------------- Investment income Interest $ 1,281,170 Dividends from money market fund 238,290 Dividends 2,497 ----------- Total investment income 1,521,957 ----------- Expenses Salaries and benefits 282,077 Directors' compensation and expenses 246,748 Legal and accounting 23,392 Custodian 11,777 Insurance expense 71,967 Office and equipment leases 55,769 General and administrative 63,942 ----------- Total expenses 755,672 ----------- Net investment income 766,285 ----------- Realized and unrealized gain on investments Net realized gain on investments 216,449 Net decrease in unrealized appreciation on investments (756,272) ----------- Net realized and unrealized gain (loss) on investments (539,823) ----------- Net operating income (loss) 226,462 ----------- Other income 58,975 ----------- Net increase in net assets resulting from operations $285,437 =========== The Notes to Financial Statements are an integral part of this statement.
KAVILCO INCORPORATED (an investment company) STATEMENTS OF CHANGES IN NET ASSETS Years Ended December 31, 2005 and 2004 -------------------------------------- 2005 2004 ----------- ----------- Increase (decrease) in net assets from operations Net investment income $766,285 $777,180 Net realized gain on investments 216,449 390,956 Net(decrease) in unrealized appreciation (756,272) (1,172,266) Net other income 58,975 48,660 ----------- ---------- Net increase in net assets resulting from operations 285,437 44,530 ----------- ---------- Dividends and distributions Net investment income (888,545) (775,384) Net realized gain on investments (61,680) (390,956) Net other income (58,975) (48,660) ----------- ---------- Total dividends and distributions (1,009,200) (1,215,000) ----------- ----------- Total (decrease) in net assets (723,763) (1,170,470) Net assets Beginning of year 38,402,776 39,573,246 ----------- ----------- End of year (including undistributed net investment income of $34,305 and $1,796, respectively) $37,679,013 $38,402,776 =========== =========== The Notes to Financial Statements are an integral part of these statements.
KAVILCO INCORPORATED (an investment company) FINANCIAL HIGHLIGHTS Years Ended December 31, 2001 - 2005 ------------------------------------ Per share operating performance (for a share of capital stock outstanding throughout the period): 2005 2004 2003 2002 2001 Net asset value, --------- --------- --------- --------- --------- beginning of year $3,200.23 $3,297.77 $3,310.27 $3,268.17 $3,203.96 --------- --------- --------- --------- --------- Income from investment operations Net investment income 63.86 64.77 103.48 123.70 150.06 Net realized and unrealized gain (loss) (44.99) (65.11) 18.68 49.91 70.41 Net other income 4.92 4.06 2.84 15.49 4.74 --------- --------- --------- --------- --------- Total from investment operations 23.79 3.72 125.00 189.10 225.21 --------- --------- --------- --------- --------- Less dividends and distributions from Net investment income (74.04) (64.62) (115.06) (116.99) (159.93) Net realized gain on investments (5.14) (32.58) (19.60) (10.85) - Net other income (4.92) (4.06) (2.84) (19.16) (1.07) --------- --------- --------- --------- --------- Total distributions (84.10) (101.26) (137.50) (147.00) (161.00) --------- --------- --------- --------- ------- Net asset value, end of year $3,139.92 $3,200.23 $3,297.77 $3,310.27 $3,268.17 ========= ========= ========= ========= ========= Total return (%) 0.74 0.11 3.78 5.79 7.54 Ratios/supplemental data Net assets, end of year (in thousands)($) 37,679 38,403 39,573 39,723 39,218 Ratio to average net assets (%) Expenses 1.98 1.97 1.92 1.88 1.78 Net investment income 2.01 1.98 3.08 3.75 4.54 Portfolio turnover rate (%) 131.3 6.2 56.7 9.6 3.0 The Notes to Financial Statements are an integral part of these statements.
KAVILCO INCORPORATED (an investment company) NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE 1. ORGANIZATION -------------------- Kavilco Incorporated (the Company) is a village corporation within the Sealaska region organized pursuant to the Alaska Native Claims Settlement Act ("ANCSA"). Contributed capital includes receipts from the U.S. government and the state of Alaska under provisions of ANCSA. Under Section 12(a) of ANCSA, on December 5, 1979 the Company received entitlement to the surface estate of real property totaling approximately 23,055 acres. In 1987, 194 acres of the Company's real property were distributed to shareholders, and the timber rights on the remaining 22,861 acres were sold. However, the Company retains all other rights to the surface estate of the real property. The sale of the timber rights contract expired in December 2001, and the timber rights reverted back to the Company. However, at that time, there were no stands of economically viable timber remaining on the property. Since selling the timber rights, the Company has derived the majority of its income from investments. On November 1, 1989, the Company began to operate as a self-managed, closed-end management investment company, as defined by the Investment Company Act of 1940 (the "Act"). The Company is subject to various restrictions imposed by the Act and the Internal Revenue Code, including restrictions on borrowing, dividend and distribution policies, operations and reporting requirements. The Company's investment decisions, which focus primarily on fixed income investments, are made by management under the direction of the Board of Directors. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------- The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for investment companies. The following is a summary of the significant accounting policies consistently followed by the Company in the preparation of these financial statements. SECURITY VALUATION: Investments in securities consist primarily of U.S. government securities, corporate obligations, commercial paper and common stock. Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. Commercial paper is stated at amortized cost, which approximates market value. INVESTMENT TRANSACTIONS: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost. INVESTMENT INCOME: Interest income is recorded on an accrual basis as adjusted for the amortization of discounts and premiums using the effective interest method. Premiums and discounts, including original issue discounts, are amortized for both tax and financial reporting purposes. Dividend income is recorded as of the ex-dividend date. REAL ESTATE: Real estate is carried at fair value as determined in good faith by the board of directors. Real estate represents entitlement to the surface estate of real property described in Note 1, for which no readily available market quotation exists. The real estate was initially recorded by the Company at its appraised value at the date of conveyance ($934,089). In addition, during the year 2002, the Company received an additional 89.24 acres in the process of closing out the timber sale contract, in payment of a past due rent obligation that was owed to the Company. The board of directors engaged a Certified Forester (the "Forester") to provide an estimate of the value of the real property. The value of this additional land was estimated by the Forester to be $120,000 for a total cost basis of $1,054,089. In order to estimate the fair value of this real property, the board of directors has considered such relevant factors as the lack of commercially viable timber due to previous harvest, amount of capital expenditures required for the future growth of timber, location of the property, recent sales of similar real property in the region and market demand and supply for this type of real property during the valuation process. The board of directors estimated the fair value of this real property at December 31, 2005 to be $3,588,815 on the basis of good faith consideration of both the aforementioned pertinent factors and the analysis performed by the Forester. Based on the inherent uncertainty of valuation, however, this estimated value may differ significantly from the value that would have been used had a ready market for the real property existed, and the difference could be material. FEDERAL INCOME TAXES: The Company's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its net investment taxable income to its shareholders. Therefore, no federal income tax provision is required for the Company. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends and distributions to shareholders are recorded on their payable date. Dividends are generally declared and paid twice a year. Capital gain distributions are generally declared and paid annually. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States of America. USE OF ESTIMATES: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. NOTE 3. INVESTMENTS ------------------- Purchases of investment securities (consisting of U.S. government securities, commercial paper, and common stock) aggregated $41,299,609 for the year ended December 31, 2005, and sales and maturities of investment securities (consisting of U.S. government securities, corporate obligations, commercial paper, and common stock) aggregated $50,500,329 for the year ended December 31, 2005. NOTE 4. PREMISES AND EQUIPMENT ------------------------------ Buildings and equipment are recorded at cost less accumulated depreciation. Depreciation is computed generally on the straight-line method over the estimated useful lives of the related assets, which range from 5 to 15 years. Depreciation expense was $2,505 for the year ended December 31, 2005. Building $154,369 Furniture, fixtures and equipment 100,096 -------- 254,465 Less accumulated depreciation (249,820) --------- $ 4,645 =========
NOTE 5. LEASE OBLIGATION ------------------------ The Company leases office space under a non-cancelable operating lease agreement, which terminates September 30, 2008. Rent expense for the year ended December 31, 2005 was $38,249, which has been included in the general and administrative expenses. At December 31, 2005, future minimum lease commitments under the non-cancelable operating lease are approximately as follows: 2006 $29,700 2007 29,700 2008 22,200 -------- $81,600 ========
NOTE 6. NET ASSETS ------------------ The Company's capital structure is as follows: Common Stock Class A, no par value - Authorized, 1,000,000 shares; issued and outstanding, 11,576.83 shares Class B, no par value - Authorized, 500,000 shares; issued and outstanding, 423.17 shares Upon organization, 100 shares of common stock (Class A) were issued to each qualified shareholder enrolled in the Company pursuant to ANCSA. The Company utilized a roll comprising 120 Alaska Natives eligible to receive stock certificates as certified by the U. S. Secretary of the Interior. Under the provisions of ANCSA, stock dividends paid or other stock grants are restricted, and the stock may not be sold, pledged, assigned, or otherwise alienated, except in certain circumstances by court decree or death, unless approved by a majority of the shareholders. (Before the Company's stock may be publicly traded, it must amend its Articles of Incorporation.) The stock carries voting rights only if the holder hereof is an eligible Alaska Native. Nonvoting common stock (Class B) is issued to non-Native persons who inherit stock. NOTE 7. TAX BASIS OF DISTRIBUTABLE INCOME ----------------------------------------- At December 31, 2005, there was approximately $43,000 of undistributed ordinary income for tax purposes. During the year ended December 31, 2005, $947,520 of the Company's distributions comprised ordinary income, and $61,680 were considered long-term capital gains. The tax cost of investments is the same as for financial reporting purposes. The gross unrealized appreciation and gross unrealized depreciation on a tax basis is $550,151 and $147,971, respectively. NOTE 8. PENSION PLAN -------------------- Employees of the Company are covered by a defined contribution pension plan. The Company contributes 20% of each participant's compensation to the plan. The Company's contributions during the year ended December 31, 2005 totaled $50,640. ITEM 2. CODE OF ETHICS ------------------------ Kavilco adopted a code of ethics on January 29, 1990. The code of ethics was amended on November 10, 2000 and is available on the Registrant's website at: www.kavilco.com. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT ------------------------------------------ Kavilco Incorporated is subject to the Alaska Native Claims Settlement Act (Act). Pursuant to the Act, Kavilco's stock and dividends may not be sold, pledged, subjected to a lien or judgement execution, assigned in present or future, or otherwise alienated, except pursuant to a court decree of separation or child support. However, the stock can be gifted to a relative provided the recipient is a descendant of an Alaska Native. The Chief Financial Officer has no control over the financial records of the corporation. The Corporate Secretary maintains the accounting records. Monthly, an independent accountant performs various reconciliations and adjusting journal entries on the corporate books and records. Kavilco does not have an audit committee. The CFO reviews the entire audited financial statement and various CPA correspondences with the board of directors. Two board members have degrees in business. However, pursuant to SEC regulations their experience would not qualify them as financial experts. The only contentious financial issue that Kavilco has had to deal with since becoming an Investment Company involves the evaluation of our land holdings in Alaska. After a two-year battle with our previous auditors, PricewaterhouseCoopers, and pressure by the Security Exchange Commission, the Board relented and increased the value of our land holdings. The CFO opposed this action because it served no practical purpose. The primary purpose of a financial expert serving on the board of directors is to prevent the gross accounting inequities that were driven by greed and outright thievery at such firms as Qwest Communications, Enron, and Tyco. There is no incentive on behalf of management to commit fraud since Kavilco's stock cannot be publicly traded and we do not have compensation incentives. More importantly, the board of directors is not a rubber stamp for management. Many of the shareholders are related to the directors, which acts as an additional incentive to have a high degree of business probity. Kavilco has never been involved in financial deceit. This superior track record can only be attributed to the excellent oversight of an active and knowledgeable board of directors. Accordingly, Kavilco does not have an audit committee or a financial expert as defined by the SEC. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES ------------------------------------------------ During the period covering the fiscal years ended December 31, 2005 and 2004, Anderson ZurMuehlen & Co., P.C. performed the following professional services: 2005 2004 ------- ------- (a)AUDIT FEES $17,000 $16,500 (b)AUDIT RELATED FEES $0 $0 (c)TAX FEES $3,100 $2,750
(d) ALL OTHER FEES. In addition, Anderson ZurMuehlen & Co., P.C.'s sister company, Employee Benefits Resources, LLC (EBR), provided services to the Company in connection with the plan document for the Company's pension plan and preparation of Form 5500. The total fees paid by the Company to EBR were $475 in 2005 and $1,225 in 2004. (e) Not applicable. (f) Not applicable. (g) Not applicable. (h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS ----------------------------------------------- Kavilco is a privately held registered investment company, and accordingly is not subject to the Securities Act of 1933. ITEM 6. SCHEDULE OF INVESTMENTS --------------------------------- This schedule is included as part of the report to shareholders filed under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES --------------------------------------------------------------------------- The Board of Directors adopted the following resolution during the November 2003 Board Meeting. KAVILCO INCORPORATED RESOLUTION 11-14-03b: PROXY VOTING POLICIES ---------------------------------------------------------------- The Securities and Exchange Commission believes the recent corporate scandals have created renewed investor interest in corporate governance issues. In response, the SEC has new rules designed to increase transparency of proxy voting by mutual funds. RESOLVED, on voting common stock, the Chief Financial Officer is hereby directed to vote the management slate of directors and management's recommendations on any corporate proposals that appear on the proxy. RESOLVED, where there is a material conflict of interest where the Chief Financial Officer has a business, personal, or family relationship with a public company, voting will be deferred until the next scheduled board of directors meeting at which time the issue will be discussed. RESOLVED, pursuant to rule 30b1-4 under the Investment Company Act, Kavilco will file of form N-PX with SEC detailing a complete voting record. This filing will be made for a 12-month period commencing on June 30,2004. In addition, this information will be available on Kavilco's Web site as soon as reasonably practicable, after filing the report with the SEC, which means the same day, absent unforeseen circumstances. Date: November 14, 2003 /s/Louis A. Thompson Louis A. Thompson, President /s/John Campbell John Campbell, Secretary (Corporate Seal) ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES ------------------------------------------------------------------------ This disclosure requirement is not applicable to Registrant at this time. ITEM 9. RESERVED ------------------ ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------- There have been no material changes to the procedures by which shareholders may recommend nominees to Kavilco's Board of Directors since Kavilco last provided disclosure in response to this item. ITEM 11. CONTROLS AND PROCEDURES --------------------------------- (a) The registrant's President and Chief Financial Officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2 under the Investment Company Act of 1940) are effective in design and operation and are sufficient to form the basis of the certifications required, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 12. EXHIBITS ------------------ (a)(1) CEO Certification (a)(2) CFO Certification SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of Kavilco Incorporated and in the capacities and on the dates indicated. By /s/Louis A. Thompson Louis A. Thompson Chief Executive Officer March 1, 2006 By /s/Scott Burns Scott Burns Chief Financial Officer March 1, 2006