“The ACS customer-driven  approach has delivered  superior products and  services to a growing base  of loyal customers.” Liane Pelletier President, CEO and Board Chair Dear Fellow ACS Shareholder: 2004 marked a year of significant progress for Alaska  Communications Systems. Our execution centered on  a customer-focused business model, which clearly drove  benefits for customers, Alaskan communities, employees  and shareholders. Our commitment to delivering a  quality customer experience is the daily expression of  ACS’ competitive growth strategy. During 2004, we translated this growth strategy into an  operating model. We operate as “One ACS” rather than a  collection of product-centric divisions. We have leaders  in the business who are distinctly focused on individuals,  on enterprises and on other telecom carriers. These  leaders are streamlining how we do business, enhancing  our customers’ experience and reducing our costs of  operation. Our goal has been and is to grow the number of loyal  ACS customers within each segment, and in 2004 we  made great progress. In terms of retail relationships  established, by year-end we had grown to approximately  400,000 and reached a milestone of 100,000 wireless  subscribers. These retail relationships allow us to grow  our share of wallet through cross-selling, bundles and  highly differentiated integrated offerings. Today, few of  our customers purchase all of their telecommunications  services from ACS, yet ACS has its own statewide local,  long distance, internet and wireless networks to serve  them. As a result, we enjoy a wonderful organic and  efficient growth model.  These customers are also our neighbors and we recognize  our responsibility to the communities we serve – after  all, “Alaska” is our first name. ACS and its employees  contribute their financial support, time and commitment  Board Chair Board of Directors  Liane Pelletier Gary R. Donahee - John M. Egan - Saul A. Fox Byron I. Mallott - W. Dexter Paine, III - Patrick Pichette Brian D. Rogers - Charles P. Sitkin - Wray T. Thorn to many organizations, events and civic activities  throughout Alaska. Through our civic work and our daily  work, our investment in leading edge communications  services enables Alaskans to grow and prosper. ACS employees have both embraced and benefited from  the transformation taking place at ACS. As one example, in  March 2005, the members of our local union, IBEW Local  1547, approved an extension of the collective bargaining  agreement through 2009. This new agreement affirms our  employees’ confidence in the company as the union  members elected to take ACS common stock in lieu of  cash cost-of-living increases in future years. In fact,  the confidence of all segments of the employee base is  evident as we saw a 40%+ increase in Employee Stock  Purchase Plan participation from the beginning of 2004  to date. We face the future with the strongest balance sheet in  our history. Earlier this year ACS concluded a series  of capital market activities, which reduced borrowing  costs, lowered our debt-to-equity ratio and resulted in a  much broader base of shareholders including many new  institutional investors. We initiated a cash dividend  policy in October 2004, with the first quarterly cash  dividend of $0.185 per share paid in January 2005. The  successful financial restructuring and our continued  ability to generate cash from operations enabled a  subsequent increase in the quarterly cash dividend to  $0.20 per share. CDMA 1xRTT Launch May 2004 Wireless Broadband  (EV-DO) Launch June 2004 ACS Named to  Russell 3000 Index June 2004 Functionally Integrated Product  Launch: Mobile-To-Home August 2004 ACS Initiates  Dividend Program October 2004 ������� ������� ������� ������� ������� ������� ������� �� ���� �� ���� �� ���� �� ���� ������� ������ ������ ����� ����� ����� ����� �� ���� �� ���� �� ���� �� ���� �� ���� �� ���� ������ ACS Stock Price �� ���� �� ���� �� ���� �� ���� ������� ������� ������ ������ ������ ������ ������� Wireless Subscribers Retail Relationships