NPP BODs Mtg 26 May 2010 RAdm(Ret’d) Bryn Weadon

OUTLINE Scope of NPP Assets Principle fund generators: CANEX CFCF Annual Financial Contributions Impact for Bases and Wings

Financial Scope of NPP As of 31 Mar 09, total NPP Net Assets were almost $850M and Equity was estimated at $519M Approximately 50% of the Assets and Equity are SISIP The other 50% is divided as follows: CFCF - $199M Assets/$102M Equity Base/Wing/Unit Funds - $86M/$59M CANEX - $74M/$54M Messes - $24M/$21M CFPAF - $16M DGPFSS - $6M/$4M

FY Revenues Net Revenues in FY 09 were $294M – divided as follows: CANEX - $164M Base/Wing/Unit Funds - $61M Messes - $34M SISIP - $33M DGPFSS - $15M CFPAF - $2M CFCF – ($18M) Ships/Reserve Units - $3M estimate

CANEX $154M in Sales $36M in Gross Profit (23.5% of Sales) $10M in Other Revenue (Concession Agreements) $20M in Wages and Benefits $15M in Other Operating Expenses $11M Net Earnings before Royalties (7% of Revenues) $5M in Royalties and Contributions

CANEX All trade payables and receivables are passed to the CFCF at fair value less a fee of 1% for credit losses CANEX had $18M on deposit with CFCF: $6M non-interest generating $12M receives Prime plus 0.25% CANEX had borrowed $11M from CFCF at a 4% interest rate CANEX added $9M of fixed assets in FY 09 $65M Capital Asset Cost/$27M Net Book Value

CFCF Is the financial heart of NPP cash flows The $199M of 31 Mar 09 assets were comprised of: $88M held in Trust $71M of Receivables ($58M assumed from other NPP Entities) $21M of Loans $18M share of investment portfolio Contributes $3M a year towards the cost of NPP Operations and pays over $3M to other NPP Entities/Trusts $900K cost for CFCF management, user fees, and investment expenses

CFCF Trust Assets Almost $88M as of 31 Mar 09: Base/Wing/Unit Funds and Messes - $52M CANEX - $18M Museums/Regiments/RMC Club - $11M SISIP/CFPAF - $2.5M NPP Pension - $2M MFF - $2M

CFCF Capital Was $11M 30 years ago – contributing $300K a year Received $50M from Base/Unit Closures In addition to $3M in annual grants contributed: $24M towards Capital Projects (shared with SISIP) $15M in Loan Forgiveness Pledged $100M Contingent Liability to SISIP for War Insurance Needs to generate approximately $10M a year from investment portfolio (Interest, Grants, Expenses) At average return of 4% after inflation need $250M in investment assets

Base/Wing Funds

Messes

Annual Financial Contributions CANEX Royalties - $4.8M $3.3M to Bases/Wings/Units $1.5M to NATO Airbase from NATEX SISIP Morale and Welfare Grants - $3M to $4M CFCF Grants to NPP non-Capital operations - $3M

Impact for Bases/Wings/Units 15% of Revenues come from: CANEX Royalties - $3.3M SISIP Morale and Welfare Grants - $3M CFCF Interest - $3M $3.6M in User Fees paid to DGPFSS to support Accounting, IT, HR and Consolidated Insurance Program

What Can You Do? Pick the best CFCF interest option: Option A – 3% Fixed – 38% Option B – Prime plus 0.25% - 30% Option C – CFCF Investment Return less 0.5% - 32% Enhance CANEX sales and concession revenue Promote use of SISIP for Personal Financial Services Be fiscally prudent when considering capital projects or special events Consider options to make the overall system more equitable