First Nations Finance Authority

1. First Nations Finance Authority AFOA February 10th 2005 Ottawa

2. To provide First Nations with the ability to raise capital on the national and international Bond markets by pooling their infrastructure borrowing requirements through a national First Nations� controlled financing institution. The Vision

3. How the FNFA started Identified need for First Nations� governments to raise capital in the same way as other governments raise capital First Nations have no practical access to the Bond markets for raising capital Currently Poor access to capital Forces short term loans at higher rates

4. About the FNFA Non-profit body All Aboriginal Board of Directors Open to First Nation governments & their entities One of Four Institutions to be statutorily established under the proposed First Nations Fiscal and Statistical Management Act Long term debt financing (for sewer, water, roads public infrastructure) to follow legislation

5. How the FNFA will improve access to Capital Pools borrowers Creates advantages of size Diversifies risk Supplies professional financial expertise FNFA WILL POOL BORROWING REQUIREMENTS CREATES ADVANTAGE OF SIZE AND REVENUE DIVERSIFICATION DIVERSIFIES RISK DIVERSIFIES BORROWING REQUIREMETNTS SUPPLIES EXPERTISE CAN POTENTIALLY SEEK OUT PARTNERS WILL SUPPLY EXFNFA WILL POOL BORROWING REQUIREMENTS CREATES ADVANTAGE OF SIZE AND REVENUE DIVERSIFICATION DIVERSIFIES RISK DIVERSIFIES BORROWING REQUIREMETNTS SUPPLIES EXPERTISE CAN POTENTIALLY SEEK OUT PARTNERS WILL SUPPLY EX

6. How does a First Nation become a Borrowing Member? First Nation passes a Resolution of council requesting certification from FMB and notification to FNFA. First Nation amends its property taxation law to: authorize FMB to act as agent of first nation if third party management is required FMB conducts review of First Nation and provides certification. FNFA Board accepts First Nation as a Borrowing Member

7. How will the borrowing work? The First Nation passes a borrowing law - certified by First Nations Tax Commission (FNTC) FNFA batches the borrowing requirements of the Members and goes to market (issues Bond) FNFA relends the proceeds of the Bond issue to the Borrowing Members FNFA manages the issue (collects from Members, manages sinking funds and repays bondholders)

8. How to borrow. Community plans infrastructure project: Plan is approved and borrowing authorized by the First Nation through the passage of a Borrowing Law FNTC reviews Borrowing Law: Is their enough borrowing room? FNTC certifies Borrowing Law

9. To the market and after� FNFA batches the Borrowing Laws, determines the size of the Bond Issue and issues Bonds. Bonds are sold through a �syndicate�. Proceeds of Bond issue are distributed to participating Borrowing Members and Debt Reserve Fund is created. First Nation collects property tax and pays FNFA semiannual interest and sinking fund requirements. FNFA pays the Bondholders and manages the sinking funds. When the Bond matures FNFA pays the Bondholder in full from sinking fund.

10. Debt Reserve Fund 5% over and above borrowing requirement. Mandatory. Cornerstone to a good credit rating. Repaid to First Nation when Bond matures with earnings. Canada to provide a Credit Enhancement Fund of $10 Million as additional security to promote good credit rating.

11. Sinking Fund The FNFA collects the Borrowing member�s principal and interest payments semi-annually. The FNFA pays the interest portion semi-annually to the Bondholder. The principal portion of the payment is deposited into that First Nation�s Sinking Fund. The Bond holder is paid back their capital from the sinking fund at maturity Interest earned on the sinking fund can allow for early retirement of debt.

12. FNFA Credit Rating FNFA will request a credit rating from an internationally recognized Credit Rating Agency such as Moody�s Investors Service, DBRS and Standard & Poors. Aim to achieve an investment grade credit rating. Based on the credit rating, pension funds, institutional investors, First Nations etc. will buy FNFA Bonds.

13. Comparative Credit Rating DBRS Moody�s S&P Municipal Finance Authority - Aaa AAA City of Vancouver AA(high) Aaa AAA Province of British Columbia AA(low) Aa2 AA- Province of Alberta AAA Aaa AAA Province of Saskatchewan A Aa3 AA- Province of Manitoba A(high) Aa2 AA- Province of Ontario AA Aa2 AA Province of New Brunswick A(high) Aa3 AA- Province of Quebec A A1 A+ Province of Nova Scotia A(low) A2 A- Province of PEI A(low) A2 A Province of Newfoundland BBB A3 A- Canada AAA Aaa AAA FNFA (anticipated rating) A A1 - As at September 30 2004

14. Next Steps Passage of legislation � The First Nations Fiscal and Statistical Management Act - and associated Regulations Certification of initial Borrowing Members Obtain formal Credit Rating Issue Bond

15. Summary - Benefits of FNFA Expanded access to capital to include smaller First Nations Lowered cost of capital for First Nations� governments. Reduced need for collateral Longer term loans Benefits of taxation and other source revenue becomes more evident Reduced demands on First Nation management by saving time, lowering administration and negotiation costs.

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