ASM 2021

Jun 11, 2021

Slides

Good morning and welcome everyone. My name is Justin Bieber. I am the Chief Legal Officer of Brookfield Asset Management and I will serve as secretary for this meeting. Mr. Chair, we are ready to commence the meeting. Good morning, ladies and gentlemen. It's now 10:30 and time to begin the Annual Meeting of Shareholders of Brookfield Asset Management. My name is Trent McKenna, and as Chair of the Board, it's my pleasure to chair today's meeting. On behalf of the Board and management, I'd like to extend a warm welcome to everyone joining us virtually through our live webcast. Hopefully, we'll be together in person next year. Similar to our virtual meeting last year, voting during the meeting will take place on our virtual webcast platform. I'll now explain the process. We will conduct the votes on the matters before us by a poll. On a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholders. The poll will be open for all resolutions at the same time and throughout the formal portion of the meeting. This will allow you to choose to vote on each resolution immediately or wait until conclusion of discussion on each resolution prior to casting your vote. If you voted in advance of the meeting and do not wish to revoke your previously submitted proxies, then no action is needed. We will welcome questions from our shareholders. As described in our management information circular for this meeting, participants can submit questions by clicking on the messaging icon on the top of the webcast and typing a question. Please indicate whether your question is of a general nature or if it relates to a motion being considered as part of the meeting's formal business. Questions relating to a particular motion will be answered at the appropriate time during the meeting. Note that we recommend that you submit questions related to motions being tabled as soon as possible as there is a 32nd delay in the webcast. Questions of a general nature will be answered during a question and answer period following the formal business of the meeting. Please click the Submit button once you have finished taking your question. Our Corporate Secretary, who is serving as moderator of this virtual meeting, will read out the question and either a member of management or I will respond. If we receive similar questions, of course, we will read one of them and note it to be one of a similar of a number of similar questions. We are unable to receive questions from participants joining the meeting only by telephone. Further, only shareholders or proxy holders, including beneficial shareholders who have appointed themselves as proxy holders, are able to submit questions at this meeting. We will endeavor to answer all questions submitted during the allotted time. Now moving on, we wish to thank you for your participation in today's meeting. I now call the meeting to order and would ask AST Trust Company Canada via its representatives, Tony Tacania and Carol Panetta to act as scrutineers. I will also ask our Chief Legal Officer, Justin Bieber and Corporate Secretary to act as secretary of today's meeting in the unlikely event of technology issues connecting disconnecting. I have designated Justin to step in as chair of the meeting in the unlikely event that my audio would be disconnected. In addition to Justin, it's now my pleasure to introduce the members of management who are with us today. Firstly, Bruce Slapp, our Chief Executive Officer and Nicholas Goodman, our Chief Financial Officer. Following the conclusion of the formal part of the meeting, there will be a presentation from management. As outlined in our management information circular, we have 4 formal items of business to be considered today. 1st, to receive the consolidated financial statements of the corporation for the fiscal year ending December 31, 2020, including the external auditors report 2nd, to elect directors who will serve until the next annual meeting of shareholders 3rd, to appoint the external auditor and authorize the directors to set remuneration and forth to consider an advisory resolution on the corporation's approach to executive compensation. As mentioned, in connection with the business to be dealt with today, all voting will be conducted by online ballot through the live audio webcast platform. Voting is now open on all resolutions. In order to expedite the formal part of today's meeting, I've asked certain shareholders to move and second various resolutions. Although this procedure will assist us in the handling of formal matters, it is not intended to discourage anyone from submitting questions in reference to any resolution after it has been proposed and seconded. I'm advised that the notice calling the meeting and the management information circular were disseminated to voting shareholders in accordance with all applicable laws. I've asked the corporate secretary to keep a copy of the notice and proof of mailing with the minutes of the meeting. The minutes of last year's annual meeting with shareholders held on June 12, 2020 are also available upon request should any shareholder wish to review them. Based upon these scrutineers' preliminary report and attendance, the secretary has confirmed that there is a forum. I therefore declare the meeting properly constituted for the transaction of business for which it has been called. Turning to the first item of formal business, I will now table the corporation's 2020 annual report to shareholders, which includes the corporation's consolidated financial statements for the fiscal year ended December 31, 2020, together with the external auditors report. Copies of our annual report have been mailed to shareholders who have requested it and are available in the meeting materials for this live broadcast as well as on our website. Mr. Chair? Mr. Chair, we have not received any questions or comments submitted in connection with the financial statements. The second item of business at our meeting today is to elect directors who will serve until our next Annual Meeting of Shareholders. Before I introduce the nominees, I want to first extend our sincere appreciation and gratitude to Mr. Murillo Pereira, who has been a Director of Brookfield since 2017 and who is now standing for reelection. I'd like to take this opportunity to acknowledge Murillo for his guidance and commitment to the Board on behalf of all shareholders. To assist you in identifying our directors, their photos will be shown on the slides of the webcast platform as I read their names. The 8 proposed nominees for election by holders of the corporation's Class A Limited Voting Shares are as follows: Elise Allen, Angela Braulley, Janice Lucakusa, Maureen Kemston Darkse, Houtem Oeyan, Sipney Wat, Diana Taylor and myself. The 8 nominees for election by the holders of the Corporation's Class B Limited Voting Shares are Jeffrey Blittner, Jack Cockwell, Marcel Tutu, Bruce Slack, Brian Lawson, Howard Marks, Rafael Miranda and Lord Gasodamo. 15 of the 16 proposed nominees were elected at our last annual meeting in June 2020 and are standing for reelection today. We are also delighted to have Khutta Molyan for election this year. Ms. Molyan is the Chair of the Corporate Board of the Olyan Group, a private international investor with a portfolio of global investments and serves on a number of other public and private boards. She joined the board in January 2021 and we're thrilled to have her. Information on all 16 director nominees is set out in our management information circular, which was posted on our website for shareholder review and is available from the company upon request. Mr. Chair, we have not received any questions or comments with respect to the nomination of directors. The meeting is now open to receive nominations for the election of the post directors. We invite shareholders and proxy holders to submit their vote online if they've not already done so. As a reminder, if you've already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote. Mr. Chair, I nominate for election as directors the 8 nominees for the Class A limited voting shareholders and the 8 nominees for the Class B limited voting shareholders named in the management information circular dated April 30, 2021. Thank you, Claire. Mr. Chair, I second the motion. And thank you, Monica. Are there any further nominations? Are there any further nominations? Are there any further nominations? If not, I declare the nominations closed. As there are 16 directors to be elected and the same number of nominees, I now declare that those nominated have been duly elected as directors of the corporation. The third item of business today is the appointment of the corporation's external auditor and authorizing the directors to set their remuneration. As stated in the management information circular, the audit committee of our Board of Directors has recommended to shareholders that Deloitte LLP be reappointed as the corporation's external auditor. It is now in order for someone to move this resolution. Mr. Chair, I move that Deloitte LLP be appointed the external auditor of the corporation until the next annual meeting and that the directors be authorized to set the remuneration. Thank you, Monica. Mr. Chair, I second the motion. And thank you, Claire. The resolution has been moved and seconded and the motion is now before the meeting for discussion. Mr. Chair, we have not received any questions or comments submitted in connection with the appointment of auditors. Adoption of the motion requires a favorable vote of a majority of the votes cast at the meeting by the holders of each of the Class A limited voting shares and the Class B limited voting shares voting as separate classes. Management has received proxies representing approximately 66% of the corporation's Class A limited voting shares and 100% of the Class B limited voting shares. These proxies direct me to vote over 97% of the Class A Limited voting shares and all of the Class B Limited voting shares in favor of the resolution. I will now call for shareholders and proxy holders to submit their vote if they've not already done so. We will report on the results at the conclusion of the formal business of the meeting. The 4th and final item of business today is the approval of the advisory resolution on the corporation's approach to executive compensation described in the management information circular. The Corporation has put forth an advisory resolution at this meeting as part of the ongoing efforts to meet both its corporate governance responsibilities and also to ensure a high level of shareholder engagement. Because this is an advisory vote, results will not be binding upon the Board. However, the Board and the Management Resources Committee and Compensation Committees will take into account the result of the vote, as appropriate when considering future compensation policies and decisions. The Board welcomes comments and questions on the corporation's executive compensation practices. It's now in order for someone to move this resolution. Mr. Chair, I move that the advisory resolution accepting the approach to executive compensation described in the management information circular dated April 30, 2021 be approved. Thank you, Claire. Mr. Chair, I second the motion. Thank you, Monica. The resolution has been moved and seconded and the motion is now before the committee before the meeting for discussion. Mr. Chair, we have not received any questions or comments submitted in connection with the corporation's approach to executive compensation. Thank you, Justin. Adoption of this motion requires the favorable vote of a majority of the Class A limited voting shares. Management has received proxies representing approximately 66% of the corporation's Class A Limited voting shares. These proxies direct them to vote over 93% of the Class A Limited voting shares in favor of the resolution. I'll now call for shareholders and proxy holders to submit their vote if they've not already done so. Voting is now closed on all resolutions. I'm advised that our corporate secretary has the results of the vote based on the final tabulations of proxy vote received. Thank you, Mr. Chair. I'm pleased to report as there are 16 directors to be elected and the same number of nominees, I now declare that those nominated have been duly elected as directors of the corporation. On the appointment of the Corporation's external auditor and authorization of Directors to set their remuneration, I declare the motion carried. On the approval of the advisory resolution on the corporation's approach to executive compensation, I declare the motion carried. The final voting results will be available after the meeting and posted to SEDAR at www.sedar.com. Thank you. Ladies and gentlemen, that completes the formal business of today's meeting. There is no other business. I declare the meeting terminated. Now that the meeting has concluded, Bruce Wagner and Nick Bibman will be leading a presentation on behalf of our management team. At the end of the presentation, we will be available to respond to any questions or comments that may have been submitted. Please note that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, you are encouraged to review the business environment and risk section of management's discussion and analysis in our annual report. Finally, we would like to ensure that all shareholders are interested in asking a question of the opportunity to do so. We will make every effort on our part to address questions during the allocated question and answer period. Over to you, Nick. Thanks, Mr. Chair, and good morning, everyone. I'm going to start with a review of 2020, which as we all know was an unprecedented year. I'll then provide an update and an outlook for the business. Bruce will end the presentation with a summary of our key priorities moving forward. I will then both be available to answer any questions you may have. While the last year was challenging on many fronts, the resiliency of our business model was proven out. During the year, we continued to strengthen the foundation of our business and today we find ourselves in the stronger position as we've ever been and that's from a balance sheet and liquidity perspective and also with regards to the size and scale of our operations. Over the past year, we successfully raised $40,000,000,000 of capital across our business through numerous diverse strategies and product offerings. We deployed $43,000,000,000 across the business with a diversified set of investments across platforms and geographies and we generated $6,100,000,000 of distributable earnings further enhancing our strong liquidity position. Our asset management franchise and the operating companies in which we invest are built to be robust and resilient across economic cycles. That was tested in the last 12 months and in that period our business performed very well. In that regard, there are 4 key attributes that continue to underpin the business today. Investing in real assets which provide essential products and services, long dated contracted cash flows with high quality counterparties, sticky and long standing customer relationships and finally, our conservative capital structure which provide a stable base and financial flexibility. Our real asset investments form the backbone of the global economy. As vaccines rollout vaccine rollouts continue to accelerate and restrictions around the world ease, the global economy will normalize and we expect our underlying businesses will further benefit from this. We are seeing a number of indicators that markets are opening back up. For example, this includes increasing levels of traffic on our toll roads. We are seeing greater food traffic in our malls which continues to increase and sales are back to almost pre pandemic levels with some of our malls seeing higher spend per head with pent up demand. We are seeing higher aftermarket car battery sales as traffic picks up and people have been returning to the office in many jurisdictions and we're starting to see leasing and transaction activity return to more normal levels. In addition to the strength of our existing businesses, we remain well positioned for growth opportunities. Our fever in capital continues to grow. We hit record levels of core liquidity at the corporate level and we've seen very strong monetization and capital recycling activities that we expect to continue for the foreseeable future. Our fever in capital continues to grow through fundraising, strong deployment of capital and a growing perpetual capital base. In total, fee bearing capital has increased from $264,000,000,000 in the Q1 of 2020 to $319,000,000,000 in the Q1 of 2021. That's an increase of $55,000,000,000 over the last 12 months or 21%, which has driven an 18% increase in fee related earnings over the same period. And with a very positive backdrop, we are seeing strong fundraising momentum for our next round of flagship fundraising. We have raised $14,700,000,000 for our latest distressed debt fund, which is our largest distressed debt fund to date and the fund size could increase even further as it has yet to have its final close. We've launched our inaugural global transition fund focused on investing in assets and projects that benefit the decarbonization of the energy grid and we expect this fund will be at least $7,500,000,000 in size. This is a first mover product which has seen a lot of extremely positive interest to date. We also recently launched fundraising for our 4th flagship real estate fund and expect to have a strong first close in the coming months. The current private equity and infrastructure flagship funds are approximately 60% invested or committed and we expect the mix vintage of these funds to be in the market by the end of the year or early next year. On top of our flagship fund offerings, we continue to expand our asset management products and expect these will drive strong growth in AUM and fee bearing capital in the next 5 to 10 years. This is done by continuing to grow our existing line of perpetual and core products, expanding new products into existing verticals and creating new product offerings. At the same time, we continue to strengthen the infrastructure supports our private funds business with a strong focus on client service, product development and broadening our distribution capabilities. These efforts are having a positive impact. To focus on a few key trends in our business, first, our client base continues to grow. Secondly, our LP clients have interest in dealing with fewer asset managers today, which means they are increasingly investing in more products with us. And 3rd, largely as a result, the average commitment size per investor is growing and all of this positions us well for fundraising and achieving our growth plans. Our liquidity position is the strongest that it has ever been, which provides a very strong foundation to the business and positions us well for growth. This includes $18,000,000,000 of core liquidity, including cash financial assets and undrawn credit facilities, dollars 62,000,000,000 of uncalled third party fund commitments, which is capital that has been raised and is available, but has not yet been deployed. And that brings total liquidity to $80,000,000,000 And this liquidity position continues to be bolstered through strong distributable earnings before realizations, which is a steady measure of our recurring fees and distributions earned on our direct investments. With the recent ramp up in asset sales activity, we are seeing a steady increase in the realization of carried interest as we continue to monetize investments that were held in our earlier vintage funds. And lastly, balance sheet recycling initiatives, which include the monetization of principal investments, recent examples being the West Fraser and Betsey secondary offerings, which together raised about 1.7 $5,000,000,000 in proceeds are the most recent examples of this initiative. And all of this allows us to progress in our strategic initiatives. The strength in our liquidity allows us to progress these including the spin out of BAM Reinsurance in the coming weeks and the previously announced privatization of BPY which we expect to close in July. To summarize, what we have achieved over the past year and where we stand now, our operating businesses have continued to perform well and have demonstrated their resiliency over the past year. Our asset management franchise continues to grow at a very strong rate and the outlook is very positive and we are well positioned from a deployment perspective with record levels of dry powder. Now that we've summarized the past, let's look forward. The interest rate environment today is favorable for our business and we believe this will continue to be the case even as we see rates steadily increasing. We own real assets that perform at their best when there is a strong economic background. That means growth and somewhat higher inflation and interest rates. In that environment, inflation linkage in the revenue streams of our assets and the high cash margins will see strong cash flow growth and a strong economic background should see very strong demand. So while our businesses have proven to be resilient over the past year, they are even more valuable when fundamentals are strong. If we think about the foundation of our business, our competitive advantages remain unchanged. Our size and scale allows us to raise substantial pools of capital and execute on large scale transactions that very few can do. Our operating expertise and team of operator professionals means that we have in house specialists who can focus on improving the operations of our assets. And our global reach allows us to diversify the geographic location of our investments and in some case expand the footprint of our investments when needed. Focusing first on size and scale, We have a number of sources of capital that allows us to pursue large scale transactions, including our own balance sheet and the balance sheet of our listed affiliates, each of which is a substantial size and scale on their own with strong access to capital markets. We have 3rd party capital raised in our private funds and 3rd party co invest capital that can come in on an investment by investment basis. All of this together means that we can pursue very large transactions of scale, which can sometimes mean lower competition. 2nd, our operating expertise provides us with the knowledge and operational know how for each of our investments, which helps makes us market leaders in the sectors that we invest in. And as a reminder, we have approximately 150,000 operating employees that have many years of experience and knowledge in their industry, which adds tremendous value to our business. 3rd, our global reach spans across the world and not only do we have a significant amount of AUM in each of our key geographies, We have offices and boots on the ground in each of these key regions, allowing us to execute on local due diligence in a timely manner performed by individuals that understand that specific country and market. Today, we are in about 30 countries and don't necessarily plan on growing that number. We already are in the geographies that we want to be in and are focused on growing that footprint in those local countries. Turning to our position on ESG. We always invest with a high priority on ESG principles and ESG is really embedded into our culture and in everything we do. We ensure the well-being and safety of our employees. Specifically during COVID, we took great efforts to protect our employees and ensure their well-being. We are good stewards in the communities in which we operate and participate in a number of philanthropic initiatives that give back to the communities in which we operate. We mitigate the impact of our operations on the environment. This is true across our business, but most evident through our market leading position in renewables and now the transition space through our Global Transition Fund and we expect other initiatives will follow. And as always, we continue to conduct business at the highest level of ethical, legal and regulatory standards. Looking at our capital deployment activity, we have deployed large scale capital in crossing number of transactions in just the past year. These opportunities spanned across a number of geographies. Starting with infrastructure, we invested $3,400,000,000 of equity into a portfolio of 137,000 telecommunication towers in India, which will capitalize on the rollout of 5 gs and other future technologies in the country. In our private equity group, we privatized Seijin, the largest private sector residential mortgage insurer in Canada for $1,300,000,000 in equity. In renewables, we acquired Shepherds Flat Wind Farm for $745,000,000 This is one of the largest repowering opportunities in the world. And in real estate, we acquired a high quality office portfolio in India for $630,000,000 This operating portfolio includes 12,500,000 square feet of space. As we continue to grow, we will continue to execute on large scale opportunities across our platforms and geographies. The strength of our liquidity, client base and evolving asset management franchise positions us well for growth and our strategic initiatives will position us well over the longer term. We believe our business has been stress tested over the year and we have come out strong and are in the best position that we have ever been in. With that, I will turn it over to Bruce to discuss our key priorities. Thank you, Nick, for the presentation. To everyone online, thank you for joining today and for your support of Brookfield and all of our companies. We appreciate all of you who have been with Brookfield a short time and some of you I know a very long time. To summarize before Nick or I take any questions, if there are any, we'd like to leave you with 4 points. We continue to maintain significant liquidity across all parts of our business to ensure that we can take care of situations where we need to support businesses or in an opportunistic basis to grow the business. 2nd, we remain disciplined when assessing investment opportunities, so that we can endure time and earn the returns that we need to in all of our funds. 3rd, we continue to deploy capital for value in order to deliver long term returns to our investors. And lastly, we have a number of strategies which we've described in past and we will continue to describe to you, which are setting ourselves up for future long term growth to continue what we've done over the last many years. And with that, Nick or I or Frank would be pleased to take any questions from any shareholders that have any. Mr. Chair, there are no further matters or questions to be addressed. Thank you, Justin. Ladies and gentlemen, since there are no further questions or comments, I'd like to thank you for taking the time to join us today online through our webcast. We appreciate your participation, and I hope that you have found the meeting and management presentations to be very informative. Thank you very much for joining.