ASM 2019

Jun 14, 2019

Slides

Wasn't that a night? Wow, I'm surprised you're all up actually. My name is Frank McKenna, and as Chair of the Board, it's my pleasure to welcome you to today's meeting and Chair of this meeting. On behalf of the Board and management, I'd like to extend a warm welcome to everyone here today, including those joining us online through our live video webcast. I will now call the meeting to order and would ask Trust Company Canada by its representatives Tony Tacania and Kay Harrison to act as scrutineers. I will also ask our Corporate Secretary, Justin Bieber, in the front row here to act as Secretary of today's meeting. It's now my pleasure to introduce the members of management on the stage with me. We have our very own Kaohi Leonard, the unflappable Bruce Slatt and Brian Lawson, our own Kyle Lowry, our Chief Financial Officer. Following the conclusion of the meeting today, there'll be a presentation from management. As outlined in our management information there are 6 items of business to be transacted today. First, to receive the consolidated financial statements of the corporation for the fiscal year ended December 31, 2018, including the external auditors report secondly, to elect directors who will serve until the next Annual General Meeting third, to appoint the external auditor and authorize the directors to set their remuneration 4th, to consider an advisory resolution on the corporation's approach to executive compensation 5th, to consider resolution approving a new management share option plan and 6th, to consider 2 shareholder proposals described in our management information circular. In connection with the business to be dealt with today, unless a shareholder or a proxy holder demands a ballot, all voting will be conducted by a show of hands. In order to expedite the formal part of today's meeting, I've asked certain shareholders to move and to second various resolutions. Although the procedure will assist in the handling of formal matters, it is not intended to discourage anyone from speaking in reference to any resolution after it has been proposed and seconded. I'm advised that the notice calling this 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 this meeting. The minutes of last year's Annual Meeting of Shareholders held on June 15, 2018 are also available should any director shareholder wish to review them. Based upon the scrutineers preliminary report and attendance, the Secretary has confirmed that we do have a quorum present. I therefore declare the meeting properly constituted for the transaction of the business for which it has been called. Now, turning to the first item of formal business, I will now table the corporation's 2018 annual report to shareholders. This includes the corporation's consolidated financial statements for the fiscal year ended December 31, 2018, together with the external auditors report. Copies of our annual report have been mailed to shareholders who have submitted the request and are also available here today. 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 note that one of our directors has decided to retire this year, Youssef Nazar. Youssef served for over 8 years on our board and has had a long standing association with Brookfield extending over 36 years. Through his own business enterprise, his financial acumen and global geopolitical perspective, he's been instrumental to Brookfield's growth and success. TD wants to take I'd like to take the opportunity today to thank Yousef for his many years of service to Brookfield on behalf of shareholders. It's now my pleasure to introduce the 18 director nominees standing for election this year. To assist you in identifying our directors, their pictures will be shown on the screen as I read the names. The 8 proposed nominees for election by holders of the corporation's Class A Limited Voting Shares are Elise Allen, Angela Brawley, Maureen Kempsterdarks, Diana Taylor, Rafael Miranda, Nie Watseek, Merlo Ferreira and myself. The 8 nominees for election by the holders of the Corporation's Class B Limited Voting Shares are Marcel Coutu, Lord Gus O'Donnell, Jeff Glidner, Jack Cockwell, Bruce Flatt, Robert Harding, Brian Lawson and Timothy Price. 15 of the 16 proposed nominees were elected at last year's annual meeting in June of 2018 and are standing for reelection today. We are also delighted to have Timothy Price standing for election this year. Tim has had a distinguished relationship with the Brookfield Group of Companies dating back some 40 years. He currently serves as Chairman of the Brookfield Funds. His experience and financial knowledge will be of tremendous benefit as we look forward and we look forward to his contributions to the Board. 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. The meeting is now open to receive nominations for the election of the proposed directors. Mr. Chair, I nominate for shareholders named in the management information circular dated April 29, 2019. Thank you, Claire. Mr. Chair, I second the motion. And thank you, Rachel. 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 nominees have been duly elected as Directors of the Corporation. Ladies and gentlemen, many of our Directors are with us here today and are wearing name tags. Sitting in the front row right here. I hope you'll take an opportunity to meet and talk with them after the meeting over some refreshments. The 3rd 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 auditors. It's now in order for someone to move that 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 their remuneration. Thank you, Rachel. Mr. Chair, I second the motion. And thank you, Claire. The resolution has been moved and seconded. The motion is now before the meeting for discussion. Adoption of the motion requires the favorable vote of a shareholders 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 76.5% of the Corporation Class A Limited Voting Shares and 100 percent of the Class B Limited Voting Shares. These proxies direct me to vote over 97.5 percent of the Class A Limited voting shares and all of the Class B voting shares in favor of the resolution. I will now call for the vote on the motion by show of hands. All those in favor? Against? I declare the motion carried. 4th item of business is the approval of the advisory resolution on the corporation's approach to executive compensation, which is described in the management information circular. The corporation has put forth an advisory resolution at this meeting as part of its ongoing efforts to both meet its corporate governance objectives and ensure a high level of shareholder engagement. Because this is an advisory vote, the results will not be binding upon the Board. However, the Board and the Management Resources and Compensation Committee will take into account the results 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 29, 2019, be approved. Thank you, Claire. Mr. Chair, I second the motion. And thank you, Rachel. The resolution has been moved and seconded. The motion is now before the meeting for discussion. Adoption of the motion requires a favorable vote of a majority of Class A Limited Voting Shares. Management has received proxies representing about 74% of the Class A Limited Voting Shares. These proxies direct me to vote about 91% of the Class A Limited Voting shares in favor of the resolution. I'll now call for the vote on the motion by a show of hands. All those in favor? Thank you. Those opposed? I declare the motion carried. The 5th item of business today is the approval of share option plan, which is set forth in greater detail on Page 23 of our management information circular. The corporation's use of options to acquire Class A shares is an important component of its long term incentive compensation for executives and an alternative to cash compensation. It's now in order for someone to move this resolution. Mr. Chair, I move that the resolution approving the new management share option plan described in the management information circular dated April 29, 2019 be approved. Thank you, Rachel. Mr. Chair, I second the motion. Thank you, Claire. The resolution has been moved and seconded and the motion is now before the meeting for discussion. Adoption of the motion requires the 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 blocks. Management has received proxies representing approximately 74% of the corporation's Class A limited voting shares and 100% of the Class B limited voting shares. These proxies direct me to vote 86% 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 the vote on the motion by show of hands. All those in favor? Thank you. Against? I declare the motion carried. The 6th and final item of business today is the consideration of 2 shareholder proposals. The proposals and the corporation's responses to these proposals are set forth in greater detail on Pages 71 to 76 of our management information circular. The 1st shareholder proposal was submitted by BC Government and Service Employees Union General Fund and BC Government and Service Employees Union Defense Fund. At this time, can I have a motion in respect of the 1st shareholder proposal? Mr. Chair, the shareholder proposal submitted by BC Government and Service Employees Union General Fund and BC Government and Service Employees Union Defense Fund and described in detail on Pages 71 to 72 of our management information circular is hereby moved. Thank you, Claire. Mr. Chair, I second the motion. Thank you, Rachel. The proposal has been moved and seconded, and the motion is now before the meeting for discussion. Hello there. Are we good? My name is Emma Pullman, and I am here on behalf of the British Columbia Government and Services Employees Union, General and Defense Fund. And I'm here to we represent 80,000 workers in British Columbia, and I'm here to speak about the motion. And I'm going to let my colleague introduce themselves too. My name is Kay Drummond, and I'm here from Unite Here 75. And Kay actually works at a Brookfield owned property, which is why she is with me today. So right now, a key risk facing companies, including ours, is sexual misconduct. Sexual misconduct can have a dramatic financial impact on investors, can have a crippling reputational cost and less visibly, but no less significant, it hinders our ability to create long term value and that it impacts corporate culture and the ability to attract and retain top talent. This proposal is based on analysis of effective risk management strategies for sexual misconduct from institutional shareholder services. One of their recommendations is to tie executive conduct executive compensation to sexual misconduct, and that is what I'm here to propose today. Our company has responded to this proposal by stating that its 2018 positive work environment policy and reporting mechanism are adequate to prevent sexual misconduct. And here's why we respectfully disagree. A 2019 survey of those working in the financial sector found that 30% had experienced sexual misconduct and that number jumps to 60% when you consider just women. 2 thirds of those did not report using the proper reporting mechanisms. That's consistent with the 2018 survey where nearly 62% of respondents who were harassed or witnessed harassment did not use the protocols their firms had in place to report. I should add that at all firms where these incidents happened, there were sexual misconduct policies in place similar to that of our company. In fact, most companies, including ours, have harassment trainings and policies in place, but evidently, more needs to be done. We believe our proposal will create conditions from the top down to protect investors from the risks associated with sexual misconduct in the workplace and position Brookfield as a leader in the Canadian Financial Sector. Canadians agree prior to today, 1,000 Canadians directly contacted over 140 pension funds regarding this proposal. So with that, be it resolved, shareholders of Brookfield Asset Management request the Board Management Resources and Compensation Committee to prepare a report assessing the feasibility of integrating measures related to workplace sexual misconduct into the performance metrics used to determine incentive compensation paid or awarded to senior executives. This is a motion whose time has come. I urge you to vote for it. Thank you. Hi. My name is Amelia Meister. I'm here on behalf of some of us, and I'm a proxy appointed to the BC Government and Service Employees Union Defense Fund. I have a question today about this shareholder proposal. We were in conversation with executives before this meeting in regards to this shareholder proposal. And what we were told is that trainings were happening, and we are very happy that they have happened and that they are happening. But as Ms. Pullman just mentioned, trainings are not enough. Stand alone trainings are not seen as an effective way to mitigate sexual misconduct, as firms with instances of sexual misconduct all had trainings in place, but they were ineffective deterrents. In acknowledging the inadequacy of trainings alone and the risks of inaction in the era of Me Too, the Institutional Shareholder Services published a study on effective sexual misconduct risk management measures. The first was sexual misconduct risk as specifically enumerated and oversight assigned to a Board committee. The second was the Board has expertise in workplace and employees' issues. The third was material penalties are in place for perpetrators and abettors. The 4th, which this shareholder proposal is specifically addressing, is that executive compensation structures, at a minimum, contain incentives for creating a safe and equitable workplace and 5, the company models the behavior that it seeks to promote. My question and my comment around this is, if the institutional shareholder services who are experts in this field and know how to handle risk management for investors, are recommending this. Why are executives and the Board not recommending that we adopt this shareholder proposal to ensure that we move beyond trainings and policies towards effective prevention of sexual misconduct in the financial Thank you. Well, to start with, let me thank you for the articulate and confident way that you've expressed yourself on the issue. And it's been heard and well debated within the organization. As you're aware from your discussions, Brookfield does not tolerate sexual harassment or any other type of harassment or inappropriate conduct by its executives or its employees. We are committed and have taken steps to ensure a positive work environment for all. And in fact, a number of measures are in place dealing with new hires with affiliate companies, all of whom are subject to similar structures. And of course, at all times, compensation can be used as part of dealing with that as well. So we believe that we have a very robust and proactive program in place, but it's one that I would suggest that we need to watch all the time. And it'll be helpful if you continue to watch us all the time as well and make sure that what we're saying is right. I'd also invite you to speak as you wish with Laurie Pearson, who owns the policy and I think would be very sensitive to a lot of the issues that you've raised. I would direct your attention to Pages 72 and 73 of our Management Information Circular, which describe in detail the position of management, the Board on the matter. 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 shares and the Class B limited voting shares voting as separate classes. Management has received proxies representing about 74% of the Class A Limited voting shares and 100% of the Class B. These proxies direct me to vote over 92% of the Class A Limited Voting Shares and all of the Class B Voting Shares against the proposal. I now call for the vote on the motion by a show of hands. All those in favor? And those opposed? Thank you. So the motion is not carried and the shareholder proposal is not passed, but will not be ignored either. So thank you. The 2nd shareholder proposal was submitted by the Atkinson Charitable Foundation. At this time, can I have a motion in respect of the 2nd shareholder proposal? Mr. Chair, the shareholder proposal submitted by the Atkinson Charitable Foundation and described in detail on Pages 7374 of our management information circular is hereby moved. Thank you. Mr. Chair, I second the motion. Thank you, Rachel. The proposal has been moved and seconded, and the motion is now before the meeting for discussion. Good morning, and here to move shareholder resolution, ballot item number 6. This proposal asked for additional information about workforce practices across the company's global operations. The foundation filed this proposal because research consistently demonstrates that stronger workforce management is material to a company's performance. The foundation also filed this proposal because we understand that decent work for all is a prerequisite for a healthy competitive economy. Brookfield Asset Management has more than 100,000 employees and relies on 1,000 more contract workers in countries with some of the worst labor rights violations in the world, including Colombia, the United Arab Emirates and China. It maintains a diverse portfolio of businesses across sectors, further increasing workforce related risks. Given the size of this global workforce and the risk to human and labor rights where it operates, the foundation seeks disclosure of workforce information so investors can evaluate the company's human capital management practices. Brookfield states in its proxy circular that it has the highest health and safety standards across operating businesses and tracks and monitors performance. As such, the company has already collected information requested in the proposal and there would be a little additional burden in disclosing it to shareholders. What the Company has disclosed to date is qualitative and based on anecdotal success stories, but investors need comparable metrics to evaluate the company's Human Capital Management performance, particularly key performance indicators in areas of occupational health and safety, as well as employee complaints and grievances. In order to provide comparable and consistent information, the metrics reported should align with internationally recognized good practice for reporting. The company argues that its portfolio of companies changes year over year, making comparisons not meaningful. This challenge is not unique. Other companies overcome this issue by providing disclosure at the portfolio level or providing information about any changes to its operations. Ultimately, providing shareholders with additional disclosure on the company's workforce practices will bring value to both investors and Brookfield's workforce. Accordingly, I move that the Board of Directors expand its annual disclosure to shareholders to include key performance indicators on human capital management related to the company's global manufacturing sites and its global supply chain consistent with the guidance set out in proposal in ballot item number 6. Thank you. My name is Sarah Couture Etano here representing shareholder, and I second the motion. Thank you. Thank you very much. Any further discussion on this motion? Thank you to the Atkinson Foundation for surfacing this issue. And I do want to emphasize that Brookfield is committed to conducting business in a sustainable and ethical manner. We place a very high priority on employee health and safety. Which in fact, it's a large part of our discussion at every meeting. And that's an essential part of how we expect our businesses to be managed. I would direct your attention to Pages 74 and 76 of our management information circular, which describes in detail the position of management and the Board on this matter. Adoption of the motion requires the favorable vote of a majority of the votes cast at the meeting by the holders of each of the Class A shares and the Class B limited voting shares, voting as separate classes. Management has received proxies of about 74% of the corporation's Class A shares and 100% of the Class B Shares. These proxies direct me to vote over 89% of the Class A Limited voting shares and all of Class B against the proposal. I'll now call for the vote on the motion by a show of hands. All those in favor? And all those against? Thank you. I declare that the motion is not carried and the shareholder proposal is not passed. I don't want to leave the section without thanking the shareholders for introducing motions and participating in this exercise in that manner. It's how we get better, quite frankly. Ladies and gentlemen, that completes the formal business of today's meeting. Is there any other business from the floor? Since there is no other business, I declared that the meeting is terminated. Now that the meeting has concluded, Bruce Flatt will be leading a presentation on behalf of the management team. At the end of the presentation, we will be available to respond to any questions or comments that you might have. And please note that in responding to questions and in talking about new initiatives and our financial and operating performances, 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, I'd encourage you to review the Business Environment and Risks 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. So we kindly ask that you limit your questions or comments to 3 minutes or less so that we can engage with as many shareholders as possible today. Ladies and gentlemen, if there are no further questions or comments, I'd like to thank you for taking the time and joining us today in person and online through our webcast. We appreciate your participation and hope that you have found the meeting representative and informative. And with that, I will turn the meeting over to Bruce Latt. So good morning. Good morning, everyone. Thank you also for joining. I kind of like this once a year because usually I have to do the hard work all year and Frank does very little. And at this time of year, he has to do all the hard work and I get to do the fun stuff. So it's actually fun once a year. So I have I'll just take a few minutes and tell you a little bit about what happened over the past 12 months since we had the Annual Meeting last and do just go through a little bit about the year end review. And I guess the number one goal, as all of you know that we spent the last 20 years doing, is to continue to grow the corporation into one of the leading alternative asset managers globally. And we've made a number of strides in that this year. So just to pull it all together because often over the year, you see different pieces of it in press releases or information or quarterly letters. But in the last year, in 2018, we raised $31,000,000,000 for our strategies. Not too many people in the world raised that type of money. We deployed $30,000,000,000 into investments on behalf of either our balance sheet, our partnerships or our institutional clients. And we sold $17,000,000,000 of assets. So they were these are investments that would have been purchased years ago that we've affected our operating plans and we sold out of funds or investment strategies. In addition to that, our private fundraising business, and I'll talk about this a little later, but continues to grow. And you can see on this slide that even if you look just back to 2015, the Private Client business has gone from 280 clients, It's just over 600 clients today, and we expect it to be over 1,000 in the next 5 years. And the business continues to expand, and we're really doing that in 3 ways. The first way is the flagship funds that we have that we deploy on behalf of institutional clients and which are the partner of our partnerships. So a number of you would, in addition to owning Brookfield Asset Management, own the partnerships we have that are listed. And the flagship funds really invest beside those partnerships. And we've continued to grow those, and it's good for Brookfield Asset Management and good for our clients because we can put more of their capital to work, but it allows our partnerships to do larger transactions, and we think that gives us a competitive advantage. So we've continued to grow those transactions. 2nd, we're always expanding into new strategies usually adjacent to what we do. So for example, in the last 12 months, we launched a what we call a super core infrastructure fund. So we have a flagship fund for infrastructure investing, but often our clients were coming to us and saying, we want to own infrastructure for the long term. So this is an open ended fund where they can come in from time to time, and these are perpetual assets that we own for them. So it's a different type of fund, but it's adjacent to the things that we do. And then thirdly, on the distribution side, we continue to expand our distribution from our Private Client business where we're taking care of institutional investors to many retail investors and distribute we've distributed a number of our funds through the banking systems mostly in the United States. And if you look at our funds, the 3 large flagship funds, they're invested in real estate, our Private Equity business and infrastructure. And we closed recently our latest real estate fund, which is $15,000,000,000 which I think is the 2nd largest fund in the world. We closed $7,500,000,000 for the first close of our Private Equity business, and we've closed $14,500,000,000 for our first close of our infrastructure business. And both of those last two funds will be larger than the numbers that are on there when we do our second and final close over the next 3 to 6 months. In addition to that, we made one strategic transaction, which we don't often do, but we felt that for our institutional investors that one of the things that we could provide them and add adjacent to the franchise is credit. And we think we found one of the best credit shops in the world. It's run by 2 individuals by the name of Howard Marks and Bruce Karsh. They're sort of legends in the distress investment credit business, and we partnered with them to take Oaktree private. The transaction is still outstanding. We hope it will close in the Q3 this year. And once closed, we will be their partners. We'll own 60% of the business. The management team will own 40% of the business, and they will continue to carry on with the strategies that they've very successfully invested for clients. And what we hope to be able to do is to bring our franchise and client relationships to their business and make it more successful than it ever has been before. And by virtue of that, all of us will become more successful. All of those things has led to the following on this slide. Fee bearing capital has gone up 18%, which in and itself I wouldn't say is that important because fee bearing capital, it's important as an indication, but it's not what flows to the bottom line of the business. Our fee related earnings have gone up by 15%. Our annualized fees and carry, which is really important because our funds most of them have carry in them and it doesn't it isn't seen next year when we start a fund, but it's very, very important to the company over the next 10 years of a fund. And therefore, that's really important. That's gone up by 26 percent. Our FFO has gone up by 13%. And just the cash that we have available for distribution at the parent level has gone up by 11%. So the numbers are all pretty successful and bode well for the future of the company. Just on current opportunities, I guess what I would say three things. We try to use our competitive advantages that we have to invest your money such that it can be advantaged during a higher return than it would otherwise get. If we can't use those competitive advantages in some way, usually we can't optimize the return for you or we're actually taking more risks than one should take with a transaction. And the three things that we have that we spend all of our time trying to optimize are size. So the reason we're getting bigger is because we believe and have believed that size differentiates us from others and therefore the transactions we can do are different than others. If you have $100,000,000 you can't bid on a transaction for $2,000,000,000 If you have $2,000,000,000 you can't bid on a transaction for 5,000,000,000 dollars And in essence, what it does is it the scale allows us to differentiate ourselves from others because there's not too many. There are some and no one should ever think they're the only one, but there's not too many that have the size that we have. So that's differentiation number 1. The second one is that we have built a global platform around the world to be able to put your money to work and on behalf of Instructure clients to put their money to work in these places. And what that means is that we can move money into the countries. We can execute on transactions. We can move it out of the countries. We can take care of it while it's there, and we can work with the people in the country. And we get when we get into problems, which inevitably we do, we have people to help us get out. And that took a long time to do, but we believe in the 30 places where we invest around the world, we have people on the ground to be able to do that. Again, there are people in all of these. Some others that compete with us are global. There are local competitors in every market, but there aren't that many that have the size we have and have the global platform we have. So they can move to all of those countries. That differentiates our capital. And lastly, and I'd say the most important thing that we have which differentiates us from others, doesn't make us better or worse, it just differentiates us, is that our businesses are we have many of many franchises within the company, and we have 100,000 people that work for us. And those people allow us to do things and operate the businesses we think that gives us a differentiation compared to many other people. So if you take the size, the ability to move money around the world and the fact that we have operating people, it gives us a formidable franchise to at least odds favoring that we will invest capital and not make too many mistakes. And if you keep doing that and compounding the growth, that's really the success of Brookfield Asset Management and the success of all of our partnerships and funds. One should not think that the situation would be that way if we didn't get into a business which actually favored us. And the fact is we got, I'd say, lucky or we were astute in figuring out. And I think we got lucky and then we just tried to capitalize on it. But we got into a business which is extremely powerful because the long term return characteristics of the thing we buy are exactly what institutional clients want to own. And in fact, retail investors, when looking at investments for the long term, these are perfect things because they earn cash on cash yields. They can be contract for duration. They have inflation protection. They're generally scarce if you buy them right. Therefore, they appreciate. So in 10 years from now, they're worth more than they were today. And you got a return along the way. And therefore, the returns you get out of these assets are actually better than otherwise you would get. So we got into a very good business and have just tried to capitalize on the things around it that we've done. And irrespective and we often get asked about the markets and what does that mean for this business, what does it mean for those assets. Irrespective of all that, I would say, and politics and the world and what's going on in everything, and I won't really make too many comments on politics. But what we've tried to focus on is just doing the business in the countries we operate in in a good way because we've tried to pick places that have good long term fundamentals. And yes, governments come and go and yes, leaders come and go. Yes, politics comes and goes. But if you pick good places, you'll endure. And but in addition to that, we've been strengthening the balance sheets because we are 10 years into a recession. We've been deploying capital for value knowing that likely many of the investments we make today will go through a recession. Therefore, we should be prepared for that. We've been recycling out of investments, which are completed in our operational strategies, and we should get off of those assets and turn it into cash. And we've been patient waiting for breaks in the market. And it isn't because of our global business, that happens in many different ways. Countries operate at different paces and that so when you say everything's good in the United States that doesn't mean the same thing for India. In fact, there's a large lack of capital in India, so we've been finding lots of opportunities in a place like India. In addition to that, as Frank mentioned, we've spent an enormous amount of time trying to ensure that we operate with the highest ethics within the country in every country that we operate in, that we have the best standards of governance and we have the best standards of sustainability and operations and partly because it's the thing to do and that's what people want us to do, but partly because it's just really good for business. And the example I would use is we have been in the Renewables business for 30 years in a very significant way. Far, far, far before anyone came up with sustainability of power. And we did that because we believe those were the best type of assets to own if you were going to be in the power business. And we didn't we weren't necessarily in coal plants and we weren't in gas plants and all those other types of power. We chose hydro plants and now wind and solar because we believe they were sustainable. And that continues to increase and we have a great competitive advantage of that merely because we've been in the business for a long time. On the institutional side, and when you think of what's a big part of what's driven the business is the institutional side of our business and the clients have continued to allocate significant amounts of capital to the type of products that we invest into, real estate infrastructure, private equity, other types of alternatives. And if you just look at this slide, you can see that if you even just look back to 2,008, the number was $20,000,000,000,000 within these pools of capital. Today, it's we estimate just over 50,000,000,000 and it'll be $100,000,000,000,000 Part of that is just compound math, part of it's money flowing in, but these are enormous sums of capital. And you will have seen this slide before, but we believe and we have believed and we've shown this slide probably for 15 years, numbers the numbers were 5% allocations to alternatives in these funds on average in 2000. Today, they're approximately 25%. We're going we think they're going to 40%. I think if returns if Treasury bills stay at 2% in the U. S, 0% in Japan and negative rates in Germany, I think 40%, maybe 60%. But even if you stick at 40%, what that means is that there is and this sounds like a staggering number there is $25,000,000,000,000 of capital over the next 10 years that will flow into alternatives globally. So there's an enormous drop of money that needs to be invested in these sectors. And essentially, what we are for these institutional clients is we're an outsourced investment manager for them in alternatives. So to sum up that opportunity, there's really 3 points. The first one is these institutions are increasingly allocating more to real assets and alternatives. The plans are under allocated even at the current numbers that they have. So if they have an allocation of 20, often many of them are 10 or 15. So they're even under allocated to what they want to be at. The capital is very substantial that will come into here. And essentially, there are 5 to 10 global managers that can take capital in large portions from those funds, and we fortuitously are one of those. So on the investment side and what often the next question that gets asked after that, yes, if there's that much money, how do you actually find opportunities? And will you make mistakes in investing? And what I'd say is that's all great, but if we can't put the money to work properly, no clients will ever come with us. And same as if you're not successful with us in the partnerships or in BAM, you're probably going to invest somewhere else. So we continue to focus very much on attracting the capital but also making sure we find the opportunities. So just to reflect on a couple. In Real Estate, we think there's many positive fundamentals across the world out there. Interest rates are very low. The returns you can earn in real estate are still high relative to interest rates. There is where we find significant value is where there's operational capabilities required. Specifically as to investment areas, I'd say Europe, India and China offer more opportunity than other places today for us. And the one sector in the United States where we've been investing is in retail because it's in it's extremely out of favor. Two businesses we took private this year just to indicate that. We took GGP private for $14,500,000,000 We don't buy that all retail is going out of business. There's no doubt some of the things you read in the paper are true, but we think they get far overblown and great retail centers. Think of some of the great ones here since we're in Toronto, the great ones here. When you drive by, you will see that the biggest issue they have is fitting the cars in the parking lot. And think of that when you think about whether retail is going to go to business. So our belief is that these retail centers, great ones, will continue. But secondly, we will be able to continue to concentrate them by building apartments, condos, hotels, office buildings and other things on these amazing 100 Acre sites within these malls. 2nd, we took a business private, called Forest City Trust. It was a $12,000,000,000 company. It has an incredible portfolio of assets across the United States, and we're very excited about some of the things that are going on within that business in New York, Washington and San Francisco largely. In Infrastructure and Renewables, I'll just say that there is a systemic underinvestment globally in Renewables. And there are not that many people that can own, develop and build Renewables, and it is going to continue to increase in the next 20, 30 years. Today, the total investment is maybe 10% in Renewables globally, and that could go to 25 percent, and that's an enormous amount. The energy decarbonization going on is clearly going to drive towards renewables. In addition to that, governments have enormous amounts of infrastructure, and it's happening at different paces in different places. But all of that infrastructure is going to end up in private hands. And this will happen over the next 50 years, but it's all going to end up in private hands because governments have too much debt. The right place to own it and the better way to run it is in private hands. And that shift is part of what we're benefiting from in infrastructure. In addition to that, the broad energy chain and what's going on with energy pricing pipelines and different things has been a great opportunity for us. Just a couple of examples. We bought a company called EnWave or Enercare, and it's a residential energy infrastructure provider, provides water heaters and other things into housing. It's a great business, which was in the public markets. We took it private. We think we can expand it very significantly with a lot of the residential franchises and other things that we have within the business. And we're going to continue to do that over the next while. In Private Equity, we've continued to take our operations oriented strategy and all the people we have to deploy that towards companies where we can find value. You often hear it's the top of the market and private equity has lots of money and too much money and you can't find investments. And what I would say is for various reasons, earlier, it's never easy, but we always seem to find opportunities to put money to work in very interesting ways. And a couple examples of those are we just bought an automotive battery manufacturer. We paid CHF13.2 billion. It was a carve out from a company in the U. S. That's listed called Johnson Controls. The company is now named Clarios. And we provide 40% of all car batteries in the world. So every car on the planet has 40% of them has 1 of our batteries in it. This is an amazing company with a huge moat, and we think we can do a number of things with the business over time. And we think we got it for various reasons, which I don't have time to explain right now. But for various reasons, we were able to buy it. Again, where we have a thesis about the future because of our views of the renewable sector and the power sector. We have a thesis about the future of batteries that maybe was different than some others. I'm going to sum up with priorities. And looking ahead, we're really focused on 5 things. And when you go through our materials that we publish on a quarterly basis, I'd encourage you to just think of these 5 things. And if we don't get them if we don't focus on these next year when you show up to the Annual Meeting, you can ask us a question on them. Firstly, all of the things we have, we're trying to enhance the assets we have and the returns we get out of those. We have to complete the fundraising successfully for the flagship funds, which I mentioned we have been raising and we're going to close. We have to close the Oaktree acquisition and we need to successfully ensure that we bring them into the fold in a way that they're comfortable and it fits within our business. We need to continue to put money to work in a large scale in opportunities that meet the targets that we have. And anyone can find opportunities when you have money. It's finding ones that meet the returns you have and match the success that we've had within the funds. And lastly, and maybe most important for this crowd, we need to all of that is to the end of continuing to generate increased cash flows within Brookfield Asset Management, so that we have extra and more and increasing and growing free cash flow such that we can either choose to pay an increased dividend, give it back to shareholders in some way by share repurchases possibly or do something better with it that will enhance the business greater than that. And we continue to be focused on all of those things. So with that, that really sums up 2018. And Brian or Frank or I'd be happy to take questions from any of you. I think there's going to be a mic come to you just so people can hear you and I don't have to repeat the question, if that's okay. Do we have mic or they're going to go to the site? Yes. So mic Could you go there? Thank you very much. Sorry to make you move. I am a shareholder, but and you've done a great job with the business, probably all the rest of you too that are helping Mr. Flat. But the problem seems to be the corporations are being asked as international corporations, they're being asked to do things which they don't have within their power to bring about. And Mr. McKenna, you said to these ladies here that you would do your very best to make sure that in the factories and the businesses that are worldwide, okay, you would respect that human rights and therefore try to bring an end to harassment. But how can you bring that about in China and India, which are not really respectful of human rights? Some are, of course, in the country, but a lot aren't. Certainly, the leadership. So how can you go in there and then say, We're Brookfield, and we're going to have our employees treated this way, the correct way according to the views of North America, for example, the free countries, the Western countries. It seems to me that it's an impossible situation, something like the pipelines with the environmentalists and we'll get into that. But anyway, you should be able Mr. McKenney Huber the politician, okay? You should be able to give an answer to that. And maybe even Mr. Platt who was sitting there listening to you, but I'd like to hear that answer. You've done a great job on everything else. No doubt about it. I just like to Well, thank you for the question. Look, I would just say and Frank, you can add to this, but I would just say the following. We I accept around the world that in there are places that don't operate with the same standards as Canada. India, Brazil, China, to pick 3 where we operate, are tougher to do business every day than doing business in Canada and the United States. Having said that, we try we do our best to operate with global standards and I think we do a pretty good job. It's never perfect. And I'd admitted that to you, it's just tough doing business in those places. And the only reason we go there as a corporation is because the opportunity set available to us and the returns that we get by being there is much more significant than we get here for the same opportunity. The one thing I can say to you is we don't break we don't knowingly ever break the standards that we have. We try to impress that upon all of our people. And ultimately, we believe that, that gives us an enormous competitive advantage within those countries because people expect that standard from us and they know we won't break it. And people often people for example, in India, we're building we have big IT office parks and parks where there's financial institutions. And many of the North American institutions come to us and deal with us because they know that they will get the standard that they deal with us in Toronto, New York and London. And they don't go to developer X because they have no idea what standard they're going to get. So we've tried to turn it into a competitive advantage, but I accept it's always tough. My name is Paul Durnan from Burlington, Mr. Flat. I think we would be best to look at Page 60 of the management information circular and Page 2 of the annual report. And obviously, if you yes, to give you a minute to turn to it. Page 60, management information. And Page 2 of the annual report. The share price, the total return has fallen quite sharply in 2018. And yeah, that's dividend and capital loss, quite sharply. However, when you look at Page 2 on the annual report, the earnings the net income per share is the highest it's been since 2014. And in fact, it's a lot more than 2016 and 'seventeen, really quite a bit more. To me, that's a disconnect. What has happened there? To me, earnings per share is what drives share price more than anything else. It looks like a disconnect to me. Go ahead. So I think I can respond to it in 2 ways. Firstly, stock markets can be stock markets go up and down, a business is a business. One fact of why that's happened is that in December of last year, you recall, I don't know if you will recall, but in December of last year, all stocks went down by 20%. Yes, I do recall that. So when we measure this, I'm quite certain we do the December 31 figure. So I think if we did this now, there'd be it would either be up or it would be a lot less down. So you're picking a one point in time which happened to be a month where the stock price went down. So that chart doesn't actually tell the full story. I'd encourage you to so that's I think that's part of the reason. The second thing is you're right in that net income and cash flow earnings growth over time is what you should be looking at to figure out whether a business is doing well. I would encourage not even to look at a 5 year chart. I would look at the growth over the business over a 5, 10, 15, 20 year period. And looking at it in 1 year often doesn't do it justice because there's things that can happen in the stock market that affect what the trading price of a security is that have nothing to do with the security. And therefore, over time, just look at the business. And what I can tell you is the business we have is doing really well. And therefore, the aberrations in the stock price, sometimes too high and sometimes too low, are just based on technical, sometimes outside of what really is going on in the business. Yes. The whole picture over time is really very good. Thank you very much. You're welcome. Hi, good morning. Can everybody hear me? Good morning. Thank you all. My name is Trevor McDougall. I'm a shareholder. Mr. McKenna, I'm from New Brunswick. I just had a couple of questions. I don't necessarily agree with these points, but there's sort of as an observer and investor, there's sort of a narrative that's out in the market. I just wonder maybe you could comment. One was despite the fact that the stock has done extremely well over the last 15 years and the business models has transitioned as we all know. There seems to be a narrative out there that still there's a level of complexity to the company that means at times the shares trade below what we all would assume would be the intrinsic value of the company, notwithstanding what you just said Bruce about the markets which I completely agree with. So that was one comment or one narrative. And the other one is, which I also don't agree with, but just wanted to ask is you sort of hear from other investors, other shareholders that the fee structure and IDR structure and so forth with the LPs to those shareholders is penal in favor of BAAM, which also I don't agree with, but just wanted to ask you about that. Thank you. Thank you all. Thank you. So maybe I'll take them in reverse order. So the question on fee structures and IDRs. Look, we here's what I'd say. We set up 4 partnerships. We thought it was good for us. We thought the way to do it was to start them largely by just dividending out the shares to our shareholders at Brookfield. That created the structures. And in essence, what these are, are publicly listed institutional clients. So we manage money for Sovereign Fund A, B, C and D. We manage for insurance company A, B, C and D high net worth individual A, B, C and D and 4 partnerships, BBU, BPY, BIP and BEP. And those 4 partnerships pay us for pay BAM for the services that we provide. And what they pay us are essentially they're structured differently, because they're meant to accommodate the public markets. They're structured such that they pay roughly the same as our institutional clients. So what I can say or I just broadly say as a first comment that our all of the clients we have and those four entities are clients of ours, of Brookfield Asset Management. All of them pay roughly the same amount of fees. And yes, there is a fee, and that gets paid to us just like any other client, and that's the way the business was set up. The only other thing I'd just say, we recognize that those entities need to be highly successful for our investors in those companies to be successful. And so we're always cognizant of the fees. We're always looking at them. We're looking at if there's better ways we can do things. And we'll treat we try to treat the shareholders as best we can. So that's the first comment. On complexity, look, I just say the following. The business isn't as simple if you just had a single industry company where you invested in one thing. It's not as simple because we have those 4 listed partnerships, and someone needs to do their arithmetic to figure out how you value the company. But because of those things, this company is one of the most valuable businesses one can ever find. And we've tried to over the last 20 years as we built the business, we've tried to ensure that we explained the business better. If anyone has any different ideas for us, we'll take them. We've tried to do things that streamlined the company, made it simpler. I think it's a lot it's way, way, way better than it was before. It can always be better. But because of those things, this is an unbelievably valuable business. So we won't change. All we're trying to do is just describe them better to people. And we hear those time to time, I guess I'd say a lot less than years ago because I think we have been making progress. And a lot of that progress is because investors like yourself come to us and say, look, I'd like you to do it this way. And often, we do adopt those type of disclosures. Thank you. I'd like to ask 2 questions. One is, I'd like to explain, we heard a lot about the carrier interest, and I'm not sure I understand how that actually takes place. Is that like a dividend, share participation into the business? There's some incentive on the performance, understand. How does it actually take place? And how does it get realized in the end? It's Brian. This is on? Yes. Okay, good. So the carried interest that Bruce was referring to, that is our participation as the manager in the investment returns of any of the private funds that we operate for our clients. So in each of those, we would earn a base fee, but the performance element of it is that we get a fixed percentage of the net profit that's generated in that fund over time. So it is a very longer term stream of earnings. And when Bruce talks about the carry, the target carry, that's what we calculate as being the expected amount of carry that should generate within a fund over its life, assuming that we achieve the target returns, which if you look at the facts, we're in to give you an idea of how much should be building up in the carry each year. So it's like a fairly straightforward approach to give you an idea of how much should be building up in the carry each year. So it's like a dividend more or less? It's a dividend, but the amount of it based on the performance as opposed to a fixed rate. The base management fees are fixed. The carry is based on performance. My second question was that the business is really big and you're investing a lot of money for other people. So there's the minority interest are really huge in the company. And sometime when you look at the earning, for instance, the earning for the shareholder of the BAM itself are in different direction than from those of the whole company. So I'd like to know how do we make sure that we get the interest of the BAM or it might not be in conflict with the minority interest? So I think if I don't get it 100%, please ask again. But I think your question is sometimes the overall income of the company is gets split between the minorities and the shareholders of Brookfield Asset Management. Exactly, yes. How can we make sure that we, shareholders of Brookfield Asset Management right here, all get our fair share? What fair share or how do you think about that? We'd like a little more, right? Our results, the conflicts You'd like a little more. I get it. Okay. So when we report our overall results, everything that gets consolidated goes into total net income and then the shareholders of Brookfield Asset Management get allocated their portion. What I can say is there are times when one business earned a significant amount and there's a big minority in that. In that period of time, you may see that the minority gets more than Brookfield Asset Management. It's just arithmetic. If we deconsolidated, meaning you forgot about who else other people's money and just said this was Brookfield, and that's what we think about every day, That's what comes to just Brookfield Asset Management. And what I can say to you is the management team of Brookfield Asset Management is working for you and is worried about what comes to those shares of Brookfield Asset Management very much. Okay. Thank you. You're welcome. My name is Sid Van Viersen, I'm a shareholder. So Bruce, you mentioned a little bit about the perpetual funds at the beginning. Would you be able to give us an update on them? Help us understand how your clients are thinking about that product relative to your more traditional flagship product? And then help us maybe understand the longer term opportunity there and how it plays into the growth of the business. So the question is on perpetual private funds. And just for everyone's benefit, we raise our private funds that we have are usually 12 year funds. So we raise them, we invest the money over 2 or 3 years and then we can hold the assets for 10 years, and we can extend another 2. So they're basically 12 year funds. We invest for 3. We work things for 5, and we have to sell the assets later on. Our institutional clients invest in those, and our partnerships invest alongside those. What many investors are looking for today is an additional investment, but sometimes that's how they want to invest is they want to own assets which they don't have to dispose they don't have to invest into and then dispose. And the structures that have come about are what are called open ended perpetual funds. And these open ended perpetual funds are they buy assets, they can hold them forever. Assets don't ever have to leave. And the investors, if they want to sell, they sell amongst themselves privately or we arrange a sale for them privately. As interest rates continue to stay low, which it appears like that it appeared they were going to go up a bit, but it appears like that will be for at least 10 more years. Institutional clients are now increasingly looking to put more money into open ended perpetual funds. So we have one for real estate core plus. We buy office buildings, retail, industrial and they're it's a perpetual owner of assets. We have now one for infrastructure and we'll probably do one for private equity. And these are I think the real estate ones, dollars 4,000,000,000 in size. The infrastructure ones, dollars 2,000,000,000 in size. I'm looking around if I'm wrong. I think it's around $2,000,000,000 today. Money has just been coming in. And the private equity one will start. I think they could be very, very large. And these are perpetual, and they just keep going. They hold assets forever. They could be $10,000,000,000 $20,000,000 $30,000,000,000 $50,000,000,000 a piece over time, and I think it'll be a very big business for us and for others. Thank you. Seeing no other questions, I'm going to turn it over to our Chairman to end the meeting. Thank you, Bruce. And thank you all. This company works hard. The employees in it work hard. And we work hard for shareholders. And the best way you can show your appreciation is by coming to this event once a year and letting us know that you care about what we're doing. So I appreciate that enormously. I also am conscious of the fact you have lots of other things to do in your life. So you've taken the time to be with us. So thank you for that, 1 and all. And the meeting is now