ASM 2014

May 7, 2014

Slides

Ladies and gentlemen. It's now 10:30 and time to begin the Annual Meeting of Shareholders of Brookfield Asset Management, Inc. My name is Frank McKenna, and as Chair of the Corporation, it's my pleasure to chair today's meeting. On behalf of the Board and management, I would like extend a warm welcome to everyone who is here today, including those joining us through our webcast. I will now call the meeting to order and would ask CST Trust Company by its representatives, Tony Taconya and Kay Harrison to act as scrutineers. I will also ask A. J. Silber to act as Secretary of today's meeting. Now my pleasure to introduce the members of management up here with me will be participating in today's meeting: Bruce Latt, our President and Chief Executive Officer and Brian Lawson, Chief Financial Officer. As outlined in our management information circular, there are 4 items of business to be considered today. First, to receive the consolidated financial statements of the corporation for the fiscal year ended December 31, 2013 secondly, to elect directors who will serve until the end of our next annual meeting of shareholders 3rd, to appoint the external auditor and authorize the directors to set their remuneration and 4th, to consider an advisory resolution on the corporation's approach to executive compensation. In connection with the business to be dealt with today, unless a shareholder or 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 second various resolutions. Although this procedure will assist in the handling of the 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 the meeting and the management information circular were disseminated to voting shareholders in accordance with all applicable legal requirements. I've asked the Secretary to keep a copy of the notice and proof of mailing with the minutes of this meeting. The minutes of last year's meeting of shareholders held on May 9, 2013 are also available should any shareholder wish to review them. Based upon the scrutineers preliminary report on attendance, the Secretary has confirmed that there is a quorum present. I therefore declare this meeting properly constituted for the transaction of the business for which it has been called. Now turning to the first item of business, I will now table the Corporation's 2013 annual report to shareholders, which includes the corporation's consolidated financial statements for the fiscal year ended December 31, 2013, together with the external auditors report. Copies of our annual report have been mailed to our shareholders who so requested and are also available here today. The second item of business at our meeting today is to elect directors who will serve until the end of our next annual meeting of shareholders. Now my pleasure to introduce the 16 Director nominees standing for election this year. To assist you in identifying your directors, their pictures will be shown on the screen as I read their names. The 8 proposed nominees for election by holders of the Corporation's Class A Limited voting shares are Marcel Coutu, Maureen Kempster Darkse, Lance Liebman, Youssef Nasser, Jim Pattison, Doctor. Seke, Diana Taylor myself, Frank McKenna and the 8 nominees for election by the holders of the corporation's Class B Limited Voting shares are Jeff Blittner, Jack Cockwell, Bruce Flatt, Robert Harding, David Kerr, Bill Lind, Lord Gus O'Donnell and George Taylor. All 16 proposed nominees were elected at our last annual meeting in May 2013 and are standing for reelection today. Additional information for all 16 Director nominees is set out in our management information circular, which was posted on our website for shareholder review and available from the company upon request. The meeting is now open to receive nominations for the election of the proposed directors. 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 March 25, 2014. Thank you, Amar. Mr. Chair, I second the motion. Thank you, Andy. 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. Ladies and gentlemen, many of the Directors are with us here today and are wearing name tags. I hope you'll have an opportunity to meet and talk with them after the meeting over some light refreshments. Thank you. The 3rd item of formal 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 your 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 remuneration. Thank you, Andy. The chair, I second the motion. And thank you, Ameri. The resolution has been moved and seconded, and the motion is now before the meeting for discussion. Adoption of this 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 classes. Management has received proxies representing approximately 68% 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 98% 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, signify. Thank you. Against, I declare the motion carried. The next item of formal 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 to 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 the resolution. Mr. Chair, I move the advisory resolution accepting the approach to executive compensation described in the management information circular dated March 25, 2014 be approved. Thank you, Amar. Mr. Chair, I second the motion. And thank you, Andy. Any questions on the motion? Adoption of this motion requires the favorable vote of a majority of the Class A Limited Voting shares. Management has received proxies representing approximately 65% of the corporation's Class A Limited voting shares. These proxies direct me to vote over 96% of the Class A 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, raise your hands, please. And all of those against, I declare the motion carried. Ladies and gentlemen, that completes formal part of today's meeting, and we will now move forward to management presentation. Brian Lawson will be presenting on behalf of the management team. And at the end of that presentation, Bruce Flatt will be available to respond to any questions or comments you might have. Now please note, or required to say this 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, I would encourage you to review our management's discussion and analysis in our annual report, which is available today at the registration desk or on our website. And now, Brian Lawson. Thank you, Frank, and good morning, everybody. So there we go. What I was proposing to do is to cover off really three things: give an update on the business, talk about where we see global capital flows going and how that impacts us and go over some of our key priorities. So just turning to the overview, our operations now encompass nearly $200,000,000,000 of assets in 20 countries around the world. Still very focused on the key operating platforms that we've been in for the past number of years and on the type of countries that we feel offer the best prospects for our businesses. And this reach does give us tremendous insight and knowledge and the operating employees and the operating base so that we can really get at the right assets, the best assets in the right place and for the right price as well. If you think about the business, there's really 2 elements of it that I'll say drive shareholder value. And the first part of it is the fee bearing capital that we manage on behalf of our clients and it now stands at roughly $84,000,000,000 That generates annualized fees and target carried interest in excess of $1,000,000,000 now. So it's grown significantly over the past number of years. And clearly, the objective here is to continue to expand that fee bearing capital, but more importantly, to create outsized investment returns for our clients, hit the targets and exceed them because we participate in the investment returns of the funds and in the increases in the distributions that we make out of the listed entities. The other part of the business is we do have $26,000,000,000 on our balance sheet that is invested in these various assets And that creates a tremendous alignment of interest with our clients because we are investing in the same assets as they are and managing them for our collective benefit. And over the past number of years, with the ongoing development of our listed entities, we now sit at the position where over 85% of our balance sheet of this invested capital is in the form of listed entities. And that's really in the form of about 4 or 5 principal investments. So our balance sheet is very, very simple. It's very transparent. And also this capital generates more than $1,300,000,000 of annualized cash distributions. So we get a lot of cash flow coming into Brookfield to put to reinvest in the business and pay distributions and buy back stock and other things to create value. There really hasn't been much change in the business model over the past many years. It's really all about sourcing equity from our clients, using that global reach to put it into the best assets, buy them at a very disciplined manner so that we can do that on a value basis, finance them on a very secure long term basis and then really use the operating platforms to continue to work the assets and drive the returns to increase the investment returns. We've got a lot of momentum in the business. The past number of years have been quite fruitful in that regard. And a couple of things I'd point to, over the past 18 months, we've raised nearly $15,000,000,000 of capital in our funds. And that includes a $7,000,000,000 infrastructure fund and a nearly $5,000,000,000 property opportunity fund. And this gives us a lot of flexibility and opens the door for us to pursue quite significant transactions and it is very important competitive edge as we conduct these activities. And what we've also been able to do is to greatly expand the number of clients in our funds from, as you see on the slide, from 40 back in 2,008 to well over 200 today. And I would say that we're really just barely scratching the surface, particularly in some of the big markets like America. We made great progress, but there's a lot more of institutional relationships to develop. So there's a lot of room for growth there. The other, I'd say, very significant achievement of last year, and there were a number, but I just really wanted to focus on 2 of them, was launching Brookfield Property Partners and then we're going to be completing the merger of it with Brookfield Office Properties in June. We received a tremendous support for the transaction in terms of the initial merger and take up. And what this does is establish an entity that has a portfolio that is it's hard to find another listed portfolio that would be similar in terms of the scale of the diversification and the global reach. And so we think Brookfield Property Partners is well set up to be a very, very attractive security for people to own property investments. The other thing that has been going on was with the a lot of the capital that we put to work during the global financial crisis and particularly things that related to the U. S. Economy have recovered very well. We're seeing tremendous strength there. And it's enabled us to monetize and realize on a number of these investments, which general growth was obviously a very successful one for our clients, which even over 30% IRR that led to a significant gain for our clients, and we participate in their profits through a carried interest that comes to us, which exceeded $500,000,000 So that was very successful transaction for us. And we've been able to monetize a number of other private equity investments to lock in favorable returns for our clients as well. And this naturally leads to doing the raising the capital and monetizing the investments and getting the strong investment returns has just feed on itself in terms of the growth in the fee bearing capital and the fee revenues. One of the things that's been helpful to us is that the real assets of the type that we own are very much in demand by investors. It's a trend that you've really seen come to bear over the past several years and it makes a lot of sense because of the nature of these assets. We often characterize them as yield enhanced real return fixed income alternatives and they fit portfolios for pension plans and a number of investors that are focused on achieving these types of extremely well. And as we'll talk later on, there's a lot of money that is flowing into these types of investment strategies. Part of what's driving that is the returns really do speak for themselves. They've been a and we believe these asset classes are set up to deliver these types of returns over a very, very long period of time into the future as well. And as I think you all know, we do own a number of these very high quality assets, and I'll just touch on a few of them. Obviously, the office properties has been central to the business for many years. We own over 100,000,000 square feet that we own and operate, and we've recently acquired an interest in a fantastic portfolio in Shanghai, and we've started to branch out into India as well. So while the history of that's been principally in North America and in the UK and in Australia, we're broadening out globally. Ala Moana, which is a spectacular retail mall in Hawaii, it's consistently one of the most profitable malls in America. Hydroelectric, over 200 facilities there. And we've been developing a wind energy capability over the past number of years. Again, mostly North America, more recently, we acquired a large wind business in Ireland. And then we own some of the great infrastructure projects around the world, this coal terminal in Australia and a number of other very compelling projects. As I mentioned, there's a lot of money flowing into institutional client accounts and that is projected to increase significantly. And with also the increase in clients' allocations towards real assets, we think the pie is growing and we are well set up to capture a bigger slice of that pie. And why is that? Some of the things that we've talked about, the geographic region, those operating capabilities set us up very well to find the assets and manage them effectively and the industry expertise as well. And having that large scale capital is important when you're pursuing some of these larger transaction and does position us very well competitively. And that, of course, has translated into a good rate of return for Brookfield shareholders. But more importantly, the returns for our clients have been very, very strong as well. And that really just feeds back into the fee capital, the fee earnings and then translates back into good returns for Brookfield shareholders. So I did want to touch on some of the key priorities that we're focusing on over the next period of time. The first one is we are looking continuing to look at expanding the product offering asset class. You've seen us expand our capabilities in multi res, residential and industrial and moving into China and India. Again, selectively, very focused, but these are areas where our clients want us to go, where we think there's great value. And so we're expanding on that front. The client and other strategic relationships, we've had the benefit of developing some very strong relationships. But as I mentioned, the U. S. Market in this regard is huge. And we've really just scratched the surface on it. So there's lots of room for growth there. The people and the operating capabilities, the organization has grown a lot. We've been fortunate in being able to attract and develop a lot of fantastic people. And I think our ability to continue to that culture and also share all the knowledge that exists across the 28,000 people is a tremendous asset for the organization. So that's a big priority as well. Capital allocation, that $26,000,000,000 what can we be doing with that to optimize the returns on that invested capital and increasing the brand awareness and just the understanding of value, really two things there. One is to ensure that our brand as an asset manager continues to be developed across the world. And then also understanding the value to make sure that our securities are trading appropriately in the market as well. In terms of fund offerings, that's obviously key. A couple of areas that we would expect to see we expect to see growth in across the board, but a couple of particular areas. On the private equity side, we're working on developing larger funds there, expanding the capabilities and the reach there. A credit platform, it's something that's in demand from our clients and it fits very well with the credit culture within the firm. So it's very much of a logical extension of our capabilities. We do have 2 very large infrastructure and property funds. They're very well invested to date. So the objective there is to continue to finish the investment programs there and then that positions us to go out and launch the successor funds. And then again, we should be able to achieve larger funds as we go forward. We made a the conclusion of the BPO, BPY merger is a huge step forward for Brookfield Property Partners and we'll continue to focus very much on making sure that security trades very well and it's a success. And then lastly, we continue to muse about a list of sustainable resources fund again. This would not be at the same scale of the other listed entities, but with strong capabilities in that regard, we think it would be a very good security and very successful. And then in terms of investment opportunities, I think the themes here are pretty consistent over the past period of time. We will continue to focus on our core areas of strength over the past while, obviously North America, South America, Australia, but we are seeing a lot of opportunities in Europe. We've built a very good base there. And then as I mentioned, we've been expanding into China and India and see those as being tremendous areas of opportunity. It really hits on the themes down below in terms of Europe and the ongoing, I'll say, recapitalization and recovery there. In the developing markets, we've capital flow away from these markets. And any time that happens, it's a great time to be putting capital in because of the value opportunities that arise there. And then finally, with some of the changes in pricing within the commodity complex, we are seeing opportunities with respect to infrastructure that's related to those commodity producers. Lastly, on the monetization side of things, we are seeing the U. S. Economy continue to recover and that's creating a lot of opportunities for us in that regard to recycle capital and take returns and crystallize them for our clients. So really in summary, we do our CRs believe that we've we're well set up to take the company to the next level. And we feel quite fortunate in a number of things that have happened over the past several years. And there's no doubt some things have, I'll say, fallen our way. But a lot of it is also due to the efforts of the employees, the 20,000 employees within the organization, but also the tremendous support that we've received from our clients, from a number of our business partners and our shareholders and many of you are in the room today. So thank you for your support. So that concludes the formal remarks that we wanted to make. And I think at this stage, we'd like to open it up for any questions of Bruce or myself, where we can direct questions elsewhere as well. So thank you. If there are any questions, we can answer them from here or of course, we'll be around afterwards if anyone wants to speak to us. So, Brian or I or Frank would be happy to answer anything if there is anybody. You mentioned you have wind farms. Are there any solar funds in your assets? Solar, Mike. So the question is about solar. And we do have one group of assets we purchased 18 months ago. There is 1 solar facility we have in we're able to build, which is in Puerto Rico. We're not planning on building it right now and it's sort of in mothball stage, but and the reason for that is that the solar industry, while it is getting better every day and costs keep coming down, it still demands a lot of government incentives to make it economic. So we continue to watch it. Wind used to be that way in a dramatic sense and the cost came down. So we continue to watch it and I expect in the next 5 to 7 years, we will get significantly involved in the solar business, but we always try to wait until it becomes more late stage and it's less dependent on government incentives. But that's definitely coming and so it probably will fit into our business longer term in the renewable partnership. I see no other questions. So we truly thank you for coming out. We thank everyone for being a participant in Brookfield, and we hope to see you next year. Thank you very much.