Brookfield Asset Management Inc. (NYSE: BAM, TSX: BAM.A) today
announced financial results for the quarter ended
March 31, 2020.
Bruce Flatt, CEO of Brookfield, stated, “Our
business performed well in the first quarter despite global issues,
showcasing the resiliency of our business model and its ability to
withstand periods of disruption. Today, we are in a strong
financial position, with $60 billion of available liquidity, ready
to be deployed globally as opportunities arise.”
Operating Results
UnauditedFor the periods ended March 31(US$ millions, except per
share amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net (loss) income1 |
$ |
(157 |
) |
$ |
1,256 |
|
$ |
3,941 |
|
$ |
6,889 |
|
Per Brookfield
share2,3 |
(0.20 |
) |
0.39 |
|
1.13 |
|
2.12 |
|
Funds from operations2,4 |
$ |
884 |
|
$ |
1,051 |
|
$ |
4,022 |
|
$ |
4,282 |
|
Per Brookfield share2,3,4 |
0.55 |
|
0.69 |
|
2.57 |
|
2.82 |
|
1. Consolidated basis – includes amounts
attributable to non-controlling
interests.2. Excludes amounts attributable
to non-controlling interests.3. 2020 and
2019 per share amounts have been updated to reflect BAM’s
three-for-two stock split effective April 1,
2020.4. See Basis of Presentation on page 9
and a reconciliation of net (loss) income to FFO on page 6.
Most of our operations continued to generate
favorable operating profits, reflecting the essential and durable
nature of their services and activities, however these were offset
by the impact of non-cash, unrealized adjustments including
mark-to-market movements during the last month of the quarter. As a
result, we recorded a net loss of $157 million during the quarter.
We anticipate many of these changes will reverse as markets
recover. Income of $3.9 billion was recorded over the last
twelve months (“LTM”). This compares to last year when a number
of positive gains were recorded. Net loss and income per share
of $0.20 and $1.13 for the respective periods are presented on a
post-split basis.
Funds from operations (“FFO”) were $884 million
for the quarter and $4.0 billion over the LTM. Fee-related earnings
increased by 35% on a quarter-over-quarter basis to $321 million,
and 44% over the LTM before performance fees to $1.3 billion. This
reflects strong fundraising in our long-term and perpetual private
funds, as well as the contribution of fee-related earnings from
Oaktree. FFO from invested capital for the quarter decreased from
the prior year, primarily as a result of lower mark-to-market
gains on financial assets. In addition, certain portfolio companies
across our operating segments experienced production slowdowns
during the quarter as a result of measures taken to mitigate the
spread of Covid-19.
Realized carried interest and disposition gains
during the current quarter were lower due to the timing of
dispositions being delayed, largely as a result of the current
environment. We expect that any planned dispositions and associated
realized carried interest initially forecasted to be recognized in
the first half of 2020 will be recognized later in 2020 or into
2021. We have no required asset monetizations, and therefore
capital recycling initiatives will be done opportunistically on a
value basis.
Dividend Declaration
The Board declared a quarterly dividend of
US$0.12 per share (representing US$0.48 per annum), payable on
June 30, 2020 to shareholders of record as at the close of
business on May 29, 2020. On a post-split basis, the quarterly
dividend is consistent with the previous quarter’s dividend. The
Board also declared the regular monthly and quarterly dividends on
its preferred shares.
Operating Highlights
We raised $45 billion of capital from third
parties over the last twelve months, including $9 billion in the
first quarter of 2020, which, combined with capital assumed on our
acquisition of Oaktree, contributed to a 44% growth in fee-related
earnings, before performance fees, over the same period.
Assets under management and fee-bearing capital
grew over the last twelve months to $519 billion and
$264 billion as at March 31, 2020, representing an increase of
42% and 76% from the prior year, respectively. This growth includes
the acquisition of a 61% interest in Oaktree Capital Management in
September 2019. In addition, fee-bearing capital from our long-term
private fund strategies grew by over 30% as we raised significant
capital across our strategies and enhanced our distribution
capabilities through new channels. During the quarter, we held the
final close of our fourth flagship infrastructure fund, which
reached a total fund size of $20 billion. Today, our latest
flagship real estate, infrastructure and private equity funds are
approximately 50% invested or committed, in aggregate. We expect
that we will continue to find excellent places to deploy this
capital as the current environment begins to stabilize over the
coming months and new opportunities are uncovered. Oaktree’s latest
distressed debt fund has been actively investing over the recent
months and is now approximately 80% invested. We expect that its
next fund vintage will hold its initial fundraising close in the
coming months.
Growth in our fee-related earnings is
attributable to private fund capital raised in our infrastructure
and private equity flagship funds, and across our perpetual private
fund strategies as noted above. These fees are stable, based
primarily on value of initial commitments and not subject to market
volatility. In addition, fee-related earnings benefited from
increased listed partnership fee revenues over the LTM period, as
well as two quarters of fee-related earnings from Oaktree.
We realized $370 million of net realized carried
interest into income over the LTM, and our accumulated unrealized
carried interest now stands at $3.2 billion.
We realized $12 billion through asset sales
across the portfolio over the LTM and we remain focused on
recycling capital across the business and returning capital to our
investors. During the LTM period we recorded $370 million of net
realized carried interest into income, including $59 million during
the current quarter. Our unrealized carried interest generation
decreased $298 million, before the impact of foreign exchange and
costs, during the quarter. For the LTM period, we generated
$379 million of carried interest, before the impact of foreign
exchange or costs. The impact in the current quarter was not
material to our total unrealized carried interest today given the
long-term, defensive nature of our investments, with many being
critical service assets or businesses that have contracted, leased
or regulated cash flows. The long-term nature of our funds also
allows us to be patient when seeking to exit investments and
crystalize the value creation.
Annualized fee revenues and target carried
interest now stand at a run-rate of $5.6 billion.
Annualized fee revenues and annualized
fee-related earnings are now $2.8 billion and $1.3 billion,
respectively. Gross target carried interest stands at $2.8 billion,
or $1.6 billion net of costs, at our share. Growth in both our
annualized fee-related earnings and target carried interest is
attributable to private fund capital raised in
our infrastructure and private equity flagship funds, and
across our perpetual private fund strategies, as well as the
contribution from our investment in Oaktree.
We generated over $2.8 billion of cash available
for distribution and/or reinvestment (“CAFDR”) over the LTM, and as
at March 31, 2020, we had $59 billion of available liquidity to
deploy into new investments.
As of quarter end, we had uncalled fund
commitments of $46 billion, from high credit third-party investors,
available for transactions yet to close and new investments. We
also had $13 billion of liquidity in the form of cash and financial
assets, as well as long-dated, committed undrawn credit facilities,
across BAM and our public affiliates. Subsequent to quarter end, we
further bolstered our liquidity position by opportunistically
accessing the investment grade debt market, raising approximately
$1.3 billion of long-term financing across BAM and the public
affiliates, which included $750 million at BAM, C$400 million at
BIP, and C$350 million at BEP. In addition, we obtained
$2 billion in temporary incremental credit facility capacity
to be used for new investment opportunities.
Our liquidity is increasingly supplemented by
our CAFDR, which is underpinned by perpetual and long-dated fee
revenues contracts and stable distributions from our listed
affiliates. We generated $751 million of CAFDR during the quarter
and $2.8 billion over the LTM, representing increases of 43% and
16% over the prior periods, respectively. Today, we continue to
generate over $2.4 billion of annualized CAFDR, before accounting
for any carried interest.
We invested $40 billion of capital over the
twelve-month period, including $11 billion during the current
quarter.
During the quarter, we closed on a number of
previously announced transactions, including the acquisition of a
49% interest in BrandSafway within our Private Equity business, and
a number of global investments within our Real Estate business. Our
Renewable Power business announced a merger agreement to take
TerraForm Power private, which we expect to be completed in the
second half of 2020.
We deployed $1 billion of capital into the
public markets in many ways, including repurchasing shares of BAM
and our public affiliates at significant discounts to what we
believe their intrinsic value is, as their prices traded down with
the general market sell-off. We have also built up toehold
positions in a number of companies that we feel, like ours, have
been significantly undervalued in the current market
environment.
Given the market dislocation, Oaktree has
significantly increased its pace of deployment, putting
approximately $1.5 billion to work during the quarter within their
flagship distressed debt fund, and an additional $4 billion across
their other strategies.
Subsequent to quarter end, we have deployed
approximately $4 billion of additional capital across our combined
businesses.
Management Information
Circular
Brookfield has completed the filing of its
management information circular (“Circular”) in connection with its
upcoming annual shareholders meeting, which will be held on June
12, 2020.
Due to the current environment and consistent
with the latest guidance from public health and government
authorities, this year’s meeting will be held in a virtual meeting
format. Shareholders of Brookfield will require a control number to
be able to listen to, participate in and vote at the meeting in
real time through a web-based platform instead of attending the
meeting in person. The live audio webcast will be accessible at
https://web.lumiagm.com/194315325. If your shares are held in the
name of an intermediary, you must register online as a proxyholder
to receive a control number. Shareholders without a control number
will be able to attend the virtual meeting, but will not be able to
ask questions or vote at the meeting. See “Q&A on Voting” in
the Circular for more information on how to listen, register for
and vote at the meeting.
As previously announced, Howard Marks,
Co-Chairman of Oaktree, joined the Board on February 13, 2020 and
is standing for election for the first time. Since co-founding
Oaktree in 1995, Mr. Marks has been responsible for ensuring
Oaktree’s adherence to its core investment philosophy;
communicating closely with clients concerning products and
strategies; and contributing his experience to big-picture
decisions relating to investments and corporate direction.
Janice Fukakusa is also being presented as a new
director nominee. Ms. Fukakusa is the former Chief Administrative
Officer and Chief Financial Officer of the Royal Bank of Canada,
positions she held for approximately 10 years, after having served
in various other positions with RBC. Currently, she is the
Chancellor of Ryerson University and serves on various boards of
directors for corporate and not-for-profit organizations.
The Circular also describes the ownership of the
Class B Limited Voting Shares (“Class B shares”) of the company
that, for close to 50 years, have been held by executives of the
Corporation in partnership with one another (the “Partnership”).
The Partnership has today agreed to refine the ownership structure
of the Class B shares by placing stewardship of the Class
B shares with a trust that is controlled by a number of
longstanding members of the Partnership, which is designed to
further reinforce the long-term stability of ownership of these
shares. While there is no material impact on any workings of the
Partnership, the Partnership is nonetheless required to announce
the transfer of all 85,120 Class B shares and file an Early Warning
Report, which can be obtained from the SEDAR profile of Brookfield
at www.sedar.com. Completion of these arrangements is subject to
customary consents and regulatory approvals being obtained. The
head office of the BAM Voting Trust is located at 181 Bay Street,
Suite 300, Toronto, Ontario M5J 2T3. For further information,
please contact Kathy Sarpash, Secretary of BAM Voting Trustee Inc.
at (416) 363-9491 or kathy.sarpash@brookfield.com.
CONSOLIDATED BALANCE SHEETS
Unaudited (US$ millions) |
|
|
March 31 |
|
|
|
December 31 |
|
|
|
2020 |
|
|
|
2019 |
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
9,868 |
|
|
$ |
6,778 |
|
Other financial assets |
|
11,206 |
|
|
12,468 |
|
Accounts receivable and
other |
|
19,356 |
|
|
21,971 |
|
Inventory |
|
9,719 |
|
|
10,272 |
|
Equity accounted
investments |
|
39,747 |
|
|
40,698 |
|
Investment properties |
|
95,479 |
|
|
96,686 |
|
Property, plant and
equipment |
|
85,143 |
|
|
89,264 |
|
Intangible assets |
|
25,151 |
|
|
27,710 |
|
Goodwill |
|
13,338 |
|
|
14,550 |
|
Deferred income tax
assets |
|
3,576 |
|
|
3,572 |
|
Total Assets |
|
$ |
312,583 |
|
|
$ |
323,969 |
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
Corporate borrowings |
|
$ |
7,235 |
|
|
$ |
7,083 |
|
|
|
|
|
|
Accounts payable and
other |
|
40,808 |
|
|
44,767 |
|
Non-recourse borrowings in
entities that we manage |
|
133,760 |
|
|
136,292 |
|
Subsidiary equity
obligations |
|
4,158 |
|
|
4,132 |
|
Deferred income tax
liabilities |
|
14,175 |
|
|
14,849 |
|
|
|
|
|
|
Equity |
|
|
|
|
Preferred equity |
$ |
4,145 |
|
|
$ |
4,145 |
|
|
Non-controlling interests in net assets |
79,637 |
|
|
81,833 |
|
|
Common equity |
28,665 |
|
112,447 |
|
30,868 |
|
116,846 |
|
Total Liabilities and Equity |
|
$ |
312,583 |
|
|
$ |
323,969 |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
UnauditedFor the periods ended March 31(US$ millions, except per
share amounts) |
Three Months Ended |
|
2020 |
|
|
|
2019 |
|
Revenues |
$ |
16,586 |
|
|
$ |
15,208 |
|
Direct costs |
(12,709 |
) |
|
(11,585 |
) |
Other income and gains |
241 |
|
|
32 |
|
Equity accounted (loss)
income |
(212 |
) |
|
344 |
|
Expenses |
|
|
|
Interest |
(1,852 |
) |
|
(1,616 |
) |
Corporate costs |
(24 |
) |
|
(26 |
) |
Fair value changes |
(414 |
) |
|
169 |
|
Depreciation and
amortization |
(1,409 |
) |
|
(1,034 |
) |
Income tax |
(364 |
) |
|
(236 |
) |
Net (loss) income |
$ |
(157 |
) |
|
$ |
1,256 |
|
|
|
|
|
Net (loss) income attributable
to: |
|
|
|
Brookfield shareholders |
$ |
(293 |
) |
|
$ |
615 |
|
Non-controlling interests |
136 |
|
|
641 |
|
|
$ |
(157 |
) |
|
$ |
1,256 |
|
|
|
|
|
Net (loss) income per
share1 |
|
|
|
Diluted |
$ |
(0.20 |
) |
|
$ |
0.39 |
|
Basic |
(0.20 |
) |
|
0.39 |
|
1. Adjusted to reflect the
three-for-two stock split effective April 1, 2020.
SUMMARIZED FINANCIAL
RESULTS
RECONCILIATION OF NET (LOSS) INCOME TO
FUNDS FROM OPERATIONS
Unaudited For the periods ended March 31 (US$ millions) |
Three Months Ended |
|
Last Twelve Months Ended |
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Net (loss) income |
$ |
(157 |
) |
|
$ |
1,256 |
|
|
$ |
3,941 |
|
|
$ |
6,889 |
|
Realized disposition gains in
fair value changes or prior periods |
93 |
|
|
232 |
|
|
482 |
|
|
1,257 |
|
Non-controlling interests |
(1,981 |
) |
|
(1,602 |
) |
|
(7,540 |
) |
|
(6,155 |
) |
Financial statement components
not included in FFO |
|
|
|
|
|
|
|
Equity accounted fair value changes and other non-FFO items |
938 |
|
|
251 |
|
|
830 |
|
|
1,202 |
|
Fair value changes |
414 |
|
|
(169 |
) |
|
1,414 |
|
|
(1,391 |
) |
Depreciation and amortization |
1,409 |
|
|
1,034 |
|
|
5,251 |
|
|
3,466 |
|
Deferred income taxes |
168 |
|
|
49 |
|
|
(356 |
) |
|
(986 |
) |
Funds from operations1,2 |
$ |
884 |
|
|
$ |
1,051 |
|
|
$ |
4,022 |
|
|
$ |
4,282 |
|
SEGMENT FUNDS FROM
OPERATIONS
UnauditedFor the periods ended March 31(US$ millions, except per
share amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Asset management |
$ |
380 |
|
|
$ |
323 |
|
|
$ |
1,654 |
|
|
$ |
1,277 |
|
Real estate |
219 |
|
|
250 |
|
|
1,154 |
|
|
1,597 |
|
Renewable power |
66 |
|
|
154 |
|
|
245 |
|
|
382 |
|
Infrastructure |
137 |
|
|
194 |
|
|
407 |
|
|
455 |
|
Private equity |
165 |
|
|
175 |
|
|
834 |
|
|
916 |
|
Residential |
(9 |
) |
|
(22 |
) |
|
138 |
|
|
60 |
|
Corporate |
(74 |
) |
|
(23 |
) |
|
(410 |
) |
|
(405 |
) |
Funds from operations1,2 |
$ |
884 |
|
|
$ |
1,051 |
|
|
$ |
4,022 |
|
|
$ |
4,282 |
|
Per
share3,4 |
$ |
0.55 |
|
|
$ |
0.69 |
|
|
$ |
2.57 |
|
|
$ |
2.82 |
|
- Non-IFRS measure – see Basis of Presentation on page 9.
- Excludes amounts attributable to non-controlling
interests.
- Adjusted to reflect the three-for-two stock split effective
April 1, 2020.
- Per share amounts are inclusive of dilutive effect of
mandatorily redeemable preferred shares held in a consolidated
subsidiary.
EARNINGS PER SHARE
Unaudited For the periods ended March 31 (US$ millions, except per
share amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
Net (loss) income |
$ |
(157 |
) |
|
$ |
1,256 |
|
|
$ |
3,941 |
|
|
$ |
6,889 |
|
|
Non-controlling interests |
(136 |
) |
|
(641 |
) |
|
(2,042 |
) |
|
(3,547 |
) |
|
Net (loss) income attributable
to shareholders |
(293 |
) |
|
615 |
|
|
1,899 |
|
|
3,342 |
|
|
Preferred share dividends |
(35 |
) |
|
(37 |
) |
|
(150 |
) |
|
(150 |
) |
|
Dilutive effect of conversion of subsidiary preferred shares |
19 |
|
|
(13 |
) |
|
(42 |
) |
|
(85 |
) |
|
Net
(loss) income available to common shareholders |
$ |
(309 |
) |
|
$ |
565 |
|
|
$ |
1,707 |
|
|
$ |
3,107 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares1 |
1,511.6 |
|
|
1,433.0 |
|
|
1,475.4 |
|
|
1,435.4 |
|
|
Dilutive effect of the
conversion of options and escrowed shares using treasury stock
method1,2 |
— |
|
|
29.6 |
|
|
30.1 |
|
|
28.3 |
|
|
Shares and share equivalents1 |
1,511.6 |
|
|
|
1,462.6 |
|
|
1,505.5 |
|
|
1,463.7 |
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share1,3 |
$ |
(0.20 |
) |
|
$ |
0.39 |
|
|
$ |
1.13 |
|
|
$ |
2.12 |
|
|
- Adjusted to reflect the three-for-two stock split effective
April 1, 2020.
- Includes management share option plan and escrowed stock
plan.
- Per share amounts are inclusive of dilutive effect of
mandatorily redeemable preferred shares held in a consolidated
subsidiary.
CASH AVAILABLE FOR DISTRIBUTION AND/OR
REINVESTMENT
Unaudited For the periods ended March 31 (US$ millions) |
Three Months Ended |
|
Last Twelve Months Ended |
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Fee-related earnings1,
excluding performance fees |
$ |
286 |
|
|
$ |
238 |
|
|
$ |
1,217 |
|
|
$ |
889 |
|
Our share of Oaktree’s
distributable earnings |
55 |
|
|
— |
|
|
97 |
|
|
— |
|
Distributions from
investments |
562 |
|
|
383 |
|
|
1,777 |
|
|
1,691 |
|
Other invested capital
earnings |
|
|
|
|
|
|
|
Corporate interest
expense |
(89 |
) |
|
(87 |
) |
|
(350 |
) |
|
(332 |
) |
Corporate costs and
taxes |
(37 |
) |
|
(37 |
) |
|
(135 |
) |
|
(163 |
) |
Other wholly owned
investments |
(46 |
) |
|
(39 |
) |
|
(43 |
) |
|
40 |
|
|
(172 |
) |
|
(163 |
) |
|
(528 |
) |
|
(455 |
) |
Preferred share dividends |
(35 |
) |
|
(37 |
) |
|
(150 |
) |
|
(150 |
) |
Add
back: equity-based compensation |
25 |
|
|
21 |
|
|
91 |
|
|
82 |
|
Cash available for
distribution and/or reinvestment before carried interest and
performance fees |
721 |
|
|
442 |
|
|
2,504 |
|
|
2,057 |
|
Realized carried interest,
net, excluding Oaktree1,2 |
30 |
|
|
85 |
|
|
331 |
|
|
253 |
|
Performance fees |
— |
|
|
— |
|
|
— |
|
|
135 |
|
Cash
available for distribution and/or reinvestment |
$ |
751 |
|
|
$ |
527 |
|
|
$ |
2,835 |
|
|
$ |
2,445 |
|
- Excludes our share of Oaktree’s fee-related earnings and
carried interest.
- Non-IFRS measure – see Basis of Presentation on page 9.
Additional Information
The Letter to Shareholders and the company’s
Supplemental Information for the three months ended
March 31, 2020, contain further information on the
company’s strategy, operations and financial results. Shareholders
are encouraged to read these documents, which are available on the
company’s website.
The statements contained herein are based
primarily on information that has been extracted from our financial
statements for the quarter ended March 31, 2020, which have been
prepared using IFRS, as issued by the IASB. The amounts have not
been audited by Brookfield’s external auditor.
Brookfield’s Board of Directors have reviewed
and approved this document, including the summarized unaudited
consolidated financial statements prior to its release.
Information on our dividends can be found on our
website under Stock & Distributions/Distribution History.
Quarterly Earnings Call
Details
Investors, analysts and other interested parties
can access Brookfield Asset Management’s 2020 First Quarter Results
as well as the Shareholders’ Letter and Supplemental Information on
Brookfield’s website under the Reports & Filings section at
www.brookfield.com.
To participate in the Conference Call, please
dial 1-866-688-9425 toll free in North America, or for overseas
calls please dial 1-409-216-0815 (Conference ID: 9243049) at
approximately 10:50 a.m. EST. The Conference Call will also be
Webcast live at www.brookfield.com under Brookfield Asset
Management/Events and Presentations. For those unable to
participate in the Conference Call, the telephone replay will be
archived and available until midnight May 21, 2020. To access this
rebroadcast, please call 1-855-859-2056 or 1-404-537-3406
(Conference ID: 9243049).
Brookfield Asset Management
Inc. is a leading global alternative asset manager with
over $515 billion of assets under management across real
estate, infrastructure, renewable power, private equity and
credit. Brookfield owns and operates long-life assets and
businesses, many of which form the backbone of the global economy.
Utilizing its global reach, access to large-scale capital and
operational expertise, Brookfield offers a range of alternative
investment products to investors around the world—including public
and private pension plans, endowments and foundations, sovereign
wealth funds, financial institutions, insurance companies and
private wealth investors. Brookfield Asset Management is listed on
the New York and Toronto stock exchanges under the symbol BAM and
BAM.A respectively. For more information, please visit our website
at www.brookfield.com.
Please note that Brookfield’s previous audited
annual and unaudited quarterly reports have been filed on EDGAR and
SEDAR and can also be found in the investor section of its website
at www.brookfield.com. Hard copies of the annual and quarterly
reports can be obtained free of charge upon request.
For more information, please visit our website at
www.brookfield.com or contact:
Communications &
Media:Claire HollandTel: (416) 369-8236Email:
claire.holland@brookfield.com |
|
Investor
RelationsLinda Northwood Tel: (416) 359-8647
Email: linda.northwood@brookfield.com |
Basis of Presentation
This news release and accompanying financial
statements are based on International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board
(“IASB”), unless otherwise noted.
We make reference to Funds from Operations
(“FFO”). We define FFO as net income attributable to shareholders
prior to fair value changes, depreciation and amortization, and
deferred income taxes, and include realized disposition gains that
are not recorded in net income as determined under IFRS. FFO also
includes the company’s share of equity accounted investments’ FFO
on a fully diluted basis. FFO consists of the following
components:
- FFO from Operating Activities represents the company’s share of
revenues less direct costs and interest expenses; excludes realized
carried interest and disposition gains, fair value changes,
depreciation and amortization and deferred income taxes; and
includes our proportionate share of FFO from operating activities
recorded by equity accounted investments on a fully diluted basis.
We present this measure as we believe it assists in describing our
results and variances within FFO.
- Realized Carried Interest represents our contractual share of
investment gains generated within a private fund after considering
our clients minimum return requirements. Realized carried interest
is determined on third-party capital that is no longer subject to
future investment performance.
- Realized Disposition Gains are included in FFO because we
consider the purchase and sale of assets to be a normal part of the
company’s business. Realized disposition gains include gains and
losses recorded in net income and equity in the current period, and
are adjusted to include fair value changes and revaluation surplus
balances recorded in prior periods which were not included in prior
period FFO.
We use FFO to assess our operating results and
the value of Brookfield’s business and believe that many
shareholders and analysts also find this measure of value to
them.
We note that FFO, its components, and its per
share equivalent are non-IFRS measures which do not have any
standard meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other issuers and
entities.
We make reference to Invested Capital. Invested
Capital is defined as the amount of common equity in our segments
and underlying businesses within the segments.
We make reference to Cash available for
distribution and/or reinvestment, which is referring to the sum of
our Asset Management segment FFO and distributions received from
our ownership of investments, net of Corporate activities FFO,
equity-based compensation and preferred share dividends. This
provides insight into earnings received by the corporation that are
available for distribution to common shareholders or to be
reinvested into the business.
We provide additional information on key terms
and non-IFRS measures in our filings available at
www.brookfield.com.
Notice to Readers
Brookfield is not making any offer or invitation
of any kind by communication of this news release and under no
circumstance is it to be construed as a prospectus or an
advertisement.
This news release contains “forward-looking
information” within the meaning of Canadian provincial securities
laws and “forward-looking statements” within the meaning of
Canadian provincial securities laws and “forward-looking
statements” within the meaning of the U.S. Securities Act of 1933,
the U.S. Securities Exchange Act of 1934, and, “safe harbor”
provisions of the United States Private Securities Litigation
Reform Act of 1995 and in any applicable Canadian securities
regulations. Forward-looking statements include statements that are
predictive in nature, depend upon or refer to future events or
conditions, include statements which reflect management’s
expectations regarding the operations, business, financial
condition, expected financial results, performance, prospects,
opportunities, priorities, targets, goals, ongoing objectives,
strategies and outlook of Brookfield and its subsidiaries, as well
as the outlook for North American and international economies for
the current fiscal year and subsequent periods, and include words
such as “expects,” “anticipates,” “plans,” “believes,” “estimates,”
“seeks,” “intends,” “targets,” “projects,” “forecasts” or negative
versions thereof and other similar expressions, or future or
conditional verbs such as “may,” “will,” “should,” “would” and
“could.” In particular, the forward-looking statements contained in
this News Release include statements referring to the
impact Covid-19 may have on the market, economic conditions,
or our business; the future state of the economy and the securities
market; expected financial performance of the business; and
expected future dispositions and associated realized carried
interest.
Where this news release refers to “target
carried interest” it is based on an assumption that existing funds
meet their target gross returns. Target gross returns are
typically ~20% for opportunistic funds; 10% to 15% for value add,
credit and core funds. Fee terms vary by investment strategy
and may change over time.
Although we believe that our anticipated future
results, performance or achievements expressed or implied by the
forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not
place undue reliance on forward-looking statements and information
because they involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, which may
cause the actual results, performance or achievements of Brookfield
to differ materially from anticipated future results, performance
or achievement expressed or implied by such forward-looking
statements and information.
Factors that could cause actual results to
differ materially from those contemplated or implied by
forward-looking statements include, but are not limited to:
(i) investment returns that are lower than target;
(ii) the impact or unanticipated impact of general economic,
political and market factors in the countries in which we do
business including as a result of Covid-19; (iii) the behavior
of financial markets, including fluctuations in interest and
foreign exchange rates; (iv) global equity and capital markets
and the availability of equity and debt financing and refinancing
within these markets; (v) strategic actions including
dispositions; the ability to complete and effectively integrate
acquisitions into existing operations and the ability to attain
expected benefits; (vi) changes in accounting policies and
methods used to report financial condition (including uncertainties
associated with critical accounting assumptions and estimates);
(vii) the ability to appropriately manage human capital;
(viii) the effect of applying future accounting changes;
(ix) business competition; (x) operational and
reputational risks; (xi) technological change;
(xii) changes in government regulation and legislation within
the countries in which we operate; (xiii) governmental
investigations; (xiv) litigation; (xv) changes in tax
laws; (xvi) ability to collect amounts owed;
(xvii) catastrophic events, such as earthquakes, hurricanes
and epidemics/pandemics; (xviii) the possible impact of
international conflicts and other developments including terrorist
acts and cyberterrorism; (xix) the introduction, withdrawal,
success and timing of business initiatives and strategies;
(xx) the failure of effective disclosure controls and
procedures and internal controls over financial reporting and
other risks; (xxi) health, safety and environmental risks;
(xxii) the maintenance of adequate insurance coverage;
(xxiii) the existence of information barriers between certain
businesses within our asset management operations; (xxiv) risks
specific to our business segments including our real estate,
renewable power, infrastructure, private equity, and residential
development activities; and (xxv) factors detailed from time
to time in our documents filed with the securities regulators in
Canada and the United States.
We caution that the foregoing list of important
factors that may affect future results is not exhaustive and other
factors could also adversely affect its results. Investors and
other readers are urged to consider the foregoing risks, as well as
other uncertainties, factors and assumptions carefully in
evaluating the forward-looking information and are cautioned not to
place undue reliance on such forward-looking information. Except as
required by law, the corporation undertakes no obligation to
publicly update or revise any forward-looking statements or
information, whether written or oral, that may be as a result of
new information, future events or otherwise.
Past performance is not indicative nor a
guarantee of future results. There can be no assurance that
comparable results will be achieved in the future, that future
investments will be similar to the historic investments discussed
herein (because of economic conditions, the availability of
investment opportunities or otherwise), that targeted returns,
diversification or asset allocations will be met or that an
investment strategy or investment objectives will be achieved.
Target returns set forth in this news release
are for illustrative and informational purposes only and have been
presented based on various assumptions made by Brookfield in
relation to the investment strategies being pursued by the funds,
any of which may prove to be incorrect. There can be no assurance
that targeted returns will be achieved. Due to various risks,
uncertainties and changes (including changes in economic,
operational, political or other circumstances) beyond Brookfield’s
control, the actual performance of the funds and the business could
differ materially from the target returns set forth herein. In
addition, industry experts may disagree with the assumptions used
in presenting the target returns. No assurance, representation or
warranty is made by any person that the target returns will be
achieved, and undue reliance should not be put on them. Prior
performance is not indicative of future results and there can be no
guarantee that the funds will achieve the target returns or be able
to avoid losses.
Certain of the information contained herein is
based on or derived from information provided by independent
third-party sources. While Brookfield believes that such
information is accurate as of the date it was produced and that the
sources from which such information has been obtained are reliable,
Brookfield makes no representation or warranty, express or implied,
with respect to the accuracy, reasonableness or completeness of any
of the information or the assumptions on which such information is
based, contained herein, including but not limited to, information
obtained from third parties.
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