Brookfield Asset Management Inc. (NYSE: BAM, TSX: BAM.A) today
announced financial results for the quarter ended
September 30, 2020.
Bruce Flatt, CEO of Brookfield, stated, “Our
third quarter results reflect the strength of both our operating
businesses and our asset management franchise. We generated record
operating FFO in the quarter, and over the last twelve months
earned a record $2.8 billion of cash available for distribution
and/or reinvestment, underlining the stability and continued growth
of our cash flows. With over $75 billion of capital for deployment,
our business is stronger than it has ever been.”
Operating Results
Unaudited For the
periods ended September 30 (US$ millions, except per share
amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
2020 |
|
2019 |
|
|
2020 |
|
|
|
2019 |
|
Net income attributable to shareholders1 |
$ |
172 |
|
$ |
947 |
|
|
$ |
69 |
|
|
|
$ |
3,845 |
|
Per Brookfield
share1,2 |
0.10 |
|
0.61 |
|
|
(0.02 |
) |
|
|
2.48 |
|
Funds from operations1,3 |
$ |
1,039 |
|
$ |
826 |
|
|
$ |
4,288 |
|
|
|
$ |
4,341 |
|
Per Brookfield
share1,2,3 |
0.65 |
|
0.54 |
|
|
2.70 |
|
|
|
2.86 |
|
Net
income4 |
$ |
542 |
|
$ |
1,756 |
|
|
$ |
530 |
|
|
|
$ |
6,744 |
|
1. Excludes amounts attributable to
non-controlling interests.2. 2019 per share
amounts have been updated to reflect BAM’s three-for-two stock
split effective April 1, 2020.3. See Basis
of Presentation on page 9 and a reconciliation of net (loss) income
to FFO on page 6.4. Consolidated basis –
includes amounts attributable to non-controlling interests.
Funds from operations (FFO) were
$1.0 billion for the quarter and $4.3 billion over the last
twelve months. Fee-related earnings were $372 million for the
quarter and $1.4 billion over the last twelve months, representing
increases of 22% and 36% from the prior periods, respectively. This
reflects record fundraising and deployment across our
long-term and perpetual private funds, growth in our listed
affiliates, and a full year’s contribution of fee-related earnings
from our credit business. FFO from invested capital increased 34%
from the prior year quarter and was driven by positive results
in several of our private equity businesses and financial assets
which reversed losses from the second quarter. We also recorded
$162 million of disposition gains in FFO. All of this led to
overall net income in the quarter of $542 million. Net income
attributable to shareholders was $172 million, or $0.10 per
share.
Regular Dividend
Declaration
The Board declared a quarterly dividend of
US$0.12 per share, payable on December 31, 2020 to shareholders of
record as at the close of business on November 30, 2020. The Board
also declared the regular monthly and quarterly dividends on its
preferred shares.
Operating Highlights
We raised $18 billion of private fund capital
during the quarter, and approximately $40 billion over the last
twelve months. Growth in fee-bearing capital over the last twelve
months led to a 36% increase in fee-related earnings over the same
period.
Fundraising included $12 billion of previously
announced commitments to our latest distressed debt fund and $6
billion of commitments raised across our perpetual core strategies,
private credit funds and other co-investments and separately
managed accounts. We launched our European core-plus real estate
fund during the quarter raising over €1 billion and exceeding its
initial target, and our second vintage private infrastructure debt
fund has raised over $1.8 billion to date, compared with its
predecessor fund of approximately $875 million. Most of our
credit funds and perpetual fund strategies earn fees on invested
capital, as such the capital raised in the period will become
fee-earning as it is invested.
Fee-bearing capital increased $12 billion during
the quarter to $290 billion as at September 30, 2020. Growth
in fee-bearing capital includes $10 billion of growth across our
listed affiliates, as well as $4 billion of capital invested across
our credit and perpetual private funds. This growth was partially
offset by distributions and the end of the investment period of our
third flagship infrastructure fund. We currently also have
approximately $30 billion of committed capital across our
strategies that will earn $300 million of fees annually once
deployed.
We generated $703 million of carried
interest during the quarter, and our accumulated unrealized carried
interest now stands at $4.0 billion.
We recorded $482 million of realized
carried interest into income over the last twelve months, including
$42 million during the quarter related to distributions
received from the sale of shares in one of our private equity
businesses. Real asset transactions slowed meaningfully over the
last six months as a result of the economic shutdown, but we have
seen the pipeline of deal activity for both private and public
market transactions begin to pick up again, and we expect to
realize an increasing amount of carried interest as we complete
monetizations within our mature vintage flagship funds.
Annualized fee revenues and target carried
interest now stand at a run-rate of $6.1 billion.
Growth in fee-bearing capital generated a
commensurate increase in annualized fee revenues and target carried
interest. Annualized fee revenues and annualized fee-related
earnings are now $3.0 billion and $1.4 billion, respectively, and
gross target carried interest stands at $3.1 billion, or $1.7
billion net of costs, at our share.
We generated a record $2.8 billion of cash
available for distribution and/or reinvestment (CAFDR) over the
last twelve months. As at September 30, 2020, we had $76
billion of capital available to deploy into new investments.
Excluding realized carried interest, CAFDR
increased 27% over the last twelve month period. The increase is
due to the growth in our asset management franchise, and continues
to be very resilient due to the contracted and predictable nature
of both our fee-related earnings and distributions from listed
affiliates.
Deployable capital of $76 billion includes $16
billion of cash, financial assets and undrawn lines of credit in
BAM and our affiliates and $60 billion of uncalled fund commitments
available for new transactions. Liquidity remains very strong for
high credit-worthy counterparties such as ourselves, and during the
quarter we completed $1 billion of corporate financings across BAM
and the listed affiliates. Subsequent to quarter-end, we also
issued at a corporate level, $400 million of green subordinated
notes with the proceeds to be deployed into eligible green
projects.
We invested $14 billion during the current
quarter, and $48 billion over the last twelve months.
During the quarter we invested $9 billion of
private fund capital, along with $3 billion of co-investment
capital, bringing our latest vintage of flagships to approximately
60% committed. We expect to be in the market with our next round of
flagship funds shortly, starting with our next flagship real estate
fund in early 2021. We funded BPY’s purchase of close to $1 billion
of its units/shares through substantial and normal-course issuer
bids, and repurchased approximately $100 million of BAM shares
since quarter end. We will remain active with repurchases as long
as the shares continue to trade at meaningful discounts to our view
of their underlying value. We also continued to increase the public
floats of Brookfield Infrastructure Corporation (BIPC) and
Brookfield Renewable Corporation (BEPC) by selling approximately
$500 million of shares in those two securities into the
markets.
BAM Reinsurance
We intend to distribute, in the first half of
2021, a special dividend in the form of a newly created “paired”
entity, Brookfield Asset Management Reinsurance Partners (“BAM
Reinsurance”). We expect this special dividend to be
approximately $500 million, or approximately 33 cents per share of
BAM. BAM Reinsurance is the entity through which Brookfield will
conduct its reinsurance and other related activities for the
benefit of all shareholders of both entities.
BAM Reinsurance will be a paired share to
Brookfield Asset Management Inc. and will aim to replicate the
success of the structure used by us to create Brookfield Renewable
Corporation and Brookfield Infrastructure Corporation. BAM
Reinsurance will allow us to grow our reinsurance business in the
most efficient fashion, and also provide flexibility to
Brookfield’s shareholders in how they can own their interests in
Brookfield. The attributes of these shares should be more
attractive to some groups of shareholders.
As with our other paired entities, the Class A
shares of BAM Reinsurance will be structured with the intention of
being economically equivalent to the Class A shares of BAM. Each
share of BAM Reinsurance will have the same dividend as a BAM share
and shares of BAM Reinsurance will be exchangeable into shares of
Brookfield at the shareholder’s option. Our infrastructure,
renewable, and property partnerships successfully implemented this
type of structure, pairing entities with shares having economic
equivalency with their associated publicly traded units. In a
similar manner, BAM Reinsurance will offer Brookfield shareholders
an alternative security through which to hold their interests in
the business and are expected to trade substantially at the same
price as shares of Brookfield.
In order to launch BAM Reinsurance, Brookfield
intends to pay a special dividend in the form of a fraction of a
share of BAM Reinsurance for a given number of Class A shares of
Brookfield. Details will be provided at the time of the declaration
of the dividend, but from a corporate perspective, the transaction
will be analogous to a stock split as it will not result in any
underlying change to aggregate cash flows or net asset value,
except for the adjustment for the number of shares outstanding and
owned by all shareholders.
“BAM Reinsurance is intended to provide our
shareholders with a choice of holding either shares of Brookfield
or the new shares of BAM Reinsurance, depending on what is most
attractive to them based on their own circumstances,” stated Nick
Goodman, Chief Financial Officer of Brookfield. “The very positive
market reception, including in the case of the most recent listing
of Brookfield Renewable Corporation, has encouraged us to offer a
similar structure for our own shareholders, enhancing shareholders’
ability to meet their own financial planning objectives, while also
facilitating the growth of our overall organization.”
The special dividend will require the filing of
a registration statement (including a prospectus) with the U.S.
Securities and Exchange Commission and a preliminary prospectus
with the Canadian securities regulatory authorities. BAM
Reinsurance also intends to apply to list its class A shares in the
United States on the NYSE and in Canada on the TSX. Subject to the
receipt of all regulatory approvals, Brookfield anticipates
completing the special distribution in the first half of 2021.
CONSOLIDATED BALANCE SHEETS
Unaudited (US$ millions) |
|
September 30 |
|
|
|
December 31 |
|
|
|
|
|
|
|
2020 |
|
|
|
|
|
|
|
2019 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
$ |
8,723 |
|
|
|
|
|
|
$ |
6,778 |
|
Other financial assets |
|
|
|
|
|
15,997 |
|
|
|
|
|
|
|
12,468 |
|
Accounts receivable and
other |
|
|
|
|
|
22,015 |
|
|
|
|
|
|
|
21,971 |
|
Inventory |
|
|
|
|
|
10,374 |
|
|
|
|
|
|
|
10,272 |
|
Equity accounted
investments |
|
|
|
|
|
40,911 |
|
|
|
|
|
|
|
40,698 |
|
Investment properties |
|
|
|
|
|
96,495 |
|
|
|
|
|
|
|
96,686 |
|
Property, plant and
equipment |
|
|
|
|
|
89,895 |
|
|
|
|
|
|
|
89,264 |
|
Intangible assets |
|
|
|
|
|
25,245 |
|
|
|
|
|
|
|
27,710 |
|
Goodwill |
|
|
|
|
|
13,872 |
|
|
|
|
|
|
|
14,550 |
|
Deferred income tax assets |
|
|
|
|
|
3,556 |
|
|
|
|
|
|
|
3,572 |
|
Total Assets |
|
|
|
|
$ |
327,083 |
|
|
|
|
|
|
$ |
323,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate borrowings |
|
|
|
|
$ |
8,587 |
|
|
|
|
|
|
$ |
7,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
other |
|
|
|
|
|
46,656 |
|
|
|
|
|
|
|
44,767 |
|
Non-recourse borrowings in
entities that we manage |
|
|
|
|
|
140,230 |
|
|
|
|
|
|
|
136,292 |
|
Subsidiary equity
obligations |
|
|
|
|
|
3,989 |
|
|
|
|
|
|
|
4,132 |
|
Deferred income tax
liabilities |
|
|
|
|
|
14,314 |
|
|
|
|
|
|
|
14,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity |
$ |
4,145 |
|
|
|
|
|
|
$ |
4,145 |
|
|
|
|
|
Non-controlling interests in net assets |
|
80,156 |
|
|
|
|
|
|
|
81,833 |
|
|
|
|
|
Common equity |
|
29,006 |
|
|
|
113,307 |
|
|
|
30,868 |
|
|
|
116,846 |
|
Total Liabilities and Equity |
|
|
|
|
$ |
327,083 |
|
|
|
|
|
|
$ |
323,969 |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
UnauditedFor the
periods ended September 30(US$ millions, except per share
amounts) |
Three Months Ended |
|
Nine Months Ended |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Revenues |
$ |
16,249 |
|
|
$ |
17,875 |
|
|
$ |
45,664 |
|
|
$ |
50,007 |
|
Direct costs |
(12,372 |
) |
|
(13,910 |
) |
|
(34,527 |
) |
|
(38,880 |
) |
Other income and gains |
34 |
|
|
51 |
|
|
304 |
|
|
972 |
|
Equity accounted income
(loss) |
139 |
|
|
414 |
|
|
(704 |
) |
|
1,761 |
|
Expenses |
|
|
|
|
|
|
|
Interest |
(1,757 |
) |
|
(1,926 |
) |
|
(5,324 |
) |
|
(5,375 |
) |
Corporate costs |
(25 |
) |
|
(23 |
) |
|
(74 |
) |
|
(72 |
) |
Fair value changes |
(31 |
) |
|
394 |
|
|
(1,598 |
) |
|
(835 |
) |
Depreciation and
amortization |
(1,470 |
) |
|
(1,299 |
) |
|
(4,255 |
) |
|
(3,567 |
) |
Income
tax |
(225 |
) |
|
180 |
|
|
(594 |
) |
|
(295 |
) |
Net income (loss) |
$ |
542 |
|
|
$ |
1,756 |
|
|
$ |
(1,108 |
) |
|
$ |
3,716 |
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to: |
|
|
|
|
|
|
|
Brookfield shareholders |
$ |
172 |
|
|
$ |
947 |
|
|
$ |
(777 |
) |
|
$ |
1,961 |
|
Non-controlling interests |
370 |
|
|
809 |
|
|
(331 |
) |
|
1,755 |
|
|
$ |
542 |
|
|
$ |
1,756 |
|
|
$ |
(1,108 |
) |
|
$ |
3,716 |
|
|
|
|
|
|
|
|
|
Net income (loss) per
share1 |
|
|
|
|
|
|
|
Diluted |
$ |
0.10 |
|
|
$ |
0.61 |
|
|
$ |
(0.53 |
) |
|
$ |
1.24 |
|
Basic |
0.10 |
|
|
0.62 |
|
|
(0.53 |
) |
|
1.26 |
|
1. Adjusted to reflect the three-for-two stock
split effective April 1, 2020.
SUMMARIZED FINANCIAL
RESULTS
RECONCILIATION OF NET INCOME TO FUNDS
FROM OPERATIONS
Unaudited For the
periods ended September 30 (US$ millions) |
Three Months Ended |
|
Last Twelve Months Ended |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income |
$ |
542 |
|
|
$ |
1,756 |
|
|
$ |
530 |
|
|
$ |
6,744 |
|
Financial statement components
not included in FFO |
|
|
|
|
|
|
|
Equity accounted fair value changes and other non-FFO items |
602 |
|
|
180 |
|
|
2,884 |
|
|
274 |
|
Fair value changes |
31 |
|
|
(394 |
) |
|
1,594 |
|
|
578 |
|
Depreciation and amortization |
1,470 |
|
|
1,299 |
|
|
5,564 |
|
|
4,494 |
|
Deferred income taxes |
21 |
|
|
(464 |
) |
|
26 |
|
|
(1,671 |
) |
Realized disposition gains in
fair value changes or prior periods |
161 |
|
|
190 |
|
|
915 |
|
|
972 |
|
Non-controlling interests |
(1,788 |
) |
|
(1,741 |
) |
|
(7,225 |
) |
|
(7,050 |
) |
Funds
from operations1,2 |
$ |
1,039 |
|
|
$ |
826 |
|
|
$ |
4,288 |
|
|
$ |
4,341 |
|
SEGMENT FUNDS FROM
OPERATIONS
UnauditedFor the
periods ended September 30(US$ millions, except per share
amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Asset management |
$ |
399 |
|
|
$ |
345 |
|
|
$ |
1,663 |
|
|
$ |
1,461 |
|
Real estate |
90 |
|
|
271 |
|
|
746 |
|
|
1,514 |
|
Renewable power |
64 |
|
|
44 |
|
|
762 |
|
|
381 |
|
Infrastructure |
244 |
|
|
103 |
|
|
570 |
|
|
454 |
|
Private equity |
249 |
|
|
154 |
|
|
740 |
|
|
867 |
|
Residential |
37 |
|
|
42 |
|
|
104 |
|
|
90 |
|
Corporate |
(44 |
) |
|
(133 |
) |
|
(297 |
) |
|
(426 |
) |
Funds
from operations1,2 |
$ |
1,039 |
|
|
$ |
826 |
|
|
$ |
4,288 |
|
|
$ |
4,341 |
|
|
|
|
|
|
|
|
|
Per
share3,4 |
$ |
0.65 |
|
|
$ |
0.54 |
|
|
$ |
2.70 |
|
|
$ |
2.86 |
|
- 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
UnauditedFor the
periods ended September 30(US$ millions, except per share
amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income |
$ |
542 |
|
|
$ |
1,756 |
|
|
$ |
530 |
|
|
$ |
6,744 |
|
Non-controlling interests |
(370 |
) |
|
(809 |
) |
|
(461 |
) |
|
(2,899 |
) |
Net income attributable to
shareholders |
172 |
|
|
947 |
|
|
69 |
|
|
3,845 |
|
Preferred share dividends |
(34 |
) |
|
(38 |
) |
|
(144 |
) |
|
(150 |
) |
Dilutive effect of conversion of subsidiary preferred shares |
9 |
|
|
(17 |
) |
|
38 |
|
|
(53 |
) |
Net
income (loss) available to common shareholders |
$ |
147 |
|
|
$ |
892 |
|
|
$ |
(37 |
) |
|
$ |
3,642 |
|
|
|
|
|
|
|
|
|
Weighted average shares1 |
1,511.7 |
|
|
1,434.1 |
|
|
1,505.7 |
|
|
1,434.3 |
|
Dilutive effect of the conversion of options and escrowed shares
using treasury stock method1,2 |
24.7 |
|
|
36.1 |
|
|
— |
|
|
32.0 |
|
Shares
and share equivalents1 |
1,536.4 |
|
|
1,470.2 |
|
|
1,505.7 |
|
|
1,466.3 |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share1,3 |
$ |
0.10 |
|
|
$ |
0.61 |
|
|
$ |
(0.02 |
) |
|
$ |
2.48 |
|
- 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 September 30 (US$ millions) |
Three Months Ended |
|
Last Twelve Months Ended |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Fee-related earnings1, excluding performance fees |
$ |
323 |
|
|
$ |
306 |
|
|
$ |
1,250 |
|
|
$ |
1,034 |
|
Our share of Oaktree’s
distributable earnings |
41 |
|
|
— |
|
|
196 |
|
|
— |
|
Distributions from
investments |
459 |
|
|
333 |
|
|
1,706 |
|
|
1,539 |
|
Other wholly owned
investments |
46 |
|
|
1 |
|
|
(3 |
) |
|
(14 |
) |
Corporate interest
expense |
(98 |
) |
|
(87 |
) |
|
(370 |
) |
|
(342 |
) |
Corporate costs and taxes |
(37 |
) |
|
(9 |
) |
|
(166 |
) |
|
(139 |
) |
Preferred share dividends |
(34 |
) |
|
(38 |
) |
|
(144 |
) |
|
(150 |
) |
Add
back: equity-based compensation |
23 |
|
|
20 |
|
|
93 |
|
|
84 |
|
Cash available for
distribution and/or reinvestment before carried interest |
723 |
|
|
526 |
|
|
2,562 |
|
|
2,012 |
|
Realized carried interest,
net, excluding Oaktree1,2 |
24 |
|
|
39 |
|
|
188 |
|
|
427 |
|
Cash available for distribution and/or reinvestment |
$ |
747 |
|
|
$ |
565 |
|
|
$ |
2,750 |
|
|
$ |
2,439 |
|
1. Excludes our share of
Oaktree’s fee-related earnings and carried
interest.2. 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 September 30,
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 September 30, 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 Third 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 today,
please dial 1-866-688-9425 toll free in North America, or for
overseas calls please dial 1-409-216-0815 (Conference ID: 2235277)
at approximately 10:50 a.m. EST. The Conference Call will also be
Webcast live at https://edge.media-server.com/mmc/go/bamQ3-2020.
For those unable to participate in the Conference Call, the
telephone replay will be archived and available until midnight
November 19, 2020. To access this rebroadcast, please call
1-855-859-2056 or 1-404-537-3406 (Conference ID:
2235277).
Brookfield Asset Management
Inc. is a leading global alternative asset manager with
approximately $575 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.
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
Relations: Linda 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 future state
of the economy and markets; the expected future deployment of
capital, including to repurchase shares; dispositions and the
associated realized carried interest; as well as statements
regarding the results of future fundraising efforts. In addition,
forward-looking statements contained in this News Release include
statements regarding the formation, business, and performance of
BAM Reinsurance, as well as the expected trading price of its
shares.
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, including the
ongoing and developing COVID-19 pandemic and the global
economic shutdown, 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 and the related global
economic shutdown; (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 (xxiv) 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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