Brookfield Asset Management INVESTOR DAY SEPTEMBER 26, 2018

Transcription

1 Brookfield Asset Management INVESTOR DAY SEPTEMBER 26, 2018

2 Agenda Strategic Review Bruce Flatt, Senior Managing Partner & CEO Focusing on Our People and Culture Lori Pearson, Senior Managing Partner & COO Financial Review Brian Lawson, Senior Managing Partner & CFO Q&A 2

3 We continue to expand our franchise as one of the largest global alternative asset managers 3

4 $300B+ ASSETS UNDER MANAGEMENT 80,000+ EMPLOYEES 530+ INSTITUTIONAL INVESTORS 30+ COUNTRIES $129B+ FEE BEARING CAPITAL 4

5 Over the last year 1 Raised $20 billion of capital in our public and private funds Deployed $33 billion of capital in high-quality assets, globally Realized $13 billion of proceeds from asset sales Notes/Assumptions: 1) For the period September 1, 2017 August 31,

6 Returns have been strong and this should continue We expect interest rates to stay lowish Rising rates generally lead to growth in our cash flows International trade is very topical Our assets provide shelter Currencies are volatile We earn high returns and hedge where we can 6

7 Irrespective of markets and politics, we continue to focus on: Strengthening our balance sheets Deploying capital for value Recycling proceeds into higher yielding opportunities Being patient, waiting for market breaks 7

8 Returns from value investing in real assets have been strong 19% 1 7% 1 4% BAM returns % S&P U.S. 10-year yields Notes/Assumptions: 1) Represents total return, compound with dividends reinvested 2) Represents total return, compound with coupon reinvested 8

9 There are four key factors to our growth strategy Increasing real asset allocations Best-in-class investor service Identifying great investment opportunities Focusing on our people and culture 9

10 Increasing Real Asset Allocations 1 10

11 Institutional allocations to real assets are below current targets ~$3 Trillion1 underweight Notes/Assumptions: 1) Brookfield estimate 11

12 In addition, the universe of institutional capital continues to grow $100T 3 $52T 2 $23T E Notes/Assumptions: 1) Source: Willis Towers Watson Global Pension Assets Study, 2010; Preqin (in association with PwC) Sovereign Wealth Fund Report ) Source: Willis Towers Watson Global Pension Assets Study, 2018; Preqin (in association with PwC) Sovereign Wealth Fund Report ) Brookfield estimate 12

13 Why are investors choosing to invest their growing capital base in real assets? 7%-20% Excess returns Diversification 6%-8% Less volatility 1%-4% Predictable cash flows Bond Yields 1 Equity Yields 2 Target Real Asset Yields 3 Notes/Assumptions: 1) Bloomberg as of June 30, 2018, U.S. 10-year treasury yield range over the past 10 years 2) Bloomberg as of June 30, 2018, total return of SPX, NASDAQ and DJI over the past 20 years, compounded with dividends reinvested 3) Bloomberg as of June 30, 2018, real asset yield range is based on total returns earned by five publicly traded real asset managers over the past 10 years and the S&P Real Asset Total Return Index 13

14 POLLING QUESTION #1 What % of institutional investors plan on increasing allocations to alternative assets over the next 12 months? a) >35% b) 20-30% c) <20% 14

15 A: According to a recent survey of over 100 institutional investors 39% plan to increase target allocations to alternative assets over the next 12 months Notes/Assumptions: Source: Coller Capital Global Private Equity Barometer Summer

16 % of respondents Decrease Increase Alternative Assets (Overall) 4% 39% Real estate 5% 27% Infrastructure 5% 51% Private equity 4% 29% Notes/Assumptions: 1) Source: Coller Capital Global Private Equity Barometer Summer

17 We still believe target allocations will reach 40% in the long term and may be higher % 5% 75% 25% 60% 40%+ Equity/Fixed Income Real Assets/Alternatives Notes/Assumptions: 1) Source: Willis Towers Watson Global Pension Assets Study, ) Brookfield estimate 17

18 Potential capture size? $100T x 40% = $40T Market Size 1 Allocation 1 Capture Size Notes/Assumptions: 1) Brookfield estimate 18

19 To sum up the opportunity Institutions are increasing allocations to real assets Plans are currently under-allocated even at current numbers The capital to come is many trillions Experienced managers will benefit from this 19

20 POLLING QUESTION #2 What % of total in-year fundraising do the top 20 firms (by size) represent? a) >50% b) 30-50% c) 20-30% d) <20% 20

21 A: According to market analysis ~38% of 2017 fundraising went to the top 20 firms Notes/Assumptions: Source: McKinsey & Company The rise and rise of private markets; McKinsey Global Private Markets Review

22 We have four distinct advantages We offer large global funds We have established track records We deliver exceptional investor experience We operate in multiple asset classes These advantages position us well 22

23 Best-in-Class Investor Service 2 23

24 We strive to provide best-in-class investor service centered around three key areas 1 Investor Interactions 2 Investor Communications 3 Investor Reporting 24

25 We have expanded our core investor service team North America - Institutional North America - Private Wealth EMEA APAC Total Q Q

26 and have dedicated resources to service new channels 13 PRIVATE WEALTH RELATIONSHIP MANAGERS 1 Wirehouses Registered Investment Advisors Family Offices Notes/Assumptions: 1) As at June 30,

27 We surpassed 500 institutional investors this year +89% 5-Year Target ~1, % Notes/Assumptions: 1) As at June 30, ) As at June 30,

28 Our existing investors are expanding their relationships with us From to Average # commitments per investor % 2.0 Average commitment size per investor $90M +28% $115M Notes/Assumptions: 1) As at June 30 28

29 We are seeing more re-investment >60% of capital raised in the last 12 months is from existing investors Notes/Assumptions: 1) Includes co-investments and direct investments 29

30 ..and crossover 80% of our top 20 investors invest in multiple asset classes Notes/Assumptions: 1) Includes co-investments and direct investments 30

31 We are focused on innovative and broad product offerings to meet investor demand 31

32 Over the years, our product offering has grown Years Owner and Operator +115 Private Markets Private Equity Real Estate Credit Real Estate Infrastructure Infrastructure Credit Open End Europe Credit Public Markets Other Public Securities Listed Issuers Notes/Assumptions: 1) Sample of select private and public strategies 32

33 and we will continue to expand in three key ways Flagship Funds New Strategies New Channels Expanding the size of our traditional funds Launching new strategies adjacent to existing strategies Expanding our distribution channels for existing products 33

34 Flagship Funds 1 ($ billions) Previous Three Flagship Vintages Current 2 Real Estate $1.0 $4.4 $9.0 $11B 3 Private Equity $0.8 $1.0 $4.0 $7B 4 + Infrastructure $2.7 $7.0 $14.0 Launch Q The size of our flagship funds continue to grow Notes/Assumptions: 1) Amounts raised include Brookfield s commitment 2) Actual timing and amounts raised may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 to 118 3) Raised to date as at September 25, ) Has not yet had a first close 34

35 New Strategies 1 2 PERPETUAL CORE CREDIT CREDIT Investors are looking for longer-term and lower risk investments 1 Notes/Assumptions: 1) Source: McKinsey & Company The rise and rise of private markets; McKinsey Global Private Markets Review

36 We recently launched eight funds under these new strategies Current Perpetual Core $2.3B 1 4 Funds Credit $4.0B 1 4 Funds Long-Term Target 2 $60B 2 $100B 2 Notes/Assumptions: 1) Committed as at June 30, 2018, includes Brookfield commitment 2) Brookfield estimate; includes future funds not yet raised. Actual timing and amounts raised may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

37 New Channels have raised ~$1 billion 1 since last investor day PRIVATE WEALTH Private Banks Registered Investment Advisors/ Wirehouses Broadens investor base for existing products Targeting 10% of capital in the future Notes/Assumptions: 1) As at August 31,

38 Retail capital growth is substantial $130T 2 $70T 1 $32T Notes/Assumptions: 1) Source: Capgemini Financial Services Analysis, ) Brookfield estimate; includes future funds not yet raised. Actual timing and amounts raised may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

39 Identifying Great Investment Opportunities 3 39

40 Investing in real assets globally requires casting a wide net 40

41 Our large scale capital provides us with a competitive advantage Less competition for large transactions 41

42 We will always find a home for attractive investments Private Funds Co-investment Listed Issuer BAM 42

43 The assets we acquire vary but our investment approach is always the same Acquire high-quality assets On a value basis Enhance value through operating expertise 43

44 We continue to find excellent opportunities to deploy capital globally, leveraging our operating expertise 44

45 We deployed over $33 billion in the last 12 months 1 86% NORTH AMERICA 1% ASIA& OTHER $33B 8% EUROPE 5% SOUTH AMERICA Notes/Assumptions: 1) From September 1, 2017 to August 31,

46 TerraForm Power and TerraForm Global 2017 Q4 $1.5 billion LARGE SCALE CAPITAL North & South America and Asia GLOBAL REACH Renewable Team OPERATING CAPABILITIES 46

47 Westinghouse Electric Corporation 2018 Q3 $4 billion LARGE SCALE CAPITAL U.S., Europe and Asia GLOBAL REACH Private Equity Team OPERATING CAPABILITIES 47

48 Enercare 2018 Q4 1 $3.3 billion LARGE SCALE CAPITAL Canada and the U.S. GLOBAL REACH Infrastructure Team OPERATING CAPABILITIES Notes/Assumptions: 1) Transaction expected to close in Q

49 Forest City 2018 Q4 1 $6.8 billion LARGE SCALE CAPITAL U.S. GLOBAL REACH Real Estate Team OPERATING CAPABILITIES Notes/Assumptions: 1) Transaction expected to close in Q

50 Enbridge assets 2019 H1 1 $3.3 billion LARGE SCALE CAPITAL Canada GLOBAL REACH Infrastructure Team OPERATING CAPABILITIES Notes/Assumptions: 1) Transaction expected to close in H

51 To sum up 51

52 We want to leave you with five important points Our franchise is still growing rapidly We are well positioned to capture a larger piece of a growing market We continue to deploy capital in high-quality real assets Excellence in customer service is critical to success We are structured for growth 52

53 Focusing on Our People and Culture Lori Pearson 4 53

54 Maintaining our culture as we continue to grow supports value creation Long-term Focus Alignment of Interests Collaboration People + Operating Philosophy = VALUE FOR SHAREHOLDERS AND INVESTORS 54

55 The Goal: achievement of potential 1 Hire Right Focus on people who can grow with the organization 2 Develop Succession planning effectively starting on day one 3 Exposure Operate a flat structure to provide exposure to leadership 4 Opportunities Provide them with stretch roles 5 Compensation Compensate with a focus on alignment Attract Develop Align 55

56 We hire people who have potential and the attributes of a Brookfield leader COLLABORATIVE ENTREPRENEURIAL DISCIPLINED 56

57 Recruit from within Business Group Business Group Region Region Region Function Function Business Group Portfolio Companies Reinforces culture and knowledge sharing 57

58 Our compensation strategies reinforce alignment Emphasis on long-term compensation All management receives some BAM equity based compensation Management owns 20% of Brookfield 58

59 We have built an experienced and deep management team 59

60 The Senior Executive Team has an average tenure of 18 years working together 124 Managing Partners and Managing Directors across our geographies and business groups Real Estate Renewable Power Infrastructure Private Equity Public Securities Group Corporate

61 To summarize OPERATING PHILOSOPHY INDIVIDUAL EXCELLENCE Long-term focus Collaborative Alignment of interests Brookfield culture Entrepreneurial Flat structure Disciplined 61

62 Financial Review Brian Lawson 62

63 Agenda 1 Value Creation 2 Balance Sheet Resilience 3 Carried Interest 4 Financial Profile 63

64 Our business is Straightforward Transparent Resilient Growing 64

65 Value Creation 1 65

66 Value creation at Brookfield comes from two primary sources Asset Manager Invested Capital BAM VALUE Fee related earnings Carried interest Value appreciation Cash distributions 66

67 Our value creation process is straightforward and transparent Business Cycle BAM Value Drivers 1 2 Raise Capital Invest Base Fees 3 Enhance Returns Performance Income 1 4 Monetize Invested Capital Returns Notes/Assumptions: 1) Performance income includes incentive distributions, performance fees and carried interest 67

68 The sum of the parts is ~$56 billion Plan Value 1 AS AT JUNE 30 ($ millions) Multiple 1 Ann Asset manager Annualized fee related earnings 20x $ 861 $ 17,220 $ 15,480 Net target carried interest 10x 808 8,080 6,020 25,300 21,500 Invested capital 3 31,122 29,413 Total $ 56,422 $ 50,913 $6B Notes/Assumptions: 1) Information presented is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118. Assumes a 60% margin on annualized fee revenues and a 70% margin on gross target carried interest. Reflects Brookfield s estimates of appropriate multiples applied to fee related earnings and carried interest in the alternative asset management industry based on, among other things, industry reports. These multiples are used to measure performance for business planning purposes 2) Annualized as at June 30, ) Represents blended value, which is the quoted value of listed investments and IFRS value of unlisted investments, subject to two adjustments. First, we reflect BPY at its IFRS value as we believe that this best reflects the fair value of the underlying properties. Second, we reflect Brookfield Residential at its privatization value 68

69 which means BAM is trading at a 25% discount ($ millions) Total Per Share 3 Asset manager plus invested capital (plan value) 1,2 $ 56,422 $ Implied equity market capitalization 4 42, Discount to plan value $ 13,945 25% Notes/Assumptions: 1) As at June 30, Information presented is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118 2) Illustrative stock price analysis is not intended to forecast or predict future events, but rather to provide information utilized by Brookfield in measuring performance for business planning purposes, based on the specific assumptions and other factors described herein and in our Notice to Recipients on Slides 116 through 118. Actual results and share price performance may differ materially and are subject to market conditions 3) Per share amount calculated using total diluted shares as at June 30, ) Based on September 14, 2018 public pricing 69

70 Our activities add value in other ways High-quality critical assets and services Protect financial future for investors Positive contribution to communities and employee base 70

71 We put a high priority on ESG principles Consistent with owning and operating long-term sustainable assets Important to our investors, employees and other stakeholders 71

72 ESG in action Built into our investment approval process One of world s largest pure-play renewable energy portfolios 90% of our core office portfolio is green building certified 90% reduction in energy usage from our infrastructure district energy business 72

73 Balance Sheet Resilience 2 73

74 Maintaining a resilient balance sheet is a core part of our strategy Strong liquidity $11 billion of core liquidity $22 billion of dry powder Non-recourse asset level debt Non-recourse, limited crosscollateralization or parental guarantees Duration matching with the underlying assets Stable capital structure Long-term debt, perpetual shares Investment grade model with limited covenants Self-sufficient listed entities Strong cash flow generation $1.8 billion annual free cash flow Contractual fee revenues Stable distributions Notes/Assumptions: 1) As at and annualized June 30,

75 Our net invested capital totals $31 billion Our invested capital is transparent, flexible and generates substantial cash flow Distributed AS AT JUNE 30 ($ millions) Quoted 1 IFRS Blended 2 Cash Flow 3 BPY $ 10,547 $ 16,907 $ 16,907 $ 691 BEP 5,661 3,801 5, BIP 4,519 1,920 4, BBU 3,362 1,921 3, Other listed 4 5,536 5,483 5, Total listed investments $ 29,625 30,032 35,985 $ 1,584 Unlisted investments 4,463 5,585 Corporate capitalization and working capital (10,448) (10,448) Net invested capital $ 24,047 $ 31,122 Notes/Assumptions: 1) Quoted amounts based on June 29, 2018 public pricing 2) Represents the quoted value of listed investments and IFRS value of unlisted investments as at June 30, 2018, subject to two adjustments. First, we reflect BPY at its IFRS value as we believe that this best reflects the fair value of the underlying properties. Second, we reflect Brookfield Residential at its privatization value 3) Calculated as multiplying units held at June 30, 2018 by distributions per unit, except for distributed cash flow on our financial assets which is estimated to be an 8% total return on the weighted average balance of the last four quarters 4) Includes other listed investments and financial assets. Financial assets cash flow estimated 8% annualized total return on the weighted average balance over the last four quarters. As at June 30, 2018, the financial assets balance was $3.4 billion 75

76 Our capital structure is resilient and long term in nature $56B Common equity (at plan value) $4B Perpetual preferred shares $6B Long-term investment grade debt (10-year average term) Notes/Assumptions: 1) As at June 30,

77 We generate over $1.8 billion of cash available for distribution / reinvestment on an annualized basis, with no carried interest AS AT JUNE 30 ($ millions) Fee related earnings $ 861 Distributions from listed investments 1,584 Corporate activities 2,445 Corporate costs, cash taxes and other (156) Corporate interest expense (320) Preferred share dividends (152) Cash available for distribution / reinvestment $ 1,817 Notes/Assumptions: 1) Annualized 77

78 and distribute ~ 30% to shareholders AS AT JUNE 30 ($ millions) Cash available for distribution / reinvestment $ 1,817 Common share dividends (576) Cash available for distribution / reinvestment, net $ 1,241 Percent distributed to shareholders 32% Notes/Assumptions: 1) Annualized 78

79 How are we using this cash to enhance shareholder return? Participate in capital raises by our listed partnerships Seed new investment strategies Help facilitate large fund transactions BAM share repurchases, which have been a lower priority in recent years 79

80 Carried Interest 3 80

81 How we measure carried interest Target Carried Interest Unrealized Carried Interest Realized Carried Interest The carried interest we expect to earn on third-party capital, assuming the fund achieves the target return, annualized on a straight-line basis Carried interest generated and based on fund performance to date, assuming funds are liquidated at current values Carried interest earned, excluding amounts subject to clawback; basis for financial statement and FFO recognition Earnings Potential Current Performance Final Results 81

82 Carried interest profile for a typical fund Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Target carry Generated carry Realized carry Notes/Assumptions: 1) Illustrative of carried interest generated and realized over the 10-year life of a fund 82

83 Common carry misconception Misconception Fact Carry is earned only on profit above the preferred return Carry is earned on total profits provided that the preferred return is met 83

84 Carry is earned on total fund profits Opportunistic Gross target return 20.0% Base fee (2.0)% Total fund profit 18.0% Carry at 20% of total fund profit 1,2 3.6% Return to investor 14.4% Typical preferred return 8% Notes/Assumptions: 1) Carried interest is generated once a private fund exceeds its preferred return. It will typically go through a catch-up period until the manager and limited partner (LP) are earning carry at their respective percentages 2) Average carried interest rate on opportunistic funds 84

85 The majority of our funds are tracking to meet or exceed their target returns 1 AS AT JUNE 30, 2018 ($ millions) Vintage 2 Total CEC Unrealized Carried Interest Gross IRR 3,4,5 Target Gross IRR 5 Opportunistic $ 21,692 $ 1,655 23% 28% 20% Value add , % 13% 15% Credit and core plus , % 12% 15% Total $ 46,860 $ 2,527 Which means they are well over the preferred return and will earn carry on each dollar of profit Notes/Assumptions: 1) See Q Supplemental Information for further disaggregation by investment strategy 2) Year of final close 3) On existing carry eligible funds, excluding open-ended funds and funds categorized as Other in the Supplemental Information 4) Unrealized fund returns reflected. The actual realized returns on current unrealized investments may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 to 118 5) Gross IRR reflects performance before fund expenses, management fees (or equivalent fees) and carried interest 85

86 In the last twelve months, we generated $1 billion of net carried interest, exceeding our target of $808 million ($ millions) Carry eligible capital 1 $ 46,860 $ 40,426 Invested 25,769 22,901 Uncalled fund commitments 21,091 17,525 Target carry, net 1, Generated carry, net 3 1, Notes/Assumptions: 1) As at June 30 2) Assumes 70% margin on gross target carried interest 3) Last twelve months ended June 30 86

87 Our generation expectations have grown and shifted forward since last year ($ billions) $12.0 Existing Funds Only 1 $ IR Day $ IR Day $6.0 $4.0 Generated $2.0 Generated $ Generated IR Day Generated IR Day Notes/Assumptions: 1) As at June 30. Information presented, including gross carried interest on existing funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

88 and realizations are now expected to be $10 billion ($ billions) $12.0 Existing Funds Only 1 $ IR Day $8.0 $6.0 $4.0 $2.0 Realized $ Realized IR Day Notes/Assumptions: 1) As at June 30. Information presented, including gross carried interest on existing funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

89 On an annualized basis realizations should look like this ($ billions) $4.0 $3.5 $3.0 30% 70% $2.5 $2.0 $1.5 $1.0 $0.5 $ Realized - Existing Funds Notes/Assumptions: 1) As at June 30. Information presented, including gross carried interest on existing funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

90 and will be supplemented by carry on future funds ($ billions) $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $ Generated - Existing Funds Generated - Future Funds Realized - Existing Funds Realized - Future Funds Notes/Assumptions: 1) As at June 30. Information presented, including gross carried interest on existing funds and future funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

91 How do we value this carry? 91

92 We value carry as a multiple of net target carry Expect to generate net target carry of $808 million if we meet target returns on existing funds $808M Net target carry 10 $8B Multiple 1 Value created 1 Notes/Assumptions: 1) Information presented is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118. Assumes a 70% margin on gross target carried interest. Reflects Brookfield s estimates of an appropriate multiple applied to carried interest in the alternative asset management industry based on, among other things, industry reports. This multiple is used to measure performance for business planning purposes 92

93 This $8 billion of value is supported by our DCF model 1 Existing Funds Terminal Value $3.7B $4.3B $8.0B Notes/Assumptions: 1) To value carried interest we use discounted cash flow values for expected carried interest assuming gross target returns, before fund expenses, management fees (or equivalent fees) and carried interest of 20% for opportunistic funds and 13% for value add, credit and core plus funds are achieved. We apply a terminal multiple of 5x on expected carried interest at the end of 10 years to account for future funds. The aggregate amount is then discounted at 10% and we assume a 70% margin 93

94 Net terminal value represents value of future funds 1 Gross Target Return 2 18% 19% 20% 21% 22% Opportunistic AS AT JUNE 30, 2018 ($ milions) 11% 12% 13% 14% 15% Value Add, Credit & Core Plus Discount Rate 8% 3,700 4,600 5,100 5,700 6,200 9% 3,400 4,200 4,700 5,200 5,700 10% 3,100 3,900 4,300 4,800 5,200 11% 2,800 3,600 3,900 4,400 4,800 12% 2,600 3,300 3,600 4,000 4,400 Our net terminal value of carried interest is $4.3 billion Notes/Assumptions: 1) Net terminal value is the estimated value of carried interest on future funds. It is calculated based on a range of gross target returns implying a range of future carried interest to which we then apply an assumed 5x multiple to. This value is then discounted using a range of discount rates. Net terminal value is presented on a net basis assuming a 70% margin 2) Gross target return reflects performance before fund expenses, management fees (or equivalent fees) and carried interest 94

95 Takeaways Carry is earned on every dollar of profits, as long as the preferred return is met We value our carry at $8 billion, net of costs, discounted Our carry is growing rapidly 95

96 Financial Profile 4 96

97 Five years ago we projected where we could be in

98 We surpassed our growth projections P 2018 Fee related earnings 1 ($ millions) $ 302 $ 675 $ 861 Target carried interest, net 2 ($ millions) $ 263 $ 427 $ 808 Notes/Assumptions: 1) Annualized as at June 30 2) As at June 30 98

99 Strong private fund inflows offset the sale of lower margin public securities businesses P 2018 Fee bearing capital 1 ($ billions) $ 78 $ 126 $ 129 Listed partnerships Private funds Public securities Notes/Assumptions: 1) As at June 30 2) Within the Public Securities Group, we sold a portion of our fixed income business in April 2014 and sold our securitized credit business in June

100 Looking ahead 100

101 Private fund fee bearing capital should more than double to $121 billion Private Funds Fee Bearing Capital ($ billions) Flagship Funds Credit, Core & Other Outflows $121B Flagship Funds $57B 1 16% CAGR Notes/Assumptions: 1) Opening private fund fee bearing capital as at June 30, ) Information presented, including growth in fee bearing capital over the period, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

102 and listed partnerships capitalization should increase to over $100 billion Listed Partnership Fee Bearing Capital ($ billions) Issuances $101B Market value growth (BPY, BBU) Distribution growth (BEP, BIP, TERP) $56B 1 13% CAGR Notes/Assumptions: 1) Opening listed partnership fee bearing capital as at June 30, ) Information presented, including distribution growth, market valuation and issuances relating to listed partnerships, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

103 In aggregate, we expect to increase our fee bearing capital to $245 billion in the next five years AS AT JUNE 30 ($ billions) 2018 ~5 Years 1 Listed partnership $ 56 $ 101 Private funds Public securities Fee bearing capital $ 129 $ % CAGR Notes/Assumptions: 1) Information presented, including growth in fee bearing capital over the period, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

104 The increase in fee bearing capital should generate strong growth in fee related earnings AS AT JUNE 30 ($ millions) ~5 Years 2 Base fees $ 1,153 $ 2,500 IDRs Other fees Fee revenues 1,435 3,200 Direct costs (574) (1,280) Fee related earnings $ 861 $ 1, % CAGR Notes/Assumptions: 1) Annualized as at June 30 2) Information presented, including growth in fee related earnings, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

105 And increase our potential to earn carried interest AS AT AND FOR THE LTM ENDED JUNE ~5 Years ($ millions) Carry eligible capital $ 46,860 $ 111,000 19% Generated carry, gross 1 $ 1,429 $ 2,500 12% Generated carry, net 1 $ 1,007 $ 1,750 12% Notes/Assumptions: 1) Information presented, including gross and net generated carried interest on existing and future funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

106 Growing cash flows significantly increase our invested capital Invested Capital ($ billions) $42B 1 Distribution increase (BEP, BIP) 2 4 Value appreciation (BPY, BBU) 2 6 Cash retained fee related earnings 3 8 Cash retained distributions from invested capital 3 Capitalization and dividends $66B 2018 ~5 years Notes/Assumptions: 1) Opening Blended invested capital value as at June 30, ) Information presented, including distribution growth, market valuation and issuances relating to listed partnerships, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118 3) Cash retained includes fee related earnings, invested capital cash flow and dispositions of directly held assets. Accumulated balances are reinvested at 8% 4) Capitalization and dividends assumes a constant capitalization level and 7% annual growth in BAM dividends 106

107 Putting it all together 107

108 Plan value results in $118 per share over the next five years Asset manager ~5 Years Multiple ~5 Years ($ millions) ($ billions, except per share amounts) Fee related earnings 1 $ 1,920 20x $ 38 Generated carried interest, net 1 1,750 10x 18 Accumulated carried interest, net 7 Asset owner Invested capital 66 Leverage (10) Total plan value $ % Plan value per share 2,3 $ 118 Total Return 4 Notes/Assumptions: 1) Information presented is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118. Assumes a 60% margin on fee related revenues and a 70% margin on gross carried interest 2) Illustrative stock price analysis is not intended to forecast or predict future events, but rather to provide information utilized by Brookfield in measuring performance for business planning purposes, based on the specific assumptions and other factors described herein and in our Notice to Recipients on Slides 116 through 118. Actual results and share price performance may differ materially and are subject to market conditions 3) Per share amount calculated using total diluted shares as at June 30, ) Includes dividends; total return calculated as compared to public pricing ($42.32 per share as at September 14, 2018)

109 driven by fundraising and investing Cash retained 4 $118 5 Value creation asset manager 3 21 Discount to plan value 2 $42 14 Value creation invested capital Market Price 24% Total Return ~5 years Notes/Assumptions: 1) All figures on a per share basis. Calculated using total diluted shares as at June 30, ) Current discount to plan value per Slide 69 3) Information presented, including (i) distribution growth, (ii) market valuation, (iii) issuances relating to listed partnerships, (iv) future fundraising, (v) fee related earnings and (vi) carried interest estimates, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118 4) Cash retained includes fee related earnings, invested capital cash flow and dispositions of directly held assets. Accumulated balances are reinvested at 8% 5) Illustrative stock price analysis is not intended to forecast or predict future events, but rather to provide information utilized by Brookfield in measuring performance for business planning purposes, based on the specific assumptions and other factors described herein and in our Notice to Recipients on Slides 116 through 118. Actual results and share price performance may differ materially and are subject to market conditions 109

110 The cash available for distribution, before carried interest, should more than double in ~5 years ($ millions) ~5 Years Fee related earnings 1 $ 1,920 Distributions from listed investments 2 2,750 Corporate activities 3 Corporate costs, cash taxes and other (200) Corporate interest expense (320) Preferred share dividends (150) Cash available for distribution / reinvestment $ 4,000 Notes/Assumptions: 1) Information presented, including growth in fee related earnings, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through 118 2) Distributions from listed investments assumes dividend growth at mid-point of target distribution growth rates 3) Corporate activities based on current capitalization per plan and growth in corporate costs of 5% 110

111 And including realized carried interest, distributable cash should increase to over $5 billion in ~5 years $5.1 $4.0 $ $ $ $ Cash available for distribution Realized carried interest, net ($ billions) Notes/Assumptions: 1) Information presented, including net realized carried interest on existing funds, is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients on Slides 116 through

112 Looking out 10 years ($ millions) Net cash from: Cumulative ~10 Years 1 Fee related earnings $ 20,000 Net invested capital 25,000 Realized carried interest, net 15,000 $ 60,000 Notes/Assumptions: 1) Per Brookfield plan, consistent with 5-year plan assumptions 112

113 This gives us flexibility to return substantial capital to shareholders ($ millions) Cumulative ~10 Years 1 Potential cash generation $ 60,000 Cash investment into listed partnerships (10,000) Return of capital through dividends 2 (10,000) Available for share repurchases $ 40,000 Notes/Assumptions: 1) Per Brookfield plan, consistent with 5-year plan assumptions 2) Based on BAM annual dividend growth of 7% 113

114 We want to leave you with four important points Our balance sheet is resilient We are generating almost $2 billion, heading to over $5 billion of annual cash flows Carry is growing rapidly and is very meaningful These together should generate $60 billion of cash flow over the next 10 years with few identified uses 114

115 Q & A 115

116 Notice to Recipients Brookfield is not making any offer or invitation of any kind by communication of this document to the recipient and under no circumstances is it to be construed as a prospectus or an advertisement. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, is subject to change, and will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing or changes occurring after the date hereof. Unless otherwise noted, all references to $ or Dollars are to U.S. Dollars. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION This presentation contains forward-looking information within the meaning of Canadian and United States securities laws, including United States Private Securities Litigation Reform Act of Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, and include statements regarding our and our subsidiaries operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include, but are not limited to, statements regarding our asset management. In some cases, forward-looking statements can be identified by terms such as expects, anticipates, plans, believes, estimates, seeks, intends, targets, projects, forecasts or negative versions thereof and other similar expressions such as Brookfield plan or Brookfield estimate, or future or conditional verbs such as may, will, should, would and could. Below are certain of the forward-looking statements that are contained in this presentation and a number of assumptions underlying them. Where this presentation refers to gross carried interest or carried interest, carried interest for existing funds is based on June 30, 2018 carry eligible capital and carried interest for future funds is based on Brookfield s estimates of future fundraising as at June 30, 2018, as described below. In addition, this presentation assumes that existing and future funds meet their target gross return. Target gross returns are typically 20+% for opportunistic funds; 13% to 15% for value add funds; 12% to 15% for credit and core plus funds. Fee terms vary by investment strategy (carried interest is approximately 15% to 20% subject to a preferred return and catch-up) and may change over time. This presentation assumes that capital is deployed evenly over a four-year investment period and realized evenly over three years of sales. The year in which such sales commence varies by investment strategy and ranges from year 6 to year 10. Where this presentation refers to future fundraising, or growth in fee bearing capital we assume that flagship funds are raised every two to three years based on historical fund series and non-flagship funds are raised annually within certain strategies, and in other strategies every two years. Fund series sizes remain constant and consistent with target funds from period-to-period. This presentation also assumes that distributions are based on fund realizations evenly over three years of sales. The year in which such sales commence varies by investment strategy and ranges from year 6 to year 10. References to distribution, growth, market valuation, and issuances relating to listed partnerships, include the following assumptions: (i) BIP, BEP, and TERP grow at a rate equal to the mid-point of their target distribution growth rate, assuming current yield; (ii) the market price to IFRS discount on BPY (see Slide 75) is eliminated; (iii) BBU share price grows at a 10% annual rate; and (iv) total listed partnership capitalization includes issuances related to debt and preferred equity for BPY, BIP and BEP, based on a debt to total capitalization ratio of 20-30%. Where this presentation refers to fee related earnings, fee related earnings from listed partnerships and private funds are based on fee bearing capital increasing in accordance with Slide 103. The listed partnership management fees for BPY, BEP and TERP are fixed fees on initial capitalization and an additional fee of 1.25% on the amount in excess of initial capitalization. Management fees for BIP and BBU are 1.25% of total capitalization. Fee terms for private funds vary by investment strategy (generally, within a range of approximately 1-2%). The incentive distribution rights of the listed partnerships are based on a mid-point of the applicable listed partnership s distribution growth rate as described above. Other fees include the BBU performance fee assuming a 10% BBU annual share price growth. Fee related earnings assumes a margin of 60%. 116

117 Notice to Recipients cont d 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 our and our subsidiaries actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information. Factors that could cause actual results (including, among other things, carried interest; future fundraising; growth in fee bearing capital; growth in distribution, market valuation, and issuances relating to listed partnerships; and fee revenues and earnings) to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: lower than target investment returns; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the fact that our success depends on market demand for our products; the behavior of financial markets, including fluctuations in interest rates and foreign exchanges rates; changes in inflation rates in North America and international markets; the performance of global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; strategic actions including dispositions; the competitive market for acquisitions and other growth opportunities; our ability to satisfy conditions precedent required to complete such acquisitions; our ability to effectively integrate acquisitions into existing operations and attain expected benefits; the outcome and timing of various regulatory, legal and contractual issues; changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); the effect of applying future accounting changes; business competition; operational and reputational risks; technological change; changes in government regulation and legislation within the countries in which we operate; changes in tax laws; catastrophic events, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; and other risks and 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. When relying on our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements or information in this presentation, whether as a result of new information, future events or otherwise. CAUTIONARY STATEMENT REGARDING INVESTMENT PERFORMANCE Past performance is not necessarily indicative of future results and there can be no assurance that comparable results will be achieved, that an investment will be similar to the historic investments presented 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. Any information regarding prior investment activities and returns contained herein has not been calculated using generally accepted accounting principles and may not have been audited or verified by an auditor or any independent party. Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a gross basis (i.e., they do not reflect management fees (or equivalent fees), carried interest (or incentive allocation), taxes, transaction costs and other expenses to be borne by investors, which in the aggregate are expected to be substantial). Any changes to assumptions could have a material impact on projections and actual returns. Actual returns on unrealized investments will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, legal and contractual restrictions on transfer that may limit liquidity, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the valuations used in the prior performance data contained herein are based. Accordingly, the actual realized returns on unrealized investments may differ materially from the returns indicated herein. 117

118 Notice to Recipients cont d TARGET RETURNS The target returns set forth herein 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. Target gross returns do not reflect fund expenses, management fees (or equivalent fees) and carried interest. Target net returns take into account these items. 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 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. CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES This presentation contains references to financial metrics that are not calculated in accordance with, and do not have any standardized meaning prescribed by, International Financial Reporting Standards ( IFRS ). We believe such non-ifrs measures including, but not limited to, funds from operations ( FFO ) and invested capital, are useful supplemental measures that may assist investors and others in assessing our financial performance and the financial performance of our subsidiaries. As these non-ifrs measures are not generally accepted accounting measures under IFRS, references to FFO and invested capital, as examples, are therefore unlikely to be comparable to similar measures presented by other issuers and entities. These non-ifrs measures have limitations as analytical tools. They should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. For a more fulsome discussion regarding our use of non-ifrs measures and their reconciliation to the most directly comparable IFRS measures refer to our documents filed with the securities regulators in Canada and the United States. OTHER CAUTIONARY STATEMENTS 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 does not guarantee the accuracy or completeness of such information and has not independently verified such information or the assumptions on which such information is based. This document is subject to the assumptions (if any) and notes contained herein. The information in this document does not take into account your investment objectives, financial situation or particular needs and nothing contained herein should be construed as legal, business or tax advice. Each prospective investor should consult its own attorney, business adviser and tax advisor as to legal, business, tax and related matters concerning the information contained herein. 118