Brookfield Asset Management Inc. A GLOBAL ALTERNATIVE ASSET MANAGEMENT COMPANY Focused on Real Estate, Infrastructure, Power and Private Equity BROOKFIELD TIMBERLANDS TIMBER INVEST EUROPE 2012 MANAGER SELECTION: STRUCTURING A SUCCESSFUL PARTNERSHIP Please see Notice to Recipients on page 11.
Brookfield Leading Alternative Asset Management Firm Experienced Value Investor More than 100-year history of owning, operating and investing in businesses with a focus on real estate, infrastructure, timberlands, power and private equity Disciplined investment process focused on value-oriented acquisitions, operational value-add, long-term returns and capital preservation Global Experienced team of over 500 investment professionals and 23,000 operating employees globally Global reach with local presence in key markets, including New York, Toronto, São Paulo, London, Sydney, Hong Kong, Mumbai, Abu Dhabi and Dubai Established Asset Management History Over $150 billion of assets under management Approximately $50 billion of third-party capital in asset management business Brookfield has an established private funds platform with commitments of approximately $29 billion, including $9 billion from Brookfield 1 Brookfield Asset Management Inc.
Brookfield Timberlands Platform Significant timberlands owner-operator with large, established platforms in core timberland markets Island Timberlands ( Island ) 257,000 hectares Acadian Timber Corp. ( Acadian ) 1 million hectares* Longview Timber ( Longview ) 264,000 hectares Brookfield Brazil Timber Fund ( Brazil Timber ) 97,000 acres * Includes management services relating to approximately 526,100 hectares of crown licensed timberlands 2 Brookfield Asset Management Inc.
Timberland Investment Structures A wide range of timberland investment structures is available with the most common having the following attributes: Structure Timberland Exposure Ability to Customize Contact with Management Liquidity Typical Minimum Investment Direct Investments High High High Medium Varies, typically $25 - $100 + million Managed Account High High Medium Medium + $10 million Fund High Low to Medium Medium Low $1 - $10 million or more Fund of Funds Medium to High Low Low Low to Medium $1 - $10 million or more Publicly Traded Timberland REIT Medium Low Low High + $5,000 Timberland Exchange Traded Fund ( ETF ) Low to Medium Low Low High + $5,000 Forest Products Co. Low Low Low High + $5,000 Source: TimberLink and Brookfield internal research. 3 Brookfield Asset Management Inc.
Why Hire a Manager? Managers bring industry expertise and resources to the table Given increased interest in and competitiveness of the asset class, manager selection has become more important A dedicated timberlands group can offer an opportunity to add considerable value at all stages of the investment Informed operating decisions play a key role in maximizing total return It is generally not viable for investors to internalize the expertise required to properly manage timberlands John Deere log processor Loading ship with logs, destined for China Tree planter on BC Coast 4 Brookfield Asset Management Inc.
Selecting a Manager Manager selection is the process of aligning investor goals with manager competencies and strategies Investors should become familiar with the asset class, determine their own priorities and match these with manager alternatives There is no one-size-fits-all best strategy or manager diligence is required Areas to explore in order to evaluate a manager include: Competence / past performance Current strategy and offering(s) Alignment of interests United States 5 Brookfield Asset Management Inc. Regional Experience Vertical Fund Structuring Latin Integration of Managed Canada America Australasia Management Funds accounts TIMO 1 4 TIMO 2 2 TIMO 3 1 4 TIMO 4 3 TIMO 5 2 TIMO 6 3 TIMO 7 2 TIMO 8 3 TIMO 9 3 TIMO 10 1 TIMO 11 1 Sources: Company reports/websites, DANA Ltd. 2011 and Brookfield internal research. TIMO stands for Timberland Investment Management Organization. (1) TIMO 3 owns and manages significant real estate assets in Australia, but does not currently operate timberlands in the region.
Typical Investor Priorities Investor priorities are increasingly wide-ranging bringing increased attention to manager selection Investor Goals Investment Likelihood Assured vs. Rapid vs. Selective vs. Opportunistic Placement Fee Focus Balance between overall fee loading, management and performance fees Decision-Making Authority Control Advisory Board Manager discretion Manager Experience: financial / operational / other Alignment: fee structure / investment participation Organization: active / passive / vertically integrated / internal analysis and research competencies / etc. Value added: tax / legal advisory Cash Flow vs. Capital Appreciation Investment Limitations Country / region, age class, leverage, certification, etc. Investment Emphasis Biological growth HBU (housing, recreation, wind, minerals, environmental services, conservation, etc.) 6 Brookfield Asset Management Inc.
Exploring Manager Strategies and Competencies 1 Investors should explore different managers strategies, competencies and regional experience Investigating manager competencies across all proposed investment regions and circumstances is important Diligence should include, but is not limited to: Deal sourcing capability Approach to underwriting Management approach and expertise Exit strategy Process should inform investor and result in better manager selection Timberlands investments involve a long-term relationship between investor and manager, process helps determine whether the manager is someone you can work with! 1 The items and views described herein are based on Brookfield s good faith analysis and belief. Each investor should consider its own criteria before making an investment in any Brookfield fund. 7 Brookfield Asset Management Inc.
GP Net IRR (%) Alignment of Interests 1 Fee structure and meaningful co-investment align investor and manager interests Meaningful co-investment requires that the manager contributes 10%+ of invested capital so that returns generated by the investment become more relevant than the fees earned This co-investment ensures an alignment of investor / manager objectives, but does not guaranty manager competency 60% Alignment of TIMO and Investment Partners Returns 50% 40% 30% 20% IRR for GP Investor reflects LP IRR + management fees and carried interest 10% LP Investor Net IRR 0% 0% 5% 10% 15% 20% 25% GP Participation as a Percentage of Total Equity Source: Brookfield internal research. Assumptions: gross nominal IRR of 10%, annual asset management fees of 85 bps, 80/20 LP/GP carried interest over 8.0% net LP return 1 The items and views described herein are based on Brookfield s good faith analysis and belief. Each investor should consider its own criteria before making an investment in any Brookfield fund. 8 Brookfield Asset Management Inc.
Conclusion 1 Approach to structuring a strong and sustainable, long-term partnership involves: Understanding your timberland investment priorities Finding a like-minded manager with a solid and consistent approach Completing due diligence required Seeking out and negotiating for partnership terms that demonstrate an alignment of interest between you and the manager Successful managers buy well, actively manage investment(s) and have an exit plan This is a long term relationship, so find someone you can work with 1 The items and views described herein are based on Brookfield s good faith analysis and belief. Each investor should consider its own criteria before making an investment in any Brookfield fund. 9 Brookfield Asset Management Inc.
Questions? PNW operations U.S. South plantation 10 Brookfield Asset Management Inc. Brazil 2 month old in front of a 7 year old plantation
Notice to Recipients This document is strictly confidential and is intended solely for the information of the person to whom it has been delivered. It may not be reproduced or transmitted, in whole or in part, to third parties except as agreed in writing by Brookfield Asset Management Inc. ( BAM and together with its affiliates, Brookfield ). By accepting this material, you hereby acknowledge that you are aware that the United States and other applicable laws prohibit any person who has material, non-public information about a company or its affiliates obtained directly or indirectly from that company from purchasing or selling securities or other financial interests of such company or its affiliates or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities or other financial interests. Brookfield Private Advisors LLC, a wholly owned subsidiary of BAM, is a registered broker dealer with the SEC and a FINRA Member. Certain employees of Brookfield s Private Funds Group may be registered with Brookfield Private Advisors LLC. None of Brookfield, its officers, employees, agents or affiliates makes any express or implied representation, warranty or undertaking with respect to this document. This document has been prepared for institutional investors only. It has not been filed with FINRA and may not be reproduced, shown, quoted to, or used with members of the public. In considering investment performance information contained herein, prospective investors should bear in mind that 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 has not 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, carried interest or other general partner distributions, taxes, transaction costs and other expenses to be borne by investors, which in the aggregate are expected to be substantial and which would reduce the actual returns experienced by an investor). Nothing contained herein should be deemed to be a prediction or projection of future performance of an investment. Any references to committed capital include all pledged commitments. 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. 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. Neither this document nor the interests offered hereby have been approved by the United States Securities and Exchange Commission or by any regulatory or supervisory authority of any state or other jurisdiction, including Canada and the United Kingdom, nor has any such authority or commission passed on the accuracy or adequacy of this document. The information contained herein is subject to correction, completion, verification and amendment. Any representation to the contrary is a criminal offense. This document is not intended to be made available to any person in Australia who is not a wholesale client (within the meaning of the Corporations Act 2001 (Cth) of Australia). Any offer or invitation in Australia to invest in the fund, and any investment in the fund by a person in Australia, is limited to such wholesale clients. Any such offer or invitation is made in the expectation that such person will not sell or transfer its interest in the fund within 12 months after the issue of the interest. This document is not a disclosure document or product disclosure statement (within the meaning of the Corporations Act 2001 (Cth) of Australia). U.S. Internal Revenue Service Circular 230 Notice: To ensure compliance U.S. Internal Revenue Service Circular 230, prospective investors are hereby notified that: (a) any discussion of federal tax issues contained or referred to herein is not intended or written to be used, and cannot be used, by prospective investors for the purpose of avoiding penalties that may be imposed on them under the U.S. Internal Revenue Code; (b) such discussion is written in connection with the promotion or marketing of the transactions or matters addressed herein; and (c) prospective investors should seek advice based on their particular circumstances from an independent tax advisor. Unless otherwise noted, all references to $ or Dollars are to U.S. Dollars. All time-sensitive representations are made as of June 2012, unless otherwise expressly indicated. Please contact Brookfield if you would like to discuss any of the information set forth herein. 11 Brookfield Asset Management Inc.