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Brookfield Asset Management Inc
Symbol BAM
Shares Issued 11,982,568
Close 2017-02-09 C$ 23.26
Market Cap C$ 278,714,532
Recent Sedar Documents

Brookfield Asset earns $3,338-million (U.S.) in 2016

2017-02-09 07:08 ET - News Release

Mr. Bruce Flatt reports

BROOKFIELD ASSET MANAGEMENT REPORTS 2016 RESULTS

Brookfield Asset Management Inc. has released its financial results for the year ended Dec. 31, 2016. All currency figures in this release are in U.S. dollars.

Bruce Flatt, chief executive officer of Brookfield, stated: "We had a strong year in 2016 across our businesses. We closed $30-billion of private funds, including what are among the largest infrastructure and real estate funds globally. We also deployed nearly $20-billion of capital on behalf of our investors in several high-quality assets, including a major pipeline system in Brazil, a premier mixed-use complex in South Korea and the tower assets of a leading cellular carrier in India, among others."

                      OPERATING RESULTS
           (in millions, except per-share amounts) 

                                 For the years ended Dec. 31,             
                                           2016          2015

Net income (1)                           $3,338        $4,669
Per Brookfield share (2)                   1.55          2.26
Funds from operations (2)                $3,237        $2,559
Per Brookfield share (2)                   3.18          2.49

Notes
(1) Consolidated basis -- includes amounts attributable 
to non-controlling interests.
(2) Reflects amounts attributable to Brookfield 
shareholders.

Net income for 2016 totalled $3.3-billion or $1.55 per Brookfield share, compared with $4.7-billion or $2.26 per Brookfield share in the prior year. Funds from operations (FFO) increased by 26 per cent due to strong growth in asset management revenues and carried interests, although fair value changes declined relative to the prior year which led to an overall reduction in net income.

The increase in FFO includes a 64-per-cent increase from the company's asset management business, which is a result of the continued growth in the company's fee-bearing capital, including capital raised in the company's private funds and the increased capitalization of the company's listed issuers. The company also recorded carried interests relating to the monetization of investments in its private funds. Operating FFO from invested capital increased by 22 per cent as a result of the contribution from acquisitions and operational improvements throughout the company's businesses, including the commencement of leases and commissioning of development projects. Current-year FFO also included realized disposition gains of $923-million, compared with $842-million in the prior year, as the company continued to monetize assets as part of its continuing capital recycling program.

Appraisal gains within the company's property portfolio totalled $1.0-billion in 2016, compared with gains of $2.3-billion in the prior year. Most of the current-year gains occurred in the company's opportunistic property portfolios and were a result of increasing cash flows while appraisal gains in the company's core office portfolios were flat over all. Fair value changes also included the impact of lower values for certain investments that are determined by stock market prices. As a result, consolidated fair value changes were essentially flat in 2016.

Dividend declaration

The board declared a quarterly dividend of 14 cents per share (representing 56 cents per annum), payable on March 31, 2017, to shareholders of record as at the close of business on Feb. 28, 2017. This represents an 8-per-cent increase over the prior year. The board also declared all of the regular monthly and quarterly dividends on its preferred shares.

Operating highlights

Fundraising of $30-billion in private funds has driven significant growth in the company's fee base and scale of its asset management business.

Fee-bearing capital increased by 16 per cent to $110-billion during 2016, driven largely by an increase of 44 per cent in private funds. During the year the company closed its latest series of its flagship fund strategies in real estate, infrastructure and private equity, as well as credit strategies and the company's first open-ended core real estate fund, which held its first close of $1-billion in the fourth quarter. These results demonstrate strong demand from clients for existing products and new offerings that the company is actively pursuing.

As a result, the company's annualized fee revenues increased by 26 per cent to $1.2-billion from capital that is primarily very long term or perpetual in nature and is backed by long-term contracted fee arrangements. In addition, carry eligible capital expanded by 62 per cent, increasing the company's annualized target carried interest to $865-million compared with $560-million at the end of 2015. This represents a significant increase in the earning potential of the company's asset management franchise.

The company made solid progress in capital deployment, investing or committing $18-billion, putting capital to work for the company's clients, and progressing toward the next series of funds.

The company continues to invest significant amounts of capital into new investments, diversified by both asset class and geography. The company's latest flagship real estate opportunity fund, BSREP II, is now approximately 75 per cent invested. The company's most recent flagship funds in infrastructure (BIF III) and private equity (BCP IV), closed earlier this year, and are both advancing well at approximately 35 per cent and 50 per cent invested or committed, respectively.

The company's property group agreed to buy a 4.2-million-square-foot office portfolio in Mumbai, a mixed-use office, retail and hospitality complex in South Korea, and completed the acquisition of a prime mixed-use estate in the centre of Berlin. The company also completed the privatization of the company's U.S. regional mall business, and continued to build out the company's hospitality, self-storage, and student housing operations with strategic add-on acquisitions.

The company's renewable power business completed the acquisition of Isagen, which is a premier 3,000-megawatt Colombian hydroelectric portfolio, as well as other hydro assets in North America and Brazil. The company continued to advance its development pipeline, including wind projects in Europe and hydroelectric projects in Brazil. Over the last year, the company acquired, with its partners, a 34-per-cent interest in the public float of TerraForm Power, as its sponsor SunEdison filed for bankruptcy protection. TerraForm Power and its sister company TerraForm Global collectively own and operate 4,000 megawatts of solar and wind assets. The company is working to acquire the companies under an exclusivity arrangement, which, if successful, will position them as a growing, viable business.

The company's infrastructure group made first investments in India and Peru, building out its global toll road business. The company also recently reached an agreement to acquire the tower assets of a leading cellular carrier in India. In Brazil, the company made a commitment to acquire a high-quality natural gas transmission system and secured a number of electricity transmission projects. The company also closed the previously announced acquisitions of an Australian ports business and a North American gas storage business.

The company's private equity operations announced the acquisition of a 70-per-cent stake in Brazil's largest private water distribution, collection and treatment business. This positions the company well to invest in a growing share of the water and sewage improvements planned in Brazil over the next two decades. Subsequent to year-end, the company agreed to acquire an approximate 85-per-cent controlling stake in Greenergy Fuels Holdings Ltd., a leading provider of road fuels in the United Kingdom, expanding the company's footprint in the European market.

The company further focused its business and simplified its structure, providing improved transparency for investors.

In June, the company spun off Brookfield Business Partners, its fourth listed partnership. This completes the process of separating the company's operating businesses into four distinct business groups, each with private and public funding entities, furthering the company's asset management strategy. Following this spinoff, approximately 85 per cent of the company's invested capital is now in listed assets. These listed partnerships provide the company with perpetual capital as well as providing additional investment options and increased transparency for investors.

Brookfield Property Partners (BPY) recently made a proposal to Brookfield Canada Office Properties (BOX) to acquire the remaining equity interest in BOX not owned by it or its affiliates. Acquiring full ownership of BOX will allow BPY to fully integrate its North American office operations and further simplifies the company's structure.

Finally, the company has been able to take advantage of the historically low-interest-rate environment over the last couple of years, including raising proceeds from asset sales and refinanced a significant portion of the company's debt.

The company continued to recycle capital by selling mature assets and redeploying it for higher returns in the company's opportunistic funds. Sales have been in sectors and geographies where the company felt it could achieve attractive valuations and either redeploy that capital or return it to investors. In total the company realized proceeds of approximately $6-billion in the last two years, including $3.5-billion in 2016, predominately from core office assets, where capitalization rates were favourable, as well as assets in the company's retail and hotel, utility and renewable power business. In January, the company's private equity group entered into an agreement to sell one of the remaining businesses in one of its early private equity funds for a sizable gain, which also resulted in the realization of accumulated carried interest in this fund.

During this time, the company also completed a significant number of financings throughout its operating businesses and listed entities at attractive rates. The company completed more than $35-billion of financings over the last two years, including over $20-billion in 2016, locking in low rates and extending overall term to an average of seven years on a proportionate basis. Although rates have risen over the past months, the company continues to view these to be at attractive levels and therefore intends to continue to execute on refinancing opportunities throughout the company's business.

As a result of the foregoing, as well as the company's fundraising activities, the company finished the year with substantial financial resources with which to pursue future transactions. Dry powder in the company's private funds at the end of the quarter was $20-billion. In addition to this the company has core liquidity of over $9-billion, of which $3-billion is at the corporate level with the balance within the company's listed partnerships.

Trisura Group

For the past 10 years, the company has owned a property and casualty insurance business called Trisura Guarantee Insurance Company, which has consistently and profitably grown its operations. This business is no longer strategic to Brookfield as the company focuses on its asset management operations, and the company believes Trisura Guarantee could benefit from being a stand-alone company with direct access to the capital markets. The company is planning to combine Trisura Guarantee with the rest of its small specialty insurance operations and spin them off by way of a special dividend to holders of Brookfield's class A and B limited voting shares. The dividend, estimated to be worth 10 U.S. cents per Brookfield share, or approximately $100-million (U.S.), will take the form of common shares of Trisura Group Ltd., an Ontario corporation, and should occur in the first half of 2017, subject to the receipt of regulatory approvals.

Basis of presentation

This news release and accompanying financial statements are based on international financial reporting standards (IFRS).

Additional information

The letter to shareholders and the company's supplemental information for the three months ended Dec. 31, 2016, 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 are based primarily on information that has been extracted from the company's financial statements for the year ended Dec. 31, 2016, 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 reviewed and approved this document, including the summary unaudited consolidated financial statements prior to its release.

Information on the company's dividends can be found on the company's website under stock and distributions/distribution history.

Quarterly earnings call details

Investors, analysts and other interested parties can access Brookfield Asset Management's 2016 fourth quarter results as well as the shareholders' letter and supplemental information on Brookfield's website under the reports and filings section the company's website.

The conference call can be accessed via webcast on Feb. 9, 2017, at 11 a.m. Eastern Time at the company's website or via teleconference at 1-800-319-4610 toll-free in North America. For overseas calls please dial 1-604-638-5340, at approximately 10:50 a.m. Eastern Time. A recording of the teleconference can be accessed at 1-800-319-6413 or 1-604-638-9010 (password 1072 followed by the number sign).

About Brookfield Asset Management Inc.

Brookfield Asset Management is a leading global alternative asset manager with approximately $250-billion in assets under management. The company has more than a 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity.

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. Hard copies of the annual and quarterly reports can be obtained free of charge upon request.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in millions, except per-share amounts)

                                 Years ended Dec. 31,  Three months ended Dec. 31,
                                      2016       2015              2016       2015

Revenues                           $24,411    $19,913            $6,935     $5,538
Direct (costs)                     (17,718)   (14,433)           (5,150)    (4,092)
Other income and gains                 482        145                91          -
Equity accounted income              1,293      1,695               252        521
Expenses
Interest (expense)                  (3,233)    (2,820)             (826)      (703)
Corporate (costs)                      (92)      (106)              (24)       (23)
Fair value changes (loss)             (130)     2,166              (488)       594
Depreciation and amortization
(loss)                              (2,020)    (1,695)             (482)      (430)
Income tax (loss)                      345       (196)             (211)      (218)
                                     -----      -----             -----      -----
Net income                           3,338      4,669                97      1,187
                                     =====      =====             =====      =====
Net income attributable to
Brookfield shareholders              1,651      2,341               173        678
Net income attributable to
non-controlling interests
(loss)                               1,687      2,328               (76)       509
                                     -----      -----             -----      -----
                                     3,338      4,669                97      1,187
                                     =====      =====             =====      =====
Net income per share
Diluted                               1.55       2.26              0.14       0.66
Basic                                 1.58       2.32              0.15       0.67

We seek Safe Harbor.

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