Brascan Corporation: Letter to Shareholders.

Business Editors

TORONTO--(BUSINESS WIRE)--Nov. 6, 2003

Brascan Corporation (NYSE:BNN) (TSX:BNN.A):

The following document is to be added to the press release sent today at 7:45 am (ET)

LETTER TO SHAREHOLDERS

Fellow Shareholders

We are pleased to report continued progress during the first nine months of 2003 in our drive to build value for you. We achieved a number of our goals to date and, while we still have a lot to do prior to year end, we are on track for our best financial year on record, which will hopefully establish the base for years to come.

SOLID FINANCIAL RESULTS

For the nine months ended September 30, 2003, we recorded cash flow from operations of $400 million ($2.01 per share), compared with $322 million ($1.64 per share) excluding property gains and $352 million ($1.81 per share) including such gains in the same period last year. On a comparable basis (excluding the impact of net gains on the sale of property), cash flow per share for the first nine months increased by 23%. This growth was driven by increased contribution across virtually all our operations.

For the three months ended September 30, 2003, cash flow from operations increased to $138 million ($0.69 per share), compared with $118 million ($0.58 per share) excluding property gains and $128 million ($0.63 per share) including such gains in the same period last year. This represents cash flow per share growth on a comparable basis of 19% over the same period in 2002.

Operating results continue to be on target to achieve the highest cash flows in the company's history, backed in large measure by long-term real estate leases and power contracts. On a net income basis, results improved significantly in the third quarter, assisted by stronger resource income which was driven by both productivity achievements and higher prices. Net income for the three months ended September 30, 2003 increased to $100 million ($0.48 per share) compared with $58 million ($0.25 per share) in the third quarter last year, representing per share growth of 92%.

In addition to expected strong operating results, the fourth quarter of 2003 will also contain a $100 million gain, prior to tax and minority shareholder interests, from the sale of a 49% interest in our 245 Park Avenue property in New York. This continues our strategy of opportunistically realizing on value created within our operations.

VALUE CREATION AND GROWTH INITIATIVES

During the first nine months of the year we undertook a number of initiatives to expand our operations, strengthen our balance sheet and generate further liquidity to ensure the company is positioned to take advantage of opportunities for continued growth and value creation:

Continued to pursue a strategy of maximizing the value from our 9% interest in Canary Wharf Group. Achieving this could involve a variety of alternatives and we continue to invest time to assess this opportunity.

Acquired a 383,000 square foot newly constructed office property in Washington D.C. for $157.5 million, establishing a foothold in this attractive, supply constrained market. This 12 storey office tower includes a five level underground parking garage and is located two blocks from the White House. The property is 50% leased and we expect that our proactive approach to leasing will ensure that the building will be fully occupied in the next 12 months.

Agreed to sell our equity interest in Northgate Exploration for net proceeds of $170 million to a syndicate of underwriters, successfully concluding the restructuring of this company, an initiative commenced several years ago as part of our asset management business.

Expanded our asset management business with the successful launch and introduction of new income funds designed for institutional and retail investors seeking alternatives to the equity markets. During the third quarter of 2003, we completed an initial public offering for the Royal LePage Franchise Services Fund, which generated C$100 million in gross proceeds.

Acquired three hydroelectric power generating facilities in New Hampshire and Maine totaling 16.5 megawatts for approximately $30 million. These facilities are proximate to our existing hydroelectric facilities in New Hampshire and Maine and are interconnected to the New England power grid. The transaction, which is expected to close before the end of the year, brings to 42 the number of power generating facilities we own across North America and increases our total generating capacity to over 1,700 megawatts.

Completed construction of two power generating facilities, one in Ontario and one in British Columbia, and a 25 mile transmission line in Maine. The completion of these projects expands our presence and capacity in these markets.

Expanded our market penetration in Canadian residential franchise services with the acquisition of one of Quebec's leading real estate franchisors, Le Groupe Trans-Action, increasing our franchise services network to over 8,900 professionals in 520 offices across Canada.

Generated approximately $200 million of cash proceeds through the sale of a 49% interest in 245 Park Avenue in New York to New York State Teachers Pension Fund (NYSTERS). The property was sold on a property valuation of approximately $900 million.

Substantially completed construction on our 300 Madison Avenue development at 42nd Street in Midtown Manhattan. The 1.1 million square foot building received its temporary certificate of occupancy in September 2003.

Issued approximately $1.5 billion in long-term fixed rate securities, taking advantage of the low rate interest environment to further strengthen our balance sheet and reduce our cost of capital. These transactions, which took place primarily in the first six months of the year, included the issuance of 30 year corporate debt, three preferred share issues with favorable dividend rates of approximately 5.25% and a 20 year debenture with recourse only to six hydroelectric facilities in northern Ontario.

Repurchased 4.2 million common shares of the company for cancellation at an average price per share of $21.29. We remain committed to investing in the repurchase of our shares when they can be acquired at below our estimate of net asset value.

Completed the spin-off of our residential operations from our North American office property operations in the first quarter, creating a focused residential business centered in California. The trading price for shares of this new company, of which 50% are held directly by Brascan, has more than doubled since the spinoff, driven by the extremely buoyant underlying fundamentals in the housing market.

Acquired 350,000 acres of timberlands and two low cost paper mills as a restructuring opportunity in the first quarter of 2003. The timberlands are currently generating strong cash flows, the directory and newsprint mill is fully operational and on plan, and we are reviewing our options for the start-up of the fine paper mill.

OPERATING BUSINESS HIGHLIGHTS

During the nine months of 2003, we maintained our focus on enhancing and strengthening the cash flows from our operating businesses while at the same time expanding our base of high quality assets.

Real Estate

Commercial Properties

Our strategy of owning and operating high quality commercial properties in downtown markets with long-term leases to high credit quality tenants continues to deliver strong results. In addition, we see positive signs of tenants making long-term decisions and as a result, believe leasing markets overall will become more positive as the economies recover. The third quarter contribution from our commercial operations increased 3% over the same period last year to $157 million and brings the nine-month net operating income to $471 million.

Year to date, we have leased 2.7 million square feet of space, over four times the contractual expiries for 2003, including approximately 800,000 square feet in Toronto and approximately 400,000 square feet in each of Boston, Minneapolis and Denver. This strong leasing activity is driven in large part by market rents which have been stable over the past year. This has encouraged existing tenants to renew their expiring leases early and companies are now looking to expand or consolidate their operations by relocating into our higher quality properties.

In particular, legal and accounting firms are leading the increase in leasing activity. This trend is evidenced by the recent announcements of one company's move to the World Financial Center, and we expect to be involved in further sub-leasing of space within our portfolio of upwards of 1 million square feet prior to year end.

Today, we are 95% leased across our portfolio with an average lease term of over 10 years, one of the strongest office leasing profiles in North America.

Residential Properties

The unprecedented strength of the North American housing market continued to drive superior results in our residential property operations, across virtually all markets. To date, we have sold 100% of our 2003 planned home closings and we are forward selling into 2004. Overall, we have pre-sold over 20% of our planned home closings for 2004, higher than at the same period last year. Total operating income for the nine months was $123 million compared with $73 million in 2002. This significant increase is due to increased home sales and accelerated lot sales as described below.

As mentioned last quarter, we have been taking advantage of these strong markets by selling lots that we do not require in the short term. In the first nine months, we generated net proceeds of $120 million of cash from the sale of excess entitled lots, in addition to our regular housing sales. We remain focused on continuing to reduce risk in our operations and we are ensuring we maintain future flexibility by acquiring options on developments in our markets.

Power Generation

The expansion of our power operations in the last two years through the acquisition and development of 21 power generation facilities in Ontario, New Hampshire and Maine has provided us with important watershed diversity, reducing our hydrology risk in periods of low precipitation. This has been important for us this year as we were faced with low precipitation levels across several of our regions. In the first nine months of the year we achieved generation of 4,448 gigawatt hours, equivalent to generation in the same period in 2002 but below plan and the long-term historical averages for our operations. Overall net operating income was $115 million, the same as 2002, as our increased asset base offset weak hydrology.

However near the end of the third quarter, we started to benefit from an end to low water levels in Quebec and a return to more normal precipitation levels across all our operations. As we enter the fourth quarter, our reservoirs are near average historical levels.

We are continuing to pursue opportunities to further expand our power generation business in Canada and the United States, and while we are primarily interested in hydroelectric generation, we will consider other forms of electricity generation, as part of portfolio acquisitions.

Asset Management

In transforming our financial services business into an asset management operation we continue to add investors to our alternative investment funds with a focus on our areas of expertise - real estate, energy and resources. Institutional and other investors have shown strong interest in the funds that we are currently marketing, as they seek to identify investments that produce consistent and sustainable returns.

Our Tricap Restructuring Fund's largest investment is in Doman Industries, a Western Canadian lumber producer. Tricap has put forward a restructuring plan and is working with other stakeholders to effect a timely restructuring of the company. The Fund has recorded attractive returns on its realized investments, and is currently pursuing new investment opportunities, primarily in the resource and steel industries.

Our Real Estate Finance Fund has established a strong presence in the US market for real estate mezzanine financing. To date, the Fund has invested approximately $150 million in real estate mortgage loans and other investments and continues to see a strong flow of potential opportunities.

Our Real Estate Opportunity Fund, which was launched in the second quarter of 2003, continues to source deals and solicit investor interest. We have committed C$100 million to the Fund, which is currently evaluating a number of opportunities to acquire under performing commercial real estate properties in North America. In addition, we negotiated a partnership with Tri Continental, an investment company with a well established track record in managing residential equity lending investments.

We also continue to provide many clients with complementary business services in areas where we have special expertise. In the real estate sector, we continued to expand our investment banking, corporate advisory, property services and facilities management services. The revenues earned from these services have grown dramatically over the past few years, and will continue to grow as we further build our client base and market share.

Investments

Noranda

Noranda's results in the third quarter exceeded their performance in the same period last year with a rebound in base metals prices that was somewhat offset by exchange rate changes. Higher nickel, copper and zinc prices assisted in this rebound, but full results at current price levels should provide more positive results for the fourth quarter.

We completed the recapitalization plan of Noranda Inc., following major restructuring efforts in the past 18 months. Brascan subscribed for $175 million of an approximate $430 million equity issue, which combined with the sale of assets and a 10 year bond financing, enabled Noranda to end the quarter with $700 million of cash, $1 billion of undrawn bank lines and a net debt to capitalization of 44%, reduced from 54% at the end of 2002. As a result of the above, and with metal prices increasing, recently built capacity now on stream, and productivity improvements delivering results, Noranda's financial performance should continue to improve.

Nexfor

Nexfor's oriented strandboard (OSB) operations continued to benefit from constrained supply, buoyancy of the North American housing markets, virtually no new capacity in the medium term, and poor weather in the first half of the year which caused delays in the build-out of homes. As a result, OSB prices exceeded $450 per thousand square feet, which because of order lags resulted in realized prices of $320 in the third quarter. Nexfor is now forward selling its inventory into 2004 with fourth quarter production at average realized OSB prices well in excess of those realized in the third quarter.

Results recorded in the third quarter were the highest in Nexfor's history, despite continued low paper prices in the other component of their operations. The debt to capitalization of Nexfor, given the substantial cash flow generated, was reduced to 40% during the quarter compared to nearly 50% after its acquisition of three OSB mills in 2002. A continued reduction in Nexfor's debt to capitalization is expected through to year end.

Net Asset Values

Our Supplementary Information Package has been updated for the quarter and we have now valued the assets based on expected 2004 cash flows. As a result of initiatives undertaken during the year, the net asset value has increased to $36.50 per share. As these are estimates that are not subject to audit, we have provided our parameters for this valuation in our Supplementary Information Package. We encourage you to utilize your own metrics and come to your own conclusions on these values.

In Closing

The strong performance in the first nine months of this year reinforces our belief that our strategic direction of owning high quality, long-term cash flow producing assets is sound. In addition, we continue to build our asset management business in order to leverage our operating expertise, especially in our real estate and power generation businesses. As we enter the balance of the year, we are well positioned to achieve our 2003 financial objectives and, with significant liquidity at our disposal, to continue to pursue profitable growth opportunities.

J. Bruce Flatt

President and Chief Executive Officer