Brascan Reports 18% Increase In Cash Flow From Operations Per Share To US$0.66 Or US$132 Million For The Second Quarter Of 2003.Business Editors TORONTO--(BUSINESS WIRE)--Aug. 7, 2003 Investors, analysts and other interested parties can access Brascan's 2003 Second Quarter Results Shareholders Letter, as well as the Supplementary Information Package and Corporate Profile, which form the basis of this release, on Brascan's web site under the Investor Information/Financial Reports section at www.brascancorp.com. The 2003 Second Quarter Results conference call can be accessed via webcast on August 7, 2003 at 2:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. at www.brascancorp.com or via teleconference at 416-695-9753 or 1-877-888-7019, toll free in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , at approximately 1:50 p.m. EST, using Reservation Number T433523S. The teleconference replay can be accessed at 416-695-5278 or 1-877-244-9054 using pass code 3523. Brascan Corporation (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : BNN BNN Boston Neighborhood Network BNN Boundary Network Node (IBM) BNN Back-Propagation Neural Network BNN Biological Neural Network BNN Bart's Neverending Network (public-service TV network in The Netherlands) .A, NYSE NYSE See: New York Stock Exchange : BNN) today reported an 18% increase in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses to US$0.66 per share in the second quarter of 2003 compared with US$0.56 per share in the same period last year. Total cash flow from operations increased to US$132 million, compared with US$110 million in 2002. On a comparable basis for the first six months of 2003, cash flow from operations per share increased 25% to US$1.32 compared with US$1.06, excluding $20 million of net gains on the sale of commercial real estate, and US$1.18 per share including these gains. Total cash flow from operations increased to US$262 million for the six month period, from US$224 million in 2002.
For the Three For the Six
Months Ended Months Ended
Results June 30 June 30
------------- ----------------------------
Unaudited (US$ millions,
except per share
information) 2003 2002 2003 2002
----- ------ ------ -------------
Including Excluding
property property
disposition disposition
gains gains
Cash flow
from operations $ 132 $ 110 $ 262 $ 224 $ 204
- per share $ 0.66 $ 0.56 $ 1.32 $ 1.18 $ 1.06
Net income prior to
resource investments $ 71 $ 57 $ 145 $ 121 $ 108
Total net income $ 63 $ 72 $ 119 $ 135 $ 122
- per share $ 0.27 $ 0.35 $ 0.50 $ 0.67 $ 0.59
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Net income prior to resource investments in the second quarter increased by 25% to US$71 million from US$57 million in the same period last year. After taking into account the equity accounted results from resource investments, net income for the period was US$63 million, compared with US$72 million in 2002. On a per share basis, this resulted in net income of US$0.27 during the three months compared with US$0.35 per share in the same period last year. "Our continued focus on building sustainable cash flows in our operations delivered strong results in the first half of the year. This was driven by increasing returns from our office properties, buoyant Buoyant The term used to describe a commodities market where the prices generally rise with ease when there are considerable signals of strength. Notes: These types of markets can be very volatile as the prices are rapid to rise and fall with investor sentiment. housing markets, increased contribution from our asset management operations and greater cash flows from our power generation operations following acquisitions made in 2002. With a solid foundation of contract driven cash flows and significant liquidity, we are well positioned to maintain our momentum throughout the year," commented Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. Flatt, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Brascan. Year to Date Achievements and Highlights During the first six months of the year, Brascan undertook a number of initiatives to further its growth objectives, build liquidity, enhance return on capital and position the company to take advantage of future opportunities: -- Issued over US$1 billion of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and preferred shares, taking advantage of the low interest rate environment to repay higher rate indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and add to the company's strong financial position. -- Completed conversion of the balance sheet into U.S. dollars to better reflect the geographic distribution of the company's principal assets and sources of cash flow. -- Increased Brascan's investment in a number of premier office properties through the acquisition of 53 million shares of Canary Wharf
Canary Wharf is a large business development in London, located on the Isle of Dogs in the London Borough of Tower Hamlets, centred on the old West India Docks in Group, furthering the company's strategy to invest directly and indirectly in high quality assets within the company's core areas of operation. -- Expanded Brascan's power operations to 39 generating facilities with the completion of the construction of two hydroelectric power hydroelectric power: see power, electric; water power. hydroelectric power Electricity produced from generators driven by water turbines that convert the energy in falling or fast-flowing water to mechanical energy. plants in northern Ontario Northern Ontario is the part of the province of Ontario which lies north of Lake Huron (including Georgian Bay), the French River and Lake Nipissing. Northern Ontario has a land area of 802,000 km² (310,000 mi²) and constitutes 87% of the land area of Ontario, although it and British Columbia, and a strategic hydroelectric transmission line in Maine Maine, ship Maine, U.S. battleship destroyed (Feb. 15, 1898) in Havana harbor by an explosion that killed 260 men. The incident helped precipitate the Spanish-American War (Apr., 1898). Commanded by Capt. Charles Sigsbee, the ship had been sent (Jan. , linking the company's six hydroelectric facilities in Maine with the New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. Power grid. -- Expanded the company's asset management business with the successful launch of several alternative asset management funds, including a Real Estate Opportunity Fund and a Franchise Services Fund. -- Announced and completed a recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. plan in Noranda, which should enable Brascan to better pursue strategic options with this investment as the commodity cycle recovers. Additional Information The Letter to Shareholders for the second quarter of 2003 is attached to this release and contains further information on the company's strategy, operations and financial results. This letter is available on the company's web site. A Supplementary Information Package with additional financial information is also posted on Brascan's web site (under Investor Information, Financial Reports) and should be read in conjunction with this press release. The Supplementary Information Package includes management's estimates of the underlying value of the company's operating businesses based on their cash flows. Dividend Declaration On August 6, 2003, the Board of Directors declared a quarterly common share dividend of C$0.26 per share, payable November 30, 2003 to shareholders of record on November 1, 2003. This dividend follows an announcement in the first quarter of 2003 of an annual increase in the dividend of C$0.04 per share to C$1.04 per share. Information on all of the company's common and preferred share dividends can be found on Brascan's web site under Stock Information. Brascan Profile Brascan is a real estate, power generation and asset management company. The company's objective is to earn a superior return on equity by owning operations which produce consistent and sustainable cash flows. Total assets exceed US$15 billion, with a further US$5 billion of assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . This includes 55 high quality office properties and 39 power generating plants. Within Brascan's areas of expertise, the company invests in high quality assets when they can be acquired at discounts to their underlying value, and provides bridge and mezzanine capital Mezzanine capital (or mezzanine debt) is a broad financial term that refers to unsecured, high-yield, subordinated debt or preferred stock that represents a claim on a company's assets that is senior only to that of a company's shareholders. . The company is listed on the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and Toronto stock exchanges Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol BNN and BNN.a respectively. Note: This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forward in the forward looking statements include general economic conditions, interest rates, availability of equity and debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay and other risks detailed from time to time in the company's 40-F filed with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED STATEMENT OF INCOME
---------------------------------------------------------------------
unaudited Three months ended Six months ended
June 30 June 30
US$ millions,
except per share amounts 2003 2002 2003 2002
---------------------------------------------------------------------
Total revenues $ 719 $ 727 $ 1,386 $ 1,432
------------------------------------
Net operating income
Real estate operations 188 186 379 363
Power generating plants 44 42 80 74
Financial operations 51 42 101 84
Property gains - - - 40
Investment income and other 23 21 53 46
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306 291 613 607
Expenses
Interest expense 108 118 224 232
Minority share of income
before non-cash items 64 65 127 156
Other operating costs 19 14 33 27
---------------------------------------------------------------------
Income before non-cash items 115 94 229 192
Depreciation and amortization 36 32 71 60
Taxes and other non-cash items 30 24 58 53
Minority share of non-cash
items (22) (19) (45) (42)
---------------------------------------------------------------------
Income before resource
investments 71 57 145 121
Equity accounted (loss)
earnings from resource
investments (8) 15 (26) 14
---------------------------------------------------------------------
Net income $ 63 $ 72 $ 119 $ 135
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per common share
Diluted $0.27 $0.35 $0.50 $0.67
Basic $0.27 $0.35 $0.51 $0.68
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CONSOLIDATED STATEMENT OF CASH FLOW FROM OPERATIONS
---------------------------------------------------------------------
unaudited Three months ended Six months ended
June 30 June 30
US$ millions,
except per share amounts 2003 2002 2003 2002
---------------------------------------------------------------------
Income before non-cash items $ 115 $ 94 $ 229 $ 192
Dividends from Noranda Inc. 13 12 25 24
Dividends from Nexfor Inc. 4 4 8 8
---------------------------------------------------------------------
Cash flow from operations and
gains $ 132 $ 110 $ 262 $ 224
---------------------------------------------------------------------
---------------------------------------------------------------------
See Note 1
CONSOLIDATED BALANCE SHEET
unaudited
June 30 December 31 December 31
2003 2002 2002
---------------------------------------------------------------------
US$ millions Cdn$ millions
---------------------------------------------------------------------
Assets
Cash and cash equivalents $ 264 $ 332 $ 525
Financial assets 659 718 1,134
Accounts receivable and other 1,421 1,348 2,130
Operating assets
Real estate properties 6,884 6,618 10,457
Power generating plants 1,783 1,480 2,338
Financial operations 1,829 1,328 2,099
Assets under development 1,423 1,412 2,231
Investment in Noranda and
Nexfor 1,344 1,186 1,874
---------------------------------------------------------------------
$15,607 $14,422 $22,788
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities
Corporate borrowings $ 1,433 $ 1,035 $ 1,635
Non-recourse borrowings
Property specific mortgages 5,140 4,992 7,887
Other debt of subsidiaries 1,873 1,867 2,950
Accounts and other payables 1,434 1,262 1,994
Shareholders' interests
Minority interests of others
in assets 1,435 1,456 2,301
Preferred equity
Corporate 852 735 1,149
Subsidiaries 576 450 710
Common equity 2,864 2,625 4,162
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$15,607 $14,422 $22,788
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Note 1 The press release and accompanying consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge make reference to cash flow from operations on a total and per share basis. Management uses cash flow from operations as a key measure to evaluate performance and to determine the underlying value of its businesses. The consolidated statement of cash flow from operations provides a full reconciliation between this measure and net income. Readers are encouraged to consider both measures in assessing Brascan's results. LETTER TO SHAREHOLDERS August 7, 2003 Fellow Shareholders During the first six months of 2003, we maintained our focus on increasing and strengthening the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. sustainability of our cash flow from operations. We also took advantage of the low interest rate environment to complete a number of financings which added to our available financial resources and continued to reduce our cost of capital. As we enter the latter part of the year, we remain confident that we are on track to deliver on our financial targets for 2003. SOLID FINANCIAL RESULTS For the three months ended June 30, 2003, we achieved an 18% increase in cash flow from operations to US$0.66 per share compared with US$0.56 per share in the second quarter of 2002. This growth is the result of higher returns from our office properties, strong housing markets, increased contribution from our asset management operations, and greater cash flow from our power generation operations, as a result of acquisitions in 2002. Total cash flow from operations increased 20% to US$132 million for the three month period, and to US$262 million for the full six month period. For the benefit of new shareholders, it is worth noting that our business philosophy and hence our financial reporting is largely focused on cash flows. This is based on our conviction that, for the type of assets we own, cash flow is the most important measure of success in creating value for you. In this regard, we expect to generate over US$600 million of free cash flow in 2003, which will be used to grow our operations or returned to you through dividends or share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . Net income prior to resource investments in the second quarter of 2002 increased by 25% to US$71 million from US$57 million in the same period last year. After taking into account the equity results from resource investments, net income for the quarter was US$63 million, compared with US$72 million in 2002. On a per share basis, this resulted in net income of US$0.27 compared with $0.35 per share in the same period last year. VALUE CREATION AND GROWTH INITIATIVES During the first half of 2003, we undertook a number of initiatives to further our growth objectives, build liquidity, enhance our return on capital, and position the company to take advantage of future opportunities. Strengthened our financial position. We continued to take advantage of the low interest rate environment in the first half of the year to issue long-term fixed rate securities, locking in long-term, low cost financings. In total, we issued approximately US$1 billion of long-term debt and preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. to repay other higher rate indebtedness and bolster This article is about the pillow called a bolster. For other meanings of the word "bolster", see bolster (disambiguation). A bolster (etymology: Middle English, derived from Old English, and before that the Germanic word bulgstraz our already solid financial position. The major financings included: -- US$450 million of corporate debt, including a US$250 million 7.375% 30-year issue, and a US$200 million 5.75% 7-year issue -- C$175 million of 5.125% 15-year preferred shares issued by Brascan Corporation -- US$110 million of 5.25% 12-year preferred shares issued by our commercial office property subsidiary -- C$385 million of A(low) rated 6.60% 20-year property-specific debentures, with recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. only to six hydroelectric facilities and related transmission lines in northern Ontario Completed the conversion of our balance sheet into U.S. dollars to better reflect the geographic distribution of our asset base and revenues. In the first quarter, we completed the conversion and are now reporting all of our results in U.S. dollars. Increased our investment in a number of premier office properties through the acquisition of 53 million shares, or 9% of Canary Wharf Group, a property development company focused exclusively on premier office space in the Docklands area of the London, England office market. This investment furthers our strategy of creating value for shareholders by investing directly and indirectly in high quality assets, when they trade at meaningful discounts to underlying value. As of the end of the second quarter, our investment was valued in the market at approximately US$80 million greater than cost. Completed the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of our U.S. residential operations from our commercial property operations, creating a focused homebuilding company. Centered in two of the strongest markets, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). and Virginia, this company has grown over the past five years into one of the leading move-up homebuilders with an exceptionally high return on capital. Completed basic construction of our 100% leased, 1.1 million sq. ft., 300 Madison Avenue Madison Avenue, celebrated street of Manhattan, borough of New York City. It runs from Madison Square (23d St.) to the Madison Bridge over the Harlem River (138th St.). In the 1940s and 50s, some of the major U.S. development at 42nd Street in midtown mid·town n. A central portion of a city, between uptown and downtown. midtown Noun US & Canad the centre of a town Manhattan with an anticipated delivery date of mid-September. Constructed a key hydroelectric transmission line in Maine, linking our generating plants to the New England power grid. The new line, which includes two new substations, follows the acquisition by Brascan in January 2002 of six hydroelectric generating facilities in Maine. The expansion strengthens our ability to market power within the New England region. Expanded Brascan's total generating capacity to over 1,680 megawatts with the completion of two newly constructed hydroelectric power stations This is a list of major hydroelectric power plants in all countries in the world with installed capacity over 100 MW. This is an incomplete list. You can help Name of power station Installed capacity in MW Country in Canada. The US$52 million Dunford Generating Station in northern Ontario enhances our operating flexibility and optimizes the power generated by the 12 hydroelectric stations we own and operate in this region. The Pingston Creek Station in British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography further diversifies our hydroelectric operations. Further expanded our asset management business with the successful launch of several funds, including a Real Estate Opportunity Fund and a Franchise Services Fund. Acquired 350,000 acres of timberlands and two paper manufacturing plants as a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). opportunity within our asset management business. We are now executing our restructuring plan for the paper operations. Repurchased 3.4 million common shares of the company for cancellation at an average price per share of US$20.43, well below our net asset value of approximately US$33.00. In addition, we renewed our normal course issuer bid, which permits us to purchase up to 14 million Class A Limited Voting Limited voting is a voting system in which electors have fewer votes than there are positions available. The positions are awarded to the candidates who receive the most votes absolutely. Shares from April 21, 2003 to April 20, 2004. Withdrew Brookfield Properties' proposal to merge with BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra Properties. Brookfield's intention was to provide additional liquidity to shareholders of a company that became 90% owned by Brookfield following the purchase of shares held by the company's largest institutional shareholder. While the transaction was of limited significance to Brookfield from a financial perspective, it left an incorrect perception of Brookfield's intentions. The offer to merge was withdrawn and BPO Properties, for the time being, will continue as a 90%-owned subsidiary of Brookfield, working to duplicate DUPLICATE. The double of anything. 2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. the investment success created for all shareholders over the past five years under Brookfield's direction. OPERATING BUSINESS HIGHLIGHTS During the past six months, we expanded our asset management business and maintained our focus on enhancing our return on capital and strengthening our cash flow from operations: Real Estate We are beginning to see greater leasing momentum in our office property portfolio as large corporations are starting once again to commit to relocating or consolidating their existing space. Our strategic focus on long-term leases to high quality office tenants has largely insulated in·su·late tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates 1. To cause to be in a detached or isolated position. See Synonyms at isolate. 2. us from the market weakness of the past two years and we are benefiting from the move by tenants to quality. During the first six months of the year, we leased close to 1.5 million square feet of space in total, which included over 750,000 sq. ft. in Toronto and close to 400,000 sq. ft. in Minneapolis. Today we are 95% leased across our office portfolio with few major leases rolling over during the next year. This strong lease profile compares very favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. with the average market vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. rates in the Class A office property sector in virtually all of the cities in which we are located. Our commercial property operations met their financial targets with an increase in total operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. on a same property basis of 4% year over year. With the continued withdrawal of excess capital from these operations, returns now exceed 20% on an ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. basis. In addition, with lease terms averaging 11 years across our premier office portfolio we are very well positioned to generate solid returns notwithstanding a slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in economic activity across North America. Our residential property operations continued to benefit from the low interest rate environment, which has encouraged homeowners to trade up or acquire new homes. Currently, we have commitments for more than 100% of our 2003 planned sales and we are now forward selling into 2004. We anticipate that this strong housing activity will continue throughout 2003, and accordingly our operating results should benefit. We have responded to these strong market conditions by selling land inventory that is not required for our housing business in the near term. At the end of the first quarter, our San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. operations completed a land sale for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of US$52 million. We expect to complete other similar sales during the balance of the year, given our expectation that positive fundamentals will continue. Power Generation Year to date, we achieved generation of approximately 3,000 gigawatt gig·a·watt n. Abbr. GW One billion (109) watts. hours from our portfolio of 39 power generating plants, consistent with production levels in the same period last year, but lower than expected from our expanded capacity, due to drier conditions in Quebec and Maine. Water flows in these two areas were substantially lower than historical averages. The contribution from our new power plant acquisitions and developments, as well as the diversity of our assets across our 10 watersheds, did, however, help to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. below average hydrology hydrology, study of water and its properties, including its distribution and movement in and through the land areas of the earth. The hydrologic cycle consists of the passage of water from the oceans into the atmosphere by evaporation and transpiration (or conditions in some areas during the first six months of 2003. In
addition, with approximately 85% of our power generation contracted on a
forward basis with an average contract life of 15 years, we remain
confident that we will achieve our operational targets set for the
entire year.
We continue to look for acquisition opportunities in this area of our operations. However a number of industry companies, which were experiencing financial difficulties as a result of the distressed U.S. energy markets, have been able to relieve the financial pressures on them with a resurgence re·sur·gence n. 1. A continuing after interruption; a renewal. 2. A restoration to use, acceptance, activity, or vigor; a revival. in the high yield markets. While this is not positive for potential buyers of generating assets, some companies have not been as fortunate, and we are continuing to explore opportunities to participate in their corporate restructuring initiatives. Asset Management We continue to be focused within our areas of expertise, primarily in real estate, power generation and resources. In addition, we made substantial progress in our conversion of this business from a financial into an asset management operation by launching a number of new funds, in partnership with institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. . We launched our Brascan Real Estate Opportunity Fund. This US$175 million equity fund will invest in under performing real estate across North America, with the potential to deliver strong investment returns. Investments will focus on commercial real estate in major North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. markets. In addition, we leveraged the market leadership of our Royal LePage Royal LePage is a Canadian real estate franchiser and owner-operator with more than 600 locations and over 12,000 Realtors in Canada.[1] Founded in 1913 by Albert E. LePage, Royal LePage is now owned by the Royal LePage Franchise Services Fund (TSX: RSF.un). residential brokerage services firm to launch the Royal LePage Franchise Services Fund, a US$100 million income fund which will pay unit holders based on the steady stream of royalty payments collected from franchisees in the Royal LePage network of real estate brokerages across Canada Across Canada was an afternoon program that formerly aired on The Weather Network. The segment ran from early 1999 until mid 2002. The show ran from 3:00PM ET until 7:00 PM ET. . This Fund provides an important platform for the continued growth of our residential franchise services business. We will retain a 25% interest in the Fund and will continue to manage and build the business utilizing a lower cost of capital than had previously been available. In our U.S. real estate mezzanine mez·za·nine n. 1. A partial story between two main stories of a building. 2. The lowest balcony in a theater or the first few rows of that balcony. business, we completed the previously announced recapitalization of Criimi Mae, acquired a mezzanine loan A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). position on a New York office building and purchased a subordinate note on a northeastern U.S. shopping mall. Non-recourse leveraged returns on this capital are in the range of 20%. In addition, we re-aligned our Brascan Financial Real Estate Group to expand our finance and advisory service activities to the real estate sector, predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. in Canada. Since its formation in this quarter, we have been involved in a number of transactions and see exciting opportunities ahead as we integrate this business with the other lending and investment components of our real estate activities. Noranda and Nexfor Subsequent to quarter end, Noranda took the final steps to implement its recapitalization plan. With the major operational initiatives behind it, the company raised US$400 million of common share capital, re-set its dividend in line with its peers, and converted its balance sheet to U.S. dollars to reflect its asset base and revenues. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, Noranda's net debt to capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ratio will be approximately 38% compared with 51% at year end, and there will be no unfunded debt Unfunded debt Debt maturing within one year (short-term debt). See: Funded debt. maturities for three years. We purchased US$175 million of the Noranda common share issue to maintain our pro-rata interest in the company. A portion of the proceeds of the issue were utilized by Noranda to repay US$110 million of preferred shares owned by us. This final step of Noranda's financial recapitalization enables us to better pursue strategic options with this investment, as the commodity cycle recovers. Nexfor's OSB OSB abbr. Order of Saint Benedict (oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. strandboard) operations performed strongly over the past two months as OSB prices increased to over US$300 compared with a long-term price trend of approximately US$200. The strong performance in this segment of Nexfor's operations is being driven by the buoyant residential building market and unanticipated supply shortages of OSB across North America. While the paper side of Nexfor's business is under performing as a result of low industry prices, the contribution from OSB is expected to generate substantially higher cash flows in the third quarter. Dividends After taking into account the views expressed by a number of our shareholders, in April we announced a C$0.04 per share increase in our annual dividend payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. , bringing the quarterly dividend to C$0.26 per share effective with the August dividend. The increase reflects our commitment to enhance the distributions over time by an amount that corresponds to the growth in cash flow generated within our operations, while ensuring we retain sufficient capital to build our equity base and maintain strong corporate debt ratings. On August 6, 2003, the Board of Directors approved a quarterly common share dividend of C$0.26 per share, payable November 30, 2003 to shareholders of record on November 1, 2003. Information on all of our common and preferred share dividends can be found on our website under Stock Information. The Look Ahead With a singular SINGULAR, construction. In grammar the singular is used to express only one, not plural. Johnson. 2. In law, the singular frequently includes the plural. focus on enhancing our return on equity and building shareholder value through contract driven cash flows in our real estate and power businesses, we are confident we can maintain our momentum throughout the year and deliver on our financial targets for 2003. As to future years, we are well positioned, to continue to enhance our cash flows and build value for shareholders. Thank you for your continued support. J. Bruce Flatt President and Chief Executive Officer August 7, 2003 |
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