-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G6Y3WuVrPoDa/cxsuQfX7SM46zJrut9AxjMCPFxBX+BbPma0Rz0lfVObFm0z65KE uODz7ZgCZnJhcVbJuM0KXg== 0000909567-02-000084.txt : 20021212 0000909567-02-000084.hdr.sgml : 20021212 20021212100750 ACCESSION NUMBER: 0000909567-02-000084 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021211 FILED AS OF DATE: 20021212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRASCAN CORP/ CENTRAL INDEX KEY: 0001001085 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-97038 FILM NUMBER: 02855261 BUSINESS ADDRESS: STREET 1: BCE PLACE 181 BAY ST STREET 2: STE 4400 PO BOX 762 CITY: TORONTO ONTARIO STATE: A6 BUSINESS PHONE: 4163639491 MAIL ADDRESS: STREET 1: HAYTHE & CURLEY STREET 2: 237 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: BRASCAN LTD DATE OF NAME CHANGE: 19950919 FORMER COMPANY: FORMER CONFORMED NAME: EDPERBRASCAN CORP DATE OF NAME CHANGE: 19970904 6-K 1 t08506e6vk.htm FORM 6-K e6vk
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of December, 2002

BRASCAN CORPORATION


(Translation of Registrant’s Name Into English)

Suite 4400, BCE Place, 181 Bay Street, P.O. Box 762, Toronto, Canada M5J 2T3


(Address of Principal Executive Offices)

(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)

Form 20-F [     ]    Form 40-F [  X  ]

(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)

Yes [     ]    No [  X  ]

(If “Yes” is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-           .

 


 


SIGNATURES
Exhibit List
Interim Report for nine months ended Sept.30, 2002


Table of Contents

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
        BRASCAN CORPORATION
         
Date: December 11, 2002       By: /s/ Alan V. Dean
       
        Name: Alan V. Dean
Title:   Senior Vice President

 


Table of Contents

Exhibit List

                 
            Sequential
Exhibit   Description   Page Number

 
 
  99.1    
Interim Report for the nine months ended September 30, 2002
         

  EX-99.1 3 t08506exv99w1.htm INTERIM REPORT FOR NINE MONTHS ENDED SEPT.30, 2002 exv99w1

 

Exhibit 99.1

Brascan LOGO

INTERIM REPORT TO SHAREHOLDERS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                                 
    Three Months Ended September 30   Nine Months Ended September 30
UNAUDITED  
 
CDN$ MILLIONS, EXCEPT PER SHARE AMOUNTS   2002   2001   Increase   2002   2001   Increase

 
 
 
 
 
 
Net income
  $ 90     $ 70       29 %   $ 304     $ 266       14 %
Net income per share — diluted
  $ 0.39     $ 0.35       11 %   $ 1.44     $ 1.35       7 %
Cash flow from operations
  $ 199     $ 155       28 %   $ 553     $ 460       20 %
Cash flow per share — diluted
  $ 0.99     $ 0.84       18 %   $ 2.84     $ 2.45       16 %

Fellow Shareholders: We are pleased to report another quarter of strong financial performance. In both the third quarter and the first nine months of 2002, we exceeded our objective of achieving 15% growth in cash flow from operations and meaningfully strengthened our financial position.

Today, we have over $2 billion of liquidity and, with solid credit ratings, we have full access to the capital markets at historically low interest rates. Our continued focus is on operating, and selectively acquiring for value, quality assets that produce sustainable cash flows in our real estate, power generation, and financial businesses.

Our favourable financial position and the current business environment are expected to provide us with opportunities over the next twelve months to add assets which will position us to continue achieving our growth objectives in the years ahead.

FINANCIAL RESULTS

For the three months ended September 30, 2002, cash flow from operations increased 18% to $0.99 per share from the $0.84 per share reported in the same period in 2001. Total cash flow from operations for the period increased to a record $199 million, compared with $155 million in 2001.

Net income per share during the quarter increased 11% to $0.39 per share from $0.35 per share during the same period in 2001. In total, net income for the three months increased to $90 million compared with $70 million in 2001.

For the first nine months of 2002, cash flow from operations per share and net income per share were $2.84 and $1.44, respectively, compared with $2.45 and $1.35, respectively in the same period last year, representing a 16% increase in operating cash flow per share and a 7% increase in net income per share.

Q3/2002 INTERIM REPORT

 


 

Notwithstanding the current business downturn, we achieved strong results driven in large part by long-term leases and sales contracts in our real estate and power generation operations. In addition, we continue to strive to expand the more predictable fee-based revenues within our financial services operations.

We will continue our emphasis on building sustainable cash flows across our businesses, and remain confident that we are on track to achieve our cash flow from operations target of $3.75 per share for 2002 and $4.25 per share for 2003.

CAPITAL GENERATION

At the end of 2001, we set out to strengthen our financial position and enhance our liquidity in anticipation of volatile capital markets and the opportunities that this environment might present. Toward this end, we raised approximately $2 billion for our operating businesses in the first nine months of 2002. These included:

4   three preferred equity issues totaling $400 million;
 
4   a US$350 million ten year debenture issue which was significantly oversubscribed;
 
4   a $105 million hydro income trust equity offering;
 
4   an innovative US$550 million long-term mortgage loan with recourse limited to our 300 Madison Avenue development project; and
 
4   the sale of 50% interests in two commercial properties, surfacing the value embedded in these mature assets and generating $450 million of capital.

In addition, public debt issues by Noranda, Nexfor and Falconbridge raised US$800 million to extend debt maturities and add liquidity to their balance sheets. Noranda also financed a zinc processing facility through an income trust, which raised proceeds of $425 million.

As a result of these initiatives, we have significantly strengthened our financial profile and ability to pursue growth initiatives.

VALUE CREATION

The following were some of the more important transactions undertaken during the third quarter of 2002, to enhance shareholder value:

4   Acquired a half interest in the 2.1 million square foot Three World Financial Center in New York for US$158 million, significantly below replacement cost. This 52-story office tower is the world headquarters of co-owner American Express and was the only tower in the eight million square foot World Financial Center complex in Lower Manhattan in which we did not have an ownership interest. While currently unoccupied, we believe we will be able to utilize our presence in New York City to lease the property to our expectations.
 
4   Signed over 600,000 square feet of new leases, including two leases for 255,000 square feet in Lower Manhattan. Zurich North America entered into a new 10-year renewal lease for nearly 210,000 square feet in our One Liberty Plaza office property, and Arch Insurance committed to a new lease of 45,000 square feet in the same office tower. These two leases will contribute to strengthening the sustainable portion of cash flows and pre-lease space which would otherwise come due in 2005.
 
4   Acquired the remaining half interest in the Lake Superior Power gas-fired generation facility in northern Ontario from Duke Energy. This transaction, totaling $65 million, will provide attractive returns and furthers our growth strategy of investing in high-quality, low cost generating assets, producing sustainable streams of cash flow.

Brascan Corporation

2


 

4   Entered into a 20-year contract to sell the power from the Pingston hydroelectric power plant under construction, to BC Hydro.
This 30 megawatt (“MW”), 50% owned run-of-river hydroelectric plant is expected to be operational in early 2003.We are currently seeking regulatory approval to expand the plant’s capacity by an additional 15 MW when it becomes operational later this year.
 
4   Repurchased 1.6 million common shares of the company, bringing the total number of shares repurchased year-to-date to 5.3 million. As value steadily builds within our businesses, we believe that our common shares represent an attractive place to invest capital. These repurchases have enabled us to mitigate the dilution resulting from the issuance of shares for the privatization of Brascan Financial Corporation in the second quarter.

These value enhancing initiatives in the third quarter of 2002 build on our achievements in the first six months of the year, which included:

4   Privatizing the company’s financial operations for $775 million. This transaction furthered our strategy of streamlining our ownership structure and our ability to allocate capital to increase returns. In addition, we are utilizing more effectively, our industry operating resources to enhance returns from our financial operations.
 
4   Completing the purchase of 16 hydroelectric power plants in Maine, New Hampshire and northern Ontario, bringing our total power facilities to 38, and increasing our production capacity by 645 MW to 1,636 MW. These acquisitions will contribute meaningfully to our cash flows this year and more fully in 2003. They also diversify our watersheds, reduce hydrology risk, and position us as a leading generator in Ontario and an important entrant to the New England electricity markets.

The underlying value of Brascan is a key measure of our success in enhancing value for shareholders. Based on the cash flows we expect to generate in 2003, and the initiatives undertaken in the first nine months of this year, we estimate our underlying value is approximately $47.50 per share. The supplementary information package we provided in our Annual Report, and which we update each quarter on our website, outlines how we assess the underlying value of each of our businesses. We encourage you to review this information and to make your own assessment of Brascan’s underlying value.

OPERATING OBJECTIVES AND GROWTH INITIATIVES

Brascan’s businesses in 2002 continued to benefit from our strategic focus on generating sustainable cash flows.

Commercial Properties

Our strategy of owning and operating high quality commercial properties in downtown markets with long-term leases to high credit quality tenants has largely insulated the company from the current economic downturn that is negatively impacting many cities and office properties across the U.S. Operating income from our office properties, before lease termination income and other gains, increased 4% over the same period last year. This was driven by internal growth and largely reflects contractual step-ups in leases embedded in the lease profile.

With our properties 96% leased to high credit quality tenants, and few leases expiring over the next number of years, we are well positioned to continue to generate growing cash flows. This should be achieved even in a deteriorating market environment.

Furthermore, other investors continue to invest in high quality real estate assets in search of a safe haven for their capital, resulting in increased values for our properties. We are capitalizing on this by selling half interests in office properties, as we did earlier in the year with Exchange Tower in Toronto and Bankers Hall in Calgary.

Q3/2002 INTERIM REPORT

3


 

Power Generation

Our strategy of building long-term sustainable cash flows by investing in high-quality hydroelectric power generating assets, at attractive values, has generated significant low-risk growth for the company over the last nine months. The recent acquisition of 16 hydroelectric power plants in Ontario, New Hampshire and Maine demonstrates our ability to utilize the current environment to achieve our long term plans.

These acquisitions, in conjunction with higher water levels when compared to last year, increased our electricity generation by 59% to 4,450 gigawatt hours, compared to 2,804 gigawatt hours last year. During the same period, cash flow from operations increased 60% to $181 million, compared with $113 million in the same period in 2001.

With 85% of our power generation under contract, several projects scheduled for completion over the next six months, and acquisitions contributing fully in 2003,we are confident that we will achieve our cash flow targets for this business in 2002 and enhanced levels of cash flow in 2003.

As we noted last quarter, the financial difficulties of many companies in the U.S. merchant power generation industry should provide us with opportunities to further expand our operations by acquiring additional high-quality power generation assets at discounts to replacement cost. We are actively pursuing acquisitions that meet our return hurdles and where we have a competitive advantage to enhance returns over time.

Financial Services

Our strategy of deploying capital into financial assets in our operating areas of expertise continues to further our ability to generate high risk-adjusted returns on the capital deployed.

We were active during the quarter on a number of restructuring initiatives in the Tricap Restructuring Fund. This included working with Doman Industries, a west coast timber and lumber producer, on a debt restructuring plan, and assisting AT&T Canada with their financial reorganization. In addition, given the capital market environment, we are seeing many new opportunities.

Utilizing our core real estate infrastructure, we launched the Brascan Real Estate Finance Fund in New York to provide mezzanine capital secured by real estate. This fund is focused on fulfilling the market demand for mezzanine loans, which earn high, risk-adjusted returns on high-quality real estate, ranking senior to equity but subordinate to first mortgages.

Residential Properties

Our residential property operations continued to benefit from the unprecedented strength of the North American housing markets, fueled in large part by low interest rates and a lack of alternatives for consumers to safely invest capital. As a result of these market conditions, we have already achieved our planned sales for 2002 and are actively booking orders for 2003.

Recently, we announced a plan to separate our residential operations from our commercial real estate activities. While this will have minimal impact on our overall interests in these two businesses, it will allow us to own and operated these assets in more focused companies. This should also provide greater financial and operating flexibility in managing the growth of these businesses in the future.

Investments

Both Noranda and Nexfor made progress toward increasing future shareholder returns by reducing costs and increasing efficiencies across their operations. Despite the challenging environment which negatively affected its results for the quarter, Noranda is redoubling its efforts to streamline its operations, focusing on further cost containment and workforce reductions. Nexfor has successfully integrated the three oriented strandboard plants acquired during the second quarter with its six existing facilities in the

Brascan Corporation

4


 

United States, strengthening its competitive position in this key market.

During the third quarter, we elected to receive our dividends from Noranda in Noranda shares under the reinvestment plan available to all shareholders. With commodity prices remaining at industry lows, the shares of Noranda have been trading at a discount to what we believe is their long-term value. We will revisit this decision quarterly, but we continue to be highly supportive of Noranda’s business plans and believe that you will be rewarded as Noranda’s restructuring efforts take effect, and commodity prices recover.

THE LOOK AHEAD

So far in 2002, we have met our financial performance targets and made strides in creating further value for shareholders. As we plan ahead, we are confident that our focused business strategy and disciplined approach to investing your capital will deliver growing streams of cash flow in 2003, providing a positive foundation for our continued growth.

ADDITIONAL INFORMATION

A Supplementary Information Package with more detailed financial information is posted on Brascan’s web site and should be read in conjunction with this Interim Report. The Supplementary Information Package contains management’s estimates of underlying values based on cash flows on a business unit basis.

On November 6, 2002, the Board of Directors declared a quarterly common share dividend of $0.25 per share, payable February 28, 2003 to shareholders of record on February 1, 2003. Information on all the company’s common and preferred dividends can be found on Brascan’s web site under Stock Information.

[ signed ]

J. Bruce Flatt
President and Chief Executive Officer

November 6, 2002

Note: This Interim Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, 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 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.

Q3/2002 INTERIM REPORT

5


 

CONSOLIDATED STATEMENT OF INCOME

                                                   
    Three months ended September 30   Nine months ended September 30
UNAUDITED  
 
CDN$ MILLIONS, EXCEPT PER SHARE AMOUNTS   2002   2001(1)   2001   2002   2001(1)   2001

 




 
Total revenues
  $ 1,079     $ 1,197     $ 346     $ 3,330     $ 3,350     $ 948  
 
   
     
     
     
     
     
 
Net operating income
                                               
 
Commercial property operations
    271       253       36       833       839       109  
 
Financial operations
    96       82       82       264       257       257  
 
Power generating operations
    64       40       40       181       113       113  
 
Residential property operations
    43       40       3       115       98       5  
 
Other
    22       25       8       58       71       25  
 
   
     
     
     
     
     
 
 
    496       440       169       1,451       1,378       509  
Expenses
                                               
 
Interest expense
    190       186       72       554       580       239  
 
Minority share of income before non-cash items
    113       106       26       358       347       87  
 
Other operating costs
    19       17       5       61       63       16  
 
   
     
     
     
     
     
 
Income before non-cash items
    174       131       66       478       388       167  
 
 
Depreciation and amortization
    47       40       10       140       116       29  
 
Taxes and other non-cash items
    42       27       1       126       95       (2 )
 
Minority share of non-cash items
    (34 )     (28 )           (99 )     (92 )      
 
Equity accounted loss / (income)
    29       22       (15 )     7       3       (126 )
 
   
     
     
     
     
     
 
Net income
  $ 90     $ 70     $ 70     $ 304     $ 266     $ 266  
 
   
     
     
     
     
     
 
Net income per common share
                                               
 
Diluted
  $ 0.39     $ 0.35     $ 0.35     $ 1.44     $ 1.35     $ 1.35  
 
Basic
  $ 0.40     $ 0.36     $ 0.36     $ 1.47     $ 1.36     $ 1.36  
 
   
     
     
     
     
     
 

CONSOLIDATED STATEMENT OF CASH FLOW FROM OPERATIONS

                                                 
    Three months ended September 30   Nine months ended September 30
UNAUDITED  
 
CDN$ MILLIONS, EXCEPT PER SHARE AMOUNTS   2002   2001(1)   2001   2002   2001(1)   2001

 
 
 
 
 
 
Income before non-cash items
  $ 174     $ 131     $ 66     $ 478     $ 388     $ 167  
Dividends from Noranda Inc. and Nexfor Inc.
    25       24       24       75       72       72  
Other
                12                   28  
 
   
     
     
     
     
     
 
Cash flow from operations and gains
  $ 199     $ 155     $ 102     $ 553     $ 460     $ 267  
 
   
     
     
     
     
     
 
Cash flow from operations and gains per common share
  $ 0.99     $ 0.84     $ 0.46     $ 2.84     $ 2.45     $ 1.35  
 
   
     
     
     
     
     
 

1.     Presented on a pro forma basis comparable to 2002. See Note 2.

Brascan Corporation

6


 

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                     
UNAUDITED   Three months ended September 30   Nine months ended September 30
CDN$ MILLIONS  
 
        2002   2001(1)   2001   2002   2001(1)   2001

 
 
 
 
 
 
Operating activities
                                               
 
Cash flow from operations and gains
  $ 199     $ 155     $ 102     $ 553     $ 460     $ 267  
 
Commercial property gains, net of minority share
    (16 )                 (47 )     (41 )      
 
Net change in non-cash working capital balances
    45       164       205       103       129       135  
 
   
     
     
     
     
     
 
 
    228       319       307       609       548       402  
 
   
     
     
     
     
     
 
Financing activities
                                               
 
Corporate borrowings, net of repayments
    50       (136 )     (136 )     561       (156 )     (156 )
 
Property specific mortgages net of repayments
    142       (154 )     (54 )     615       (143 )     19  
 
Other debt of subsidiaries, net of repayments
    (9 )     27       36       (28 )     (316 )     (11 )
 
Corporate preferred equity issued
    74       250       250       199       250       250  
 
Preferred equity of subsidiaries repurchased
    (198 )           (28 )     (198 )     (109 )     (67 )
 
Preferred equity of subsidiaries issued
    200                   200              
 
Common shares and equivalents, repurchased
    (52 )     (56 )     (56 )     (168 )     (78 )     (78 )
 
Common shares of consolidated subsidiaries repurchased
    (20 )     (2 )           (387 )     (297 )     (175 )
 
Undistributed minority share of cash flow
    56       40       12       160       146       33  
 
Shareholder distributions
    (63 )     (55 )     (55 )     (178 )     (163 )     (163 )
 
   
     
     
     
     
     
 
 
    180       (86 )     (31 )     776       (866 )     (348 )
 
   
     
     
     
     
     
 
Investing activities
                                               
 
Investment in or sale of operating assets, net Commercial and residential properties
    264       220       100       124       621       (4 )
   
Financial operations
    (138 )     (468 )     (468 )     (160 )     (22 )     (22 )
   
Power generating plants
    (35 )     (12 )     (12 )     (671 )     (166 )     (166 )
   
Assets under development
    (431 )     (119 )     (19 )     (638 )     (246 )     (49 )
 
Investment in Noranda Inc. and Nexfor Inc.
    (26 )     (23 )     (23 )     (38 )     (51 )     (51 )
 
   
     
     
     
     
     
 
 
    (366 )     (402 )     (422 )     (1,383 )     136       (292 )
 
   
     
     
     
     
     
 
Cash and cash equivalents
                                               
 
Increase (decrease)
    42       (169 )     (146 )     2       (182 )     (238 )
 
Balance, beginning of period
    567       645       255       607       658       347  
 
   
     
     
     
     
     
 
 
Balance, end of period
  $ 609     $ 476     $ 109     $ 609     $ 476     $ 109  
 
   
     
     
     
     
     
 

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

                                                 
UNAUDITED Three months ended September 30   Nine months ended September 30
CDN$ MILLIONS
   
    2002   2001(1)   2001   2002   2001(1)   2001

 
 
 
 
 
 
Retained earnings, beginning of period
  $ 2,541     $ 2,455     $ 2,455     $ 2,447     $ 2,367     $ 2,367  
Net income
    90       70       70       304       266       266  
Preferred equity issue costs
    (2 )     (7 )     (7 )     (7 )     (7 )     (7 )
Shareholder distributions — Preferred equity
    (19 )     (10 )     (10 )     (49 )     (31 )     (31 )
                                          — Common equity
    (44 )     (45 )     (45 )     (129 )     (132 )     (132 )
 
   
     
     
     
     
     
 
Retained earnings, end of period
  $ 2,566     $ 2,463     $ 2,463     $ 2,566     $ 2,463     $ 2,463  
 
   
     
     
     
     
     
 

1.     Presented on a pro forma basis comparable to 2002. See Note 2.

Q3/2002 INTERIM REPORT

7


 

CONSOLIDATED BALANCE SHEET

                     
UNAUDITED   September 30   December 31
CDN$ MILLIONS   2002   2001

 
 
Assets
               
 
Cash and cash equivalents
  $ 609     $ 607  
 
Accounts receivable and other
    2,498       2,202  
 
Operating assets
   
Commercial properties
    9,201       9,580  
   
Financial operations
    3,297       3,137  
   
Power generating plants
    2,151       1,511  
   
Residential properties
    1,236       1,110  
   
Assets under development
    2,269       1,631  
 
Investment in Noranda Inc. and Nexfor Inc.
    2,107       2,151  
 
   
     
 
 
  $ 23,368     $ 21,929  
 
   
     
 
Liabilities
               
 
Non-recourse borrowings
   
   
Property specific mortgages
  $ 7,715     $ 7,160  
   
Other debt of subsidiaries
    3,126       3,161  
 
Corporate borrowings
    1,866       1,313  
 
Accounts and other payables
    1,921       1,718  
Shareholders’ interests
               
 
Minority interests of others in assets
    2,318       2,720  
 
Preferred equity
               
   
Corporate
    1,332       1,107  
   
Subsidiaries
    491       489  
 
Common equity (Note 4)
    4,599       4,261  
 
   
     
 
 
  $ 23,368     $ 21,929  
 
   
     
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — unaudited

1.     Summary of Accounting Policies
Reference is made to the most recently issued Annual Report of Brascan Corporation (the “company”), which includes information necessary or useful to understanding the company’s businesses and financial statement presentation. In particular, the company’s significant accounting policies and practices are presented as Note 1 to the Consolidated Financial Statements included in that Report, and have been consistently applied in the preparation of these interim financial statements.

     The interim financial statements are unaudited and follow the accounting policies summarized in the notes to the annual financial statements except for the changes in accounting policies described in Note 3. Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with Canadian generally accepted accounting principles.

Brascan Corporation

8


 

The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current period’s presentation.

2.     Investment in Brookfield Properties Corporation
Effective December 31, 2001, the company commenced consolidating the results of Brookfield Properties Corporation (“Brookfield”). For comparability, the company has included pro forma statements of income, cash flow from operations, cash flows and retained earnings that give effect to consolidating the results of Brookfield since January 1, 2001 at the company’s ownership level in that year. The consolidation of Brookfield has no effect on net income, net income per share or retained earnings.

3.     Changes in Accounting Policies
Effective January 1, 2002, the company adopted, without restatement of the prior period comparative financial statements, the new accounting standards issued by the Canadian Institute of Chartered Accountants on Stock-based Compensation and other Stock-based Payments, Business Combinations and Goodwill and Other Intangible Assets.

     The company and its consolidated subsidiaries account for stock options using the fair value method. Under the fair value method, compensation expense for stock options that are direct awards of stock is measured at fair value at the grant date using an option pricing model and recognized over the vesting period. The impact of the adoption of this new standard on the nine months ended September 30, 2002 was compensation expense of $6 million recorded as a charge to net income. In addition, goodwill is no longer being amortized but will be subject to impairment tests on at least an annual basis. The amount of goodwill amortized in the prior nine month period was $8 million.

4.     Common Equity
The company’s common equity is comprised of the following:

                 
    September 30   December 31
CDN$ MILLIONS   2002   2001

 
 
Convertible notes
  $ 99     $ 99  
Class A and B common shares
    1,934       1,715  
Retained earnings
    2,566       2,447  
 
   
     
 
Common equity
  $ 4,599     $ 4,261  
 
   
     
 
SHARES OUTSTANDING
               
Class A and Class B common shares issued
    176,009,656       169,781,433  
Options issued
    7,006,655       3,474,717  
Reserved for conversion of subordinated notes
    3,106,847       3,106,847  
 
   
     
 
Total fully diluted common shares
    186,123,158       176,362,997  
 
   
     
 

During the nine months ended September 30, 2002, the company completed the privatization of Brascan Financial Corporation for consideration of $378 million in cash; 11 million common shares; and one million Class A Preference Shares, Series 11. In addition, 3.2 million Brascan Corporation options were issued in exchange for Brascan Financial Corporation options pursuant to the tender offer. The company issued $125 million of 8.3% preferred securities due 2051 and also issued an additional three million Class A Preference Shares, Series 11 for cash proceeds of $74 million.

5.     Stock Based Compensation

Options issued under the company’s Management Share Option Plan (“MSOP”) vest proportionately over five years and expire ten years after the grant date. The exercise price is equal to the market price at the grant date.

Q3/2002 INTERIM REPORT

9


 

During the first quarter of 2002, the company granted 500,000 stock options at a price of $28.72 per share. The compensation expense was calculated using the Black-Scholes model of valuation, assuming a 7.5 year term, 23% volatility, a weighted average expected dividend yield of 2.67% annually and an interest rate of 5.4%. The cost is charged against net income over the five-year vesting period of the options granted.

6.     Segmented Information
Revenue, cash flow from operations and net income by reportable segments for the nine months ended September 30 were as follows:

                                                                         
            2002                   2001(1)                   2001        
            Cash flow                   Cash Flow                   Cash Flow        
UNAUDITED           from   Net           from   Net           from   Net
CDN$ MILLIONS   Revenue   Operations   Income   Revenue   Operations   Income   Revenue   Operations   Income

 
 
 
 
 
 
 
 
 
Commercial property operations
  $ 1,261     $ 833     $ 833     $ 1,325     $ 839     $ 839     $ 125     $ 137     $ 238  
Financial operations
    517       262       262       500       257       257       500       257       257  
Power generating operations
    248       181       181       204       113       113       204       113       113  
Residential property operations
    1,213       115       115       1,231       98       98       78       5       5  
Resource investments
          75       (7 )           72       (3 )           72       (3 )
Corporate and other
    91       58       58       90       71       71       41       25       25  
 
   
     
     
     
     
     
     
     
     
 
 
  $ 3,330       1,524       1,442     $ 3,350       1,450       1,375     $ 948       609       635  
Interest and other expenses
            971       1,138               990       1,109               342       369  
 
           
     
             
     
             
     
 
Cash flow / net income
          $ 553     $ 304             $ 460     $ 266             $ 267     $ 266  
 
           
     
             
     
             
     
 

Revenue by geographic segment for the nine months ended September 30 was as follows:

                         
UNAUDITED                        
CDN$ MILLIONS   2002   2001(1)   2001

 
 
 
Canada
  $ 1,075     $ 1,048     $ 522  
United States
    1,803       1,888       12  
South America and other
    452       414       414  
 
   
     
     
 
Revenue
  $ 3,330     $ 3,350     $ 948  
 
   
     
     
 

1.     Presented on a pro forma basis comparable to 2002. See Note 2.

QUARTERLY FINANCIAL STATISTICS

                                                                         
  2002   2001   2000
UNAUDITED  
 
 
CDN$ MILLIONS, EXCEPT PER SHARE AMOUNTS   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Q4   Q3

 
   
   
 
 
 
 
 
 
 
Total
                                                                       
Cash flow from operations
  $ 199     $ 172     $ 182     $ 141     $ 155     $ 154     $ 151     $ 128     $ 131  
Net income
  $ 90     $ 112     $ 102     $ 45     $ 70     $ 107     $ 89     $ 91     $ 106  
Common equity — book value
  $ 4,599     $ 4,614     $ 4,206     $ 4,261     $ 4,307     $ 4,347     $ 4,248     $ 4,181     $ 4,056  
 
Common shares outstanding
    176.0       177.2       166.6       169.8       170.4       172.4       172.6       169.4       169.9  
 
   
     
     
     
     
     
     
     
     
 
Per common share (diluted)
                                                                       
Cash flow from operations
  $ 0.99     $ 0.86     $ 0.99     $ 0.75     $ 0.84     $ 0.82     $ 0.79     $ 0.67     $ 0.67  
Net income
  $ 0.39     $ 0.54     $ 0.51     $ 0.17     $ 0.35     $ 0.56     $ 0.44     $ 0.45     $ 0.55  
Dividends
  $ 0.25     $ 0.25     $ 0.25     $ 0.25     $ 0.25     $ 0.25     $ 0.25     $ 0.25     $ 0.245  
Book value
  $ 25.58     $ 25.54     $ 24.78     $ 24.68     $ 24.82     $ 24.77     $ 24.46     $ 24.24     $ 24.02  
Market trading price (TSX)
  $ 31.71     $ 34.99     $ 34.05     $ 28.75     $ 26.24     $ 26.02     $ 25.75     $ 21.95     $ 19.60  
Market trading price (NYSE) — US$
  $ 19.88     $ 22.98     $ 21.81     $ 18.35     $ 18.76     $ 17.92     $ 17.00     $ 14.56     $ 12.88  
 
   
     
     
     
     
     
     
     
     
 

Brascan Corporation

10


 

SHAREHOLDER INFORMATION

                           
Stock Exchange Listings   Outstanding at Sept. 30, 2002   Symbol   Stock Exchange

 
 
 
Class A Common Shares
    175,924,536     BNN / BNN.A   New York / Toronto
Class A Preference Shares
                       
 
Series 1
    19,091     BNN.PR.A   Toronto
 
Series 2
    10,465,100     BNN.PR.B   Toronto
 
Series 3
    2,000     BNN.PR.F   Canadian Venture
 
Series 4
    2,800,000     BNN.PR.C   Toronto
 
Series 8
    1,049,792     BNN.PR.E   Toronto
 
Series 9
    6,950,208     BNN.PR.G   Toronto
 
Series 10
    10,000,000     BNN.PR.H   Toronto
 
Series 11
    4,032,401     BNN.PR.I   Toronto
Preferred Securities
                       
 
Due 2050
    5,000,000     BNN.PR.S   Toronto
 
Due 2051
    5,000,000     BNN.PR.T   Toronto
   
   
 
 
 
Dividend Record and Payment Dates
  Record Date           Payment Date

 
         
   
Class A Common Shares1
  First day of February, May,           Last day of February, May
 
  August and November           August and November
Class A Preference Shares1
                       
 
Series 1, 2, 4, 10 and 11
  15th day of March, June           Last day of March, June,
 
  September and December           September and December
 
Series 3
  Second Wednesday of each month           Thursday following second
 
                  Wednesday of each month
 
Series 8
  Last day of each month           12th day of following month
 
Series 9
  15th day of January, April,           First day of February, May,
 
  July and October           August and November
Preferred Securities2
  15th day of March, June           Last day of March, June
 
  September and December           September and December
 
 
         
   

1.   All dividends are subject to declaration by the company’s Board of Directors.
 
2.   These securities pay interest on a quarterly basis.

Dividend Reinvestment Plan
Registered holders of Class A common shares who are resident in Canada may elect to receive their dividends in the form of newly issued Class A common shares at a price equal to the weighted average price at which the shares traded on the Toronto Stock Exchange during the five trading days immediately preceding the payment date of such dividends.

The utilization of the Plan allows current shareholders to acquire additional shares in the company without payment of commissions. Further details on the Plan and a Participation Form can be obtained from the company’s Head Office or from its web site.

Q3/2002 INTERIM REPORT

11


 

Brascan Corporation is a North American based company which owns and manages assets which generate sustainable cash flows. Current operations are largely in the real estate, power generation and financial sectors. Total assets exceed $23 billion and include 55 premier commercial properties and 38 power generating facilities. In addition, Brascan holds investments in the resource sector. Brascan’s publicly traded securities are listed on the New York and Toronto stock exchanges.

Shareholder Enquiries
Shareholder enquiries should be directed to Katherine Vyse, Senior Vice-President, Investor Relations and Communications at
416-363-9491 or kvyse@brascancorp.com. Alternatively shareholders may contact the company at the head office:

                         
Toronto:          
Suite 4400, 181 Bay Street
     
BCE Place, P.O. Box 762
     
Toronto, Ontario M5J 2T3
     
Telephone: 416-363-9491
     
Facsimile: 416-363-2856
     
Web Site: www.brascancorp.com
     
e-mail: enquiries@brascancorp.com
     
 
         
New York:
                       
One Liberty Plaza
                       
165 Broadway, 6th Floor
                     
New York, New York
                       
10002 U.S.A.
                       

Shareholder enquiries relating to dividends, address changes and share certificates should be directed to our Transfer Agent:

                         
CIBC Mellon Trust Company        
P.O. Box 7010, Adelaide Street Postal Station
       
Toronto, Ontario M5C 2W9
       
Telephone: 416-643-5500 or
 
                   1-800-387-0825
   
(Toll free in Canada and U.S.A.)
 
Facsimile: 416-643-5501
     
Web Site: www.cibcmellon.com
 
e-mail: inquiries@cibcmellon.com
 

Communications
We endeavour to keep our shareholders informed of our progress through a comprehensive annual report, quarterly interim reports, periodic press releases and quarterly conference calls.

Brascan maintains a web site that provides summary information on the company and ready access to our published reports, press releases, statutory filings, supplementary information and stock and dividend information.

We maintain an investor relations program to respond to enquiries in a timely manner. Management meets on a regular basis with investment analysts, financial advisors and investors to ensure that accurate information is available to investors, including quarterly conference calls and webcasts to discuss the company’s financial results. We also endeavour to ensure that the media are kept informed of developments as they occur.

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