-----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, KG5plwBZxaJ6KTDHCOuLSiXqCXpH5Xp26ZW5rFkYkkQ8yO00BfbnWoohM0loSkbH tXp21/UJS8FIYiWqToDOpw== 0000950109-02-002018.txt : 20020416 0000950109-02-002018.hdr.sgml : 20020416 ACCESSION NUMBER: 0000950109-02-002018 CONFORMED SUBMISSION TYPE: F-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20020411 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: F-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-86024 FILM NUMBER: 02608092 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 F-8 1 df8.txt FORM F-8 As filed with the Securities and Exchange Commission on April 11, 2002. Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ FORM F-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ____________ BRASCAN CORPORATION (Exact name of registrant as specified in its charter) Province of Ontario, Canada 1121, 1031, 1061, 1311, 1321, 2421, 4939, 6311 Not Applicable (Providence or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Numbers) Identification Number)
Brascan Corporation 181 Bay Street, Suite 4400 P.O. Box 762 Toronto, Ontario M5J 2T3 (416) 363-9491 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Andrew J. Beck, Esq. Torys LLP 237 Park Avenue New York, New York 10017-3142 (212) 880-6000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Edwin Nordholm, Esq. Torys LLP Suite 3000, Maritime Life Tower Toronto Dominion Centre Toronto, Canada M5K 1N2 (416) 865-0040 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. ____________ This registration statement and any amendment thereto shall become effective upon filing with the Commission in accordance with Rule 467(a). If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus offering procedures, check the following box. [_] PART I INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS Item 1. Home Jurisdiction Documents Offer and Circular dated as of April 11, 2002, including Letter of Transmittal and Notice of Guaranteed Delivery (attached to Exhibits 3.2 and 3.3 to this Registration Statement). Item 2. Informational Legends See the inside cover page of the Offer and Circular dated as of April 11, 2002. Item 3. Incorporation of Certain Information by Reference See "Documents Incorporated by Reference Regarding Brascan" in the Offer and Circular dated as of April 11, 2002. Item 4. List of Documents Filed with the Commission See "Documents Filed as Part of the U.S. Registration Statement" in the Offer and Circular dated as of April 11, 2002. I-1 This document is important and requires your immediate attention. If you are in doubt as to how to deal with it, you should consult your investment dealer, stockbroker, bank manager, lawyer or other professional advisor. BRASCAN CORPORATION OFFER TO PURCHASE all of the outstanding Class A Shares and Class B Non-Voting Shares of TRILON FINANCIAL CORPORATION not owned by Brascan Corporation or its affiliates in exchange for, at the election of each Shareholder tendering to the Offer, (i) $17.00 in cash (subject to pro ration and other adjustments, as described in sections 1 and 11, respectively, of the Offer); or (ii) 0.5 of a Class A Limited Voting Share of Brascan Corporation (subject to pro ration, as described in the Offer); or (iii) 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 and $0.05 in cash for each share of Trilon Financial Corporation tendered. The aggregate amount of cash paid as consideration is limited to $388 million. The aggregate number of Class A Limited Voting Shares of Brascan Corporation issued as share consideration is limited to 11.4 million shares. If either of these limits is exceeded, the amount of cash paid in the first option above and the number of Class A Limited Voting Shares of Brascan Corporation issued in the second option above will be adjusted on a pro rata basis. The Brascan Non-Cumulative Class A Preference Shares, Series 11 will only be issued if Shareholders elect in aggregate to receive at least $10,000,000 (or such lesser amount as Brascan may determine) in issue price of Brascan Non-Cumulative Class A Preference Shares, Series 11. The offer (the "Offer") to purchase Class A Shares and Class B Non-Voting Shares (collectively, the "Trilon Shares") of Trilon Financial Corporation ("Trilon") by Brascan Corporation ("Brascan") will be open for acceptance until 11:59 p.m. (local time) on May 16, 2002, unless withdrawn or extended. Subject to the terms and conditions of the Offer, Brascan will take up and pay for the Trilon Shares deposited under the Offer on, or as soon as practicable after, May 17, 2002. Brascan has received conditional listing approval from The Toronto Stock Exchange for the additional Class A Limited Voting Shares of Brascan and the Brascan Non-Cumulative Class A Preference Shares, Series 11 to be issued under the Offer. Brascan has also applied to list the additional Class A Limited Voting Shares of Brascan on the New York Stock Exchange and the Brussels Stock Exchange. The Offer is subject to the conditions set forth in section 4 of the Offer, "Conditions of the Offer", including that the number of Trilon Shares tendered to the Offer represents more than 50% of the total number of Class A Shares of Trilon outstanding (calculated on a fully diluted basis), other than those Trilon Shares owned by Brascan, its associates or affiliates or by other persons whose Trilon Shares may not be included as part of the minority approval of a Subsequent Acquisition Transaction (as defined herein). Brascan reserves the right to amend any or all of the conditions in its sole discretion at any time. The Trilon board of directors, after review of the Offer by an independent committee of the board has determined that the Offer is fair to holders of Trilon Shares ("Shareholders") other than Brascan and its affiliates and has unanimously recommended that those Shareholders accept the Offer and tender their Trilon Shares to the Offer. April 11, 2002 Shareholders who wish to accept the Offer must properly complete and execute the accompanying Letter of Transmittal (printed on green paper) or a manually signed facsimile thereof and deposit it, together with certificates representing their Trilon Shares, in accordance with the instructions in the Letter of Transmittal. A Shareholder who wishes to deposit Trilon Shares and whose share certificates for those Trilon Shares are not readily available should complete and execute the accompanying Notice of Guaranteed Delivery (printed on blue paper) or a manually signed facsimile thereof and deposit it in compliance with the procedure for guaranteed delivery set forth under section 3 of the Offer, "How to Tender Trilon Shares to the Offer". Questions and requests for assistance may be directed to the CIBC Mellon Trust Company (the "Depositary") and additional copies of this document, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained without charge on request from the Depositary at its offices and phone numbers shown on the last page of this document. Persons whose Trilon Shares are held in an account with an investment dealer, stockbroker, bank, trust company or other nominee should contact their representative if they wish to accept the Offer. This document does not constitute an offer or a solicitation to any person in any jurisdiction in which such offer or solicitation is unlawful. The Offer is not being made to, nor will deposits be accepted from or on behalf of, Shareholders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. However, Brascan or its agents may, in Brascan's sole discretion, take such action as it may deem necessary to extend the Offer to Shareholders in such jurisdiction. INFORMATION FOR U.S. SHAREHOLDERS This offering is made by a foreign issuer that is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this document in accordance with the disclosure requirements of its home country. Shareholders should be aware that such requirements are different from those of the United States. The financial statements included or incorporated herein, if any, have been prepared in accordance with foreign generally accepted accounting principles, and may be subject to foreign auditing and auditor independence standards, and, thus, may not be comparable to financial statements of United States companies. Shareholders should be aware that acquisition of the Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11 described herein may have tax consequences both in the United States and in the home country of Brascan. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein. The enforcement by investors of civil liabilities under the United States federal securities laws may be affected adversely by the fact that each of Trilon and Brascan is formed under the laws of Ontario, that some or all of their directors and officers may be residents of Canada, that some or all of the experts named in the Offer or Circular may be residents of Canada, and that all or a substantial portion of the assets of said persons may be located outside the United States. THE SECURITIES OFFERED HEREUNDER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Shareholders should be aware that, while the Offer is outstanding, Brascan or its affiliates, directly or indirectly, may bid for and make purchases of Trilon Shares or other securities as permitted by applicable laws or regulations of Canada or its provinces or territories. Additional copies of this document, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Depositary at any of its offices listed on the last page of this document. All dollar references in the Offer and Circular are in Canadian dollars, except as otherwise indicated. ii TABLE OF CONTENTS
Page ---- GLOSSARY.................................................................. iv OFFER..................................................................... 1 1.The Offer............................................................... 1 2.Time for Acceptance..................................................... 3 3.How to Tender Trilon Shares to the Offer................................ 3 4.Conditions of the Offer................................................. 5 5.Extension and Variation of the Offer.................................... 7 6.Payment for Deposited Trilon Shares..................................... 7 7.Return of Trilon Shares................................................. 8 8.Withdrawal of Deposited Trilon Shares................................... 8 9.Market Purchases........................................................ 9 10.Notice and Delivery.................................................... 10 11.Dividends and Distributions............................................ 10 12.Other Terms of the Offer............................................... 11 13.Mail Service Interruption.............................................. 11 14.General................................................................ 12 CIRCULAR.................................................................. 13 1.Brascan Corporation..................................................... 13 2.Description of Brascan Non-Cumulative Class A Preference Shares, Series 11............................................................... 17 3.OPSEU Strike............................................................ 21 4.Trilon Financial Corporation............................................ 21 5.Background to the Offer................................................. 22 6.Prior Valuations........................................................ 24 7.Valuation and Fairness Opinion.......................................... 25 8.Purpose of the Offer and Brascan's Plans for Trilon..................... 30 9.Brascan's Comments on the Offer......................................... 30 10.Holdings of Securities of Trilon....................................... 31 11.Acceptance of the Offer................................................ 34 12.Trading in Securities of Trilon........................................ 34 13.Commitments to Acquire Trilon Shares................................... 34 14.Arrangements, Agreements or Understandings............................. 34 15.Effect of the Offer on Market and Listings............................. 34 16.Source of Funds........................................................ 35 17.Price Range and Trading Volume of Trilon Shares........................ 35 18.Previous Distributions................................................. 36 19.Dividend Record of Trilon.............................................. 36 20.Depositary............................................................. 36 21.Acquisition of Trilon Shares not Deposited............................. 36 22.Canadian Federal Income Tax Considerations............................. 38 23.Interest of Persons in the Matters Related to the Offer................ 45 24.Material Changes and Other Information................................. 46 25.Documents Incorporated by Reference Regarding Brascan.................. 46 26.Eligibility for Investment............................................. 47 27.Interests of Experts................................................... 47 28.Statutory Rights....................................................... 47 29.Documents filed as Part of the United States Registration Statement.... 47 30.Consents............................................................... 48 APPROVAL AND CERTIFICATE OF BRASCAN CORPORATION........................... 49
iii GLOSSARY In the Offer and the Circular, unless the subject matter or context is inconsistent therewith, the following terms shall have the meanings set forth below: "affiliate" has the meaning ascribed thereto in the OSA; "associate" has the meaning ascribed thereto in the OSA; "Brascan" means Brascan Corporation, a corporation existing under the OBCA; "Brascan Non-Cumulative Class A Preference Shares, Series 11" means non- cumulative Class A Preference Shares, Series 11 of Brascan; "Brascan Shares" means Class A Limited Voting Shares of Brascan; "CCRA" means Canada Customs & Revenue Agency; "Circular" means the take-over bid circular accompanying and forming part of the Offer; "Compulsory Acquisition" has the meaning ascribed thereto in "Acquisition of Trilon Shares not Deposited - Compulsory Acquisition" in the Circular; "Current Brascan Market Price" means the weighted average trading price of the Brascan Shares on The Toronto Stock Exchange for a period of 20 consecutive trading days ending on the fourth day prior to the date specified for conversion of the Class A Preference Shares, Series 11, or, if that fourth day is not a trading day, on the immediately preceding trading day; "CVMQ" means the Commission des valeurs mobilieres du Quebec; "Deposit Period" means the period commencing on the date hereof and ending at 11:59 p.m. (local time) on May 16, 2002, or such later time or times or date or dates as may be fixed by Brascan from time to time pursuant to section 5 of the Offer, "Extension and Variation of the Offer"; "Depositary" means CIBC Mellon Trust Company; "Directors' Circular" means the directors' circular prepared by the board of directors of Trilon in respect of the Offer; "Eligible Institution" means a Canadian chartered bank, a major trust company in Canada, a member of the Securities Transfer Association Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange, Inc. Medallion Signature Program (MSP). Members of these programs are usually members of a recognized stock exchange in Canada or the United States, members of the Investment Dealers Association of Canada, members of The National Association of Securities Dealers or banks or trust companies in the United States; "Expiry Time" means the later of (i) the end of the Deposit Period, and (ii) the time at which Brascan is obligated to take up or reject the Trilon Shares deposited under the Offer; "fully-diluted" means, with respect to the number of Trilon Shares at any time, the number of Trilon Shares actually outstanding at such time assuming that any options then outstanding to acquire Trilon Shares or other securities then outstanding which are convertible into or exercisable or exchangeable for Trilon Shares have been exercised, converted or exchanged; "going private transaction" has the meaning given to that term in Rule 61-501 and Policy Q-27; "Independent Committee" means the special committee of the board of directors of Trilon consisting of A. Gordon Craig, Susan E. Crocker, William A. Dimma (Chair), Patrick J. Keenan, Donald C. Lowe and David R. McCamus, all of whom are independent directors of Trilon; "Letter of Transmittal" means the letter of transmittal and election form accompanying this Circular, to be completed by registered holders of Trilon Shares (printed on green paper); iv "Management" means the management of Trilon; "Material Adverse Change" means any change (or any condition, event or development involving a prospective change) in the business, operations, affairs, assets, liabilities (including any contingent liabilities that may arise through outstanding or threatened litigation or otherwise), capitalization, financial condition or prospects of Trilon or Brascan or any of their subsidiaries or associates that would reasonably be expected to materially and adversely affect either Trilon and its subsidiaries and associates, or Brascan and its subsidiaries and associates, as the case may be, in each case on a consolidated basis; "MDSUP" means the Management Deferred Share Unit Plan of Trilon; "Minimum Condition" has the meaning ascribed thereto in section 4 of the Offer, "Conditions of the Offer"; "Minimum Series 11 Amount" means $10,000,000, or such lesser amount as Brascan may determine in its sole discretion; "MSOP" means the Management Share Option Plan of Trilon; "MSPP" means the Management Share Purchase Plan of Trilon; "Notice of Guaranteed Delivery" means the notice of guaranteed delivery in the form accompanying the Offer and Circular (printed on blue paper); "NYSE" means the New York Stock Exchange; "OBCA" means the Business Corporations Act (Ontario), as amended; "Offer" means the offer to purchase Trilon Shares made hereby, the terms and conditions of which are set forth in the accompanying Offer, Circular, Letter of Transmittal and Notice of Guaranteed Delivery; "Offer Period" means the period commencing on the date hereof and ending at the Expiry Time; "Options" means options to acquire Trilon Shares issued under Trilon's stock option plan; "OSA" means the Securities Act (Ontario), as amended; "OSC" means the Ontario Securities Commission; "Policy Q-27" means Policy No. Q-27 of the CVMQ; "Rule 61-501" means OSC Rule 61-501 - Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions; "Shareholders" means the holders of Trilon Shares, and "Shareholder" means any one of them; "Subsequent Acquisition Transaction" has the meaning ascribed thereto in "Acquisition of Trilon Shares Not Deposited" in the Circular; "subsidiary" has the meaning ascribed thereto in the OSA; "Tax Act" means the Income Tax Act (Canada), as amended; "TD Securities" means TD Securities Inc., the independent financial advisor retained by the Independent Committee to prepare the Valuation and the Fairness Opinion; "Trilon" means Trilon Financial Corporation, a corporation existing under the OBCA; "Trilon Shares" means both the Class A Shares and the Class B Non-Voting Shares of Trilon; "TSE" means The Toronto Stock Exchange; v "undiluted" means, with respect to the number of shares in the capital of any company at any time, the number of such shares actually outstanding at such time without assuming that any options for such shares or other securities then outstanding which are convertible into or exercisable or exchangeable for such shares have been exercised, converted or exchanged; and "Valuation and Fairness Opinion" means the written valuation and fairness opinion dated April 9, 2002 of TD Securities to the Independent Committee as to the fair market value as of April 4, 2002 of the Trilon Shares and the value as of April 4, 2002 of the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 as required pursuant to Rule 61-501 and Policy Q-27 and the opinion of TD Securities as to whether the consideration to be received pursuant to the Offer is fair, from a financial point of view, to the Shareholders other than Brascan and its affiliates. vi BRASCAN CORPORATION Suite 4400, BCE Place 181 Bay Street Toronto, Ontario Canada M5J 2T3 OFFER April 11, 2002 TO: THE HOLDERS OF CLASS A SHARES AND CLASS B NON-VOTING SHARES OF TRILON FINANCIAL CORPORATION 1.The Offer Brascan hereby offers to purchase, on and subject to the terms and conditions specified in this Offer, all of the outstanding Class A Shares and Class B Non-Voting Shares of Trilon in exchange for, at the election of Shareholders tendering to the Offer: (i) Cash consideration: $17.00 in cash for each Trilon Share (subject to pro ration as described below and subject to adjustment for a Trilon dividend anticipated to be declared in April 2002 (see section 11 of the Offer)), (ii) Share consideration: 0.5 of a Brascan Share for each Trilon Share (subject to pro ration as described below); or (iii) Preference share consideration: 0.678 of a $25.00 Brascan Non- Cumulative Class A Preference Share, Series 11 and $0.05 in cash. Option to not receive cash: Shareholders electing to receive the preference share consideration option above can elect to forego the $0.05 in cash per Trilon Share. This option may enable certain Shareholders to exchange their Trilon Shares for Brascan Non-Cumulative Class A Preference Shares, Series 11 on a tax deferred basis who would not be entitled to do so without foregoing the $0.05 in cash and to enable Shareholders to obtain a tax deferral without filing documentation that may otherwise be required to obtain such deferral. See section 22 of the Circular, "Canadian Federal Income Tax Considerations - Exchange of Trilon Shares for Brascan Non-Cumulative Class A Preference Shares, Series 11 Only or for Brascan Shares Only". The holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 will be entitled to fixed non-cumulative preferential dividends in the amount of $1.375 per share per annum, payable quarterly, representing a dividend yield of 5.5% per annum. These preference shares are redeemable on or after June 30, 2009 based on a specified redemption schedule. The Brascan Non- Cumulative Class A Preference Shares, Series 11 are convertible by Brascan on or after June 30, 2009, and by the holder on or after December 31, 2013, into Brascan Shares based on 95% of the weighted average market price of the Brascan Shares at the time of conversion, subject to the specific conversion terms and conditions. The Brascan Non-Cumulative Class A Preference Shares, Series 11 rank equally with all other series of Class A Preference Shares of Brascan. See section 2 in the Circular, "Description of Brascan Non-Cumulative Class A Preference Shares, Series 11". No Brascan Non-Cumulative Class A Preference Shares, Series 11 will be issued unless Shareholders elect in aggregate to receive at least the Minimum Series 11 Amount in issue price of Brascan Non-Cumulative Class A Preference Shares, Series 11. If no Brascan Non-Cumulative Class A Preference Shares, Series 11 are issued due to this minimum condition, Shareholders electing to receive these preference shares will be deemed to have elected to receive an equivalent amount of cash consideration. The Offer is made only for Trilon Shares and is not made for any options, warrants, or other rights to purchase Trilon Shares. Any holder of options, warrants or rights who wishes to accept the Offer should exercise the options, warrants or rights in order to obtain certificates representing Trilon Shares and deposit the same in accordance with the Offer. Any such exercise must be effected sufficiently in advance of the Expiry Time to ensure that the holders of options, warrants or other rights to purchase Trilon Shares will have share certificate(s) available for deposit before the Expiry Time, or in sufficient time to comply with the procedures regarding guaranteed delivery. 1 The aggregate value of cash paid (including the cash paid in lieu of fractional shares and the $0.05 in cash per Trilon Share paid with the Brascan Non-Cumulative Class A Preference Shares, Series 11) as consideration is limited to $388 million. The aggregate number of Brascan Shares issued is limited to 11.4 million shares. If either of these limits is exceeded pursuant to elections made (or deemed to be made) by Shareholders who tender to the Offer, the cash consideration paid or the number of Brascan Shares issued will be adjusted on a pro rata basis for all Shareholders, as described below. In the event that Brascan is unable to secure a certificate of amendment under the OBCA in respect of articles of amendment creating the Brascan Non- Cumulative Class A Preference Shares, Series 11 as a result of the strike by Ontario government employees prior to taking up and paying for Trilon Shares under the Offer, a Shareholder who elects to receive Brascan Non-Cumulative Class A Redeemable Preference Shares, Series 11 will be entitled to receive those preference shares as at the date that Brascan pays for Trilon Shares tendered by that Shareholder. However, notwithstanding the foregoing and sections 6 and 10 of the Offer, share certificates representing Brascan Non- Cumulative Class A Preference Shares, Series 11 will not be delivered to Shareholders until such time as Brascan receives a certificate of amendment under the OBCA in respect of articles of amendment creating the Brascan Non- Cumulative Class A Preference Shares, Series 11. Brascan will seek to secure this certificate immediately upon the strike ending. The TSE has conditionally approved for listing the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 issuable in connection with the Offer. The TSE will post these securities for trading when all conditions imposed by the TSE have been met, including in respect of the listing of the Brascan Non- Cumulative Class A Preference Shares, Series 11 when they are fully transferable. The transferability of the Brascan Non-Cumulative Class A Preference Shares, Series 11 may be adversely affected until such time as Brascan receives the certificate of amendment described above. The Letter of Transmittal and Notice of Guaranteed Delivery accompanying this Offer and Circular set forth the manner in which such elections may be made. Shareholders who otherwise validly accept the Offer but fail to make an election or fail to properly make an election in the Letter of Transmittal or Notice of Guaranteed Delivery shall be deemed to have elected to receive $17.00 in cash per Trilon Share. The actual consideration to be received by a Shareholder will be determined in accordance with the following: (a) The maximum aggregate value of cash (including any cash paid in lieu of fractions of Brascan Non-Cumulative Class A Preference Shares, Series 11 and of Brascan Shares referred to below and including the $0.05 in cash per Trilon Share paid along with Brascan Non-Cumulative Class A Preference Shares, Series 11) that Brascan will pay as consideration for the Trilon Shares acquired under the Offer shall be $388 million (the "Maximum Cash Consideration"). (b) The maximum number of Brascan Shares that Brascan will issue as consideration for the Trilon Shares acquired under the Offer shall be 11.4 million Brascan Shares (the "Maximum Share Consideration"). (c) If Shareholders in the aggregate elect or are deemed to have elected to receive cash only consideration which, together with any cash to be paid in lieu of fractions of Brascan Shares or of Brascan Non- Cumulative Class A Preference Shares, Series 11 and together with the $0.05 in cash per Trilon Share to be paid along with Brascan Non- Cumulative Class A Preference Shares, Series 11, exceeds an aggregate value equal to the Maximum Cash Consideration multiplied by a fraction, the numerator of which is the number of Trilon Shares to be taken up and the denominator of which is the number of issued and outstanding Trilon Shares (other than those held by Brascan and its affiliates) (the "Maximum Take-Up Date Cash Consideration"), the amount of cash consideration available to those Shareholders who have elected or are deemed to have elected cash only consideration will be allocated pro rata (on a per share basis) among such Shareholders in an amount equal to the aggregate amount of the cash sought (or deemed to be sought) by such Shareholders multiplied by a fraction, the numerator of which is the Maximum Take-Up Date Cash Consideration, less any cash to be paid in lieu of fractions of Brascan Shares or of Brascan Non-Cumulative Class A Preference Shares, Series 11 and less the $0.05 in cash per Trilon Share to be paid along with Brascan Non-Cumulative Class A Preference Shares, Series 11, and the denominator of which is the aggregate amount of the cash consideration sought (or deemed to be sought) by such Shareholders and the balance of their consideration will be paid in Brascan Shares (provided that Brascan may, at the time of electing to take up and pay for Trilon Shares, determine to modify this allocation mechanism applicable to the Shareholders who have elected to receive cash to provide for additional cash consideration to be distributed at such time to take into account Brascan's intention with respect to extensions of the Offer). For greater certainty, cash to be paid for 2 fractional shares and the $0.05 in cash to be paid along with the Brascan Non-Cumulative Class A Preference Shares, Series 11 will not be subject to pro ration. (d) If Shareholders in the aggregate elect to receive or are deemed to have elected to receive Brascan Shares in a number which exceeds an amount equal to the Maximum Share Consideration multiplied by a fraction the numerator of which is the number of Trilon Shares to be taken-up and the denominator of which is the number of issued and outstanding Trilon Shares (other than those held by Brascan and its affiliates) (the "Maximum Take-Up Date Share Consideration"), the number of Brascan Shares available to those Shareholders will be allocated pro rata (on a per share basis) among such Shareholders in an amount equal to the number of Brascan Shares sought (or deemed to have been sought) by such Shareholders multiplied by a fraction, the numerator of which is the Maximum Take-Up Date Share Consideration and the denominator of which is the number of Brascan Shares sought (or deemed to have been sought) by such Shareholders, rounded down to the nearest whole number, and the balance of their consideration will be paid in cash, provided that Shareholders who are required to take cash may elect instead to receive the preference share consideration described above (including $0.05 in cash per Trilon Share unless the Shareholder has also elected to forego this cash consideration) (provided that Brascan may, at the time of electing to take up and pay for Trilon Shares, determine to modify this allocation mechanism applicable to the Shareholders who have elected or are deemed to have elected to receive Brascan Shares to provide for additional Brascan Shares to be issued at such time to take into account Brascan's intention with respect to extensions of the Offer). Shareholders who have not made an election between cash and Brascan Non-Cumulative Class A Preference Shares, Series 11 will be deemed to have elected to receive cash. No fractional Brascan Non-Cumulative Class A Preference Shares, Series 11 or Brascan Shares will be issued pursuant to the Offer. In lieu of fractional Brascan Non-Cumulative Class A Preference Shares, Series 11 or fractional Brascan Shares, a Shareholder accepting the Offer who would otherwise receive a fraction of a Brascan Non-Cumulative Class A Preference Share, Series 11 or of a Brascan Share will receive a cash payment determined on the basis of $25.00 for each whole Brascan Non-Cumulative Class A Preference Share, Series 11 and $34.00 for each whole Brascan Share. The $25.00 represents the issue price of the Brascan Non-Cumulative Class A Preference Shares, Series 11. The $34.00 amount approximates the closing sale price of the Brascan Shares on the TSE on March 25, 2002, the last date on which the Brascan Shares traded prior to the first announcement of the Offer, which was $34.05 per Brascan Share. The accompanying Circular, which is incorporated into and forms part of the Offer, contains important information which should be read carefully before making a decision with respect to the Offer. 2.Time for Acceptance This Offer is open for acceptance during the period commencing on the date hereof and ending at 11:59 p.m. (local time) on May 16, 2002, or until such later time and date to which this Offer may be extended, unless the Offer is withdrawn by Brascan. 3.How to Tender Trilon Shares to the Offer Letter of Transmittal The Offer may be accepted by delivering to CIBC Mellon Trust Company (the "Depositary") at any of its offices listed in the Letter of Transmittal (printed on green paper) accompanying this Offer, so as to arrive there not later than the Expiry Time: (a) certificate(s) representing the Trilon Shares in respect of which this Offer is being accepted; (b) a Letter of Transmittal (printed on green paper) in the form accompanying this Offer or a manually executed facsimile thereof, properly completed and executed as required by the rules and instructions set out in the Letter of Transmittal; and (c) any other relevant documents required by the rules and instructions set out in the Letter of Transmittal. Brascan reserves the right to permit the Offer to be accepted in a manner other than as set forth herein. 3 Except as otherwise provided in the instructions and rules set out in the Letter of Transmittal, the signature on the Letter of Transmittal must be guaranteed by an Eligible Institution. If a Letter of Transmittal is executed by a person other than the registered holder of the certificate(s) deposited therewith, the certificate(s) must be endorsed, or be accompanied by an appropriate share transfer power of attorney duly and properly completed by the registered holder, with the signature on the endorsement panel or share transfer power guaranteed by an Eligible Institution. Procedure for Guaranteed Delivery If a person wishes to deposit Trilon Shares pursuant to this Offer and (i) the certificates representing the Trilon Shares are not immediately available, or (ii) the certificate(s) and all other required documents cannot be delivered to the Depositary at or prior to the Expiry Time, those Trilon Shares may nevertheless be deposited validly under the Offer, provided that all of the following conditions are met: (a) the deposit is made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery (printed on blue paper) in the form accompanying the Offer, or a facsimile thereof, together with a guarantee by an Eligible Institution in the form specified in the Notice of Guaranteed Delivery, is received by the Depositary at its office in Toronto as set forth in the accompanying Notice of Guaranteed Delivery, during the Deposit Period; and (c) the certificate(s) representing deposited Trilon Shares, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal or a manually executed facsimile thereof, and any other documents required by the Letter of Transmittal, are received at the office of the Depositary in Toronto on or before 5:00 p.m. (local time) on the third trading day on The Toronto Stock Exchange after the expiry of the Deposit Period. To constitute delivery for the purpose of satisfying a guaranteed delivery, the Letter of Transmittal and accompanying share certificate(s) must be delivered to the same office of the Depositary in Toronto where the Notice of Guaranteed Delivery was delivered. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary at its Toronto office and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. An election in a Notice of Guaranteed Delivery as to the form of consideration to be received by a Shareholder will supersede any election made by that Shareholder in a Letter of Transmittal. If no election as to the form of consideration to be received is made on the Notice of Guaranteed Delivery, the Shareholder shall be deemed to have elected to receive $17.00 in cash for each Trilon Share. General In all cases, payment for Trilon Shares deposited and taken up by Brascan will be made only after timely receipt by the Depositary of the certificate(s) representing the Trilon Shares, a properly completed and duly executed Letter of Transmittal, or a manually signed facsimile thereof, properly completed and signed, covering such Trilon Shares with the signature(s) guaranteed in accordance with the instructions set out in the Letter of Transmittal and any other required documents. The method of delivery of certificate(s) representing Trilon Shares, the Letter of Transmittal and all other required documents is at the option and risk of the person depositing those documents. Brascan recommends that those documents be delivered by hand to the Depositary and a receipt obtained or, if mailed, that registered mail, with return receipt requested, be used and that proper insurance be obtained. Shareholders whose Trilon Shares are registered in the name of an investment dealer, stockbroker, bank, trust company or other nominee should contact such nominee if they wish to accept the Offer. The execution of a Letter of Transmittal irrevocably appoints certain senior officers of Brascan and any other person designated by Brascan in writing, as the true and lawful agents, attorneys and attorneys-in-fact, and proxies of the holder of the Trilon Shares covered by the Letter of Transmittal with respect to Trilon Shares registered in the name of the Shareholder on the securities register maintained by or on behalf of Trilon and deposited pursuant to the Offer and purchased by Brascan (the "Purchased Trilon Shares"), and with respect to any and all dividends, distributions, payments, securities, rights, warrants, assets or other interests (collectively "distributions") which may be declared, paid, accrued, issued, distributed, made or transferred on or in respect of the Purchased Trilon Shares or 4 any of them on or after the date of the Offer, full power of substitution (such powers of attorney, being coupled with an interest, being irrevocable), in the name of and on behalf of such Shareholder: (a) to register or record the transfer or cancellation of Purchased Trilon Shares and distributions consisting of securities on the appropriate registers maintained by or on behalf of Trilon; (b) for so long as any such Purchased Trilon Shares are registered or recorded in the name of such Shareholders (whether or not such Purchased Trilon Shares are so registered or recorded as at the time of the completion of the Letter of Transmittal), to execute and deliver (provided the same is not contrary to applicable law), as and when requested by Brascan, any instruments of proxy, authorisation or consent in form and on terms satisfactory to Brascan in respect of any Purchased Trilon Shares and distributions, and to designate in any such instruments of proxy any person or persons as the proxyholder of such Shareholder in respect of such Purchased Trilon Shares and distributions; (c) except as provided in section 11 of the Offer, to execute and negotiate any cheques or other instruments representing such distributions payable to or to the order of, or endorsed in favour of, the Shareholder; and (d) to exercise any rights of a holder of Purchased Trilon Shares and any distribution with respect to such Purchased Trilon Shares, all as specified in the Letter of Transmittal. The acceptance of the Offer pursuant to the procedures set forth above will constitute an agreement between the depositing Shareholder and Brascan in accordance with the terms and conditions of the Offer. All questions as to the validity, form, eligibility (including timely receipt) and acceptance of any Trilon Shares deposited pursuant to the Offer will be determined by Brascan in its sole discretion. Depositing Shareholders agree that such determination shall be final and binding. Brascan reserves the absolute right to reject any and all deposits which it determines not to be in proper form or which may be unlawful to accept under the laws of any jurisdiction. Brascan reserves the absolute right to waive any defects or irregularities in the deposit of any Trilon Shares. There shall be no obligation on Brascan, the Depositary or any other person to give notice of any defects or irregularities in any deposit and no liability shall be incurred by any of them for failure to give any such notice. Brascan's interpretation of the terms and conditions of the Offer, the Circular, the Letter of Transmittal and Notice of Guaranteed Delivery will be final and binding. Brascan reserves the right to permit the Offer to be accepted in a manner other than that set out above. 4.Conditions of the Offer Brascan shall have the right to withdraw the Offer and not take up and pay for, or extend the period of time during which the Offer is open and postpone taking up and paying for, any Trilon Shares deposited under the Offer, unless all of the following conditions are satisfied or waived by Brascan at or prior to the Expiry Time: (a) Brascan shall, on the completion of the Offer, own at least 66 2/3% of the outstanding Class A Shares (calculated on a fully-diluted basis); (b) there shall have been deposited under the Offer and not withdrawn that number of Class A Shares representing more than 50% of the total number of Class A Shares of Trilon outstanding (calculated on a fully-diluted basis), other than Trilon Shares owned by Brascan, its associates or affiliates or by persons whose Trilon Shares may not be included as part of the minority approval of a Subsequent Acquisition Transaction (the "Minimum Condition"); (c) all domestic or foreign governmental, administrative or regulatory approvals, consents, authorizations, exemptions, waivers or declarations (including in respect of the issuance of the Brascan Non- Cumulative Class A Preference Shares, Series 11 and the Brascan Shares) which Brascan considers necessary or desirable in connection with the making of the Offer, the take-up of and payment for Trilon Shares under the Offer or completing a Subsequent Acquisition Transaction shall have been obtained or waived on terms satisfactory to Brascan in its sole judgment; (d) Brascan shall have determined in its sole judgment that (i) no act, action, suit or proceeding shall have been threatened, commenced or taken before or by any domestic or foreign arbitrator, court, tribunal, governmental agency, regulatory authority, administrative agency, commission or stock exchange, in Canada, the United States or elsewhere, and (ii) no law, regulation, rule, policy, directive or order shall have been proposed, enacted, issued, promulgated, amended or applied, in the case of each of (i) or (ii): (i) to cease trade, enjoin, prohibit, challenge or impose limitations or conditions on the purchase by Brascan of the Trilon Shares or the right of Brascan to own or exercise full rights of ownership of the Trilon Shares or the ability of Brascan to complete a Subsequent Acquisition Transaction; or 5 (ii) which, if Trilon Shares are taken-up and paid for under the Offer, could in Brascan's sole judgment adversely affect Trilon or Brascan or any of their respective subsidiaries or the ability of Brascan to complete a Subsequent Acquisition Transaction; (e) there shall not exist any prohibition at law against Brascan taking-up and paying for the Trilon Shares under the Offer or completing a Subsequent Acquisition Transaction; (f) there shall not have occurred or arisen (or, if there shall have previously occurred or arisen, there shall not have been publicly disclosed or disclosed to Brascan) any Material Adverse Change; (g) Brascan shall have determined in its sole judgment that no material property, asset, agreement, right, franchise or license of Trilon or any of its subsidiaries has been or would be impaired or adversely affected as a result of the making of the Offer, the taking-up and paying for Trilon Shares deposited under the Offer, the completion of a Subsequent Acquisition Transaction or otherwise, which might make it inadvisable for Brascan to proceed with the Offer or with taking-up and paying for Trilon Shares deposited under the Offer; (h) Brascan shall have determined in its sole judgment that there does not exist any covenant, term or condition in any of the instruments or agreements to which Trilon or any of its subsidiaries is a party or to which they or any of their properties or assets are subject that might make it inadvisable for Brascan to proceed with the Offer or with taking-up and paying for Trilon Shares under the Offer or completing a Subsequent Acquisition Transaction (including but not limited to any covenant, term or condition that may be breached or cause a default or permit third parties to exercise rights against Trilon or any of its subsidiaries); (i) Brascan shall have determined in its sole judgment that neither Trilon nor any of its subsidiaries has taken any action (including entering into any agreement or making any commitment), or disclosed any previously undisclosed action, that might make it inadvisable for Brascan to proceed with the Offer or with taking-up and paying for Trilon Shares under the Offer or completing a Subsequent Acquisition Transaction; (j) there shall not have occurred any tax change (including any proposal to amend the Tax Act or any announcement, governmental or regulatory initiative, issue of an interpretation bulletin, condition, event or development involving a prospective change) that, in the sole judgment of Brascan, has or may have an adverse effect on Trilon, Brascan or any of their respective subsidiaries, on any Subsequent Acquisition Transaction or on a subsequent sale or disposition of assets of Trilon or any of its subsidiaries; (k) there shall not have occurred, developed or come into effect or existence any event, action, state, condition or occurrence of national or international consequence which, in Brascan's sole judgment, has materially and adversely affected, or may materially and adversely affect, the financial markets in Canada or the United States; and (l) all outstanding options, rights and warrants, if any, to acquire Trilon Shares shall have been exercised or cancelled or exchanged for or converted into options to acquire Brascan Shares on or prior to the expiry of the Offer on terms satisfactory to Brascan. The foregoing conditions are for the exclusive benefit of Brascan and may be asserted by Brascan at any time, regardless of the circumstances giving rise to such assertion, including any action or inaction by Brascan. Brascan may waive any of the foregoing conditions, including without limitation the Minimum Condition, in whole or in part at any time and from time to time, without prejudice to any other rights which Brascan may have. The failure by Brascan at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right and each such right will be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by Brascan concerning the events described in the foregoing conditions will be final and binding upon all parties. Any waiver of a condition or the withdrawal of the Offer will be effective upon written notice or other communication confirmed in writing by Brascan to that effect to the Depositary at its principal office in Toronto. Brascan, forthwith after giving any such notice, will make a public announcement of such waiver or withdrawal, will cause the Depositary as soon as practicable thereafter to notify the Shareholders in the manner set forth in section 10 of the Offer, "Notice and Delivery", and will provide a copy of the aforementioned notice to the TSE. If the Offer is 6 withdrawn, Brascan will not be obligated to take up or pay for any Trilon Shares deposited under the Offer and the Depositary will promptly return all certificates representing deposited Trilon Shares, Letters of Transmittal, Notices of Guaranteed Delivery and related documents to the parties by whom they were deposited at Brascan's expense. 5.Extension and Variation of the Offer The Offer is open for acceptance until, but not after, the Expiry Time. Brascan reserves the right, in its sole discretion, at any time and from time to time while the Offer is open for acceptance, to extend the Deposit Period or to vary the Offer by giving written notice of such extension or variation to the Depositary at its principal office in Toronto, and by causing the Depositary to provide as soon as practicable thereafter a copy of such notice in the manner set forth in section 10 of this Offer to all holders of Trilon Shares that have not been taken up prior to the extension or variation. Brascan shall, as soon as possible after giving notice of an extension or variation to the Depositary, make a public announcement of the extension or variation and provide a copy of the notice thereof to the TSE. Any notice of extension or variation will be deemed to have been given and to be effective on the day on which it is delivered or otherwise communicated in writing to the Depositary at its principal office in Toronto. Where the terms of the Offer are varied, the Offer will not expire before 10 days after the notice of such variation has been delivered to Shareholders, unless otherwise permitted by applicable law and subject to abridgement or elimination of that period pursuant to such orders as may be granted by applicable securities regulatory authorities. If before the Expiry Time, or after the Expiry Time but before the expiry of all rights of withdrawal with respect to the Offer, a change occurs in the information contained in the Offer or the Circular, as amended from time to time, that would reasonably be expected to affect a decision of a Shareholder to accept or reject the Offer (other than a change that is not within the control of Brascan or of an affiliate of Brascan), Brascan will give written notice of such change to the Depositary at its principal office in Toronto, and will cause the Depositary to provide as soon as practicable thereafter a copy of such notice in the manner set forth in section 10 of the Offer, to all holders of Trilon Shares that have not been taken up under the Offer at the date of the occurrence of the change. As soon as possible after giving notice of a change in information to the Depositary, Brascan will make a public announcement of the change in information and provide a copy of the notice thereof to the TSE. Any notice of change in information will be deemed to have been given and to be effective on the day on which it is delivered or otherwise communicated to the Depositary at its principal office in Toronto. Notwithstanding the foregoing, the Offer may not be extended by Brascan if all of the terms and conditions of the Offer, except those waived by Brascan, have been fulfilled or complied with unless Brascan first takes up and pays for all Trilon Shares deposited under the Offer and not withdrawn. During any such extension or in the event of any variation or change in information, all Trilon Shares previously deposited and not taken up or withdrawn will remain subject to the Offer and may be accepted for purchase by Brascan in accordance with the terms hereof, subject to section 8 of this Offer, "Withdrawal of Deposited Trilon Shares". An extension of the Expiry Time or a variation of the Offer does not constitute a waiver by Brascan of its rights under section 4 hereof. An extension of the Deposit Period, a variation of the Offer or a change in information does not constitute a waiver by Brascan of its rights under section 4 of the Offer, "Conditions of the Offer". In the unlikely event that the consideration being offered for the Trilon Shares under the Offer is increased, the increased consideration will be paid to all depositing Shareholders whose Trilon Shares are taken up under the Offer. 6.Payment for Deposited Trilon Shares If all the conditions referred to under "Conditions of the Offer" have been fulfilled or waived at the Expiry Time, Brascan will become obligated to take up and pay for Trilon Shares validly deposited under the Offer and not withdrawn, not later than 10 days from the Expiry Time. Brascan will be obligated to pay for Trilon Shares taken up as soon as possible, but in any event not more than the lesser of three business days after taking up the Trilon Shares and 10 days after the Expiry Time. In addition, from May 17, 2002, if all of the terms and conditions attached to the Offer have been fulfilled or waived, Brascan shall be entitled to take up and pay for all Trilon Shares deposited under the Offer, subject to 7 applicable laws. Any Trilon Shares deposited pursuant to the Offer after the first date on which Trilon Shares have been taken up and paid for by Brascan will be taken up and paid for within 10 days of such deposit. For the purposes of the Offer, Brascan will be deemed to have taken up and accepted for payment Trilon Shares validly deposited and not withdrawn pursuant to the Offer if, as and when Brascan gives oral (subject to confirmation in writing) or written notice to the Depositary to that effect. Brascan expressly reserves the right in its sole discretion to delay taking up and paying for any Trilon Shares or to terminate the Offer and not take up or pay for any Trilon Shares if any condition specified in section 4 of the Offer, "Conditions of the Offer", is not satisfied or waived, by giving written notice thereof or other communication confirmed in writing to the Depositary at its principal office in Toronto. Brascan also expressly reserves the right, in its sole discretion and notwithstanding any other condition of the Offer, to delay taking up and paying for Trilon Shares in order to comply, in whole or in part, with any applicable law. Brascan will pay for Trilon Shares validly deposited pursuant to the Offer and not withdrawn by providing the Depositary with sufficient funds (by bank transfer or other means satisfactory to the Depositary) for transmittal to depositing Shareholders and by providing the Depositary with sufficient share certificates for the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 for transmittal to depositing Shareholders. Under no circumstances will interest accrue or be paid by Brascan or the Depositary to persons depositing Shares on the purchase price of Trilon Shares purchased by Brascan, regardless of any delay in making such payment. Notwithstanding this section, the delivery of share certificates representing the Brascan Non- Cumulative Class A Preference Shares, Series 11 may be delayed, as set out in section 1 of the Offer. The Depositary will act as the agent of persons who have deposited Trilon Shares in acceptance of the Offer for the purposes of receiving payment from Brascan and transmitting payment to such persons, and receipt of payment by the Depositary will be deemed to constitute receipt of payment by persons depositing Trilon Shares. Settlement with each Shareholder who has deposited Trilon Shares under the Offer will be made by the Depositary forwarding a cheque, payable in Canadian funds, representing the cash and/or forwarding a share certificate representing the Brascan Non-Cumulative Class A Preference Shares, Series 11 and/or the Brascan Shares to which the depositing Shareholder is entitled, as the case may be. Subject to the foregoing and unless otherwise directed by the Letter of Transmittal, cheques and share certificates will be issued in the name of the registered holder of the Trilon Shares so deposited. Unless the person depositing the Trilon Shares instructs the Depositary to hold the cheque and/or share certificates for pick-up by checking the appropriate box in the Letter of Transmittal, such cheque and/or share certificates will be forwarded by first class insured mail to such person at the address specified in the Letter of Transmittal. If no such address is specified, the cheque and/or share certificates will be sent to the address of the holder as shown on the register of Shareholders maintained by or on behalf of Trilon. Cheques and/or share certificates mailed in accordance with this paragraph will be deemed to be delivered at the time of mailing. Depositing Shareholders will not be obligated to pay brokerage fees or commissions if they accept the Offer by depositing their Trilon Shares directly with the Depositary. 7.Return of Trilon Shares Any deposited Trilon Shares that are not taken up by Brascan will be returned, at the expense of Brascan, to the depositing Shareholder as soon as practicable after the Expiry Time or withdrawal or early termination of the Offer, by sending certificates representing Trilon Shares not purchased by first class mail to the address of the depositing Shareholder specified in the Letter of Transmittal or, if such name and address is not so specified, in such name and to such address as shown on the share register of Trilon. 8.Withdrawal of Deposited Trilon Shares Except as otherwise stated in this section 8, all deposits of Trilon Shares pursuant to the Offer are irrevocable. Unless otherwise required or permitted by applicable law, any Trilon Shares deposited in acceptance of the Offer may be withdrawn by or on behalf of the depositing Shareholder: (a) at any time up to and including 11:59 p.m. (local time) on May 16, 2002; 8 (b) at any time where the Trilon Shares have not been taken up and paid for by Brascan prior to the receipt by the Depositary of the notice of withdrawal in respect of such Trilon Shares; or (c) if the Trilon Shares have not been paid for by Brascan within three business days after having been taken up; or (d) at any time before the expiration of 10 days from the date upon which either: (i) a notice of change relating to a change which has occurred in the information contained in the Offer or the Circular, as amended from time to time, that would reasonably be expected to affect the decision of a Shareholder to accept or reject the Offer (other than a change that is not within the control of Brascan or of an affiliate of Brascan), in the event that such change occurs before the end of the Deposit Period or after the end of the Deposit Period but before the expiry of all rights of withdrawal in respect of the Offer; or (ii) a notice of variation concerning a variation in the terms of the Offer (other than a variation consisting solely of an increase in the consideration offered for the Trilon Shares where the Deposit Period is not extended for more than 10 days), is mailed, delivered, or otherwise properly communicated, but subject to abridgement of that period pursuant to such order or orders as may be granted by applicable courts or securities regulatory authorities and only if such deposited Trilon Shares have not been taken up by Brascan at the date of the notice. Withdrawals of Trilon Shares deposited pursuant to the Offer must be effected by notice of withdrawal made by or on behalf of the depositing Shareholder and must be actually received by the Depositary at the place of deposit before such Trilon Shares are taken up and paid for. Notice of withdrawal (i) must be made by a method, including facsimile transmission, that provides the Depositary with a written or printed copy, (ii) must be signed by or on behalf of the person who signed the Letter of Transmittal accompanying, or the Notice of Guaranteed Delivery in respect of, the Trilon Shares which are to be withdrawn, and (iii) must specify such person's name, the number of Trilon Shares to be withdrawn, the name of the registered holder and the certificate number shown on each certificate representing the Trilon Shares to be withdrawn. Any signature in a notice of withdrawal must be guaranteed by an Eligible Institution in the same manner as in a Letter of Transmittal (as described in the instructions and rules set out in such letter), except in the case of Trilon Shares deposited for the account of an Eligible Institution. The withdrawal will take effect upon receipt by the Depositary of the properly completed notice of withdrawal. None of the Depositary, Brascan or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or will incur any liability for failure to give such notification. All questions as to the validity (including timely receipt) and form of notices of withdrawal will be determined by Brascan in its sole discretion, and such determination will be final and binding. If Brascan is delayed in taking up or paying for Trilon Shares or is unable to take up or pay for Trilon Shares for any reason, then, without prejudice to Brascan's other rights, Trilon Shares deposited under the Offer may be retained by the Depositary on behalf of Brascan and such Trilon Shares may not be withdrawn except to the extent that depositing Shareholders are entitled to withdrawal rights as set forth in this section 8 or pursuant to applicable law. Any Trilon Shares withdrawn will be deemed not validly deposited for the purposes of the Offer, but may be re-deposited at any subsequent time prior to the end of the Deposit Period by following any of the procedures described in section 3 of the Offer, "How to Tender Trilon Shares to the Offer". In addition to the foregoing rights of withdrawal, Shareholders in certain provinces of Canada are entitled to statutory rights of rescission or to damages, or both, in certain circumstances. See section 28 of the Circular, "Statutory Rights". 9.Market Purchases Subject to applicable law, Brascan reserves the right to and may purchase Trilon Shares in the market at any time and from time to time prior to the Expiry Time. If Brascan purchases Trilon Shares other than pursuant to the Offer while the Offer is outstanding, it will do so through the facilities of The Toronto Stock Exchange and such purchases will not be made before the third business day following the date of the Offer. The aggregate number of Trilon Shares acquired in this manner will not exceed 5% of the number of outstanding Trilon Shares as of the date of this Offer and 9 Brascan will issue and file a press release forthwith after the close of business of The Toronto Stock Exchange on each day on which such Trilon Shares have been purchased. Any Trilon Shares so purchased shall be counted in determining whether the condition as to the number of Trilon Shares deposited to the Offer has been fulfilled. If Brascan purchases any Trilon Shares on The Toronto Stock Exchange while the Offer is outstanding for a price in excess of that offered pursuant to the Offer, Brascan will pay such higher amount to each person whose Trilon Shares are taken up and paid for under the Offer, whether or not such Trilon Shares have already been taken up, and will immediately so notify the holders of Trilon Shares. For purposes of this section 9, "Brascan" includes Brascan and any person or company acting jointly or in concert with Brascan. Although Brascan has no present intention to sell Trilon Shares taken up under the Offer, it reserves the right to make or enter into arrangements, commitments or understandings at or prior to the Expiry Time to sell Trilon Shares after the Expiry Time. 10.Notice and Delivery Any notice to be given by Brascan or the Depositary pursuant to the Offer will be deemed to have been properly given if it is mailed by first class mail, postage prepaid, to the registered holders of Trilon Shares at their addresses as shown on the register maintained by or on behalf of Trilon and will be deemed to have been received on the first business day following the date of mailing. For this purpose, "business day" means any day other than a Saturday, Sunday or federal or Ontario statutory holiday in the jurisdiction to which the notice is mailed. These provisions apply notwithstanding any accidental omission to give notice to any one or more holders of Trilon Shares and notwithstanding any interruption of mail services in Canada following mailing. In the event of any interruption of mail service following mailing, Brascan intends to make reasonable efforts to disseminate the notice by other means, such as publication. Except as otherwise required or permitted by law, if post offices in Canada are not open for the deposit of mail, any notice which Brascan or the Depositary may give or cause to be given under the Offer will be deemed to have been properly given and to have been received by holders of Trilon Shares if it is given to The Toronto Stock Exchange for dissemination and if it is published (i) once in the National Edition of The Globe and Mail, and (ii) once, if possible, in daily newspapers of general circulation in each of the French and English languages in the City of Montreal, provided that if the National Edition of The Globe and Mail is not being generally circulated, publication thereof shall be made in The National Post. The Offer will be mailed to registered Shareholders or made in such other manner as is permitted by applicable regulatory authorities and will be furnished by Brascan to brokers, investment dealers, banks and similar person whose names, or the names of whose nominees, appear in the register maintained by or on behalf of Trilon in respect of the Trilon Shares or, if security position listings are available, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to the beneficial owners of Trilon Shares. Wherever the Offer calls for documents to be delivered to the Depositary, such documents will not be considered delivered unless and until they have been physically received at one of the addresses listed for the Depositary on the Letter of Transmittal. Wherever the Offer calls for documents to be delivered to a particular office of the Depositary, such documents will not be considered delivered unless and until they have been physically received at the particular office at the address indicated on the Letter of Transmittal or Notice of Guaranteed Delivery, as applicable. 11.Dividends and Distributions If, on or after the date of this Offer, Trilon should split, combine or otherwise change any of the Trilon Shares or its capitalization, or shall disclose that it has taken any such action, then Brascan may, in its sole discretion, make such adjustments as it considers appropriate to the purchase price and other terms of this Offer (including, without limitation, the type of securities offered to be purchased and the amounts payable therefor) to reflect such split, combination or other change. Trilon Shares acquired pursuant to the Offer shall be transferred to Brascan free and clear of all liens, charges, encumbrances, claims and equities, together with all rights and benefits arising therefrom including the right to all dividends, distributions, payments, securities, rights, assets or other interests which may be declared, paid, issued, distributed, made or transferred on or after the date hereof on or in respect of the Trilon Shares. If, on or after April 11, 2002, Trilon should declare or pay any dividend or declare, make or pay any other distribution or payment on or 10 declare, allot, reserve or issue any securities, rights or other interests with respect to the Trilon Shares, payable or distributable to holders of Trilon Shares of record on a date prior to the transfer to the name of Brascan or its nominees or transferees on Trilon's transfer registers of Trilon Shares accepted for payment pursuant to this Offer, then (i) in the case of cash dividends, distributions or payments, the amount of the dividends, distributions or payments shall be received and held by the depositing holders of Trilon Shares for the account of Brascan until Brascan pays for such Trilon Shares, and to the extent that such dividends, distributions or payments do not exceed the purchase price per Trilon Share payable by Brascan pursuant to this Offer, the purchase price per Trilon Share payable by Brascan pursuant to the Offer will be reduced by the amount of any such dividend, distribution or payment, and (ii) in the case of non-cash dividends, distributions, payments, rights or other interests, the whole of any such non-cash dividend, distribution, payment, right or other interest, and in the case of any cash dividends, distributions or payments in an amount that exceeds the purchase price per Trilon Share, the whole of any such cash dividend, distribution or payment, will be received and held by the depositing holder of Trilon Shares for the account of Brascan and shall be required to be promptly remitted and transferred by the depositing holder of Trilon Shares to the Depositary for the account of Brascan, accompanied by appropriate documentation of transfer. Pending such remittance, Brascan will be entitled to all rights and privileges as owner of any such dividend, distribution, payment, right or other interest and may withhold the entire purchase price payable by Brascan pursuant to the Offer or deduct from the purchase price payable by Brascan pursuant to the Offer the amount or value thereof, as determined by Brascan in its sole discretion. Brascan understands that, in light of the Offer, the board of directors of Trilon intends to declare a partial dividend of $0.10 per Trilon Share at its board meeting in April 2002 (to be paid by Trilon at a later date) in lieu of the regular quarterly dividend of $0.16 per Trilon Share that would customarily be payable to Shareholders of record in June 2002, which date is expected to be after the Deposit Period. Brascan understands that the record date for this partial dividend will be during the Deposit Period and is intended to provide dividend continuity to Shareholders to the extent they receive Brascan securities for their Trilon Shares under the Offer. Accordingly, notwithstanding the foregoing paragraph, Brascan will not reduce the purchase price for Trilon Shares under the Offer to the extent that Shareholders receive Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 for their Trilon Shares under the Offer (including any cash to be paid in lieu of fractions of Brascan Shares or of Brascan Non-Cumulative Class A Preference Shares, Series 11 and including the $0.05 per Trilon Share to be paid along with Brascan Non-Cumulative Class A Preference Shares, Series 11). 12.Other Terms of the Offer (a) The Offer and all contracts resulting from acceptance hereof shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Each party to any agreement resulting from the acceptance of the Offer unconditionally and irrevocably attorns to the exclusive jurisdiction of the courts of the Province of Ontario. (b) No broker, dealer or other person has been authorized to give any information or make any representation on behalf of Brascan not contained herein or in the accompanying Circular, and, if given or made, such information or representation must not be relied upon as having been authorized. (c) Brascan, in its sole discretion, shall be entitled to make a final and binding determination of all questions relating to the interpretation of the Offer, the Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery, the validity of any acceptance of the Offer and the validity of any withdrawals of Trilon Shares. (d) No Offer is being made to, and no deposits will be accepted from or on behalf of, Shareholders residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Brascan may, in its sole discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to Shareholders in any such jurisdiction. 13.Mail Service Interruption Notwithstanding the provisions of the Offer, the Circular, the Letter of Transmittal or the Notice of Guaranteed Delivery, cheques and/or share certificates in payment for Trilon Shares purchased pursuant to the Offer, certificates for any Trilon Shares to be returned and other relevant documents will not be mailed if Brascan determines that delivery thereof by mail may be delayed. Persons entitled to cheques, certificates and other relevant documents which are not mailed for the foregoing reason may take delivery thereof at the office of the Depositary to which the deposited certificates for Trilon Shares were delivered until such time as Brascan has determined that delivery by mail will no 11 longer be delayed. Brascan shall provide notice of any such determination not to mail made under this section as soon as reasonably practicable after the making of such determination and in accordance with section 10, "Notice and Delivery". The deposit of cheques and/or share certificates with the Depositary in such circumstances shall constitute delivery to the persons entitled thereto and the Trilon Shares shall be deemed to have been paid for immediately upon such deposit. 14.General The provisions of the Glossary, the Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery accompanying the Offer, including the instructions and rules contained therein, as applicable, form part of the terms and conditions of the Offer. The accompanying Circular, together with the documents forming part of the Offer, constitutes the take-over bid circular required under Canadian provincial securities legislation with respect to the Offer. BRASCAN CORPORATION (Signed) J. Bruce Flatt President and Chief Executive Officer 12 CIRCULAR The following information is supplied with respect to the accompanying Offer by Brascan to purchase the Trilon Shares. Terms defined in the Offer and not otherwise defined herein have the same meaning in this Circular. The terms and conditions of the Offer are incorporated in and form part of this Circular. Shareholders should refer to the Offer for details of the terms and conditions of the offer to purchase Trilon Shares, including details as to payment and withdrawal rights. The information concerning Trilon contained in the Offer and this Circular has been taken from or based upon publicly available documents and records on file with Canadian securities administrators and other public sources. Although Brascan has no knowledge that would indicate that any statements contained herein taken from or based on such documents and records are untrue or incomplete, Brascan does not assume any responsibility for the accuracy or completeness of the information contained in such documents and records, or for any failure by Trilon to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Brascan. 1.Brascan Corporation Brascan owns, manages and builds businesses which generate sustainable cash flows. Current operations are largely in the real estate, financial and power generating sectors. In addition, Brascan holds investments in the resource sector. Brascan's goal is to build long-term shareholder value by investing in high quality assets at attractive values, by actively working to increase returns on capital invested in these assets, and by continuously pursuing new opportunities for future growth. Recent Developments The following is a summary of significant recent developments affecting Brascan since January 1, 2001. On April 2, 2002, Brascan announced its intention to issue $125 million of 8.30% preferred securities due June 30, 2051, subject to the underwriters' option to purchase an additional $75 million of preferred securities. On March 12, 2002, Brascan sold a 50% interest in the approximately one million square foot Exchange Tower office property in downtown Toronto for $155 million or $85 million net after non-recourse indebtedness on the property. On March 8, 2002, Brascan announced an agreement to acquire four hydroelectric generating stations in northern Ontario with a combined generating capacity of 488 megawatts from Ontario Power Generation Inc. for $340 million. Brascan expects this acquisition to close in early May 2002. On February 1, 2002, Brascan acquired six hydroelectric generating stations with a combined generating capacity of 126 megawatts and related transmission facilities in northern Maine for cash consideration of US$156.5 million. During 2001, Brascan increased its ownership of Nexfor Inc. from 33% to 41%. On December 20, 2001, Brascan issued $125 million of 8.35% preferred securities due December 31, 2050. On December 12, 2001, Brascan issued US$300 million of 8.125% senior notes due December 15, 2008 in the United States. On November 1, 2001, an aggregate of 6,950,208 Class A Preference Shares, Series 8 of Brascan were converted into an equivalent number of Class A Preference Shares, Series 9 on a one-for-one basis. On September 17, 2001, Brascan issued 10,000,000 Class A Preference Shares, Series 10, for gross offering proceeds of $250 million. In August 2001, Brascan received rating upgrades for its long-term debt to "A (low)" from "BBB (high)" from Dominion Bond Rating Service Limited ("DBRS") and to "A-" from "BBB" from Standard & Poor's Rating Service ("S&P"). Also in August 2001, Brascan's preferred share ratings were increased to "pfd-2(low)" and "P-2" by DBRS and S&P, respectively. 13 In April 2001, Brascan received approval for a normal course issuer bid to acquire up to 8,652,276 Brascan Shares, which runs until April 2002. Brascan intends to file for a renewal of its normal course issuer bid at that time. In February 2001, Brascan increased its ownership of Great Lakes Power Inc. from 93% to 100%. In January 2001, Brascan's ownership of Trilon Financial Corporation was increased from 65% to 71% as a result of Trilon's repurchasing 14.5 million of its own Class A Shares. In February 2002, Brascan's interest in Trilon was diluted to 70% as a result of the exercise of outstanding share purchase warrants of Trilon which expired on February 28, 2002. Except as described above, there have been no material changes in the share and loan capital of Brascan on a consolidated basis since December 31, 2000. Share Capital The authorized share capital of Brascan consists of an unlimited number of Class A Limited Voting Shares ("Brascan Shares"); up to 85,120 Class B Limited Voting Shares ("Class B Shares"); an unlimited number of Class A Preference Shares, issuable in series; and an unlimited number of Class AA Preference Shares, issuable in series. As at April 11, 2002, the following shares of Brascan were issued and outstanding: 166,369,595 Brascan Shares (net of 111,846,461 Brascan Shares held internally by subsidiaries of Brascan); 85,120 Class B Shares; 19,091 Class A Preference Shares, Series 1; 10,465,100 Class A Preference Shares, Series 2; 2,000 Class A Preference Shares, Series 3; 4,000,000 Class A Preference Shares, Series 4; 2,600,000 Class A Preference Shares, Series 5; 4,000,000 Class A Preference Shares, Series 7; 1,049,792 Class A Preference Shares, Series 8; 6,950,208 Class A Preference Shares, Series 9; and 10,000,000 Class A Preference Shares, Series 10. For a description of the Brascan Non-Cumulative Class A Preference Shares, Series 11, see section 2, "Description of Brascan Non-Cumulative Class A Preference Shares, Series 11". Brascan Shares have the following rights, privileges, restrictions and conditions: Ranking. The Brascan Shares rank on a parity with the Class B Shares and rank after the Class A Preference Shares and the Class AA Preference Shares with respect to the payment of dividends and the return of capital on the liquidation, dissolution or winding-up of Brascan. After payment to the holders of the Class A Preference Shares, Class AA Preference Shares and any other shares ranking as to dividends prior to the Brascan Shares and the Class B Shares of the amount or amounts to which they may be entitled, the holders of the Brascan Shares and the Class B Shares are entitled to receive any dividend declared by the board of directors of Brascan and to receive the remaining property of Brascan upon dissolution. Voting. Other than as provided below, each holder of Brascan Shares is entitled to notice of and to attend all meetings of shareholders of Brascan (except meetings at which only holders of another specified class or series of shares are entitled to vote) and are entitled to cast at any such meeting one vote per share. Subject to applicable law and in addition to any other required shareholder approvals, all matters to be approved by shareholders (other than the election of directors) must be approved by (i) a majority or, in the case of matters that require approval by a special resolution of shareholders, at least 66 2/3% of the votes cast by holders of Brascan Shares who vote in respect of the resolution or special resolution, as the case may be, and (ii) a majority or, in the case of matters that require approval by a special resolution of shareholders of Brascan, at least 66 2/3% of the votes cast by holders of Class B Shares who vote in respect of the resolution or special resolution, as the case may be. Election of Directors. In the election of directors of Brascan, holders of Brascan Shares are entitled to elect one-half of the board of directors of Brascan, provided that if holders of Class A Preference Shares, Series 1, Series 2 and Series 3 become entitled to elect two or three directors, as the case may be, the number of directors to be elected by holders of Brascan Shares shall be reduced by the number of directors to be elected by holders of Class A Preference Shares, Series 1, Series 2 and Series 3. The holders of Class B Shares of Brascan are entitled to elect the other one-half of the board of directors of Brascan. Each holder of Brascan Shares has the right to cast a number of votes in the election of directors of Brascan equal to the number of votes attached to the Brascan Shares held by the holder multiplied by the number of directors to be elected by the holders of Brascan Shares. A holder may cast all such votes in favour of one candidate or distribute such votes among its candidates in any manner the holder sees fit. If a holder has voted for more than one candidate without specifying the distribution of votes among such candidates, the holder will be deemed to have divided the holder's votes equally among the candidates for whom the holder voted. 14 Principal Shareholders To Brascan's knowledge, the only persons or corporations which beneficially own, directly or indirectly, or exercise control or direction over voting securities of Brascan carrying more than 10% of the votes attached to any class of outstanding voting securities of Brascan are EdperPartners Limited ("EdperPartners") and its shareholders, who collectively hold, directly and indirectly, or have options to acquire, approximately 27.1 million Brascan Shares representing approximately 15% of the Brascan Shares on a fully diluted basis, and 85,120 Class B Shares, representing all of the Class B Shares of Brascan. Jack L. Cockwell, J. Bruce Flatt, Lynda C. Hamilton, Robert J. Harding, David W. Kerr and Allen T. Lambert, who are directors of Brascan, and Harry A. Goldgut, Edward C. Kress, Brian D. Lawson, Richard J. Legault and John C. Tremayne, who are officers of Brascan, are shareholders of EdperPartners. EdperPartners is a party to an amended and restated Trust Agreement with Montreal Trust Company of Canada (as trustee for the holders of Brascan Shares) dated August 1, 1997. The Trust Agreement provides, among other things, that EdperPartners has agreed not to sell any Class B Shares, directly or indirectly, pursuant to a take-over bid, unless a concurrent bid is made to all holders of Brascan Shares. The concurrent offer must be (i) for the same percentage of Brascan Shares as the percentage of Class B Shares offered to be purchased from EdperPartners, and (ii) the same in all material respects as the offer for the Class B Shares. Among other things, the Trust Agreement permits (i) a sale by EdperPartners of Class B Shares at a price per share less than 115% of the market price of Brascan Shares and as part of a transaction involving not more than five persons in the aggregate, and (ii) a direct or indirect sale of shares of EdperPartners to a purchaser who is or will become a shareholder of EdperPartners and will not hold more than 20% of EdperPartners' outstanding shares as a result of the transaction. Price Range and Trading Volumes for the Brascan Shares The Brascan Shares trade on the TSE, the Brussels Exchange and, since December 20, 2000, on the NYSE. There is currently no market for the Brascan Non-Cumulative Class A Preference Shares, Series 11. Brascan has received conditional listing approval from The Toronto Stock Exchange for the additional Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 to be issued under the Offer. Brascan has also applied to list the additional Brascan Shares on the NYSE and the Brussels Stock Exchange. The Toronto Stock Exchange The combined volume of trading and price ranges of the Brascan Shares on the TSE are set forth in the following table for the periods indicated.
Price per share -------------------------- High Low Average(/1/) Volume ------ ------ ------------ ---------- 2002 - ---- April (to April 5)........................ $34.95 $34.00 $34.22 2,349,591 March (1 to 25)........................... 35.35 33.95 33.04 7,286,276 March (26 to 31).......................... 34.25 31.15 34.26 3,814,131 March..................................... 35.35 31.15 33.46 11,100,407 February.................................. 31.95 27.95 29.95 4,846,399 January................................... 29.95 28.06 28.99 12,110,716 2001 - ---- December.................................. 29.55 25.75 27.37 6,940,649 November.................................. 28.38 23.40 25.90 7,819,809 October................................... 26.90 23.50 25.79 6,733,331 September................................. 28.71 22.10 26.06 8,496,176 August.................................... 29.04 27.05 28.21 10,064,193 July...................................... 27.80 25.30 26.91 8,511,114 June...................................... 26.75 24.80 25.89 6,706,470 May....................................... 27.45 23.80 25.61 7,139,714 April..................................... 26.20 23.65 25.48 9,269,463 March..................................... 26.30 25.00 25.59 8,313,781
- ------- Note: (1) Volume weighted average of trading prices. Brascan announced its intention to make an offer to purchase the Trilon Shares on March 26, 2002. The closing price of the Brascan Shares on the TSE on March 25, 2002, the last day on which the Trilon Shares traded prior to the announcement, was $34.05. 15 The New York Stock Exchange The combined volume of trading and price ranges of the Brascan Shares on the NYSE are set forth in the following table for the periods indicated.
Price per share ------------------------------ High Low Average(/1/) Volume -------- -------- ------------ ------- 2002 - ---- April (to April 5)....................... US$21.90 US$21.35 US$21.58 162,200 March (1 to 25).......................... 22.17 21.31 20.81 371,700 March (26 to 31)......................... 21.59 19.56 21.69 95,700 March.................................... 22.17 19.56 21.08 467,400 February................................. 19.90 17.60 18.84 420,600 January.................................. 18.74 17.21 19.18 730,700 2001 - ---- December................................. 18.29 16.28 17.64 597,600 November................................. 17.48 14.49 16.27 759,600 October.................................. 16.75 14.70 16.27 799,100 September................................ 17.86 14.64 16.61 686,000 August................................... 18.29 17.29 18.20 975,600 July..................................... 17.55 15.98 17.59 917,700 June..................................... 16.71 15.75 16.88 495,300 May...................................... 17.32 14.83 16.97 739,700 April.................................... 16.01 14.78 16.32 227,600 March.................................... 16.02 14.97 16.46 281,700
- ------- Note: (1) Volume weighted average of trading prices. Brascan announced its intention to make an offer to purchase the Trilon Shares on March 26, 2002. The closing price of the Brascan Shares on the NYSE on March 25, 2002, the last day on which the Trilon Shares traded prior to the announcement, was US$21.50. Earnings Coverage Ratios The earnings coverage ratios below include pro forma information giving effect to the consolidation of the results of Brookfield Properties Corporation ("Brookfield") since January 1, 2000. Prior to December 31, 2001, Brookfield was accounted for using the equity method of accounting. The consolidation of Brookfield had no effect on net income or income per share. The ratios have been calculated after giving effect to the assumed issuance of $10 million of Class A Preference Shares, Series 11 pursuant to the Offer and $125 million in principal amount of 8.30% preferred securities due June 30, 2051 pursuant to an offering announced by Brascan on April 2, 2002 (see "Brascan Corporation - Recent Developments"). Brascan's dividend requirements on all of its preference shares, after giving effect to the issuance of the above mentioned securities and adjusted to a before tax equivalent using an effective tax rate of 28%, amounted to $69 million for each of the years ended December 31, 2001 and December 31, 2000. Brascan's interest requirements for the year ended December 31, 2001 and December 31, 2000 amounted to $266 million and $280 million (pro forma basis - $724 million and $667 million), respectively. Brascan's earnings before interest and income tax for the year ended December 31, 2001 and December 31, 2000 were $570 million and $1,088 million (pro forma basis -$1,157 million and $1,597 million), respectively, which are 1.7 and 3.1 times (pro forma basis - 1.5 and 2.2 times) Brascan's aggregate preference share dividend and interest requirements for the respective periods. Brascan's earnings from continuing operations before interest and income tax for the year ended December 31, 2001 and December 31, 2000 were $570 million and $683 million (pro forma basis - $1,157 million and $1,192 million), respectively, which are 1.7 and 2.0 times (pro forma basis - 1.5 and 1.6 times) Brascan's aggregate preference share dividend and interest requirements for the respective periods. Interest on Brascan's convertible notes for the years ended December 31, 2001 and December 31, 2000 were $5 million and $6 million, respectively, the inclusion of which has a negligible effect on the ratios. 16 Auditors, Transfer Agent and Registrar The auditors of Brascan are Deloitte & Touche LLP, Chartered Accountants, Suite 1400, BCE Place, 181 Bay Street, Toronto, Ontario M5J 2V1. The transfer agent and registrar for the Brascan Shares is CIBC Mellon Trust Company of Canada, P.O. Box 7010, Adelaide Street Postal Station, Toronto, Ontario M5C 2W9. 2.Description of Brascan Non-Cumulative Class A Preference Shares, Series 11 Certain Provisions of the Class A Preference Shares of Brascan as a Class The following is a summary of certain provisions attaching to or affecting the Class A Preference Shares of Brascan as a class. Series The Class A Preference Shares of Brascan may be issued from time to time in one or more series. The board of directors of Brascan will fix the number of shares in each series and the provisions attached to each series before issue. Priority The Class A Preference Shares of Brascan rank senior to the Class AA Preference Shares of Brascan, the Brascan Shares, the Class B Limited Voting Shares of Brascan and other shares ranking junior to the Class A Preference Shares with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of Brascan, whether voluntary or involuntary, or in the event of any other distribution of assets of Brascan among its shareholders for the purpose of winding up its affairs. Each series of Class A Preference Shares ranks on a parity with every other series of Class A Preference Shares with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of Brascan, whether voluntary or involuntary, or in the event of any other distribution of assets of Brascan among its shareholders for the purpose of winding up its affairs. Shareholder Approvals Brascan shall not delete or vary any preference, right, condition, restriction, limitation or prohibition attaching to the Class A Preference Shares as a class or create preference shares ranking in priority to or on parity with the Class A Preference Shares except by special resolution passed by at least 66 2/3% of the votes cast at a meeting of the holders of the Class A Preference Shares duly called for that purpose, in accordance with the provisions of the articles of Brascan. Each holder of Class A Preference Shares of Brascan entitled to vote at a class meeting of holders of Class A Preference Shares, or at a joint meeting of the holders of two or more series of Class A Preference Shares, has one vote in respect of each $25.00 of the issue price of each Class A Preference Share held by such holder. Certain Provisions of the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a Series The following is a summary of certain provisions attaching to or affecting the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a series. No Brascan Non-Cumulative Class A Preference Shares, Series 11 will be issued unless Shareholders elect in the aggregate to receive at least the Minimum Series 11 Amount in issue price of these shares when tendering to the Offer. Issue Price The Brascan Non-Cumulative Class A Preference Shares, Series 11 will have an issue price of $25.00 per share. Dividends The holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 will be entitled to receive fixed non-cumulative preferential cash dividends, if, as and when declared by the board of directors of Brascan, in an amount per share per annum equal to $1.375 (representing a coupon rate of 5.5%), accruing daily from the date of issue (expected to be the date Brascan pays for Trilon Shares taken up under the Offer), payable quarterly on the last day of March, June, September and December in each year. The first such dividend will be payable on the later of: (a) the 17 date of a certificate of amendment under the OBCA in respect of articles of amendment creating the Brascan Non-Cumulative Class A Preference Shares, Series 11, and (b) September 30, 2002 and will be pro-rated to the number of days between the earliest date of payment under the Offer and the date of payment for the first dividend. Redemption The Brascan Non-Cumulative Class A Preference Shares, Series 11 are not redeemable before June 30, 2009. On or after this date, but subject to applicable law and to the provisions described under "Certain Provisions of the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a Series - Restrictions on Dividends and Retirement and Issue of Shares", Brascan may, at its option, at any time redeem all, or from time to time any part, of the outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11, by the payment of an amount in cash for each such share so redeemed of $25.75 if redeemed before June 30, 2010, of $25.50 if redeemed on or after June 30, 2010 but before June 30, 2011, of $25.25 if redeemed on or after June 30, 2011, but before June 30, 2012, and of $25.00 thereafter plus, in each case, all declared and unpaid dividends up to but excluding the date fixed for redemption. Notice of any redemption will be given by Brascan not less than 30 days and not more than 60 days prior to the date fixed for redemption. If less than all the outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11 are at any time to be redeemed, the shares to be redeemed will be selected in such manner as Brascan may determine. Conversion at the Option of Brascan The Brascan Non-Cumulative Class A Preference Shares, Series 11 will not be convertible at the option of Brascan prior to June 30, 2009. On or after this date, Brascan may, subject to applicable law and any requirement to obtain regulatory relief, convert all, or from time to time any part, of the outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11 into that number of Brascan Shares determined (per Brascan Non-Cumulative Class A Preference Share, Series 11) by dividing the then applicable redemption price, together with all declared and unpaid dividends up to but excluding the date fixed for conversion, by the greater of $2.00 or 95% of the then Current Brascan Market Price. Fractional Brascan Shares will not be issued on any conversion of Brascan Non-Cumulative Class A Preference Shares, Series 11, but in lieu thereof Brascan will make cash payments. Notice of any conversion will be given by Brascan not less than 30 days and not more than 60 days prior to the date fixed for conversion. If less than all the outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11 are at any time to be converted, the shares to be converted will be selected in such manner as Brascan may determine. Upon exercise by Brascan of its right to convert Brascan Non-Cumulative Class A Preference Shares, Series 11 into Brascan Shares, Brascan reserves the right not to issue Brascan Shares to any person whose address is in, or whom Brascan or its transfer agent has reason to believe is a resident of, any jurisdiction outside Canada, to the extent that such issue would require compliance by Brascan with the securities or other laws of such jurisdiction. Conversion at the Option of the Holder Subject to applicable law and the rights of Brascan described below, on and after December 31, 2013, each Brascan Non-Cumulative Class A Preference Share, Series 11 will be convertible at the option of the holder on the last day of each of March, June, September and December in each year on at least 30 days notice (which notice shall be irrevocable) into that number of Brascan Shares determined by dividing $25.00, together with all declared and unpaid dividends up to but excluding the date fixed for conversion, by the greater of $2.00 or 95% of the then Current Brascan Market Price. Fractional Brascan Shares will not be issued on any conversion of Brascan Non-Cumulative Class A Preference Shares, Series 11, but in lieu thereof Brascan will make cash payments. Upon exercise of the conversion privilege by the holder of Brascan Non- Cumulative Class A Preference Shares, Series 11, Brascan reserves the right not to issue Brascan Shares to any person whose address is in, or whom Brascan or its transfer agent has reason to believe is a resident of, any jurisdiction outside Canada, to the extent that such issue would require compliance by Brascan with the securities or other laws of such jurisdiction. Brascan, subject to the provisions described under "Certain Provisions of the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a Series - Restrictions on Dividends and Retirement and Issue of Shares", as applicable, may by notice given not later than 20 days before the date fixed for conversion to all holders who have 18 given a conversion notice, either (i) redeem on the first business day after the date fixed for conversion all or any part of the Brascan Non-Cumulative Class A Preference Shares, Series 11 forming the subject matter of the applicable conversion notice, or (ii) cause the holder of such Brascan Non- Cumulative Class A Preference Shares, Series 11 to sell on the first business day after the date fixed for conversion all or any part of such Brascan Non- Cumulative Class A Preference Shares, Series 11 to another purchaser or purchasers in the event that a purchaser or purchasers willing to purchase all or any part of such Brascan Non-Cumulative Class A Preference Shares, Series 11 is or are found. Any such redemption or purchase shall be made by the payment of an amount in cash of $25.00 per share, together with all declared and unpaid dividends up to but excluding the date fixed for redemption or purchase. The Brascan Non-Cumulative Class A Preference Shares, Series 11 to be so redeemed or purchased shall not be converted on the date set forth in the conversion notice. If Brascan elects to redeem or arrange for the purchase of any Brascan Non- Cumulative Class A Preference Shares, Series 11 that are the subject of a conversion notice ("Subject Shares"), Brascan shall, at least 20 days prior to the conversion date, give notice to all holders who have given a conversion notice to Brascan, stating: (a) the number of Subject Shares to be redeemed by Brascan; (b) the number of Subject Shares to be sold to another purchaser; and (c) the number of Subject Shares to be converted into Brascan Shares, such that all of the Subject Shares will be redeemed, purchased or converted on the first business day after the date fixed for conversion and that the proportion of the Subject Shares which are either redeemed, purchased or converted on that conversion date shall, to the extent practicable, be the same for each holder delivering a conversion notice. Purchase for Cancellation Subject to applicable law and to the provisions described under "Certain Provisions of the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a Series - Restrictions on Dividends and Retirement and Issue of Shares" below, Brascan may at any time purchase (if obtainable) for cancellation the whole or any part of the Brascan Non-Cumulative Class A Preference Shares, Series 11 at the lowest price or prices at which in the opinion of the board of directors of Brascan such shares are obtainable. Rights on Liquidation In the event of the liquidation, dissolution or winding-up of Brascan or any other distribution of assets of Brascan among its shareholders for the purpose of winding-up its affairs, the holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 will be entitled to receive $25.00 per share, together with all declared and unpaid dividends up to but excluding the date fixed for payment, before any amount is paid or any assets of Brascan are distributed to the holders of any shares ranking junior as to capital to the Brascan Non-Cumulative Class A Preference Shares, Series 11. The holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 will not be entitled to share in any further distribution of the assets of Brascan. Restrictions on Dividends and Retirement and Issue of Shares So long as any of the Brascan Non-Cumulative Class A Preference Shares, Series 11 are outstanding, Brascan will not, without the approval of the holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11: (a) declare, pay or set apart for payment any dividends (other than stock dividends payable in shares of Brascan ranking as to capital and dividends junior to the Brascan Non-Cumulative Class A Preference Shares, Series 11) on shares of Brascan ranking as to dividends junior to the Brascan Non-Cumulative Class A Preference Shares, Series 11; (b) except out of the net cash proceeds of a substantially concurrent issue of shares ranking as to return of capital and dividends junior to the Brascan Non-Cumulative Class A Preference Shares, Series 11, redeem or call for redemption, purchase or otherwise pay off or retire any shares of Brascan ranking as to capital junior to the Brascan Non-Cumulative Class A Preference Shares, Series 11; (c) redeem or call for redemption, purchase or otherwise retire for value less than all of the Brascan Non-Cumulative Class A Preference Shares, Series 11 then outstanding; 19 (d) except pursuant to any purchase obligation, sinking fund, retraction privilege or mandatory redemption provisions attaching thereto, redeem or call for redemption, purchase or otherwise pay off or retire any Class A Preference Shares, ranking as to the payment of dividends or return of capital on a parity with the Brascan Non-Cumulative Class A Preference Shares, Series 11; or (e) issue any additional Brascan Non-Cumulative Class A Preference Shares, Series 11 or any shares ranking as to dividends or return of capital prior to or on a parity with the Brascan Non-Cumulative Class A Preference Shares, Series 11, except for an issue of Brascan Non- Cumulative Class A Preference Shares, Series 11 pursuant to the Offer, any Compulsory Acquisition or any Subsequent Acquisition Transaction, unless, in each such case, all declared and unpaid dividends up to and including the dividend payable for the last completed period for which dividends were payable on the Brascan Non-Cumulative Class A Preference Shares, Series 11 and on all other shares of Brascan ranking prior to or on a parity with the Brascan Non-Cumulative Class A Preference Shares, Series 11 with respect to the payment of dividends have been declared paid or set apart for payment. Shareholder Approvals The approval of all amendments to the rights, privileges, restrictions and conditions attaching to the Brascan Non-Cumulative Class A Preference Shares, Series 11 as a series and any other approval to be given by the holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 may be given by a resolution carried by an affirmative vote of at least 66 2/3% of the votes cast at a meeting at which the holders of a majority of the outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11 are present or represented by proxy or, if no quorum is present at such meeting, at an adjourned meeting at which the holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 then present would form the necessary quorum. At any meeting of holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 as a series, each such holder shall be entitled to one vote in respect of each Class A Preference Share, Series 11 held. Voting Rights The holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 will not (except as otherwise provided by law and except for meetings of the holders of Class A Preference Shares as a class and meetings of the holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 as a series) be entitled to receive notice of, attend, or vote at, any meeting of shareholders of Brascan unless and until Brascan shall have failed to pay eight quarterly dividends on the Brascan Non-Cumulative Class A Preference Shares, Series 11, whether or not consecutive and whether or not such dividends have been declared and whether or not there are any monies of Brascan properly applicable to the payment of dividends. In that event, until such time as Brascan pays the whole amount of a quarterly dividend, the holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 will be entitled to receive notice of and to attend each meeting of Brascan's shareholders other than any meetings at which only holders of another specified class or series are entitled to vote, and to one vote for each Class A Preference Share, Series 11 held, provided that in respect of the election of directors, the holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 will vote with holders of Brascan Shares and, in certain circumstances, with the holders of certain other series of the Class A Preference Shares in the election of one-half of the board of directors (less the number of directors which the holders of the Class A Preference Shares, Series 1, Class A Preference Shares, Series 2 and Class A Preference Shares, Series 3 may be entitled to elect). The voting rights of the holders of the Brascan Non-Cumulative Class A Preference Shares, Series 11 shall forthwith cease upon payment by Brascan of the whole amount of a quarterly dividend on the Brascan Non-Cumulative Class A Preference Shares, Series 11 subsequent to the time such voting rights first arose. Brascan's articles provide that each holder of shares entitled to vote in an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the holder of shares multiplied by the number of directors to be elected. The holder of shares may cast all such votes in favour of one candidate or distribute them among the candidates in any manner the holder of shares sees fit. Where the holder of shares has voted for more than one candidate without specifying the distribution of votes among such candidates, the holder of shares shall be deemed to have divided his votes equally among the candidates for whom the holder of shares voted. Subject to applicable law and in addition to any other required shareholder approvals, Brascan's articles also require that all matters to be approved by shareholders (other than the election of directors) must be approved separately by the holders of the Brascan Shares and by the holders of the Brascan Class B Limited Voting Shares. 20 Tax on Dividends Brascan will elect, in the manner and within the time provided under Part VI.1 of the Tax Act, to pay or cause payment of the tax under Part VI.1 at a rate such that the corporate holders of Brascan Non-Cumulative Class A Preference Shares, Series 11 will not be required to pay tax under Part IV.1 of the Tax Act on dividends received on such shares. 3.OPSEU Strike As a result of a strike by the Ontario Public Service Employees Union ("OPSEU"), the provision of government services in Ontario has been disrupted, including the processing of amendments to the articles of corporations incorporated in Ontario, including Brascan and Trilon. In order to create the Brascan Non-Cumulative Class A Preference Shares, Series 11, Brascan must file and receive a certificate of amendment in respect of articles of amendment creating the Brascan Non-Cumulative Class A Preference Shares, Series 11. As a result of the strike, Brascan has no assurances that it will be able to create the Brascan Non-Cumulative Class A Preference Shares, Series 11 prior to taking up and paying for the Trilon Shares tendered to the Offer. However, upon conclusion of the strike and the resumption of normal government services, Brascan anticipates being able to create the Brascan Non-Cumulative Class A Preference Shares, Series 11, with effect on a date prior to taking up and paying for the Trilon Shares. In the event that Brascan is unable to secure a certificate of amendment under the OBCA in respect of articles of amendment creating the Brascan Non- Cumulative Class A Preference Shares, Series 11 as a result of the strike by Ontario government employees prior to taking up and paying for Trilon Shares under the Offer, a Shareholder who elects to receive Brascan Non-Cumulative Class A Redeemable Preference Shares, Series 11 will be entitled to receive those preference shares as at the date upon which Brascan pays for Trilon Shares tendered by that Shareholder. However, notwithstanding the foregoing and sections 6 and 10 of the Offer, share certificates representing Brascan Non-Cumulative Class A Preference Shares, Series 11 will not be delivered to Shareholders until such time as Brascan receives a certificate of amendment under the OBCA in respect of articles of amendment creating the Brascan Non- Cumulative Class A Preference Shares, Series 11. Brascan will seek to secure this certificate immediately upon the strike ending. The TSE has conditionally approved for listing the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 issuable in connection with the Offer. The TSE will post these securities for trading when all conditions imposed by the TSE have been met, including in respect of the listing of the Brascan Non- Cumulative Class A Preference Shares, Series 11 when they are fully transferable. The transferability of the Brascan Non-Cumulative Class A Preference Shares, Series 11 may be adversely affected until such time as Brascan receives the certificate of amendment described above. 4.Trilon Financial Corporation Trilon was continued under the laws of Ontario by Certificate and Articles of Continuance dated February 8, 1994. The articles of Trilon were subsequently amended to change the number of its directors. Trilon is a financial services company that provides asset management and merchant banking services. Trilon's clients include governments, institutions, corporations and high net-worth individuals. Trilon also provides select business services and is active in the capital markets. Trilon focuses its activities on industry sectors that require substantial amounts of capital. These sectors include real estate, natural resources, energy and financial services. Trilon's operations are grouped under four core businesses: merchant banking, business services, capital markets and asset management. The merchant banking group provides merchant banking loans and makes merchant banking investments and a majority of these comprise acquisition bridge loans made to small and medium sized companies to facilitate their growth initiatives. The business services group provides residential home-related services to corporations and institutions. These fee-based services include relocations, move management, home appraisals and transaction closing services. Trilon's capital markets group provides financial advisory, property brokerage and securities underwriting services. Property brokerage is provided through Trilon's Royal LePage division, a leading broker in Canada in both the commercial and residential markets. Trilon also invests its own capital in higher-yielding fixed income and equity securities. Trilon's asset management group, directly and indirectly through Trilon's associates, manages assets for institutional and other investors. Included among the assets managed are the assets within the Tricap Restructuring Fund, launched in late 2001, and the assets in the Trilon Opportunity Fund, which invests in new and emerging technologies. 21 Recent Developments In December 2001, Trilon completed the first closing, and in March 2002 the second closing, of the Tricap Restructuring Fund. The Fund has over $415 million committed to make equity and debt investments in under-performing companies which require financial and/or operational restructuring. Trilon has committed $200 million to the Fund. Share Capital Trilon's authorized capital consists of: . an unlimited number of Class I Preferred Shares, issuable in series, the first series of which consists of 6,000,000 Floating Rate Class I Preferred Shares Series A; . an unlimited number of Class II Preferred Shares, issuable in series, the first series of which consists of 3,500,000 Class II Cumulative Redeemable Convertible Preferred Shares Series One, the second series of which consists of 1,000,000 Class II Preferred Shares Series Two, the third series of which consists of 4,000,000 Class II Preferred Shares Series Three and the fourth series of which consists of 4,000,000 Class II Preferred Shares Series Four; . an unlimited number of preferred shares designated as Class III Preferred Shares Series One, the second series of which consists of 1,330,200 Class III Preferred Shares Series Two and the third series of which consists of 4,000,000 Class III Preferred Shares Series Three; and . an unlimited number of Class A Shares of Trilon and an unlimited number of Class B Non-Voting Shares of Trilon. At April 11, 2002, the following shares were issued and outstanding: 6,000,000 Class I Preferred Shares Series A, 665,000 Class II Preferred Shares Series Two, 3,999,000 Class II Preferred Shares Series Three, 4,000,000 Class II Preferred Shares Series Four, 5,000,000 Class III Preferred Shares Series One, 482,888 Class III Preferred Shares Series Two, 103,745,836 Class A Shares and 47,917,647 Class B Non-Voting Shares. Trilon Shares have the following rights, privileges, restrictions and conditions: Conversion. The Class B Non-Voting Shares are convertible on a one-for-one basis into Class A Shares, up to that number of Class B Shares equal to the lesser of: (a) all the Class B Shares held, and (b) that number of Class B Shares which, on exercise of the conversion right, would result in that holder, together with holders of Class A Shares which are its affiliates, holding that number of Class A Shares that is one Class A Share less than 50% of the outstanding Class A Shares. Dividends. Subject to the prior rights of the holders of Class I, II and III Preferred Shares and any other senior ranking shares outstanding from time to time, holders of Class B Non-Voting Shares have a right to receive fixed, preferential, non-cumulative quarterly cash dividends of $0.03 per share. If in any quarter, after providing for the full quarterly dividend on the Class B Non-Voting Shares, any moneys of Trilon properly available for the payment of dividends remain, all or any part of those moneys may be applied to dividends on the Class A Shares, provided that if in that quarter dividends aggregating $0.03 per share have been paid or declared and set aside for payment on Class A Shares, any and all further dividends declared in that quarter shall be declared and paid in equal or equivalent amounts per share on all Class A Shares and all Class B Shares then outstanding without preference or priority. Ranking. Subject to the prior rights of holders of Class I Preferred Shares, Class II Preferred Shares and Class III Preferred Shares and any other shares of Trilon ranking senior to the Trilon Shares, all Trilon Shares share equally in the property and assets of Trilon in the event of the liquidation, dissolution or winding-up of Trilon or any other distribution of the assets of Trilon. Voting. Holders of Class A Shares are entitled to vote at all meetings of shareholders of Trilon, other than meetings at which holders of only a specified class or series may vote. Holders of Class B Non-Voting Shares have no right to vote generally. 5.Background to the Offer Brascan has owned a significant interest in Trilon since Trilon was established as a public company in 1982. In January 2001, when Trilon repurchased 14.5 million of its Class A Shares pursuant to a substantial issuer bid, Brascan's controlling interest in Trilon increased from 65% to 71% of the Trilon Shares (subsequently decreased to 70% as a result of the exercise of outstanding share purchase warrants of Trilon). As of April 11, 2002, Brascan holds 22 58,214,553 Class A Shares of Trilon, representing approximately 56% of the number of Class A Shares outstanding. Brascan also holds 47,897,344 Class B Non-Voting Shares of Trilon, each of which is convertible one-for-one into Class A Shares of Trilon. Management and the boards of directors of both Brascan and Trilon have discussed the potential combination of the two companies on numerous occasions over the past several years, given that the companies' business plans and activities are highly complementary to each other. Brascan has recently stated that its business strategy includes, among other objectives, acquiring 100% ownership of certain of its operating businesses. In August 2001, preliminary discussions took place between Brascan and Trilon regarding a potential transaction between the two companies. These discussions ended in October 2001, as it was determined at the time that a transaction was unlikely to proceed in the short term, largely as a result of the impact on the financial markets of the events of September 11, 2001. In March 2002, senior executives of Brascan approached senior executives of Trilon to re-engage discussions concerning a merger transaction. These discussions were concluded on March 25, 2002, at which point the proposed transaction was submitted to the boards of directors of each of Trilon and Brascan for their consideration and the board of directors of Brascan authorized management of Brascan to proceed with its plans to conclude a merger between Trilon and Brascan. On March 26, 2002, Brascan announced by press release its intention to acquire all of the Trilon Shares not already held by Brascan. The Independent Committee Effective August 22, 2001, the board of directors of Trilon (the "Trilon Board") appointed a special committee of directors (the "Independent Committee") who are independent of Brascan and Management for the purposes of exploring the possibility of engaging in a merger transaction with Brascan. William A. Dimma, A. Gordon Craig, Susan E. Crocker, Patrick J. Keenan, Donald C. Lowe and David R. McCamus were each appointed to the Independent Committee. The Independent Committee appointed William A. Dimma as its Chair. Independent Legal and Financial Advisors At the time of its formation, the Independent Committee engaged Osler, Hoskin & Harcourt LLP as its legal counsel to assist the Independent Committee in discharging its responsibilities and to provide the Independent Committee with advice concerning its duties and the conduct of its meetings. On September 6, 2001, the Independent Committee engaged TD Securities to serve as financial advisor to the Independent Committee and, if required, to prepare and deliver the Valuation and Fairness Opinion. The Independent Committee satisfied itself that TD Securities was a qualified and independent advisor and competent to provide the financial services required by the Independent Committee. In October 2001, the Independent Committee adjourned its initial deliberations for the reasons set out above. Immediately following the announcement by Brascan of its intention to make the Offer, the board of directors reconvened the Independent Committee to review the Offer. The Independent Committee requested that both Osler, Hoskin & Harcourt LLP and TD Securities continue their services to the Independent Committee and to complete the work previously undertaken. Deliberations of the Independent Committee During the course of its deliberations, the Independent Committee received a presentation from management of Brascan with respect to the Offer. Management of Brascan was asked to provide and did provide an explanation as to why, in their opinion, the Offer was in the best interests of Trilon and fair to Shareholders other than Brascan and its affiliates ("minority Shareholders"). Detailed discussions were then held with Management concerning the impact of the Offer on Trilon and its stakeholders. Representatives of TD Securities attended substantially all of the Independent Committee's meetings and provided financial advice with respect to the Offer. From September 6, 2001 to April 4, 2002, TD Securities proceeded to gather and review the financial information necessary for the preparation of the Valuation and Fairness Opinion. The Independent Committee conducted a detailed review with TD Securities of the analysis and methodologies underlying the Valuation and Fairness Opinion. The Independent Committee's members satisfied themselves that the methodology and assumptions were appropriate in the circumstances. The Independent Committee also discussed with TD Securities the results of its due diligence meetings with Management. 23 On April 4, 2002, the Independent Committee received orally from TD Securities a valuation of the Trilon Shares prepared in compliance with Rule 61-501 and Policy Q-27. The written valuation sets out a range of fair market values for the Trilon Shares as of April 4, 2002 of $15.65 to $17.45 per Trilon Share. Further, the valuation sets out a range of values for the Brascan Shares as of April 4, 2002 of $33.76 to $34.06 per Brascan Share and a range of values for the Brascan Non-Cumulative Class A Preference Shares, Series 11 as of April 4, 2002 of $24.79 to $25.21. TD Securities also provided the Independent Committee with its fairness opinion in which it concluded that in its opinion, as of April 4, 2002, the consideration offered under the Offer is fair, from a financial point of view, to the minority Shareholders. A summary of the Valuation and Fairness Opinion is provided in section 7 of this Circular. On April 4, 2002, the Independent Committee unanimously concluded that the Offer is in the best interests of Trilon and is fair from a financial point of view to the minority Shareholders based both on the Valuation and Fairness Opinion and the following additional considerations: (a) the value of the consideration being offered is in the upper range of the valuation of the Trilon Shares prepared by TD Securities Inc.; (b) while the value of the consideration being offered represents a nominal premium to the trading price immediately prior to the announcement of the Offer, the value does represent a 20% premium to the price Trilon's Class A Shares traded at 3 months ago, and a 42% premium to the price at which Trilon repurchased Class A Shares under a substantial issuer bid completed 15 months ago; (c) the premium implied by the consideration being offered is attractive in light of Trilon's asset base, which consists primarily of a portfolio of financial assets and offers limited opportunity to generate incremental value relative to its underlying value; (d) Shareholders are being offered alternative forms of consideration designed to suit their individual needs. Shareholders can elect to receive their payment 100% in Brascan Shares or 100% in cash subject to proration. Furthermore, Shareholders can elect to receive their payment in the form of Brascan Non-Cumulative Class A Preference Shares, Series 11 without limit so that Shareholders can both defer capital gains taxes and increase the yield on the securities received. Brascan Non- Cumulative Class A Preference Shares, Series 11 will pay a dividend of $1.375 per share per annum, payable quarterly, representing a dividend yield of 5.5% per annum; and (e) Brascan owns 70% of the common equity of the Corporation. As a result, no alternative value maximizing transaction can occur without the co- operation and consent of Brascan. Brascan regards its investment in Trilon as one of its principal operating business units and does not contemplate a sale or divestiture. Accordingly, it is highly unlikely that there will be an alternative transaction available to Shareholders. Shareholders are urged to read the Valuation and Fairness Opinion in its entirety. As indicated in the Valuation and Fairness Opinion, the Valuation and Fairness Opinion must be considered as a whole and selecting portions of such analysis or the factors considered by it, without considering all analyses and factors together, could create a misleading view of the process underlying the Valuation and Fairness Opinion. Recommendation of the Independent Committee On April 4, 2002, after considering all of these factors and after having met a total of 11 times, the Independent Committee unanimously concluded that in the circumstances, the Offer was fair to the minority Shareholders and it was in the best interests of Trilon for the Trilon Board to recommend that minority Shareholders accept the Offer. At the meeting of the Trilon Board held on April 4, 2002, the Independent Committee recommended to the Trilon Board that they recommend that the minority Shareholders accept the Offer. The board of directors of Trilon approved the report of the Independent Committee and accepted the recommendation of the Independent Committee (Jeffrey Blidner, Jack Cockwell, Allen Lambert, George Myhal and Timothy Price abstaining from voting). See also the discussion of the deliberations of the Independent Committee and the Trilon board of directors in the Directors' Circular. 6.Prior Valuations To the knowledge of Brascan and its directors and senior officers, there are no prior valuations of Trilon, its material assets or its securities made in the 24 months preceding the date of this Offer. 24 7.Valuation and Fairness Opinion Under the provisions of provincial securities laws respecting take-over bids, where a take-over bid is an "insider bid", the offeror is required, unless otherwise exempted, to have a valuation of the target company prepared by a qualified and independent valuer based on techniques that are appropriate in the circumstances, after considering all relevant assumptions, that arrives at an opinion as to a value or range of values for the participating securities. The following section summarizes the Valuation and Fairness Opinion, describing the basis of the computations utilized to determine the valuation contained therein, the scope of the review made, the relevant factors and their values and the key assumptions on which the valuation is based. The following summary is qualified in its entirety by, and should be read in conjunction with, the Valuation and Fairness Opinion. A copy of the Valuation and Fairness Opinion is available for inspection during business hours at the registered and principal office of Brascan located at Suite 4400, BCE Place, 181 Bay Street, Toronto, Ontario, M5J 2T3, and copies of the Valuation and Fairness Opinion may be obtained without charge upon written request to the Secretary of Brascan at the same address and is attached as a schedule to the Directors' Circular. Engagement The Independent Committee initially approached TD Securities regarding a potential financial advisory assignment in August 2001, and TD Securities was formally engaged by the Independent Committee pursuant to an engagement agreement (the "Engagement Agreement") dated September 6, 2001. In October 2001, the Independent Committee informed TD Securities that a potential transaction with Brascan was unlikely to proceed at that time, in large part as a result of the state of the financial markets. Following the public announcement by Brascan of its intention to acquire the Trilon Shares not already owned by it on March 26, 2002, the Independent Committee requested that TD Securities continue to provide it with financial advisory services and complete the work previously undertaken. The terms of the Engagement Agreement provide that TD Securities will receive a fee of $600,000 for its services and is to be reimbursed for its reasonable out-of-pocket expenses. In accordance with the requirements of Rule 61-501 and Policy Q-27, such fees and expenses will be paid by Brascan. In addition, Trilon has agreed to indemnify TD Securities, in certain circumstances, against certain expenses, losses, claims, actions, damages and liabilities incurred in connection with the provision of its services. The fee payable to TD Securities is not contingent in whole or in part on the success of the Offer or on the conclusions reached in the Valuation and Fairness Opinion. Engagement of TD Securities as an Independent Valuer TD Securities is a Canadian investment banking firm with operations in a broad range of activities, including corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading, investment management and investment research. TD Securities has participated in a significant number of transactions involving public and private companies and has extensive experience in preparing valuations and fairness opinions. Neither TD Securities, nor any of its affiliates is an insider, associate or affiliate (as those terms are used in the Policies) of Trilon, Brascan or any of their respective affiliates (collectively, the "Interested Parties"). Except as financial advisor to the Independent Committee, neither TD Securities nor any of its affiliates is an advisor to any of the Interested Parties with respect to the Offer. During the 24 months preceding the engagement by the Independent Committee, TD Securities has provided various financial advisory services in connection with unrelated transactions, and has participated in various other securities offerings and financial transactions involving Brascan and certain of its associates and affiliates. TD Securities is an investor in certain investment funds managed by Trilon. The Toronto-Dominion Bank ("TD Bank"), the parent company of TD Securities, is a lender pursuant to certain credit facilities involving Brascan and certain of its associates and affiliates. TD Securities acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have and may in the future have positions in the securities of any Interested Party and, from time to time, may have executed or may execute transactions on behalf of such companies or other clients for which it may have received or may receive compensation. As an investment dealer, TD Securities conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including matters with respect to the Offer, Trilon or other Interested Parties. 25 The fees paid to TD Securities in connection with the mandates outlined above, together with the fees payable to TD Securities pursuant to the Engagement Agreement, are not financially material to TD Securities. No understandings or agreements exist between TD Securities and either Trilon, Brascan or any Interested Party with respect to future financial advisory or investment banking business. TD Securities may in the future, in the ordinary course of its business, perform financial advisory or investment banking services for Trilon, Brascan or any Interested Party, and TD Bank may provide banking services to Trilon, Brascan or any Interested Party. Scope of Review In preparing the Valuation and the Fairness Opinion, TD Securities held discussions with the Independent Committee, various members of Management and the auditors of Trilon; reviewed certain publicly available information, financial statements and information, projections, schedules of outstanding shares and options, indemnities, credit agreements, transaction documents and non-public information relating to Trilon, its subsidiaries and business segments and Brascan; reviewed information relating to the business, operations, financial performance and, where applicable, stock market data and credit rating and research publications relating to Trilon, its subsidiaries and business segments, Brascan and other selected comparable companies; and carried out other analyses and investigative exercises, all of which are more specifically described in the Valuation and Fairness Opinion attached as an exhibit to the Directors' Circular. General Assumptions and Limitations With the Independent Committee's acknowledgement and agreement as provided for in the Engagement Agreement, TD Securities has relied upon the accuracy and completeness of all data and other information obtained by it from public sources or provided to it by Trilon, Brascan and their respective personnel, advisors, or otherwise, including the representations contained in certificates dated April 4, 2002, provided by senior officers of both Trilon and Brascan (collectively, the "Information"). The Valuation and Fairness Opinion are conditional upon such accuracy and completeness. Subject to the exercise of professional judgment, and except as expressly described in the Valuation and Fairness Opinion, TD Securities has not attempted to verify independently the accuracy or completeness of any of the Information. With respect to the budgets, forecasts, projections or estimates provided to TD Securities and used in its analyses, TD Securities notes that projecting future results is inherently subject to uncertainty. TD Securities has assumed, however, that such budgets, forecasts, projections and estimates were prepared using the assumptions identified therein which, in the opinion of Trilon, are (or were at the time of preparation and continue to be) reasonable in the circumstances. The Valuation and Fairness Opinion has been provided for the use of the Independent Committee and the board of directors of Trilon and is not intended to be, and does not constitute, a recommendation that any shareholder of Trilon tender Trilon Shares to the Offer. The Valuation and Fairness Opinion may not be used by any other person or relied upon by any other person other than the Independent Committee and the board of directors of Trilon without the express prior written consent of TD Securities. The Valuation and Fairness Opinion is rendered as of April 4, 2002 (the "Valuation Date"), on the basis of securities markets, economic and general business and financial conditions prevailing on that date and the condition and prospects, financial and otherwise, of Trilon, Brascan and their respective affiliates as they were reflected in the Information provided to TD Securities. Any changes therein may affect the Valuation and Fairness Opinion and, although TD Securities reserves the right to change or withdraw the Valuation and Fairness Opinion in such event, it disclaims any undertaking or obligation to advise any person of any such change that may come to its attention, or update the Valuation and Fairness Opinion after the Valuation Date. In preparing the Valuation and Fairness Opinion, TD Securities was not authorized to solicit, and did not solicit, interest from any other party with respect to the acquisition of, or any business combination or other extraordinary transaction involving, Trilon, nor did TD Securities negotiate with any party in connection with such a transaction involving Trilon. The preparation of a valuation and fairness opinion is a complex process and is not necessarily amenable to partial analysis or summary description. TD Securities believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create an incomplete view of the process underlying the Valuation and Fairness Opinion. Each Shareholder should read the Valuation and Fairness Opinion in its entirety. 26 Definition of Fair Market Value For purposes of the formal valuation of Trilon Shares, fair market value is defined as the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay a prudent and informed seller each acting at arm's length with the other and under no compulsion to act. TD Securities has made no downward adjustment to the fair market value of the Trilon Shares to reflect the liquidity of the Trilon Shares, the effect of the Offer or the fact that the Trilon Shares held by minority Shareholders do not form part of a controlling interest. Trilon Valuation Methodology The formal valuation of the Trilon Shares is based upon techniques and assumptions that TD Securities considers appropriate in the circumstances for the purposes of arriving at an opinion as to the range of fair market value of the Trilon Shares. Given that Trilon is active in a number of different business segments, TD Securities believes that a segmented approach is the most appropriate method to use in valuing Trilon. As a result, TD Securities' approach to determine the fair market value of the Trilon Shares was the Net Asset Value ("NAV") approach which involves attributing values to Trilon's assets and liabilities on a segmented basis. This approach reflects the different risks, growth prospects and earnings contribution of each of Trilon's business segments and the various assets within those segments. TD Securities believes that the NAV approach is particularly relevant for Trilon since a high percentage of Trilon's assets are financial in nature rather than assets of operating businesses. Except where noted in the Valuation and Fairness Opinion, the valuation approach arrives at a going concern, en bloc sale value of the Trilon Shares. In preparing the formal valuation of the Trilon Shares, TD Securities relied primarily upon three valuation methodologies: 1. asset value analysis; 2. discounted cash flow ("DCF") analysis; and 3. comparable precedent transactions analysis. Asset Value Analysis All material financial assets within Trilon were valued individually on a mark-to-market basis. Publicly traded assets were valued via quoted market prices based on volume-weighted average trading prices for the 20 trading days ended April 3, 2002. Private investments were valued based on TD Securities' estimates of the amounts at which the instruments could be exchanged in a transaction between knowledgeable and willing parties and/or by using comparable publicly-traded securities as proxies. Longer-term loans were valued based on discounting cash flows receivable under the existing terms of the loans at a rate that reflects refinancing the loans under current market conditions, that is, at rates reflecting the current cost of capital and risk in receiving the corresponding cash flows. Loans with near-term maturities were valued based on TD Securities' view on the probability of return of the outstanding principal or current market rates to extend the term of these loans by one year. Cash flows not related to investment income were valued using comparable precedent transactions analysis. These cash flows primarily consisted of any fee streams (including underwriting and advisory fees, reinsurance fees and asset management fees) and participation gains less operating costs (primarily salaries) specific to the segment. DCF Analysis The Brokerage & Business Services business segment was valued using a DCF approach. The DCF approach reflects the growth prospects and risks inherent in the business by taking into account the amount, timing and relative certainty of projected unlevered free cash flows expected to be generated by the business. The DCF approach requires that certain assumptions be made regarding, among other things, future unlevered after-tax free cash flows, discount rates and terminal values. The possibility that some of the assumptions will prove to be inaccurate is one factor involved in the determination of the discount rates used in establishing a range of values. Comparable Precedent Transactions Analysis The comparable precedent transactions approach consists of selecting appropriate value benchmarks based on recently completed transactions of a comparable nature specific to each business segment, in which there was sufficient public information to derive valuation multiples, and applying these value benchmarks to the appropriate Trilon metrics to determine values for each business segment. The transaction multiples are based on arms-length transactions of 27 businesses that are similar in size, operating characteristics, risk profile and asset type, among others, to Trilon's activities in specific segments. Net Asset Value Approach Although Trilon currently reports its financial results in four business segments, Trilon was separated into five business segments for the purposes of the NAV Approach: Asset Management, Merchant Banking, Investment Banking (member of the Capital Markets reporting group), Commercial Financing (member of the Capital Markets reporting group) and Brokerage & Business Services (member of the Capital Markets and Business Services reporting groups). TD Securities believes that for valuation purposes, Investment Banking, Brokerage & Business Services and Commercial Finance are disparate businesses and should be analyzed and valued separately. The NAV approach aggregates a value for Trilon by separately considering each operating and financial asset, whose individual values are estimated through the application of the methodology considered by TD Securities to be most appropriate in the circumstances, net of obligations, corporate costs and liabilities. In addition to the assets of the five business segments outlined above, there are an additional five components to the NAV analysis: 1. other assets and liabilities; 2. debt and preferred shares of Trilon; 3. stock options; 4. tax pools; and 5. capitalized corporate general and administrative ("G&A") expenses. TD Securities considered the financial assets held by Trilon as at December 31, 2001, the most recent date of financial reporting, and adjusted the holdings for material acquisitions, divestitures, or refinancings of assets known to have occurred during 2002 up until the Valuation Date. All financial assets were valued as at the Valuation Date based on the current mark-to- market values, with the exception of securities of Trilon or Brascan. Any Trilon or Brascan securities held by Trilon as well as obligations of Trilon were valued at the 20-day volume-weighted average trading price as at March 25, 2002, the last trading day before the announcement by Brascan of its intention to acquire the Trilon Shares not already owned by it, to remove the possible effect of the announcement on the trading prices of the securities. The range of values of the Trilon Shares resulting from the NAV approach was $15.65 to $17.45 per Trilon Share. Trilon Valuation Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as of the Valuation Date, the fair market value of the Trilon Shares is in the range of $15.65 to $17.45 per Trilon Share. Brascan Share Valuation Methodology In assessing the value of the Brascan Shares being received by Shareholders other than Brascan and its affiliates as Brascan Share consideration under the Offer, TD Securities has relied on the market trading approach. Since Shareholders other than Brascan and its affiliates receiving Brascan Shares will be receiving a minority position in Brascan and will not be able to effect a sale of 100% of Brascan, TD Securities concluded that it was not appropriate to consider methodologies that are based on the assumption of a change of control transaction involving Brascan. TD Securities has not prepared an en bloc valuation of the Brascan Shares. Brascan Share Valuation Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as of the Valuation Date, the value of the Brascan Shares is $33.76 to $34.06 per share. Brascan Non-Cumulative Class A Preference Shares, Series 11 Valuation Methodology In assessing the value of the Brascan Non-Cumulative Class A Preference Shares, Series 11 being received by Shareholders other than Brascan and its affiliates as Brascan preference share consideration under the Offer, TD Securities has relied on the comparable market trading approach. On this basis, an appropriate dividend rate for the Brascan Non-Cumulative Class A Preference Shares, Series 11 would fall in a range of 5.40% to 5.60%. 28 Brascan Non-Cumulative Class A Preference Share, Series 11 Valuation Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as of the Valuation Date, the value of the Brascan Non-Cumulative Class A Preference Shares, Series 11 is $24.79 to $25.21 per share. Fairness Opinion Factors Considered In considering the fairness of the consideration, from a financial point of view, to the Shareholders other than Brascan and its affiliates, TD Securities principally considered and relied upon the following: (i) an assessment of the value of the consideration to be received pursuant to the Offer; (ii) a comparison of the value per Trilon Share of the consideration to be received pursuant to the Offer to the range of fair market values as determined under the formal valuation of the Trilon Shares; and (iii) a comparison on a per Trilon Share basis of the value of the consideration to be received pursuant to the Offer to the trading price of the Trilon Class A Shares prior to the announcement by Brascan of its intention to make the Offer. Value of the Consideration The value of the consideration to be received under the Offer depends on the form of consideration selected by each Shareholder other than Brascan and its affiliates and on the resulting pro ration. The implied values under the three alternatives available to Shareholders other than Brascan and its affiliates are outlined below:
Alternative Consideration per Trilon Share Implied Value - ----------- ------------------------------ --------------------- Cash Consideration........ $17.00 cash $16.90(/1/) Brascan Class A Share Consideration............ 0.5 Brascan Shares $16.88 to $17.03(/2/) Brascan Preference Share 0.678 Brascan Non-Cumulative $16.86 to $17.14(/3/) Consideration............ Class A Preference Shares, Series 11 plus $0.05 cash
- ------- (1) Adjusted for foregoing the $0.10 Trilon partial dividend if the Cash Consideration option is selected. (2) Based on a value of $33.76 to $34.06 per Brascan Share, as determined in the formal valuation of the Brascan Shares. (3) Based on a value of $24.79 to $25.21 per Brascan Non-Cumulative Class A Preference Share, Series 11, as determined in the formal valuation of the Brascan Non-Cumulative Class A Preference Shares, Series 11, plus $0.05 cash. Depending on the combination of securities selected by the Shareholders other than Brascan and its affiliates in aggregate, there is a range of outcomes possible including certain individual Shareholders other than Brascan and its affiliates being subject to pro ration. Regardless of the outcome, based on the foregoing, TD Securities is of the opinion that the implied value of the consideration is in the range of $16.86 to $17.14 per Trilon Share. Comparison of the Value per Trilon Share Under the Offer to the Formal Valuation of the Trilon Shares The value per Trilon Share of the consideration to be received pursuant to the Offer of $16.86 to $17.14 is within the range of fair market value of the Trilon Shares of $15.65 to $17.45. Comparison of the Value per Trilon Share Under the Offer to the Trading Price The value per Trilon Share of the consideration under the Offer represents a nominal premium of approximately 3% to the $16.50 market price of the Trilon Class A Shares on March 25, 2002, the last trading day prior to the announcement of Brascan's intention to acquire the Trilon Shares not already owned by it. TD Securities believes that the following considerations are relevant in comparing the value per Trilon Share of the consideration under the Offer to the pre-announcement trading price: 1. Trilon's asset base consists primarily of a portfolio of financial assets. Financial assets, due to their nature, offer limited opportunity to generate incremental value, either from additional revenues or from cost reduction, in excess of their underlying value. As a result, any potential en bloc acquiror of Trilon would be willing to pay a lower than average premium over the pre-announcement market price of the Trilon Class A Shares. 29 2. Based in part on recent public comments by Brascan senior management, there has been speculation among equity market participants that Brascan may move to acquire the Trilon Shares it does not already own. TD Securities believes that this has increased the market trading price of Trilon Class A Shares above the price at which they would trade in the absence of such speculation. As a result, the premium over the pre- announcement trading price of the Trilon Class A Shares that the value of the consideration pursuant to the Offer represents is decreased. 3. Trilon Shares offer a current dividend yield of approximately 4%. This dividend is higher than the dividend available on most common equity securities in Canada. Many public equity investors view this dividend to be an attractive aspect of the Trilon Class A Shares. As a result, the market trading price of the Trilon Class A Shares is not indicative solely of Trilon's underlying net asset value, but also reflects its relatively high dividend yield. In the current market environment, TD Securities believes that the dividend yield increases the market trading price of the Trilon Shares above the price at which they would trade in the absence of such dividend. However, a potential en bloc acquiror of Trilon would not be willing to pay a premium for such a dividend yield. Fairness Conclusion Based upon and subject to the foregoing, it is the opinion of TD Securities that, as at the Valuation Date, the consideration under the Offer is fair, from a financial point of view, to the Shareholders other than Brascan and its affiliates. 8.Purpose of the Offer and Brascan's Plans for Trilon Brascan has an ongoing strategy of owning 100% of certain of its operating businesses. The purpose of the Offer is to increase Brascan's interest in Trilon from the current 70% level and, if the conditions to the Offer are satisfied, to allow Brascan to own 100% of the Trilon Shares. If the Offer is accepted by holders of not less than 90% of the outstanding Trilon Shares (other than Trilon Shares held by Brascan, its affiliates and its associates on the date of the Offer), Brascan may seek to acquire all Trilon Shares not deposited under the Offer pursuant to a compulsory acquisition. Brascan may also seek to acquire all Shares not deposited under the Offer pursuant to a subsequent transaction between Trilon and Brascan. Both types of transactions are more particularly described under section 21 of this Circular, "Acquisition of Trilon Shares not Deposited." However, Brascan reserves the right to not propose a compulsory acquisition or a subsequent acquisition transaction, or to propose a subsequent acquisition transaction on terms not described herein. In any case, Trilon will continue to be a company with publicly traded preferred shares and public debt outstanding. If the Offer is successful, Brascan expects that Trilon will continue to carry on its current business activities as a subsidiary of Brascan. In particular, Trilon will focus on expanding its asset management, merchant banking, business services and capital markets activities. Trilon will be managed from a financial perspective as a self-sustaining operation with continuing corporate governance practices and a continued emphasis on maintaining or improving its current high credit ratings. Brascan will integrate the Trilon management team with its own from an operating perspective. This integration will enhance Trilon's close working relationships with Brascan's operating businesses and resources investments, which provide Trilon with an important competitive advantage in conducting its financial operations. In addition, Trilon believes that its operating profile will be enhanced by being a fully integrated operating business of Brascan. There would also be modest cost and administrative benefits available by privatizing the publicly listed Trilon Shares, should Brascan acquire 100% of the Trilon Shares. 9.Brascan's Comments on the Offer Brascan believes strongly that it is in the interests of Shareholders to tender to the Offer. Shareholders should accept the Offer for the following reasons: . Trilon directors recommend acceptance of the Offer - The board of directors of Trilon, including the members of the Independent Committee established to review the Offer, unanimously recommends that Shareholders tender their Trilon Shares to the Offer. 30 . Independent fairness opinion supports the Offer - TD Securities, the independent financial advisors to the Independent Committee, has provided its written opinion that the consideration to be paid by Brascan is fair, from a financial point of view, to Trilon's minority shareholders. . Independent valuation of the Trilon shares supports the Offer - The value of the consideration being offered is in the upper range of the valuation of the Trilon Shares prepared by TD Securities, which determined that the value of the Trilon Shares is in a range of $15.65 to $17.45 per share. . Trilon officers and directors intend to accept the Offer - The directors and senior officers of Trilon have advised that they intend to tender their Trilon Shares to the Offer. . The Offer price represents a premium over previous trading prices - While the value of the consideration being offered represents a modest premium to the trading price immediately prior to the Offer being announced, the value represents a 20% premium to the price Trilon's Class A Shares traded at 3 months ago, and a 42% premium to the price at which Trilon repurchased Class A Shares under a substantial issuer bid completed 15 months ago. . Flexible consideration to meet Shareholder objectives - Shareholders are being offered alternative forms of consideration designed to suit their individual needs. Shareholders can elect to receive their payment 100% in Brascan Shares or 100% in cash, subject to pro ration. Furthermore, Shareholders can elect to receive their payment in the form of Brascan Non-Cumulative Class A Preference Shares, Series 11, without limit, so that Shareholders can both defer capital gains taxes and increase the yield on the securities received. Brascan Non-Cumulative Class A Preference Shares, Series 11 will pay a dividend of $1.375 per share per annum representing a dividend yield of 5.5% per annum. . Brascan Shares represent underlying value in excess of the transaction price - Shareholders electing to receive payment in Brascan Shares will receive Brascan Shares based on a valuation of $34.00 per Brascan Share herein. Based on publicly disclosed information regarding Brascan, management of Brascan believes that, as of December 31, 2001, the underlying value of Brascan was $42.90 per share. . Brascan Shares provide shareholders with greater liquidity than Trilon Shares - The market capitalization of Trilon's public float is $775 million as at the date of the Offer, whereas the market capitalization of Brascan's public float is $4.8 billion. Furthermore, the average daily trading volume of Trilon's Class A Shares was $1.4 million during the three month period prior to the offer being made, compared with Brascan's average daily trading volume of $12.2 million over the same period. In addition, Trilon is listed only in Toronto, while Brascan is listed only on both the Toronto and New York Stock Exchanges. . Brascan owns additional high quality businesses - Brascan owns a number of high-quality businesses in addition to Trilon, including some of the highest-quality real estate in North America, such as BCE Place in Toronto and The World Financial Center in New York, as well as one of the lowest cost power generation businesses in North America. Shareholders electing to receive Brascan Shares will own an interest in these businesses in addition to continuing to own an interest in Trilon's financial services business. . Brascan and Trilon are stronger as a combined entity - Brascan believes that, together as one merged entity, Trilon and Brascan will be stronger financially and operationally. Brascan believes that Trilon and Brascan will together be able to create even greater value by combining resources as the two companies move forward. 10.Holdings of Securities of Trilon As of the date hereof, Brascan and its affiliates beneficially own, directly or indirectly, or exercise control or direction over securities of Trilon as follows:
Percentage Number Designation Ownership ------ ----------- ---------- 58,214,553 Class A Shares.......................................... 56.1% 47,897,344 Class B Non-Voting Shares............................... 99.9% 235,000 Floating Rate Class I Preferred Shares Series A......... 3.9% 242,600 Class II Preferred Shares Series Three.................. 6.1% 1,150,000 Class II Preferred Shares Series Four................... 28.8% 5,000,000 Class III Preferred Shares Series One................... 100.0% 482,888 Class III Preferred Shares Series Two................... 100.0%
31 The following table sets out the approximate number of Trilon Shares that each director and senior officer of Brascan has advised are beneficially owned, directly or indirectly, or subject to control or direction by that person at the date of this Circular:
% of Total % of Total Outstanding Trilon Class A Outstanding Trilon Class A Trilon Class A Shares Trilon Class A Name Office Shares Held Shares Options Held Share Options - ---- ------ -------------- -------------- -------------- -------------- James J. Blanchard...... Director -- -- -- -- Lord Black of Director -- -- -- -- Crossharbour........... Roberto P. Cezar de Director -- -- -- -- Andrade................ Jack L. Cockwell(/1/)... Co-Chairman and Director 10,694 (less than)0.1% -- -- John P. Curtin, Jr...... Director -- -- -- -- Alan V. Dean............ Senior Vice-President -- -- -- -- and Secretary Hon. J. Trevor Eyton.... Director -- -- -- -- J. Bruce Flatt.......... President and Chief -- -- -- -- Executive Officer and Director Julia E. Foster......... Director -- -- -- -- Harry A. Goldgut........ Senior Vice-President, -- -- -- -- Power Generation James K. Gray........... Director -- -- -- -- Lynda C. Hamilton....... Director -- -- -- -- Robert J. Harding....... Chairman and Director -- -- -- -- David W. Kerr........... Director -- -- -- -- Edward C. Kress......... Executive Vice-President -- -- -- -- Allen T. Lambert(/1/)... Director and Group 515,320 0.5% 110,000 1.8% Chairman, Financial Services Craig J. Laurie......... Vice-President, Finance -- -- 15,000 0.2% Brian D. Lawson(/1/).... Executive Vice-President -- -- 440,000 7.2% and Chief Financial Officer Richard J. Legault...... Senior Vice-President, -- -- -- -- Business Development Philip B. Lind.......... Director -- -- -- -- Hon. Roy MacLaren....... Director -- -- -- -- Cyrus Madon(/1/)........ Vice-President, 40,600 (less than)0.1% 200,000 3.3% Corporate Development Saul Shulman............ Director -- -- -- -- Jack Sidhu(/1/)......... Vice-President, Capital -- -- 60,000 1.0% Markets George S. Taylor........ Director -- -- -- -- John C. Tremayne(/1/)... Senior Vice-President -- -- 273,000 4.5% and Treasurer Katherine C. Vyse....... Vice-President, Investor -- -- -- -- Relations and Communications ------- ---- --------- ---- TOTAL................... 566,614 0.6% 1,098,000 18.0% ======= ==== ========= ====
- ------- Note: (1) These individuals are also directors and/or officers of Trilon. Each of the above directors and senior officers exercising control or direction over Trilon Shares has advised Brascan that he or she intends to tender his or her Trilon Shares to the Offer. 32 The following table sets out the approximate number of Trilon Shares that each director and senior officer of Trilon, other than those listed above as directors or officers of Brascan, has advised are beneficially owned, directly or indirectly, or subject to control or direction by that person at the date of this Circular:
% of Total % of Total Outstanding Trilon Outstanding Trilon Class A Trilon Class A Class A Share Trilon Class A Name Office Shares Held Shares Options Held Share Options - ---- ------ -------------- -------------- ------------- -------------- Colum P. Bastable....... Managing Partner, -- -- 200,000 3.3% Commercial Property Services Jeffrey M. Blidner...... Vice-Chairman 162,600 0.2% 470,000 7.7% A. Gordon Craig......... Director 1,000 (less than)0.1% 5,000 (less than)0.1% Susan E. Crocker........ Director -- -- 5,000 (less than)0.1% Bryan K. Davis.......... Vice-President and Chief -- -- 104,500 1.7% Financial Officer Simon P. Dean........... Managing Partner, 100,000 0.1% 295,000 4.8% Business Services William A. Dimma........ Director 22,013 (less than)0.1% 5,000 (less than)0.1% Dr. Sy Eber............. Director 1,000 (less than)0.1% 5,000 (less than)0.1% J. Peter Gordon......... Managing Partner, -- -- 250,000 4.1% Restructuring Services Karen Kain.............. Director -- -- 5,000 (less than)0.1% Patrick J. Keenan....... Director 1,000 (less than)0.1% 5,000 (less than)0.1% Brian G. Kenning........ Managing Director, -- -- 240,000 3.9% Forest Products Trevor D. Kerr.......... Vice-President and -- -- 91,000 1.5% Secretary Frank N.C. Lochan....... Managing Partner, 309,342 0.3% 307,061 5.1% Commercial Financing Donald C. Lowe.......... Director 25,000 (less than)0.1% 5,000 (less than)0.1% Terrance A. Lyons....... Managing Partner, Mining -- -- 240,000 3.9% Kelly Marshall.......... Vice-President Corporate -- -- 85,000 1.4% Finance David R. McCamus........ Director 5,000 (less than)0.1% 2,000 (less than)0.1% George E. Myhal......... President and Chief 607,271 0.6% 650,000 10.7% Executive Officer and Director Sam J.B. Pollock........ Managing Partner, 106,400 0.1% 540,000 8.9% Merchant Banking Timothy R. Price(/1/)... Chairman and Director 1,000 (less than)0.1% 140,000 2.3% Bruce K. Robertson...... Managing Partner, 53,500 (less than)0.1% 356,500 5.9% Asset Management --------- ---- --------- ---- TOTAL................... 1,395,126 1.3% 4,006,061 65.9% ========= ==== ========= ====
- ------- Note: (1) Mr. Price also holds indirectly 2,000 Class I Preferred Shares Series A. Each of the above directors and senior officers exercising control or direction over Trilon Shares has advised Brascan that he or she intends to tender his or her Trilon Shares to the Offer. 33 Apart from the foregoing, to the knowledge of the directors and senior officers of Brascan, after reasonable inquiry, no securities of Trilon are owned, directed or controlled by any associate or affiliate of Brascan or by any director or senior officer of Brascan or any associate of them or by any person or company who holds more than 10% of any class of equity securities of Brascan, or by any person or company acting jointly or in concert with Brascan. Reference is made to section 9 of the Offer with respect to the purchase of Trilon Shares in the market by Brascan. 11.Acceptance of the Offer Except as set forth in the previous section, Brascan has no knowledge regarding whether any holders of Trilon Shares will accept the Offer. 12.Trading in Securities of Trilon No securities of Trilon have been traded during the six-month period preceding the date of the Offer by Brascan, by directors or senior officers of Brascan or, to the knowledge of the directors and senior officers of Brascan, after reasonable inquiry, by (i) associates or affiliates of Brascan (other than Trilon and its subsidiaries), (ii) any associate of any director or senior officer of Brascan, (iii) any person or company who holds more than 10% of any class of equity securities of Brascan, or (iv) any person or company acting jointly or in concert with Brascan. On November 28, 2000, Trilon announced its intention to purchase up to 5,796,781 Class A Shares or approximately 5% of the number of outstanding Class A Shares in the ordinary course through the facilities of the TSE over the next 12 months under a normal course issuer bid. Trilon acquired 138,300 Class A Shares pursuant to that normal course issuer bid at a weighted average price of $12.97 per Class A Share. Trilon did not renew this normal course issuer bid for 2001-2002. 13.Commitments to Acquire Trilon Shares No commitments to acquire any Trilon Shares have been made by Brascan or, to the knowledge of the directors and senior officers of Brascan, after reasonable inquiry, by (i) any associate of such directors or senior officers, (ii) any person or company who beneficially owns, or exercises control or direction over, more than 10% within a class of equity securities of Brascan, or (iii) any person or company acting jointly or in concert with Brascan. 14.Arrangements, Agreements or Understandings There are no arrangements or agreements made or proposed to be made between Brascan and any of the directors or senior officers of Trilon and no payments or other benefits are proposed to be made or given by way of compensation for loss of office or to such directors or senior officers remaining in or retiring from office. There are no contracts, arrangements or understandings, formal or informal, between Brascan and any security holder of Trilon with respect to the Offer or between Brascan and any person or company with respect to any securities of Trilon in relation to the Offer. There is no soliciting dealer in connection with the Offer. 15.Effect of the Offer on Market and Listings The purchase of Trilon Shares by Brascan pursuant to the Offer will reduce the number of Trilon Shares that might otherwise trade publicly and may reduce the number of holders of Trilon Shares and, depending on the number of Trilon Shares purchased, could adversely affect the liquidity and market value of the remaining Trilon Shares held by the public. The rules and regulations of The Toronto Stock Exchange (the "TSE") establish certain criteria which, if not met, could lead to the delisting of the Trilon Shares from the TSE. Among such criteria are the number of Shareholders, the number of Trilon Shares publicly held and the aggregate market value of the Trilon Shares publicly held. Depending upon the number of Trilon Shares purchased pursuant to the Offer, it is possible the Trilon Shares would fail to meet the criteria for continued listing on the TSE. If this were to happen, the Trilon Shares could be delisted and this could, in turn, adversely affect the market or result in a lack of an established market for the Trilon Shares. 34 The published guidelines of the TSE indicate that such exchange would consider delisting a class of shares listed thereon if, among other criteria, there were less than 500,000 freely-tradeable, publicly held shares or if there were fewer than 150 board lot holders. If the Trilon Shares were delisted from the TSE, it is possible that they would be traded in the over-the-counter market and that price quotations for the Trilon Shares would be reported in Canada through the Canadian over-the- counter automated trading system. The extent of the public market for the Trilon Shares and the availability of such quotations would, however, depend upon the number of Shareholders at such time, the interest in maintaining a market in the Trilon Shares on the part of brokerage houses and other factors. If Brascan acquires the Trilon Shares not deposited under the Offer pursuant to a compulsory acquisition or a Subsequent Acquisition Transaction, the Trilon Shares will be delisted from the TSE. See section 21 of this Circular, "Acquisition of Trilon Shares not Deposited." The preferred shares of Trilon which are currently listed on public stock exchanges will continue to be listed on those stock exchanges and the listing of those shares will not be affected by the Offer. 16.Source of Funds If all outstanding Trilon Shares are deposited under the Offer, the amount of cash required by Brascan to purchase all Trilon Shares will be no more than $388 million. Brascan expects that fees and expenses associated with the Offer will be $350,000, plus the cost of the valuation prepared by TD Securities of $600,000. These amounts will be funded by existing cash resources of Brascan. 17.Price Range and Trading Volume of Trilon Shares The Trilon Class A Shares are traded on the TSE. The combined volume of trading and price ranges of the Trilon Class A Shares on the TSE are set forth in the following table for the periods indicated.
Price per share -------------------------- High Low Average(/1/) Volume ------ ------ ------------ ---------- 2002 - ---- April (to April 5)........................ $17.40 $16.95 $17.15 4,061,359 March (1 to 25)........................... 18.10 17.00 16.61 1,763,732 March (26 to 31).......................... 17.97 16.00 17.62 18,961,693 March..................................... 18.10 16.00 17.53 20,725,425 February.................................. 16.21 15.20 15.93 2,433,163 January................................... 16.10 15.00 15.50 1,267,739 2001 - ---- December.................................. 15.50 13.85 14.50 1,595,667 November.................................. 14.15 13.30 13.99 1,452,817 October................................... 13.99 13.25 13.62 956,350 September................................. 14.48 12.90 13.53 1,271,594 August.................................... 14.10 12.75 13.42 1,417,167 July...................................... 13.04 12.75 12.91 984,415 June...................................... 13.50 12.80 13.06 1,796,010 May....................................... 13.50 12.95 13.16 1,291,551 April..................................... 13.60 12.80 13.18 1,105,510 March..................................... 14.10 12.50 13.18 1,736,452
- ------- Note: (1) Volume weighted average of trading prices. Brascan announced its intention to make the Offer on March 26, 2002. The closing price of the Trilon Shares on the TSE on March 25, 2002, the last day on which the Trilon Shares traded prior to the announcement, was $16.50. 35 18.Previous Distributions Based on publicly available information, Brascan believes that the following distributions of Trilon Shares were effected during the previous five completed fiscal years of Trilon:
Number of Trilon Class A Year Description Shares Distribution Price - ---- ----------- -------------- ------------------ 1997 Exercise of stock options.............................. 633,700 $1.90 Dividend reinvestment plan issuances................... 16,925 9.36 1998 Exercise of stock options.............................. 662,499 1.87 Dividend reinvestment plan issuances................... 11,094 11.61 Conversion of Trilon Class B Non Voting Shares......... 1,999,015 3.76 1999 Exercise of stock options.............................. 375,000 3.02 Dividend reinvestment plan issuances................... 25,268 9.72 2000 Exercise of stock options.............................. 685,000 3.90 Dividend reinvestment plan issuances................... 31,651 7.11 Exercise of stock options.............................. 45,000 4.15 Exercise of warrants................................... 730 11.25 Management Share Purchase Plan issuances............... 162,600 9.23 2001 Exercise of warrants................................... 174,169 11.25 Exercise of stock options.............................. 10,000 5.00 Exercise of stock options.............................. 66,439 6.60 Dividend reinvestment plan issuances................... 13,756 13.39 2002 Exercise of warrants................................... 3,104,491 11.25
19.Dividend Record of Trilon Based on publicly available information, Brascan believes that Trilon's policy is to pay a quarterly dividend of $0.16 per share on both the Class A Shares and the Class B Non-Voting Shares. The quarterly dividend on the Class A Shares was set in December 2000, when Trilon raised its quarterly dividend rate from $0.14 per Class A share to its current level. Brascan also understands that the board of directors of Trilon intends to declare a partial dividend of $0.10 per Trilon Share in April 2002. See section 11 of the Offer, "Dividends and Distributions". 20.Depositary Brascan has engaged the Depositary for the receipt of certificates representing Trilon Shares and related Letters of Transmittal and Notices of Guaranteed Delivery deposited under the Offer and for the payment for Trilon Shares purchased by Brascan pursuant to the Offer. The Depositary will receive reasonable and customary compensation from Brascan for its services in connection with the Offer, will be reimbursed for certain out-of-pocket expenses and will be indemnified against certain liabilities, including liabilities under securities laws, and expenses in connection therewith. 21.Acquisition of Trilon Shares not Deposited Compulsory Acquisition Section 188 of the OBCA permits an offeror to acquire the shares not tendered to an offer for shares of a particular class of shares of a corporation if, within 120 days after the date of the offer, the offer is accepted by the holders of not less than 90% of the shares to which the offer relates, other than shares held at the date of the offer by or on behalf of the offeror or its affiliates or associates (as such terms are defined in the OBCA). If, within 120 days after the date hereof, the Offer has been accepted by holders of not less than 90% of the issued and outstanding Trilon Shares, other than Trilon Shares held on the date of the Offer by or on behalf of Brascan or its affiliates or associates (as such terms are defined in the OBCA), and Brascan acquires such deposited Trilon Shares, Brascan may acquire the remainder of the Trilon Shares on the same terms as such Trilon Shares were acquired under the Offer, pursuant to the provisions of section 188 of the OBCA (a "Compulsory Acquisition"). In determining whether or not 90% of the outstanding Trilon Shares have been acquired under the Offer, any Trilon Shares acquired 36 by Brascan during the course of the Offer are included in the number of outstanding Trilon Shares but excluded from the number of Trilon Shares acquired under the Offer. To exercise such statutory right, Brascan must give notice (a "Compulsory Acquisition Notice") to each holder of Trilon Shares who did not accept the Offer (and to each person who subsequently acquires any such Trilon Shares) (in each case a "Dissenting Offeree") of such proposed acquisition on or before the earlier of 60 days from the Expiry Time and 180 days from the date of the Offer. Within 20 days of giving a Compulsory Acquisition Notice, Brascan must pay or transfer to Trilon the consideration Brascan would have had to pay to the Dissenting Offerees if they had elected to accept the Offer, to be held in trust for the Dissenting Offerees. In accordance with section 188 of the OBCA, within 20 days after receipt of a Compulsory Acquisition Notice, each Dissenting Offeree must send the certificate(s) representing the Trilon Shares held by such Dissenting Offeree to Trilon, and may elect either to transfer such Trilon Shares to Brascan on the terms of the Offer or to demand payment of the fair value of such Trilon Shares held by such holder by so notifying Brascan. If a Dissenting Offeree has elected to demand payment of the fair value of such Trilon Shares, Brascan may apply to a court having jurisdiction to hear an application to fix the fair value of such Trilon Shares of the Dissenting Offeree. If Brascan fails to apply to such court within 20 days after it made the payment or transferred the consideration to Trilon referred to above, the Dissenting Offeree may then apply to the court within a further period of 20 days to have the court fix the fair value. If there is no such application by the Dissenting Offeree within such period, the Dissenting Offeree will be deemed to have elected to transfer such Trilon Shares to Brascan on the terms of the Offer. Any judicial determination of the fair value of the Trilon Shares could be more or less than the amount paid pursuant to the Offer. The foregoing is a summary only. See section 188 of the OBCA for the full text of the relevant statutory provisions. Section 188 of the OBCA is complex and may require strict adherence to notice and timing provisions, failing which such rights may be lost or altered. Shareholders who wish to be better informed about those provisions of the OBCA should consult their legal advisors. Subsequent Acquisition Transaction If Brascan takes up and pays for Trilon Shares validly deposited under the Offer and the foregoing statutory right of acquisition is not available, Brascan may, within 120 days of the Expiry Time, seek to cause a meeting of Shareholders to be called to consider an amalgamation, capital reorganization or other transaction involving Trilon and Brascan and/or one or more affiliates of Brascan or Trilon (a "Subsequent Acquisition Transaction") for the purpose of acquiring all Trilon Shares not acquired by Brascan pursuant to the Offer. The timing and details of any such transaction will necessarily depend on a variety of factors, including the number of Trilon Shares acquired pursuant to the Offer. Rule 61-501 and Policy Q-27 may deem certain types of Subsequent Acquisition Transactions to be "going private transactions" if such Subsequent Acquisition Transactions would result in the interest of the holder of Trilon Shares (the "affected securities") being terminated without the consent of the holder. Rule 61-501 and Policy Q-27 provide that, unless exempted, a corporation proposing to carry out a going private transaction is required to prepare a valuation of the affected securities (and any non-cash consideration being offered therefor) and provide to the holders of the affected securities a summary of such valuation. Brascan intends to rely on any exemption available or to seek waivers pursuant to Rule 61-501 and Policy Q-27 exempting Trilon and Brascan or one or more of its affiliates, as appropriate, from the valuation requirements of Rule 61-501 and Policy Q-27. For an independent valuation of the Trilon Shares in these circumstances, Shareholders should consult the Valuation and Fairness Opinion prepared by TD Securities which accompanies this Offer. Depending on the nature and terms of the Subsequent Acquisition Transaction, the provisions of the OBCA may require the approval of at least 66 2/3% of the votes cast by holders of the outstanding Trilon Shares at a meeting duly called and held for the purpose of approving the Subsequent Acquisition Transaction. Rule 61-501 and Policy Q-27 would also require that, in addition to any other required security holder approval, in order to complete a going private transaction, the approval of a simple majority of the votes cast by "minority" shareholders of the affected securities must be obtained. If, however, following the Offer, Brascan and its affiliates are the registered holders of 90% or more of the Trilon Shares at the time the Subsequent Acquisition Transaction is initiated, the requirement for minority approval would not apply to the transaction if an enforceable appraisal right or substantially equivalent right is made available to minority shareholders. 37 In relation to the Offer and any going private transaction, the "minority" shareholders will be, unless an exemption is available or discretionary relief is granted by applicable securities regulatory authorities, all Shareholders other than Brascan or any related party of Brascan, including affiliates of Brascan, directors or senior officers of Brascan and of affiliates of Brascan or any person or company acting jointly or in concert with Brascan or any of their respective directors or senior officers in connection with the Offer or any subsequent going private transaction. Rule 61-501 and Policy Q-27 also provide that Brascan may treat Trilon Shares acquired pursuant to the Offer as "minority" shares and to vote them, or to consider them voted, in favour of such going private transaction if, among other things, the consideration per security in the going private transaction is at least equal in value to and in the same form as the consideration paid under the Offer. Brascan currently intends that the consideration offered under any Subsequent Acquisition Transaction proposed by it would be identical to the consideration offered under the Offer and Brascan intends to cause Trilon Shares acquired under the Offer to be voted in favour of any such transaction and to be counted as part of any minority approval required in connection with any such transaction. Any such Subsequent Acquisition Transaction may also result in Shareholders having the right to dissent in respect thereof and demand payment of the fair value of their Trilon Shares. The exercise of such right of dissent, if certain procedures are complied with by the holder, could lead to a judicial determination of fair value required to be paid to such dissenting Shareholder for its Trilon Shares. The fair value so determined could be more or less than the amount paid per Trilon Share pursuant to such transaction or pursuant to the Offer. The details of any such Subsequent Acquisition Transaction, including the timing of its implementation and the consideration to be received by the minority holders of Trilon Shares, would necessarily be subject to a number of considerations, including the number of Trilon Shares acquired pursuant to the Offer. There can be no assurance that any such transaction will be proposed or, if proposed, effected. Shareholders should consult their legal advisors for a determination of their legal rights with respect to a Subsequent Acquisition Transaction. Shareholders should also see section 22 "Canadian Federal Income Tax Considerations", for a discussion of the tax considerations to Shareholders in the event of a Subsequent Acquisition Transaction. Certain judicial decisions may be considered relevant to any going private transaction that may be proposed or effected subsequent to the expiry of the Offer. Canadian courts have, in a few instances prior to the adoption of Rule 61-501 and Policy Q-27, granted preliminary injunctions to prohibit transactions involving certain going private transactions. The current trend in both legislation and Canadian jurisprudence is toward permitting going private transactions to proceed, subject to evidence of procedural and substantive fairness in the treatment of minority shareholders. While the foregoing reflects the present intention of Brascan, there can be no assurance that any transaction of the foregoing nature or other transactions will be proposed by Brascan or consummated or, if proposed, as to whether the terms thereof will be less favourable or more favourable to persons then holding Trilon Shares than the terms of the Offer. 22.Canadian Federal Income Tax Considerations In the opinion of Torys LLP, counsel to Brascan, the following summary fairly presents the principal consequences under the Tax Act generally applicable to Shareholders who dispose of their Trilon Shares pursuant to the Offer or pursuant to certain transactions described in section 21 of this Circular, "Acquisition of Trilon Shares not Deposited". The summary is based upon the current provisions of the Tax Act, the regulations thereunder and counsel's understanding of the current administrative practices of the CCRA. This summary takes into account all specific proposals to amend the Tax Act and the regulations that have been publicly announced by the Minister of Finance (Canada) prior to the date hereof (the "Tax Proposals"), but does not otherwise take into account or anticipate any changes in law, whether by judicial, governmental or legislative decision or action, or changes in administrative practices of the CCRA. No assurances can be given that the Tax Proposals will be enacted as proposed, if at all. This summary does not take into account the tax legislation of any province or territory of Canada or any non-Canadian jurisdiction. Provisions of provincial income tax legislation vary from province to province in Canada and in some cases differ from federal income tax legislation. 38 The Tax Act contains certain provisions relating to securities held by certain financial institutions (the "mark-to-market rules"). This summary does not take into account the mark-to-market rules and Shareholders that are financial institutions for the purpose of those rules should consult their own tax advisers. The following summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Shareholder. Accordingly, Shareholders should consult their own tax advisers with respect to their particular circumstances. Residents of Canada The following summary is applicable to Shareholders who are resident in Canada, who hold their Trilon Shares as capital property and will hold the Brascan Non-Cumulative Class A Preference Shares, Series 11 and the Brascan Shares as capital property and who deal at arm's length with Brascan and Trilon. Trilon Shares, Brascan Non-Cumulative Class A Preference Shares, Series 11 and Brascan Shares will generally constitute capital property to a holder thereof unless the holder holds such Trilon Shares, Brascan Non- Cumulative Class A Preference Shares, Series 11 or Brascan Shares in the course of carrying on a business of trading or dealing in securities or otherwise as part of a business of buying and selling securities or has acquired such Trilon Shares, Brascan Non-Cumulative Class A Preference Shares, Series 11 or Brascan Shares in a transaction or transactions considered to be an adventure in the nature of trade. Shareholders who do not hold their shares as capital property should consult their own tax advisors regarding their particular circumstances, as the following summary does not apply to such shareholders. Exchange of Trilon Shares for Cash Only A holder whose Trilon Shares are taken up and paid for under the Offer who receives cash only will realize a capital gain (or capital loss) to the extent that the proceeds received for such Trilon Shares, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the holder of such Trilon Shares. The general tax treatment of capital gains and losses is discussed below under the heading "Taxation of Capital Gains and Losses". Exchange of Trilon Shares for Brascan Non-Cumulative Class A Preference Shares, Series 11 Only or for Brascan Shares Only Where a Shareholder exchanges Trilon Shares and receives no consideration other than Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 and, in either case, cash received in lieu of a fraction of a Brascan Share or a Brascan Non-Cumulative Class A Preference Share, Series 11, as the case may be, except where the Shareholder has, in the holder's return of income for the taxation year in which the exchange occurs, included in computing the holder's income for that year any portion of the gain or loss, otherwise determined, from the disposition of Trilon Shares, the holder will be considered to have disposed of such Trilon Shares for proceeds of disposition equal to the adjusted cost base to the holder of such Trilon Shares immediately before the exchange and to have acquired the Brascan Shares or the Brascan Non-Cumulative Class A Preference Shares, Series 11, as the case may be, at a cost for tax purposes equal to that amount (less any cash received in lieu of a fraction of a Brascan Share or of a Brascan Non- Cumulative Class A Preference Share, Series 11). No election forms are required to be filed for Shareholders to achieve this tax deferral. For Brascan Shares, the cost for tax purposes will be averaged with the adjusted cost base to such holder of any other Brascan Shares held by the holder at the time as capital property. In the event that the Minimum Series 11 Amount condition is met and a Shareholder elects to receive Brascan Non-Cumulative Class A Preference Shares, Series 11 on the exchange, the foregoing will apply only if the Shareholder has elected to forego the $0.05 in cash per Trilon Share; rather, the section entitled "Exchange of Trilon Shares for Cash and Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 or for Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11" will apply. Certain Shareholders who have acquired their Trilon Shares on the exercise of employee stock options of Trilon may be able to continue to defer the inclusion in their income of the stock option benefit resulting from such exercise after they have disposed of their Trilon Shares under the Offer so long as they receive only Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 on the exchange (having foregone the $0.05 in cash per Trilon Share). 39 Exchange of Trilon Shares for Cash and Brascan Shares and/or Brascan Non- Cumulative Class A Preference Shares, Series 11 or for Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11 No Election under Section 85 of the Tax Act Subject to the availability of the joint election referred to below, a Shareholder who exchanges Trilon Shares for (a) cash (including cash received as a result of the application of the Maximum Share Consideration condition under the terms of the Offer or as a result of no Brascan Non-Cumulative Class A Preference Shares, Series 11 being issued because of the Minimum Series 11 Amount condition not being met, but excluding cash in lieu of a fraction of a Brascan Share or Brascan Non-Cumulative Class A Preference Share, Series 11) and Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11, or for (b) Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11, will be considered to have disposed of such Trilon Shares for proceeds of disposition equal to the sum of (i) any cash received by such Shareholder, including any cash received in lieu of fractional shares, and (ii) the fair market value as at the time of acquisition of any Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 acquired by such Shareholder on the exchange. As a result, the Shareholder will in general realize a capital gain (or capital loss) to the extent that such proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Shareholder of such Trilon Shares. The cost to a holder of any Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 acquired on the exchange will be equal to the fair market value of those shares as at the time of acquisition, such cost of Brascan Shares to be averaged with the adjusted cost base to that holder of any other Brascan Shares held by the holder at the time as capital property. The general tax treatment of capital gains and losses is discussed below under the heading "Taxation of Capital Gains and Losses". Election under Section 85 of the Tax Act An "Eligible Holder" (as defined below) who exchanges Trilon Shares for (a) cash (including cash received as a result of the application of the Maximum Share Consideration condition under the terms of the Offer or as a result of no Brascan Non-Cumulative Class A Preference Shares, Series 11 being issued because of the Minimum Series 11 Amount condition not being met) and Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11, or for (b) Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11, may make a joint election with Brascan pursuant to subsection 85(1) of the Tax Act (or, in the case of a Shareholder that is a partnership, pursuant to subsection 85(2) of the Tax Act) and thereby obtain a full or partial tax deferred "rollover" for Canadian income tax purposes, depending on the "Elected Amount" (as defined below) and the adjusted cost base to the holder of the Trilon Shares at the time of the exchange. So long as, at the time of the exchange, the adjusted cost base to an Eligible Holder of the holder's Trilon Shares equals or exceeds the amount of any cash received on the exchange by such holder, the Eligible Holder may elect so as to not realize a capital gain for the purposes of the Tax Act on the exchange. For this purpose, an "Eligible Holder" means a holder of Trilon Shares (i) who is a resident of Canada for the purposes of the Tax Act, other than any such holder who is exempt from tax under the Tax Act, or (ii) which is a partnership which owns Trilon Shares if one or more of its members would be an Eligible Holder if such member held such Trilon Shares directly. The "Elected Amount" means the amount selected by an Eligible Holder to be the proceeds of disposition of the Trilon Shares in his or her election made pursuant to section 85 of the Tax Act. In order to make an election, an Eligible Holder must ensure that two signed copies of the necessary election forms are returned in accordance with the procedures set out in the tax instruction letter on or before 90 days after the Expiry Time duly completed with the details of the number of Trilon Shares transferred and the applicable Elected Amounts for the purposes of such elections. The relevant tax forms may be obtained from the CCRA (or the applicable provincial tax authority). Subject to the election forms complying with the provisions of the Tax Act (or applicable provincial income tax law), the forms will be returned to such holders, signed by Brascan, for filing by the holder with the CCRA (or the applicable provincial tax authority). The relevant tax election form is CCRA form T2057 (or, in the event that the Trilon Shares are held as partnership property, CCRA form T2058). For Eligible Holders required to file in Quebec, Quebec form TP-518V (or, in the event that the Trilon Shares are held as partnership property, Quebec form TP- 529V) will also be required. A tax instruction letter may be obtained from the Depositary by checking the appropriate box on the Letter of Transmittal and submitting the Letter of Transmittal in accordance with the procedures set out in section 3 of the Offer. The relevant tax forms may be obtained from the CCRA (or the applicable provincial tax authority). An Eligible Holder interested in making an election should indicate that intention in the Letter of Transmittal accompanying the Offer and this 40 Circular in the space provided therein and a tax instruction letter will be sent to such holder. Holders who elect to receive only Brascan Shares or only Brascan Non-Cumulative Class A Preference Shares, Series 11 in exchange for Trilon Shares should note that they may receive cash, and thus may wish to make an election in that event, as a result of the application of the Maximum Share Consideration condition under the terms of the Offer or as a result of no Brascan Non-Cumulative Class A Preference Shares, Series 11 being issued because of the Minimum Series 11 Amount condition not being met. Where Trilon Shares are held in joint ownership and two or more of the co- owners wish to elect, one of the co-owners designated for that purpose should file the designation and a copy of the CCRA election form T2057 (and where applicable, the corresponding Quebec form with the Quebec taxation authorities) for each co-owner along with a list of all co-owners electing, which list should contain the address and social insurance number or tax account number of each co-owner. Where the Trilon Shares are held as partnership property, a partner designated by the partnership must file one copy of CCRA election form T2058 on behalf of all members of the partnership (and where applicable, the corresponding Quebec form in duplicate with the Quebec taxation authorities). Such CCRA election form T2058 (and Quebec form, if applicable) must be accompanied by a list containing the name, address, social insurance number or tax account number of each partner as well as a letter signed by each partner authorizing the designated partner to complete and file the form. In general, where an election is made, the Elected Amount must comply with the following rules: (a) the Elected Amount may not be less than the amount of cash received by such holder on the exchange; (b) the Elected Amount may not be less than the lesser of the adjusted cost base to the holder of the holder's Trilon Shares exchanged, determined immediately before the time of the exchange, and the fair market value of the Trilon Shares at that time; and (c) the Elected Amount may not exceed the fair market value of the Trilon Shares at the time of the exchange. Where a Shareholder and Brascan make an election, the tax treatment to the holder generally will be as follows: (a) the Shareholder's Trilon Shares will be deemed to have been disposed of for proceeds of disposition equal to the Elected Amount; (b) if the proceeds of disposition of the Trilon Shares are equal to the aggregate of the adjusted cost base to the Shareholder of the Shareholder's Trilon Shares, determined immediately before the exchange, and any reasonable costs of disposition, no capital gain or capital loss will be realized by the Shareholder; (c) to the extent that the proceeds of disposition of the Trilon Shares exceed (or are less than) the aggregate of the adjusted cost base thereof to the Shareholder and any reasonable costs of disposition, the Shareholder will in general realize a capital gain (or capital loss); and (d) the cost of the Brascan Shares (subject to averaging rules contained in the Tax Act) or Brascan Non-Cumulative Class A Preference Shares, Series 11 received on the exchange will be equal to the amount, if any, by which the Elected Amount exceeds any cash received on the exchange. Where both Brascan Shares and Brascan Non-Cumulative Class A Preference Shares, Series 11 are received, such cost will be allocated first to the Brascan Non-Cumulative Class A Preference Shares, Series 11 up to the fair market value of such shares, and the balance to the Brascan Shares. Brascan will make an election under section 85 of the Tax Act (and the corresponding provisions of any applicable provincial tax legislation) only with an Eligible Holder, and at the amount selected by the Eligible Holder subject to the limitations set out in the Tax Act (and any applicable provincial tax legislation). Brascan will not be responsible for the proper completion or filing of any election and the Eligible Holder will be solely responsible for the payment of any late filing penalty. Brascan agrees only to execute any properly completed election and to forward such election by mail (within 60 days after the receipt thereof) to the Eligible Holder. With the exception of execution of the election by Brascan, compliance with the requirements for a valid election will be the sole responsibility of the Eligible Holder making the election. Accordingly, neither Brascan nor the Depositary will be responsible or liable for taxes, interest, penalties, damages or expenses resulting from the failure by anyone to deliver any election in accordance with the procedures set out in the tax instruction letter, to properly complete any election or to properly file it within the time prescribed and in the form prescribed under the Tax Act (or the corresponding provisions of any applicable provincial tax legislation). 41 In order for the CCRA (and where applicable the Ministere du Revenu du Quebec) to accept a tax election without a late filing penalty being paid by an Eligible Holder, the election must be received by such revenue authorities on or before the day that is the earliest of the days on or before which either Brascan or the Eligible Holder is required to file an income tax return for the taxation year in which the exchange occurs. Brascan's taxation year is scheduled to end December 31, 2002. Thus, where the exchange occurs in 2002, the tax election will, in the case of an Eligible Holder who is an individual, generally have to be received by the revenue authorities by April 30, 2003 (being generally the last day for filing the tax returns for the 2002 taxation year of individuals). Eligible Holders other than individuals are urged to consult their own advisers as soon as possible respecting the deadlines applicable to their own particular circumstances. However, regardless of such deadline, the tax election forms of an Eligible Holder must be received in accordance with the procedures set out the tax instruction letter no later than 90 days after the Expiry Time. Because Brascan has agreed to execute and return the election to the Eligible Holder within 60 days of its receipt in accordance with the procedures set out the tax instruction letter, to avoid late filing penalties certain Eligible Holders may be required to forward their tax election forms to the Depositary before that date. Any Eligible Holder who does not ensure that a duly completed election has been received in accordance with the procedures set out in the tax instruction letter on or before 90 days after the Expiry Time will not be able to benefit from the rollover provisions of the Tax Act (or the corresponding provisions of any applicable provincial tax legislation). Accordingly, all Eligible Holders who wish to enter into an election with Brascan should give their immediate attention to this matter. The instructions for requesting a tax instruction letter are set out in the Letter of Transmittal. Eligible Holders are referred to Information Circular 76-19R3 and Interpretation Bulletin IT- 291R2 issued by the CCRA for further information respecting the election. Eligible Holders wishing to make the election should consult their own tax advisers. A holder who does not make a valid election under subsection 85(1) or subsection 85(2), as applicable, of the Tax Act may realize a taxable capital gain. The comments herein with respect to such elections are provided for general assistance only. The law in this area is complex and contains numerous technical requirements. Taxation of Brascan Non-Cumulative Class A Preference Shares, Series 11 Disposition of Brascan Non-Cumulative Class A Preference Shares, Series 11 A holder who disposes of or is deemed to dispose of Brascan Non-Cumulative Class A Preference Shares, Series 11 (either on redemption or otherwise) will generally realize a capital gain (or sustain a capital loss) to the extent that the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the Shareholder's adjusted cost base of the Brascan Non-Cumulative Class A Preference Shares, Series 11 so disposed of. The amount of any deemed dividend arising on the redemption or acquisition by Brascan of Brascan Non-Cumulative Class A Preference Shares, Series 11 will not generally be included in computing the proceeds of disposition to a holder for purposes of computing the capital gain or capital loss arising on the disposition of the Brascan Non-Cumulative Class A Preference Shares, Series 11. Dividends on Brascan Non-Cumulative Class A Preference Shares, Series 11 Dividends (including deemed dividends) received on the Brascan Non- Cumulative Class A Preference Shares, Series 11 by an individual will be included in the individual's income and generally will be subject to the gross-up and dividend tax credit rules normally applicable to taxable dividends received from taxable Canadian corporations. Dividends (including deemed dividends) received on the Brascan Non- Cumulative Class A Preference Shares, Series 11 by a corporation other than a "specified financial institution" as defined in the Tax Act will be included in computing the corporation's income and will generally be deductible in computing the taxable income of the corporation. Dividends (including deemed dividends) received on the Brascan Non- Cumulative Class A Preference Shares, Series 11 by a corporation which is a specified financial institution will be included in computing the corporation's income and will generally be deductible in computing the taxable income of the corporation provided that the Brascan Non-Cumulative Class A Preference Shares, Series 11 are not "term preferred shares", as defined in the Tax Act, at the time the dividends are received or, if they are term preferred shares, such shares were not acquired by the specified financial institution in the ordinary course of the business carried on by it. A Brascan Non-Cumulative Class A Preference Share, Series 11 will not be a "term preferred share" to a specified financial institution where such share is 42 listed on a prescribed stock exchange in Canada and the specified financial institution, alone or together with persons with whom it does not deal at arm's length within the meaning of the Tax Act, does not receive dividends (including deemed dividends) in respect of more than 10% of the issued and outstanding Brascan Non-Cumulative Class A Preference Shares, Series 11. Shareholders that are specified financial institutions should consult with their own tax advisors as to whether the Brascan Non-Cumulative Class A Preference Shares, Series 11 will be considered to be term preferred shares. The Brascan Non-Cumulative Class A Preference Shares, Series 11 are "taxable preferred shares" as defined in the Tax Act. The terms of the Brascan Non-Cumulative Class A Preference Shares, Series 11 require Brascan to make the necessary election under Part VI.1 of the Tax Act so that corporate holders will not be subject to tax under Part IV.1 of the Tax Act on dividends received (or deemed to be received) on the Brascan Non-Cumulative Class A Preference Shares, Series 11. A "private corporation", as defined in the Tax Act, or any other corporation controlled by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts), will generally be liable to pay refundable tax under Part IV of the Tax Act of 33 1/3% on dividends received (or deemed to be received) on the Brascan Non-Cumulative Class A Preference Shares, Series 11 to the extent such dividends are deductible in computing its taxable income. Redemption of Brascan Non-Cumulative Class A Preference Shares, Series 11 If Brascan redeems or otherwise acquires Brascan Non-Cumulative Class A Preference Shares, Series 11, other than by a purchase in the open market in the manner in which shares are normally purchased by a member of the public in the open market or by reason of conversion of the Brascan Non-Cumulative Class A Preference Shares, Series 11 into Brascan Shares, the holder will be deemed to have received a dividend equal to the amount, if any, paid by Brascan in excess of the paid-up capital (as determined for purposes of the Tax Act) of such shares at such time. The aggregate amount that can be added to the paid- up capital of the Brascan Non-Cumulative Class A Preference Shares, Series 11 issued under the Offer is limited under the Tax Act, and it is not possible to determine at this time what the paid-up capital of a Brascan Non-Cumulative Class A Preference Share, Series 11 will be. It is possible that such paid-up capital will be less than the redemption price of a Brascan Non-Cumulative Class A Preference Share, Series 11. Shareholders who are contemplating electing to receive Brascan Non-Cumulative Class A Preference Shares, Series 11 when tendering to the Offer should consult their own tax advisers. Generally, the difference between the amount paid by Brascan and the amount of the deemed dividend will be treated as proceeds of disposition for the purposes of computing the capital gain or capital loss arising on the disposition of such shares. In the case of a corporate shareholder, it is possible that in certain circumstances all or part of the deemed dividend may be treated as proceeds of disposition and not a dividend. Conversion of Brascan Non-Cumulative Class A Preference Shares, Series 11 The exercise by a holder of the right to convert such holder's Brascan Non- Cumulative Class A Preference Shares, Series 11 into Brascan Shares or the conversion of the Brascan Non-Cumulative Class A Preference Shares, Series 11 into Brascan Shares at the option of Brascan will be deemed not to constitute a disposition of such Brascan Non-Cumulative Class A Preference Shares, Series 11 and will not give rise to a capital gain or capital loss. The cost to the holder of the Brascan Shares issued on such conversion will, subject to averaging rules contained in the Tax Act, be the adjusted cost base to such holder of such Brascan Non-Cumulative Class A Preference Shares, Series 11 immediately before such conversion. Under the current administrative practice of the CCRA, a holder of Brascan Non-Cumulative Class A Preference Shares, Series 11 who receives cash not exceeding $200 in lieu of a fractional share will have the option of recognizing the capital gain or capital loss arising on the disposition of the fractional share in computing the holder's income for the taxation year in which the conversion occurs or, alternatively, of reducing the adjusted cost base of the Brascan Shares received at the time of the conversion by the amount of cash received by the holder. The fair market value of Brascan Shares received on conversion determined at the time of receipt in respect of declared and unpaid dividends will be included in a holder's income as a dividend and, subject to the averaging rules contained in the Tax Act, will be the cost to the holder of such Brascan Shares. 43 Taxation of Capital Gains and Losses A Shareholder who, as described above, realizes a capital gain or a capital loss on the disposition of Trilon Shares, Brascan Non-Cumulative Class A Preference Shares, Series 11 or Brascan Shares, as the case may be, will generally be required to include in income one half of any such capital gain ("taxable capital gain") and may apply one half of any such capital loss ("allowable capital loss") against taxable capital gains in accordance with the detailed rules in the Tax Act. Allowable capital losses in excess of taxable capital gains may be carried back and deducted in any of the three preceding years or carried forward and deducted in any following year against taxable capital gains realized in such year in accordance with the detailed rules of the Tax Act. If the Shareholder is a corporation or a partnership or trust of which a corporation is a partner or a beneficiary, any capital loss realized on the disposition of any such shares may be reduced by the amount of certain dividends previously received in accordance with detailed provisions of the Tax Act in that regard. Shareholders should consult their tax advisers for specific information regarding the application of these provisions. A "Canadian-controlled private corporation" (as defined in the Tax Act) may be liable to pay an additional 6 2/3% refundable tax on certain investment income, including taxable capital gains. The realization of a capital gain or loss by an individual (including most trusts) may affect the individual's liability for alternative minimum tax under the Tax Act. Compulsory Acquisition As described in section 21 of this Circular, "Acquisition of Trilon Shares not Deposited - Compulsory Acquisition", Brascan may, in certain circumstances, acquire Trilon Shares pursuant to section 188 of the OBCA. The tax consequences to a shareholder of a disposition of Trilon Shares in such circumstances generally will be as described above depending upon the consideration received by the Shareholder for the Shareholder's Trilon Shares but Shareholders whose Trilon Shares may be so acquired should consult their own tax advisers in this regard. Subsequent Acquisition Transaction If the compulsory acquisition provisions of section 188 of the OBCA are not utilized, other means of acquiring the remaining issued and outstanding Trilon Shares may be proposed. The tax treatment of a Subsequent Acquisition Transaction described above under "Acquisition of Shares Not Deposited - Subsequent Acquisition Transaction" to a Shareholder may be materially less favourable than would apply if Trilon Shares are sold to Brascan under the Offer and will depend upon the exact manner in which the Subsequent Acquisition Transaction is carried out. Shareholders should consult their own tax advisers for advice with respect to the income tax consequences to them of having their Shares acquired pursuant to a Subsequent Acquisition Transaction. This summary does not describe the tax consequences of any such transaction to a shareholder. Non-Residents of Canada The following summary is generally applicable to a Shareholder who, at all relevant times, for the purpose of the Tax Act and any applicable income tax treaty is neither resident nor deemed to be resident in Canada and who does not use or hold, and is not deemed by the Tax Act to use or hold, Trilon Shares, Brascan Non-Cumulative Class A Preference Shares, Series 11 or Brascan Shares in connection with carrying on a business in Canada and whose shares do not otherwise constitute "taxable Canadian property" under the Tax Act (a "Non-Resident Holder"). Generally, shares of a Non-Resident Holder will not be "taxable Canadian property" of the Non-Resident Holder unless, at any time during the five year period immediately preceding the disposition, 25% or more of the issued shares of any class of the relevant corporation were held by the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm's length, or the Non-Resident Holder together with persons with whom he did not deal at arm's length. For this purpose, a person will be considered to own any shares in respect of which such person has an interest or option or other right to acquire. Non-Resident Holders should consult their own tax advisers for advice with respect to any foreign tax consequences. Realization of Capital Gains (or Capital Losses) No tax will be payable on any capital gains realized by a Non-Resident Holder whose Trilon Shares are taken up and paid for under the Offer or acquired under the statutory compulsory acquisition provisions hereinbefore described. 44 A Non-Resident Holder also will not be subject to tax under the Tax Act in respect of any capital gain realized on the disposition of Brascan Non- Cumulative Class A Preference Shares, Series 11 or of Brascan Shares, as the case may be. Non-Resident Holders should consult their own tax advisers with respect to the Canadian tax consequences, including the effects thereon of the provisions of any income tax treaty between Canada and the Non-Resident Holder's jurisdiction of residence, of disposing of "taxable Canadian property" if, based on the above summary, their shares are or may be "taxable Canadian property". Dividends Dividends (including deemed dividends) received on the Brascan Shares or the Brascan Non-Cumulative Class A Preference Shares, Series 11 by Non- Resident Holders will be subject to Canadian withholding tax at the rate of 25% unless the rate is reduced under the provisions of an applicable tax treaty. Depending on the exact manner in which a Subsequent Acquisition Transaction is carried out, where Trilon Shares are acquired pursuant to a Subsequent Acquisition Transaction, a dividend may be deemed to be received on such Trilon Shares. Non-Resident Holders should consult their own advisers for advice with respect to the income tax consequences to them of having their Trilon Shares acquired pursuant to a Subsequent Acquisition Transaction. The Canadian federal income tax consequences set forth above are for general information only. Holders of Trilon Shares are urged to consult their own tax advisers to determine the particular tax effects to them of the Offer. 23.Interest of Persons in the Matters Related to the Offer Except as disclosed herein, no director or senior officer of Trilon nor any associate or affiliate of any of the foregoing persons, nor any person who beneficially owns or exercises control or direction over more than 10% of the outstanding Class A Shares has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise in any matter related to the Offer. The following are the principal interests of insiders in matters related to the Offer: . EdperPartners and its shareholders, collectively hold, directly and indirectly, or have options to acquire, approximately 27.1 million Brascan Shares representing 15% of the Brascan Shares on a fully diluted basis (net of Brascan Shares held internally by Brascan's subsidiaries), and 85,120 Class B Limited Voting Shares of Brascan, representing all of the Class B Limited Voting Shares of Brascan. Jack L. Cockwell, Jeffrey M. Blidner, George E. Myhal, Brian D. Lawson, Trevor D. Kerr, Allen T. Lambert, Frank N.C. Lochan, Bruce K. Robertson, Sam J.B. Pollock, Timothy R. Price and John C. Tremayne, who are directors and/or officers of Trilon, are also shareholders of EdperPartners. . On the Effective Date, holders of options granted under Trilon's MSOP (other than for directors of Trilon who are not also officers of Trilon, whose options will accelerate and vest, and other than for option holders who are no longer officers or employees of Trilon or its affiliates) will exchange their options for options to acquire Brascan Shares under Brascan's management share option plan. The exercise price of the options to acquire Brascan Shares will be equal to two times the exercise price of the option to acquire Class A Shares and one Brascan replacement option (each exercisable for one Brascan Share) will be granted by Brascan for every two options of Trilon held. The vesting and term of the options will be unchanged. The exchange ratio between the existing options and the replacement Brascan options is based on the terms of the Brascan Share consideration available in the Offer. An aggregate of 5,089,061 options are outstanding and held by senior officers and directors. . On the Effective Date, units under Trilon's MDSUP will become a number of units under Brascan's management deferred share unit plan equal to one-half the number of units held under the MDSUP. An executive who holds units will receive additional units as dividends are paid on the Brascan Shares on the same basis as if dividends were reinvested pursuant to Brascan's dividend reinvestment plan and the cash value of the new units when redeemed will be equivalent to the market value of an equivalent number of Brascan Shares at the time of cessation of employment with Trilon. The exchange ratio between the existing units and the replacement units is based on the terms of the Brascan Share consideration available in the Offer. 45 . On the Effective Date, Trilon Shares issued by Trilon under its MSPP and held by the trustee of the MSPP will be deposited pursuant to the Offer. The consideration received will be held by the trustee of the MSPP and applied towards the loans granted pursuant to the MSPP. An aggregate of 162,600 Trilon Shares are held by one officer and director. 24.Material Changes and Other Information Brascan has no information which indicates any material change in the affairs of Trilon since the date of the last published annual financial statements of Trilon. Brascan has no knowledge of any other matter that has not previously been generally disclosed but which would reasonably be expected to affect the decision of Shareholders to accept or reject the Offer. Brascan's plans or proposals to seek to effect certain material changes in the affairs of Trilon are set out under "Purpose of the Offer and Brascan's Plans for Trilon". 25.Documents Incorporated by Reference Regarding Brascan The following documents of Brascan filed with the securities commission or similar authority in each of the provinces and territories of Canada are specifically incorporated by reference in this Circular: (a) the Annual Information Form of Brascan dated May 15, 2001; (b) management's discussion and analysis for the year ended December 31, 2001, included as pages 17 through 44 of the 2001 Annual Report of Brascan; (c) the audited comparative consolidated financial statements of Brascan and the notes thereto for the financial year ended December 31, 2001, together with the report of the auditors thereon, found at pages 45 through 67 of the 2001 Annual Report of Brascan; and (d) the Management Information Circular of Brascan dated February 28, 2002 in connection with the 2002 Annual Meeting of Shareholders, other than the sections entitled "Report of the Management Resources and Compensation Committee", "Performance Graph" and "Corporate Governance". Any documents of Brascan of the type referred to above (excluding confidential material change reports) together with any material change reports filed with a securities commission or similar regulatory authority in Canada on or after the date of this Circular and prior to the Expiry Time shall be deemed to be incorporated by reference into this Circular. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of the Offer to the extent that a statement contained in the Offer or Circular, or in any other subsequently filed document which also is or is deemed to be incorporated by reference in the Offer or Circular, modifies or supersedes that statement. The making of a modifying or superseding statement shall not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Offer and the Circular. 46 26.Eligibility for Investment At the date of issue pursuant to the Offer, the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 received as part of the consideration in the Offer will be eligible investments, as at such date, under, or their purchase would not be prohibited by, the statutes listed below (and, where applicable, the regulations thereunder), in each case subject to the general investment provisions thereof and, in certain cases, subject to the prudent investor requirements thereof and additional requirements relating to investment or lending policies, procedures or goals. Insurance Companies Act (Canada) Pension Benefits Act (Ontario) Pension Benefits Standards Act, an Act respecting insurance 1985 (Canada) (Quebec) (for an insurer, as Trust and Loan Companies Act defined herein, incorporated (Canada) under the laws of the province of Financial Institutions Act Quebec, other than a guarantee (British Columbia) fund corporation, an insurance Alberta Heritage Savings Trust fund or a mutual association) Fund Act (Alberta) an Act respecting trust companies Employment Pension Plans Act and savings companies (Quebec) (Alberta) (for a trust company investing Insurance Act (Alberta) its own funds and deposits it Loan and Trust Corporations Act receives and a savings company (Alberta) investing its own funds) The Pension Benefits Act Supplemental Pension Plans Act (Manitoba) (Quebec) The Pension Benefits Act, 1992 (Saskatchewan) Loan and Trust Corporations Act (Ontario) Subject to the qualifications and assumptions discussed under the heading "Canadian Federal Income Tax Considerations", the Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 will also be qualified investments under the Income Tax Act (Canada) (the "Tax Act") for trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans and deferred profit sharing plans (collectively, the "Deferred Income Plans"). The Brascan Shares and the Brascan Non-Cumulative Class A Preference Shares, Series 11 do not constitute "foreign property" for the purposes of the Tax Act for Deferred Income Plans and other persons subject to tax under Part XI of the Tax Act. 27.Interests of Experts Torys LLP, counsel to Brascan, has provided legal advice upon certain corporate and securities law matters in connection with the Offer. As of April 11, 2002, the partners and associates of Torys LLP beneficially owned, directly or indirectly, less than 1% of the outstanding securities of any class of securities of Brascan. 28.Statutory Rights Securities legislation in certain of the provinces and territories of Canada provides holders of Trilon Shares with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, if there is a misrepresentation in a circular or a notice that is required to be delivered to the holders of Trilon Shares. However, such rights must be exercised within prescribed time limits. Holders of Trilon Shares should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer. 29.Documents Filed as Part of the United States Registration Statement A registration statement on Form F-8 (the "Registration Statement") has been filed with the Securities and Exchange Commission of the United States (the "SEC") under the Securities Act of 1933, as amended, relating to the Offer. The following documents have been filed with the SEC as part of the Registration Statement of which the Offer is part, insofar as called for by the SEC's Form F-8: (i) the letter to Shareholders from the President and Chief Executive Officer of Brascan; (ii) the Offer and the Circular; (iii) the documents listed in the Circular as incorporated by reference herein; (iv) the Directors' Circular; (v) the Valuation and Fairness Opinion; (vi) the form of the Letter of Transmittal; (vii) the form of Notice of Guaranteed Delivery; (viii) consents of accountants, counsel and financial advisors; and (ix) powers of attorney pursuant to which amendments to the Registration Statement may be signed. Copies of these documents may be obtained on request without charge from the Secretary of Brascan, 181 Bay Street, Suite 4400, P.O. Box 762, Toronto, Ontario, Canada M5J 2T3, (416) 363-9491. 47 30.Consents CONSENT OF COUNSEL TO: British Columbia Securities Commission Alberta Securities Commission Saskatchewan Securities Commission Manitoba Securities Commission Ontario Securities Commission Commission des valeurs mobilieres du Quebec Office of the Administrator of Securities, New Brunswick Nova Scotia Securities Commission Director of Corporations, Department of Justice, Prince Edward Island Securities Commission of Newfoundland Registrar of Securities, Northwest Territories Registrar of Securities, Yukon Territories Registrar of Securities, Government of Nunavut (collectively, the "Canadian Securities Administrators") AND TO: The directors of Brascan Corporation We hereby consent to the reference to our opinion contained under "Canadian Federal Income Tax Considerations" in the Circular accompanying the Offer dated April 11, 2002 made by Brascan Corporation to the holders of Class A Shares and Class B Non-Voting Shares of Trilon Financial Corporation. Dated: April 11, 2002 (Signed) Torys LLP CONSENT OF TD SECURITIES INC. TO:All Canadian Securities Administrators AND TO:The directors of Brascan Corporation Dear Sirs: Re: Trilon Financial Corporation We refer to the Offer and accompanying Circular (the "Bid") dated April 11, 2002 of Brascan Corporation relating to an offer to purchase the Class A Shares and Class B Non-Voting Shares of Trilon Financial Corporation. Reference is made to a valuation and fairness opinion dated April 9, 2002 of the Class A Shares and Class B Non-Voting Shares of Trilon Financial Corporation and the Class A Limited Voting Shares and the Class A Preference Shares, Series 11 of Brascan Corporation provided by this firm to the independent members of the board of directors of Trilon Financial Corporation. We hereby consent to the inclusion of a summary of our valuation and fairness opinion and the references thereto in the Bid and its distribution to shareholders of Trilon Financial Corporation as provided for in the Bid. In providing such consent, except as may be required by securities laws, we do not intend that any person other than the board of directors of Trilon Financial Corporation rely upon such valuation and fairness opinion. Dated: April 11, 2002 Yours truly, (Signed) TD Securities Inc. 48 APPROVAL AND CERTIFICATE OF BRASCAN CORPORATION The contents of the Offer and the Circular (including all schedules thereto which are incorporated therein by reference) have been approved, and the sending, communication or delivery thereof to the Shareholders has been authorized by, the board of directors of Brascan. The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made. In addition, the foregoing does not contain any misrepresentation likely to affect the value or the market price of the Class A Shares and Class B Non- Voting Shares of Trilon Financial Corporation which are the subject of the Offer. DATED: April 11, 2002 (Signed) J. Bruce Flatt (Signed) Brian D. Lawson President and Chief Executive Officer Executive Vice-President and Chief Financial Officer On behalf of the Board of Directors (Signed) Jack L. Cockwell (Signed) Robert J. Harding Director Director 49 The Depositary for the Offer is CIBC Mellon Trust Company Offices of the Depositary Telephone: (416) 643-5500 Toll-Free: 1-800-387-0825 Inquiries by email: inquiries@cibcmellon.com Toronto: By Mail: By Hand or Courier: P.O. Box 1036 199 Bay Street Adelaide Street Postal Commerce Court West Station Securities Level Toronto, ON Toronto, ON M5C 2K4 M5L 1G9 Montreal: Calgary: By Hand or Courier: By Hand or Courier: 2001 University Street 600 The Dome Tower Floor 16 333 - 7th Avenue S.W. Montreal, PQ Floor 6 H3A 2A6 Calgary, AB T2P 2Z1 Vancouver: By Hand or Courier: 1066 West Hastings Street Suite 1600 Vancouver, BC V6E 3X1 Any questions and requests for assistance may be directed by Shareholders to the Depositary at the telephone numbers and locations set out above. PART II INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS INDEMNIFICATION Under the Business Corporations Act (Ontario), Brascan Corporation (the "Registrant") may indemnify a present or former director or officer or a person who acts or acted at the Registrant's request as a director or officer of another body corporate of which such Registrant is or was a shareholder or creditor, and his or her heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the Registrant or such other body corporate, as the case may be, provided that such person acted honestly and in good faith with a view to the best interests of the Registrant and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, such person had reasonable grounds for believing that his or her conduct was lawful. Such indemnification may be made in connection with an action by or on behalf of the Registrant or such other body corporate, as the case may be, to procure a judgment in its favor only with court approval. A director or officer referred to above is entitled to indemnification from the Registrant as a matter of right if he or she was substantially successful on the merits in his or her defense of the action or proceeding and fulfilled the conditions set forth above. In accordance with the Business Corporations Act (Ontario), the board of directors of the Registrant approved a resolution (the "Resolution") dated August 1, 1997 providing for the following: (i) the Registrant shall indemnify a director or officer of the Registrant, a former director or officer of the Registrant or a person who acts or acted at the Registrant's request as a director or officer of a body corporate of which the Registrant is or was a shareholder or creditor, and his or her heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the Registrant or such body corporate (except in respect of an action by or on behalf of the Registrant or such body corporate to procure a judgment in its favor), if, (a) he or she acted honestly and in good faith with a view to the best interests of the Registrant, and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful; (ii) the Registrant shall, with the prior approval of the court having jurisdiction, indemnify a person referred to in (i) above in respect of an action by or on behalf of the Registrant or such body corporate to procure a judgment in its favor, to which he or she is made a party by reason of being or having been a director or an officer of the Registrant or such body II-1 corporate against all costs, charges and expenses reasonably incurred by him or her in connection with such action if he or she fulfills the conditions set out in paragraphs (i)(a) and (b) above; and (iii) notwithstanding anything in (i) and (ii) above, a person referred to in (i) above shall be indemnified by the Registrant in respect of all costs, charges and expenses reasonably incurred by him or her in connection with the defense of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the Registrant or body corporate, if the person seeking indemnity, (a) was substantially successful on the merits in his or her defense of the action or proceeding, and (b) fulfills the conditions set out in paragraphs (i)(a) and (b) above. Nothing in the by-laws or resolutions of the Registrant limits the right of any person entitled to claim indemnity apart from the indemnity provided pursuant to the Resolution. The Registrant maintains a policy of directors' and officers' liability insurance, under which, the Registrant and certain of its associated companies (collectively, the "Organization") is reimbursed for indemnity payments made to directors or officers as required or permitted by law or under provisions of its by-laws as indemnity for losses, including legal costs arising from acts, errors or omissions committed by directors and officers during the course of their duties as such. This insurance also provides coverage to individual directors and officers without any deductible if they are not indemnified by the Organization. The insurance coverage for directors and officers has certain exclusions including, but not limited to, those acts determined to be deliberately fraudulent or dishonest or to have resulted in personal profit or advantage. The cost of such insurance is borne by the Organization. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. II-2 EXHIBITS The following exhibits have been filed as part of this Registration Statement. Exhibit Number Description - ------ ----------- 3.1 Letter to Shareholders of Trilon Financial Corporation dated April 8, 2002 from the President and Chief Executive Officer of the Registrant. 3.2 Letter of Transmittal and Election Form to be completed by registered holders of shares of Trilon Financial Corporation. 3.3 Notice of Guaranteed Delivery and Election Form. 3.4 Directors' Circular prepared by the board of directors of Trilon Financial Corporation dated April 11, 2002 3.5 Valuation and Fairness Opinion of TD Securities Inc. to the Independent Committee as to the fair market value of the Trilon Shares and the opinion of TD Securities Inc. as to whether the consideration to be received in the Offer is fair, from a financial point of view, to the shareholders of Trilon Financial Corporation other than Brascan Corporation and its affiliates dated as of April 9, 2002 (included as Schedule A to Exhibit 3.4 to this Registration Statement). 3.6 Management Information Circular of Brascan Corporation dated February 28, 2002 in connection with the 2002 Annual Meeting of Shareholders, other than the sections entitled "Report of the Management Resources and Compensation Committee", "Performance Graph" and "Corporate Governance." 3.7 Annual Information Form of Brascan Corporation dated May 15, 2001 (incorporated herein by reference to the Registrant's annual report on Form 40-F/A dated May 21, 2001, file no. 033-97038). 3.8 Management's Discussion and Analysis of the financial results of Brascan Corporation for the fiscal year ended December 31, 2001, included as pages 17 through 44 of the 2001 Annual Report of Brascan Corporation (incorporated herein by reference to the Registrant's annual report on Form 40-F filed April 3, 2002, file no. 033-97038). 3.9 Audited Comparative Consolidated Financial Statements of Brascan Corporation and the notes thereto for the fiscal year ended December 31, 2001, together with the report of the auditors thereon, found at pages 45 through 67 of the 2001 Annual Report of Brascan Corporation (incorporated herein by reference to the Registrant's annual report on Form 40-F filed April 3, 2002, file no. 033-97038). 4.1 Consent of Torys LLP (included in Part I of this Registration Statement). II-3 4.2 Consent of TD Securities Inc. (included in Part I of this Registration Statement). 4.3 Consent of Deloitte & Touche LLP (included in Part I of this Registration Statement). 5.1 Powers of Attorney (set forth on the signature pages of this Registration Statement). 5.2 Form F-X (incorporated herein by reference to the Registrant's appointment of agent for service of process and undertaking on Form F- X filed November 26, 2001, file no. 333-14130). II-4 PART III UNDERTAKINGS AND CONSENT TO SERVICE OF PROCESS Item 1. Undertakings. (a) Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the U.S. Securities and Exchange Commission (the "Commission") staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to this Registration Statement on Form F-8 or to transactions in said securities. (b) Registrant further undertakes to disclose in the United States, on the same basis as it is required to make such disclosure pursuant to any applicable Canadian federal and/or provincial or territorial law, regulation or policy, information regarding purchases of the Registrant's securities or of the subject issuer's securities during the exchange offer. Such information shall be set forth in amendments to this Form. Item 2. Consent to Service of Process. (a) Registrant has filed with the Securities and Exchange Commission a written irrevocable consent and power of attorney on Form F-X. III-1 POWER OF ATTORNEY Brascan Corporation and each person whose signature appears below hereby appoints Brian D. Lawson and J. Bruce Flatt as attorneys-in-fact with full power of substitution, severally, to execute in the name and on behalf of Brascan Corporation and each such person, individually, and in each capacity stated below, one or more amendments (including post-effective amendments) to the Registration Statement as the attorney-in-fact acting in the premises deems appropriate and to file any such amendment to the Registration Statement with the U.S. Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Province of Ontario, Country of Canada on the 11/th/ day of April, 2002. BRASCAN CORPORATION /s/ Alan V. Dean By:------------------------------ Name: Alan V. Dean Title: Senior Vice President and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ J. Bruce Flatt President and Chief Executive April 11, 2002 - ------------------------------- Officer and Director J. Bruce Flatt (Principal Executive Officer) /s/ Brian D. Lawson Executive Vice-President and April 11, 2002 - ------------------------------- Chief Financial Officer Brian D. Lawson (Principal Financial Officer) /s/ Craig J. Laurie Vice-President, Finance April 11, 2002 - ------------------------------- (Principal Accounting Officer) Craig J. Laurie /s/ Roberto P. Cezar de Andrade Director April 11, 2002 - ------------------------------- Roberto P. Cezar de Andrade
/s/ Conrad M. Black - ------------------------------- April 11, 2002 Lord Black of Crossharbour Director - ------------------------------- April __, 2002 James J. Blanchard Director /s/ Jack L. Cockwell - ------------------------------- April 11, 2002 Jack L. Cockwell Co-Chairman and Director - ------------------------------- April __, 2002 John P. Curtin, Jr. Director /s/ J. Trevor Eyton - ------------------------------- April 11, 2002 The Honourable J. Trevor Eyton, O.C. Director /s/ Julia E. Foster - ------------------------------- April 11, 2002 Julia E. Foster Director /s/ James K. Gray - ------------------------------- April 11, 2002 James K. Gray, O.C. Director /s/ Lynda C. Hamilton - ------------------------------- April 11, 2002 Lynda C. Hamilton Director /s/ Robert J. Harding - ------------------------------- April 11, 2002 Robert J. Harding, FCA Chairman and Director /s/ David W. Kerr - ------------------------------- April 11, 2002 David W. Kerr Director /s/ Allen T. Lambert - ------------------------------- April 11, 2002 Allen T. Lambert, O.C. Director /s/ Philip B. Lind - ------------------------------- April 11, 2002 Philip B. Lind Director /s/ Roy MacLaren - ------------------------------- April 11, 2002 The Honourable Roy MacLaren, P.C. Director /s/ Saul Shulman - ------------------------------- April 11, 2002 Saul Shulman, Q.C. Director - ------------------------------- April __, 2002 George S. Taylor Director
AUTHORIZED REPRESENTATIVE Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the Authorized Representative has duly caused this Registration Statement to be signed on its behalf by the undersigned, solely in its capacity as the duly authorized representative of Brascan Corporation in the United States, on April 11, 2002. TORYS LLP (Authorized Representative) By: /s/ Andrew J. Beck ----------------------- Andrew J. Beck Partner EXHIBITS Exhibit Number Description - ------ ----------- 3.1 Letter to Shareholders of Trilon Financial Corporation dated April 8 2002 from the President and Chief Executive Officer of the Registrant. 3.2 Letter of Transmittal and Election Form to be completed by registered holders of shares of Trilon Financial Corporation. 3.3 Notice of Guaranteed Delivery and Election Form. 3.4 Directors' Circular prepared by the board of directors of Trilon Financial Corporation dated April 11, 2002 3.5 Valuation and Fairness Opinion of TD Securities Inc. to the Independent Committee as to the fair market value of the Trilon Shares and the opinion of TD Securities Inc. as to whether the consideration to be received in the Offer is fair, from a financial point of view, to the shareholders of Trilon Financial Corporation other than Brascan Corporation and its affiliates dated as of April 9, 2002 (included as Schedule A to Exhibit 3.4 to this Registration Statement). 3.6 Management Information Circular of Brascan Corporation dated February 28, 2002 in connection with the 2002 Annual Meeting of Shareholders, other than the sections entitled "Report of the Management Resources and Compensation Committee", "Performance Graph" and "Corporate Governance." 3.7 Annual Information Form of Brascan Corporation dated May 15, 2001 (incorporated herein by reference to the Registrant's annual report on Form 40-F/A dated May 21, 2001, file no. 033-97038). 3.8 Management's Discussion and Analysis of the financial results of Brascan Corporation for the fiscal year ended December 31, 2001, included as pages 17 through 44 of the 2001 Annual Report of Brascan Corporation (incorporated herein by reference to the Registrant's annual report on Form 40-F filed April 3, 2002, file no. 033-97038). 3.9 Audited Comparative Consolidated Financial Statements of Brascan Corporation and the notes thereto for the fiscal year ended December 31, 2001, together with the report of the auditors thereon, found at pages 45 through 67 of the 2001 Annual Report of Brascan Corporation (incorporated herein by reference to the Registrant's annual report on Form 40-F dated filed April 3, 2002, file no. 033-97038). 4.1 Consent of Torys LLP (included in Part I of this Registration Statement). 4.2 Consent of TD Securities Inc. (included in Part I of this Registration Statement). 4.3 Consent of Deloitte & Touche LLP (included in Part I of this Registration Statement). 5.1 Powers of Attorney (set forth on the signature pages of this Registration Statement). 5.2 Form F-X (incorporated herein by reference to the Registrant's appointment of agent for service of process and undertaking on Form F- X filed November 26, 2001, file no. 333-14130). E-1 EX-3.1 3 dex31.txt LETTER TO SHAREHOLDERS OF TRILON CORP. Exhibit 3.1 [LOGO] BRASCAN April 8, 2002 Dear Trilon Shareholders: I am pleased to enclose an offer whereby Brascan is offering to purchase all of the Class A and Class B Shares of Trilon that it does not already own. As you probably know, Brascan currently owns 70% of the Class A and Class B shares of Trilon. An independent committee of the Trilon board of directors was established to review the transaction. The independent committee of Trilon, based in part on advice from their financial advisor TD Securities Inc., unanimously recommends that Trilon shareholders accept our offer. Furthermore, Trilon's directors and senior officers have advised that they intend to tender their Trilon shares to the offer. The Offer Brascan has offered to purchase all of the Trilon Class A and Class B shares that it does not already own at a price of $17.00 for each Trilon share. Trilon shareholders may elect to receive payment for each of their Trilon shares in three different ways: (i) $17.00 in cash, subject to pro ration and other adjustments as described in the offer; (ii) 0.5 of a Brascan Class A Limited Voting Share ("Brascan Shares"), subject to pro ration as described in the offer; or (iii) 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Shares, Series 11 and $0.05 in cash. Reasons to Accept the Offer We believe that shareholders of Trilon should accept the offer for the following reasons: . Trilon directors recommend acceptance of the offer - Your board of directors, including the members of the independent committee established to review the transaction, unanimously recommends that Trilon shareholders tender their shares to the offer. . Independent fairness opinion supports the offer - TD Securities Inc., the independent financial advisors to the independent committee, has provided its written opinion that the consideration to be paid by Brascan is fair, from a financial point of view, to Trilon's minority shareholders. . Independent valuation of the Trilon shares supports the offer - The value of the consideration being offered is in the upper range of the valuation of Trilon's Class A and Class B shares prepared by TD Securities Inc., which determined that the value of Trilon's Class A and Class B shares is in a range of $15.65 to $17.45 per share. . The offer price represents a premium over previous trading prices - While the value of the consideration being offered represents a modest premium to the trading price immediately prior to the offer being announced, the value represents a 20% premium to the price Trilon's Class A shares traded at 3 months ago, and a 42% premium to the price at which Trilon repurchased Class A shares under a substantial issuer bid completed 15 months ago. . Flexible consideration to meet shareholder objectives - Shareholders are being offered alternative forms of consideration designed to suit their individual needs. Shareholders can elect to receive their payment 100% in Brascan shares or 100% in cash, subject to pro ration. Furthermore, shareholders can elect to receive their payment in the form of Brascan Class A Preference Shares, Series 11, without limit, so that they can both defer capital gains taxes and increase the yield on the securities received. Brascan's Class A Preference Shares, Series 11 will pay a dividend of $1.375 per share per annum, representing a dividend yield of 5.5% per annum. . Brascan shares represent underlying value in excess of the transaction price - If you choose to receive payment in Class A shares of Brascan, you will receive shares based on a valuation of $34.00 per Brascan share. Based on publicly disclosed information in Brascan's 2001 annual report, management of Brascan believes that, as of December 31, 2001, the underlying value of Brascan was $42.90 per share. . Brascan Class A shares provide shareholders with greater liquidity than Trilon shares - The market capitalization of Trilon's public float is $775 million as at the date of this letter, whereas the market capitalization of Brascan's public float is $4.8 billion. Furthermore, the average daily trading volume of Trilon's Class A Shares was $1.4 million during the three month period prior to the offer being made, compared with Brascan's average daily trading volume of $12.2 million over the same period. In addition, Trilon is listed only in Toronto, while Brascan is listed on both the Toronto and New York Stock Exchanges. . Brascan owns additional high quality businesses - Brascan owns a number of high-quality businesses in addition to Trilon, including some of the highest quality real estate in North America, such as BCE Place in Toronto and The World Financial Center in New York, as well as one of the lowest cost power generation businesses in North America. Trilon shareholders who elect to receive Brascan shares will own an interest in these businesses in addition to continuing to own an interest in Trilon's financial services business. . Brascan and Trilon are stronger as a combined entity - We believe that, together as one merged entity, Brascan and Trilon will be stronger financially and operationally. As a result, we will be able to create even greater value by combining our resources as we move forward. In Summary In Brascan's 2001 annual report, we described our plans to achieve our return on equity and other objectives over the next five years. One of the objectives is to complete the final steps of transforming Brascan from a diversified holding company with many investments to a focused and growing operating business which currently consists of three main operations - real estate, financial services and power generation. The Trilon offer fits with this objective. With this in mind, we believe we have made a fair and equitable offer to Trilon shareholders. We do hope that you will decide to tender your shares and become a Brascan shareholder. If you do, and we succeed in accomplishing what we have planned, you will receive enhanced value for your investment in the years ahead through your Brascan shares. While we cannot guarantee the future, we do believe that we have laid solid foundations for future growth. Thank you for your consideration of this offer, and for those of you who elect to accept the offer and receive Brascan shares, we welcome you as new shareholders. Yours very truly, /s/J. Bruce Flatt J. Bruce Flatt President and Chief Executive Officer 2 EX-3.2 4 dex32.txt LETTER OF TRANSMITTAL Exhibit 3.2 LETTER OF TRANSMITTAL AND ELECTION FORM for use by registered holders of Class A Shares and Class B Non-Voting Shares of TRILON FINANCIAL CORPORATION THE OFFER WILL BE OPEN FOR ACCEPTANCE UNTIL 11:59 P.M. (LOCAL TIME) ON MAY 16, 2002 UNLESS THE OFFER IS EXTENDED OR WITHDRAWN. The Depositary (see back cover page for addresses and telephone numbers) or your broker or other financial advisor will assist you in completing this Letter of Transmittal. Shareholders whose Trilon Shares are registered in the name of a broker, investment dealer, bank, trust company or other nominee should contact that nominee for assistance in delivering those Trilon Shares. This Letter of Transmittal and Election Form (the "Letter of Transmittal"), properly completed and duly executed, together with all other required documents, must accompany certificates representing Class A Shares and Class B Non-Voting Shares (collectively, the "Trilon Shares") of Trilon Financial Corporation ("Trilon") deposited pursuant to the offer (the "Offer") dated April 11, 2002 made by Brascan Corporation ("Brascan" or the "Offeror") to holders of Trilon Shares. Shareholders whose Trilon Share certificates are not immediately available or who cannot cause their Trilon Share certificates and all other required documents to be delivered to the Depositary at or before the Expiry Time must deliver their Trilon Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer, "How to Tender Trilon Shares to the Offer - Procedure for Guaranteed Delivery". If you are a participant in Trilon's Dividend Reinvestment Plan (the "Plan"), you may tender to the Offer any whole Trilon Shares held in your account under the Plan ("Trilon Plan Shares") by checking the box on page two entitled "Election for Participants in Trilon's Dividend Reinvestment Plan". You should not make any elections for your Trilon Plan Shares, as the allocation of the consideration you elect to receive in this Letter of Transmittal for your deposited Trilon Shares will be applied to your Trilon Plan Shares (subject to pro ration). In addition, you are not required to submit share certificates in respect of your Trilon Plan Shares in order for your deposit and elections in respect thereof to be valid. Any requirement in this Letter of Transmittal to submit share certificates does not apply to Trilon Plan Shares. The terms and conditions of the Offer are incorporated by reference in this Letter of Transmittal. Capitalized terms used but not defined in this Letter of Transmittal which are defined in the Offer and Circular dated April 11, 2002 have the meanings set out therein. The Instructions accompanying this Letter of Transmittal should be read carefully before completing this Letter of Transmittal. TO:BRASCAN CORPORATION AND TO:CIBC MELLON TRUST COMPANY (the "Depositary") The undersigned delivers to you the enclosed certificate(s) for Trilon Shares and, subject only to the provisions of the Offer regarding withdrawal, irrevocably accepts the Offer for such Trilon Shares and hereby assigns all right, title and interest therein. The following are the details of the enclosed certificate(s): - -------------------------------------------------------------------------------- Name in which Trilon Number of Trilon Shares Certificate Number Shares are Registered Deposited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL ------------------- (If space is insufficient, please attach a list in the above form.) ELECTION FOR PARTICIPANTS IN TRILON'S DIVIDEND REINVESTMENT PLAN By checking the box below, the undersigned hereby irrevocably authorizes and directs CIBC Mellon Trust Company, as trustee under the Plan, to deliver and transmit to the Depositary by 11:59 p.m. (local time) on May 16, 2002, or by such later time and date to which the Offer is extended, unless the Offer is withdrawn by Offeror, any and all whole Trilon Plan Shares held by the undersigned pursuant to the Plan on behalf or for the benefit of the undersigned in order to tender such shares to the Offer. [_]Please check if you are a participant in the Plan. The undersigned hereby acknowledges receipt of the Offer and the accompanying Circular and represents and warrants that the undersigned has good and sufficient authority to deposit, sell and transfer the Trilon Shares represented by the enclosed certificate(s) and that when the same are accepted for payment by the Offeror, the Offeror will acquire good title thereto free from all liens, charges, encumbrances, claims and equities and in accordance with the following sentence. IN CONSIDERATION OF THE OFFER AND FOR VALUE RECEIVED, subject only to the rights of withdrawal set out in the Offer, the undersigned hereby irrevocably accepts the Offer, on and subject to the terms and conditions of the Offer, and sells, assigns and transfers to Offeror all of the right, title and interest of the undersigned in and to the Trilon Shares registered in the name of the undersigned on the securities register maintained by or on behalf of Trilon and deposited pursuant to the Offer and purchased by Offeror (the "Purchased Trilon Shares") and in and to any and all dividends, distributions, payments, securities, rights, warrants, assets or other interests which may be declared, paid, issued, distributed, made or transferred on or in respect of the Purchased Trilon Shares or any of them on or after April 11, 2002 (collectively, "distributions"), as well as the right of the undersigned to receive any and all distributions. If, on or after April 11, 2002, Trilon should declare or pay any dividend or declare, make or pay any other distribution or payment on or declare, allot, reserve or issue any securities, rights or other interests with respect to the Purchased Trilon Shares, payable or distributable to the undersigned as a registered Shareholder on a date prior to the transfer to the name of Offeror or its nominee or transferee on the transfer registers of Trilon Shares deposited by the undersigned and accepted for payment pursuant to the Offer, then (i) in the case of cash dividends, distributions or payments, the amount of the dividends, distributions or payments shall be received and held by the undersigned for the account of Offeror until Offeror pays for such Purchased Trilon Shares, and to the extent that such dividends, distributions or payments do not exceed the purchase price per Share payable by Offeror pursuant to the Offer (the "Purchase Price per Share"), the Purchase Price per Share will be reduced by the amount of any such dividend, distribution or payment, and (ii) in the case of non-cash dividends, distributions, payments, rights or other interests, the whole of any such non-cash dividend, distribution, payment, right or other interest, and in the case of any cash dividends, distributions or payments in an amount that exceeds the Purchase Price per Share, the whole of any such cash dividend, distribution or payment, shall be received and held by the undersigned for the account of Offeror and shall be required to be promptly remitted and transferred by the undersigned to the Depositary for the account of Offeror, accompanied by appropriate documentation of transfer. Pending such remittance, Brascan will be entitled to all rights and privileges as owner of any such dividend, distribution, payment, right or other interest and may withhold the entire purchase price payable by Brascan pursuant to the Offer or deduct from the purchase price payable by Brascan pursuant to the Offer the amount or value thereof, as determined by Brascan in its sole discretion. Brascan understands that, in light of the Offer, the board of directors of Trilon intends to declare a partial dividend of $0.10 per Trilon Share at its regular board meeting in April 2002. Brascan understands that the record date for this partial dividend will be during the Deposit Period. Notwithstanding the foregoing paragraph, Brascan will not reduce the purchase price to the extent that Shareholders receive Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 for their Trilon Shares under the Offer (including any cash to be paid in lieu of fractions of Brascan Shares or of Brascan Non-Cumulative Class A Preference Shares, Series 11 and including the $0.05 per Trilon Share to be paid along with Brascan Non-Cumulative Class A Preference Shares, Series 11). The undersigned hereby irrevocably constitutes and appoints J. Bruce Flatt and Brian D. Lawson, each of whom is a senior officer of Offeror, and each of them, and any other person designated by Offeror in writing, as the true and lawful agent, attorney and attorney-in-fact, and proxy of the undersigned with respect to the Purchased Trilon Shares and any distributions with full power of substitution (such power of attorney, being coupled with an interest, being irrevocable) to, in the name of, and on behalf of, the undersigned (a) register or record the transfer or cancellation of the Purchased Trilon Shares or any of them, and any distributions consisting of securities on the appropriate registers 2 maintained by or on behalf of Trilon in such manner as the agent, attorney and attorney-in-fact, proxy or any of them may determine, or in the name of Offeror or such other person or persons as Offeror may specify; (b) for so long as any such Purchased Trilon Shares are registered or recorded in the name of the undersigned (whether they are now so registered or recorded), execute and deliver (provided the same is not contrary to applicable law) at any time and from time to time, as and when requested by Offeror, any instruments of proxy, authorization or consent in form and on terms satisfactory to Offeror in respect of any such Purchased Trilon Shares and distributions, and to designate in any such instruments of proxy any person or persons as the proxyholder of the undersigned in respect of such Purchased Trilon Shares and distributions; (c) except as provided in section 11 of the Offer, execute and negotiate any cheques or other instruments representing such distributions payable to or to the order of, or endorsed in favour of, the undersigned; and (d) exercise any rights of a holder of Purchased Trilon Shares and any distribution with respect to such Purchased Trilon Shares. The undersigned hereby revokes any and all other authority, whether as agent, attorney, attorney-in-fact, proxy or otherwise, hereinbefore conferred or agreed to be conferred by the undersigned at any time with respect to the Purchased Trilon Shares or any of them (and any and all distributions) and covenants that no subsequent authority, whether as agent, attorney, attorney- in-fact, proxy or otherwise, will be granted with respect thereto by or on behalf of the undersigned. The undersigned agrees not to vote any of the Purchased Trilon Shares, or distributions consisting of securities, at any meeting or meetings (whether annual, special or otherwise) of holders of Trilon Shares or distributions consisting of securities, or any and all of them, as the case may be, and any adjournment or adjournments thereof, and not to exercise any or all of the other rights or privileges attaching to any or all of the Purchased Trilon Shares or distributions consisting of securities, or otherwise act with respect thereto and agrees to execute and deliver to Offeror, provided the same is not contrary to applicable law, at any time and from time to time, as and when requested by, and at the expense of, Offeror any and all instruments of proxy, authorizations or consents in form and on terms satisfactory to Offeror in respect of any or all of the Purchased Trilon Shares, or distributions consisting of securities, and to designate in any such instruments of proxy the person or persons specified by Offeror as the proxy or the proxy nominee or nominees of the undersigned in respect of the Purchased Trilon Shares or distributions consisting of securities. The undersigned hereby agrees to execute all such documents, transfers and other assurances as may be necessary or desirable to effectively convey the Purchased Trilon Shares and distributions to Offeror. The undersigned waives any right to receive notice of purchase of the undersigned's deposited Purchased Trilon Shares. Each authority herein conferred or agreed to be conferred by the undersigned shall not be revoked by the death or any subsequent legal incapacity of the undersigned and all obligations of the undersigned herein shall be binding upon the heirs, personal representatives and successors of the undersigned. Except as stated in the Offer, this deposit is irrevocable. The authority herein conferred, coupled with an interest, is not intended to be a continuing power of attorney within the meaning of and governed by the Substitute Decisions Act (Ontario), or any similar power of attorney under equivalent legislation in any of the provinces or territories of Canada (a "CPOA"). The execution of this Letter of Transmittal shall not terminate any such CPOA granted by the undersigned previously and shall not be terminated by the execution by the undersigned in the future of a CPOA, and the undersigned hereby agrees not to take any action in future which results in the termination of the authority herein conferred. The undersigned hereby directs the Depositary to issue or cause to be issued a cheque or share certificates, as appropriate, in respect of the Purchased Trilon Shares sold and transferred hereby, and mail the same by registered mail or make available for delivery and deliver the same, in accordance with the instructions given below (or, if no instructions are given, in the name and to the address, if any, of the undersigned as the same appears on the securities register maintained by or on behalf of Trilon). Should any of the Purchased Trilon Shares not be purchased, the undersigned directs the Depositary to return the deposited certificates or new certificates representing the Purchased Trilon Shares not purchased (and other relevant documents) in accordance with the instructions in the preceding sentence. By reason of the use by the undersigned of an English language form of Letter of Transmittal, the undersigned and both of you shall be deemed to have required that any contract evidenced by the Offer as accepted through this Letter of Transmittal, as well as all documents related thereto, be drawn exclusively in the English language. En raison de l'utilisation par le soussigne de la version anglaise de la lettre d'envoi, le soussigne et les destinataires sont reputes avoir requis que tout contrat atteste par l'offre telle qu'acceptee par la presente lettre d'envoi et tout autre document s'y rapportant, soient rediges exclusivement en anglais. 3 ELECTION FOR SHAREHOLDERS Under the Offer, the undersigned hereby elects to receive one or more of the following forms of consideration for the deposited Trilon Shares represented by the above certificate number(s). Shareholders may elect to receive a combination of cash, Brascan Shares and/or Brascan Non-Cumulative Preference Shares, Series 11 by distributing the total number of deposited Trilon Shares among Choice A, B and C below. The allocation of deposited Trilon Shares among Choice A, B and C is solely for the purpose of determining the form(s) of consideration to be received. Shareholders will receive the various forms of consideration in aggregate for all of the Trilon Shares deposited pursuant to this Letter of Transmittal. CHOICE A - THE BRASCAN SHARES ELECTION I hereby allocate: -------------------- Trilon Shares to receive Brascan Shares, in the (insert number of amount of 0.5 Brascan Shares for each Trilon Share Trilon Shares) allocated under this Choice A by the undersigned with this Letter of Transmittal. AND/OR CHOICE B - THE CASH ELECTION I hereby allocate: -------------------- Trilon Shares to receive cash, in the amount of (insert number of $17.00 (subject to adjustments as described in the Trilon Shares) Offer) for each Trilon Share allocated under this Choice B by the undersigned with this Letter of Transmittal. AND/OR CHOICE C - THE BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 ELECTION I hereby allocate: -------------------- Trilon Shares to receive (a) Brascan Non-Cumulative (insert number of Class A Preference Shares, Series 11, in the amount Trilon Shares) of 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 for each Trilon Share and (b) cash, in the amount of $0.05 for each Trilon Share, allocated under this Choice C by the undersigned with this Letter of Transmittal. If none of the foregoing choices is made or the choice(s) are not properly made, the undersigned will be deemed to have elected to receive $17.00 in cash per Trilon Share. The total number of Trilon Shares allocated must equal the total number of Trilon Shares represented by the above certificate number(s). SECONDARY ELECTION FOR SHAREHOLDERS ELECTING TO RECEIVE BRASCAN SHARES OPTION TO RECEIVE CASH OR BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 AS CASH CONSIDERATION By checking the appropriate box below, Shareholders electing above to receive Brascan Shares but who will receive cash consideration if the pro ration adjustments described in the Offer apply, may elect to receive such consideration in the form of (a) $17.00 in cash per Trilon Share, or (b) 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 and $0.05 in cash per Trilon Share. Please check the appropriate box below to specify which form of consideration you wish to receive in lieu of Brascan Shares for your Trilon Shares (check only one): [_] $17.00 in cash per Trilon Share OR [_] 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 and $0.05 in cash per Trilon Share If the undersigned has elected to receive Brascan Shares, but no box is checked above or this section is not otherwise properly completed, the undersigned will be deemed to have elected to receive $17.00 in cash per Trilon Share if the pro ration adjustments apply. SECONDARY ELECTION FOR SHAREHOLDERS ELECTING TO RECEIVE BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 AND WHO DO NOT WISH TO RECEIVE $0.05 IN CASH [_] By checking this box, a Shareholder electing to receive Brascan Non- Cumulative Class A Preference Shares, Series 11 will forego the $0.05 in cash per Trilon Share in all circumstances. 4 No fractional Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 will be delivered in exchange for Trilon Shares pursuant to the Offer. Rather, each Shareholder entitled to a fractional Brascan Share will receive a cash payment determined on the basis of $34.00 for each whole Brascan Share. Each Shareholder entitled to a fractional Brascan Non- Cumulative Class A Preference Share, Series 11 will receive a cash payment determined on the basis of $25.00 for each whole Brascan Non-Cumulative Class A Preference Share, Series 11. The undersigned acknowledges that the consideration payable under the Offer and accordingly, this election, are subject to the provisions set forth in Section 1 of the Offer with respect to the Maximum Share Consideration and Maximum Cash Consideration payable under the Offer. Brascan will pay no more than an aggregate of $388 million in cash under the Offer and will issue no more than an aggregate of 11.4 million Brascan Shares. No Brascan Non- Cumulative Class A Preference Shares, Series 11 will be issued unless Shareholders elect in the aggregate to receive at least the Minimum Series 11 Amount in issue price of such preference shares. If a Shareholder delivers a Notice of Guaranteed Delivery and Election Form in respect of the Trilon Shares deposited with this Letter of Transmittal, the election (or deemed election) made in that notice as to the consideration to be received will supercede any election made in this Letter of Transmittal. FOR CANADIAN RESIDENT SHAREHOLDERS WHO ARE ELIGIBLE FOR AND DESIRE A CANADIAN TAX DEFERRAL By checking the box below, the undersigned: (i) requests a tax instruction letter; (ii) represents that the undersigned is an Eligible Holder (as defined below); (iii) acknowledges that it is the undersigned's responsibility to prepare and file the appropriate tax election(s) that will be described in the tax instruction letter and send such documents to the Depositary, so that they are received by the Depositary no later than 90 days after the Expiry Time; (iv) acknowledges that Brascan, Trilon and the Depositary are not responsible for the proper completion or filing of any tax election and that the undersigned will be solely responsible for the payment of any late filing penalty; (v) acknowledges that Brascan agrees only to execute any properly completed tax election form submitted to it in duplicate and to forward one copy of such tax election form executed by Brascan by ordinary mail to the undersigned; (vi) acknowledges that with the exception of the execution of the tax election forms by Brascan compliance with the requirements for a valid tax election will be the sole responsibility of the undersigned and that Brascan, Trilon and the Depositary are not responsible or liable for taxes, interest, penalties, damages or expenses resulting from the failure by anyone to properly complete any tax election or to file it properly within the time prescribed and in the form prescribed by the Income Tax Act (Canada) (the "Tax Act") (or the corresponding provisions of any applicable provincial legislation); and (vii) acknowledges that a deferral is only available in the circumstances described in the Offer to the extent the undersigned receives Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 in respect of Trilon Shares deposited herewith. Please see "Canadian Federal Income Tax Considerations" in the Circular. [_]Please check if you want and are eligible for a tax instruction letter. An "Eligible Holder" is a Shareholder: (i) who is a resident of Canada for purposes of the Tax Act other than any such Shareholder who is exempt from tax under the Tax Act, or (ii) which is a partnership that owns Trilon Shares if one or more of its members would be an Eligible Holder if such member held such Trilon Shares directly. Please see "Canadian Federal Income Tax Considerations" in the Circular. Signature guaranteed by Dated: _______________________ , 2002 (if required under Instruction 3): _____________________________________ _____________________________________ Signature of Shareholder or Authorized Signature Authorized Representative - see Instruction 4 _____________________________________ _____________________________________ Name of Guarantor (please print or Name of Shareholder (please print or type) type) _____________________________________ _____________________________________ Address (please print or type) Name of Authorized Representative, if applicable _____________________________________ (please print or type) _____________________________________ Daytime telephone number of Shareholder or Authorized Representative 5 A. REGISTRATION AND PAYMENT B. DELIVERY INSTRUCTIONS INSTRUCTIONS SEND CHEQUE/CERTIFICATE (unless ISSUE CHEQUE/CERTIFICATE IN THE BLOCK "D" below is checked) TO: NAME OF: (please print) ----------------------------------- ----------------------------------- (Name) (Name) ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- (Street Address and Number) (Street Address and Number) ----------------------------------- ----------------------------------- (City and Province or State) (City and Province or State) ----------------------------------- ----------------------------------- (Country and Postal (Zip) Code) (Country and Postal (Zip) Code) ----------------------------------- (Telephone - Business Hours) ----------------------------------- (Social Insurance or Social Security Number) C. U.S. RESIDENTS/CITIZENS D. SPECIAL PICK-UP INSTRUCTIONS U.S. residents/citizens must [_]HOLD CHEQUE/CERTIFICATE FOR provide their Taxpayer PICKUP Identification Number -------------------------------- [_] CHECK HERE IF TRILON SHARES ARE BEING DEPOSITED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND ELECTION FORM PREVIOUSLY SENT TO THE DEPOSITARY AND, IF SUCH NOTICE WAS SENT, COMPLETE THE FOLLOWING (please print or type): Name of Registered Holder: _________________________________________________ Date of Execution of Notice of Guaranteed Delivery and Election Form: _______ Name of Institution which Guaranteed Delivery: ______________________________ INSTRUCTIONS 1. Use of Letter of Transmittal (a) This Letter of Transmittal, properly completed and signed, must be received by the Depositary together with the certificates representing the Trilon Shares in order for Shareholders to obtain the cheque and/or certificates evidencing the Brascan Shares and/or Brascan Non- Cumulative Class A Preference Shares, Series 11 to which they are entitled. Shareholders are urged to deliver their properly completed Letter of Transmittal, together with their certificate(s) representing Trilon Shares, for receipt by the Depositary on or before May 16, 2002. (b) The method used to deliver this Letter of Transmittal and any accompanying certificate(s) representing Trilon Shares is at the option and risk of the holder, and delivery will be deemed effective only when such documents are actually received. Brascan recommends that the necessary documentation be hand delivered to the Depositary at one of the addresses specified below and a receipt obtained; otherwise the use of first class insured mail, with return receipt requested, is recommended. A pre-addressed security return envelope is enclosed for your convenience. (c) Shareholders whose Trilon Shares are registered in the name of a broker, investment dealer, bank, trust company or other nominee should contact that nominee for assistance in delivering those Trilon Shares. 6 2. Signatures This Letter of Transmittal must be filled in, dated and signed by the holder of Trilon Shares or by such holder's duly authorized representative (in accordance with Instruction 4 below). (a) If this Letter of Transmittal is signed by the registered owner(s) of the accompanying certificate(s) for Trilon Shares, such signature(s) on this Letter of Transmittal must correspond with the name(s) as registered or as written on the face of such certificate(s) without any change whatsoever, and the certificate(s) need not be endorsed. If such transmitted certificate(s) is owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (b) If this Letter of Transmittal is signed by a person other than the registered owner(s) of the accompanying certificate(s) for Trilon Shares, or if a cheque or certificates representing Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 are to be issued to a person other than the registered owner(s): (i) such deposited certificate(s) must be endorsed or be accompanied by appropriate share transfer power(s) of attorney properly completed by the registered owner(s); and (ii) the signature(s) on such endorsement or power(s) of attorney must correspond exactly to the name(s) of the registered owner(s) as registered or as appearing on the certificate(s) and must be guaranteed as noted in Instruction 3 below. 3. Guarantee of Signatures If this Letter of Transmittal is signed by a person other than the registered owner(s) of the accompanying certificates for Trilon Shares (in accordance with Instruction 2 above), such signature must be guaranteed by an Eligible Institution, or in some other manner satisfactory to the Depositary (except that no guarantee is required if the signature is that of an Eligible Institution). An "Eligible Institution" means a Canadian chartered bank, a major trust company in Canada, a member of the Securities Transfer Association Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange, Inc. Medallion Signature Program (MSP). Members of these programs are usually members of a recognized stock exchange in Canada or the United States, members of the Investment Dealers Association of Canada, members of The National Association of Securities Dealers or banks or trust companies in the United States. 4. Fiduciaries, Representatives and Authorizations Where this Letter of Transmittal is executed by a person as an executor, administrator, trustee or guardian, or on behalf of a corporation, partnership or association or is executed by any other person acting in a representative capacity, this Letter of Transmittal must be accompanied by satisfactory evidence of authority to act. Brascan or the Depositary, in their discretion, may require additional evidence of authority or additional documentation. 5. Delivery Instructions If any cheque(s) and/or any share certificate(s) are to be sent to someone other than the address of the Shareholder as it appears in this Letter of Transmittal, the box entitled "Delivery Instructions" should be completed. If that box is not completed, any cheque(s) and any share certificate(s) representing Brascan Shares and/or Brascan Non-Cumulative Class A Preference Shares, Series 11 issued in exchange for Trilon Shares will be mailed to the depositing Shareholder at the address of the Shareholder as it appears in this Letter of Transmittal or, if no address of the Shareholder is provided in this Letter of Transmittal, then it will be mailed to the address of the Shareholder as it appears on the securities register of Trilon. 6. Miscellaneous (a) If the space on this Letter of Transmittal is insufficient to list all certificates for Trilon Shares, additional certificate numbers and numbers of Trilon Shares may be included on a separate signed list annexed to this Letter of Transmittal. (b) If Trilon Shares are registered in diff erent names (e.g. "John Doe" and "J. Doe"), a separate Letter of Transmittal should be signed for each different registration. (c) No alternative, conditional or contingent deposits will be accepted and no fractional Brascan Shares or fractional Brascan Non-Cumulative Class A Preference Shares, Series 11 will be issued. (d) Additional copies of this Letter of Transmittal may be obtained from the Depositary at one of the offices specified below. (e) Before completing this Letter of Transmittal, you are urged to read the accompanying Offer and Circular. (f) Brascan reserves the right in its absolute discretion to instruct the Depositary to waive any defect or irregularity contained in any Letter of Transmittal received. 7. Lost Certificates If a share certificate representing the Trilon Shares of a holder has been destroyed, lost, mutilated or mislaid, the registered holder of that certificate should immediately contact the Depositary at (416) 643-5500 in the Toronto area, or toll free at 1-800-387-0825, regarding the issuance of a replacement certificate upon the holder satisfying such requirements as may be imposed by Brascan in connection with the issuance of a replacement certificate. 8. Assistance CIBC MELLON TRUST COMPANY (SEE BACK COVER PAGE FOR ADDRESSES AND TELEPHONE NUMBERS) OR YOUR BROKER OR OTHER FINANCIAL ADVISOR WILL BE ABLE TO ASSIST YOU IN COMPLETING THIS LETTER OF TRANSMITTAL. 7 The Depositary for the Offer is CIBC Mellon Trust Company Offices of the Depositary Telephone: (416) 643-5500 Toll-Free: 1-800-387-0825 Inquiries by email: inquiries@cibcmellon.com Toronto By Mail: By Hand or Courier: P.O. Box 1036 199 Bay Street Adelaide Street Postal Station Commerce Court West Toronto, ON Securities Level M5C 2K4 Toronto, ON M5L 1G9 Montreal Calgary By Hand or Courier: By Hand or Courier: 2001 University Street 600 The Dome Tower Floor 16 333 - 7th Avenue S.W. Montreal, PQ Floor 6 H3A 2A6 Calgary, AB T2P 2Z1 Vancouver By Hand or Courier: 1066 West Hastings Street Suite 1600 Vancouver, BC V6E 3X1 Any questions and requests for assistance may be directed by Shareholders to the Depositary at the telephone numbers and locations set out above. EX-3.3 5 dex33.txt NOTICE OF GUARANTEED DELIVERY AND ELECTION FORM Exhibit 3.3 THIS IS NOT A LETTER OF TRANSMITTAL NOTICE OF GUARANTEED DELIVERY AND ELECTION FORM for Deposit of Class A Shares and Class B Non-Voting Shares of TRILON FINANCIAL CORPORATION to be deposited pursuant to the Offer dated April 11, 2002 of BRASCAN CORPORATION This Notice of Guaranteed Delivery and Election Form (the "Notice of Guaranteed Delivery") must be used to accept the offer (the "Offer") dated April 11, 2002 made by Brascan Corporation ("Brascan" or the "Offeror") to holders ("Shareholders") of Class A Shares and Class B Non-Voting Shares (collectively, the "Trilon Shares") of Trilon Financial Corporation ("Trilon"), if certificates for the Trilon Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiry Time of the Offer (11:59 p.m. (local time)) on May 16, 2002. The terms and conditions of the Offer are incorporated by reference in this Notice of Guaranteed Delivery. Capitalized terms used but not defined in this Notice of Guaranteed Delivery have the meanings ascribed to them in the Offer and Circular dated April 11, 2002 that accompanies this Notice of Guaranteed Delivery. If you are a participant in Trilon's Dividend Reinvestment Plan, do not submit this Notice of Guaranteed Delivery to accept the Offer in respect of Trilon Shares held in your account under the plan ("Trilon Plan Shares"). You should use the Letter of Transmittal and follow the instructions therein in order to tender your Trilon Plan Shares. WHEN AND HOW TO USE THIS NOTICE OF GUARANTEED DELIVERY As set forth in Section 3 of the Offer, if a Shareholder wishes to deposit Trilon Shares pursuant to the Offer and (i) the certificate(s) representing such Trilon Shares are not immediately available, or (ii) such Shareholder is not able to deliver such certificate(s) and all other required documents to the Depositary at or prior to the expiry of the Deposit Period, such Trilon Shares may nevertheless be deposited pursuant to the Offer by utilizing the procedures contemplated by this Notice of Guaranteed Delivery, provided that all of the following conditions are met: (a) such deposit is made by or through an Eligible Institution; (b) a properly completed and duly executed copy of this Notice of Guaranteed Delivery, or a manually executed facsimile hereof, together with a guarantee by an Eligible Institution in the form set forth below, is received by the Depositary at its principal office in Toronto listed below, at or prior to the Expiry Time; and (c) the certificate(s) representing deposited Trilon Shares, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal, or a manually executed facsimile thereof, covering such Trilon Shares and all other documents required by the Letter of Transmittal, are received by the Depositary at its principal office in Toronto listed below at or before 5:00 p.m. (Toronto time) on the third trading day on The Toronto Stock Exchange after the expiry of the Deposit Period. To constitute delivery for the purpose of satisfying a guaranteed delivery, the Letter of Transmittal and accompanying share certificate(s) must be delivered to the same office of the Depositary in Toronto where the Notice of Guaranteed Delivery was delivered. An "Eligible Institution" means a Canadian chartered bank, a major trust company in Canada, a member of the Securities Transfer Association Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange, Inc. Medallion Signature Program (MSP). Members of these programs are usually members of a recognized stock exchange in Canada or the United States, members of the Investment Dealers Association of Canada, members of The National Association of Securities Dealers or banks or trust companies in the United States. This Notice of Guaranteed Delivery may be delivered by hand, transmitted by fax or delivered by mail to the Depositary at its principal office in Toronto listed below not later than the expiry of the Deposit Period and must include a guarantee by an Eligible Institution in the form set forth below. TO: The Depositary, CIBC Mellon Trust Company Telephone: (416) 643-5500 Toll-Free: 1-800-387-0825 Inquiries by email: inquiries@cibcmellon.com By Mail: By Hand or Courier: By Fax: P.O. Box 1036 199 Bay Street (416) 643-3148 Adelaide Street Postal Commerce Court West Station Toronto, ON Securities Level M5C 2K4 Toronto, ON M5L 1G9 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY TO A FAX NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures on the Letter of Transmittal. If a signature for the Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature must appear in the applicable space in the Letter of Transmittal. The undersigned hereby deposits with the Offeror, upon the terms and subject to the conditions set forth in the Offer and Circular dated April 11, 2002 and the related Letter of Transmittal, receipt of which is hereby acknowledged, the Trilon Shares described below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer, "How to Tender Trilon Shares to the Offer - Procedure for Guaranteed Delivery" and in the Letter of Transmittal. - ------------------------------------------------------------------------------- Certificate Number Name of Registered Holder (if available) (please print) Number of Trilon Shares - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TOTAL ------------------- Telephone number during business hours: ( ) Signature: ________________________ Dated: ______________________ , 2002 2 ELECTION FOR SHAREHOLDERS Under the Offer, the undersigned hereby elects to receive one or more of the following forms of consideration for the deposited Trilon Shares represented by the above certificate number(s). Shareholders may elect to receive a combination of cash, Brascan Shares and/or Brascan Non-Cumulative Preference Shares, Series 11 by distributing the total number of deposited Trilon Shares among Choice A, B and C below. The allocation of deposited Trilon Shares among Choice A, B and C is solely for the purpose of determining the form(s) of consideration to be received. Shareholders will receive the various forms of consideration in aggregate for all of the Trilon Shares deposited pursuant to this Notice of Guaranteed Delivery. CHOICE A - THE BRASCAN SHARES ELECTION I hereby allocate: -------------------- Trilon Shares to receive Brascan Shares, in the (insert number of amount of 0.5 Brascan Shares for each Trilon Share Trilon Shares) allocated under this Choice A by the undersigned with this Notice of Guaranteed Delivery. AND/OR CHOICE B - THE CASH ELECTION I hereby allocate: -------------------- Trilon Shares to receive cash, in the amount of (insert number of $17.00 (subject to adjustments as described in the Trilon Shares) Offer) for each Trilon Share allocated under this Choice B by the undersigned with this Notice of Guaranteed Delivery. AND/OR CHOICE C - THE BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 ELECTION I hereby allocate: -------------------- Trilon Shares to receive (a) Brascan Non-Cumulative (insert number of Class A Preference Shares, Series 11, in the amount Trilon Shares) of 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 for each Trilon Share and (b) cash, in the amount of $0.05 for each Trilon Share, allocated under this Choice C by the undersigned with this Notice of Guaranteed Delivery. If none of the foregoing choices is made or the choice(s) are not properly made, the undersigned will be deemed to have elected to receive $17.00 in cash per Trilon Share. The total number of Trilon Shares allocated must equal the total number of Trilon Shares represented by the above certificate number(s). SECONDARY ELECTION FOR SHAREHOLDERS ELECTING TO RECEIVE BRASCAN SHARES OPTION TO RECEIVE CASH OR BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 AS CASH CONSIDERATION By checking the appropriate box below, Shareholders electing above to receive Brascan Shares but who will receive cash consideration if the pro ration adjustments described in the Offer apply, may elect to receive such consideration in the form of (a) $17.00 in cash per Trilon Share, or (b) 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 and $0.05 in cash per Trilon Share. Please check the appropriate box below to specify which form of consideration you wish to receive in lieu of Brascan Shares for your Trilon Shares (check only one): [_] $17.00 in cash per Trilon Share OR [_] 0.678 of a $25.00 Brascan Non-Cumulative Class A Preference Share, Series 11 and $0.05 in cash per Trilon Share If the undersigned has elected to receive Brascan Shares, but no box is checked above or this section is not otherwise properly completed, the undersigned will be deemed to have elected to receive $17.00 in cash per Trilon Share if the pro ration adjustments apply. 3 SECONDARY ELECTION FOR SHAREHOLDERS ELECTING TO RECEIVE BRASCAN NON-CUMULATIVE CLASS A PREFERENCE SHARES, SERIES 11 AND WHO DO NOT WISH TO RECEIVE $0.05 IN CASH [_]By checking this box, a Shareholder electing to receive Brascan Non- Cumulative Class A Preference Shares, Series 11 will forego the $0.05 in cash per Trilon Share in all circumstances. No fractional Brascan Shares or Brascan Non-Cumulative Class A Preference Shares, Series 11 will be delivered in exchange for Trilon Shares pursuant to the Offer. Rather, each Shareholder entitled to a fractional Brascan Share will receive a cash payment determined on the basis of $34.00 for each whole Brascan Share. Each Shareholder entitled to a fractional Non-Cumulative Brascan Class A Preference Share, Series 11 will receive a cash payment determined on the basis of $25.00 for each whole Brascan Non-Cumulative Class A Preference Share, Series 11. The undersigned acknowledges that the consideration payable under the Offer and accordingly, this election, are subject to the provisions set forth in Section 1 of the Offer with respect to the Maximum Share Consideration and Maximum Cash Consideration payable under the Offer. Brascan will pay no more than an aggregate of $388 million in cash under the Offer and will issue no more than an aggregate of 11.4 million Brascan Shares. No Brascan Non- Cumulative Class A Preference Shares, Series 11 will be issued unless Shareholders elect in the aggregate to receive at least the Minimum Series 11 Amount in issue price of such preference shares. Any election (or deemed election) as to the consideration to be received by a Shareholder made in this Notice of Guaranteed Delivery will supercede any election made in a Letter of Transmittal. If no election as to the form of consideration to be received by a Shareholder is made in this Notice of Guaranteed Delivery, that Shareholder shall be deemed to have elected to receive $17.00 in cash per Trilon Share. GUARANTEE (Not to be used for signature guarantee) The undersigned, an Eligible Institution, hereby guarantees delivery to the office of the Depositary in Toronto specified herein of the certificates representing Trilon Shares tendered hereby, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal in the form enclosed herewith or an originally signed facsimile copy thereof, and all other documents required by the Letter of Transmittal, all at or before 5:00 p.m. (Toronto time) on the third trading day on The Toronto Stock Exchange after the expiry of the Deposit Period. Dated: _____________________ , 2002. ___________________________________ ___________________________________ (Name of Firm) (Authorized Signature) ___________________________________ ___________________________________ (Address of Firm) (Name) ___________________________________ ___________________________________ (Title) ___________________________________ ___________________________________ (Telephone Number) (Date) DO NOT SEND CERTIFICATES WITH THIS FORM. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 4 EX-3.4 6 dex34.txt DIRECTORS' CIRCULAR Exhibit 3.4 This document is important and requires your immediate attention. If you are in doubt as to how to respond to the Offer, you should consult with your investment dealer, stockbroker, lawyer or other professional advisor. Inquiries concerning the information in this document should be directed to Trilon Financial Corporation to the attention of Bryan K. Davis at (416) 359-8612. [LOGO] TRILON TRILON FINANCIAL CORPORATION Directors' Circular recommending ACCEPTANCE of the Offer by BRASCAN CORPORATION dated April 11, 2002 to purchase all issued and outstanding Class A Shares and Class B Non-Voting Shares of TRILON FINANCIAL CORPORATION on the basis of Cdn.$17.00 cash (subject to proration and other adjustments, as described in the Offer) or 0.5 of a Class A Limited Voting Share of Brascan Corporation (subject to proration, as described in the Offer) or 0.678 of a Cdn. $25.00 Non-Cumulative Class A Preference Share, Series 11 of Brascan and Cdn. $0.05 in cash for each Trilon Financial Corporation share tendered The Board of Directors unanimously recommends that Trilon Financial Corporation's Shareholders ACCEPT the Offer and deposit their Class A Shares and Class B Non-Voting Shares under the Offer April 11, 2002 [LOGO] TRILON April 11, 2002 Dear Shareholder: Accompanying this Directors' Circular is an offer from Brascan Corporation ("Brascan"), dated April 11, 2002 (the "Offer"), to purchase all of your Trilon Class A Shares and Class B Non-Voting Shares not already held by Brascan and its affiliates (the "Trilon Shares"). Holders of Trilon Shares ("Minority Shareholders") tendering to the Offer may elect to receive payment for each Trilon Share tendered in three different ways: (i) in the form of $17.00 cash (subject to proration and other adjustments, as described in the Offer); or (ii) in the form of 0.5 of a Class A Limited Voting Share of Brascan ("Brascan Shares") (subject to proration, as described in the Offer); or (iii) in the form of 0.678 of a $25.00 Non-Cumulative Class A Preference Share, Series 11 of Brascan ("Series 11 Shares") and $0.05 in cash subject to Shareholders electing in the aggregate to receive at least $10,000,000 (or such lesser amount as Brascan may determine) in issue price of Series 11 Shares. The Board of Directors has determined that the Offer is in the best interests of Trilon and is fair to holders of Trilon Shares (other than Brascan and its affiliates), and unanimously recommends that you accept the Offer and tender your Trilon Shares. The Board of Directors has carefully considered the Offer and received advice from its financial and legal advisors and from a committee of independent directors established to consider the Offer (the "Independent Committee"). In concluding that the Offer is in the best interests of Trilon and is fair to the Minority Shareholders, the Board of Directors identified a number of factors as being most relevant, including the following: . the conclusion reached by the Independent Committee after careful deliberation that the Offer is in the best interests of Trilon and is fair to the Minority Shareholders; . the opinion of TD Securities Inc., which is reproduced in full as a schedule to this Directors' Circular, that the consideration under the Offer is fair, from a financial point of view, to the Minority Shareholders; . the value of the consideration being offered is in the upper range of the valuation of the Trilon Shares prepared by TD Securities Inc., which determined that the fair market value of the Trilon Shares as of April 4, 2002 is in a range of $15.65 to $17.45 per share; . while the value of the consideration being offered represents a nominal premium to the trading price of Trilon's Class A Shares immediately prior to the announcement of the Offer, the value represents a 20% premium to the price the Trilon Class A Shares traded at 3 months ago, and a 42% premium to the price at which Trilon repurchased Class A Shares under a substantial issuer bid completed 15 months ago; . the premium implied by the consideration being offered is attractive in light of Trilon's asset base which consists primarily of a portfolio of financial assets and offers limited opportunity to generate incremental value relative to its underlying value; . Minority Shareholders are being offered alternative forms of consideration designed to suit their individual needs. Minority Shareholders can elect to receive their payment 100% in Brascan Shares or 100% in cash, in each case subject to proration. Furthermore, Minority Shareholders can elect to receive their payment in the form of Series 11 Shares without limit so that Minority Shareholders can both defer capital gains taxes and increase the yield on the securities received. Series 11 Shares will pay a dividend of $1.375 per share per annum payable quarterly, representing a dividend yield of 5.5% per annum; and . Brascan owns 70% of the common equity of Trilon. As a result, no alternative value maximizing transaction can occur without Brascan's co- operation and consent. Brascan has indicated that it regards its investment in Trilon as one of its principal operating business units and it does not contemplate a sale or divestiture. Accordingly, it is highly unlikely that there would be an alternative transaction available to the Minority Shareholders. We urge you to read the enclosed material carefully. If you have any questions about the Offer or require any assistance with the materials or with depositing your Trilon Shares, please call one of the numbers listed on the last page of the enclosed material or contact your personal advisors. In addition to the foregoing, we hereby give notice that, in light of the Offer, the Annual and Special Meeting of the Shareholders scheduled to take place on April 23, 2002 will be adjourned until May 21, 2002 at 11:00 a.m. at the Design Exchange, Toronto. Sincerely, /s/ Timothy R. Price Timothy R. Price Chairman ii TABLE OF CONTENTS
Page ---- Recommendation............................................................ 1 Reasons for Recommendation................................................ 1 Background to the Offer and Review by the Corporation..................... 2 Recommendation of the Independent Committee............................... 3 Trilon Financial Corporation.............................................. 4 Principal Holders of Securities of the Corporation........................ 4 Directors and Senior Officers of the Corporation and Ownership of Securities............................................................... 5 Trading in Securities of the Corporation.................................. 6 Intention of Directors, Senior Officers, associates and Certain Shareholders with respect to the Offer................................... 8 Ownership of Securities of the Offeror.................................... 8 Relationship between the Offeror and the Directors and Senior Officers of the Corporation.......................................................... 9 Interests of Directors, Senior Officers and Others in Material Contracts with the Offeror......................................................... 9 Arrangements or Agreements Between the Corporation and its Directors and Senior Officers.......................................................... 9 Prior Valuations.......................................................... 10 Material Changes in the Affairs of the Corporation........................ 10 Statutory Rights.......................................................... 10 Consent of TD Securities Inc.............................................. 11 Approval and Certificate.................................................. 12 Schedule A................................................................ A-1
NOTICE TO U.S. SHAREHOLDERS The tender offer referred to herein is made for the securities of a Canadian issuer and while the Offer is subject to Canadian disclosure requirements, investors should be aware that these requirements are different from those of the United States. The enforcement by investors of civil liabilities under the United States federal securities laws may be affected adversely by the fact that Trilon Financial Corporation is located in Toronto, Canada and most of its officers and directors are Canadian residents or residents of jurisdictions other than the United States. iii TRILON FINANCIAL CORPORATION DIRECTORS' CIRCULAR April 11, 2002 This Directors' Circular is issued by the board of directors (the "Board of Directors" or the "Board") of Trilon Financial Corporation ("Trilon" or the "Corporation") in connection with the offer dated April 8, 2002 (the "Offer") made by Brascan Corporation (the "Offeror" or "Brascan") to purchase all of the outstanding Class A Shares ("Trilon Class A Shares") and Class B Non- Voting Shares ("Trilon Class B Shares") of the Corporation not including such shares already held by Brascan or its affiliates (the "Trilon Shares"), all upon the terms and subject to the conditions set forth in the Offer and accompanying offering circular (the "Offering Circular") of the Offeror dated April 11, 2002. The Offer will expire at 11:59 p.m. (local time) on May 16, 2002 unless withdrawn or extended (the date on which the Offer, as it may be extended, expires being referred to as the "Expiry Date"). All dollar amounts set forth in this Directors' Circular are in Canadian dollars. Under the Offer, registered holders of Trilon Shares ("Minority Shareholders") may tender their Trilon Shares in exchange for the following consideration for each Trilon Share tendered: (i) $17.00 in cash (subject to proration, as described in the Offer and subject to adjustment for a Trilon dividend anticipated to be declared in April 2002, as described in the Offer); or (ii) 0.5 of a Class A Limited Voting Share of Brascan ("Brascan Shares") (subject to proration, as described in the Offer); or (iii) 0.678 of a $25.00 Non-Cumulative Class A Preference Share, Series 11 of Brascan ("Series 11 Shares") and $0.05 in cash. Minority Shareholders electing to receive Series 11 Shares in the third option above may choose to forgo the $0.05 in cash for each Trilon Share. This option may enable certain Minority Shareholders to exchange their Trilon Shares for Series 11 Shares on a tax deferred basis who would not be entitled to do so without foregoing the $0.05 in cash and to enable Minority Shareholders to obtain a tax deferral without filing any documentation that may otherwise be required to obtain such deferral. The aggregate amount of cash paid as consideration is limited to $388 million. The aggregate number of Class A Limited Voting Shares of Brascan issued as share consideration is limited to 11.4 million shares. If either of these limits is exceeded, the amount of cash paid in the first option above and the number of Brascan Shares issued in the second option above will be adjusted on a pro rata basis. The Series 11 Shares will only be issued if Minority Shareholders elect in the aggregate to receive at least $10,000,000 (or such lesser amount as Brascan may determine) in issue price of Series 11 Shares. RECOMMENDATION ACCEPTANCE OF THE OFFER RECOMMENDED The Board of Directors of Trilon unanimously recommends that the Offer be ACCEPTED and that Minority Shareholders deposit their Trilon Shares under the Offer by completing and returning the letter of transmittal or notice of guaranteed delivery that accompanies the Offer. REASONS FOR RECOMMENDATION The Board of Directors has carefully considered the Offer and received advice from its financial and legal advisors and a committee of independent directors established to consider the Offer (the "Independent Committee"). In concluding that the Offer is in the best interests of the Corporation and is fair to the Minority Shareholders, the Board of Directors identified a number of factors as being most relevant, including the following: . the conclusion reached by the Independent Committee after careful deliberation that the Offer is in the best interests of Trilon and is fair to the Minority Shareholders; 1 . the opinion of TD Securities Inc. ("TD Securities"), which is reproduced in full as a schedule to this Directors' Circular, that the consideration under the Offer is fair from a financial point of view to the Minority Shareholders; . the value of the consideration being offered is in the upper range of the valuation of the Trilon Shares prepared by TD Securities Inc., which determined that the fair market value of the Trilon Shares as of April 4, 2002 is in a range of $15.65 to $17.45; . while the value of the consideration being offered represents a nominal premium to the trading price of Trilon's Class A Shares immediately prior to the announcement of the Offer, the value represents a 20% premium to the price the Class A Shares traded at 3 months ago, and a 42% premium to the price at which Trilon repurchased Class A Shares under a substantial issuer bid completed 15 months ago; . the premium implied by the consideration being offered is attractive in light of Trilon's asset base which consists primarily of a portfolio of financial assets and offers limited opportunity to generate incremental value relative to its underlying value; . Minority Shareholders are being offered alternative forms of consideration designed to suit their individual needs. Minority Shareholders can elect to receive their payment 100% in Brascan Shares or 100% in cash subject to proration. Furthermore, Minority Shareholders can elect to receive their payment in the form of Series 11 Shares without limit so that Shareholders can both defer capital gains taxes and increase the yield on the securities received. Series 11 Shares will pay a dividend of $1.375 per share per annum payable quarterly, representing a dividend yield of 5.5% per annum; and . Brascan owns 70% of the common equity of Trilon. As a result, no alternative value maximizing transaction can occur without Brascan's co- operation and consent. Brascan has indicated that it regards its investment in Trilon as one of its principal operating business units and it does not contemplate a sale or divestiture. Accordingly, it is highly unlikely that there would be an alternative transaction available to the Minority Shareholders. The Board of Directors is not recommending which of the three available forms of consideration Minority Shareholders should elect to receive for their Trilon Shares. This is an individual decision to be made by a Shareholder based on his or her circumstances. BACKGROUND TO THE OFFER AND REVIEW BY THE CORPORATION Background to the Offer Brascan has owned a significant interest in the Corporation since the Corporation was established as a public company in 1982. In January 2001, when the Corporation repurchased 14.5 million of its Trilon Class A Shares pursuant to a substantial issuer bid, Brascan's controlling interest in Trilon increased from 65% to 71% of the Trilon Shares (subsequently decreased to 70% as a result of the exercise of outstanding share purchase warrants of Trilon). As of April 11, 2002, Brascan holds 58,214,553 Trilon Class A Shares, representing approximately 56% of the number of Trilon Class A Shares outstanding. Brascan also holds 47,897,344 Trilon Class B Shares, each of which is convertible one-for-one into Trilon Class A Shares. Management and the boards of directors of both Brascan and Trilon discussed the potential combination of the two companies on numerous occasions over the past several years, given that the companies' business plans and activities are highly complementary to each other. Brascan has recently stated that its business strategy includes, among other objectives, acquiring 100% ownership of certain of its operating businesses. In August 2001, preliminary discussions took place between Brascan and Trilon regarding a potential transaction between the two companies. These discussions ended in October 2001, as it was determined at the time that a transaction was unlikely to proceed in the short term, largely as a result of the impact on the financial markets of the events of September 11, 2001. In March 2002, senior executives of Brascan approached senior executives of Trilon to re-engage discussions concerning a merger transaction. These discussions were concluded on March 25, 2002, at which point the proposed transaction was submitted to the boards of directors of each of Trilon and Brascan for their consideration and the board of directors of Brascan authorized management of Brascan to proceed with its plans to conclude a merger between Trilon and Brascan. On March 26, 2002, Brascan announced by press release its intention to acquire all of the Trilon Shares not already held by Brascan. 2 The Independent Committee Effective August 22, 2001, the Board of Directors appointed the Independent Committee, the members of which are independent of Brascan and management of Trilon, for the purposes of exploring the possibility of engaging in a merger transaction with Brascan. William A. Dimma, A. Gordon Craig, Susan E. Crocker, Patrick J. Keenan, Donald C. Lowe and David R. McCamus were each appointed to the Independent Committee. The Independent Committee appointed William A. Dimma as its Chair. Independent Legal and Financial Advisors At the time of its formation, the Independent Committee engaged Osler, Hoskin & Harcourt LLP as its legal counsel to assist the Independent Committee in discharging its responsibilities and to provide the Independent Committee with advice concerning its duties and the conduct of its meetings. On September 6, 2001, the Independent Committee engaged TD Securities to serve as financial advisor to the Independent Committee and, if required, to prepare and deliver a valuation of the Trilon Shares and to provide an opinion as to whether any proposed transaction was fair, from a financial point of view, to Minority Shareholders. The Independent Committee satisfied itself that TD Securities was a qualified and independent advisor and competent to provide the financial services required by the Independent Committee. In October 2001, the Independent Committee adjourned its initial deliberations for the reasons set out above. Immediately following the announcement by Brascan of its intention to make the Offer, the Board of Directors reconvened the Independent Committee to review the Offer. The Independent Committee requested that both Osler, Hoskin & Harcourt LLP and TD Securities continue their services to the Independent Committee and complete the work previously undertaken. Deliberations of the Independent Committee During the course of their deliberations, the Independent Committee received a presentation from management of Brascan with respect to the Offer. Management of Brascan was asked to provide and did provide an explanation as to why in their opinion the Offer was in the best interests of Trilon and fair to Minority Shareholders. Detailed discussions were then held with management of Trilon concerning the impact of the Offer on Trilon and its stakeholders. Representatives of TD Securities attended substantially all of the Independent Committee's meetings and provided financial advice with respect to the Offer. From September 6, 2001 to April 4, 2002, TD Securities proceeded to gather and review the financial information necessary for the preparation of a valuation of the Trilon Shares and the consideration payable for the Trilon Shares (the "Valuation") and an opinion as to the fairness of the Offer from a financial point of view to Minority Shareholders (the "Fairness Opinion"). The Independent Committee conducted a detailed review with TD Securities of the analysis and methodologies underlying the Valuation and Fairness Opinion. The Independent Committee's members satisfied themselves that the methodology and assumptions were appropriate in the circumstances. The Independent Committee also discussed with TD Securities the results of its due diligence meetings with management of Trilon. On April 4, 2002, the Independent Committee received orally from TD Securities the Valuation in compliance with Ontario Securities Commission Rule 61-501 and Commission des mobilieres du Quebec Policy Q-27. The written Valuation sets out a range of fair market values for the Trilon Shares as of April 4, 2002 of $15.65 to $17.45 per Trilon Share. Further, the Valuation sets out a range of values for the Brascan Shares as of April 4, 2002 of $33.76 to $34.06 per Brascan Share and a range of values for the Series 11 Shares as of April 4, 2002 of $24.79 to $25.21. TD Securities also provided the Independent Committee with its Fairness Opinion in which it concluded that, in its opinion, as of April 4, 2002 the consideration offered under the Offer is fair, from a financial point of view, to the Minority Shareholders. The Valuation and Fairness Opinion, including the assumptions on which they are based, are attached as Schedule A to this Directors' Circular, and are summarized in the Offer. Minority Shareholders are urged to read the Valuation and Fairness Opinion in its entirety. As indicated in the Valuation and Fairness Opinion, the Valuation and Fairness Opinion must be considered as a whole and selecting portions of such analysis or the factors considered by it, without considering all analyses and factors together, could create a misleading view of the process underlying the Valuation and Fairness Opinion. RECOMMENDATION OF THE INDEPENDENT COMMITTEE In reaching its determination to recommend that the Board of Directors recommend that Minority Shareholders accept the Offer, the Independent Committee reviewed and considered, among other matters (i) the Valuation and 3 Fairness Opinion given by TD Securities Inc, the financial advisor to the Independent Committee (ii) the premium offered and the characteristics of the consideration involved in the Offer and (iii) submissions from the Board of Directors and officers of the Corporation other than members of the Independent Committee with respect to the benefits of the Offer and the best interests of the Corporation. The Independent Committee reviewed the information provided by the Corporation, had discussions with the legal counsel and financial advisor to the Independent Committee, and examined all other documents and information that the Independent Committee and its legal counsel and financial advisor considered relevant. In addition, in their capacity as members of the Board of Directors, the members of the Independent Committee had very recent discussions with senior management of the Corporation with respect to the business, financial condition and prospects of the Corporation. Furthermore, the Independent Committee was advised by the management of Brascan that Brascan would not be prepared to increase the consideration under the Offer. The Independent Committee regularly consulted with its legal counsel and financial advisor during the course of its analysis of the Offer. Among other factors considered by the Independent Committee were those that also formed the basis for the Board's decision to recommend the Offer, which are set out above under "Reasons for Recommendation". On April 4, 2002, after considering all of these factors and after having met a total of 11 times, the Independent Committee unanimously concluded that, in the circumstances, the Offer was fair to the Minority Shareholders and it was in the best interests of the Corporation for the Board of Directors to recommend that the Shareholders accept the Offer. At the meeting of the Board of Directors held on April 4, 2002, the Independent Committee recommended to the Board of Directors that they recommend that Minority Shareholders accept the Offer. The Board of Directors approved the report of the Independent Committee and accepted the recommendation of the Independent Committee (Jeffrey M. Blidner, Jack L. Cockwell, George E. Myhal, Allen T. Lambert and Timothy R. Price abstaining from voting). TRILON FINANCIAL CORPORATION Trilon is a financial services company that provides asset management and merchant banking services. Trilon's clients include corporations, institutions, governments and high net worth individuals. Trilon also provides select business services and is active in the capital markets. Trilon focuses its activities on industry sectors that require substantial amounts of capital. These sectors include real estate, natural resources, energy and financial services. Trilon's authorized capital consists of an unlimited number of preferred shares designated as Class I Preferred Shares, issuable in series, the first series of which consists of 6,000,000 Floating Rate Class I Preferred Shares Series A (the "Class I Preferred Shares Series A"), an unlimited number of preferred shares designated as Class II Preferred Shares, issuable in series, the first series of which consists of 3,500,000 Class II Cumulative Redeemable Convertible Preferred Shares Series One ("Class II Series One Shares"), the second series of which consists of 1,000,000 Floating Rate Class II Preferred Shares Series Two ("Class II Series Two Shares"), the third series of which consists of 4,000,000 Class II Preferred Shares Series Three ("Class II Series Three Shares") and the fourth series of which consists of 4,000,000 Auction Perpetual Preferred Shares Series Four ("Class II Series Four Shares"), an unlimited number of preferred shares designated as Class III Preferred Shares, issuable in series, the first series of which consists of 5,000,000 Class III Preferred Shares Series One ("Class III Series One Shares"), the second series of which consists of 1,330,200 Class III Preferred Shares Series Two ("Class III Series Two Shares") and the third series of which consists of 4,000,000 Class III Preferred Shares Series Three ("Class III Series Three Shares"), an unlimited number of Trilon Class A Shares and an unlimited number of Trilon Class B Shares, of which, as at April 11, 2002, 6,000,000 Class I Preferred Shares Series A, 665,000 Class II Series Two Shares, 3,999,000 Class II Series Three Shares, 4,000,000 Class II Series Four Shares, 5,000,000 Class III Series One Shares, 482,888 Class III Series Two Shares, 103,745,836 Trilon Class A Shares and 47,917,647 Trilon Class B Shares were issued and outstanding. PRINCIPAL HOLDERS OF SECURITIES OF THE CORPORATION To the knowledge of the directors and senior officers of the Corporation, after reasonable inquiry, except for the Offeror, which beneficially owns or exercises control over approximately 56% of the outstanding Trilon Class A Shares and substantially all of the outstanding Trilon Class B Shares which results in ownership of 70% of the combined Trilon Class A Shares and Trilon Class B Shares, no person or company beneficially owns or exercises control or direction over Trilon Shares carrying more than 10% of the voting rights attached to the outstanding Trilon Shares and no person acting jointly or in concert with the Corporation beneficially owns or exercises control over any securities of the Corporation. 4 DIRECTORS AND SENIOR OFFICERS OF THE CORPORATION AND OWNERSHIP OF SECURITIES The following table sets forth the names and positions with the Corporation of all directors and senior officers of the Corporation, and the number and class of securities of the Corporation beneficially owned, directly or indirectly, or over which control or direction is exercised by each such director and senior officer of the Corporation and, to the knowledge of the directors and senior officers after reasonable inquiry, by their respective associates:
Securities of the Corporation Beneficially Owned Directly or Indirectly or Held by Associates ---------------------------------------------------- Options to Acquire Class A Percentage Trilon Class A Class A Deferred of Class Name Position(s) Held Shares Held(/1/) Shares(/2/) Share Units (%)(/3/) ---- ---------------- ---------------- ----------- ----------- ---------- Colum P. Bastable....... Managing Partner, -- 200,000 -- 0.1 Commercial Property Services Jeffrey M. Blidner...... Director and Vice- 162,600 470,000 22,325 0.4 Chairman Jack L. Cockwell........ Director 10,694 -- -- < 0.1 A. Gordon Craig......... Director 1,000 5,000 -- < 0.1 Susan E. Crocker........ Director -- 5,000 -- < 0.1 Bryan K. Davis.......... Vice-President and -- 104,500 -- < 0.1 Chief Financial Officer Simon P. Dean........... Managing Partner, 100,000 295,000 -- < 0.2 Business Services William A. Dimma........ Director 22,013 5,000 -- < 0.1 Sy Eber, Dr............. Director 1,000 5,000 -- < 0.1 J. Peter Gordon......... Managing Partner, -- 250,000 -- 0.2 Restructuring Services Karen Kain.............. Director -- 5,000 -- < 0.1 Patrick Keenan.......... Director 1,000 5,000 -- < 0.1 Brian Kenning........... Managing Partner, -- 240,000 -- 0.2 Forest Products Trevor D. Kerr.......... Vice-President and -- 91,000 -- < 0.1 Secretary Allen T. Lambert........ Director 515,320 110,000 -- 0.4 Brian D. Lawson......... Managing Partner, -- 440,000 62,030 0.3 Corporate Finance Frank N.C. Lochan....... Managing Partner, 309,342 307,061 26,385 0.4 Commercial Financing Donald C. Lowe.......... Director 25,000 5,000 -- < 0.1 Terry Lyons............. Managing Partner, Mining -- 240,000 -- 0.2 Cyrus Madon............. Managing Partner, 40,600 200,000 12,655 0.2 Advisory Services Kelly Marshall.......... Vice-President, -- 85,000 -- < 0.1 Corporate Finance David R. McCamus........ Director 5,000 2,000 -- < 0.1 George E. Myhal......... Director and President 607,271 650,000 65,512 0.8 and Chief Executive Officer Sam J. B. Pollock....... Managing Partner, 106,400 540,000 62,030 0.4 Merchant Banking Timothy R. Price(/4/)... Director and Chairman 1,000(/3/) 140,000 1,898 0.1 Bruce K. Robertson...... Managing Partner, Asset 53,500 356,500 53,438 0.3 Management Jack S. Sidhu........... Vice-President and -- 60,000 -- < 0.1 Assistant Treasurer John C. Tremayne........ Managing Partner and -- 273,000 28,921 0.2 Treasurer
- ------- Notes: (1) The following individuals hold indirect interests in Trilon Class A Shares pro-rata through EdperPartners, BNN Investments and Family Trusts (see "Ownership of Securities of the Offeror): J. Blidner - 426,429, J. Cockwell - 3,088,333, J.P. Gordon - 3,860, B. Kenning - 30,568, T. Kerr - 76,247, A. Lambert - 94,960, B. Lawson - 790,692, F. Lochan - 89,980, G. Myhal - 1,203,374, S. Pollock - 630,119, T. Price - 1,741,948, B. Robertson - 346,337, and J. Tremayne - 242,061. 5 (2) Exercise prices range from $6.60 to $15.95. (3) Percentage of outstanding Trilon Shares as at April 11, 2002 on a fully diluted basis. (4) Mr. Price also holds indirectly 2,000 Class I Preferred Shares Series A of the Corporation. TRADING IN SECURITIES OF THE CORPORATION During the six month period preceding the date of this Directors' Circular, neither the Corporation, nor the directors and senior officers of the Corporation nor, to the knowledge of the directors and senior officers of the Corporation, after reasonable inquiry, their respective associates, nor any person or company who beneficially owns or exercises control or direction over Class A Shares of the Corporation carrying more than 10% of a class of equity securities of the Corporation and no person acting jointly or in concert with the Corporation, traded any securities of the Corporation except as noted below:
Number of Trilon Nature of Purchase or Sale Name Shares Traded Transaction Price of Trade ($) Date of Trade - ---- ---------------- -------------------- ------------------ ------------- Colum P. Bastable....... 150,000 Growth Exercise(/1/) 10.00 January 9, 2002 Bryan K. Davis.......... 3,500 Growth Exercise(/1/) 8.40 March 11, 2002 Trevor D. Kerr.......... 8,000 Growth Exercise(/1/) 11.30 February 20, 2002 8,000 Growth Exercise(/1/) 11.30 January 9, 2002 5,000 Growth Exercise(/1/) 11.00 November 9, 2001 Craig J. Laurie......... 10,000 Growth Exercise(/1/) 11.30 November 12, 2001 Allen T. Lambert........ 30,000 Option Exercise(/1/) 6.60 March 8, 2002 8,000 Sale 15.10 January 3, 2002 Frank N.C. Lochan....... 9,000 Sale 17.13 March 13, 2002 1,100 Sale 17.25 March 12, 2002 12,600 Sale 16.84 March 11, 2002 5,000 Sale 16.40 March 4, 2002 10,000 Sale 16.50 March 4, 2002 10,000 Sale 16.10 February 27, 2002 5,000 Sale 16.20 February 27, 2002 20,000 Sale 16.07 February 26, 2002 10,000 Sale 16.05 February 19, 2002 2,000 Sale 16.00 February 14, 2002 5,000 Sale 16.05 February 7, 2002 3,000 Sale 15.75 January 29, 2002 20,000 Sale 16.00 January 7, 2002 David P. McCamus........ 3,000 Growth Exercise(/1/) 11.00 February 11, 2002 Bruce K. Robertson...... 43,500 Option Exercise(/1/) 6.60 December 7, 2001 John C. Tremayne........ 16,000 Growth Exercise(/1/) 8.40 March 11, 2002
- ------- (1) Under the Corporation's Management Share Option Plan participants, rather than exercising an in-the-money option, may elect to receive an amount (the "Growth Amount") equal to the difference between the market price of the Trilon Class A Shares underlying the options and the exercise price of the option, which Growth Amount will be payable either in cash or by issuance by the Corporation to the participant of a number of Trilon Class A Shares calculated by dividing the Growth Amount by the market price of the underlying Trilon Class A Share. These directors and senior officers accepted cash in satisfaction of the Growth Amount and their options were cancelled. The price shown in respect of each Growth Exercise and Option Exercise is the exercise price of the associated option. 6 No Trilon Shares or securities exercisable for or convertible into Trilon Shares were issued to the directors and senior officers of the Corporation during the two-year period preceding the date of this Directors' Circular except as set forth below:
Nature of Number of Price Name Transaction(/1/) Securities ($) Date - ---- ---------------- ---------- ----- ---- Jeffrey M. Blidner......... Option Grant 100,000 15.95 February 25, 2002 Option Grant 120,000 13.00 March 2, 2001 Purchase 162,600 9.23 November 2, 2000 Option Grant 250,000 9.20 July 27, 2000 Susan E. Crocker........... Option Grant 5,000 13.00 April 25, 2001 Bryan K. Davis............. Option Grant 40,000 15.95 February 25, 2002 Option Grant 40,000 13.00 March 2, 2001 Simon P. Dean.............. Option Grant 70,000 15.95 February 25, 2002 Option Grant 60,000 13.00 March 2, 2001 Option Grant 75,000 9.20 July 27, 2000 J. Peter Gordon............ Option Grant 60,000 15.95 February 25, 2002 Option Grant 60,000 13.00 March 2, 2001 Karen Kain................. Option Grant 5,000 13.00 April 25, 2001 Patrick Keenan............. Option Grant 5,000 13.00 April 25, 2001 Trevor D. Kerr............. Option Grant 20,000 15.95 February 25, 2002 Option Grant 20,000 13.00 March 2, 2001 Brian G. Kenning........... Option Grant 45,000 15.95 February 25, 2002 Option Grant 50,000 13.00 March 2, 2001 Allen T. Lambert........... Option Exercise 30,000 6.60 March 8, 2002 Option Grant 20,000 15.95 February 25, 2002 Option Grant 20,000 13.00 February 8, 2001 Option Exercise 45,000 4.15 October 24, 2000 Brian D. Lawson............ Option Grant 100,000 15.95 February 25, 2002 Option Grant 100,000 13.00 March 2, 2001 Frank N.C. Lochan.......... Option Grant 45,000 15.95 February 25, 2002 Option Exercise 22,939 6.60 September 12, 2001 Option Grant 50,000 13.00 March 2, 2001 Terrence A. Lyons.......... Option Grant 45,000 15.95 February 25, 2002 Option Grant 50,000 13.00 March 2, 2001 Cyrus Madon................ Option Grant 50,000 15.95 February 25, 2002 Option Grant 50,000 13.00 March 2, 2001 Kelly Marshall............. Option Grant 35,000 15.95 February 25, 2002 Option Grant 50,000 12.85 July 31, 2001 George E. Myhal............ Option Grant 100,000 15.95 February 25, 2002 Option Grant 120,000 13.00 March 2, 2001 Option Exercise 140,000 4.15 June 12, 2000 Sam J.B. Pollock........... Option Grant 100,000 15.95 February 25, 2002 Option Grant 100,000 13.00 March 2, 2001 Timothy R. Price........... Option Grant 20,000 15.95 February 25, 2002 Option Grant 25,000 13.00 March 2, 2001 Bruce K. Robertson......... Option Grant 100,000 15.95 February 25, 2002 Option Exercise 43,500 6.60 December 7, 2001 Option Grant 80,000 13.00 March 2, 2001 Option Exercise 10,000 5.00 February 20, 2001 Jack S. Sidhu.............. Option Grant 30,000 15.95 February 25, 2002 Option Grant 30,000 13.00 March 2, 2001 John C. Tremayne........... Option Grant 60,000 15.95 February 25, 2002 Option Grant 70,000 13.00 March 2, 2001
- ------- (1) All grants involved Class A Shares. 7 INTENTION OF DIRECTORS, SENIOR OFFICERS, ASSOCIATES AND CERTAIN SHAREHOLDERS WITH RESPECT TO THE OFFER Each of the directors and senior officers of the Corporation and their respective associates listed under "Directors and Senior Officers of the Corporation and Ownership of Securities" has indicated that at the date hereof he or she intends to accept the Offer, with respect to Trilon Shares currently owned held by such persons. With respect to options, see "Relationship between the Offeror and the Directors and Senior Officers of the Corporation". OWNERSHIP OF SECURITIES OF THE OFFEROR The Corporation is advised that Brascan's major shareholder is EdperPartners Limited ("EdperPartners"). EdperPartners and its shareholders collectively own, directly and indirectly, exercise control over, or have options or warrants to acquire, approximately 27.1 million Brascan Shares, representing approximately 15% of the outstanding Brascan Shares on a fully diluted basis, and 85,120 Class B Limited Voting Shares of Brascan, representing all of the Class B Limited Voting Shares of Brascan. These shareholdings include the pro rata ownership of Brascan Shares held through BNN Investments Ltd., as further described below. Messrs. J.M. Blidner, J.L. Cockwell, A.T. Lambert, G.E. Myhal and T.R. Price, who are directors of the Corporation, as well as Messrs. P. Gordon, B. Kenning, T. Kerr, B. Lawson, F. Lochan, T. Lyons, S. Pollock, B. Robertson and J. Tremayne, all officers of the Corporation, are also shareholders of EdperPartners. EdperPartners is an investment holding company owned by 37 investors with no one shareholder holding more than a 15% effective equity interest. Most of these investors are active in the business affairs of Brascan and its affiliates as directors and/or officers of these companies. Messrs. J.M. Blidner, P. Gordon, G.E. Myhal, B. Lawson, S. Pollock, B. Robertson and J. Tremayne, all officers of Trilon, own common shares of BNN Investments Ltd., a TSE listed investment company that owns 9.6 million Brascan Shares. The following table sets forth the number and class of securities of Brascan beneficially owned by each director or senior officer of the Corporation, directly or indirectly, or over which control or direction is exercised by each director and senior officer of the Corporation and, to the knowledge of the directors and senior officers after reasonable inquiry, by their respective associates:
Securities of Brascan Beneficially Owned Directly or Indirectly or Held by Associates ------------------------------------------------------------- Options to Percentage Brascan Acquire Brascan Share Brascan Deferred of Class Name Shares Held(/1/) Brascan Shares(/2/) Warrants Held Share Units Held (%)(/3/) - ---- ---------------- ------------------- ------------- ---------------- ---------- Jeffrey M. Blidner...... 708,586 -- -- -- 0.4 Jack L. Cockwell........ 4,493,403 340,000 298,400 33,765 3.0 J. Peter Gordon......... 6,414 -- -- -- 0.1 Brian G. Kenning........ 30,793 20,000 -- -- 0.1 Trevor D. Kerr.......... 126,697 -- -- -- 0.1 Allen T. Lambert........ 145,293 12,500 -- -- 0.1 Brian D. Lawson......... 1,178,973 35,000 99,900 -- 0.8 Frank N.C. Lochan....... 154,630 -- -- -- 0.1 Terrance A. Lyons....... 30,793 20,000 -- -- 0.1 George E. Myhal......... 1,805,415 194,200 -- -- 1.2 Sam J.B. Pollock........ 1,047,053 -- -- -- 0.6 Timothy R. Price........ 2,558,975 20,000 315,575 -- 1.7 Bruce K. Robertson...... 575,499 -- -- -- 0.3 John C. Tremayne........ 355,227 17,274 5,000 -- 0.2
- ------- (1)Includes pro rata ownership of Brascan Shares held through EdperPartners and BNN Investments Ltd. (2)Exercise prices range from $16.55 to $28.72. (3)Percentage of outstanding Brascan shares as at April 11, 2002 on a fully diluted basis. 8 RELATIONSHIP BETWEEN THE OFFEROR AND THE DIRECTORS AND SENIOR OFFICERS OF THE CORPORATION None of the directors or senior officers of the Corporation is a director or officer of the Offeror or any of its subsidiaries (other than the Corporation) except for the following:
Name Brascan Title - ---- ------------- Jack L. Cockwell........... Director and Co-Chairman Allen T. Lambert........... Director and Group Chairman, Financial Services Brian D. Lawson............ Executive Vice-President and Chief Financial Officer Cyrus Madon................ Vice-President, Corporate Development Jack Sidhu................. Vice-President, Capital Markets John C. Tremayne........... Senior Vice-President and Treasurer
On the Expiry Date, holders of options granted under the management stock option plan (other than directors of Trilon who are not also officers of Trilon, whose options will accelerate and vest, and other than for option holders who are no longer officers or employees of Trilon or its affiliates) will exchange their options for options to acquire Brascan Shares under Brascan's management share option plan. The exercise price of the options to acquire Brascan Shares will be equal to two times the exercise price of the option to acquire Trilon Class A Shares, and one Brascan replacement option (each exercisable for one Brascan Share) will be granted by Brascan for every two options of Trilon held. The vesting and term of the options will be unchanged. The exchange ratio between the existing options and the replacement Brascan options is based on the terms of the Brascan Share consideration available in the Offer. An aggregate of 6,388,061 options are outstanding and held by senior officers and directors. On the Expiry Date, units under Trilon's Management Deferred Share Unit Plan ("MDSUP") will become a number of units under Brascan's management deferred share unit plan equal to one-half the number of units held under the MDSUP. An executive who holds units will receive additional units as dividends are paid on the Brascan Shares on the same basis as if dividends were reinvested pursuant to Brascan's dividend reinvestment plan and the cash value of the new units when redeemed will be equivalent to the market value of an equivalent number of Brascan Shares at the time of cessation of employment with Trilon. The exchange ratio between the existing units and the replacement units is based on the terms of the Brascan Share consideration available in the Offer. On the Expiry Date, Trilon Shares issued by the Corporation under its Management Share Purchase Plan ("MSPP") and held by the trustee of the MSPP will be deposited pursuant to the Offer. The consideration received will be held by the trustee of the MSPP and applied towards the loans granted pursuant to the MSPP. An aggregate of 162,600 Trilon Shares are held on behalf of one officer and director. INTERESTS OF DIRECTORS, SENIOR OFFICERS AND OTHERS IN MATERIAL CONTRACTS WITH THE OFFEROR Except as disclosed in this Directors' Circular, none of the directors or senior officers of the Corporation or their respective associates or, to the knowledge of the directors or senior officers of the Corporation after reasonable inquiry, any person or company who holds securities of the Corporation carrying more than 10% of any class of equity securities of the Corporation outstanding at the date of this Directors' Circular (other than Brascan) has any interest in any material contract to which Brascan is a party. ARRANGEMENTS OR AGREEMENTS BETWEEN THE CORPORATION AND ITS DIRECTORS AND SENIOR OFFICERS There are no arrangements or agreements made or proposed to be made between the Corporation and any of the directors or senior officers of the Corporation pursuant to which a payment or other benefit is to be made or given by way of compensation for loss of office or to such directors or senior officers for remaining in or retiring from office. 9 PRIOR VALUATIONS Trilon routinely assesses the value of assets prior to their acquisition, financing or refinancing and periodically reappraises specific assets in the ordinary course of its business. To the knowledge of the directors and officers of the Corporation, no other independent appraisal or valuation or material non-independent appraisal or valuation regarding Trilon or its material assets has been prepared within the two years preceding the date hereof. MATERIAL CHANGES IN THE AFFAIRS OF THE CORPORATION Except as disclosed or referred to in this Directors' Circular, to the knowledge of the directors and senior officers of the Corporation after reasonable inquiry, there has been no material change in the affairs or prospects of the Corporation since the date of the publication of its last financial statements, being the audited financial statements of the Corporation for the year ended December 31, 2001, and there is no information contained in such financial statements which is materially misleading because of events subsequent to their publication or any other information which has not been generally disclosed to the public which would reasonably be expected to affect the decision of the Shareholders to accept or reject the Offer. STATUTORY RIGHTS Securities legislation in certain of the provinces and territories of Canada provides securityholders of the Corporation with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, if there is a misrepresentation in a circular or notice that is required to be delivered to such securityholders. However, such rights must be exercised within prescribed time limits. Securityholders should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer. 10 CONSENT OF TD SECURITIES INC. TO:Board of Directors of Trilon Financial Corporation We have provided our valuation opinion letter dated April 9, 2002, with respect to the value as of April 4, 2002 of the Class A Shares and Class B Non-Voting Shares of Trilon Financial Corporation, the value as of April 4, 2002 of the Class A Limited Voting Shares and the Non-Cumulative Class A Preference Shares, Series 11 of Brascan Corporation, and our opinion as of April 4, 2002 as to the fairness, from a financial point of view, of the consideration under the offer made by Brascan Corporation in an offer and circular dated April 11, 2002, to purchase all of the outstanding Class A Shares and Class B Non-Voting Shares of Trilon Financial Corporation which it does not already own (the "Valuation and Fairness Opinion"). In that regard, we hereby consent to the reference to the Valuation and Fairness Opinion of our firm in the Directors' Circular dated April 11, 2002 (the "Directors' Circular") and to the inclusion of the foregoing Valuation and Fairness Opinion in the Directors' Circular. In providing such consent, except as may be required by securities laws, we do not intend that any person other than the Board of Directors rely upon such Valuation and Fairness Opinion. Toronto, Ontario (Signed) TD Securities Inc. Dated: April 11, 2002 11 APPROVAL AND CERTIFICATE The contents of this Directors' Circular has been approved and the delivery and the distribution thereof authorized by the Board of Directors. The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. The foregoing does not contain any misrepresentation likely to affect the value or the market price of the securities subject to the offer within the meaning of the Securities Act (Quebec). April 11, 2002 On behalf of the Board of Directors (Signed) Timothy R. Price (Signed) Jeffrey M. Blidner Chairman and Director Vice-Chairman and Director 12 SCHEDULE A VALUATION AND FAIRNESS OPINION [LOGO] Securities TD Securities Inc. TD Tower 66 Wellington Street West, 8th Floor Toronto, Ontario M5K 1A2 April 9, 2002 The Independent Committee of the Board of Directors Trilon Financial Corporation BCE Place, 181 Bay Street Suite 4420, P.O. Box 771 Toronto, Ontario M5J 2T3 To the Independent Committee: TD Securities Inc. ("TD Securities") understands that Brascan Corporation ("Brascan" or the "Offeror") intends to make an offer (the "Offer") to acquire all of the outstanding Class A Shares (the "Trilon Class A Shares") and Class B Non-Voting Shares (the "Trilon Class B Non-Voting Shares") (individually or collectively as the context requires, the "Trilon Shares") of Trilon Financial Corporation ("Trilon" or the "Company") not already owned by Brascan or its affiliates. TD Securities understands that Brascan and its affiliates currently own approximately 70% of the issued and outstanding Trilon Shares. TD Securities further understands that the consideration under the Offer is, at the election of each holder of Trilon Shares, either (i) $17.00 in cash consideration ("Cash Consideration") per Trilon Share (subject to reduction by the $0.10 per Trilon Share dividend (the "Interim Dividend") to be paid by Trilon); (ii) 0.5 of a Class A Limited Voting Share of Brascan ("Brascan Class A Share Consideration") per Trilon Share; or (iii) 0.678 of a $25.00 Brascan Class A Preference Share, Series 11 ("Brascan Preference Shares") plus cash of $0.05 ("Brascan Preference Share Consideration") per Trilon Share, subject to proration such that the maximum aggregate Cash Consideration payable will be $388 million and the maximum aggregate number of Brascan Class A Limited Voting Shares issued will be 11.4 million shares, and, in the case of the Brascan Preference Share Consideration, subject to the issue of an aggregate minimum of $10 million in issue price of Brascan Preference Shares, or such lesser amount as Brascan may determine. The specific terms and conditions of the Offer are to be described in a take-over bid circular (the "Brascan Circular"), which is to be mailed to holders of Trilon Shares in connection with the Offer. TD Securities also understands that a committee (the "Independent Committee") of independent members of the board of directors (the "Board") of the Company has been constituted to consider the Offer and make recommendations thereon to the Board. TD Securities understands that the Offer is an "insider bid" within the meaning of Ontario Securities Commission Rule 61-501 and Policy Statement No. Q-27 of the Commission des valeurs mobilieres du Quebec (collectively, the "Policies"). The Independent Committee has retained TD Securities to provide financial advice and assistance to the Independent Committee in evaluating the Offer, including the preparation and delivery to the Independent Committee of a formal valuation of the Trilon Shares (the "Trilon Valuation"), the Brascan Class A Limited Voting Shares (the "Brascan Share Valuation"), and the Brascan Preference Shares (the "Brascan Preference Share Valuation") (individually the "Valuation", or collectively as the context requires, the "Valuations") in accordance with the requirements of the Policies and its opinion as to the fairness (the "Fairness Opinion") of the consideration under the Offer, from a financial point of view, to the holders of Trilon Shares other than Brascan and its affiliates (the "Minority Shareholders"). Engagement of TD Securities by the Independent Committee The Independent Committee initially approached TD Securities regarding a potential financial advisory assignment in August 2001, and TD Securities was formally engaged by the Independent Committee pursuant to an A-1 engagement agreement (the "Engagement Agreement") dated September 6, 2001. In October 2001, the Independent Committee informed TD Securities that a potential transaction with Brascan was unlikely to proceed at that time, in large part as a result of the state of the financial markets. Following the public announcement by Brascan of its intention to acquire the Trilon Shares not already owned by it on March 26, 2002, the Independent Committee requested that TD Securities continue to provide it with financial advisory services and complete the work previously undertaken. The terms of the Engagement Agreement provide that TD Securities will receive a fee of $600,000 for its services and is to be reimbursed for its reasonable out-of-pocket expenses. In accordance with the requirements of the Policies, such fees and expenses will be paid by Brascan. In addition, the Company has agreed to indemnify TD Securities, in certain circumstances, against certain expenses, losses, claims, actions, damages and liabilities incurred in connection with the provision of its services. The fee payable to TD Securities is not contingent in whole or in part on the success of the Offer or on the conclusions reached in the Valuations or the Fairness Opinion. Subject to the terms of the Engagement Agreement, TD Securities consents to the inclusion of the Valuations and the Fairness Opinion, along with a summary thereof, in a form acceptable to TD Securities, in the Brascan Circular and the directors' circular ("Directors' Circular") which will be mailed to Trilon shareholders in connection with the Offer, and to the filing thereof, as necessary, by the Company with the applicable Canadian securities commissions or similar regulatory authorities. Credentials of TD Securities TD Securities is a Canadian investment banking firm with operations in a broad range of activities, including corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading, investment management and investment research. TD Securities has participated in a significant number of transactions involving public and private companies and has extensive experience in preparing valuations and fairness opinions. The Valuations and the Fairness Opinion are the opinions of TD Securities and their form and content have been approved by a committee of senior investment banking professionals of TD Securities, each of whom is experienced in merger, acquisition, divestiture, valuation and fairness opinion matters. Independence of TD Securities Neither TD Securities, nor any of its affiliates is an insider, associate or affiliate (as those terms are used in the Policies) of the Company, the Offeror or any of their respective affiliates (collectively, the "Interested Parties"). Except as financial advisor to the Independent Committee, neither TD Securities nor any of its affiliates is an advisor to any of the Interested Parties with respect to the Offer. During the 24 months preceding the engagement by the Independent Committee, TD Securities has provided various financial advisory services in connection with unrelated transactions, and has participated in various other securities offerings and financial transactions involving Brascan and certain of its associates and affiliates. TD Securities is an investor in certain investment funds managed by Trilon. The Toronto-Dominion Bank ("TD Bank"), the parent company of TD Securities, is a lender pursuant to certain credit facilities involving Brascan and certain of its associates and affiliates. TD Securities acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have and may in the future have positions in the securities of any Interested Party and, from time to time, may have executed or may execute transactions on behalf of such companies or other clients for which it may have received or may receive compensation. As an investment dealer, TD Securities conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including matters with respect to the Offer, the Company, or other Interested Parties. The fees paid to TD Securities in connection with the mandates outlined above, together with the fees payable to TD Securities pursuant to the Engagement Agreement, are not financially material to TD Securities. No understandings or agreements exist between TD Securities and either the Company, the Offeror or any Interested Party with respect to future financial advisory or investment banking business. TD Securities may in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Company, the Offeror or any Interested Party, and TD Bank may provide banking services to the Company, the Offeror or any Interested Party. A-2 Scope of Review In connection with the Valuations and the Fairness Opinion, TD Securities reviewed and relied upon (without attempting to verify independently the completeness or accuracy of) or carried out, among other things, the following: 1. April 4, 2002 draft of the Circular; 2. annual reports of the Company for the three years ended December 31, 1999, 2000 and 2001; 3. quarterly reports of the Company for the three-month periods ended March 31, June 30, and September 30, from 1998 to 2001; 4. Trilon corporate profile presentations prepared by management of Trilon for the three month periods ended June 30, 2001 and December 31, 2001; 5. annual information forms of the Company for the two years ended December 31, 1999 and 2000; 6. articles of incorporation and bylaws (as amended) and organizational chart for the Company; 7. minutes of meetings of the Board, the audit committee, the independent committee, the governance committee and business conduct committee of the Company held between December 31, 1998 and April 4, 2002; 8. notices of annual meetings of shareholders and management information circulars of the Company for the three years ended December 31, 1999, 2000 and 2001; 9. press releases and other regulatory filings of the Company filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") from December 31, 1998 to April 4, 2002; 10. supplementary financial information regarding the Company's assets and liabilities as of June 30, 2001, September 30, 2001 and December 31, 2001, prepared by management of Trilon; 11. unaudited projected financial statements for the Company, prepared by management of Trilon for the years ending December 31, 2002 and 2003; 12. income tax returns for Trilon, Trilon Capital Partners Limited, Trilon Bancorp Inc., Trilon Securities Corporation ("Trilon Securities"), and 3396762 Canada Limited for the year ended December 31, 2000; 13. a schedule of Trilon Class A Shares and Trilon Class B Non-Voting Shares issued and outstanding as of February 28, 2002, prepared by management of Trilon; 14. a schedule of management options outstanding as of March 31, 2002, prepared by management of Trilon; 15. Trilon Trust Indenture dated August 19, 1996, providing for the issue of $125,000,000 8.35% Debentures due December 1, 2006; 16. Trilon Trust Indenture dated March 11, 1997, providing for the issue of $125,000,000 7.25% Debentures due June 1, 2007; 17. Trilon Trust Indenture dated October 5, 2000, providing for the issue of $125,000,000 7.35% Medium Term Notes due October 5, 2005; 18. Trilon bank credit agreements; 19. report regarding the Company's corporate expenses for the year ended December 31, 2000 prepared by management of Trilon; 20. discussions with senior management of the Company with respect to the information referred to above and other issues deemed relevant, including management estimates of potential synergies and other financial benefits which may accrue to Brascan as a result of the Offer or to other potential purchasers; 21. various press releases and other regulatory filings of B.C. Pacific Capital Corporation, Northgate Exploration Limited ("Northgate"), MIST Inc. ("MIST"), MediSolution Ltd. ("MediSolution"), Queensway Financial Holdings Limited ("Queensway"), Brookfield Properties Corporation ("Brookfield"), BPO Properties Ltd. ("BPO Properties") and Brascan filed on SEDAR from December 31, 1998 to April 4, 2002; 22. audited financial statements for Imagine Reinsurance Holdings Limited (the "Imagine Group") for the period from the date of incorporation of December 18, 1998 to June 30, 2001 and December 31, 2001; A-3 23. merger agreement between the Imagine Group and Enterprise Reinsurance Holdings Corporation ("Enterprise Re") dated May 18, 2001; 24. closing documents related to the Company's US$200 million investment in the Imagine Group completed in October 2000; 25. circular regarding the offer by the Company to purchase for cash 25,000,000 Trilon Class A Shares at a purchase price of not more than $12.00 nor less than $10.00 per share, dated December 21, 2000; 26. notice of the special and annual meeting and management information circular concerning the annual and special meeting of Royal LePage Limited ("Royal LePage") to approve the proposed amalgamation of Royal LePage and 1343085 Ontario Limited, a subsidiary of the Company, dated March 10, 1999; 27. unanimous shareholder agreement among the Company and principals of Highstreet Asset Management Inc. ("Highstreet") dated September 30, 1998; 28. loan facility arrangement between the Company and Highstreet dated June 30, 1998, amended April 7, 2000; 29. asset transfer agreement and supporting documentation between EdperBrascan Corporation ("EdperBrascan") and Hees International Limited regarding the sale of Hees International Investments Inc. dated September 24, 1997; 30. representations contained in a certificate dated as of April 4, 2002, from senior officers of the Company; 31. representations contained in a certificate dated as of April 4, 2002, from senior officers of Brascan; 32. a due diligence session (the "Due Diligence Session") among Brascan and its syndicate of underwriters on April 2, 2002, in connection with Brascan's offering of 5.0 million unsecured junior subordinated debentures for gross proceeds of $125 million; 33. discussions with the Company's auditors; 34. discussions with members of the Independent Committee; 35. various research publications prepared by equity research analysts regarding the Company, Brascan, the industries in which Trilon and Brascan conduct business, and other selected public companies considered relevant; 36. credit rating publications regarding the Company from Dominion Bond Rating Services Limited ("DBRS") and Standard & Poor's ("S&P" and its predecessor, Canadian Bond Rating Service Inc.) from December 31, 1998 to April 4, 2001; 37. public information relating to the business, operations, financial performance and stock trading history of the Company, Brascan, and other selected public companies considered relevant; 38. public information with respect to certain other transactions of a comparable nature considered relevant; and 39. such other corporate, industry, and financial market information, investigations and analyses as TD Securities considered necessary or appropriate in the circumstances. TD Securities has not, to the best of its knowledge, been denied access by the Company to any information requested by TD Securities. The Valuations and the Fairness Opinion have been prepared in accordance with the disclosure standards for formal valuations and fairness opinions of the Investment Dealers Association of Canada (the "IDA"), but the IDA has not been involved in the preparation or review of the Valuations or the Fairness Opinion. In a letter to TD Securities dated April 9, 2002, as per IDA bylaw 29.22, the Independent Committee concluded that the perceived detriment to Trilon and holders of Trilon Shares of the disclosure of certain sensitive information in the Valuations and Fairness Opinion, outweighs the benefit of disclosure of such information to the readers of the Valuations and Fairness Opinion. Accordingly, TD Securities has conformed its disclosure to reflect the conclusion of the Independent Committee, resulting in the presentation of certain portions of the analysis contained in the Valuations and the Fairness Option in summary form. A-4 Prior Valuations The Company and the Offeror have represented to TD Securities that there have been no independent valuations or appraisals (as defined in the Policies) of Trilon, or material non-independent appraisals or valuations of Trilon, or any of Trilon's material securities, material subsidiaries, or material assets made in the preceding 24 months and in the possession or control of Trilon or the Offeror. The Offeror has represented to TD Securities that there have been no independent valuations or appraisals (as defined in the Policies) of Brascan, or material non-independent appraisals or valuations of Brascan, or any of Brascan's material securities, material subsidiaries, or material assets made in the preceding 24 months and in the possession or control of Brascan. General Assumptions and Limitations With the Independent Committee's acknowledgement and agreement as provided for in the Engagement Agreement, TD Securities has relied upon the accuracy and completeness of all data and other information obtained by it from public sources or provided to it by the Company, the Offeror and their respective personnel, advisors, or otherwise, including the certificates identified below (collectively, the "Information"). The Valuations and the Fairness Opinion are conditional upon such accuracy and completeness. Subject to the exercise of professional judgment, and except as expressly described herein, TD Securities has not attempted to verify independently the accuracy or completeness of any of the Information. With respect to the budgets, forecasts, projections or estimates provided to TD Securities and used in its analyses, TD Securities notes that projecting future results is inherently subject to uncertainty. TD Securities has assumed, however, that such budgets, forecasts, projections and estimates were prepared using the assumptions identified therein which, in the opinion of the Company, are (or were at the time of preparation and continue to be) reasonable in the circumstances. Senior officers of the Company have represented to TD Securities in a certificate dated April 4, 2002, among other things, that (i) the Company has no information or knowledge of any facts public or otherwise not specifically provided to TD Securities relating to the assets, liabilities, affairs, prospects or condition (financial or otherwise) of Trilon and its subsidiaries, which would reasonably be expected to affect materially the Valuation and/or Fairness Opinion to be provided by TD Securities; (ii) with the exception of forecasts, projections or estimates referred to in (iv) below, the information and data filed on SEDAR, or provided orally by or in the presence of an officer or employee of Trilon or in writing by Trilon, in respect of Trilon or its subsidiaries and their respective assets, liabilities, affairs, prospects, or conditions (financial or otherwise) or their respective agents to TD Securities in connection with the Offer is or, in the case of historical information and data, was, at the date as of which it was prepared, true and accurate in all material respects and no additional material, data or information would be required to make the information and data provided to TD Securities not misleading in the light of circumstances in which it was provided; (iii) to the extent that any of the information and data identified in (ii) above is historical, there have been no changes in any material facts or new material facts since the respective dates thereof which have not been disclosed to TD Securities by Trilon; (iv) any portions of the information and data provided to TD Securities (or filed on SEDAR) which constitute forecasts, projections or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of Trilon, are (or were at the time of preparation and continue to be) reasonable in the circumstances; (v) there have been no independent valuations or appraisals of Trilon, or material non-independent appraisals or valuations of Trilon, or any of Trilon's material securities, material subsidiaries, or material assets made in the preceding 24 months and in the possession or control of Trilon; (vi) there have been no offers for or transactions involving all or a material part of the properties and assets owned by, or the securities of, Trilon, or any of its material subsidiaries made in the preceding 24 months; (vii) Trilon has complied in all material respects with the letter agreement between TD Securities and Trilon dated September 6, 2001; (viii) there is no plan or proposal for any material change (as defined in the Securities Act (Ontario)) in the assets, liabilities, affairs, prospects or condition (financial or otherwise) of Trilon, or to the knowledge of Trilon, or any of its subsidiaries which has not been disclosed to TD Securities; and (ix) Trilon has no knowledge of any material non-public information concerning the securities of Trilon, or the assets, liabilities, operations, affairs, prospects or condition (financial or otherwise) of Trilon and its subsidiaries, considered on a consolidated basis, that has not been generally disclosed, except such information that has been disclosed to TD Securities by Trilon. A-5 Senior officers of Brascan have represented to TD Securities in a certificate dated as of April 4, 2002, that (i) Brascan has no information or knowledge of any facts public or otherwise not filed on SEDAR relating to the assets, liabilities, affairs, prospects or condition (financial or otherwise) of Brascan and its subsidiaries, which would reasonably be expected to affect materially the Valuation and/or Fairness Opinion to be given by TD Securities; (ii) there have been no changes in any material facts or new material facts relating to Brascan and its subsidiaries that have not been filed on SEDAR; (iii) there have been no independent valuations or appraisals of Brascan, or material non-independent appraisals or valuations of Brascan, or any of Brascan's material securities, material subsidiaries (including Trilon), or material assets made in the preceding 24 months and in the possession or control of Brascan; (iv) there have been no offers for or transactions involving all or a material part of the properties and assets owned by, or the securities of, Brascan, or any of its material subsidiaries (including Trilon) made in the preceding 24 months; (v) there is no plan or proposal for any material change (as defined in the Securities Act (Ontario)) in the assets, liabilities, affairs, prospects or condition (financial or otherwise) of Brascan, or to the knowledge of Brascan, or any of its subsidiaries (including Trilon) which has not been disclosed publicly on SEDAR; (vi) Brascan has no knowledge of any material non-public information concerning the securities of Brascan, or the assets, liabilities, operations, affairs, prospects or condition (financial or otherwise) of Brascan and its subsidiaries (including Trilon), considered on a consolidated basis, that has not been generally disclosed; and (vii) since April 2, 2002, there have been no material adverse changes in the assets, liabilities, operations, affairs, prospects or condition (financial or otherwise) of Brascan or in respect of any information provided by Brascan in the Due Diligence Session. In preparing the Valuations and Fairness Opinion, TD Securities has made several assumptions, including that all final versions of documents will conform in all material respects to the drafts provided to TD Securities, conditions precedent to the completion of the Offer can be satisfied in due course, all consents, permissions, exemptions or orders of relevant regulatory authorities will be obtained, without adverse condition or qualification, the procedures being followed to implement the Offer are valid and effective, the Circular and Directors' Circular will be distributed to the shareholders of the Company in accordance with the applicable laws, and the disclosure in the Circular and Directors' Circular will be accurate in all material respects and will comply, in all material respects, with the requirements of all applicable laws. In its analysis in connection with the preparation of the Valuations and the Fairness Opinion, TD Securities made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of TD Securities, the Company, or the Offeror. All financial figures in the Valuations and the Fairness Opinion are expressed in thousands of Canadian dollars unless otherwise stated. The Valuations and the Fairness Opinion have been provided for the use of the Independent Committee and the Board and are not intended to be, and do not constitute, a recommendation that any shareholder of the Company tender Trilon Shares to the Offer. The Valuations and the Fairness Opinion may not be used by any other person or relied upon by any other person other than the Independent Committee and the Board without the express prior written consent of TD Securities. The Valuations and the Fairness Opinion are rendered as of April 4, 2002 (the "Valuation Date"), on the basis of securities markets, economic and general business and financial conditions prevailing on that date and the condition and prospects, financial and otherwise, of the Company, the Offeror and their respective affiliates as they were reflected in the Information provided to TD Securities. Any changes therein may affect the Valuations or the Fairness Opinion and, although TD Securities reserves the right to change or withdraw any or all of the Valuations or the Fairness Opinion in such event, it disclaims any undertaking or obligation to advise any person of any such change that may come to its attention, or update any of the Valuations or the Fairness Opinion after the Valuation Date. In preparing the Valuations and the Fairness Opinion, TD Securities was not authorized to solicit, and did not solicit, interest from any other party with respect to the acquisition of, or any business combination or other extraordinary transaction involving, the Company, nor did TD Securities negotiate with any party in connection with such a transaction involving the Company. The preparation of a valuation and fairness opinion is a complex process and is not necessarily amenable to partial analysis or summary description. TD Securities believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create an incomplete view of the process underlying the Valuations and the Fairness Opinion. Accordingly, the Valuations and the Fairness Opinion should be read in their entirety. A-6 Overview of Trilon Trilon is a financial services company that provides asset management and merchant banking services. Trilon also provides select business services and is active in the capital markets. The Company's clients include corporations, institutions, governments and high net-worth individuals. In conducting its business, Trilon leverages the knowledge and expertise of its associates and affiliates including Brascan, Brookfield, BPO Properties, Great Lakes Power Limited, Noranda Inc., Falconbridge Limited, and Nexfor Inc. (collectively referred to as the "Brascan Affiliates") and focuses its activities on industry sectors that require substantial amounts of capital including real estate, energy, natural resources and financial services. According to Trilon's annual report dated December 31, 2001, as of that date approximately 55% of Trilon's gross assets and a material portion of its revenues for the 12 months ending that date were related to Brascan Affiliates and other related parties, Trilon subsidiaries and Trilon managed funds (collectively, "Related Parties"). Trilon's operations are grouped under four core business segments: Asset Management, Merchant Banking, Business Services and Capital Markets. Asset Management Trilon's asset management activities include the management of alternative asset-class investments on behalf of institutional, corporate and high net worth investors, as well as traditional fixed income and equity investments. Trilon invests a significant amount of its own capital, as well as capital of Brascan Affiliates, in the funds that it manages and also assists in making a secondary market for the investors in the funds being managed. This business segment also includes Trilon's finite-risk reinsurance operations, the Imagine Group, which manages more than $1 billion in assets on behalf of its reinsurance clients. As at December 31, 2001, Trilon's Asset Management segment had, directly and through its associates, approximately $3.8 billion of assets under management including $650 million invested directly by Trilon. Trilon's asset management activities are focused on two principal types of financial investments. The first type includes private equity assets which require special management expertise, such as restructuring loans and debentures, and venture capital assets. The second type includes financial assets such as income and dividend funds (which may contain assets such as high-yielding common shares), high-yield debt, preferred shares and leases. Trilon entered the finite-risk reinsurance business in October 2000 with its commitment of US$200 million to start-up the Bermuda-based Imagine Group. This business has since expanded with the Imagine Group's acquisition of Enterprise Re for US$95 million in July 2001. Merchant Banking Trilon's merchant banking activities are primarily focused on providing bridge loan financings normally to facilitate acquisitions by clients, especially those clients without ready access to the capital markets. Merchant banking loans, which range in size from $10 million to $150 million, are secured, typically have an intended term of two years or less, and normally provide a banking return plus a participation in the assets financed, and are often refinanced at maturity with the proceeds from asset sales, or the issuance of preferred or common equity. Trilon also provides advice and capital to corporations repositioning their assets to improve profitability and enhance shareholder value or to complete a financial restructuring where the amount or nature of their debt is large in relation to their equity or current earnings base. Revenue from the Merchant Banking segment is comprised of fees, commissions and gains realized on participations in the appreciation of the assets being financed, as well as interest and dividends earned on securities and loans receivable. Revenue in this segment of the Company is driven for the most part by the knowledge and expertise of the Brascan Affiliates and its management. As at December 31, 2001, Trilon had $685 million of loans receivable and investments in the Merchant Banking segment. Business Services Trilon's Business Services segment provides residential home-related services to corporations, governments and institutions including relocation services, appraisal services, move management and transaction closing services. Revenue is primarily generated through fees although a small amount of net financing income is generated through the relocation business. Also included in this business segment is Trilon's holdings of equity and debt securities of MIST, a provider of transaction processing services to banks and processors. A-7 Capital Markets Trilon's capital markets activities are described below and include investment banking, brokerage services, and commercial financing. Investment Banking Trilon's investment banking activities include securities underwriting, providing advisory services to clients in the areas of business acquisitions, financings, restructurings and dispositions, and proprietary trading. Revenues are generated from fees for service, interest and dividend income, and capital gains. Trilon's investment banking activities are conducted through Trilon Securities which is registered in Ontario as an investment dealer and is a member of the IDA. Trilon also owns a 40% interest in Banco Brascan, a Brazilian investment bank, owned in partnership with Mellon Financial Corporation. Non-Canadian underwriting fees come principally from fixed income products. Lacking a captive distribution network, participation in domestic securities underwritings is normally limited to less than 10% and includes underwriting securities of Brascan Affiliates (although these do not represent a significant portion of the overall revenue). Brokerage Services Trilon provides brokerage and other real estate services to commercial and residential customers across Canada under the Royal LePage brand name. Royal LePage offers full-service residential real estate brokerage services, through a sales force of approximately 8,000 sales agents operating out of approximately 500 locations across Canada. Commercial brokerage and related services are provided in the investment, office, industrial and retail markets through a network of offices in major business centres across Canada. Trilon also provides securities brokerage services through Trilon Securities. Commercial Financing Trilon offers a select range of commercial financing activities including commercial mortgages, term and revolving credit facilities, project loans, and debenture financings, largely to Brascan Affiliates, most notably Brookfield and BPO Properties. Trilon arranges financings for its clients and may also purchase securities for its own account to facilitate its clients' financing plans. Trilon's commercial financing operations also include treasury functions of certain Brascan Affiliates and the management of Trilon's own significant surplus of funds pending attractive re-investment opportunities. Trilon is also active in the capital markets for its own account and owns debentures, high-yield bonds, preferred and common shares. Activities in this segment are funded in part by Trilon's long-term debt and preferred shares. Historical Financial Information Operating Results The following table summarizes Trilon's consolidated operating results for the five fiscal years ended December 31, 1997 to 2001:
Year ended December 31, ($ millions, except per share amounts) ------------------------------ 1997 1998 1999 2000 2001 ------ ----- ----- ----- ----- Summary Consolidated Operating Results Revenue......................................... $ 283 $ 326 $ 367 $ 414 $ 444 Net income...................................... 789 179 357 236 251 Net income to common shareholders............... 772 151 330 206 222 Net income to common shareholders before deferred investment gains............................... 104 151 180 206 222 Net income per common share before deferred investment gains (basic).................................. $ 0.65 $0.93 $1.10 $1.27 $1.49 Dividend per common share....................... 0.325 0.42 0.50 0.58 0.64
A-8
($ millions, except per Year ended December 31, share amounts) ---------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- Earnings by Business Segment(/1/) Asset Management......... $ 5 $ 16 $ 19 $ 22 $ 42 Merchant Banking......... 4 46 62 72 67 Business Services........ 0 4 7 12 8 Capital Markets Investment Banking...... 20 35 46 53 77 Brokerage Services...... 7 5 10 13 11 Commercial Financing.... 18 78 69 71 56 Equity Accounted Investments............. 79 0 0 0 0 ---- ---- ---- ---- ---- $134 $183 $213 $242 $261 ---- ---- ---- ---- ---- Dividend gross-up adjustment(/2/)......... (30) (32) (33) (36) (39) ---- ---- ---- ---- ---- Net income to common shareholders before deferred investment gains......... $104 $151 $180 $206 $222 ==== ==== ==== ==== ====
- ------- (1) Historical results restated by Trilon management to conform with current business segment groupings. (2) Income from certain securities has been expressed on an equivalent before- tax basis. This adjustment represents the income tax attributable to dividend income, which was previously taxed in the hands of the payors. The following table summarizes Trilon's balance sheet information as at December 31, 2000 and December 31, 2001:
($ millions, except per share amounts) December 31, December 31, 2000 2001 ------------ ------------ Consolidated Balance Sheet Cash and equivalents.................................. $ 92 $ 168 Securities............................................ 1,687 1,677 Loans and receivables................................. 1,587 1,579 Other................................................. 175 161 ------ ------ Total assets.......................................... $3,541 $3,585 ====== ====== Accounts payable and other............................ $ 192 $ 315 Borrowings............................................ 642 610 Preferred shares...................................... 587 587 Common shareholders' equity........................... 2,120 2,073 ------ ------ Total liabilities and shareholders' equity............ $3,541 $3,585 ====== ====== Book value per share.................................. $13.03 $13.97 Net Assets by Segment Asset Management...................................... $ 314 $ 650 Merchant Banking...................................... 551 665 Business Services..................................... 141 141 Capital Markets Investment Banking................................... 429 307 Brokerage Services................................... 77 81 Commercial Financing................................. 697 300 ------ ------ $2,208 $2,144 Corporate accounts payable and other.................. (88) (71) ------ ------ Common shareholders' equity........................... $2,120 $2,073 ====== ======
As at February 28, 2002, there were 151,630,756 Trilon Shares issued and outstanding (158,018,817 on a fully diluted basis). A-9 Share Trading Information Trilon Class A Shares are listed on The Toronto Stock Exchange ("TSE") under the symbol TFC.A. The following table sets forth, for the periods indicated, the high and low closing prices quoted and the volume traded on the TSE:
Closing Price ($ per Trilon Total Volume Class A (000's of Trilon Share) Class A Shares) ------------- ---------------- Period High Low - ------ ------ ------ 2001 January.......................................... $12.65 $11.65 6,192 February......................................... 14.05 12.35 2,522 March............................................ 14.10 12.50 1,737 April............................................ 13.60 12.80 1,106 May.............................................. 13.50 12.95 1,292 June............................................. 13.50 12.80 1,796 July............................................. 13.04 12.75 984 August........................................... 14.10 12.75 1,417 September........................................ 14.48 12.90 1,272 October.......................................... 13.99 13.25 956 November......................................... 14.15 13.30 1,453 December......................................... 15.50 13.85 1,596 2002 January.......................................... $16.10 $15.00 1,268 February......................................... 16.21 15.20 2,433 March 1-25....................................... 17.97 16.00 1,764 March 26 to April 3.............................. 18.10 17.00 20,713
The closing price of the Trilon Class A Shares on the TSE on March 25, 2002, one day prior to the announcement of the Offer on March 26, 2002, was $16.50. Trilon Valuation Definition of Fair Market Value For purposes of the Trilon Valuation, fair market value is defined as the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay a prudent and informed seller each acting at arm's length with the other and under no compulsion to act. TD Securities has made no downward adjustment to the fair market value of the Trilon Shares to reflect the liquidity of the Trilon Shares, the effect of the Offer or the fact that the Trilon Shares Minority Shareholders do not form part of a controlling interest. Approach to Value The Trilon Valuation is based upon techniques and assumptions that TD Securities considers appropriate in the circumstances for the purposes of arriving at an opinion as to the range of fair market value of the Trilon Shares. Given that Trilon is active in a number of different business segments, TD Securities believes that a segmented approach is the most appropriate method to use in valuing the Company. As a result, TD Securities' approach to determine the fair market value of the Trilon Shares was the Net Asset Value ("NAV") approach which involves attributing values to the Company's assets and liabilities on a segmented basis. This approach reflects the different risks, growth prospects and earnings contribution of each of Trilon's business segments and the various assets within those segments. TD Securities believes that the NAV approach is particularly relevant for Trilon since a high percentage of the Company's assets are financial in nature rather than assets of operating businesses. Except where noted, the valuation approach arrives at a going concern, en bloc sale value of the Trilon Shares. Valuation Methodology In preparing the Trilon Valuation, TD Securities relied primarily upon three valuation methodologies: 1. asset value analysis; A-10 2. discounted cash flow ("DCF") analysis; and 3. comparable precedent transactions analysis. TD Securities also reviewed market trading multiples of selected public companies in the industry segments in which Trilon operates to determine whether a comparable company market trading analysis might imply values which exceed values determined by the above methodologies. Based on this review in each business segment, TD Securities concluded that the comparable company market trading analysis implied values that were generally below the values determined by the other methodologies. Given the foregoing and the fact that market trading prices generally reflect minority discount values and do not reflect an en bloc sale value, TD Securities utilized this methodology only as a check on the primary methodologies set out above. Asset Value Analysis All material financial assets within Trilon were valued individually on a mark-to-market basis. Publicly traded assets were valued via quoted market prices based on volume-weighted average trading prices for the 20 trading days ended April 3, 2002. Private investments were valued based on TD Securities' estimates of the amounts at which the instruments could be exchanged in a transaction between knowledgeable and willing parties and/or by using comparable publicly-traded securities as proxies. Longer-term loans were valued based on discounting cash flows receivable under the existing terms of the loans at a rate that reflects refinancing the loans under current market conditions, that is, at rates reflecting the current cost of capital and risk in receiving the corresponding cash flows. Loans with near-term maturities were valued based on TD Securities' view on the probability of return of the outstanding principal or current market rates to extend the term of these loans by one year. As a basis for choosing the appropriate discount rates, TD Securities first reviewed the credit quality of the issuer, or an issuer considered by TD Securities to be comparable, and the sector of the economy in which the issuer operates. In reviewing the corporate banking, public debt, commercial banking, merchant banking, and high-yield debt markets, TD Securities estimated the most appropriate cost of capital for each particular loan. Cash flows not related to investment income were valued using comparable precedent transactions analysis. These cash flows primarily consisted of any fee streams (including underwriting and advisory fees, reinsurance fees and asset management fees) and participation gains less operating costs (primarily salaries) specific to the segment. DCF Analysis The Brokerage & Business Services segment, was valued using a DCF approach. The DCF approach reflects the growth prospects and risks inherent in the business by taking into account the amount, timing and relative certainty of projected unlevered free cash flows expected to be generated by the business. The DCF approach requires that certain assumptions be made regarding, among other things, future unlevered after-tax free cash flows, discount rates and terminal values. The possibility that some of the assumptions will prove to be inaccurate is one factor involved in the determination of the discount rates used in establishing a range of values. Comparable Precedent Transactions Analysis The comparable precedent transactions approach consists of selecting appropriate value benchmarks based on recently completed transactions of a comparable nature specific to each business segment, in which there was sufficient public information to derive valuation multiples, and applying these value benchmarks to the appropriate Trilon metrics to determine values for each business segment. The transaction multiples are based on arm's length transactions of businesses that are similar in size, operating characteristics, risk profile and asset type, among other factors, to Trilon's activities in specific segments. The process of analyzing valuation multiples implied by comparable precedent transactions and applying these multiples to the various segments of Trilon involved certain judgments and assumptions concerning the financial performance and operating characteristics of the companies involved in the precedent transactions considered comparable to the segments of Trilon. Net Asset Value Approach Although Trilon currently reports its financial results in four business segments, the Company was separated into five business segments for the purposes of the NAV Approach: Asset Management, Merchant Banking, Investment A-11 Banking (member of the Capital Markets reporting group), Commercial Financing (member of the Capital Markets reporting group) and Brokerage & Business Services (member of the Capital Markets and Business Services reporting groups). TD Securities believes that for valuation purposes, Investment Banking, Brokerage and Business Services and Commercial Finance are disparate businesses and should be analyzed and valued separately. [FLOW CHART] The NAV approach aggregates a value for the Company by separately considering each operating and financial asset, whose individual values are estimated through the application of the methodology considered by TD Securities to be most appropriate in the circumstances, net of obligations, corporate costs and liabilities. In addition to the assets of the five business segments outlined above, there are an additional five components to the NAV analysis: 1. other assets and liabilities; 2. debt and preferred shares of the Company; 3. stock options; 4. tax pools; and 5. capitalized corporate general and administrative ("G&A") expenses. TD Securities considered the financial assets held by the Company as at December 31, 2001, the most recent date of financial reporting, and adjusted the holdings for material acquisitions, divestitures, or refinancings of assets known to have occurred during 2002 up until the Valuation Date. All financial assets were valued as at the Valuation Date based on the current mark-to-market values with the exception of securities of Trilon or Brascan. Any Trilon or Brascan securities held by Trilon as well as obligations of Trilon were valued at the 20-day volume-weighted average trading price as at March 25, 2002, the last trading day before the announcement by Brascan of its intention to acquire the Trilon Shares not already owned by it, to remove the possible effect of the announcement on the trading prices of the securities. All U.S. dollar denominated securities were converted to Canadian dollars at an average exchange rate of 1.5867 for the 20 days ended April 3, 2002. Trilon Class A Shares and Trilon Class B Non-Voting Shares were considered to have equal financial value for the purposes of the NAV Approach. TD Securities understands that the major differences between these classes of shares are that the Trilon Class B Non-Voting Shares have a small preferential quarterly dividend right, do not generally have voting rights, and are not publicly listed. However, the actual dividends paid by Trilon have been well in excess of the preferential dividend for at least the last five years and TD Securities believes that it is unlikely that this condition will affect the dividends paid to the Trilon Class A Shares in the future. In addition, Trilon Class B Non-Voting Shares are convertible on a one-for-one basis into Trilon Class A Shares. Asset Management TD Securities applied the asset value approach in valuing the Asset Management segment, with the exception of the Imagine Group, Trilon's reinsurance operations. TD Securities selected a 2001 earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiple of 10.0x to 13.0x for the management fees and operating costs of the business, excluding the Imagine Group, based on selected comparable precedent transactions in the asset management industry listed in Table 1 in Appendix A. Based on discussions with Trilon management, TD Securities understands that only $100 million of the Imagine Group's total net assets of $315 million has been deployed at this time to support the reinsurance business. TD Securities selected a multiple of 1.5x to 2.0x book value for these assets based on selected comparable transactions in the reinsurance industry listed in Table 2 in Appendix A. TD Securities understands that the other assets of the Imagine Group currently consist primarily of liquid fixed income investments and valued these assets at their book value. A-12 The following is a summary of the range of enterprise values of the Asset Management segment:
Value ($ in thousands) Book Value ------------------ (31-Dec-2001) Multiple Low High ------------- ------------- -------- -------- Investments The Imagine Group Deployed assets............... $100,000 1.5x - 2.0x $150,000 $200,000 Other assets.................. 215,000 1.0x 215,000 215,000 -------- -------- Total Imagine Group............ $365,000 $415,000 First Toronto Investments...... 282,000 282,000 282,000 Other (Various)................ 6,000 10,200 11,565 -------- -------- -------- Total Investments............... $603,000 $657,200 $708,565 ======== Base Amount Multiple ------------- ------------- Loans and Debentures............ $ 31,272 $ 48,755 Management Fees................. $ 7,000 10.0x - 13.0x 70,000 91,000 Operating Costs (Salaries)...... (1,931) 10.0x - 13.0x (19,313) (25,106) -------- -------- Total........................... $739,160 $823,213 ======== ========
With the exception of Trilon's reinsurance operations, TD Securities did not consider the comparable precedent transactions approach relevant in determining the value of the Asset Management segment. Trilon's asset management operations were established relatively recently in 1997, are unique in focus on non-conventional alternative investments such as high-yield loans, income and dividend product, and Trilon's own investment in the funds that it manages is relatively large in comparison to other asset management companies. Based on the foregoing, TD Securities valued the Asset Management segment at $740 million to $820 million. Merchant Banking TD Securities relied on the asset value approach in valuing the portfolio of investments made in the Merchant Banking segment. For the purposes of assigning a value to the fees, participations, and operating expenses generated by the Merchant Banking segment, TD Securities considered the fee streams earned in comparable asset management businesses, as managing these assets is similar to asset management and Trilon intends to move more of its Merchant Banking portfolio to the Asset Management segment over time. For these reasons, TD Securities selected the same multiples as were used to value the fee streams in the Asset Management section or 10.0x to 13.0x 2001 EBITDA which were based on Table 1 in Appendix A. The following is a summary of the range of enterprise values of the Merchant Banking segment: Consolidated by Type(/1/)
($ in thousands) Book Value - ---------------- (31-Dec-2001) Value -------------------------------------- ----------------- Related Parties Third Parties Total Low High --------------- ------------- -------- -------- -------- Restructurings.......... $149,249 $248,000 $397,249 $330,169 $378,654 Acquisition Bridge Loans.................. 23,000 134,000 157,000 159,340 159,377 Other................... 131,000 -- 131,000 125,554 145,548 -------- -------- -------- -------- -------- Total Portfolio......... $303,249 $382,000 $685,249 $615,063 $683,578 ======== ======== ======== ======== ========
A-13 Consolidated by Industry(/1/)
($ in thousands) Book Value (31-Dec-2001) Value -------------------------------------- ------------------ Related Parties Third Parties Total Low High --------------- ------------- -------- -------- -------- Energy.................. $ 23,000 $ 175,000 $198,000 $211,164 $213,672 Financial Services...... 32,000 153,000 185,000 106,000 145,500 Real Estate............. 131,000 -- 131,000 125,554 145,548 Natural Resources....... 100,249 -- 100,249 105,141 105,994 Other................... 17,000 54,000 71,000 67,204 72,865 -------- ------------- -------- -------- -------- Total Portfolio......... $303,249 $ 382,000 $685,249 $615,063 $683,578 ======== ============= ======== ======== ======== (1) Includes loans receivable and equity securities. Loan Size Distribution ($ in thousands) Book Value (31-Dec-2001) ----------------------------- Related Parties Third Parties --------------- ------------- Largest Loan Size....... $ 72,000 $ 175,000 Average Loan Size....... 26,438 47,750 Merchant Banking Summary ($ in thousands) Value ------------------ Low High -------- -------- Portfolio of loans receivable and equity securities............ $615,063 $683,578 Base Amount Multiple --------------- ------------- Fees.................... $ 12,000 10.0x - 13.0x $120,000 $156,000 Participation Gains..... 3,000 10.0x - 13.0x 30,000 39,000 Operating Costs (Salaries)............. (1,931) 10.0x - 13.0x (19,313) (25,106) -------- -------- Total................... $745,750 $853,472 ======== ========
TD Securities identified only two recent precedent merchant banking transactions that might be considered comparable. As these transactions occurred at or below book value, a multiple of book value applied to the Merchant Banking segment would imply a value lower than that arrived at via the asset value approach. Precedent merchant banking transactions are typically quite dependent on the nature and specific characteristics of the investments held, and as such, each transaction is individually unique. As such, TD Securities did not consider the comparable precedent transactions approach relevant in determining the value of the Merchant Banking segment, and relied on the asset value approach. Based on the foregoing, TD Securities valued the Merchant Banking segment at $750 million to $850 million. Investment Banking TD Securities applied the asset value approach in valuing the investments within the Investment Banking segment including Banco Brascan. TD Securities selected 2001 price to earnings multiples of 19.0x to 22.0x for the underwriting fees and operating costs of the segment based on comparable precedent transactions in the investment banking industry listed in Table 3 in Appendix A. Advisory fees were valued based on 2001 earnings multiples of 20.0x to 23.0x, which are at the high end of the multiples in Table 3 in Appendix A, due to the expected above-market growth in this area. A-14 The following is a summary of the range of enterprise values of the Investment Banking segment:
Value ($ in thousands) Book Value ------------------ (31-Dec-2001) Low High ------------- -------- -------- Marketable Securities(/1/)..... $129,000 $143,735 $143,735 Loans and Debentures........... 194,000 172,993 190,160 Base Amount Multiple ------------- ------------- Underwriting Fees(/2/)......... $ 2,939 19.0x - 22.0x $ 55,832 $ 64,647 Advisory Fees(/2/)............. 3,526 20.0x - 23.0x 70,524 81,103 Operating Costs (Salaries)(/2/)............... (378) 19.0x - 22.0x (7,188) (8,323) -------- -------- Total.......................... $435,895 $471,322 ======== ========
- ------- (1) Net of securities sold short. (2) For valuation purposes, net of statutory income taxes. While TD Securities identified six U.S. and two Canadian recent precedent investment bank transactions, TD Securities did not consider the comparable precedent transactions approach relevant in determining the value of the Investment Banking segment. Trilon's investment banking business is characterized as having a high proportion of its value attributable to securities and loan/debenture portfolios, participation in equity underwritings is normally limited to less than 10% of each securities issue as Trilon does not have a captive distribution network, and a large percentage of Trilon's investment banking fees are generated from Brascan Affiliates. Based on the foregoing, TD Securities valued the Investment Banking segment at $440 million to $470 million. Brokerage & Business Services DCF Approach (excluding Securities Brokerage and MIST) As a basis for the development of the projected future unlevered after-tax free cash flows, TD Securities reviewed the 2002 budget prepared by Trilon management and relevant underlying assumptions. TD Securities participated in detailed discussions with senior management of this segment in developing forecasted results for 2002 and beyond. From this review, TD Securities developed a base case scenario for the five year period starting January 1, 2002 and ending December 31, 2006 (the "TD Securities Brokerage & Business Services Forecast"). The TD Securities Brokerage & Business Services Forecast was formed independently based on the input received above. The TD Securities Brokerage & Business Services Forecast consists of the following business segments: Royal LePage's residential and commercial brokerage and relocations business contained in Trilon's Business Services segment. Based on a number of company-specific and industry factors, including TD Securities' belief that the property brokerage business is operating in a mature industry, TD Securities assumed that revenues would grow at rates equivalent to the rate of overall economic growth, assumed to be 2.0% per year, and margins would remain constant after 2002 with certain exceptions including the following: i. specific cost reductions targeted by management; ii. effect on residential brokerage operations in 2003 of the conversion of selected corporate-owned locations to franchises; and iii. a declining focus on certain business lines. Capital expenditures were forecast based on management's guidance as to the level of maintenance capital expenditures going forward consistent with the operating forecast above. The payments receivable from corporate-owned locations recently converted to franchises were modeled to the end of the forecast period. TD Securities believes that the Brokerage & Business Services segment could obtain cost synergies equal to 50% of their corporate costs if it were to be purchased by a synergistic industry buyer. TD Securities has included 50% of these synergies in the TD Securities Brokerage & Business Services Forecast to reflect sharing of these synergies with shareholders of such an acquiror. A-15 The following is a summary of the TD Securities Brokerage & Business Services Forecast:
($ in thousands) 2000A 2001A 2002E 2003E 2004E 2005E 2006E -------- -------- -------- -------- -------- -------- -------- Gross Revenue Business Services(/1/).. $ 39,092 $ 44,093 $ 42,523 $ 43,112 $ 43,744 $ 44,393 $ 45,059 Residential Property Brokerage.............. 203,773 196,184 114,221 93,648 95,521 97,431 99,380 Commercial Property Brokerage(/2/)......... 104,754 84,302 86,990 88,730 90,504 92,314 94,161 -------- -------- -------- -------- -------- -------- -------- $347,619 $324,579 $243,734 $225,490 $229,770 $234,139 $238,600 EBITDA Business Services....... $ 12,838 $ 12,993 $ 12,112 $ 12,903 $ 12,965 $ 13,005 $ 13,043 Residential Property Brokerage.............. 8,581 11,341 8,633 9,721 10,095 10,532 10,742 Commercial Property Brokerage.............. 10,922 2,920 5,879 5,997 6,117 6,239 6,364 Corporate Overhead Synergies.............. -- -- 2,003 1,798 1,780 1,755 1,791 -------- -------- -------- -------- -------- -------- -------- $32,341 $ 27,254 $ 28,626 $ 30,418 $ 30,957 $ 31,531 $ 31,939 Capital Expenditures Business Services....... $ 1,698 $ 2,700 $ 1,990 $ 1,250 $ 900 $ 750 $ 625 Residential Property Brokerage.............. 2,751 2,554 1,810 925 944 962 982 Commercial Property Brokerage.............. 7,046 1,639 1,600 2,000 2,040 2,081 2,122 -------- -------- -------- -------- -------- -------- -------- $11,495 $ 6,893 $ 5,400 $ 4,175 $ 3,884 $ 3,793 $ 3,729 Consolidated Free Cash Flow(/3/).............. $ 22,126 $ 18,611 $ 19,867 $ 19,031 $ 19,635
- ------- (1) Primarily relocation services. (2) Includes other commercial services such as corporate and advisory services. (3) Excludes the following business segments: Appraisals, RE Financial, Highlander, Home-Link, Asset Recovery and Financial Services. Includes payments related to conversions of corporate-owned locations to franchises, the effect of taxes and tax loss carry-forwards, and changes in working capital. Projected unlevered after-tax free cash flows for the above Brokerage & Business Services businesses were discounted based on the Weighted Average Cost of Capital ("WACC"). The WACC for the Brokerage & Business Services segment was calculated based upon the Brokerage & Business Services segment's after-tax cost of debt and equity, weighted based upon an assumed optimal capital structure. The assumed optimal capital structure of debt and equity was determined based upon a review of the capital structures of comparable companies and the risks inherent in the Brokerage & Business Services segment and the real estate services industry. The cost of debt for the Brokerage & Business Services segment was calculated based on the risk-free rate of return and an appropriate borrowing spread to reflect credit risk at the assumed optimal capital structure. TD Securities used the capital asset pricing model ("CAPM") approach to determine the appropriate cost of equity. The CAPM approach calculates the cost of equity with reference to the risk-free rate of return, the volatility of equity prices relative to a benchmark ("beta") and the equity risk premium. TD Securities reviewed unlevered betas of a select group of real estate services companies which have risks comparable to the Brokerage & Business Services segment, the unlevered beta of Royal LePage before it was taken private by Trilon in 1999, and unlevered betas of industry groupings related to real estate services. The selected unlevered beta was levered using the assumed optimal capital structure and was then used to calculate the cost of equity. A detailed WACC analysis is presented in Table 4 in Appendix A. Based on the foregoing, and taking account the assumptions used in the TD Securities Brokerage & Business Services Forecast, TD Securities determined the appropriate WACC for the Brokerage & Business Services segment to be in the range of 8.0% to 10.0%. TD Securities developed terminal enterprise values at the end of the forecast period using multiples in the range of 5.0x to 7.0x EBITDA in the terminal year. This range was developed by reviewing comparable precedent transactions and is the same range selected in the comparable transactions approach for the Brokerage & Business Services segment. The Home-Link, Highlander and Financial Services businesses (collectively, the "Start-up Businesses") within the Brokerage & Business Services segment are all start-up operations which are currently cash flow negative. Although TD Securities recognizes potential for future positive cash flows, because of the start-up nature of these businesses, future results are very difficult to predict. For the foregoing reasons, these businesses were valued at the cash invested by Trilon to date including operating losses and capital expenditures. The investment by Royal LePage Commercial in Straticom made in March 2001, was valued at the purchase price net of cash since the purchase was made recently and the investment has yet to be profitable. A-16 No value was attributed to the appraisals, RE Financial and asset recovery segments of the business. These businesses have not demonstrated consistent profitability in the past and are not forecasted by management to provide material positive cash flows going forward. The following is a summary of the value of the Brokerage & Business Services segment (excluding Securities Brokerage and MIST) resulting from the DCF analysis:
($ in thousands) Low High -------- -------- Terminal value EBITDA multiple............................... 5.0x 7.0x WACC......................................................... 10.0% 8.0% Net present value Unlevered after-tax free cash flows......................... $ 79,303 $ 82,687 Terminal value.............................................. 93,600 143,632 Value of Start-up Businesses................................ 8,351 8,351 -------- -------- Enterprise value of the Brokerage & Business Services segment (excluding Securities Brokerage and MIST)................... $181,254 $234,670 ======== ========
Based on the foregoing, TD Securities valued the Brokerage & Business Services segment (excluding Securities Brokerage and MIST) under the DCF approach at $180 million to $230 million. Royal LePage - Comparable Precedent Transactions Approach (excluding Securities Brokerage and MIST) TD Securities considered enterprise value ("EV") to trailing EBITDA to be the most relevant valuation multiple derived from the comparable precedent transactions. The comparable precedent transactions TD Securities relied on are listed in Table 5 in Appendix A. TD Securities believes that a premium multiple to the comparable transactions is appropriate due to Royal LePage's strong brand, national presence, and progress it has made since it was taken private by Trilon in 1999. Based on the foregoing, TD Securities believes that the appropriate EV to 2001 EBITDA multiple for the Brokerage & Business Services segment to be in the range of 5.0x to 7.0x. TD Securities also considered price to earnings multiples on a trailing and forecast basis as secondary valuation metrics. The multiples were applied to the results of Royal LePage's residential brokerage, commercial brokerage operations and the relocations operations of the Business Services group only. Additional value was added for the Start-up Businesses on the same basis as in the DCF analysis, and for tax loss carry-forwards. The following is a summary of the value of the Brokerage & Business Services segment (excluding Securities Brokerage and MIST) resulting from the comparable precedent transaction analysis:
Selected Multiple Range Value ($ in thousands) Base ----------------------------------------- Parameter Amount(/1/) Low High Low High - ---------------- ----------- ----------- -------------------- -------- Primary EV / EBITDA.............. $27,254 5.0x 7.0x $136,270 $190,778 Secondary Price / 2001 pro forma earnings(/2/)........... 9,287 11.0x 13.0x $102,157 $120,731 Add: net debt............ 26,000 26,000 -------- -------- Enterprise value......... $128,157 $146,731 Selected enterprise value before the below........ $130,000 $180,000 Value of Start-up Businesses and tax losses.................. 8,704 8,880 -------- -------- Total enterprise value... $138,704 $188,880 ======== ========
- ------- (1) Results from Royal LePage's, residential brokerage and commercial brokerage businesses and the relocations business contained in Trilon's Business Services segment. (2) Normalized interest expense to reflect a reasonable level if the Brokerage & Business Services segment were a standalone business and assumed a statutory income tax rate. Based on the foregoing, TD Securities valued the Brokerage & Business Services segment (excluding Securities Brokerage and MIST) under the precedent transaction approach at $140 million to $190 million. Value Conclusion Brokerage & Business Services (excluding Securities Brokerage and MIST) Given that TD Securities was only able to identify a limited number of comparable precedent transactions and TD Securities' belief that the value of Royal LePage at the time it was taken private and of comparable companies A-17 depended heavily on the state of the real estate market at the time of sale, TD Securities placed greater emphasis on the DCF analysis than on the comparable precedent transactions analysis in determining the value of the Brokerage & Business Services segment (excluding Securities Brokerage and MIST). Based on the foregoing, TD Securities selected a value range of $180 million to $230 million for the Brokerage & Business Services segment (excluding Securities Brokerage and MIST). Other Businesses in Brokerage & Business Services Segment The securities brokerage business was valued by applying price to earnings multiples, consistent with those used in valuing the Investment Banking segment, to 2001 actual results adjusting for a normalized tax rate. Trilon's investments in MIST were valued on a mark-to-market basis, pro forma the financial characteristics of the rights offering by MIST announced on February 28, 2002. Brokerage & Business Services Value Summary The following is a summary of the range of values TD Securities derived for the Brokerage & Business Services segment:
Value ($ in thousands) Base ----------------- Amount Multiple Low High ------ -------------- -------- -------- Brokerage & Business Services (excluding the segments below)......... $180,000 $230,000 Securities Brokerage.................... $588 19.0x - 22.0x 11,000 13,000 Securities of MIST(/1/)................. 37,000 46,000 -------- -------- Total................................... $228,000 $289,000 ======== ========
- ------- (1) Pro forma the rights offering announced February, 28, 2002. Based on the foregoing, TD Securities valued the Brokerage & Business Services segment at $230 million to $290 million. Commercial Financing TD Securities valued the Commercial Financing segment based on asset value and comparable precedent transactions analyses. Asset Value Analysis The value of loans and debentures receivable and the preferred share portfolio was determined by marking these investments to market. The value impact of operating costs was determined using a multiple of 8.5x to 10.5x 2001 EBITDA based on the comparable precedent transactions listed in Table 6 in Appendix A. The following is a summary of the range of values TD Securities derived for the Commercial Financing segment using asset value analysis: Consolidated by Type
Book Value (31-Dec-2001) Value ($ in thousands) ---------------------------------------- ---------------------- Related Parties Third Parties Total Low High --------------- ------------- ---------- ---------- ---------- Loans Conmmercial Financing Loans................. $ 602,000 $ 74,000 $ 676,000 $ 705,171 $ 709,558 Property Loans......... 75,000 17,000 92,000 81,402 97,059 Debentures and Leases.. 85,000 -- 85,000 53,039 77,193 Employee Share Ownership Plan Loans.. 28,000 -- 28,000 28,000 28,000 ---------- -------- ---------- ---------- ---------- Subtotal - Loans........ $ 790,000 $ 91,000 $ 881,000 $ 867,611 $ 911,810 Preferred and common shares................. 804,261 282,000 1,086,261 1,028,865 1,028,865 ---------- -------- ---------- ---------- ---------- Subtotal................ $1,594,261 $373,000 $1,967,261 $1,896,476 $1,940,676 Related company allocations (funds on deposit)............... (510,000) (510,000) (510,000) ---------- ---------- ---------- Total Portfolio......... $1,457,261 $1,386,476 $1,430,676 ========== ========== ==========
A-18 Consolidated by Industry(/1/)
Book Value (31-Dec-2001) Value ($ in thousands) ---------------------------------------- ---------------------- Related Parties Third Parties Total Low High --------------- ------------- ---------- ---------- ---------- Real Estate............. $ 954,261 $ 17,000 $ 971,261 $ 963,307 $ 983,393 Diversified............. 467,000 -- 467,000 425,964 425,964 Financial Services...... 28,000 319,000 347,000 355,968 355,968 Natural Resources....... 145,000 -- 145,000 114,237 138,351 Other................... -- 37,000 37,000 37,000 37,000 ---------- -------- ---------- ---------- ---------- Subtotal................ $1,594,261 $373,000 $1,967,261 $1,896,476 $1,940,676 Related company allocations (funds on deposit)............... (510,000) (510,000) (510,000) ---------- ---------- ---------- Total Portfolio......... $1,457,261 $1,386,476 $1,430,676 ========== ========== ========== (1) Includes loans receivable and preferred and common securities. Loan Size Distribution Book Value (31-Dec-2001) ($ in thousands) ----------------------------- Related Parties Third Parties --------------- ------------- Largest Loan Size....... $ 236,000 $ 37,000 Average Loan Size....... 87,778 22,750 Commercial Financing Summary Value ($ in thousands) ---------------------- Low High ---------- ---------- Portfolio of loans receivable and preferred and common securities............. $1,386,476 $1,430,676
Base Amount Multiple ----------- ------------ Operating Costs (Salaries)............... $(644) 8.5x - 10.5x (5,472) (6,759) ---------- ---------- Total..................... $1,381,005 $1,423,916 ========== ==========
Based on the foregoing, TD Securities valued the Commercial Financing segment under the asset value approach at $1,380 million to $1,420 million. Comparable Precedent Transactions Approach TD Securities considered price to book value to be the most relevant valuation metric derived from the comparable precedent transactions. TD Securities selected appropriate multiples based on the selected comparable precedent transactions listed in Table 6 in Appendix A. The following is a summary of the value of the Commercial Financing segment resulting from the comparable precedent transaction analysis:
Selected ($ in thousands) Multiple Range Value Base --------------- --------------------- Parameter Amount Low High Low High - --------- -------- ------- ------- ---------- ---------- Price / book value............... $300,000 1.6x 2.0x $ 480,000 $ 600,000 Add: net debt(/1/)............... 846,627 904,433 ---------- ---------- Enterprise value................. $1,326,627 $1,504,433 ========== ==========
- ------- (1) Includes all short and long term corporate debt and preferred shares of Trilon with the exception of Trilon's Commercial Paper and the Subsidiary Preferred shares. Values are the same as those given in the Debt and Preferred Shares section below. A-19 Based on the foregoing, TD Securities valued the Commercial Financing segment under the comparable precedent transactions approach at $1,330 million to $1,500 million. Conclusion Based on the foregoing, TD Securities valued the Commercial Financing segment at $1,370 million to $1,490 million. Other Assets and Liabilities Trilon's corporate working capital amounts were valued at their book values as of December 31, 2001. Since the basis for TD Securities' NAV analysis is Trilon's balance sheet as at December 31, 2001, TD Securities also included in Trilon's NAV the cash proceeds from the exercise of 3,359,259 warrants in 2002 (issued in connection with the privatization of Royal LePage in 1999) at an exercise price of $11.25, and the free cash flow estimated to be generated by Trilon's operations from December 31, 2001, to the Valuation Date. Debt and Preferred Shares TD Securities valued Trilon's public debt and preference shares classified as debt (the Retractable Preference Shares, Class II, Series 2) based on their mark-to-market values via quoted market prices for these securities. Drawn bank credit facilities and commercial paper were valued at their book value amounts. For purposes of the low end of TD Securities' valuation range, Trilon's perpetual preferred shares were valued based on their actual mark-to-market values or, in the cases where these perpetual preferred shares were not publicly-listed, mark-to-market values were derived from preferred shares with comparable features and ratings. TD Securities believes that to achieve the flexibility necessary to realize the maximum value for the Company, Trilon's perpetual preferred shares would have to be redeemed or repurchased. Other than the Subsidiary Preferred, Trilon has the right, subject to the usual notification provisions, to redeem in whole or in part each class and series of perpetual preferred shares at any time at their respective stated values. However, the mark-to-market value of all of Trilon's perpetual preferred shares is substantially below the value at which Trilon could repurchase them. Thus, for the purposes of the high end of the valuation range, TD Securities estimated that to repurchase the perpetual preferred shares, it would cost a purchaser in aggregate, mid-way between the current mark-to-market value and the stated value of the perpetual preferred shares. In considering the mark- to-market value of the Class III, Series 1 & 2 preferred shares, TD Securities applied a 20% premium to account for certain exchange features that are beneficial to the holders of these perpetual preferred shares. Trilon's preferred shares related to the purchase of certain merchant banking assets from EdperBrascan in 1997, mature at the end of 2004 and the maturity value is based on the performance of a portfolio of assets contained in the Merchant Banking segment. TD Securities valued this issue based on a DCF approach considering the expected amount, timing and risk of the cash flow stream from the security. TD Securities' valuation of Trilon's debt and preferred shares is summarized below:
($ in thousands) Value Book Value ----------------- (31-Dec-2001) Low High ------------- -------- -------- Short and Long-term Debt 8.35% Debentures.............................. $125,000 $133,086 $133,086 7.25% Debentures.............................. 125,000 124,701 124,701 7.35% Medium Term Note........................ 125,000 131,759 131,759 Bank Credit Facilities........................ 49,000 49,000 49,000 Retractable Preference Shares (Class II, Series 2).................................... 36,000 36,692 36,692 Commercial Paper.............................. 150,000 150,000 150,000 -------- -------- -------- Total Short and Long-term Debt................. $610,000 $625,239 $625,239 Trilon Preferred Shares Class I, Series A............................. $150,000 $109,396 $129,698 Class II, Series 3............................ 100,000 71,897 85,949 Class II, Series 4............................ 100,000 71,897 85,949 Class III, Series 1 & 2....................... 137,000 118,199 127,600 Subsidiary Preferred.......................... 100,000 71,068 84,105 -------- -------- -------- Total Preferred Shares......................... $587,000 $442,457 $513,300
A-20 Stock Options TD Securities reviewed the terms of Trilon's outstanding stock options. For purposes of the NAV analysis, TD Securities has assumed that all in-the-money options are exercised. To determine whether an option was in-the-money, TD Securities relied on the range derived in the Trilon Valuation. Cash proceeds resulting from the exercise of options was added to the NAV and the issued and outstanding share capital was adjusted to reflect the exercise of options. Tax Pools Based on discussions with Trilon management and the auditors of Trilon, TD Securities reviewed the current status of the Company's accruals for taxes payable and determined which corporate operating tax loss carry-forwards and tax pools could reasonably be assumed to be used to shelter taxable operating income. The resulting operating losses and tax pools were valued based on a DCF analysis. In performing the DCF analysis, certain general assumptions were made concerning the growth of Trilon's overall business based on the current environment and historical growth. Capitalized General and Administrative Expenses The NAV methodology requires that a downward adjustment be made to NAV to reflect the value impact of corporate, non-recoverable G&A expenses. TD Securities has reduced the amount of corporate G&A expenses to be included in the NAV analysis to reflect synergies as discussed under "Benefits to a Purchaser of Acquiring 100% of the Trilon Shares". Trilon had $10.9 million of corporate G&A expenses in 2001 and TD Securities forecasted these to grow with the overall growth of the Company with 50% of these costs assumed to be fixed, and the remaining costs assumed to be variable. TD Securities estimated potential G&A synergies at $3.6 million in 2002 and $4.4 million in 2003 which reflects an estimate of a reduction in certain legal, audit and other public company costs. TD Securities reduced the corporate G&A expenses by 50% of the estimated synergies to reflect sharing of the value of these synergies with shareholders of a purchaser. The projected costs were based on a DCF analysis using a discount rate of 9.5% to 10.5% and a terminal multiple of 4.0x to 6.0x trailing EBITDA. Based on this analysis, TD Securities' selected enterprise value impact for Trilon's corporate G&A expenses is approximately $77 million to $108 million. Benefits to a Purchaser of Acquiring 100% of the Trilon Shares TD Securities reviewed and considered whether any distinctive material value will accrue to the Offeror through the acquisition of all the Trilon Shares. TD Securities believes that Trilon and Brascan currently have a close working relationship and that it would therefore be difficult to achieve any material incremental revenue synergies. In addition, TD Securities believes that for the size of the Company, G&A expenses are already very low and therefore determined that a reduction in certain corporate expenses such as legal, audit and public company costs are the only material cost synergies that could be achieved. In assessing the amount of these synergies to include in the Trilon Valuation, TD Securities also considered the synergies that could be achieved by other third party acquirors of Trilon and the amount that the Offeror, or such other acquiror might pay for in an open auction of the Company. As explained above, it would be difficult for any acquiror of Trilon to achieve significant cost synergies. Given the current degree of integration between Trilon and Brascan, TD Securities believes that it would be unlikely that an acquiror of Trilon other than Brascan would be able to achieve greater revenue synergies than those currently achieved by Trilon and Brascan. TD Securities assumed that Brascan might pay for 50% of the value of these synergies in an open auction of the Company. TD Securities has therefore reduced the G&A expense used in its NAV analysis to reflect the portion of synergies that it believes would be paid to the shareholders of Trilon. A-21 Summary of NAV Analysis The following table summarizes TD Securities' NAV analysis of Trilon:
Value Per Value Share ($ in thousands) ---------------------- -------------- Low High Low High ---------- ---------- ------ ------ Assets Business Segment Asset Management...................... $ 740,000 $ 820,000 $ 4.72 $ 5.19 Merchant Banking...................... 750,000 850,000 4.79 5.38 Investment Banking.................... 440,000 470,000 2.81 2.97 Brokerage & Business Services......... 230,000 290,000 1.47 1.84 Commercial Financing.................. 1,370,000 1,490,000 8.75 9.43 ---------- ---------- ------ ------ Total Operating Assets................. $3,530,000 $3,920,000 $22.54 $24.81 Cash and Cash Equivalents(/1/)......... $ 104,765 $ 126,935 $ 0.67 $ 0.80 Working Capital........................ (73,000) (73,000) (0.47) (0.46) Tax Pools.............................. 33,435 33,760 0.21 0.21 ---------- ---------- ------ ------ Total Assets............................ $3,595,200 $4,007,696 $22.95 $25.36 Liabilities Short and Long-term Debt............... $ 625,239 $ 625,239 $ 3.99 $ 3.96 NPV of Corporate Overhead.............. 76,910 108,390 0.49 0.69 ---------- ---------- ------ ------ Total Liabilities....................... $ 702,148 $ 733,629 $ 4.48 $ 4.64 Preferred Shares........................ $ 442,457 $ 513,300 $ 2.82 $ 3.25 Net Asset Value......................... $2,450,594 $2,760,767 $15.65 $17.47 Shares Outstanding (000s)(/2/).......... 156,629 158,019
- ------- (1) Includes cash proceeds from assumed exercise of options and estimate of net free cash flow from December 31, 2001 to Valuation Date. (2) After the exercise of in-the-money options. Trilon Valuation Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as of the Valuation Date, the fair market value of the Trilon Shares is in the range of $15.65 to $17.45 per Trilon Share. Brascan Share Valuation Valuation Methodology In assessing the value of the Brascan Class A Limited Voting Shares being received by Minority Shareholders as Brascan Class A Share Consideration under the Offer, TD Securities has relied on the market trading approach. Since Minority Shareholders receiving Brascan Class A Limited Voting Shares will be receiving a minority position in Brascan and will not be able to effect a sale of 100% of Brascan, TD Securities concluded that it was not appropriate to consider methodologies that are based on the assumption of a change of control transaction involving Brascan. TD Securities has not prepared an en bloc valuation of the Brascan Class A Limited Voting Shares. TD Securities believes the market trading value of Brascan Class A Limited Voting Shares is an appropriate indicator of their value for purposes of assessing the value of the Brascan Class A Share Consideration under the Offer, in view of the following: i. Brascan Class A Limited Voting Shares have a substantial market capitalization and market float of approximately $6 billion and $5 billion, respectively; ii. Brascan Class A Limited Voting Shares are widely held by both retail and institutional shareholders and Brascan is actively followed by at least six equity research analysts; iii. the average combined daily trading volume on the TSE and New York Stock Exchange ("NYSE") during the past year is approximately 430,000 Brascan Class A Limited Voting Shares; iv. the maximum number of Brascan Class A Limited Voting Shares to be issued pursuant to the Offer is 11.4 million, representing approximately 7% of the outstanding Brascan Class A Limited Voting Shares and A-22 approximately 8% of the number of Brascan Class A Limited Voting Shares which comprise the market float; and v. during our review of the Offer, we were not made aware of any material information which has not been publicly disclosed which would reasonably be expected to materially affect the market price of the Brascan Class A Limited Voting Shares. TD Securities analyzed the current and average trading prices of the Brascan Class A Limited Voting Shares over various recent periods, as summarized below:
Brascan Class A Limited Voting Shares --------------- Closing price April 3, 2002................................... $34.06 Closing price March 25, 2002(/1/)............................. $34.05 Volume-Weighted Average Closing Price for Period Ending April 3, 2002: 10 trading days.............................................. $34.12 20 trading days.............................................. $33.76
- ------- (1) Trading day immediately prior to announcement by Brascan of its intention to make the Offer TD Securities believes that the volume-weighted average closing price for a 20 trading day period ended April 3, 2002, provides an appropriate assessment of the value of the Brascan Class Limited Voting Shares as it is representative of the actual number of shares traded at various prices over a sustained period of time. In addition, TD Securities believes that the closing price of April 3, 2002 is relevant in that it represents the most current market assessment of the value of the Brascan Class A Limited Voting Shares. Brascan Share Valuation Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as of the Valuation Date, the value of the Brascan Class A Limited Voting Shares is $33.76 to $34.06 per share. Brascan Preference Share Valuation Valuation Methodology In assessing the value of the Brascan Preference Shares being received by Minority Shareholders as Brascan Preference Share Consideration under the Offer, TD Securities has relied on the comparable market trading approach. The Brascan Preference Shares are conventional "soft retractable" preferred shares of a type that has been widely issued by Canadian corporations, particularly financial institutions, for more than 10 years. In applying the comparable market trading approach, TD Securities selected "soft retractable" issues of five different issuers shown in Table 7 in Appendix A. Each of these issues is either convertible into freely tradable common shares of the issuer or exchangeable into freely-tradable common shares of its public parent company on or after a fixed date in the future, with each preferred share convertible into that number of common shares determined by dividing the issue price of the preferred share by the 20-day volume-weighted average trading price of the common shares for the 20 trading days ending shortly before conversion or exchange. The ratings accorded by DBRS to the various comparable issues range between Pfd-2 and Pfd-2(low). The S&P ratings range between P-1(Low) and P-2(Low). TD Securities anticipates that the Brascan Preference Shares will attract ratings of Pfd-2(low)n and P-2 from DBRS and S&P, respectively. While only the Investors Group Inc. issue (the "Investors Group Preferred Shares") carries a non-cumulative dividend entitlement, TD Securities believes, based on its experience as an underwriter and trader of preferred shares, that investors demand only a very slight premium in yield for a non- cumulative entitlement versus a cumulative one in circumstances where the issuer is well rated (Pfd-2(low)/P-2(Low) or better) and there is no concern about the issuer's creditworthiness deteriorating in the short term. TD Securities estimates that the yield premium ranges between zero for highly rated financial institutions and 0.15% per annum. Finally, while the Brascan Preference Shares are most structurally similar to the Investors Group Preferred Shares, TD Securities has placed particular emphasis on the George Weston Limited issue (the "Weston Preferred Shares"). This issue was launched on April 4, 2002 and as a result it provides a current measure of the demand for a large volume of preferred shares from a single issuer. A-23 On this basis, we adjust the 5.15% dividend rate on the Weston Preferred Shares upward by: i. 0.20% to 0.30% to account for the longer term on the Brascan Preference Shares (11 years to investor conversion, compared to seven years for the Weston Preferred Shares); and ii. a further 0.05% to 0.15% to account for the non-cumulative dividend entitlement on the Brascan Preference Shares, compared to the cumulative entitlement on the Weston Preferred Shares. On this basis, an appropriate dividend rate for the Brascan Preference Shares would fall in a range of 5.40% to 5.60%. Brascan Preference Share Valuation Conclusion Based upon and subject to the foregoing, as the Brascan Preference Shares bear dividends at a 5.50% annual rate and have an issue price of $25.00 per Brascan Preference Share, TD Securities is of the opinion that, as of the Valuation Date, the value of the Brascan Preference Shares is $24.79 to $25.21 per share. Fairness Opinion Factors Considered In considering the fairness of the consideration, from a financial point of view, to the Minority Shareholders, TD Securities principally considered and relied upon the following: i. an assessment of the value of the consideration to be received pursuant to the Offer; ii. a comparison of the value per Trilon Share of the consideration to be received pursuant to the Offer to the range of fair market values as determined under the Trilon Valuation; and iii. a comparison on a per Trilon Share basis of the value of the consideration to be received pursuant to the Offer to the trading price of the Trilon Class A Shares prior to the announcement by Brascan of its intention to make the Offer. Value of the Consideration The value of the consideration to be received under the Offer depends on the form of consideration selected by each Minority Shareholder and on the resulting proration. The implied values under the three alternatives available to Minority Shareholders are outlined below:
Alternative Consideration per Trilon Share Implied Value - ----------- ----------------------------------------------- --------------------- Cash Consideration $17.00 cash $16.90(/1/) Brascan Class A Share Consideration 0.5 Brascan Class A Limited Voting Shares $16.88 to $17.03(/2/) Brascan Preference Share Consideration 0.678 Brascan Preference Shares plus $0.05 cash $16.86 to $17.14(/3/)
- ------- (1) Adjusted for foregoing the Interim Dividend if the Cash Consideration option is selected. (2) Based on a value of $33.76 to $34.06 per Brascan Class A Limited Voting Share, as determined in the Brascan Share Valuation. (3) Based on a value of $24.79 to $25.21 per Brascan Preference Share, as determined in the Brascan Preference Share Valuation, plus $0.05 cash. Depending on the combination of securities selected by the Minority Shareholders in aggregate, there is a range of outcomes possible including certain individual Minority Shareholders being subject to proration. Regardless of the outcome, based on the foregoing, TD Securities is of the opinion that the implied value of the consideration is in the range of $16.86 to $17.14 per Trilon Share. Comparison of the Value per Trilon Share Under the Offer to the Trilon Valuation The value per Trilon Share of the consideration to be received pursuant to the Offer of $16.86 to $17.14 is within the range of fair market value of the Trilon Shares of $15.65 to $17.45. Comparison of the Value per Trilon Share Under the Offer to the Trading Price TD Securities reviewed 51 other transactions in the Canadian equity market where controlling shareholders successfully acquired publicly traded minority interests with a value in excess of $10 million since 1995. Success was A-24 defined as acquiring at least one-half of the minority shares outstanding at the time of the transaction. Defining the premium for this purpose as the amount by which the value per share offered under the relevant transaction exceeded the closing price of the shares on the principal trading exchange immediately prior to the announcement of the transaction resulted in premiums as follows:
Highest Lowest Mean Median ------- ------ ---- ------ Premium ............................................. 64% (1)% 27% 26%
The value per Trilon Share of the consideration under the Offer represents a nominal premium of approximately 3% to the $16.50 market price of the Trilon Class A Shares on March 25, 2002, the last trading day prior to the announcement of Brascan's intention to acquire the Trilon Shares not already owned by it. The premiums over pre-announcement market prices observed above arise, in part, because of the incremental value that an acquiror of 100% of a target business can achieve relative to a purchaser of a minority position in the equity of such business through the public market. This incremental value results from, among other things: (i) revenue that an acquiror can generate through, for example, increased market influence, complementary business lines, improved market coverage and similar benefits that would not otherwise be available to the target company on a stand-alone basis; and (ii) cost reductions that an acquiror can achieve as a result of economies of scale, elimination of duplicate and redundant functions, increased purchasing power with suppliers, and similar cost savings that would not otherwise be achievable by the target company on a stand-alone basis. Trilon's asset base consists primarily of a portfolio of financial assets. Financial assets, due to their nature, offer limited opportunity to generate incremental value, either from additional revenues or from cost reduction, in excess of their underlying value. As a result, any potential en bloc acquiror of Trilon would be willing to pay a lower than average premium over the pre- announcement market price of the Trilon Class A Shares. In addition, TD Securities believes that there are certain other considerations that are relevant in comparing the value per Trilon Share of the consideration under the Offer to the pre-announcement trading price: i. Based in part on recent public comments by Brascan senior management, there has been speculation among equity market participants that Brascan may move to acquire the Trilon Shares it does not already own. TD Securities believes that this has increased the market trading price of Trilon Class A Shares above the price at which they would trade in the absence of such speculation. As a result, the premium over the pre- announcement trading price of the Trilon Class A Shares that the value of the consideration pursuant to the Offer represents is decreased. ii. Trilon Shares offer a current dividend yield of approximately 4%. This dividend is higher than the dividend available on most common equity securities in Canada. Many public equity investors view this dividend to be an attractive aspect of the Trilon Class A Shares. As a result, the market trading price of the Trilon Class A Shares is not indicative solely of Trilon's underlying net asset value, but also reflects its relatively high dividend yield. In the current market environment, TD Securities believes that the dividend yield increases the market trading price of the Trilon Shares above the price at which they would trade in the absence of such dividend. However, a potential en bloc acquiror of Trilon would not be willing to pay a premium for such a dividend yield. Fairness Conclusion Based upon and subject to the foregoing, TD Securities is of the opinion that, as at the Valuation Date, the consideration under the Offer is fair, from a financial point of view, to the Minority Shareholders. Yours very truly, /s/ TD Securities Inc. TD SECURITIES INC. A-25 APPENDIX A Table 1 - Asset Management Precedent Transactions
Equity Enterprise EV / Value Value EBITDA Target Acquiror Date ($mm) ($mm) LTM(/1/) - ------------------------ -------------------------- --------- ------ ---------- -------- Canadian Transactions (C$) Montrusco Bolton Inc.... First International Asset 30-Aug-00 $ 101 $ 106 9.1x Management Bissett & Associates Templeton Management 26-Jul-00 147 139 11.3x Investment Management Limited Limited................ Perigee Inc............. Legg Mason Inc. 10-Mar-00 304 299 12.1x Canadian Average............................................................... 10.8x Canadian Average (excluding High/Low).......................................... 11.3x U.S. Transactions (US$) Phoenix Investment Phoenix Home Life Mutual 11-Sep-00 $ 833 $ 982 8.2x Partners(/2/).......... Insurance Company US Trust Corporation.... Charles Schwab Corporation 13-Jan-00 2,750 2,153 16.0x Pimco Advisors Holdings Allianz AG 6-Oct-99 4,740 4,585 16.1x L.P.(/3/).............. U.S. Average................................................................... 13.4x U.S. Average (excluding High/Low).............................................. 16.0x
(1) LTM = Last Twelve Months (2) Purchased 40% of shares not already owned. (3) Purchased 70% of partnership units for US$3.3 billion. Table 2 - Reinsurance Precedent Transactions
Equity Value Price / Target Acquiror Date (US$mm) Book - ------------------------ --------------------------------- --------- ------- ------- Lincoln National Reinsurance Unit....... Swiss Reinsurance Company 30-Jul-01 $2,000 2.3x USF Re Insurance Company................ Folksamerica Holding Company Inc. 1-Apr-99 93 1.0x NAC Re Corporation...... XL Capital Ltd. 16-Feb-99 1,275 1.7x Mid Ocean Ltd........... XL Capital Ltd. 16-Mar-98 2,903 2.1x GCR Holdings Ltd........ XL Capital Ltd. 8-May-97 672 1.6x Average..................................................................... 1.7x Average (excluding High/Low)................................................ 1.8x
A-26 Table 3 - Investment Banking Precedent Transactions
Equity Price/ Value Earnings Target Acquiror Date ($mm) LTM - ------------------------ ---------------------------- --------- ------ -------- Canadian Transactions (C$) First Marathon Inc...... National Bank of Canada 17-Jun-99 $ 712 17.7x Midland Walwyn Inc...... Merrill Lynch & Company Inc. 22-Jun-98 1,287 20.7x Canadian Average...................................................... 19.2x U.S. Transactions (US$) Tucker Anthony Sutro Corporation............ Royal Bank of Canada 1-Aug-01 $ 650 22.8x Dain Rauscher Corporation............ Royal Bank of Canada 28-Sep-00 1,481 15.9x J.P. Morgan & Company... Chase Manhattan Corporation 13-Sep-00 44,287 20.2x Donaldson Lufkin & Jenrette Inc........... Credit Suisse Group 30-Aug-00 16,492 22.9x Paine Webber Group Inc.. UBS AG 12-Jul-00 16,638 27.3x Hambrecht and Quist Group.................. Chase Manhattan Corporation 28-Sep-99 1,489 18.9x U.S. Average.......................................................... 21.4x U.S. Average (excluding High/Low)..................................... 21.2x
Table 4 - Business & Brokerage Services Detailed WACC Analysis Cost of Debt Risk free rate (10 year Government of Canada bonds)...................... 5.72% Borrowing spread......................................................... 2.25% Pre-tax cost of debt..................................................... 7.97% Tax rate................................................................. 41.20% After tax cost of debt................................................... 4.69% Cost of Equity Risk free rate (10 year Government of Canada bonds)...................... 5.72% Equity risk premium...................................................... 5.00% Unlevered beta........................................................... 0.70 Levered beta............................................................. 0.80 After tax cost of equity................................................. 9.73% WACC Optimal capital structure (% debt)....................................... 20.00% WACC..................................................................... 8.72%
Table 5 - Real Estate Services Precedent Transactions
Equity Enterprise Price / EV / Value Value Earnings EBITDA Target Acquiror Date ($mm) ($mm) LTM LTM - ------------------------ ------------------------ --------- ------ ---------- -------- ------ CB Richard Ellis Inc.... Blum Capital Partners LP 24-Feb-01 US$349 US$630 10.4x 4.2x Homeservices.com Inc.... MidAmericanEnergy US$184 US$204 10.8x 4.7x Holdings Company 22-Aug-01 Royal LePage Limited.... Trilon Financial $ 89 $ 73 11.1x 5.2x Corporation 16-Feb-99 Average...................................................................... 10.8x 4.7x Average (excluding High/Low)................................................. 10.8x 4.7x
A-27 Table 6 - Commercial Financing Precedent Transactions
Equity Enterprise Price / EV / Value Value Book EBITDA Target Acquiror Date (US$mm) (US$mm) Value LTM - ------ -------- --------- ------ ---------- ------- ------ Heller Financial Inc.... GE Capital 30-Jul-01 $5,425 $4,993 2.1x 7.8x Corporation Franchise Finance Corp. GE Capital 30-Mar-01 1,486 2,152 1.6x 10.6x of America............. Corporation CIT Group Inc........... Tyco International 13-Mar-01 9,882 8,818 1.6x 6.6x Limited Sierracities.com Inc.... American Express 14-Feb-01 108 51 0.7x 14.0x Company Newcourt Credit Group Inc.................... CIT Group Inc. 5-Aug-99 2,709 2,144 0.9x 3.4x Healthcare Financial Heller Financial 19-Apr-99 502 449 2.0x 13.7x Partners Inc........... Inc. Sirrom Capital Finova Group Inc. 7-Jan-99 394 372 1.2x 9.5x Corporation............ Average................................................................ 1.4x 9.4x Average (excluding High/Low)........................................... 1.5x 9.6x
Table 7 - Comparable Preferred Share Market Trading Statistics
Term to Term to Issue First First Investor Inv. Market Dividend Cum. / Size DBRS S&P Call Call Conversion Conv. Price Issuer Series Rate Non-cum. ($ mm) Rating Rating Date (years) Date (years) 3-Apr-02 - ------ --------- -------- -------- ------ ----------- --------- --------- -------- ---------- -------- -------- Nova Scotia Power Incorporated... Series D 5.90% Cum. $125 Pfd-2(low) P-2(Low) 15-Oct-15 13.5 yrs 15-Jan-16 13.8 yrs $26.95 Investors Group Inc............ Series A 5.75% Non-cum. 360 Pfd-2n P-2(High) 30-Jun-09 7.2 yrs 30-Jun-13 11.2 yrs $25.30 Brascan Corporation.... Series 10 5.75% Cum. 250 Pfd-2(low) P-2 30-Sep-08 6.5 yrs 31-Mar-12 10.0 yrs $25.10 ATCO Ltd........ Series 3 5.75% Cum. 150 Pfd-2(low) P-1(Low) 1-Dec-08 6.7 yrs 1-Dec-11 9.7 yrs $26.15 George Weston Limited........ Series II 5.15% Cum. 265 Pfd-2(low) P-2 1-Apr-09 7.0 yrs 1-Jul-09 7.2 yrs $25.00(/1/) Yield to Inv. Issuer Conv. - ------ -------- Nova Scotia Power Incorporated... 5.10% Investors Group Inc............ 5.63% Brascan Corporation.... 5.72% ATCO Ltd........ 5.22% George Weston Limited........ 5.15% Brascan (greater Corporation.... Series 11 5.50% Non-cum. than) $10 Pfd-2(low)n P-2 30-Jun-09 7.2 yrs 30-Jun-13 11.2 yrs $25.00 Brascan Corporation.... 5.50%
- -------- (1) Issue price on April 4, 2002. A-28 ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE INFORMATION IN THIS DOCUMENT SHOULD BE DIRECTED TO: TRILON FINANCIAL CORPORATION BCE Place, 181 Bay Street Suite 4420, P.O. Box 771 Toronto, Ontario, Canada M5J 2T3 Contact: Bryan K. Davis Telephone: (416) 359-8612 Fax: (416) 365-9642 EX-3.6 7 dex36.txt MANAGEMENT INFORMATION CIRCULAR OF BRASCAN Exhibit 3.6 MANAGEMENT INFORMATION CIRCULAR VOTING INFORMATION Solicitation of Proxies This Management Information Circular ("Circular") is furnished in connection with the solicitation by the management of Brascan Corporation ("Brascan" or the "Corporation") of proxies to be used at the Annual Meeting of Shareholders of the Corporation (the "meeting") referred to in the accompanying Notice of Meeting (the "Notice") to be held at the time and place and for the purposes set forth in such Notice. The solicitation will be made primarily by mail, but proxies may also be solicited personally or by telephone by regular employees of the Corporation at nominal cost. The cost of solicitation will be borne by the Corporation. The information contained herein is given as at February 28, 2002, unless otherwise indicated. Appointment of Proxies The persons named in the enclosed form of proxy are management representatives and are directors and/or officers of the Corporation. Each shareholder has the right to appoint a person other than the persons named in the enclosed form of proxy, who need not be a shareholder of the Corporation, to represent such shareholder at the meeting or any adjournment thereof. Such right may be exercised by inserting such person's name in the blank space provided in the form of proxy. The completed form of proxy must be deposited with the Secretary of the Corporation c/o CIBC Mellon Trust Company, Attention: Proxy Department, Unit 6, 200 Queens Quay East, Toronto, Ontario, M5A 4K9, not later than the close of business on Wednesday, April 24, 2002 or, if the meeting is adjourned, 48 hours (excluding Saturdays and holidays) before any adjournment of the meeting. Non-Registered Holders Only registered holders of Class A Limited Voting Shares and Class B Limited Voting Shares of the Corporation, or the persons they appoint as their proxies, are permitted to attend and vote at the meeting. However, in many cases, Class A Limited Voting Shares of the Corporation beneficially owned by a holder (a "Non-Registered Holder") are registered either: i) in the name of an intermediary (an "Intermediary") that the Non-Registered Holder deals with in respect of the shares, such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or ii) in the name of a clearing agency (such as The Canadian Depository for Securities Limited) of which the Intermediary is a participant. In accordance with the requirements of National Policy Statement No. 41 of the Canadian Securities Administrators, the Corporation has distributed copies of the accompanying Notice, this Circular, the enclosed form of proxy and the Corporation's 2001 annual report (which includes management's discussion and analysis and consolidated financial statements for the fiscal year ended December 31, 2001) (collectively, the "meeting materials") to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders. Intermediaries are required to forward meeting materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Very often, Intermediaries will use service companies to forward the meeting materials to Non-Registered Holders. Generally, Non-Registered Holders who have not waived the right to receive meeting materials will either: ------ i) be given a proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature) which is restricted as to the number of shares beneficially owned by the Non-Registered Holder but which is otherwise not completed. This form of proxy need not be signed by the --- Non-Registered Holder. In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete the form of proxy and deposit it with the Secretary of the Corporation c/o CIBC Mellon Trust Company, Attention: Proxy Department, Unit 6, 200 Queens Quay East, Toronto, Ontario, M5A 4K9, as described above; or ii) more typically, be given a voting instruction form which must be completed and signed by the Non-Registered Holder in accordance with the directions on the voting instruction form (which may in some cases permit the completion of the voting instruction form by telephone). The purpose of these procedures is to permit Non-Registered Holders to direct the voting of the shares they beneficially own. Should a Non-Registered Holder who receives either a proxy or a voting instruction form wish to attend and vote at the meeting in person (or --------- 1 have another person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should strike out the names of the persons named in the proxy and insert the Non-Registered Holder's (or such other person's) name in the blank space provided or, in the case of a voting instruction form, follow the corresponding instructions on the form. Please note that the voting instruction form should not be brought to the meeting. In either case, Non-Registered Holders should carefully follow the instructions of their Intermediaries and their service companies. Revocation A shareholder who has given a proxy has the power to revoke it as to any matter on which a vote shall not already have been cast pursuant to the authority conferred by such proxy and may do so: (1) by delivering another properly executed form of proxy bearing a later date and depositing it as aforesaid; (2) by depositing an instrument in writing revoking the proxy executed by the shareholder or by the shareholder's attorney authorized in writing (i) at the registered office of the Corporation at any time up to and including the last business day preceding the day of the meeting, or any adjournment thereof, at which the proxy is to be used, or (ii) with the Chairman of the meeting, prior to its commencement, on the day of the meeting or any adjournment thereof; or (3) in any other manner permitted by law. A Non-Registered Holder may revoke a voting instruction form or a waiver of the right to receive meeting materials and to vote given to an Intermediary at any time by written notice to the Intermediary, except that an Intermediary is not required to act on a revocation of a voting instruction form or of a waiver of the right to receive materials and to vote that is not received by the Intermediary at least seven days prior to the meeting. Voting of Shares Represented By Management Proxies The management representatives designated in the enclosed form of proxy will vote or withhold from voting the shares in respect of which they are appointed proxy on any ballot that may be called for in accordance with the instructions of the shareholder as indicated on the proxy and, if the shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. In the absence of such direction, such shares will be voted by the management representatives for the election of directors and for the appointment of auditors, as indicated under those headings in this Circular. The enclosed form of proxy confers discretionary authority upon the management representatives designated therein with respect to amendments to or variations of matters identified in the Notice of Meeting and with respect to other matters which may properly come before the meeting. At the date of this Circular, the management of the Corporation knows of no such amendments, variations or other matters to come before the meeting. Voting Shares As at February 28, 2002, the Corporation had outstanding 168,647,595 Class A Limited Voting Shares and 85,120 Class B Limited Voting Shares. Each registered holder of Class A and Class B Limited Voting Shares of record at the close of business on Friday, March 15, 2002, the record date (the "Record Date") established for the purposes of determining shareholders entitled to receive notice of and to vote at the meeting, will, except as provided below, be entitled to one vote for each Class A or Class B Limited Voting Share held on all matters to come before the meeting or any adjournment thereof either in person, or by proxy. In the event that a holder of Class A or Class B Limited Voting Shares has transferred any such shares after the Record Date and the transferee of such shares establishes proper ownership thereof and makes a written demand, not later than 10 days before the meeting, to be included in the list of shareholders entitled to vote at the meeting, the transferee will be entitled to vote such shares at the meeting. For a description of the procedures to be followed by Non-Registered Holders to direct the voting of shares beneficially owned, see "Non-Registered Holders" above. As a result of the amalgamation of The Edper Group Limited ("Edper") and Brascan Limited ("Brascan") on August 1, 1997 to form the Corporation, subsidiaries of the Corporation hold 111,846,461 Class A Limited Voting Shares of the Corporation. Pending cancellation of these shares, they will not be voted at shareholder meetings and, accordingly, have not been included in the number of outstanding Class A Limited Voting Shares as set out above. As set out below under "Election of Directors", holders of Class A Limited Voting Shares will be entitled, as a class, to elect one-half of the board of directors of the Corporation, and holders of Class B Limited Voting Shares will be entitled, as a class, to elect the other one-half of the board of directors. As set out below under "Appointment of Auditors", the appointment of auditors must be approved by a majority of the votes cast by holders of Class A Limited Voting Shares and holders of Class B Limited Voting Shares who vote in respect of the Resolution. 2 Principal Holders of Voting Shares To the knowledge of the directors and officers of the Corporation, the only person or corporation which beneficially owns, directly or indirectly, or exercises control or direction over, voting securities of the Corporation carrying more than 10% of the votes attached to any class of outstanding voting securities of the Corporation is EdperPartners Limited ("EdperPartners") and its shareholders, who collectively own, directly or indirectly, exercise control or direction over, or have options and warrants to acquire, approximately 27.1 million Class A Limited Voting Shares, representing approximately 15% of the outstanding Class A Limited Voting Shares of the Corporation on a fully diluted basis, and 85,120 Class B Limited Voting Shares, representing all of the Class B Limited Voting Shares of the Corporation. These shareholdings include the pro rata ownership of Class A Limited Voting Shares held through BNN Investments Ltd. (formerly "Canadian Express Ltd.") as further described below. EdperPartners' operations are governed by a shareholders' agreement to which each shareholder is a party. Shareholders of EdperPartners have input on major decisions and an equal vote, irrespective of their shareholdings, in the appointment of the officers of EdperPartners. In addition, shareholders holding two-thirds of the shares of EdperPartners can at any time require a shareholder of EdperPartners to sell his or her shares based on the stock market price of the Corporation's Class A Limited Voting Shares at the time. The shareholders' agreement also provides that: (i) unless otherwise approved by holders of at least two-thirds of the common shares, any sale of an interest in EdperPartners will only be made to other shareholders; (ii) any changes to the company's by-laws, dividend policy, principal investments, the issue or redemption of shares or admission of other individuals as shareholders require the approval of shareholders holding at least two-thirds of EdperPartners' common shares; and (iii) EdperPartners will offer to purchase 10% of EdperPartners' outstanding shares annually based on the stock market price of the Corporation's Class A Limited Voting Shares, subject to its financial capability at the time. EdperPartners is a party to a Trust Agreement with Montreal Trust Company of Canada (as trustee for the holders of Brascan's Class A Limited Voting Shares) dated August 1, 1997. The Trust Agreement provides, among other things, that EdperPartners has agreed not to sell any Class B Limited Voting Shares, directly or indirectly, pursuant to a takeover bid, unless a concurrent bid is made to all holders of Class A Limited Voting Shares. The concurrent offer must be: (i) for the same percentage of Class A Limited Voting Shares as the percentage of Class B Limited Voting Shares offered to be purchased from EdperPartners; and (ii) the same in all material respects as the offer for the Class B Limited Voting Shares. Among other things, the Trust Agreement permits: (i) a sale by EdperPartners of Class B Limited Voting Shares at a price per share less than 115% of the market price of Class A Limited Voting Shares and as part of a transaction involving not more than five persons in the aggregate; and (ii) a direct or indirect sale of shares of EdperPartners to a purchaser who is or will become a shareholder of EdperPartners and will not hold more than 20% of EdperPartners' outstanding shares as a result of the transaction. As at February 28, 2002, there were 37 shareholders of EdperPartners, none of whom hold more than a 15% effective equity interest in EdperPartners. These shareholders are: G. Arnell, D. Arthur, J. Blidner, T. Casgrain, R. Clark, I. Cockwell, J. Cockwell, J. Delmar, S. Douglas, R. Dunford, B. Flatt, D. Gammiero, H. Goldgut, P. Gordon, L. Hamilton, R. Harding, B. Kenning, D. Kerr, T. Kerr, E. Kress, A. Lambert, B. Lawson, R. Legault, F. Lochan, T. Lyons, M. Marinho, G. Myhal, A. Norris, D. Pannell, S. Pollock, T. Price, A. Regent, B. Robertson, M. Shady, P. Sodre', J. Tremayne and J. Zuccotti. Shareholders of EdperPartners, in addition to receiving dividends from their investment in EdperPartners, participate in an investment fund (the "Fund") that was formed and financed by EdperPartners in 2001 to invest in securities other than those issued by Brascan and its affiliates. The Fund distributed $2 million of investment income, its first such distribution, to participants in January 2002, with no individual participant receiving more than $155,000. Jack L. Cockwell, J. Bruce Flatt, Lynda C. Hamilton, Robert J. Harding, David W. Kerr and Allen T. Lambert, who are directors of the Corporation and shareholders of EdperPartners, collectively received a total of $630,000 of distributions from the Fund. Bruce Flatt, President and Chief Executive Officer of Brascan, together with 13 other shareholders of EdperPartners, owns common shares of BNN Investments Ltd., a TSE listed public company which owns 9.6 million Class A Limited Voting Shares of the Corporation. The Corporation owns $85 million of senior preferred shares of BNN Investments Ltd., which were acquired in 1987 pursuant to a business combination. ELECTION OF DIRECTORS The board of directors of the Corporation consists of 18 members, all of whom will be elected at this meeting. The articles of the Corporation provide that holders of Class A Limited Voting Shares are entitled, as a class, to elect one-half of the board of directors of the Corporation, and that holders of Class B Limited Voting Shares are entitled, as a class, to elect the other one-half of the board of directors. The articles of the Corporation also provide that each shareholder of a class or series of shares of the Corporation entitled to vote in the election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the holder multiplied by the number of directors to be elected by the shareholder and the holders of shares of the classes or series of shares entitled to vote with the shareholder in the election of directors. The shareholder may cast all such votes in favour of one candidate or distribute such votes among the candidates in any manner the shareholder sees fit. Where the shareholder has voted 3 for more than one candidate without specifying the distribution of the shareholder's votes among such candidates, the shareholder will be deemed to have distributed the shareholder's votes equally among the candidates for whom the shareholder voted. On any ballot that may be called for in the election of directors, the management representatives designated in the enclosed form of proxy to be completed by holders of Class A Limited Voting Shares intend to cast the votes to which the Class A Limited Voting Shares represented by such proxy are entitled equally among the proposed nominees for election by the holders of Class A Limited Voting Shares as set forth below, unless the shareholder who has given such proxy has directed that such shares be otherwise voted or withheld from voting in the election of directors. In addition, on any ballot that may be called for in the election of directors, the management representatives designated in the form of proxy to be completed by the holders of Class B Limited Voting Shares intend to cast the votes to which the Class B Limited Voting Shares represented by such proxy are entitled equally among the proposed nominees for election by the holders of Class B Limited Voting Shares as set forth below, unless the shareholder who has given such proxy has directed that such shares be otherwise voted or withheld from voting in the election of directors. If a shareholder wishes to distribute the shareholder's votes other than equally among the nominees for whom the shareholder has directed the management representatives designated in the enclosed form of proxy to vote, then the shareholder must do so personally at the meeting or by another proper form of proxy. Management has received consents from the proposed nominees to serve as directors, but if, for any reason, prior to the meeting any of the proposed nominees is unable to serve as a director, the management representatives designated in the enclosed form of proxy, unless directed to withhold from voting in the election of directors, reserve the right to vote for other nominees at their discretion. Nominees for Directors The following tables set out the names of the persons proposed to be nominated for election as directors by the holders of Class A Limited Voting Shares and by the holders of Class B Limited Voting Shares, each to hold office until the next annual meeting or until a successor is elected or appointed, along with all major positions and offices currently held in the Corporation or any of its significant associated companies held by each person, the principal occupation or employment of each person, the year in which each person was first elected a director of the Corporation, and the approximate number of shares of each class of shares of the Corporation that each person has advised the Corporation are beneficially owned, directly or indirectly, or subject to control or direction by that person as at February 28, 2002. All of the persons named in the following table, other than Dr. Jack M. Mintz, were elected members of the board of directors at the last annual meeting. Dr. Mintz is currently President and Chief Executive Officer of the C.D. Howe Institute, a position he was appointed to in September 1999. Dr. Mintz is also Professor of Taxation at the Joseph L. Rotman School of Management at the University of Toronto, a position he was appointed to in 1989.
- ----------------------------------------------------------------------------------------------------------------------------------- Class A Name, Municipality of Residence Year Became Class A Class A Share Deferred Share Office, Principal Occupation & Positions Held Director (a) Shares Held Options Held Units Held - ----------------------------------------------------------------------------------------------------------------------------------- Nominees for Election by Holders of Class A Limited Voting Shares: The Lord Black of Crossharbour, P.C. (C), O.C., London, England Chairman and Chief Executive Officer, Hollinger Inc., a publishing 1986 1,500 12,500 1,197 company James J. Blanchard, Michigan and Washington, D.C., U.S.A. Partner of Verner, Liipfert, Bernhard, McPherson & Hand, a law firm 1996 2,000 12,500 792 John P. Curtin, Jr., New York, U. S. A. Managing Director, Goldman, Sachs & Co., an investment banking company 2000 1,000 10,000 1,298 Julia E. Foster, Toronto, Canada Chair, Ontario Arts Council, an arts funding organization 1996 1,500 12,500 -- Philip B. Lind, O.C., Toronto, Canada Vice-Chairman, Rogers Communications Inc., a diversified 1994 1,000 12,500 1,784 communications company The Honourable Roy MacLaren, P.C., Toronto, Canada Corporate director 2001 -- 5,000 742 Dr. Jack M. Mintz, Toronto, Canada President and Chief Executive Officer, C.D. Howe Institute, a public 2002 -- 5,000 -- policy institute Saul Shulman, Q.C., Toronto, Canada Senior Partner, Goodman and Carr, LLP, a law firm 1997 1,000 12,500 -- George S. Taylor, St. Marys, Canada Corporate director 1994 54,560 12,500 1,452 - ----------------------------------------------------------------------------------------------------------------------------------
Note: (a) Indicates year first elected as a director of the Corporation or its predecessors. 4
- ------------------------------------------------------------------------------------------------------------------------------------ Class A Year Deferred Name, Municipality of Residence Became Class A Class A Share Class A Share Share Office, Principal Occupation & Positions Held Director (a) Shares Held Options Held Warrants Held(b) Units Held - ------------------------------------------------------------------------------------------------------------------------------------ Nominees for Election by Holders of Class B Limited Voting Shares: Dr. Roberto P. Cezar de Andrade, Rio de Janeiro, Brazil Chairman and director of Brascan Brazil Ltd., a subsidiary of the corporation 1981 -- 15,000 -- -- Jack L. Cockwell, Toronto, Canada Co-Chairman of the Corporation/(e)/ 1970 4,493,403/(c)/ 340,000 298,400 33,563 The Honourable J. Trevor Eyton, O.C., Toronto, Canada Member of the Senate of Canada/(f)/ 1970 95,500 -- -- -- J. Bruce Flatt, Toronto, Canada President and Chief Executive Officer of the Corporation/(g)/ 2001 2,997,685/(c,d)/ 365,000 307,188 8,700 James K. Gray, O.C., Calgary, Canada Corporate director 1997 4,000 12,500 -- 1,197 Lynda C. Hamilton, Toronto, Canada President and Chief Executive Officer, Edper Investments Limited, an investment company 1997 246,072/(c)/ 12,500 -- -- Robert J. Harding, FCA, Toronto, Canada Chairman of the Corporation/(h)/ 1992 627,491/(c)/ 305,000 99,900 33,563 David W. Kerr, Toronto, Canada Chairman, Chief Executive Officer and director of Noranda Inc./(i)/ 1978 1,696,325/(c)/ -- -- -- Allen T. Lambert, O.C., Toronto, Canada Group Chairman, Brascan Financial Services; and director of Trilon Financial Corporation 1987 145,293/(c)/ 12,500 -- -- - ------------------------------------------------------------------------------------------------------------------------------------
Notes: (a) Indicates year first elected as a director of the Corporation or its predecessors. (b) Class A share warrants purchased for value by executives during 1998 and expiring in 2008. (c) Includes Class A Limited Voting Shares held directly and indirectly through EdperPartners. See "Principal Holders of Voting Shares". (d) Includes Class A Limited Voting Shares held directly and indirectly through BNN Investments Ltd. See "Principal Holders of Voting Shares". (e) Mr. Cockwell was President and Chief Executive Officer of the Corporation until February 14, 2002. He is also Chairman and Chief Executive Officer of EdperPartners and a director of the following affiliates of the Corporation: Brookfield Properties Corporation, the Corporation's real estate operating subsidiary; Trilon Financial Corporation, the Corporation's financial operating subsidiary; Noranda Inc. and Falconbridge Limited, which are both mining and metals companies; and Nexfor Inc., a building products and specialty paper company. (f) Mr. Eyton is a director of Noranda Inc. (g) Mr. Flatt is also a Vice-Chairman and director of Brookfield Properties Corporation; and is a director of BPO Properties Limited (a subsidiary of Brookfield Properties Corporation) and Noranda Inc. Mr. Flatt is a director-elect of Trilon Financial Corporation and Nexfor Inc. (h) Mr. Harding is also a director and Chairman of BPO Properties Ltd.; a director and Deputy Chairman of Falconbridge Limited and Noranda Inc.; and a director of Nexfor Inc. (i) Mr. Kerr is also a director of Falconbridge Limited and Nexfor Inc. Compensation of Directors Directors of the Corporation who are not officers of the Corporation or its affiliates (the "outside directors") are entitled to receive an annual retainer of $22,500 and an attendance fee of $1,200 in respect of each meeting of the board of directors which they attend in person or $500 if attending by telephone (other than any meeting held immediately following an annual meeting of shareholders). Outside directors who are chairmen of board committees receive an annual retainer of $4,000. Outside directors who are members of board committees receive an attendance fee of $1,000 for each committee meeting attended in person or $500 if the committee meeting occurs on the same day as a board meeting or if attending by telephone. Directors may elect to receive all or a portion of their compensation in deferred share units (See "Executive Compensation - Long-term Investments"). At the discretion of the Board, outside directors may also from time to time be granted options to acquire Class A Limited Voting Shares of the Corporation. Directors are also reimbursed for travel and other out-of pocket expenses incurred in attending board or committee meetings. In 2001, 12 directors of the Corporation received total cash compensation of $149,950 and 6,845 deferred share units and one director received consulting fees of $23,268. In 2001, no options were issued to directors. In February 2002, 60,000 options to acquire Class A Limited Voting Shares of the Corporation were issued to 12 non-management directors. 5 EXECUTIVE COMPENSATION The following information is provided pursuant to the executive compensation disclosure requirements contained in the Regulations to the Securities Act (Ontario). Report on Executive Compensation As of the year ended December 31, 2001, the Management Resources and Compensation Committee of the board of directors (the "Committee") was comprised of C. Black, J. Curtin, P. Lind, S. Shulman (Chairman) and G. Taylor. The Committee meets as required, and at least annually, to monitor and review management compensation policies, management succession planning and to review the overall composition and quality of the Corporation's management resources. The Committee met twice during 2001. The Committee has a specific written mandate to review and approve executive compensation. This includes an annual evaluation of the performance of at least the five highest paid executive officers including the Corporation's Chief Executive Officer (the "Named Executive Officers") and a review of a report on the performance of the other executive officers. The Committee makes recommendations to the board of directors with respect to the compensation of the executive officers, and the board gives final approval on compensations matters. Executive compensation is determined based on the relative roles and responsibilities of the executive as compared to other executives in the Corporation and in the Canadian marketplace, as well as on the performance of the executive management team collectively in meeting the Corporation's goal of enhancing shareholder value. A specific objective of the Corporation is to attract and retain highly qualified and motivated individuals and to encourage a strong team approach. Accordingly, compensation levels are monitored to ensure they are competitive within the relevant marketplace and meet the Corporation's objectives. The compensation arrangements of the Corporation are focussed on rewarding performance and are comprised of three key components: base salary, short-term incentives and long-term share ownership. The Corporation emphasizes improving long-term shareholder value, represented by the growth in the value of the Corporation's Class A Limited Voting Common Shares, as the principal measure of success of the Corporation. Accordingly, the Corporation's compensation policies are designed to provide an overall competitive compensation package with a high proportion weighted to long-term share ownership in order to provide executives with opportunities to increase their ownership of the Corporation's Class A Limited Voting Shares. This is achieved by maintaining base salaries and cash bonus awards for the most senior executives below the median level of total cash compensation in return for enhanced opportunities to participate in the growth in value of the Corporation's Class A Limited Voting Shares. This results in stock purchases, deferred share units and share options being allocated at a level higher than the median level for similar companies. These plans are more fully described in the Long-Term Share Ownership section of this report. Base Salaries Base salaries for the Corporation's executives are reviewed annually to ensure that they reflect the relative contribution of each executive within the team. The Corporation believes that base salaries for the most senior executives should be set below the median level for comparable companies within the relevant industry, in return for the opportunity for the executive to participate at a higher level in the long-term share ownership plans such as share options and deferred share unit allocations. In order to foster a team- based approach, which the Corporation believes is fundamental to meeting its long-term objectives, the difference between the base salaries of the CEO and the other senior executives in each of its operations is significantly less than in other corporations. Short-Term Incentives The Corporation's short-term incentive plan is comprised of a cash bonus award. Cash bonus awards are determined based primarily on the senior executive team's collective performance in meeting the Corporation's overall business plan objectives. Similar to the Corporation's philosophy towards Base Salaries, the difference between the cash bonus awards for the CEO and other senior executives is relatively small. The performance of the Corporation is measured by the achievement of financial and other objectives. The performance of the individual executive is also taken into account on a subjective basis. In order to further align management objectives with those of the shareholder, executives may elect to receive all or a portion of their annual bonus awards in deferred share units of the Corporation, as described below under Long-Term Share Ownership. 6 Long-Term Share Ownership Long-term share ownership plans are intended to reward management based on increases in the value of the Corporation's Class A Limited Voting Shares. The purpose of these arrangements is to achieve a commonality of interest between shareholders and management and to motivate executives to improve the Corporation's long-term financial success, measured in terms of enhanced shareholder wealth over the long term. The Corporation's long-term share ownership plans consist of three components: a) A Management Share Purchase Plan ("MSPP") under which key executives of the Corporation and its subsidiaries may apply for a loan from the Corporation in order to purchase Class A Limited Voting Shares of the Corporation. Loans bear interest in an amount equal to the cash dividends paid on the shares, are repayable within a period of five years and can be extended at the discretion of the board for a further five years. Shares purchased under the MSPP vest as to 20% each year on a cumulative basis over the five-year period. b) A Management Share Option Plan ("MSOP") under which the Corporation grants options to executives to purchase Class A Limited Voting Shares at a fixed price, being the closing price of the Shares on The Toronto Stock Exchange on the last trading day preceding the date of the grant. The number of options granted is determined based on a multiple of the executive's base salary. The options vest as to 20% at the end of each year on a cumulative basis and are exercisable over a ten-year period. c) A Management Deferred Share Unit Plan ("MDSUP") under which senior officers may, at their option, receive all or a portion of their annual bonus awards in the form of deferred share units ("Units"). The annual bonus awards are converted to Units based on the closing price of the shares on The Toronto Stock Exchange on the last trading day preceding the date of the award. The portion of the annual bonus award elected to be received in Units by the executive may, at the discretion of the board, be increased by a factor of up to two times for purposes of calculating the number of Units to be allocated under the MDSUP. An executive who holds Units will receive additional Units as dividends are paid on the Class A Limited Voting Shares of the Corporation, on the same basis as if the dividends were reinvested pursuant to the Corporation's dividend reinvestment plan. The Units vest over a five year period and participants are only allowed to redeem the Units upon cessation of employment through retirement, resignation, termination or death, after which time the Units terminate unless redeemed by the last day of the first calendar year that commences after retirement, resignation, termination or death. The cash value of the Units when redeemed will be equivalent to the market value of an equivalent number of Class A Limited Voting Shares of the Corporation at the time of cessation of employment with the Corporation. Chief Executive Officer In line with the Corporation's compensation policies set out above, Mr. Cockwell's base salary was $350,000 in 2001, an 8% increase above the $325,000 he received in each of 2000 and 1999. Based on the Corporation's compensation policies and his responsibilities, efforts, effectiveness and achievement of corporate goals, the Committee approved a Short-Term Incentive Award to Mr. Cockwell in February 2002 which he elected to take in the form of 8,700 Units under the Corporation's MDSUP. The Committee also approved the granting of 55,000 options to Mr. Cockwell under the Corporation's MSOP. Retirement Security The Corporation participates in a registered pension plan and has approved arrangements for the payment of post-retirement supplementary compensation to designated executives, details of which are described under "Pension Benefits" in the Circular. On behalf of the Committee, S. Shulman - Chairman C.M. Black J.P. Curtin P.B. Lind G.S. Taylor 7 Summary Compensation of Named Executive Officers The table that follows sets out the compensation paid to the Corporation's Chief Executive Officer and the other Named Executive Officers during the years ended December 31, 2001, 2000 and 1999:
- ------------------------------------------------------------------------------------------------------------------------------------ Annual Compensation Long-term Compensation Awards ------------------------------------------------------------------------------------------- Deferred Share Units Other Annual Securities Under Issued in Lieu of Name and Salary Paid Bonus/(d)/ Compensation Options Granted/(a)/ Bonuses/(a)/ Principal Position Year ($) ($) ($) (#) (#) - ------------------------------------------------------------------------------------------------------------------------------------ J. Bruce Flatt 2001 325,000 125,000 -- 55,000 8,700 President and 2000 300,000 125,000 -- 305,000/(f)/ 10,000/(e)/ Chief Executive Officer/(b)/ 1999 275,000 110,000 -- 90,000/(e)/ 15,602/(e)/ - ------------------------------------------------------------------------------------------------------------------------------------ Jack L. Cockwell, 2001 350,000 125,000 -- 55,000 8,700 Co-Chairman 2000 325,000 125,000 -- 70,000 11,400 1999 325,000 110,000 -- 75,000 12,200 - ------------------------------------------------------------------------------------------------------------------------------------ Robert J. Harding, 2001 325,000 125,000 -- 50,000 8,700 Chairman 2000 310,000 125,000 -- 60,000 11,400 1990 300,000 110,000 -- 70,000 12,200 - ------------------------------------------------------------------------------------------------------------------------------------ Brian D. Lawson 2001 275,000 125,000 -- 100,000/(g)/ 15,674/(g)/ Executive Vice-President 2000 260,000 120,000 -- 100,000/(g)/ 18,461/(g)/ and Chief Financial Officer/(c)/ 1999 250,000 100,000 -- 120,000/(g)/ 23,809/(g)/ - ------------------------------------------------------------------------------------------------------------------------------------ Edward C. Kress, 2001 290,000 80,000 -- 25,000 4,200 Executive Vice-President 2000 285,000 80,000 -- 30,000 5,400 1999 275,000 75,000 -- 35,000 6,250 - ------------------------------------------------------------------------------------------------------------------------------------
Notes: (a) The option and deferred share unit awards shown as awards for 2001 were granted on February 13, 2002. The options are exercisable at a price of $28.72 per share. (b) Mr. Flatt was appointed President and Chief Executive Officer of the Corporation on February 13, 2002. Salary, bonus and option amounts reflect amounts awarded to Mr. Flatt in his previous capacity as President and Chief Executive Officer of Brookfield Properties Corporation. (c) Mr. Lawson was appointed Executive Vice-President and Chief Financial Officer of the Corporation on February 13, 2002. Salary, bonus and option amounts reflect amounts awarded to Mr. Lawson in his previous capacity as Managing Partner, Corporate Finance of Trilon Financial Corporation. (d) These executives have elected to receive all or part of their bonus awards in Deferred Share Units instead of receiving cash. (e) Represents options and deferred share units of Brookfield Properties Corporation. (f) Represents 250,000 options of the Corporation and 55,000 options of Brookfield Properties Corporation. (g) Represents options and deferred share units of Trilon Financial Corporation. There are no stock appreciation rights, restricted shares, restricted share units or payouts under the long-term incentive plan, other than participation in the Corporation's MSPP, MSOP and MDSUP. Share Options Options are granted each year at the discretion of the Corporation's board to officers of the Corporation to purchase Class A Limited Voting Shares of the Corporation under the terms of the Corporation's MSOP. The following table shows the options to purchase Class A Limited Voting Shares granted during 2001 to Named Executive Officers, all of which were granted on February 9, 2001: Option Grants During 2001
- ------------------------------------------------------------------------------------------------------------------------------------ Securities Market Value of Securities Under Options% of Total Options Granted Exercise or Underlying Options on the Granted to Employees of the Base Price Date of Grant Name (#) Corporation in 2001 ($/Security) ($/Security) Expiration Date - ------------------------------------------------------------------------------------------------------------------------------------ J. Bruce Flatt 55,000/(a)/ n/a 25.00 25.00 February 5, 2011 250,000 44.5 22.70 22.70 February 9, 2011 Jack L. Cockwell 70,000 12.5 22.70 22.70 February 9, 2011 Robert J. Harding 60,000 10.7 22.70 22.70 February 9, 2011 Brian D. Lawson 100,000/(b)/ n/a 13.00 13.00 February 8, 2011 Edward C. Kress 30,000 5.3 22.70 22.70 February 9, 2011 - ------------------------------------------------------------------------------------------------------------------------------------
Notes: (a) Represents options granted to Mr. Flatt in 2001 to purchase common shares of Brookfield Properties Corporation. (b) Represents options granted to Mr. Lawson in 2001 to purchase common shares of Trilon Financial Corporation. 8 The following table sets forth options exercised during the fiscal year ended December 31, 2001 and the number and value of the unexercised options as at that date for the Named Executive Officers: Aggregate Options Exercised During The Most Recently Completed Financial Year And Financial Year-End Option Values
- ------------------------------------------------------------------------------------------------------------------------- Value of Unexercised Unexercised Options In-the-money Options at December 31, 2001 at December 31, 2001 (a) ---------------------------------------------------------------- Securities Acquired on Aggregate Value Exercise Realized Exercisable Unexercisable Exercisable Unexercisable Name (#) ($) (#) (#) ($) ($) - ------------------------------------------------------------------------------------------------------------------------- J. Bruce Flatt - Options - - 60,000 250,000 534,000 1,512,000 - Warrants/(b)/ - - 307,188 - - - Jack L. Cockwell - Options - - 110,000 175,000 946,265 1,550,750 - Warrants/(b)/ - - 298,400 - - - Robert J. Harding - Options - - 98,000 157,000 832,000 1,409,000 - Warrants/(b)/ - - 99,900 - - - Brian D. Lawson - Options - - 35,000 - 311,500 - - Warrants (b) - - 99,900 - - - Edward C. Kress - - 157,220 84,000 648,238 742,650 - -------------------------------------------------------------------------------------------------------------------------
Notes: (a) The "in-the-money" amount is the amount by which the market value of the Class A Limited Voting Shares under option at the date shown exceeded the exercise price of the options. The closing price of the Corporation's Class A Limited Voting Shares on The Toronbo Stock Exchange on December 31, 2001 was $28.75. (b) Class A share warrants purchased for value by executives during 1998 and expiring in 2008. Management Deferred Share Unit Plan Deferred share units may be granted each year at the discretion of the Corporation's board to senior executives in lieu of all or part of their annual cash bonus awards as described above under "Report on Executive Compensation - Long-Term Share Ownership". The following table sets forth the deferred share units issued to and owned by Named Executive Officers for the year ended December 31, 2001. The deferred share units allocated for 2001 were issued on February 13, 2002. Aggregate Deferred Share Units
- ------------------------------------------------------------------------------------------------------------------ Units Allocated Units Owned in Value of Units for the Year Ended Deferred Share Unit Plan as of December 31, 2001 as of February 28, 2002 December 31, 2001 ----------------------------------------------------------------------------- Name (#) ($) (#) ($) - ------------------------------------------------------------------------------------------------------------------ J. Bruce Flatt 8,700 250,000 8,700 250,125 Jack L. Cockwell 8,700 250,000 33,563 964,936 Robert J. Harding 8,700 250,000 33,563 964,936 Edward C. Kress 4,200 120,000 16,485 473,944 - ------------------------------------------------------------------------------------------------------------------
Pension and Retirement Benefits The Corporation has a registered defined benefit pension plan which provides its employees, upon reaching their normal retirement age of 65 years, with a lifetime pension and a reduced survivor pension. Employees may, at their option, opt out of the Corporation's registered defined benefit plan. The pension benefit is subject to the Revenue Canada maximum of $1,722.22 per year of credited service. Messrs. Cockwell and Kress participate in the defined benefit pension plan for the Corporation's employees. In addition, the Corporation has approved arrangements for the payment of post- retirement supplementary compensation to designated executives. The following table shows the total annual retirement benefits payable under such retirement arrangements to participants at the specified remuneration levels and years of service categories, assuming retirement at age 65. The amounts include Canadian government pension entitlements and benefits received if the participant is a member under the Corporation's registered defined benefit plan as applicable. 9 Annual Retirement Benefits
- ---------------------------------------------------------------------------------------------------------------------- Annual Remuneration/(a)/ Retirement Benefits by Years of Service ($)/(b)/ ------------------------------------------------------------------------------------------ ($) 15 yrs. 20 yrs. 25 yrs. 30 yrs. 35 yrs. - ---------------------------------------------------------------------------------------------------------------------- 175,000 45,937 61,250 76,562 91,875 107,187 200,000 52,500 70,000 87,500 105,000 122,500 225,000 & over/(c)/ 59,062 78,750 98,437 118,125 137,812 - ----------------------------------------------------------------------------------------------------------------------
Notes: (a) Remuneration for the purposes of such retirement benefits includes annual base salary only, calculated on the basis of the average of the best 60 months' earnings prior to retirement. (b) Amounts shown in the above table are payable for life, with 50% thereof payable to a participant's surviving spouse. The above table shows the total annual amounts payable under the Canada Pension Plan and both the defined benefit and supplementary arrangements based on a formula of 1.75% of the average of the best 60 months' earnings prior to retirement multiplied by the years of credited service. These amounts vest at age 55. (c) To limit the Corporation's retirement benefit liability, a remuneration level of $225,000 has been established as the maximum average remuneration eligible for calculation of retirement benefits together with a limit of 35 years of service. This maximum level will be reviewed periodically in both general application and application to specific individuals. Based on the $225,000 maximum average remuneration level as at December 31, 2001, the estimated annual total retirement benefits payable upon retirement at normal retirement age for each affected Named Executive Officer are as follows: Mr. Cockwell - $102,375, Mr. Harding - $137,812 and Mr. Kress - $137,812. For purposes of computing such retirement benefits, credited service as of January 1, 2002 was 22 years for Mr. Cockwell, 18 years for Mr. Harding and 27 years for Mr. Kress. Performance Graph The following shows the cumulative total shareholder return (assuming reinvestment of dividends) over the last five fiscal years, in comparison with the cumulative total return of the TSE 300 Index: Five-Year Cumulative Total Return on $100 Investment Assuming Dividends Are Reinvested December 31, 1996 - December 31, 2001 [GRAPH]
- --------------------------------------------------------------------------------------------------------------- December 31 --------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 - --------------------------------------------------------------------------------------------------------------- Brascan Corporation 100.0 131.49 112.24 105.77 128.04 174.08 - --------------------------------------------------------------------------------------------------------------- TSE 300 Index 100.0 114.98 113.16 149.04 160.08 139.96 - ---------------------------------------------------------------------------------------------------------------
OTHER INFORMATION Indebtedness of Directors, Executive Officers and Senior Officers Under Securities Purchase Programs As at February 28, 2002, aggregate indebtedness (other than "routine indebtedness" under applicable Canadian securities laws) to the Corporation or its subsidiaries of all officers, directors and employees and former officers, directors and employees of the Corporation and its subsidiaries, excluding public company subsidiaries, made in connection with the purchase of securities of the Corporation or any of its associated companies was approximately $15.3 million. The largest aggregate amount of debt outstanding during the year ended December 31, 2001 was $18.5 million. This indebtedness represents loans made by the Corporation (or its predecessors) to certain of its directors and officers in connection with the purchase of Class A Limited Voting Shares pursuant to the MSPP and loans to executives pursuant to the Corporation's Executive Share Ownership Plan ("ESOP"), described as follows. 10 Under the ESOP, loans were made to executive officers of the Corporation to enable them to continue to own shares designated by the board of directors, excluding shares pledged under the MSPP (the "Designated Shares"). Each loan is evidenced by a promissory note of the executive officer and the Designated Shares are pledged as collateral security for the payment of the note. The loans bear interest, payable on a quarterly basis, at a rate equal to the prime rate of a Canadian chartered bank. The following table sets forth the names of the directors and officers of the Corporation to whom loans have been made in respect of the MSPP and the ESOP, together with the largest amount outstanding during the fiscal year ended December 31, 2001 and the amount outstanding as at February 28, 2002:
- --------------------------------------------------------------------------------------------------------------------------------- Largest Amount Amount Outstanding Outstanding Financially Assisted During Year Ended as at Securities Purchased December 31, 2001/(a)/ February 28, 2002/(a)/ During Year Ended Name Issuer Company ($) ($) December 31, 2001 - --------------------------------------------------------------------------------------------------------------------------------- J. Bruce Flatt Brookfield 3,500,000 3,500,000 - Jack L. Cockwell Brascan 3,500,000 3,500,000 - Robert J. Harding Brascan 3,419,865 3,419,865 - J. Trevor Eyton Brascan 2,713,696 - - Edward C. Kress Brascan 2,259,570 1,488,737 - Harry A. Goldgut Brascan 1,642,406 1,642,406 (b) Richard Legault Brascan 1,364,306 1,364,306 (c) Craig J. Laurie Brascan 500,012 500,012 (d) Robert A. Dunford Brascan 276,000 276,000 - Brian D. Lawson Trilon 3,500,000 3,500,000 (e) John C. Tremayne Brascan/Trilon 1,952,297 1,952,297 (f) - ----------------------------------------------------------------------------------------------------------------------------------
Note: (a) The security for indebtedness referred to above are Class A Limited Voting Shares, publicly traded securities of associated companies or securities of EdperPartners or BNN Investments Ltd. (see "Principal Holders of Voting Shares"). (b) 3,125 BNN Investments Ltd. common shares; and 52,654 Brascan Corporation Class A Limited Voting Shares. (c) 10,000 common shares, 10,000 preferred shares and $30,000 debentures of EdperPartners Ltd.; and 52,654 Brascan Corporation Class A Limited Voting Shares. (d) 21,062 Brascan Corporation Class A Limited Voting Shares. (e) 70,715 BNN Investments Ltd. common shares. (f) 25,000 BNN Investments Ltd. common shares; and 42,123 Brascan Corporation Class A Limited Voting Shares. Directors' and Officers' Liability Insurance The Corporation maintains directors and officers insurance with an annual policy limit of $50,000,000 subject to a corporate deductible of $500,000 per loss. Under this insurance coverage, the Corporation and certain of its associated companies (collectively, the "Organization") is reimbursed for indemnity payments made to directors or officers as required or permitted by law or under provisions of its by-laws as indemnity for losses, including legal costs arising from acts, errors or omissions committed by directors and officers during the course of their duties as such. This insurance also provides coverage to individual directors and officers without any deductible if they are not indemnified by the Organization. The insurance coverage for directors and officers has certain exclusions including, but not limited to, those acts determined to be deliberately fraudulent or dishonest or to have resulted in personal profit or advantage. The cost of such insurance is borne by the Organization and is approximately $60,000 annually. Interest of Management and Others in Material Transactions During the fiscal year ended December 31, 2001, no director, senior officer or associate of a director or senior officer or, to the knowledge of the directors or senior officers of the Corporation after having made reasonable inquiry, any person or company who beneficially owns, directly or indirectly, voting securities of the Corporation carrying more than 10% of the voting rights attached to any class of voting securities of the Corporation outstanding at the date hereof, or any associate or affiliate thereof, had any material interest, direct or indirect, in any material transaction of the Corporation nor do any such persons have a material interest, direct or indirect, in any proposed material transaction of the Corporation. Principal Accounting Firm Fees Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively "Deloitte & Touche") are the principal accountants of the Corporation and the following of its reporting issuer subsidiaries: Brascade Resources Inc, Brookfield Properties Corporation, BPO Properties Ltd., Trilon Financial Corporation, Great Lakes Power Inc. and Brascan Brazil Ltd. Deloitte & Touche and its predecessors have served as auditors of the Corporation since 1981. 11 From time to time, Deloitte & Touche also provides consulting and other non- audit services to the Corporation and these subsidiaries. The Audit Committee of the Corporation's board of directors has considered whether the provision of non-audit services is compatible with maintaining Deloitte & Touche's independence and has concluded that it is. Aggregate fees billed to the Corporation and its subsidiaries for the fiscal year ended December 31, 2001 by Deloitte & Touche, including expenses and applicable sales taxes, amounted to approximately $4.3 million. The following table sets forth further information on the fees billed by Deloitte & Touche to the Corporation and its subsidiaries for the fiscal year ended December 31, 2001:
- ---------------------------------------------------------------------------------------------------------------------------- Fees Billed by Deloitte & Touche for Fiscal Year Ended December 31, 2001 -------------------------------------------------------------------------------------- $ millions Brascan Subsidiaries of Brascan Total - ---------------------------------------------------------------------------------------------------------------------------- Audit fees $ 0.4 $ 1.6 $ 2.0 Audit-related services 0.4 1.3 1.7 Financial information systems design and implementation fees Nil Nil Nil All other fees Nil 0.6 0.6 - ---------------------------------------------------------------------------------------------------------------------------- Total $ 0.8 $ 3.5 $ 4.3 - ----------------------------------------------------------------------------------------------------------------------------
Audit-related services include services provided by Deloitte & Touche that are directly related to its role as auditor of the Corporation and its subsidiaries, and consist principally of due diligence procedures conducted in connection with public offerings of securities, audits of special purpose financial statements and tax compliance reviews. The Corporation's policies prohibit the use of its external auditors for financial information system design and implementation assignments. Deloitte & Touche has recently announced its intent to separate its consulting business, Deloitte Consulting, from the firm. Appointment of Auditors In addition to requiring majority approval by the holders of Class A and Class B Limited Voting Shares present or represented at the meeting by proxy voting together, the appointment of auditors must be approved by a majority of the votes cast by holders of Class A Limited Voting Shares who vote in respect of the resolution and by a majority of the votes cast by holders of Class B Limited Voting Shares who vote in respect of the resolution. Unless the shareholder has specified in the enclosed form of proxy that the shares represented by such proxy are to be withheld from voting in the appointment of auditors, on any ballot that may be called for in the appointment of auditors, the management representatives designated in the enclosed form of proxy intend to vote such shares in favour of reappointing Deloitte & Touche LLP, Chartered Accountants, as auditors of the Corporation to hold office until the next annual meeting of shareholders, and authorizing the directors to fix the remuneration to be paid to the auditors. Statement of Corporate Governance Practices Corporate governance relates to the activities of the board of directors who are elected by and are accountable to the shareholders, and takes into account the role of management who are appointed by the board of directors and who are charged with the ongoing management of the Corporation. The board of directors of Brascan encourages sound corporate governance practices designed to promote the well being and ongoing development of the Corporation, having always as its ultimate objective the best long-term interests of the Corporation and the enhancement of value for all shareholders. The board also believes that sound corporate governance benefits the Corporation's employees and the communities in which the Corporation operates. Through its board representatives, the Corporation encourages its operating affiliates to also adopt corporate governance policies appropriate for their particular circumstances. The board is of the view that the Corporation's corporate governance policies and practices, outlined below, are comprehensive and consistent with the guidelines for improved corporate governance in Canada adopted by The Toronto Stock Exchange (the "TSE Guidelines"). Board of Directors Mandate of the Board Brascan's board of directors oversees the management of the Corporation's affairs directly and through its committees. In doing so, the board acts at all times with a view to the best interests of the Corporation and its shareholders. In fulfilling its mandate, the board among other matters is responsible for reviewing the Corporation's overall business strategies and its annual business plan; reviewing the principal risks of the Corporation's business to ensure that appropriate systems are in place to manage these risks; reviewing major strategic initiatives to ensure that the Corporation's proposed actions accord with shareholder objectives; appointing the Chief Executive Officer and other members of senior 12 management and reviewing succession planning; assessing management's performance against approved business plans and industry standards; reviewing and approving the reports issued to shareholders, including annual and interim financial statements; ensuring the effective operation of the board of directors; and safeguarding shareholders' equity interests through the optimum utilization of the Corporation's capital resources, including setting an appropriate dividend policy. Meetings of the Board The board of directors of Brascan meets at least once in each quarter, with additional meetings held when appropriate. The board also meets annually to review and approve the Corporation's business plan and long-term strategy. In 2001, there were four regular meetings, one strategy meeting and three special meetings to review specific strategic initiatives. Four regular meetings and one strategy meeting are scheduled for 2002. Meeting frequency and agenda items may change depending on the opportunities or risks faced by the Corporation. Composition and Size of the Board and Representation of Shareholder Interests The board of directors is comprised of independent directors, individuals nominated by the Corporation's principal shareholder and directors drawn from senior management. The board believes that this combination leads to a constructive exchange of views in board deliberations resulting in objective, well-balanced and informed discussion and decision making. The Corporation has two classes of equity shares outstanding: Class A and Class B Limited Voting Shares. The holders of the Class A Limited Voting Shares are entitled to elect one-half of the board of directors and the holders of the Class B Limited Voting Shares are entitled to elect the other one-half of the board of directors. The Corporation has cumulative voting procedures which entitle shareholders to cumulate their votes in the election of directors. The board of Brascan consists of 18 directors. The Corporation considers this to be an appropriate number given the diversity of its operations and the need for a variety of experiences and backgrounds to ensure an effective and efficient board. The nine directors proposed for election by holders of Class A Limited Voting Shares are considered to be independent directors, in that they are free of any interest in or current or recent relationship with the Corporation's principal shareholder, EdperPartners, and its shareholders. These directors are C. Black, J. Blanchard, J. Curtin, J. Foster, P. Lind, R. MacLaren, J. Mintz, S. Shulman and G. Taylor. The nine directors proposed for election by holders of Class B Limited Voting Shares have current or recent interests in or are related to Brascan or EdperPartners, and include the Chairman, the Co-Chairman and the President of the Corporation, who are also members of the Corporation's senior management. The board considers that 11 of its 18 proposed directors, comprising a majority of the board, are unrelated directors within the meaning of the TSE Guidelines, that is, free from any interest, business or other relationships (other than interests and relationships arising from shareholdings) which could, or could reasonably be perceived to, materially interfere with a director's ability to act in the best interests of the Corporation and all its shareholders. In making this determination, the circumstances of each director have been examined in relation to a number of factors, including each director's current and past role in the management of the Corporation or its affiliates. The 11 proposed directors who are considered to be unrelated within the meaning of the TSE Guidelines are C. Black, J. Blanchard, J. Curtin, J. Foster, J. Gray, A. Lambert, P. Lind, R. MacLaren, J. Mintz, S. Shulman and G. Taylor. Committees of the Board The board of directors believes that board committees assist in the effective functioning of the Corporation's board of directors and that the composition of board committees should ensure that the views of unrelated and independent directors are effectively represented. The board of directors of Brascan has three committees: the Audit Committee, the Governance and Nominating Committee and the Management Resources and Compensation Committee. Special committees may be formed from time to time as required to review particular matters or transactions. While the board of directors retains overall responsibility for corporate governance matters, the Audit Committee, the Management Resources and Compensation Committee and the Governance and Nominating Committee each have specific responsibilities for certain aspects of corporate governance as described as follows. Audit Committee The Audit Committee is responsible for monitoring the Corporation's systems and procedures for financial reporting, risk management and internal controls, reviewing all public disclosure documents and monitoring the performance of the Corporation's external auditors. The Audit Committee is also responsible for reviewing the Corporation's quarterly and annual financial statements and management's financial analysis and review of operations prior to their approval by the full board of directors and release to the public. The Audit Committee also meets periodically in private with the Corporation's external auditors to discuss and review specific issues as appropriate. The Audit Committee met four times in 2001. The Audit Committee is currently composed of the following five directors, all of whom are unrelated and independent directors: J. Blanchard, J. Foster, J. Gray, P. Lind (Chairman) and S. Shulman. 13 Governance and Nominating Committee It is the responsibility of the Governance and Nominating Committee, in consultation with the Chairman, to periodically assess the size and composition of the board and its committees; to review the effectiveness of the board's operations and its relations with management; to assess the performance of the board and its directors; to review the Corporation's statement of corporate governance practices; and to review and recommend directors' compensation. The Governance and Nominating Committee is also responsible for reviewing the credentials of nominees for election or appointment to the board and for recommending candidates for board membership. The Governance and Nominating Committee met twice in 2001. The Governance and Nominating Committee periodically reviews the performance of the board and its directors and the contribution of individual directors. Individual members of the board are also invited to raise questions and make suggestions regarding these matters for consideration by the Chairman of the Governance and Nominating Committee and by the Chairman of the Corporation. The Governance and Nominating Committee is currently comprised of five directors, a majority of whom are unrelated and independent directors: J. Blanchard, J.T. Eyton (Chairman), L. Hamilton, A. Lambert and R. MacLaren. Management Resources and Compensation Committee The Management Resources and Compensation Committee is responsible for reviewing and reporting to the board on management resource planning, including succession planning and proposed senior management appointments; the job descriptions and annual objectives of its senior executives; the form of executive compensation in general; and the levels of compensation of senior executives. The committee also reviews the performance of senior management against written objectives and reports thereon to the board. The Management Resources and Compensation Committee met twice in 2001. The Management Resources and Compensation Committee is currently comprised of the following five directors, all of whom are unrelated and independent directors: C. Black, J. Curtin, P. Lind, S. Shulman (Chairman) and G. Taylor. Management The primary responsibility of management is to safeguard the Corporation's assets and to create wealth for its shareholders. When management's performance is found to be inadequate, the directors have the responsibility to bring about change to enable the Corporation to perform satisfactorily. Brascan's governance principles are intended to encourage autonomy and effective decision making on the part of management while ensuring scrutiny by the Corporation's board of directors and its committees. Management's Relationship to the Board Brascan's senior management reports to and is accountable to the board of directors. Robert Harding, the Corporation's Chairman, Jack Cockwell, the Corporation's Co-Chairman, and Bruce Flatt, the President and Chief Executive Officer of the Corporation, are also members of the Corporation's board of directors. At its meetings, the Brascan board regularly engages in a private session with the Corporation's most senior officers without other members of senior management present. The board also meets independently of all senior management on a regular basis, under the leadership of an independent director, who during 2001 was Mr. Saul Shulman. Management Accountability The board of directors believes in the importance of developing business plans to ensure the compatibility of shareholder, board and management views on the Corporation's strategic direction and performance targets, and the effective utilization of shareholder capital. A special meeting of the Corporation's board is held each year to review the strategic initiatives and annual business plan submitted by senior management. The board's approval of the annual business plan provides a mandate for senior management to conduct the affairs of the Corporation within the terms of the plan, knowing it has the necessary board support. Material deviations from the plan are reported to and considered by the board. Board Information The information provided by management to directors is considered to be critical to their effectiveness. In addition to the reports presented to the board at its regular and special meetings, the board is also kept informed on a timely basis by management of corporate developments and key decisions taken by management in pursuing the Corporation's strategic plan and the attainment of its objectives. The directors periodically assess the quality, completeness and timeliness of information provided by management to the board. New directors are provided with comprehensive information about the Corporation and its affiliates. Directors have the opportunity to meet and participate in work sessions with senior management to obtain insight into the operations of the Corporation and its affiliates. Individual directors are also free to consult with members of senior management, whenever they so require, and to engage outside advisors with board authorization. 14 Management Rewards The Corporation's compensation policies are intended to provide a direct link between management rewards and the wealth created for shareholders, so that the largest portion of senior executives' rewards can be earned through share ownership. Accordingly, senior executives are encouraged to own shares of the Corporation directly and through EdperPartners. The Corporation is committed to conducting periodic reviews of its compensation practices to ensure that management is fairly rewarded over time based on performance. Communication and Disclosure Policies The Corporation endeavours to keep its shareholders informed of its progress through a comprehensive annual report, quarterly interim reports and periodic press releases. It also maintains a web site that provides summary information on the company and ready access to its published reports, press releases, statutory filings and supplementary information provided to analysts and investors. Directors and management meet with the Corporation's shareholders at the Annual Meeting and are available to respond to questions at that time. The Corporation also maintains an investor relations program to respond to inquiries in a timely manner. Management meets on a regular basis with investment analysts and financial advisors to ensure that accurate information is available to investors, including quarterly conference calls and web casts to discuss the Corporation's financial results. The Corporation also endeavours to ensure that the media are kept informed of developments as they occur, and have an opportunity to meet and discuss these developments with the Corporation's Chairman. The Corporation also has a Disclosure Policy which summarizes its policies and practices regarding disclosure of material information to investors, analysts and the media. The purpose of this policy is to ensure that the Corporation's communications with the investment community are timely, consistent and in compliance with all applicable securities legislation. Availability of Disclosure Documents The Corporation will provide any person or company, upon request to the Secretary of the Corporation, with a copy of this Circular and: (i) the most recent annual information form of the Corporation, together with a copy of any document or the pertinent pages of any document incorporated therein by reference; (ii) the comparative financial statements of the Corporation for the fiscal year ended December 31, 2001, together with the report of the auditors thereon; (iii) the most recent annual report of the Corporation, which includes management's discussion and analysis of financial condition and results of operations; and (iv) the interim financial statements of the Corporation for the periods subsequent to the end of its fiscal year. Other Business The Corporation knows of no other matter to come before the meeting other than the matters referred to in the accompanying Notice of Meeting. Directors' Approval The contents and sending of this Circular have been approved by the directors of the Corporation. /s/ Alan V. Dean Alan V. Dean Toronto, Canada Senior Vice-President February 28, 2002 and Secretary 15 -----END PRIVACY-ENHANCED MESSAGE-----