Brookfield Asset Management Inc. (BAM)
Q4 2012 Earnings Call
February 15, 2013, 11:00 am ET
Katherine Vyse - SVP, Investor Relations
Bruce Flatt - CEO
Brian Lawson - CFO
Bert Powell - BMO Capital Markets
Brendan Maiorana - Wells Fargo
Michael Goldberg - Desjardins Securities
Mario Saric - Scotia Bank
Andrew Kuske - Credit Suisse
Cherilyn Radbourne - TD Securities
Michael Smith - Macquarie Securities
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At this time, I would like to turn the conference over to Katherine Vyse, Senior Vice President, Investor Relations for Brookfield Asset Management. Please go ahead.
Thank you Saatchi and good morning, ladies and gentlemen. Thank you for joining us for our year-end fourth quarter webcast and conference call. On the call with me today are, Bruce Flatt, our Chief Executive Officer, and Brian Lawson, our Chief Financial Officer. Brian will start this morning discussing the highlights of our financial and operating results. Bruce will then discuss our views on the current investment and market environment as well as a number of our major growth initiatives in the quarter.
At the end of our formal comments, we will turn the call back to you Saatchi to open the call for questions. In order to accommodate all who want to ask questions, can we please ask once again that you refrain from asking multiple questions at one time to provide an opportunity for others in the queue. We will be very happy to respond to additional questions later in the call, as time permits, at the end of this session or afterwards, if you prefer.
I would at this time remind you that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information for investors, I would encourage you to review our Annual Information Form or Annual Report, both of which are available on our website.
Thank you. And I would like to turn the call over to you Brian.
Great. Thank you Katherine and good morning to all of you on the call. We reported net income for Brookfield shareholders of $1.4 billion during 2012. This compares to $1.9 billion in 2011. The variance is due to a reduction in the amount of valuation gains which while very favorable were not as large as 2011.
Funds from operations which includes disposition gains was $1.4 billion, a 12% increase over the $1.2 billion reported in 2011. Excluding disposition gains, FFO was up between 10% and 11%. The remaining increase was due to improvements in all of our businesses in particular our property group and businesses that are linked to the US home building sector, this was offset partially by the impact of lower water flows on our renewable power business.
Total return which includes both FFO and valuation gains totaled $3.4 billion. This represents a 12.4% return on our intrinsic value which ended the year at $44.93. We did make some changes to our presentation this year and we apologize for the inconvenience that may have caused some of you, but we do believe they are better and will be more useful in the future if we can help you in anyway, please let us know.
So with that I will turn to each of the major business groups. Asset management and other services increased FFO by 31%, $84 million. Total asset management income, including carried interest was $498 million compared to $226 million in 2011. This reflects the full amount of base management fees earned on our private and listed funds and our public securities portfolios which totaled $352 million during the year. And this really drove the 31% year-over-year increase and it's due to new capital raised and increases in the market values of our listed entities.
Annualized fees including base fees and incentive distribution and transaction and advisory fees now stand at $470 million annually. Performance income was also a major contributor to the growth there and this is primarily carried interest on our private fund, increased to $330 million net of direct cost and this compares to $107 million in 2011. The increase reflects strong investment performance within our funds. We crystallized $34 million of these fees during the year and deferred the recognition of the other $310 million in our financial statement and FFO into future years pending the termination of call back periods.
We added $7 billion of fee bearing capital to our private and listed funds through new commitments to private funds and new capital issued by our listed entities. Market appreciation added a further $3.3 billion. This more than offset the $2.5 billion of capital that we distributed to our clients during the year and that increased the amount of fee bearing capital in the private, on listed funds to $45 billion and capital under management overall on a fee bearing basis to $60 billion.
Public securities capital did decline by $4 billion during the year to $15 billion, but that’s in large part due to the termination of a joint venture and other mandates as we focused that part of our business on higher margin strategies. The capital committed to or invested in our private funds totaled $23 billion of the $45 billion I mentioned just shortly and included $5.2 billion of dry powder from client that is available for investment. The capitalization of our listed issuers finished the year at more than $21 billion and is expected to increase by further $12 billion with the launch of Brookfield Property Partners based on the expected initial book value of that entity.