Demand Analysis

KEY DEMAND FACTORS

• Price and Volume – Strong as they have increased together for over two years
• Institutions and Mutual Funds – OK as 54% ownership leaves room for growth
• Inside Ownership – N/A as insider buy information was not found on free sites

Ratio Comparison

		ACTUALS				5 Year Averages
	2003	2004	2005	2006	2007	Actual	Projection
Valuation
P/E Ratio	12.8	13.6	8.0	16.6	35.6	17.31	35.34
Price to Sales	1.5	2.3	2.5	2.8	2.5	2.35	2.89
Price to EBITDA	4.9	6.0	4.3	6.3	6.3	5.56	6.58
Management Effectiveness
Return on Investment	2.77	3.98	7.73	3.42	1.54	3.89	2.17
Return on Equity	8.25	12.22	33.05	19.23	8.17	16.18	9.61
Financial Condition
Total Debt to Equity	1.98	2.07	3.27	4.62	4.30	3.25	3.43
Interest Coverage	1.90	2.46	3.07	2.11	1.38	2.18	1.49
Profitability
Gross Profit Margin	42.58	42.31	44.43	54.75	50.72	46.96	53.24
EBITDA Margin	31.01	38.61	58.98	44.90	40.37	42.78	43.92
Net Profit Margin	11.96	17.08	31.84	16.96	7.13	17.00	8.22
Dividend
Dividend Yield	3.68	2.23	1.71	1.74	1.61	2.20	1.27
Payout Ratio	0.47	0.30	0.14	0.29	0.57	0.35	0.43
Growth
P/E/G						0.73	2.06

COMPARISONS

• Valuation – higher ratios justified by move away from property management only
• Management Effectiveness – lower projections indicate conservative model
• Financial Condition – projected ratios about the same as historical
• Profitability – projections are slightly lower indicating conservative model
• Dividend – payout will continue to be about the same
• Growth – historical ratio was extraordinary, but a P/E/G of 2.06 is very good

Earnings Projections

Brookfield Asset Management (BAM)
Earnings Model ($MM)
	2007	2008E	2009E	2010E	2011E	2012E	Forecast
Revenue
Property	3,776	4,040	4,323	4,626	4,950	5,296	7.0%
Power Generation	963	1,155	1,386	1,663	1,996	2,395	20.0%
Infrastructure	665	798	958	1,150	1,380	1,656	20.0%
Specialty Funds	1,373	1,579	1,816	2,089	2,402	2,762	15.0%
Cash, Financial & Other	1,469	1,543	1,620	1,701	1,786	1,875	5.0%
Total Revenues	8,247	9,116	10,104	11,229	12,513	13,985	11.1%
- Direct Operating Expenses	4,064	4,430	4,828	5,263	5,737	6,253	9.0%
Gross Profit	4,183	4,686	5,275	5,966	6,777	7,732	13.1%
Less Operating Expense
Asset Management & Operating	431	469	512	558	608	663	9.0%
Total Depreciation & Amort.	987	1,105	1,238	1,386	1,553	1,739	12.0%
Other Including Gains	423	444	466	489	514	539	5.0%
Total Expenses & Items	1,840	2,018	2,215	2,433	2,674	2,941	9.8%
EBIT	2,343	2,668	3,060	3,532	4,102	4,791	15.4%
- Interest Expenses	1,701	1,905	2,134	2,390	2,677	2,998	12.0%
Pretax Income	641	763	926	1,142	1,425	1,792	22.8%
- Income Taxes	53	92	148	228	342	502
Net Income	588	671	778	914	1,083	1,290	17.0%
Tax Rate	8.3%	12.0%	16%	20%	24%	28%
Dividends Paid	337	354	372	390	410	430	5.0%
EBITDA	3,329	3,773	4,298	4,919	5,655	6,530	14.4%
Shares outstanding (000,000's)	581	580	579	578	576	575	-0.2%
Diluted Shares outstanding	610	609	607	606	605	604	-0.2%
Earnings Per Share
Basic	$1.01	$1.16	$1.34	$1.58	$1.88	$2.24	17.3%
Diluted	$0.96	$1.10	$1.28	$1.51	$1.79	$2.14	17.3%
Source: estimates

ASSUMPTIONS

• The property segment will face a challenging environment
• The power and infrastructure segments will enjoy solid growth - 20% is conservative
• Expenses growth will be equal to or slightly less than sales growth

Earnings History

Brookfield Asset Management (BAM)
Annual Income Statements ($MM)
	2007	2006	2005	2004	2003	2002	I Yr.	5 Yr.
Revenue
Property	3,776	3,355	3,272	2,852	2,456	2,441	12.5%	9.1%
Power Generation	963	893	792	542	320	208	7.8%	35.9%
Infrastructure	665	419	176	-	-	-	58.8%	94.4%
Specialty Funds	1,373	943	106	415	281	214	45.6%	45.0%
Cash, Financial & Other	1,469	1,287	874	218	313	39	14.2%	106.6%
Total Revenues	8,247	6,897	5,220	4,027	3,370	2,902	19.6%	23.2%
- Direct Operating Expenses	4,064	3,121	2,901	2,323	1,935	1,688	30.2%	19.2%
Gross Profit	4,183	3,776	2,319	1,704	1,435	1,214	10.8%	28.1%
Less Expenses & Items
Asset Management & Operating	431	333	251	83	66	56	29.3%	50.4%
Total Depreciation & Amort.	987	600	374	251	149	121	64.4%	52.2%
Other Including Gains	423	346	(1,011)	66	324	384	22.2%	1.9%
Total Expenses & Items	1,840	1,279	(386)	400	539	561	43.9%	26.8%
EBIT	2,343	2,497	2,705	1,304	896	653	-6.2%	29.1%
- Interest Expenses	1,701	1,185	881	530	471	466	43.6%	29.6%
Pretax Income	641	1,312	1,824	774	425	187	-51.1%	28.0%
- Income Taxes	53	142	162	86	22	104	-62.4%	-12.5%
Net Income	588	1,170	1,662	688	403	83	-49.7%	47.9%
Tax Rate	8.3%	10.8%	8.9%	11.1%	5.2%	55.6%	-23.2%	-31.6%
Dividends Paid	337	337	226	210	190	170	-0.1%	14.6%
EBITDA	3,329	3,097	3,079	1,555	1,045	774	7.5%	33.9%
Shares outstanding (000,000's)	581	582	580	582	576	588	-0.1%	-0.2%
Diluted Shares outstanding	610	611	608	611	611	621	-0.2%	-0.4%
Earnings Per Share
Basic	$1.01	$2.01	$2.87	$1.18	$0.70	$0.14	-49.7%	48.3%
Diluted	$0.96	$1.92	$2.73	$1.13	$0.66	$0.13	-49.7%	48.5%
Source: Brookfield Asset Management Annual Reports

NOTES

• Focus has shifted from property by adding high growth infrastructure and power generation
• Specialty funds focused on natural resources have done well, too, but should slow down

Investor Summary

BROOKFIELD ASSET MANAGEMENT	NYSE:	BAM
Asset Management	TARGET:	$48.86

Stock Data			Sales & Earnings	2007A	2008E	2009E
Price 11/15/2007	$34.33		Revenue (MM)	$8,246.7	$9,116.1	$10,103.6
52-Week Range	29.30 - 43.82		EBITDA (MM)	$3,329.3	$3,773.1	$4,297.5
Dividend Yield	1.7%		EPS (diluted)	$0.96	$1.10	$1.28
Capitalization			Value Measures
Shares Outstanding (MM)	581.00		Price/Earnings	35.60	37.15	38.17
Market Capitalization (MM)	$19,945.7		Price/Sales	2.54	2.73	2.94
Debt/Equity	4.30		Price/Book	2.91
Projections			Growth (5 Yr.)	Historical	Projected
12-Month Price Target	$40.96		Earnings	48.5%	17.3%
24-Month Price Target	$48.86		P/E/G	0.73	2.06
Annual Total Return	19.3%

KEY AREAS FOR GROWTH

• Alternative Energy Sources – North American hydroelectric power generation
• Emerging Market Electrical Power – Chilean power generation & distribution
• Development of Wind Energy – Ontario wind farm
• Other – high quality office buildings and timberlands, worldwide
  

MAJOR RISK
A major shakeup in management could derail this stock.