Brookfield Infrastructure Overview & Investment Strategies
Endnotes
Brookfield
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Asset under management ("AUM") refers to the total fair value of assets managed, calculated as follows: investments that Brookfield, which includes Brookfield Corporation, the
asset management business, being Brookfield Asset Management Ltd., Brookfield Asset Management ULC or their affiliates, either: consolidates for accounting purposes
(generally, investments in respect of which Brookfield has a significant economic interest and unilaterally directs day-to-day operating, investing and financing activities), or does
not consolidate for accounting purposes but over which Brookfield has significant influence by virtue of one or more attributes (e.g., being the largest investor in the investment,
having the largest representation on the investment's governance body, being the primary manager and/or operator of the investment, and/or having other significant influence
attributes), are calculated at 100% of the total fair value of the investment taking into account its full capital structure equity and debt - on a gross asset value basis, even if
Brookfield does not own 100% of the investment, with the exception of investments held through our perpetual funds, which are calculated at its proportionate economic share of
the investment's net asset value. - all other investments are calculated at Brookfield's proportionate economic share of the total fair value of the investment taking into account
its full capital structure - equity and debt - on a gross asset value basis, with the exception of investments held through our perpetual funds, which are calculated at
Brookfield's proportionate economic share of the investment's net asset value. Our methodology for determining AUM differs from the methodology that is employed by other
alternative asset managers as well as the methodology for calculating regulatory AUM that is prescribed for certain regulatory filings (e.g., Form ADV and Form PF).
Institutional investors include total institutional investors across Brookfield and Oaktree private fund strategies.
Fee-bearing capital represents the capital committed, pledged or invested in the perpetual affiliates, private funds and liquid strategies that we manage which entitles us to earn
fee revenues. Fee-bearing capital includes both called ("invested") and uncalled ("pledged" or "committed") amounts. When reconciling period amounts, we utilize the following
definitions: (a) Inflows include capital commitments and contributions to our private and liquid strategies funds and equity issuances in our perpetual affiliates. (b) Outflows
represent distributions and redemptions of capital from within the liquid strategies capital. (c) Distributions represent quarterly distributions from perpetual affiliates as well as
returns of committed capital (excluding market valuation adjustments), redemptions and expiry of uncalled commitments within our private funds. (d) Market activity includes
gains (losses) on portfolio investments, perpetual affiliates and liquid strategies based on market prices. (e) Other include changes in net non-recourse debt included in the
determination of perpetual affiliate capitalization and the impact of foreign exchange fluctuations on non U.S. dollar commitments.
Distributable earnings ("DE") is a non-GAAP measure that provides insight into earnings that are available for distribution to common shareholders or to be reinvested into the
business. It is calculated as the sum of fee-related earnings and realized carried interest; returns from our corporate cash and financial assets; cash taxes; excluding equity-
based compensation costs.
Fee-related earnings is comprised of fee revenues less direct costs associated with earning those fees, which include employee expenses and professional fees as well as
business related technology costs, other shared services and taxes. We use this measure to provide additional insight into the operating profitability of our asset management
activities.
Carried interest is a contractual arrangement whereby we receive a fixed percentage of investment gains generated within a private fund provided that the investors receive a
predetermined minimum return. Carried interest is typically paid towards the end of the life of a fund after the capital has been returned to investors and may be subject to
"clawback" until all investments have been monetized and minimum investment returns are sufficiently assured. This is referred to as realized carried interest. "Annualized target
carried interest" represents the annualized carried interest we would earn on third-party private fund capital subject to carried interest based on the assumption that we achieve
the targeted returns on the private funds. It is determined by multiplying the target gross return of a fund by the percentage carried interest and by the amount of third-party
capital, and discounted by a utilization factor representing the average invested capital over the fund life.
Fee revenues include base management fees, incentive distributions, performance fees and transaction fees excluding carried interest.
Internal rate of return ("IRR") is the annualized compounded rate of return of the fund, calculated since initial investment date.
9. Base management fees are determined by contractual arrangements, are typically equal to a percentage of fee-bearing capital and are accrued quarterly. Private fund base fees
are typically earned on fee-bearing capital from third-party investors only and are earned on invested and/or uninvested fund capital, depending on the stage of the fund life.
Perpetual affiliate base fees are earned on the total capitalization or net asset value of our perpetual affiliates, which includes our investment. Base fees for BEP include a
quarterly fixed fee amount of $5 million, with additional fees of 1.25% on the increase in capitalization above their initial capitalization of $8 billion. Base fees for BIP and BBU are
1.25% of total capitalization. Base fees for BPG are 1.05% of net asset value, excluding its interests in private funds and investments which were held directly by BAM prior to
the BPY privatization. Perpetual affiliate capitalization as at March 31, 2023, was as follows: BEP/BEPC - $24 billion; BIP/BIPC - $33 billion; BBU/BBUC - $7 billion; and BPG -
$19 billion.
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