brookfield asset management - "real assets, the new essential"

Real AssetsThe New Essential

A Global Alternative Asset Manager

Real Assets — The New Essential 1

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Brookfi eld believes this pursuit of a new alternative is creating a secular shift toward increased investment in Real Assets. Importantly, we

believe that Real Assets off er a relatively unique combination of yield, stability and growth that can provide downside protection as well as

upside value creation. Over the course of Brookfi eld’s experience as an owner and operator of these assets and based upon an analysis of

their historical performance, Real Assets have demonstrated a proven ability to enhance overall risk-adjusted returns across market cycles.

Looking ahead, as investors recognize the benefi ts of Real Assets, we expect a meaningful shift in asset allocations to occur, which may rival

the historic transformation of institutional investment from fi xed income to equity securities. We expect this trend to accelerate materially

over the course of the next decade, with allocations to Real Assets reaching 20% to 30% of portfolios by 2030, with some institutional

investors allocating upwards of 50% to the asset class.

Based upon recent investment trends and fundraising activity, we believe this transformation is underway and expect that it will continue to

grow as investors recognize and appreciate the attractive, long-term benefi ts of Real Asset investment. Within the constraints of the current

market environment and across future challenges, we believe Real Assets can generate compelling risk-adjusted returns, provide attractive

capital appreciation and deliver important diversifi cation benefi ts. Accordingly, as investors move beyond the “New Normal”, we expect Real

Assets to emerge as the New Essential.

In this piece, we provide an assessment of recent investment trends as well as an overview of the attractive characteristics of Real Assets.

Following this discussion, we off er a detailed introduction to the asset class.

EXECUTIVE SUMMARY

The current market environment is leading investors across the globe to seek an alternative to traditional equity and fi xed income investments. Following a multi-year decline in interest rates and recent global fi nancial upheaval, the ability to invest for yield has diminished and the outlook for growth has been generally subdued. With interest rates beginning to rise and the potential for infl ation looming, investors are seeking a New Essential portfolio investment to help navigate the market cycles that lie ahead.

Note: An investment in Real Assets involves signifi cant risks, including loss of the full amount invested.

Potential Benefi ts of Investment in Real Assets

Stability Steady cash fl ow streams supported by regulated or contractual revenues and attractive operating margins

Income Reliable current income with long-term capital appreciation potential

Upside Potential Meaningful leverage to economic growth

Visible Growth Drivers Positive growth momentum led by signifi cant fundamental trends

Attractive Performance Compelling absolute and relative returns

Low Volatility Attractive risk-adjusted returns

Infl ation Protection Cash fl ows tend to increase in an infl ationary environment

Investment Diversifi cation Diversity of geography, currency and asset type

Portfolio Diversifi cation Low correlation to traditional equity and fi xed income investments

Real Assets — The New Essential2

Brookfi eld.com | For Clients Only. Not for Redistribution.

PART I

THE CASE FOR REAL ASSETS AS THE NEW ESSENTIALIn our view, the current market environment is presenting numerous

challenges to navigate, leading investors across the globe to seek new

alternatives to enhance overall returns while mitigating volatility and

risk.

LOW BOND YIELDS

In the years since the global fi nancial crisis of 2008 and 2009,

central banks across the globe have fl ooded capital markets with

liquidity, driving government and corporate bond yields to historic

lows. Accordingly, these instruments no longer provide suffi cient

current income to keep pace with growing liquidity needs or liability

requirements, particularly when considering the potential for rising

infl ation.

Exhibit 1: Falling Bond Yields

Source: U.S. Federal Reserve, Barclays; data as of June 30, 2013

TAPERING OF CENTRAL BANK SUPPORT ON THE HORIZON

Given the historically low level of nominal yields as well as recent

improvements in global economic growth, rates have begun to rise.

Importantly, this move in rates has been exacerbated by central bank

activity, as the U.S. Federal Reserve appears poised to begin tapering

asset purchases in the near term, with a full end to quantitative easing

possible in the next few years.

While the Federal Reserve’s potential tapering of accommodative

monetary policy does signal a return to more normalized growth

in the U.S., the drawdown of this meaningful support will almost

certainly lead to a further increase in Treasury rates and bond yields.

As a point of reference, both instruments witnessed a signifi cant rise

in rates following the mere announcement of the Federal Reserve’s

intentions – in just four months’ time, from the end of April until

the beginning of September 2013, the 10-year U.S. Treasury rate

increased by over 120 basis points or more than 70%, while the

average yield on U.S. investment grade bonds increased by over

80 basis points, or more than 45%1.

Exhibit 2: U.S. Federal Reserve Assets on Balance Sheet

Source: U.S. Federal Reserve; data as of June 30, 2013

INFLATION CONCERNS ON THE RISE

The prospect of rising interest rates is leading to a corresponding

increase in concern over infl ation. While current levels of infl ation

remain modest and do not appear to represent a near-term threat, the

potential for rising costs over the medium-term is expected to lead

investors to seek alternatives that off er a greater degree of infl ation

protection.

LOW GROWTH ECONOMIC ENVIRONMENT

Although the global economy has recovered from the recent

fi nancial crisis and pockets of growth have begun to re-emerge,

overall growth remains subdued, with few visible catalysts to

ignite a meaningful change in trend. Despite this low growth

environment, interest rates are on the rise. In such an environment,

we believe that investors will likely need to look beyond traditional

equity and fi xed income investments to generate attractive returns.

Exhibit 3: Subdued Global Growth

Source: World Bank; data as of June 30, 2013

1 U.S. Federal Reserve; Barclays



INCREASING DEMAND FOR ASSETS OFFERING STABLE INCOME

AND GROWTH POTENTIAL

At the same time that yields have fallen and the outlook for growth has

declined, demand for income-producing assets with upside potential

has increased. Among both institutional and retail investors, liquidity

needs are on the rise. For instance, the aging U.S. Baby Boomer

population is nearing retirement and is seeking a stable source of

income to weather the market cycles that lie ahead.

Exhibit 4: Aging U.S. Population

Source: U.S. Census Bureau; data as of December 2012

Additionally, many institutional investment plans that service long-

term liabilities are signifi cantly underfunded, due in large part to the

inability of investment returns from traditional asset allocations to

keep pace with rising liability requirements. In particular, public and

private pension plans have witnessed ballooning defi cits and widening

shortfalls as investment yields have fallen while liabilities have

increased. Importantly, the number of retirees serviced by these plans

continues to grow, due to the overall aging of many developed market

populations as well as increasing life expectancies across the globe.

This combination of accelerating demand for benefi ts and decelerating

growth in pension assets is leading to signifi cant fi nancial strain.

Of note, recent studies of the funding status among U.S. state and

municipal pension plans have estimated the current aggregate

shortfall at over $2 trillion1. Interestingly, while the methodology

underlying these studies assumed investment returns on pension

assets would range from approximately 4.0% to 6.0%, U.S. states are

assuming much higher rates of return, in the range of 7.25 to 8.25%.1

In view of the current low yield environment, such returns are not likely

to be achieved through investment in traditional asset classes, which

may require these pension plan sponsors to look elsewhere for more

compelling returns.

THE PATH FORWARDAs institutional investors seek to fund liabilities and navigate the

challenges of the current landscape, we believe Real Assets are

emerging as a new alternative – one that can provide attractive

yield, stability and growth irrespective of market cycles and

macroeconomic volatility. Accordingly, as investors move beyond the

“New Normal”, we believe the stage has been set for a strategic shift

in asset allocations, with Real Assets becoming the New Essential.

Importantly, we believe this transformation of traditional portfolio

allocation has only just begun. Over the next decade, we expect this

trend to accelerate materially, as investors come to recognize Real

Assets as a fundamental component of portfolio investment. Indeed,

we expect that by 2030, allocations to Real Assets among institutional

investors will reach 20% to 30% of total portfolio value, with some

institutions allocating upwards of 50% to the asset class.

A historical precedent for such a meaningful transformation can be

found in the equally signifi cant shift from fi xed income to equities that

has occurred over the last 30 years. As recently as the early 1980s,

nearly 60% of assets held by U.S. institutional investors were allocated

to fi xed income securities (Exhibit 5). However, challenging investment

trends and macroeconomic factors, including double digit infl ation, led

investors to seek a higher growth alternative. Accordingly, over the

subsequent 20 years a dramatic shift in asset allocations occurred,

whereby fi xed income investments fell to only 30% of portfolio value

by the year 2000.

Defi ning the Real Asset Investible Universe

Real Assets are often defi ned as physical or tangible assets that tend

to provide a “real return”, often linked to infl ation. This defi nition

encompasses a wide range of potential investments, including real

estate, infrastructure, timberlands, agrilands, commodities, precious

metals and natural resources. Additionally, real-return fi nancial

instruments, such as infl ation-protected bonds, are often included in

the Real Asset conversation as well.

Based upon Brookfi eld’s experience as an owner and operator of Real

Assets, we have sought to focus our defi nition of the asset class in order

to capture several key characteristics – a pure-play emphasis on long-

lived, hard assets that generate stable and growing cash fl ow streams,

provide enhanced current yield, off er protection against infl ation and

produce attractive risk-adjusted returns. Importantly, this defi nition

generally does not include commodities or fi nancial assets, which

tend to experience greater volatility and are more susceptible to global

capital market trends.

Within our narrower defi nition of the Real Asset investible universe,

we classify assets in four major categories: Property, Infrastructure,

Timberlands and Agrilands. For a detailed description of these

categories, please refer to Part II of this piece, entitled “An Introduction

to Real Assets.”

1 Center for Retirement Research at Boston College and Moody’s Investors Services:

“Adjusted Pension Liability Medians for US States”, June 2013



Exhibit 5: Shifting Institutional Investor Asset Allocations

Source: Pensions and Investments; data represents average asset mix of top

1,000 U.S. public defi ned benefi t pension plans since 1991 and average asset

mix of top 200 U.S. public defi ned benefi t pension plans from 1984-1991; data as

of September 30 of each respective year. “Alternatives” includes private equity

and hedge fund investments.

Today, investment trends and macroeconomic factors are converging

once again to lead to another potential shift in asset allocations – this

time to Real Assets. At a time when investors are struggling to fund

long-term liability requirements, protect current wealth, participate

in a recovering economy and defend against the potential for rising

infl ation, Real Assets can off er an attractive alternative. Through

a unique combination of steady current income, leverage to an

improving economy and protection against infl ation, Real Assets may

provide the foundation for institutional investors to navigate current

and future market environments.

Investors appear to be recognizing these attractive characteristics,

as demonstrated by recent trends in institutional allocations and

fundraising activity. For instance, over the last 10 years, real estate

allocations by public defi ned benefi t pension plans have increased

from just over 3.0% of portfolio value to nearly 8.0% (Exhibit 5).

More recently, fundraising activity has demonstrated a signifi cant

acceleration in demand for Real Assets. During the fi rst half of 2013,

18% of the nearly $210 billion raised globally by private equity funds

was targeted towards Real Asset investments (Exhibit 6).

Exhibit 6: Recent Momentum in Real Asset Fundraising Activity

We believe these indicators demonstrate the potential for a long-term

trend, as awareness of and appreciation for Real Assets continues

to accelerate. Over the next decade, we expect Real Assets to be

embraced by the global investment community as a compelling

alternative to traditional fi xed income and equities and emerge as the

New Essential.

Measuring Real Asset Performance

Throughout the analysis included in this piece, the following indexes have been utilized to measure and represent the performance of Real Assets, unless

otherwise noted. Please refer to the disclosures at the end of this report for a detailed description of each index.

Property NCREIF Property Index (data availability begins in 1Q 1978) Agrilands NCREIF Farmland Index (1Q 1991)

Infrastructure Dow Jones Brookfi eld Global Infrastructure Stocks MSCI World Index (1Q 1978)

Composite Index (4Q 2002) Bonds Barclays Global Aggregate Bond Index (1Q 1990)

Timberlands NCREIF Timberland Index (1Q 1987)

Of note, as private investment in infrastructure has only recently begun to accelerate, a private market infrastructure performance index with a meaningful

track record does not currently exist. Accordingly, the Dow Jones Brookfi eld Global Infrastructure Composite Index was utilized as the chosen proxy for

the asset class. Currently comprising more than 125 companies and with a market capitalization of over $1.0 trillion1, the Dow Jones Brookfi eld Global

Infrastructure Composite Index includes publicly-listed infrastructure companies traded on developed market exchanges with historical data dating

back to December 31, 2002.

A key measure for inclusion in the index is that 70% of cash fl ows must be derived from the ownership or operation of infrastructure assets. This

is a signifi cant diff erentiator from other indexes, which have a broader defi nition of infrastructure and are often dominated by infrastructure service

companies, such as energy utilities, construction companies and mining companies. In contrast, the Dow Jones Brookfi eld Global Infrastructure

Indexes focus on companies that are more likely to generate stable and predictable cash fl ow growth and are typically less cyclical in nature.

Additionally, to be eligible for inclusion in the Dow Jones Brookfi eld Infrastructure Indexes, a company must have a minimum fl oat-adjusted market

capitalization of $500 million as well as a minimum three-month average daily trading volume of $1 million. Securities also must be domiciled in a

country with a liquid market listing.

For more information on the Dow Jones Brookfi eld Global Infrastructure Indexes, please visit www.djindexes.com/infrastructure.

1 As of June 30, 2013

Source: Bloomberg; data as of June 30, 2013



OPTIMIZING AN ALLOCATION TO REAL ASSETSIn considering the optimal allocation to Real Assets, modern portfolio

theory can serve as a guide. Using tools such as the Effi cient Frontier,

it is possible to create hypothetical portfolios which contain the

“optimal” allocation to selected asset classes. The “optimal” allocation

is defi ned as that which maximizes the expected return for any given

level of risk based upon historical performance results. Combining

each of these “optimal” portfolios across the spectrum of risk and

return creates the Effi cient Frontier.

It is also possible to compare Effi cient Frontiers, to determine if the

addition of a certain asset class provides higher or lower potential

returns for each level of risk. In doing so, the portfolio benefi ts of

including a certain asset class, and the optimal allocation to that asset

class, become increasingly clear.

Exhibit 7 presents such an analysis, comparing the Effi cient Frontier

of a portfolio containing only bonds, equities and cash with that of a

portfolio which also includes Real Assets.

Exhibit 7: Effi cient Frontier Analysis

Source: U.S. Federal Reserve, Barclays, Bloomberg, NCREIF, S&P Dow Jones

Indexes; data as of June 30, 2013; the “Real Asset” category is comprised

of performance results (over the duration of available data) generated by

the previously defi ned indexes for Property, Infrastructure, Timberlands and

Agrilands, weighted by the investible universe of each; the “Stocks” category is

represented by the S&P 500 Total Return Index, the “Bonds” category consists of

the Barclays U.S. Aggregate Bond Index and the “Cash” category is comprised of

the 3-month U.S. Treasury bill.

As demonstrated above, the Effi cient Frontier for the portfolio

containing Real Assets is “higher” than that of the more traditional

portfolio, indicating that returns are greater across the spectrum of

risk. For example, assuming a standard deviation of 4.5%, the portfolio

of traditional investment options generates a return of 7.5% while the

portfolio including Real Assets produces a return of 9.5%. As such,

the portfolio including Real Assets generated 200 basis points of

incremental return for the same level of risk. While the value of this

incremental return varies across the risk spectrum, it remains positive

throughout, indicating that the addition of Real Assets to a mixed-

asset portfolio improved overall risk-adjusted returns throughout the

time period of historical performance captured by this study.

Additionally, the Effi cient Frontier suggests that the “optimal”

allocation to Real Assets can be found along the upward slope of the

curve, highlighted in Exhibit 7. The target allocation to Real Assets

refl ected in this portion of the curve ranges from 25% to 80%.

While investor risk preferences and return needs may vary and asset

allocations may include a more diverse set of opportunities than

those included above, the Effi cient Frontier confi rms our belief in the

attractiveness of Real Assets and the potential for meaningful growth

from current allocation levels.

The Growth Potential of Real Assets

While we expect investor allocations to Real Assets to accelerate

in coming years, the global investible asset base is expected to

grow exponentially as well. Current estimates of total global assets

managed by institutional investors stands at $71 trillion, of which

$45 trillion is invested to meet long-term fi nancial obligations1. We

expect this long-term invested asset base to increase in size to over $70

trillion within the 2020s, producing $25 trillion in new capital fl ows2.

Should investor allocations progress as we expect over the same time

horizon, 20% to 30% of these new capital fl ows may be targeted

towards Real Assets, leading to nearly $10 trillion of capital seeking Real

Asset investment opportunities over the next 15 years.

Importantly, as demand for Real Assets continues to rise, the supply

of Real Asset investment opportunities is expected to expand as well.

Global population growth and increasing urbanization around the world

are leading to rising demand for new development. When combined

with the overdue refurbishment or modernization of existing assets

in many mature markets, a signifi cant need for capital has become

apparent. Recent estimates indicate that this need may total as much as

$55 trillion through 2030 in the infrastructure asset class alone3. Over

the same time period, an analysis of global property markets reveals

that over $15 trillion will need to be spent in order to simply maintain

existing ratios of property investment relative to Gross Domestic

Product (GDP)4. Given the current strain on government balance sheets

around the world, public fi nancing will not be able to subsidize this

$70 trillion price tag alone, creating a signifi cant opportunity for the

investment of private capital.

Furthermore, the ability to invest in existing Real Assets is expected to

increase as well. In recent years, privatization of state-owned assets

– including toll roads, airports and seaports – has accelerated, as

governments across the globe seek to increase liquidity. Additionally,

diversifi ed owners of Real Assets are increasingly selling their holdings

in order to become more capital and cost effi cient, such as mining

companies divesting their captive railroad systems. We expect these

trends to continue to expand in the coming years, leading to a growing

opportunity to invest in existing Real Assets.

This combination of population growth, strained public fi nances and

increasing monetization of in-service assets provides many options

for investment. Whether investors seek opportunities for new

development or existing assets in mature markets or emerging growth

economies, the Real Asset investible universe appears poised for

meaningful growth.

1 OECD; Climate Policy Initiative, March 20132 Brookfi eld Asset Management estimates3 OECD: “Strategic Transport Infrastructure Needs to 2030”4 EPRA, World Bank, PricewaterhouseCoopers, Brookfi eld Asset Management



REAL ASSETS – AN ATTRACTIVE INVESTMENT OPPORTUNITYOur belief that Real Assets will emerge as the New Essential portfolio

investment is driven by the powerful combination of relative stability

and growth off ered by the asset class. Importantly, Real Assets can

provide downside protection in a recessionary climate due to the

duration and generally predictable nature of their cash fl ow streams,

while also participating in the upside of a growth environment

through meaningful exposure to a recovering economy. As such,

we believe Real Assets are uniquely positioned to provide value

and enhance overall risk-adjusted returns across the current market

cycle and those that lie ahead.

LARGE-SCALE, LONG-LIVED ASSETS PROVIDING ESSENTIAL

SERVICES

Real Assets tend to serve as the foundation for the delivery of goods

and services that are necessary to support the global economy. As a

result, drivers of end-user demand for these assets tend to be relatively

predictable, sustainable and inelastic.

STABLE, BOND-LIKE CASH FLOWS

Real Assets off er investors relatively steady cash fl ow streams,

often supported by regulated or contractual revenues and attractive

operating margins. Many Real Assets are subject to long-term lease

or concession agreements which frequently include pricing provisions

that seek to ensure a predictable return over time. As a result, these

assets tend to generate consistent, stable cash-fl ow streams with

lower volatility than other traditional asset classes.

Additionally, while macroeconomic trends can aff ect Real Asset

operations, the impact tends to be relatively muted by the long-term,

contractual nature of the underlying revenue streams. Therefore,

we believe attractive cash fl ow growth can be achieved across

market cycles. While asset-level fi nancial performance is not always

readily observable, the cash fl ow streams produced by publicly

listed companies that own and operate Real Assets are provided

on a consistent basis through quarterly reporting and disclosures.

Importantly, these fi nancial results demonstrate the relative stability

of the underlying asset cash fl ows over time.

Exhibit 8: Comparative Cash Flow Growth Rates of Listed Infrastructure

and Global Equities

Source: Brookfi eld Investment Management research and estimates; FactSet;

S&P Dow Jones Indexes; Merrill Lynch Global Quantitative Strategy; MSCI; IBES;

Worldscope; data as of December 31, 2012 and refl ects median EBITDA growth

in each respective time period.

Source: Brookfi eld Investment Management research and estimates; FactSet;

S&P Dow Jones Indexes; Merrill Lynch Global Quantitative Strategy; MSCI; IBES;

Worldscope; data as of December 31, 2012 and refl ects median EBITDA growth

in each respective time period.

B

Exhibit 9: Stability of U.S. Listed Property Cash Flow Streams

Source: Brookfi eld Investment Management research and estimates; projected

Same Store NOI Growth is based on proprietary Brookfi eld Investment

Management research and fi nancial analysis and is subject to change without

notice; data as of June 30, 2013 based upon fi rst quarter 2013 earnings

announcements.

ATTRACTIVE YIELDS WITH LONG-TERM CAPITAL

APPRECIATION

The relatively steady and predictable cash fl ows produced by Real

Assets support attractive current income streams. As indicated in

Exhibit 10, the average historical income return across Real Assets has

meaningfully outpaced equities and compares favorably with bonds.

Additionally, current Real Asset yields remain signifi cantly higher than

both traditional asset classes. These attractive income streams may

protect the value of an investment during recessionary environments

and can also provide an important cushion against rising interest rates.

Furthermore, the sustainable and predictable nature of these income

streams leads Real Assets to off er a compelling option for investors

with regular cash distribution requirements.

Exhibit 10: Comparative Income Returns and Current Yield

Source: MSCI, Barclays, Bloomberg, NCREIF, S&P Dow Jones Indexes; data as

of June 30, 2013; represents average annual returns over the duration of data

available for each index.

As demonstrated in Exhibit 10, investment in Real Assets also provides

meaningful capital appreciation potential. These long-lived, hard

assets tend to increase in value over time, as replacement costs rise

and operational effi ciencies are achieved, particularly for well-located

assets with high barriers to entry.

Source: Brookfi eld Investment Management research and estimates; projected

Same Store NOI Growth is based on proprietary Brookfi eld Investment

Management research and fi nancial analysis and is subject to change without

notice; data as of June 30, 2013 based upon fi rst quarter 2013 earnings

announcements.


of June 30, 2013; represents average annual returns over the duration of data

available for each index.



EQUITY-LIKE UPSIDE

Although a signifi cant portion of Real Asset revenue streams are

subject to long-term, contractual agreements, the asset class also

retains exposure to an improving economic environment. Whether

it is realized in the form of improved leasing of vacant property space,

growing throughput on toll roads, rising volumes of energy demand,

expanded harvesting of timber assets, or climbing food prices, Real

Assets reap the benefi ts of a strong global economy. While Real Asset

current income protects value on the downside, operational leverage

enhances value on the upside.

Exhibit 11: Average Annual Returns during Periods of Economic

Recovery


of June 30, 2013; represents average annual returns during periods of economic

recovery, as defi ned by the National Bureau of Economic Research, over the

duration of data available for each index.

GROWTH POTENTIAL

In addition to meaningful leverage to an improving economic climate,

fundamental trends in each underlying asset class are leading to

attractive growth momentum. While several of these trends may

require a longer time horizon to materialize, we believe they provide

a clear and sustainable path upon which Real Assets can continue to

produce compelling income and capital appreciation.

Exhibit 12: Growth Drivers for Real Assets


of June 30, 2013; represents average annual returns during periods of economic

recovery, as defi ned by the National Bureau of Economic Research, over the

duration of data available for each index.

Property

• Employment growth leading to increased leasing demand

• Low levels of new supply

Infrastructure • Global population growth

• Existing infrastructure in need of repair or refurbishment

• New infrastructure development in emerging markets from growing

wealth and urbanization

• Acceleration of privatization activity leading to an expanded

investible universe

• Declining availability of public capital to fund needed expenditures

Timberlands • Recovery of U.S. housing market

• Asia’s increasing wood demand

• Reduced supply from Canada and Russia

• Supply constraints due to conservation, development and damage

caused by the Mountain Pine Beetle

• Demand for wood fi ber as an alternative energy source

Agrilands

• Global population growth and increasing consumption levels

• Growing demand for biofuels

• Slowing yield growth rates

Aggrilands • Global population growth and increasing consumption levels

• Growing demand for biofuels

• Slowing yield growth rates

COMPELLING ABSOLUTE AND RELATIVE RETURNS

As evidenced in Exhibit 13, Real Assets have produced impressive

absolute and relative returns over the last 10 years, outperforming

both the global equity and global bond markets.

Exhibit 13: Attractive Return Profi le

Source: MSCI, Barclays, Bloomberg, NCREIF, S&P Dow Jones Indexes; data as of

June 30, 2013

LOW VOLATILITY AND COMPARATIVELY HIGHER

RISK-ADJUSTED RETURNS

This relative outperformance becomes even more impressive when

viewed on a risk-adjusted basis, as the volatility of Real Asset returns

has historically been lower than that of equities, while returns have

been greater than that of bonds. Importantly, while Real Assets tend

to retain value during economic downturns and participate in value

creation during economic upturns, performance generally lacks sharp

movements in either direction. When combined with the stability

of Real Asset cash fl ows, the resulting risk-adjusted returns have

meaningfully surpassed those achieved by either equities or bonds.

Exhibit 14: Comparison of Sharpe Ratios across Real Assets and

Investment Alternatives


June 30, 2013; Sharpe Ratio based upon 10-year average annualized total returns

and standard deviations of performance; assumes a risk-free rate of 3.0%.


June 30, 2013


June 30, 2013; Sharpe Ratio based upon 10-year average annualized total returns

and standard deviations of performance; assumes a risk-free rate of 3.0%.

l l b d d



HEDGE AGAINST INFLATION

With infl ationary concerns on the rise, we believe Real Assets represent

an attractive investment in long-lived, physical resources that tend to

increase in value as land and input costs rise. Additionally, Real Asset

revenue streams often respond favorably to higher infl ation, as shorter

term contractual revenues (i.e., one-year apartment leases) benefi t

from frequent resets while longer term lease structures (i.e., 30-year

airport concessions) often include regularly scheduled rent escalations

linked to infl ation. Importantly, end-user demand tends to be relatively

inelastic and often insulated from infl ation, due to the essential nature

of the goods and services provided by Real Assets. Indeed, demand

often increases during infl ationary periods, particularly when rising

prices are spurred by economic growth and improving levels of

employment and consumption. As a result of these various drivers,

Real Asset returns tend to exhibit greater correlations with infl ation

than traditional investment alternatives.

Exhibit 15: Correlation of Asset Class Returns with Infl ation

Source: MSCI, Barclays, Bloomberg, NCREIF, S&P Dow Jones Indexes, U.S.

Bureau of Labor Statistics; data as of June 30, 2013; represents the correlation

of annualized returns for Property, Timberlands, Agrilands, Bonds and Stocks

with historical Consumer Price Index over the duration of data available for

each index; represents correlation of quarterly returns for Infrastructure with

historical Consumer Price Index given the limited time series of data.

The Sharpe Ratio Defi ned

The Sharpe Ratio is a measure of return per unit of risk. The fi gure is

calculated by subtracting a risk-free rate, such as the yield of the 10-year

U.S. Treasury bond, from the rate of return achieved from an investment.

This net return is then divided by the standard deviation of performance

results. The resulting ratio indicates whether investment returns have

suffi ciently rewarded investors for the level of risk assumed. The higher

the Sharpe ratio, the greater the level of risk-adjusted performance.

Source: MSCI, Barclays, Bloomberg, NCREIF, S&P Dow Jones Indexes, U.S.

Bureau of Labor Statistics; data as of June 30, 2013; represents the correlation

of annualized returns for Property, Timberlands, Agrilands, Bonds and Stocks

with historical Consumer Price Index over the duration of data available for

each index; represents correlation of quarterly returns for Infrastructure with

historical Consumer Price Index given the limited time series of data.

Real Assets in a Rising Interest Rate Environment

Recent developments in global capital markets have led to the potential

for rising long-term interest rates, which has brought to the forefront the

question of Real Asset performance in a rising rate environment. While

we claim no unique insight on monetary policy, our views on the matter

have been shaped by our deep experience as an owner and operator of

these assets and as an active participant within global capital markets.

We fi rmly believe that Real Assets are uniquely positioned to generate

attractive performance across various market cycles, due to their

generally stable, long-term, contractual revenue streams combined with

considerable leverage to economic growth. During periods of higher

nominal interest rates (whether from higher real rates in a more positive

growth environment or from higher infl ation in a low growth environment),

we believe the increased revenues from these assets will more than off set

any potential valuation decline from rising discount rates.

In gaining an appreciation for the performance of Real Assets across

varying cycles, it is essential to understand the impact of interest rates

and infl ation on each of the main value components of an investment.

First, Real Asset revenue streams are positively impacted by interest rates and

infl ation in several ways. Infrastructure and power assets tend to operate

under regulated and contractual revenue agreements that span several

decades. These agreements often contain either direct, explicit infl ation-

linked revenue increases or revenue growth formulas that are derived

from interest rates and/or infl ation. The revenue streams derived from

in-place commercial property leases also tend to perform favorably in

an infl ationary environment, as lease rolls lead to higher revenues while

rising replacement costs lead to higher asset valuations.

Secondly, interest rates remain very low and fi xed interest rate loans

enhance equity returns as revenues increase. The economic eff ect of debt

revaluations accrues to owners and can create meaningful embedded

value. Long-term, fi xed rate debt with a low coupon is benefi cial in a

rising interest rate and infl ationary environment, due to the stable nature

of the debt service payments relative to higher revenues.

Thirdly, Real Asset expenses tend to grow more slowly than revenues. While

the revenue implications of rising interest rates and infl ation tend to be

positive, the impact of expense growth is often more subdued or passed

on to end users. Additionally, Real Assets tend to require low sustaining

capital expenditures, which helps to minimize overall expense growth.

Lastly, in anticipation of interest rate increases, capitalization rates for Real

Assets did not decrease as much as fi xed income yields in recent years. Asset

valuations are generally based upon cash-fl ow projections discounted at

an appropriate, risk-adjusted rate of return. This discount rate is, in turn,

infl uenced by both the level of benchmark interest rates and the level of

demand in the investment marketplace for the asset class. We expect that

as bond yields rise, Real Asset capitalization rates will lag this movement,

as they have maintained wider spreads to absorb interest rate increases.

In summary, we expect Real Assets to produce positive and consistent

performance and stable cash fl ows over the long term, irrespective of

interest rates movements or capital market cycles. While short-term

volatility will ebb and fl ow, Real Assets will remain the New Essential.

Real Assets in a Rising Interest Rate Environment

Recent developments in global capital markets have led to the potential

for rising long-term interest rates, which has brought to the forefront the

question of Real Asset performance in a rising rate environment. While

we claim no unique insight on monetary policy, our views on the matter

have been shaped by our deep experience as an owner and operator of

these assets and as an active participant within global capital markets.

We fi rmly believe that Real Assets are uniquely positioned to generate

attractive performance across various market cycles, due to their

generally stable, long-term, contractual revenue streams combined with

considerable leverage to economic growth. During periods of higher

nominal interest rates (whether from higher real rates in a more positive

grgrowowththeenvnvirirononmementntoorr frfromomhhigigheherr ininflfl atatioionnininaallowowggrorowtwthhenenviviroronmnmenent)t),

we believe the increased revenues from these assets will more than off set

any potential valuation decline from rising discount rates.

In gaining an appreciation for the performance of Real Assets across

varying cycles, it is essential to understand the impact of interest rates

and infl ation on each of the main value components of an investment.

First, Real Asset revenue streams are positively impacted by interest rates and

infl ation in several ways. Infrastructure and power assets tend to operate

under regulated and contractual revenue agreements that span several

decades. These agreements often contain either direct, explicit infl ation-

linked revenue increases or revenue growth formulas that are derived

from interest rates and/or infl ation. The revenue streams derived from

in-place commercial property leases also tend to perform favorably in

an infl ationary y environment, as lease rolls lead to highg er revenues while

rising replacement costs lead to higher asset valuations.

Secondly, interest rates remain very low and fi xed interest rate loans

enhance equity returns as revenues increase. The economic eff ect of debt

revaluations accrues to owners and can create meaningful embedded

value. Long-term, fi xed rate debt with a low coupon is benefi cial in a

rising interest rate and infl ationary environment, due to the stable nature

of the debt service payments relative to higher revenues.

Thirdly, Real Asset expenses tend to grow more slowly than revenues. While

the revenue implications of rising interest rates and infl ation tend to be

positive, the impact of expense growth is often more subdued or passed

on to end users. Additionally, Real Assets tend to require low sustaining

capital expenditures, which helps to minimize overall expense growth.

Lastly, in anticipation of interest rate increases, capitalization rates for Real

Assets did not decrease as much as fi xed income yields in recent years. Asset

valuations are generally based upon cash-fl ow projections discounted at

an appropriate, risk-adjusted rate of return. This discount rate is, in turn,

infl uenced by both the level of benchmark interest rates and the level of

demand in the investment marketplace for the asset class. We expect that

as bond yields rise, Real Asset capitalization rates will lag this movement,

as they have maintained wider spreads to absorb interest rate increases.

In summary, we expect Real Assets to produce positive and consistent

performance and stable cash fl ows over the long term, irrespective of

interest rates movements or capital market cycles. While short-term

volatility will ebb and fl ow, Real Assets will remain the New Essential.



GEOGRAPHIC DIVERSIFICATION

Real Assets provide access to a global opportunity set across multiple

asset classes. When combined with a variety of investment vehicle

options – detailed in the following section – we believe diversifi cation

of investment across geography, currency and asset class can be

readily achieved. This diversity can provide enhanced insulation

against regional economic trends and cycles.

PORTFOLIO DIVERSIFICATION

Real Asset returns have historically exhibited low correlations to

traditional equity and fi xed income investments. The addition of Real

Assets to a mixed-asset portfolio may therefore provide important

diversifi cation benefi ts, lowering overall volatility and enhancing risk-

adjusted returns.

Exhibit 16: Correlation of Real Asset Returns with Equities and Bonds


of June 30, 2013; represents correlation of quarterly returns for each respective

index with the MSCI World Index (stocks) and the Barclays Global Aggregate

Bond Index (bonds) since the fi rst quarter of 2003.

In regards to infrastructure, it is important to note that the proxy for

infrastructure asset performance utilized throughout this paper is a

listed index. As private market investment in infrastructure is relatively

new, having evolved in earnest over the last 20 years, an index of

private market asset performance with a meaningful track record does

not currently exist. Accordingly, the Dow Jones Brookfi eld Global

Infrastructure Composite Index was chosen as the most appropriate

proxy for the asset class.

This listed index is currently comprised of more than 125 asset-

rich infrastructure companies, with a total market capitalization

of over $1.0 trillion1 and historical data dating back to December

31, 2002. While we believe this index provides an eff ective

representation of the infrastructure asset class, it does refl ect the

performance of publicly traded equity securities. The listed nature

of the index provides many benefi ts to investors, including liquidity,

ease of investment and diversity across geography and asset type.

However, the index has also exhibited infl ated correlation levels in

recent years, as it has been aff ected by many of the same capital

market trends that have infl uenced the equity and bond markets.


of June 30, 2013; represents correlation of quarterly returns for each respective

index with the MSCI World Index (stocks) and the Barclays Global Aggregate

Bond Index (bonds) since the fi rst quarter of 2003.

In an attempt to discern the correlation of infrastructure asset

performance excluding the impact of capital market fl uctuations,

an analysis was conducted utilizing a recently established private

infrastructure market data series. The Preqin Infrastructure Quarterly

Index is calculated based upon cash fl ow transactions and Net Asset

Values as reported by over 130 individual unlisted infrastructure

partnerships. While this index dates back only to the fi rst quarter of

2008, the fi ve-year life span of this data series has been one of the

most volatile periods on record. As such, the results of a correlation

analysis utilizing this data should provide a meaningful context.

Exhibit 17: Correlation of Private Market Infrastructure Data with

Equities and Bonds

Source: MSCI, Barclays, Bloomberg, Preqin; data as of December 31, 2012;

represents correlation of quarterly returns of the Preqin Infrastructure Quarterly

Index with the MSCI World Index (stocks) and the Barclays Global Aggregate

Bond Index (bonds) since the fi rst quarter of 2008, which is the earliest date for

which data is available across all indexes.

We believe the low correlations produced by this analysis are indicative

of the relationship between infrastructure asset performance and

that of the listed markets. Accordingly, we believe this comparison

provides further support for our belief that Real Assets can provide

powerful diversifi cation benefi ts for a mixed-asset portfolio.

HOW TO ACCESS THE OPPORTUNITY

Depending on an investor’s needs surrounding liquidity, time horizon

and capacity to invest, there are a number of options for participating

in the global Real Asset investment opportunity. While the specifi c

characteristics of these options vary meaningfully, we believe they

share a common ability to provide attractive current income streams

and capital growth potential.

Exhibit 18: Typical Characteristics of Real Asset Investment Options

SouSourcerce: M: MSCISCI B, Barcarclaylayss, BloBloombombergerg P, Preqreqin;in; dadatata asas ofof DecDecembemberer 3131, 202012;12;

represents correlation of quarterly returns of the Preqin Infrastructure Quarterly

Index with the MSCI World Index (stocks) and the Barclays Global Aggregate

Bond Index (bonds) since the fi rst quarter of 2008, which is the earliest date for

which data is available across all indexes.

1 As of June 30, 2013

Private, Unlisted

FundsManagedAccount

Direct AssetInvestment

Ease of Invesment

Investment Diversification

PortfolioDiversification

STRONG LIMITED

Liquidity

GovernanceRights

Unlisted Fund of Funds

ListedMutualFunds

Exchange- TradedFunds

Publicly Traded Equity

Securities

Private Fund

Invested inDebt

Investments

Stocks Bonds

Property 0.23 -0.08

Timberlands -0.05 0.15

Agrilands 0.11 -0.03

Stocks Bonds

Private Market Infrastructure -0.11 -0.05



These investment options are available across the universe of Real

Asset opportunities, with more established asset classes off ering a

wider variety of investment options.

Exhibit 19: Availability of Real Asset Investment Options

* Limited pure-play investment opportunities

Interestingly, when deciding among this opportunity set, it is important

to note that correlations among Real Assets are quite low, as indicated

in Exhibit 20. This suggests that the optimal asset allocation should

include more than one component asset class, which can serve to

enhance overall portfolio returns while diversifying total portfolio risk.

Exhibit 20: Correlations Among Real Asset Constituents

Source: NCREIF, S&P Dow Jones Indexes; data as of June 30, 2013; represents

correlation of quarterly returns since the fi rst quarter of 2003, which is the

earliest date for which data is available across all indexes.

Source: NCREIF, S&P Dow Jones Indexes; data as of June 30, 2013; represents

correlation of quarterly returns since the fi rst quarter of 2003, which is the

earliest date for which data is available across all indexes.

Capitalizing on the Real Asset Investment Opportunity

While the potential benefi ts of Real Assets are readily observable and

the options for investment are numerous, the ability to capitalize on the

opportunity is more complex.

• As these assets tend to be large-scale, capital-intensive investments,

signifi cant access to capital is typically required in order to fund

initial acquisitions as well as ongoing capital expenditures.

• As not all Real Assets are created equally, investment sourcing and

underwriting play a vital role in understanding the key drivers of

asset performance and determining asset value. Factors such as

asset quality, location, lease or concession structure, ownership

basis and growth potential must all be considered when evaluating

a potential investment.

• As Real Asset operations tend to be industry-specifi c and often

driven by complicated regulations, operational experience is

necessary in order to maximize effi ciency and productivity.

• As Real Assets are generally long-lived assets often subject to long-

lasting contractual agreements, a long-term, patient investment

philosophy may be needed to fully realize the value of an investment.

Given the complexities of Real Asset investment and operations,

specialized expertise can assist investors seeking to access the asset

class and benefi t from its attractive characteristics. Along every step of

the investment process – sourcing, underwriting, acquiring, fi nancing,

operating and monetizing – a specialized asset manager with focused

Real Asset experience can help to ensure an investment’s full value

creation potential is achieved.

EVOLVING REAL ASSET ALLOCATIONS

Institutional investors globally are recognizing the potential benefi ts of investment in Real Assets and are evaluating the options for accessing the

opportunity. Many institutions are leading the way forward, having increased their allocations to Real Assets meaningfully in recent years. As

indicated in Exhibit 21, these allocations can move swiftly, leading to signifi cant capital fl ows seeking investment in Real Asset opportunities1.

Exhibit 21: Illustrative Examples of Increasing Real Asset Allocations

Example A

Canadian National Pension Plan | C$183.5 billion | As of June 30, 2013

Asset Allocation in 2000 Asset Allocation in 2013

Example A

Canadian National Pension Plan | C$183.5 billion | As of June 30, 2013


1 The examples included herein are based on Brookfi eld’s internal research of certain company annual reports and have been chosen and presented to illustrate the change

in asset allocations of certain investors. The examples presented herein are not intended in any way to be exhaustive of the investors investing or not investing in real

assets. An investment in real assets involves signifi cant risk, including loss of the full amount of the investment.

Capitalizing on the Real Asset Investment Opportunity

While the potential benefi ts of Real Assets are readily observable and

the options for investment are numerous, the ability to capitalize on the

opportunity is more complex.

• As these assets tend to be large-scale, capital-intensive investments,

signifi cant access to capital is typically required in order to fund

initial acquisitions as well as ongoing capital expenditures.

• As not all Real Assets are created equally, investment sourcing and

underwriting play a vital role in understanding the key drivers of

asset performance and determining asset value. Factors such as

asset quality, location, lease or concession structure, ownership

basis and growth potential must all be considered when evaluating

a potential investment.

•• AsAs RReaeall AsAssesett opopereratatioionsns ttenendd toto bbee ininduduststryry s-spepecicififi cc anandd ofoftetenn

driven by complicated regulations, operational experience is

necessary in order to maximize effi ciency and productivity.

• As Real Assets are generally long-lived assets often subject to long-

lasting contractual agreements, a long-term, patient investment

philosophy may be needed to fully realize the value of an investment.

Given the complexities of Real Asset investment and operations,

specialized expertise can assist investors seeking to access the asset

class and benefi t from its attractive characteristics. Along every step of

the investment process – sourcing, underwriting, acquiring, fi nancing,

operating and monetizing – a specialized asset manager with focused

Real Asset experience can help to ensure an investment’s full value

creation potential is achieved.

* Limited pure-play investment opportunities

Private,UnlistedFunds

ManagedAccount

Direct Asset Investment

Property

Infrastructure

Timberlands

Agrilands

Unlisted Fund ofFunds

Listed MutualFunds

Exchange- TradedFunds

PubliclyTradedEquity

Securities

Private FundInvested in

DebtInvestments

Property Infrastructure Timberlands Agrilands

Property 1.00 0.27 0.33 0.22

Infrastructure 0.27 1.00 -0.10 0.03

Timberlands 0.33 -0.10 1.00 0.74

Agrilands 0.22 0.03 0.74 1.00



We expect this trend to accelerate over the next decade, as investors

come to view Real Assets as an attractive alternative to traditional

equity and fi xed income investments. The early movers profi led in

Exhibit 21 have set the foundation for this important shift in asset mix

and have demonstrated the potential for Real Asset allocations to

increase meaningfully over a relatively short period of time.

CONCLUSION – PART I

The current economic environment is presenting numerous challenges

for investors to navigate. At a time when liability requirements are

increasing, the opportunity to invest for yield has been diminished

and the outlook for growth has been subdued. With rising interest

rates and the potential for higher infl ation on the horizon, investors are

looking beyond the traditional array of investment options in search of

a more attractive alternative.

Amid the constraints of the current environment, we believe Real

Assets can provide the path forward. With an attractive combination

of yield, stability, and growth, Real Assets off er the potential to protect

investment value on the downside while maintaining exposure to the

upside. Indeed, based upon our own 100-year history of owning and

operating these assets, we believe they combine the most appealing

attributes of traditional equity and fi xed income investments.

Accordingly, we believe Real Assets provide a unique opportunity to

generate compelling risk-adjusted returns across market cycles.

Investors across the globe are recognizing the attractive, long-term

benefi ts of investment in Real Assets. As this trend continues to

accelerate, we expect institutional allocations to the asset class to

grow materially over the next decade. We believe the foundation for

this shift has been established and the investible universe is poised to

expand to meet this rising demand. As the "New Normal" gives way to

the market cycles that lie ahead, we believe the stage has been set for

a new alternative to emerge and for Real Assets to become the New

Essential.

Brookfi eld's Real Asset Expertise

Brookfi eld Asset Management is a global alternative asset manager with over $175 billion in assets under management. We have over a 100-year history

of owning and operating Real Assets, including property, infrastructure, timberlands and agrilands.

On behalf of our clients and shareholders, we own and manage one of the world’s largest portfolios of Real Assets. We off er a range of public and private

investment strategies that leverage our expertise and experience in markets across the globe. Given our deep history in the ownership and operation

of Real Assets and our belief in their future growth potential, we actively invest a very substantial amount of our own capital alongside our clients and

partners, ensuring a signifi cant alignment of interests. We are proud of our track record for success in achieving strong risk-adjusted returns across

market cycles.

Our focus is on high quality, long-lived, cash fl ow generating Real Assets that are well-positioned to appreciate in value over time.

Asset Class AUM1 Profi le

PROPERTY

Offi ce, Retail, Residential,

Multifamily, Industrial

and Hotel

$110 billion • 192 offi ce properties comprising 101 million sq. ft.

• 174 regional malls comprising 154 million sq. ft.

• 29 million sq. ft. of offi ce and retail development globally

• 20,000 owned and over 52,500 managed apartments

• 117,000 residential lot equivalents and 54 million sq. ft. of condo density

• 7,600 hotel rooms and 146 industrial properties comprising 35 million sq. ft.

INFRASTRUCTURE

Transportation,

Renewable Power, Energy

and Utilities

$41 billion • 28 ports, 3,200 km of toll roads and 5,100 km of rail operations in Europe, South

America and Australia

• 193 hydro power plants on 70 river systems in North America and Brazil

• Nearly 950 MW of wind capacity in key North American markets

• 1,800 MW of early stage hydro and wind developments

• Electricity and gas distribution and connections in the U.S., New Zealand, the UK and

Colombia

• 9,900 km of transmission lines in Canada, the U.S. and Chile

TIMBERLANDS $4 billion • 2.6 million2,3 acres of timberlands in North and South America

AGRILANDS $1 billion • 580,000 acres of agricultural land in Brazil, which includes sugarcane for ethanol,

soya and corn, pineapple and rubber and a premium cattle operation

1 As of June 30, 2013. Excludes Private Equity assets under management of $22 billion and Asset Management and Services, Cash and Financial Assets and Other Assets

of $5 billion.2 On July 23, 2013, Brookfi eld sold 100% of Longview Timber for $2.65 billion. Longview Timber consists of approximately 645,000 acres of high quality timberlands in the

U.S. Pacifi c Northwest. Brookfi eld continues to invest in timberlands and believes this is an attractive asset class for institutional investors.3 Total acres does not include management services provided on 1.3 million acres of Crown licensed timberlands in New Brunswick.



MULTI-FAMILY RESIDENTIAL PROPERTY SECTOR

The multi-family residential sector is comprised of multi-unit rental

apartments. The main performance drivers of these assets include

employment levels, the available supply of rental housing and

competition from for-sale housing. As the typical duration of a rental

apartment lease is only one year, this property sector tends to exhibit

greater volatility and sensitivity to macroeconomic variables. However,

this enhanced operational leverage provides numerous benefi ts during

an up-cycle, allowing apartment owners to capture rising cash fl ow

levels more quickly than owners of other property types. As a result,

multi-family residential assets tend to provide meaningful protection

against rising infl ation as well as attractive growth potential during

periods of economic expansion.

INDUSTRIAL PROPERTY SECTOR

The industrial property sector is comprised of assets such as bulk

warehouse space, distribution centers, light manufacturing facilities

and modular offi ce space. Industrial assets are often located within

warehouse parks, where individual buildings range in size from

25,000 to over 1 million square feet.

Demand for industrial and warehouse assets is derived primarily

from inventory storage or the fl ow of goods through tenant supply

chains. Growth in demand is therefore dependent upon trends in

consumer spending, manufacturing and import/export activity.

Additionally, as industrial assets play a key role in the distribution

of commercial goods, these assets tend to be located near major

centers of transportation, including ports, airports and roadway

systems. The industrial sector is generally viewed as relatively stable

and defensive, due to the long-term nature of its lease structures.

PROPERTY GROWTH OUTLOOK

The nascent global economic recovery is leading to increased demand

for property across the globe, driving income and occupancy growth

and leading to enhanced levels of profi tability. Additionally, property

development activity slowed considerably following the global

fi nancial crisis due to lower demand as well as a limited availability

of construction fi nancing. Importantly, new development remains

signifi cantly below historical averages, as credit provision has only

recently begun to improve.

PART II

AN INTRODUCTION TO REAL ASSETSAs previously discussed, our defi nition of Real Assets is focused

upon long-lived, hard assets that generate stable and growing cash

fl ow streams. In particular, this investible universe includes Property,

Infrastructure, Timberlands and Agrilands.

PROPERTYAn essential component of the global economy, property is an

established asset class encompassing commercial and residential

real estate assets around the world. These hard assets off er investors

relatively steady income streams, a potential hedge against

infl ation, as well as leverage to economic growth. Additionally,

property markets are the largest consumer of capital in the world,

providing a signifi cant opportunity for private investment. As

such, demand for the asset class has remained strong for many

decades, as investors appreciate the fundamental value of property

ownership over the long term.

The total size of the global property investible universe is currently

estimated at over $25 trillion1 across developed and emerging market

economies. Within this universe, assets can be classifi ed among key

property sectors, the most signifi cant of which include Offi ce, Retail,

Multi-family Residential and Industrial.

OFFICE PROPERTY SECTOR

The offi ce property sector is comprised of assets ranging from Class

A trophy buildings in major gateway cities to single-story buildings

in suburban offi ce parks. The key driver of demand for offi ce space

across the globe is job growth, particularly within professional service

industries. While this creates a degree of sensitivity to macroeconomic

factors, any such volatility is partially mitigated by the long-term

nature of offi ce leases, which range anywhere from fi ve to thirty years.

A typical offi ce building with an average lease term of eight years

would have only 12% to 15% of leases expiring in each year. As a result,

85% or more of revenue would generally be identifi ed at least one year

in advance. This predictability, when combined with modest levels of

annual re-leasing, leads to relatively stable cash fl ow streams coupled

with upside growth potential.

RETAIL PROPERTY SECTOR

The retail property sector encompasses three main asset types: local

community shopping centers, regional malls and outlet centers. The

performance of retail property assets is driven by retailer demand

for space in the short term and by trends in consumer spending over

the long term. However, property performance tends to be relatively

stable due to multi-year lease structures that often incorporate regular

increases in contractual rent obligations, usually tied to infl ation. As

a result, retail assets produce relatively stable, long-term cash fl ow

streams that can often weather short-term macroeconomic noise.

A Note on Single-Family Housing

Although single-family homes are long-lived hard assets, they do not tend

to possess the key characteristics we utilize in defi ning the Real Asset

investible universe. Accordingly, we view the development of single

family housing as a private equity investment opportunity rather than a

Real Asset suitable for long-term institutional ownership. However, this

business does require a signifi cant amount of private investment capital,

owing to strong consumer demand for home ownership in many parts

of the world. Brookfi eld participates in this opportunity as a provider of

capital through our private equity operations.

1 EPRA, Monthly Statistical Bulletin, June 2013



Exhibit 22: Historical Aggregate U.S. Commercial Property

Construction Starts

Source: Citigroup; data as of June 30, 2013.

As demand begins to recover with the broader economy, this supply

imbalance is likely to further drive revenue and occupancy growth for

existing property owners. Accordingly, we believe that global property

assets, particularly top tier, well-located properties that enjoy some

form of barrier to entry, are positioned for meaningful growth in

coming years.

Furthermore, the global property investible universe is poised

for attractive growth as well. While property is an established,

stable asset class in many mature markets, economic growth and

expanding populations are expected to fuel ongoing development

activity. Additionally, aging property assets are likely to be replaced

or refurbished, leading to enhanced opportunities for investment.

Meanwhile, in emerging market economies, accelerating population

growth and urbanization are expected to drive signifi cant growth in

new property development activity.

In an attempt to quantify this growth potential, an analysis of the

relationship between property markets and GDP can serve as a guide.

By calculating the current ratio between these two fi gures for each

major economy around the world and applying this ratio to estimates

of 2030 GDP, a projection of growth in the global property market can

be developed. While this approach may yield conservative results, as

it assumes national property markets will not grow faster than GDP,

it serves to balance the mature growth of developed economies with

the potentially more robust growth of emerging markets. Importantly,

this approach indicates that global property markets may expand by

over $15 trillion through 20301, creating a signifi cant opportunity for

investment.

INFRASTRUCTUREInfrastructure assets are generally long-lived, capital-intensive assets

that provide essential products or services. As such, infrastructure

assets are vital to economic development and benefi t from relatively

inelastic demand. These assets are often characterized by sustainable

long-term cash fl ows, infl ation-linked revenues, high barriers to

entry and high operating margins with minimal maintenance capital

requirements. Within this defi ned investible universe, we classify

assets into four main categories: Transportation, Renewable Power,

Energy and Utilities.

TRANSPORTATION

The Transportation subsector is comprised of essential infrastructure

networks that move freight, bulk commodities and passengers,

including railroads, toll roads, seaports, bridges, tunnels and airports.

Transportation assets are generally privatized through concession

agreements, which are granted by a government body and which set

parameters for the operation of the asset, such as:

• concession length, which is generally in the range of 10 to 99 years,

and in some cases indefi nite;

• price increase mechanisms, which are often tied to infl ation; and

• future capital expenditures required to maintain good operating

performance.

Given the essential nature of transportation assets, the high barriers to

entry, and the structure of concession agreements, volumes generally

grow in-line with GDP while pricing increases in-line with infl ation. The

long-term growth potential of volumes and pricing, combined with the

low operating costs for most transportation assets, results in attractive

investment opportunities.

RENEWABLE POWER

A growing subset of the Infrastructure asset class, Renewable Power

represents one of the most commercially and environmentally-

friendly forms of power generation. As nations across the world

seek to reduce carbon emissions in a cost-eff ective manner,

renewable power has become a meaningful provider of global

electricity supply. These assets provide energy generation fueled

by renewable resources, including water, wind, solar, geothermal

and biomass (organic materials). Among these resources, water

and wind have provided the most economically feasible sources

of renewable energy and have experienced the most signifi cant

growth in both supply and demand in recent years.

Source: Citigroup; data as of June 30, 2013.

While the relatively stable, long-term nature of these cash fl ow streams

can provide resiliency through economic downturns, regional mall

performance also benefi ts during periods of economic recovery and

growth. As consumer demand increases, regional mall occupancy levels

and rental revenues tend to rise as well. In the current environment, these

growth drivers are complemented by the expected lack of new supply of

mall space over the next fi ve years and resilient demand from domestic

and international retailers. We believe this combination of potential

growth underpinned by sustainable revenues and cash fl ows provides

a solid foundation upon which regional mall assets in particular, and

property assets in general, can produce attractive performance results

across market cycles.

While the relatively stable, long-term nature of these cash fl ow streams

can provide resiliency through economic downturns, regional mall

peperfrforormamancncee alalsoso bbenenefiefittss duduriringng ppererioiodsds ooff ececononomomicic rrececovovereryy anandd

growth. As consumer demand increases, regional mall occupancy levels

and rental revenues tend to rise as well. In the current environment, these

growth drivers are complemented by the expected lack of new supply of

mall space over the next fi ve years and resilient demand from domestic

and international retailers. We believe this combination of potential

growth underpinned by sustainable revenues and cash fl ows provides

a solid foundation upon which regional mall assets in particular, and

property assets in general, can produce attractive performance results

across market cycles.

The Benefi ts of Investing in Property Assets

Property assets, particularly well-located, high quality assets, typically

generate relatively long-term cash fl ow streams that off er downside

protection as well as exposure to economic growth. For example, the

regional mall property sector is characterized by lease maturities that

usually range from fi ve to seven years, providing a measure of protection

against market cyclicality and economic challenges. In addition, regional

mall leases often contain operating cost pass-through arrangements that

provide added certainty during an unsure operating environment.

The Benefi ts of Investing in Property Assets

PrPropoperertyty aassssetetss, pparartiticuculalarlrlyy wewellll-llococatateded, hihighgh qquaualilityty aassssetetss, ttypypicicalallyly

generate relatively long-term cash fl ow streams that off er downside

protection as well as exposure to economic growth. For example, the

re igion lal m lalll propertty secttor iis chhara tcteriiz ded bby llease mattu iritities tthhatt

usually range from fi ve to seven years, providing a measure of protection

against market cyclicality and economic challenges. In addition, regional

mall leases often contain operating cost pass-through arrangements that

provide added certainty during an unsure operating environment.

1 EPRA, World Bank, PricewaterhouseCoopers, Brookfi eld Asset Management



Hydroelectric power generation facilities are long-lived assets that

generate stable, sustainable cash fl ows and require minimal ongoing

capital expenditures. Furthermore, these assets benefi t from scarcity

value and high barriers to entry. As the requirements for permitting,

building and operating hydroelectric power plants have grown more

complex, these barriers have only increased.

Hydro power cash fl ow streams are generally derived from long-term,

infl ation-linked power purchase agreements with durations of 15 years

or longer. Additionally, power generating capacity tends to be highly

predictable over time, with historical water fl ow data for many river

systems typically ranging from 50 to 60 years. Importantly, these

assets can also provide meaningful upside potential through the

storage of excess water fl ow in reservoirs. This fl exibility allows for

incremental power generation during periods of peak demand and

premium pricing.

The technology and systems underlying hydro power assets have been

utilized for over a century and are both well-proven and economically

viable. Indeed, hydroelectricity is a cost-competitive source of

production, as there are no associated fuel costs or input commodity

risks, while the source of energy is readily available and sustainable.

As the need to replace aging electricity systems or develop new

sources of power continues to increase, particularly in a manner that

is both environmentally-friendly and cost-eff ective, renewable power

is poised for meaningful growth.

Renewable power currently represents 26% of global electricity

generating capacity and over 21% of actual generation. With a current

installed base of 1,300 gigawatts worldwide, the renewable power

industry is adding in the range of 100 gigawatts of new supply each

year, which corresponds to approximately $200 billion of annual

investment. As a result, industry projections indicate that renewable

energy, particularly hydro and wind power, will be the fastest growing

source of electricity generation over the next 30 years1.

Exhibit 23: Growth in Electricity Generation by Energy Source

2010-2040

Forecasted Generation as a Percent of Actual 2010 Levels

Source: U.S. Energy Information Administration International Energy Outlook

2013

The signifi cant growth forecasted for the renewable power asset

class is expected to be driven by eff orts to ensure the sustainability

of the global economy and environment. More specifi cally,

several key trends are expected to lead to accelerating demand for

renewable energy.

• Declining competition from coal and nuclear generation – coal

plants are increasingly facing legislative pressures to undertake

signifi cant environmental compliance expenditures, leading to

an accelerating trend towards the retirement of coal generation

facilities. Additionally, following the recent Fukushima nuclear

disaster in Japan, public concern over the safety of nuclear power

generation has delayed or halted new development activities in the

U.S. and has caused other nations to legislate the early retirement of

existing nuclear capacity.

• Increasing global acceptance of climate change – in recent years,

increasing concern over global warming has become a signifi cant

catalyst for environmental policy action around the world, including

new legislation mandating renewable power procurement targets

and implementation of feed-in-tariff s that off er cost-based

compensation to renewable energy producers.

• Improving cost competitiveness of new technologies – technological

developments over the last decade continue to reduce the costs

of newer renewable power generation technologies such as wind,

solar and geothermal, enhancing the competitiveness of renewable

resources and providing an attractive means to meet increasingly

stringent environmental standards.

• Government policies – at least 64 countries, including all 27 European

Union member nations, have national targets for renewable energy

supply. Additionally, 37 U.S. states and nine Canadian provinces

have established Renewable Portfolio Standards requiring electricity

distributors to obtain a minimum percentage of their power from

renewable energy resources by specifi ed target dates and/or have

initiated policy goals that require utilities to off er long-term power

purchase contracts for new renewable supply.

ENERGY

The Energy subsector encompasses oil and gas pipelines,

processing plants, storage facilities and district energy systems.

Energy infrastructure assets are generally owned on a free-hold

basis, resulting in indefi nite cash fl ow streams. Many assets have

long-term (30 years or longer) contracts with energy exploration

and development companies, which source oil and natural gas,

and utility companies, which consume these resources. Similarly,

district energy systems provide heating and cooling to central

business districts under long-term contract arrangements. These

contractual commitments provide attractive cash fl ow stability.

Commodity price fl uctuations generally do not impact the cash

fl ow profi le of energy infrastructure assets, as income streams are

based largely upon the transport and storage of commodities. These

fees are generally not signifi cantly impacted by changes in the cost

of the commodity itself. Energy infrastructure assets also benefi t

from impressive growth potential as additional infrastructure is

required to transport energy from new sources, such as natural gas

extracted from newly tapped shale reserves.1 U.S. Energy Information Administration



UTILITIES

Utilities are typically regulated assets that transmit and distribute

essential products and services to communities, such as electricity,

natural gas and water. These assets include electricity transmission

and distribution systems, water distribution systems, wastewater

collection and processing systems, and communications towers.

Due to their natural monopoly status, these assets enjoy relatively

inelastic demand. However, these assets are also highly regulated

by governmental authorities, which determine the rate that can

be charged to the end user. These established rates are typically

determined so as to provide a “fair” return on invested capital to

the asset owner, including a recovery of operating costs, capital

costs and capital expenditures. Additionally, the regulatory body

often includes estimates of infl ation when determining future rate

growth. As a result, regulated assets tend to generate relatively

stable and predictable cash fl ow streams tied to infl ation. Further

value creation opportunities are possible through operational

effi ciencies, growing market share and system expansions.

INFRASTRUCTURE GROWTH OUTLOOK

Several signifi cant, large-scale trends are fueling infrastructure

spending worldwide and are expected to drive infrastructure

returns for decades to come. These trends include:

• Global population growth, which is creating demand for new

infrastructure;

• Aging existing infrastructure in the developed world, much of it

built over 50 years ago, is in need of refurbishment or replacement;

• Growth in emerging markets, where new infrastructure

development is required as increasing wealth, urbanization and

motorization rates lead to enhanced electricity and transportation

needs; and

• A shortage of capital due to strained government budgets, the

traditional source of funding.

A recent analysis conducted by the Organization for Economic

Cooperation and Development (OECD) projects the level of

investment needed to meet these growing demands will equal

3.5% of world GDP through the year 2030, or more than $55

trillion. This required investment is expected to encompass

all infrastructure asset types, with a particular need for the

development or modernization of roads, power networks, water

systems and telecommunication networks.

Exhibit 24: Expected Global Infrastructure Investment through 2030

Source: OECD, McKinsey Global Institute – Infrastructure Productivity: How to

Save $1 Trillion a Year (2013)

Importantly, the need for infrastructure spending is global in nature,

spanning developed and emerging markets alike. While the risk

and return profi le for investment will vary by market, the demand

for capital to fund infrastructure development is a common theme

heard around the world.

• In the U.S., the American Society of Civil Engineers has recently

estimated the total level of investment needed by 2020 across all

infrastructure categories to be $3.6 trillion in order to complete

overdue maintenance on existing infrastructure and modernize

aging systems1.

• Within Europe, the European Commission has projected

overall investment needs for transportation, energy and

telecommunication networks at EUR 1 trillion through 20202.

• Across Asia, the United Nations has forecasted that urban

populations will increase by 650 million people by 2030, led mainly

by China, India and Indonesia. In order to meet the requirements

of an increasingly urbanized society, recent estimates indicate

$11.5 trillion will need to be invested in infrastructure development

over the same time period3.

As economic distress has depleted government resources to fund

these needed infrastructure expenditures, private capital investment

in the asset class has accelerated and is expected to continue to grow

over the next decade and beyond.

The Benefi ts of Investing in Infrastructure Assets

Infrastructure assets tend to generate stable and growing cash

fl ows while benefi ting from high barriers to entry and generally low

maintenance capital requirements. These attributes are embodied in

electricity transmission systems located in local and regional markets

throughout the world. These systems typically serve as the backbone

to essential power supplies, fueling economic growth and development.

As an asset investment, electricity transmission systems benefi t from

high replacement costs and limited competition. Additionally, the revenue

derived from operation of these assets tends to be highly regulated, often

with pricing provisions that ensure a real return on investment. In some

cases, this return is based upon the replacement cost of the transmission

system, rather than the depreciated value of the asset base, providing for

stable, predictable and growing cash fl ows.

In addition to stable cash fl ow streams, electricity transmission systems

benefi t from GDP and population growth, which tend to drive increasing

power requirements. We believe the combination of this critical provision

of electricity, the regulated nature of the underlying revenue stream and

the growth potential of power demand should provide for attractive cash

fl ows over the long term, demonstrating the benefi ts of investment in

this asset class.

Source: OECD, McKinsey Global Institute – Infrastructure Productivity: How to

Save $1 Trillion a Year (2013)

1 American Society of Civil Engineers: “2013 Report Card for America’s

Infrastructure”2 European Commission: “A Growth Package for Integrated European

Infrastructures”, October 20113 HSBC Global Research: “Bridging the Gap”, May 2013



TIMBERLANDSTimberlands provide essential products for the global economy on

a sustainable basis. Across the globe, timberlands produce the raw

materials utilized in a variety of industries, including lumber and

plywood for use in construction, furniture and fl ooring and pulpwood

for use in the manufacture of paper, packaging and wood panels –

such as oriented strand board and particleboard – and in bioenergy

generation. Importantly, while demand for these products tends

to be correlated to the economic growth cycle, timberlands also

experience biological growth irrespective of market cycles. This

biological growth can lead to capital appreciation during periods

of slowing economic fundamentals, which may then be harvested

when the economy once again improves.

The global investible universe of private timberlands is estimated

at approximately $160 billion, with a majority of this opportunity

located in the U.S. Of this amount, institutional investors currently

own approximately $40 billion, with the remainder held by private

owners and/or publicly traded timber REITs ($32 billion) and

corporations having integrated manufacturing and timberlands

operations.

Exhibit 25: Estimated Value of Investible Global Private Timberlands

Source: Bloomberg, Brookfi eld estimates; data as of June 30, 2011.

TIMBERLANDS GROWTH OUTLOOK

The global timber supply and demand outlook is projected to be

very positive in the next decade onward due to several signifi cant

macroeconomic, geopolitical and industry-specifi c trends.

• Recovery of the U.S. housing market

• Asia’s increasing demand for wood and China’s signifi cant wood

defi cit

• Reduced economic wood supply from Canada due to a reduction

in public land Annual Allowable Cut

• Challenges facing the Russian forest industry, including a lack of

adequate infrastructure to access forested areas, a degradation

in forest quality due to selective harvesting, labor shortages and,

most importantly, signifi cant cost increases

• Reduced supply of timber due to the Mountain Pine Beetle

epidemic in Western Canada and U.S. inland, which is aff ecting

select pine species

• Increased demand for wood fi ber as an alternative energy source

• Conservation eff orts

Source: Bloomberg, Brookfi eld estimates; data as of June 30, 2011.

The Benefi ts of Investing in Timberlands

With an attractive combination of biological growth during periods of

economic strain and harvesting potential during periods of economic

prosperity, we believe timberlands represent a compelling investment

opportunity. Recent experience during the 2009-2010 market downturn

provides a valuable illustration of these characteristics.

Over the course of several years, the combination of the global fi nancial

crisis and the collapse of the U.S. housing market led to a signifi cant

reduction in demand for lumber and wood products. Accordingly,

timberland harvesting and production volumes were substantially

reduced. However, this diminished production did not harm the underlying

value of the asset; rather, this period of time allowed timberlands to

continue to grow and become more valuable. As the global economy

began to recover and the U.S. housing market rebounded, demand for

the products and materials produced by timberlands returned, leading

to a re-acceleration of harvesting and production levels. Importantly, the

biological growth that occurred during the economic downturn was able

to be realized once the economy improved.

We believe this ability to generate value over time, smoothing out the

eff ects of market cycles, is both meaningful and attractive. When

combined with a declining supply of available timberlands, we believe

the asset class epitomizes the benefi ts of Real Asset investment.

AGRILANDSAgricultural lands source the world’s food supply, producing

commodities that experience generally inelastic demand. The

global farmland universe consists of close to 1 billion harvested

hectares, of which approximately two-thirds are concentrated

in the top 15 countries. However, the investible portion of

this universe is more limited, due to restrictions on corporate

or institutional ownership in developed economies as well

as insuffi cient infrastructure or scale limitations in emerging

markets.

Exhibit 26: Top Net Exporters of Agricultural Products

Soy Corn Cotton Beef Sugar Wheat RiceBrazil U.S. U.S. India Brazil U.S. India

U.S. Argentina India Australia Thailand Australia Vietnam

Argentina Ukraine Brazil Brazil Australia Russia Thailand

Paraguay Brazil Australia U.S. India Canada Pakistan

Source: USDA; data as of 2012.



AGRILANDS GROWTH OUTLOOK

Tightening supply and growing demand for many agriculture

products are indicating the potential for long-term growth in

the agricultural sector. Strong macroeconomic fundamentals,

including global population growth, improving consumption in the

developing world and growing demand for biofuels, are leading to

increasing demand for agricultural commodities. As a result, it is

estimated that world food production will need to increase between

60% and 90% by 2050 in order to meet expected food demand.

However, while demand is on the rise, yield growth rates have been

slowing over the last decade due to a fundamental shift in supply

expansion from productivity enhancement to acreage expansion.

As increasing acreage is a more costly and time consuming method

of expanding production, supply growth has had diffi culty keeping

pace with demand. While these signifi cant supply and demand

trends continue to evolve, we expect institutional investment

opportunities in global agriland assets to increase meaningfully.

Exhibit 27: Inventory and Price of Major Food Crops

Source: IMF and USDA; data as of 2011

An Illustrative Example of the Agrilands Investment Opportunity

The evolution of Brazilian agriculture over the last 30 years has provided

an impressive example of realized and potential future growth. In the last

three decades, Brazil has been transformed from a food importer into

one of the world's great breadbaskets by increasing its productive land

area by 37%1 and raising agricultural production by 249%1. Today, Brazil

supplies approximately 40% of the world's soybean trade2 using just 9%

of the country's potential arable land3.

It overtook Australia as the world's largest beef exporter and grew to

develop the world's second largest cattle herd. It also became the world's

largest exporter of poultry and sugar2. Importantly, it has achieved this

with virtually no government subsidies.

Practically all of the recent agriland development in Brazil has occurred in

the cerrado biome, an area of savanna about the size of Mexico, located

south of the Amazon. This area contains approximately 80 million

hectares of agriculturally apt land, 60% of which is currently productive.

The region benefi ts from a high annual sunlight average and 1,500 mm

of rain, as well as good topography. Yet, until recently, the cerrado´s

highly acidic and infertile soil limited its performance, while the lack of

adequate infrastructure to the region, particularly cargo transport, made

it uncompetitive3.

An Illustrative Example of the Agrilands Investment Opportunity

The evolution of Brazilian agriculture over the last 30 years has provided

an impressive example of realized and potential future growth. In the last

three decades, Brazil has been transformed from a food importer into

one of the world's great breadbaskets by increasing its productive land

area by 37%1 and raising agricultural production by 249%1. Today, Brazil

supplies approximately 40% of the world's soybean trade2 using just 9%

of the country's potential arable land3.

It overtook Australia as the world's largest beef exporter and grew to

develop the world's second largest cattle herd. It also became the world's

llargestt expo trter off po lulttry andd sugar22. IImpo trtantltly, iitt hhas achihiev ded tthihis

with virtually no government subsidies.

Practically all of the recent agriland development in Brazil has occurred in

the cerrado biome, an area of savanna about the size of Mexico, located

south of the Amazon. This area contains approximately 80 million

hectares of agriculturally apt land, 60% of which is currently productive.

The region benefi ts from a high annual sunlight average and 1,500 mm

of rain, as well as good topography. Yet, until recently, the cerrado´s

highly acidic and infertile soil limited its performance, while the lack of

adequate infrastructure to the region, particularly cargo transport, made

it uncompetitive3.

Much of the growth witnessed in recent years is attributable to a

combination of operational performance and technological advances.

Pioneering government-sponsored agricultural research and innovation

tackled several of the key defi ciencies in sub-tropical agriculture,

including the development of new seed varieties, advancement of

region-specifi c soil research, and new operational farm techniques that

have considerably raised farm yields. Brazilian producers have used this

information and innovation to transform tropical agricultural production,

cultivating two and occasionally three crops each year on the same area.

As a result, Brazil´s per acre agricultural productivity is today at least

equivalent to, and in some cases better than, that of the U.S. The key

diff erences between the two markets lie in land value, which is about one-

third lower in Brazil4 than in the U.S. and logistics, which still represents

a major bottleneck in Brazil. Importantly, when properly addressed,

improvements in infrastructure and logistics are expected to considerably

further improve Brazilian agricultural competitiveness.

As Brazilian agriculture advances further and local infrastructure

improves, we expect the market to continue to off er attractive investment

opportunities.

1 Companhia Nacional de Abastecimento (CONAB)2 U.S. Department of Agriculture3 Empresa Brasileira de Pesquisa Agropecuária (EMBRAPA)4 AGRA FNP

Much of the growth witnessed in recent years is attributable to a

combination of operational performance and technological advances.

Pioneering government-sponsored agricultural research and innovation

tackled several of the key defi ciencies in sub-tropical agriculture,

including the development of new seed varieties, advancement of

reregigionon-sspepecicififi cc sosoilil rreseseaearcrch,h, aandnd nnewew oopeperaratitiononalal ffararmm tetechchniniququeses tthahatt

have considerably raised farm yields. Brazilian producers have used this

information and innovation to transform tropical agricultural production,

cultivating two and occasionally three crops each year on the same area.

As a result, Brazil´s per acre agricultural productivity is today at least

equivalent to, and in some cases better than, that of the U.S. The key

didiffff ererenencecess bebetwtweeeenn ththee twtwoo mamarkrketetss liliee inin llanandd vavaluluee, wwhihichch iiss ababououtt onone-e

third lower in Brazil4 than in the U.S. and logistics, which still represents

a major bottleneck in Brazil. Importantly, when properly addressed,

improvements in infrastructure and logistics are expected to considerably

further improve Brazilian agricultural competitiveness.

As Brazilian agriculture advances further and local infrastructure

improves, we expect the market to continue to off er attractive investment

opportunities.

1 Companhia Nacional de Abastecimento (CONAB)2 U.S. Department of Agriculture3 Empresa Brasileira de Pesquisa Agropecuária (EMBRAPA)4 AGRA FNP

SUMMARYAs indicated by this introduction and overview, Real Assets represent

a diversifi ed set of investment opportunities, with exposure to a

wide variety of geographies and underlying assets. However, these

opportunities are united by common characteristics of investment

and a shared ability to generate relatively attractive yield, stability and

growth. Accordingly, we believe these assets are collectively poised to

benefi t as Real Assets gain recognition as the New Essential portfolio

investment.



DEFINITIONS

The NCREIF Property Index is a quarterly time series composite total

rate of return measure of investment performance of a very large pool of

individual commercial real estate properties acquired in the private market

for investment purposes only. All properties in the NPI have been acquired,

at least in part, on behalf of tax-exempt institutional investors - the great

majority being pension funds. As such, all properties are held in a fi duciary

environment.

The Dow Jones Brookfi eld Global Infrastructure Composite Index is

calculated and maintained by S&P Dow Jones Indexes and comprises

infrastructure companies with at least 70% of its annual cash fl ows derived

from owning and operating infrastructure assets, including master limited

partnerships. Any comparisons, assertions and conclusions regarding the

performance of the Dow Jones Brookfi eld Global Infrastructure Composite

Index during the time period prior to its initial calculation on July 14, 2008

is based on back-testing (i.e., calculations of how the index might have

performed during that time period if the index had existed). Back-tested

performance information is hypothetical and based on index methodology

applied and calculated by S&P Dow Jones Indexes and is provided solely for

information purposes.

The NCREIF Timberland Index is a quarterly time series composite return

measure of investment performance of a large pool of individual timber

properties acquired in the private market for investment purposes only.

All properties in the Timberland Index have been acquired, at least in part,

on behalf of tax-exempt institutional investors - the great majority being

pension funds. As such, all properties are held in a fi duciary environment.

The NCREIF Farmland Index is a quarterly time series composite return

measure of investment performance of a large pool of individual agricultural

properties acquired in the private market for investment purposes only.

All properties in the Farmland Index have been acquired, at least in part,

on behalf of tax-exempt institutional investors - the great majority being

pension funds. As such, all properties are held in a fi duciary environment.

The MSCI World Index is a free fl oat-adjusted market capitalization

weighted index that is designed to measure the equity market performance

of developed markets.

The Barclays Global Aggregate Bond Index is a market capitalization-

weighted index, comprising globally traded investment grade bonds. The

index includes government securities, mortgage-backed securities, asset-

backed securities and corporate securities to simulate the universe of bonds

in the market. The maturities of the bonds in the index are more than one

year.

The S&P 500 Total Return Index is the total return version of the S&P 500

Index. Dividends are reinvested on a daily basis and the base date for the

index is January 1, 1988. All regular cash dividends are assumed reinvested

in the S&P 500 Index on the ex-date. Special cash dividends trigger a price

adjustment in the price return index.

The Barclays U.S. Aggregate Bond Index is a market capitalization-weighted

index, comprising investment grade bonds traded on U.S. exchanges. The

index includes government securities, mortgage-backed securities, asset-

backed securities and corporate securities to simulate the universe of bonds

in the market. The maturities of the bonds in the index are more than one

year.

The Preqin Infrastructure Quarterly Index is calculated on a quarterly basis

using data from Preqin's Infrastructure Online product. The models use

quarterly cash fl ow transactions and NAVs reported for over 130 individual

unlisted infrastructure partnerships.

Standard Deviation measures the degree to which an investment’s return

varies from its mean return.



DISCLOSURE

This document is confi dential and is intended solely for the information of

the persons to whom it has been delivered. It may not be reproduced or

transmitted, in whole or in part, to third parties except as agreed in writing by

Brookfi eld Asset Management Inc. (“BAM” and together with its affi liates,

“Brookfi eld”). The views and opinions expressed in this presentation are

the views of Brookfi eld generally and do not necessarily refl ect the views

of every individual or entity within Brookfi eld. These views and opinions

should not be construed as research, investment advice and/or trade

recommendations. These views and opinions should not form the basis

for any investment decisions. This document is not intended to, and does

not, relate specifi cally to any investment strategy or product that Brookfi eld

off ers. It is being provided only for informational purposes to provide a

framework to assist in the implementation of an investor’s own analysis and

an investor’s own views on the topics discussed herein.

The views expressed refl ect the current views of Brookfi eld as of the date

indicated and Brookfi eld does not undertake to advise you of any changes

in the views expressed herein. In addition, the views expressed do not

necessarily refl ect the opinions of any specifi c investment professional at

Brookfi eld, and may not be refl ected in the strategies and products that

Brookfi eld off ers.

The information contained herein is only as current as of the date indicated,

and may be superseded by subsequent market events or for other reasons.

Charts and graphs provided herein are for illustrative and informational

purposes only. Certain of the information contained herein is based on or

derived from information produced by independent third party sources.

While Brookfi eld believes that such information is accurate as of the date it

was produced and that the sources from which such information has been

obtained are reliable, Brookfi eld does not guarantee the accuracy, adequacy

or completeness of such information, and such information, and the

assumptions on which they are based, has not been independently verifi ed.

There can be no assurance that an investment in Real Assets will be

successful. Historic market trends are not reliable indicators of actual future

market behavior or future performance of any particular investment which

may diff er materially, and should not be relied upon as such. This publication

is not, and should not be viewed as, a current or past recommendation or a

solicitation of an off er to buy or sell any securities or to adopt any investment

strategy. Investments in alternative assets, including real assets, involve

signifi cant risks, including loss of the entire investment. Nothing contained

herein constitutes investment, legal, tax or other advice nor is it to be relied

on in making an investment or other decision.

The information in this publication may contain projections, estimates or

other forward-looking statements regarding future events, targets, forecasts

or expectations regarding the asset classes described herein, and is only

current as of the date indicated. There is no assurance that such events

or targets will be achieved. The information in this document, including

statements concerning fi nancial market trends, is based on current market

conditions and assumptions, which will fl uctuate and may be superseded

by subsequent market events or for other reasons. Performance of all cited

indexes is calculated on a total return basis with dividends reinvested. The

indexes do not include any expenses, fees or charges and are unmanaged

and should not be considered investments.

Investment concepts mentioned in this publication may be unsuitable for

investors depending on their specifi c investment objectives and fi nancial

position. Where a referenced investment is denominated in a currency

other than the investor’s currency, changes in rates of exchange may

have an adverse eff ect on the value, price of or income derived from the

investment. Please note that changes in the rate of exchange of a currency

may aff ect the value, price or income of an investment adversely.

Brookfi eld does not assume any duty to, nor undertakes to update

forward-looking statements or any other information contained herein.

No representation or warranty, express or implied, is made or given

by or on behalf of Brookfi eld or any other person as to the accuracy and

completeness or fairness of the information contained in this publication

and no responsibility or liability is accepted for any such information. By

accepting this document, the recipient acknowledges its understanding and

acceptance of the foregoing statement.

This document has not been approved by the United States Securities and

Exchange Commission or by any regulatory or supervisory authority of any

state or other jurisdiction, including Canada and the United Kingdom, nor

has any such authority or commission passed on the accuracy or adequacy

of this document. The information contained herein is subject to correction,

completion, verifi cation and amendment. Any representation to the contrary

is unlawful.

© 2013. Brookfi eld Asset Management Inc.

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