Brookfield Asset Management Annual Report 2003

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FY2003 Annual Report · Brookfield Asset Management

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2003 ANNUAL REPORT

BRASCANBRASCAN
Brascan is an asset management company.

With a focus on real estate and power generation, the company

has direct investments of $16 billion and a further $7 billion

of assets under management. These include 55 premier office

properties and 45 power generating plants. Brascan is listed

on the New York and Toronto stock exchanges.

MILLIONS, EXCEPT PER SHARE AMOUNTS

Per fully diluted common share

Cash flow from operations

Cash return on book equity

Market trading price – NYSE

Trailing cash flow multiple on closing share price

Net income

Dividends paid

Total

Assets

Revenues

Operating income

Cash flow from operations

Free cash flow

Net income

2003
US$

2002
US$

2001
US$

3.21

2.38

2.06

18%

30.54

9.5x

1.98

0.73

16%

20.50

8.5x

0.21

0.65

13%

18.06

9.0x

0.98

0.65

$ 16,315

$ 14,422

$ 13,792

3,370

1,435

624

733

408

3,064

1,214

469

582

3,042

1,163

388

510

201

Fully diluted number of common shares outstanding

180.8

183.9

176.4

Contents
1) Our Principles of Investment 2) Report to Shareholders
11) Management’s Discussion & Analysis 57) Consolidated Financial Statements
98) Supplementary Information

Our Principles of

Investment

GUIDELINES

• Invest in areas where we possess a competitive advantage and never

bet the company on any one acquisition.

(cid:127) Acquire assets on a value basis with a goal of maximizing return

on capital.

(cid:127) Build sustainable cash flows to provide certainty, reduce risk and lower

the cost of capital.

(cid:127) Recognize that superior returns involve hard work and often require

contrarian thinking.

MEASUREMENT OF OUR SUCCESS

(cid:127) Measure success over the long term by total return on capital on
a per share basis, including both annual cash flows and the increase
in net asset values.

(cid:127) Seek profitability rather than growth, because size does not necessarily

add value.

(cid:127) Encourage taking calculated risks, but always compare expected returns

with the risks taken to achieve those returns.

(cid:127) Be prepared to sacrifice short-term profit, if necessary, to achieve long-

term growth.

GOVERNANCE

(cid:127) Attract and retain high calibre individuals who will grow with us over

the long-term.

(cid:127) Ensure employees think and act like owners in all their decisions.

(cid:127) Maintain an open exchange of information and strategies among

investors and partners.

(cid:127) Build partnerships based on honesty and integrity, and ensure our

actions always enhance our reputation.

BRASCAN CORPORATION 2003 ANNUAL REPORT

We delivered
strong growth
and record
financial results
for shareholders
in 2003.

Report to Shareholders

We achieved our financial targets and overall opera-

tional goals in 2003. This was accomplished through

solid performance in nearly all of our operations. We

maintained our strategic focus on driving sustainable

and growing cash flows. In addition, we established the

groundwork for future growth with progress on

a number of new initiatives.

GOALS AND STRATEGY

Before we discuss our results for 2003, we thought

it important to review our Principles of Investment,

which are located on the previous page, our key

objectives and our roadmap for achieving our goals.

This way, you will have a framework to measure our

performance.

Our long-term goal is to achieve 12% to 15% growth in

cash flow from operations and as a result, increase

(i) our cash return on common equity to 20%; and

(ii) the underlying value of our assets on a total return

basis by 12%. To achieve this objective we are focused

on four key operating strategies:

(cid:127) Own, manage and build high quality cash flow
generating assets that require minimal sustaining
capital and have the potential to appreciate in value.
Today we are primarily focused on real estate and
power generation assets.

(cid:127) Maximize the value of existing operations
through active asset management to create operating
efficiencies, lower our cost of capital and enhance
cash flows. Given that our assets have relatively low
variable costs and can be leveraged on a low risk basis,
even a small increase in the top-line performance
results in a magnified contribution to the bottom line.

(cid:127) Manage assets for others when we can offer compet-
itive advantages. This allows us to augment our own
returns through performance-based management
fees, reduce risk and, with a broader pool of capital,
undertake larger transactions.

(cid:127) Base all of our decisions on disciplined return-on-
capital metrics, focused on the impact on the company
of each decision on a per share basis.

Within the context of these operating strategies, we
had a number of successes in 2003 but, as is often the
case, we also had challenges.

OUR LONG-TERM GOALS:

12% to 15%

annual growth in cash
flow from operations

20%

cash return on
common equity

12%

compound increase
in underlying value

2 BRASCAN CORPORATION 2003 ANNUAL REPORT

We remain
focused on
profitable and
measured growth
in order to
meet our key
performance
targets.

Raynor Dam, Northern Ontario

THE SUCCESSES

Record Cash Flow. We generated record cash flow
from operations of $624 million or $3.21 per share
compared with $469 million or $2.38 per share in
2002. Net income increased to $408 million compared
with $83 million last year, driven by higher income
from most of our operations and a turnaround in our
resource investments.

Enhanced Financial Strength and Flexibility. During
2003 we took advantage of the low interest rate envi-
ronment to strengthen our balance sheet. We issued
over $1.5 billion of fixed rate, preferred shares and long-
term debt. With strong credit ratings, and more than
$2 billion of cash, short-term financial assets and undrawn
bank lines, we have the financial flexibility to pursue
major growth initiatives should they become available.

Solid Operating Performance. Most of our opera-
tions performed well – but we were especially pleased
with yet another outstanding year in our residential
housing operations. The U.S. housing operations were
spun off from our commercial property operations
at the beginning of 2003 and are now held directly by
us. The share price of these operations nearly tripled

during the year. In addition, we made progress in our
funds management operations with increased mezza-
nine lending activity by our Real Estate Finance Fund
and the successful launch of our Bridge Lending Fund.

Higher Underlying Value. We exceeded our target
and achieved a 31% increase in the underlying value of the
company to $41.45 per share. Since this represents our
own estimate of Brascan’s underlying value, we have
outlined our method of calculation in the Supplemental
Information Package, provided on our web site, and
encourage you to perform your own analysis.

Increased Return on Equity. We increased our cash-
on-cash return on equity to 18% compared with 16%
last year. While we have not yet attained our long-term
goal of 20%, we are steadily moving in the right direc-
tion. In addition, we lowered our overall cost of capital
to 9.5%, despite lengthening the maturity of many
of our financings.

Completion of Significant Restructuring Initiative.
We sold our 42% interest in Northgate Exploration,
which marked the successful completion of the
operational and financial restructuring of the Kemess
Mine, commenced five years ago, achieving an annual
compound return of more than 20%.

INCREASE IN UNDERLYING VALUE:

We achieved a 31% increase in the underlying
value of the company in 2003, exceeding our
targeted performance of 12%.

$41.45

BRASCAN CORPORATION 2003 ANNUAL REPORT

Located primarily
in the downtown
business districts
of major North
American cities,
our premier
office portfolio
attracts and
retains high
quality tenants.

53 and 75 State Street, Boston

Dividend Growth. We recognize that some share-
holders rely on dividends and others are measured by
short-term share performance and therefore cannot
look at the business as we do, which is on a long-term
basis. As a result, we manage our business to enable you
to receive in cash some of the increase in value which
builds in the company each year. In this regard,
we increased the dividend payout by 4% during 2003,
and recently announced a further increase of 4% for
2004, consistent with our policy to utilize a portion
of free operating cash flow to increase dividend pay-
ments over time.

Solid Share Performance. With respect to share per-
formance, Brascan’s share price increased from $20.50
to $30.54 in 2003. While it is impossible to generate
this type of share appreciation on a consistent basis
in the future, we believe that our growth strategies will
deliver strong results in relation to the risk that we take,
and that our share price will reflect this performance
over time.

THE CHALLENGES

As usual, we faced a number of challenges in our oper-
ations. Hopefully they serve to sharpen our planning
and decision-making for these kinds of situations in the
future.

Low water inflows. Precipitation in northeast
North America, which affects our hydroelectric power
generation operations, was significantly below long-
term historical averages in the first half of 2003. As
a result, our power generation operations did not meet
expectations. The good news is that water inflows and
reservoir levels have greatly improved, resulting
in long-term average production by the end of the
third quarter of 2003 and it looks like the first quarter
of 2004 will be one of our best on record.

Slow improvement in metal prices. Despite increases
in metal prices from their historical lows, the average
realized prices in 2003 were well below long-term
trends. In the past three months, as a result of growth
in demand principally from China, as well as the over-
all world economic recovery, metal prices have
increased dramatically. This should have a very positive
impact on our investment in Noranda in 2004.

Limited opportunities to acquire sizable power
generation portfolios. While we doubled our generat-
ing capacity in the past 24 months, we had limited success
during 2003 in executing our plan to acquire
a major portfolio of power generating assets. We still
hope to be able to achieve this objective; however, the
U.S. high yield markets improved substantially more

We are increasing our return on capital
and reducing risk by narrowing the
areas in which we operate, while at
the same time broadening our activities
in each of these areas.

4 BRASCAN CORPORATION 2003 ANNUAL REPORT

With a strategic
focus on
hydroelectric
power, we
continue to seek
opportunities to
expand and
geographically
diversify our
power operations.

Gartshore Generating Station, Northern Ontario

and sooner than we predicted, temporarily restoring
liquidity to many companies that were previously finan-
cially strained and contemplating asset sales.

INCREASING RETURN ON CAPITAL

Over the past several years, we have continued to nar-
row the areas where we operate, while at the same time,
broadening our activities within each of these areas.
It is a refinement of our strategy that we believe
increases our ability to prudently deploy capital at less
risk and should lead to higher returns.

During 2003, we made significant progress in strength-
ening this business model. We leveraged the strong
market positions we enjoy in many of our operations
to launch four new managed investment funds with
capital dedicated by institutional investors and from
our own resources. These include our Real Estate
Finance Fund, Bridge Lending Fund, Restructuring
Fund and Real Estate Opportunity Fund. We are grate-
ful to the institutions that have chosen to invest along
side of us in these funds. We will work hard to deliver
on our promises to them, and in the process increase
the overall return on capital in our operations.

We are driving growth through expansion of our exist-
ing operations, leveraging our asset management
approach and utilizing our operating expertise within
the areas where we have established knowledge and
competitive advantages. Long-term leases and contracts
in our commercial real estate and power operations,
which today average 10 years and 13 years respectively,
not only provide stability to our operations, but also
generate growth. This, combined with increasing
management fees from our funds management opera-
tions, provides a solid base return, which we hope
to increase by redeploying under-utilized capital, repur-
chasing equity and pursuing acquisitions when they can
be made on a value basis.

With respect to under-utilized capital, we have over
$3 billion of assets that are not currently meeting our
return targets. These include commercial, residential
and power generation developments, which on com-
pletion will become cash generating assets. One such
asset is our $1.9 billion investment in Noranda, which
contributes an approximate 2.5% return on a cash flow
basis. Future redeployment of this capital will increase
our cash flow, significantly enhancing our return on
capital.

INCREASING RETURN ON EQUITY:

We have made continued progress
toward our objective of
a 20% cash return on equity.

BRASCAN CORPORATION 2003 ANNUAL REPORT

0302010018%16%13%11%We are putting
our capital
to work with
institutional
partners, enabling
us to complete
larger transactions
and enhance our
return on capital.

Timber Operations

We continue to repurchase shares of the company and
have done so consistently for years when our shares
have traded below net asset value. During 2003, we
repurchased 4.6 million common shares at an average
price of $22.24 per share and we will continue to
allocate a portion of our annual free cash flow for this
purpose.

Lastly, on pursuing acquisitions, we have significant
liquidity at our disposal to pursue growth opportuni-
ties. These may include corporate acquisitions or portfo-
lios of high quality assets. As this report goes to print,
we are pursuing a major investment in U.K.-based
Canary Wharf Group, plc, a property development
company focused exclusively on premier office space
in the Central London office market. We acquired 9% of
the company’s shares early in 2003 and in February 2004,
together with a number of institutional partners,
launched a £1.6 billion bid to acquire the company.

STRENGTHENING CORPORATE GOVERNANCE

Last year we reported to you a number of initiatives
we undertook to ensure we remain at the forefront of
corporate governance. This year, we made additional
changes to our policies and practices to further
strengthen our accountability to our shareholders.

The Board of Directors introduced more stringent
independence requirements for the audit and human
resource committees and increased the number of inde-
pendent directors on our Board. In addition, the Board
instituted a formal procedure for evaluating Board and
committee performance and is recommending to you
that the Board be reduced by two, to 16 directors. Last
year, we introduced minimum shareholdings and hold
periods for option gains to further strengthen manage-
ment accountability. This year, the Board introduced a
requirement that each member of the Board own a
minimum amount of equity in the company. Finally, we
have discontinued advancing loans to officers and have
made progress in reducing those which are currently
outstanding.

The Board of Directors is committed to continuously
review our policies and practices and benchmark them
against evolving legislation and those of acknowledged
leaders in this area.

A WORD ABOUT NORANDA

In talking to investors about our strategic focus on cash
flow generating businesses, questions about our
continued ownership of Noranda often arise. As many
of you have pointed out, it has been a long standing

SOLID GROWTH PLATFORM:

We have a solid platform for growth based on
stable cash flow streams from our operations.
These are largely backed by long-term leases and
contracts for our property and power assets.

6 BRASCAN CORPORATION 2003 ANNUAL REPORT

AverageTermReal EstateLeases10 yrs.PowerContracts13 yrs.We measure our
success by return
on capital, and are
constantly seeking
opportunities to
enhance returns.

IN APPRECIATION

With the proposed reduction of the Board by two
members, Dr. Roberto P. Cezar de Andrade and Lord
Black of Crossharbour are not standing for re-election
to the Board of Directors this year. We thank them for
their many years of valued advice and wise counsel.

THANK YOU

On behalf of our Board and all of our people, we thank
you for your support.

J. Bruce Flatt
President and Chief Executive Officer
February 11, 2004

BRASCAN CORPORATION 2003 ANNUAL REPORT

1625 Eye Street, Washington, D.C.

investment, but one that no longer fits within the
parameters of our stated business model.

During 2003, Noranda’s management team completed
a major operational restructuring and executed a finan-
cial recapitalization of the company. We believe that
the impact of these initiatives, in conjunction with the
improved outlook for base metal prices, will allow
all Noranda shareholders to benefit from continued
capital appreciation over the next 24 months. As the
base metals cycle continues to play out, we expect to
be in a better position to consider our options and the
long-term strategic fit of this investment.

OUTLOOK

We are hopeful that the business and economic envi-
ronment in the year ahead will continue to strengthen
and provide positive momentum for all of our operations.
Having said that, we are aware of the challenges before
us in continuing to achieve our performance objectives,
especially as we increase the size of our asset base and
scope of operations. As a result, while we cannot promise
we will always meet all of our targets, you can be assured
of our commitment to grow our business in a measured
way, with a disciplined focus on return on capital.

The expansion of our funds
management operations will
increase our cash flows in 2004.

Narrowly
Focused

Our objective is to earn a

superior return on equity

by generating consistent

and sustainable cash flows.

To achieve this goal, we

have focused our operations

in areas where we have

competitive advantages

and we are broadening

the activities within each

of these areas.

8 BRASCAN CORPORATION 2003 ANNUAL REPORT

REAL ESTATE

We own, develop and
manage one of the
highest quality office
property portfolios in
North America.

With $12 billion of
assets and 140 million
square feet under
management, we are
focused on select

northeast financial
centers.

We also develop master-
planned residential
communities and offer
clients a comprehen-
sive array of bridge
and mezzanine lending
as well as financial and
advisory services.

office
properties

thousand
residential lots

140

million
square feet under
management

thousand
residential brokers

POWER GENERATION

Brascan is a low cost
North American
power generator, with
a focus on hydroelec-
tric power generation
in the northeast.

We have 45 power
generating facilities
as well as key

interconnections and
transmission lines.

Over 80% of our
power revenue is under
long-term, fixed-rate
contracts creating
stable streams of
cash flow.

FUNDS MANAGEMENT

With $7 billion under
management, we are
focused on our core
areas of expertise.

Our expanding port-
folio of alternative
investment funds
include real estate,

energy and resources –
asset classes that are
attractive to institu-
tional investors for
their ability to
generate long-term
sustainable cash flows.

hydroelectric power
generating plants
and
one gas thermal plant

river systems

1,761

megawatts
of installed
capacity

North American
markets

billion currently
under management
for institutional
co-investors

alternative
asset funds

$1.2

billion of
invested capital

14%

return on assets

BRASCAN CORPORATION 2003 ANNUAL REPORT

Financial Strength

SIGNIFICANT LIQUIDITY

With over $700 million of free cash flow and
access to over $2 billion of cash, financial assets
and undrawn lines of credit, we are well
positioned to capitalize on growth opportunities.

LOW COST OF CAPITAL

Our financial strength gives us access to a
broad range of financing sources and lowers
our overall cost of capital, thereby improving
shareholder returns.

SECURE AND GROWING CASH FLOWS

Long-term power contracts and real estate
leases provide secure and growing cash flow
streams.

CONSERVATIVE CAPITALIZATION

Brascan’s investment grade ratings benefit
from its conservative capitalization and the
ownership of quality assets which generate
strong cash flows.

10 BRASCAN CORPORATION 2003 ANNUAL REPORT

ANNUAL FREE CASH FLOW

COST OF CAPITAL

CASH FLOW PER SHARE

DBRS A(low)
S&P A–

CREDIT RATINGS

030201$733$582$5100302019.5%9.6%9.8%030201$3.21$2.38$2.06MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS

OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CAPITAL RESOURCES AND LIQUIDITY . . 38

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CASH AND FINANCIAL ASSETS . . . . . . . . . . . . . . . . 39

OPERATING PROFILE . . . . . . . . . . . . . . . . . . . . . . . 12

CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 39

PERFORMANCE MEASUREMENTS . . . . . . . . . . . . . . 13

LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SUMMARY OF FINANCIAL POSITION
AND OPERATING RESULTS . . . . . . . . . . . . . . . . . . 14

SHAREHOLDERS’ INTERESTS . . . . . . . . . . . . . . . . . 43

FINANCIAL POLICIES . . . . . . . . . . . . . . . . . . . . . . . 44

OPERATIONS REVIEW . . . . . . . . . . . . . . . . . . 16

WORKING CAPITAL AND OTHER BALANCES . . . . . 46

REAL ESTATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Commercial Properties . . . . . . . . . . . . . . . . . . . . . . 17
Residential Properties . . . . . . . . . . . . . . . . . . . . . . . 20
Income Producing Land. . . . . . . . . . . . . . . . . . . . . 21
Development Properties . . . . . . . . . . . . . . . . . . . . . 22
Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . 25

OPERATING RESULTS . . . . . . . . . . . . . . . . . . 47

OPERATING CASH FLOW . . . . . . . . . . . . . . . . . . . . 47

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

FREE CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . 49

POWER GENERATING OPERATIONS . . . . . . . . . . . . 26

QUARTERLY RESULTS . . . . . . . . . . . . . . . . . . . . . . 51

FUNDS MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 31

INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Business Services . . . . . . . . . . . . . . . . . . . . . . . . . . 38

BUSINESS ENVIRONMENT AND RISKS . . . 52

OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

BRASCAN CORPORATION 2003 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS

OVERVIEW

INTRODUCTION
The following discussion and analysis is intended to provide readers with an assessment of our performance over

the past two years as well as our financial position and future prospects. It should be read in conjunction with our

audited consolidated financial statements, which are included on pages 58 through 95 of this report. Much

of the discussion of operating performance is based on cash flow because we feel this is the most appropriate measure

for assessing the value of our businesses and for benchmarking our performance. Nevertheless, we also provide

a full reconciliation to net income and an assessment of our performance on that basis as well.

The cash flow and valuation information which follows is based on estimates which, while they are not audited,
we believe are appropriate. The nature and form of the information presented is intended to enable shareholders,

investors and analysts to conduct their own assessment of Brascan’s performance and underlying value, utilizing

their own valuation metrics.

Our functional currency is the United States dollar (“U.S. dollar”), because most of our revenues are denominated

in that currency and a significant portion of our operations is based in the U.S. or otherwise denominated prima-

rily in that currency. Accordingly, our financial results and the information throughout this report are reported

in U.S. dollars unless otherwise stated.

Additional information, including the company’s Annual Information Form, is available on the company’s web site
at www.brascancorp.com or on SEDAR’s web site at www.sedar.com. For additional information on each of the
five most recently completed financial years, please refer to the table included on page 98 of this report.

OPERATING PROFILE
Brascan is an asset management company, with a particular focus on real estate and power generation. The company

has direct investments of $16 billion and a further $7 billion of assets under management. These investments

include 55 premier office properties and 45 power generating plants. Brascan’s market capitalization exceeds

$6.0 billion and our common shares are listed on both the New York and Toronto stock exchanges. Operating cash

flows and gains totalled $624 million in 2003 and the underlying value of our assets at year end was $22 billion.

We own and operate our operations directly as well as through partially owned companies, joint venture partner-

ships and investment funds that are co-owned with institutional and other partners. We currently manage over

$7 billion of assets for an expanding group of institutional and retail investors, in addition to our own invested

capital. We are continuing to broaden our joint venture and funds management relationships within our core areas

of expertise.

We concentrate on businesses that generate sustainable, low-risk, growing streams of cash flow. Relatively low

sustaining capital investment is required to maintain these operations, and the values of the assets typically appreciate

as the associated cash flow streams grow, rather than depreciate over time as is common with many other types

of operating assets.

For reporting purposes, we segregate our assets into operations, investments and working capital balances.

Operations include the assets employed in our real estate, power generating and funds management operations,

12 BRASCAN CORPORATION 2003 ANNUAL REPORT

including the assets under development in each of those sectors. These assets represent 73% of total assets on an

underlying value basis and generated approximately 85% of operating cash flows during 2003.

Our real estate assets include premier quality office properties, residential home building, development assets,

income producing land, and associated services businesses. Our power generating plants are predominantly

hydroelectric generating facilities located on North American river systems. The company’s funds management

operations consist of bridge loan, mezzanine, restructuring and other alternative investment funds focused within

our areas of expertise.

Investments represent assets that do not at this time constitute part of our operations, although they may become

so at a later date. Alternatively they may be sold or restructured as opportunities arise, in order to capture appre-
ciation in value.

We finance our operations with diversified sources of capital. Attractive low-risk financial leverage for common

shares is obtained through the use of property specific mortgages that have no recourse to Brascan and the issuance

of low-rate non-participating equity securities such as preferred shares. At year end, shareholders’ interests totalled

$6.4 billion at book value and $12.4 billion based on underlying value.

PERFORMANCE MEASUREMENTS
We focus principally on cash flow as a performance measurement because it is tangible, reflects the value of our

assets and is utilized by financial analysts as a key measure in each of our operating sectors. Given that operating

cash flow is a non-GAAP measure, we also provide a specific discussion of net income and a reconciliation of the

two measures, beginning on page 48.

We also evaluate performance in terms of total return, which we calculate as the increase in underlying value

per share together with common share dividends. Each year we determine the value added to the business through

our various initiatives. This allows us to demonstrate how the value of our assets appreciate over time.

Finally, while we recognize the value of debt in providing leverage to common share returns, we are committed

to maintaining a strong financial position with a prudent amount of leverage to ensure we receive high investment
grade ratings.

The following table summarizes our key performance measurements:

Objective

2003

2002

2001

Operating Measures

Operating cash flow and gains per share

Growth

Return on equity

Balance Sheet Measures

Underlying value per share

Growth, including dividends

Debt to capitalization

Excluding property specific mortgages

Corporate borrowings

12% to 15%

20%

12%

30% to 40%

20% to 30%

35%

18%

31%

29%

20%

16%

14%

31%

20%

13%

12%

30%

17%

BRASCAN CORPORATION 2003 ANNUAL REPORT

During 2003, we significantly exceeded the performance targets for growth in cash flow and underlying value, and made
additional progress toward our target of a 20% cash return on equity. Operating cash flow increased substantially
due to strong performance in a number of areas, and our underlying values benefited from additional value built
in each of our operating businesses as well as the significant appreciation in the value of our resource investments.
We recognize that it will be difficult to achieve this kind of performance each year, but we believe that our focus
on high quality assets with secure and increasing streams of cash flow will enable us to meet our growth and return
objectives on a relatively consistent basis over the long term.

SUMMARY OF FINANCIAL POSITION AND OPERATING RESULTS
The following is a summarized statement of underlying values, book values and operating cash flows from our
operations over the past three years:

Y E A R S E N D E D D E C E M B E R 3 1

Underlying
Value 3

Return on
Assets 1

Book Value

Operating Cash Flow

M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S

2003

2002

2003

2002

2001 2

Assets

Real estate

Power generation

Funds management

Investments

Cash and financial assets

Accounts receivable and other

Liabilities

Non-recourse borrowings

53% $11,789

13%

73%

14%

2,990

1,623

16,402

3,085

1,236

1,623

12%

10%

14%

12%

$ 8,311

$ 7,912

$ 941

$ 805

$ 806

1,927

1,215

1,587

1,138

11,453

10,637

2,003

1,236

1,623

1,464

1,050

1,271

172

166

1,279

134

153

140

135

1,098

1,033

100% $22,346

9.5%

$16,315

$ 14,422

$1,502

$ 1,278

$ 1,224

$ 4,881

$ 4,992

$ 300

$ 297

$ 303

Property specific mortgages

22% $ 4,881

Other debt of subsidiaries

Corporate borrowings

Accounts and other payables

Shareholders’ interests

2,075

1,213

1,745

2,075

1,213

1,745

1,867

1,035

1,262

Minority interests of others in assets

14%

3,223

20%

1,516

1,456

Preferred equity
– corporate and subsidiaries

Common equity

Total shareholders’ interests

33%

55%

1,861

7,348

12,432

18%

16%

1,861

3,024

6,401

1,185

2,625

5,266

105

294

566

943

106

262

425

756

128

252

361

681

Per common share

$ 41.45

18%

$ 17.54

$ 14.85

$ 3.21

$ 2.38

$ 2.06

100% $22,346

9.5%

$16,315

$ 14,422

$1,502

$ 1,278

$ 1,224

1 Operating cash flow as a percentage of average book value

2 Pro forma to give effect to the consolidation of our real estate operations which occurred in December of 2001

3 Underlying value of liabilities represents the cost to retire on maturity

Underlying Value
The underlying value for a Brascan common share was $41.45 at December 31, 2003 compared with $31.60
at the end of 2002, representing an increase in value of 31% including dividend distributions.

14 BRASCAN CORPORATION 2003 ANNUAL REPORT

The following table summarizes the significant contributions to the growth in value during 2003:

M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S

Underlying value, beginning of year

Operating cash flow for common equity

Repurchase of common shares

Increase in value of operations

Change in market value of resource investments

Increase in underlying value during the year

Less: common share dividends paid

Total

$ 5,720

Per Share

$ 31.60

566

(102)

380

910

1,754

(126)

1,628

3.21

0.32

2.02

5.03

10.58

(0.73)

9.85

Underlying value, end of year

$ 7,348

$ 41.45

The largest contributors to the growth in underlying value were the operating cash flow generated during

the year and the increase in value of our resource investments. Increases in the value of our business operations,

in particular the expansion of our power generating business and increased returns in our residential property

business, added $2.02 per share. In addition, we were able to repurchase 4.6 million common shares during the

course of the year at a cost of $102 million, adding $0.32 per share of underlying value.

Financial Profile

Total assets at book value increased to $16.3 billion as at December 31, 2003 from $14.4 billion at the end of the

preceding year. The increase was due to a higher level of invested assets, as well as the impact of the higher

Canadian dollar on the assets denominated in this currency.

Corporate borrowings increased by approximately $200 million due to net new debt issuances. In addition, share-

holders’ interests increased with the issuance of approximately $500 million of additional preferred equity, both

directly and through our commercial real estate operations, as well as undistributed earnings during the year.

Operating Results

Operating results for the past three years are summarized as follows:

M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S

Operating cash flow and gains

Total 1
For common equity

Per share

Net income before resource investments

Per share

Net income

Per share

1 Prior to preferred equity distributions

2003

624

566

3.21

343

1.61

408

1.98

2002

469

425

2.38

264

1.23

0.21

2001

388

361

2.06

225

1.12

201

0.98

Operating cash flow in 2003, prior to corporate preferred equity distributions, was a record $624 million, an

increase of 33% over 2002.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Each area of business recorded growth in operating cash flows, most notably the residential home building operations.

In addition, Brascan recorded substantial gains on the sale of a partial interest in a commercial property and the

successful completion of a major restructuring initiative.

Financing costs remained relatively consistent with prior years. Preferred equity and long-term debt were increased

to finance growth initiatives; however this was offset by a lower interest rate environment. Our overall cost of capital

declined slightly, to 9.5%.

Net income prior to resource investments increased in line with our operating cash flows. The major differences

between these two measures are non-cash items such as depreciation and non-cash taxes.

Net income, including resource investments, increased significantly, reflecting the improved contribution from our

resource investments which benefited from improved pricing and the completion of an operational restructuring

in the metals business during 2002.

The operating results are discussed in summary form commencing on page 47, and in detail for each segment

within the Operations Review which follows.

OPERATIONS REVIEW

REAL ESTATE
Our real estate operations consist of commercial properties, predominantly office properties, residential properties,

income producing land, development properties and real estate services activities. We manage approximately 140 million

square feet of real estate properties. This includes our own commercial properties and the approximate co-ownership

interests of $2.2 billion held by institutional investors. These operations are located predominantly in North

America, but also include operations in Brazil.

The composition of the company’s real estate assets and associated operating cash flows at the end of 2003

and 2002 was as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Commercial properties

Residential properties

Income producing land

Development properties

Real estate services

Lease termination income

and property gains

1 As a percentage of average book value

Underlying
Value

2003

$ 9,149

1,200

205

1,019

216

Return on
Assets 1

2003

9.9%

18.9%

5.8%

6.6%

46.8%

—

Book Value

Operating Cash Flow

2003

2002

2003

2002

$ 6,622

$ 5,960

738

129

774

—

650

1,195

—

$ 621

131

$ 622

105

100

—

2001

$ 642

—

$ 11,789

11.6%

$ 8,311

$ 7,912

$ 941

$ 805

$ 806

16 BRASCAN CORPORATION 2003 ANNUAL REPORT

Commercial Properties

The composition of the commercial property portfolio owned by the company at the end of 2003 and 2002,

together with the associated operating cash flows, was as follows:

Total
Leasable
Area

Effective Return on
Assets 1
Interest

Book Value

Operating Cash Flow 2

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2003

2002

2003

2002

2001

New York, New York

11,262

9,549

9.2%

$ 3,552

$ 3,295

$ 315

$ 307

$ 300

( 0 0 0 S Q . F T. )

World Financial Center

One Liberty Plaza

245 Park Avenue

300 Madison Avenue

Toronto, Ontario

BCE Place

Exchange Tower

Other

Calgary, Alberta

Bankers Hall

Petro-Canada Centre

Fifth Avenue Place

Other

Boston, Massachusetts

53 State Street

75 State Street

Denver, Colorado

Minneapolis, Minnesota

Other North America

Brazil

6,214

2,214

1,693

1,141

6,884

3,429

1,393

2,062

7,454

2,697

1,952

1,681

1,124

2,163

1,161

1,002

3,017

3,008

1,851

2,216

5,331

2,214

863

1,141

4,850

2,616

812

1,422

3,391

1,349

976

841

225

8.9%

928

758

11.1%

450

380

1,103

9.9%

333

332

592

511

2,811

3,008

1,851

2,216

8.6%

5.5%

21.3%

9.3%

9.5%

372

400

284

303

6,622

—

374

393

129

299

5,960

—

595

573

550

Operating income from properties sold

—

37,855 3

28,779 3

Total

37,855

28,779

11.5%

$ 6,622

$ 5,960

$ 621

$ 622

$ 642

Underlying value estimate

$ 9,149

1 As a percentage of average book value

2 Commercial property revenue less operating costs

3 Excludes development sites

The book value of our portfolio increased during the year with the completion of our 300 Madison Avenue develop-

ment in New York City, which will be named the PricewaterhouseCoopers Center, and the acquisition of a property

in Washington, D.C., offset in part by the sale of a 49% interest in 245 Park Avenue. The sale of 245 Park Avenue

in midtown Manhattan, which valued the property at $900 million, generated gross proceeds of $438 million and

resulted in a gain of $100 million for the 49% interest. This gain is included in lease termination income and property

gains.

BRASCAN CORPORATION 2003 ANNUAL REPORT

The underlying value of our commercial properties at year end is based on a 7.4% capitalization rate applied to

an estimated annualized 2004 net operating income for the current portfolio, prior to lease termination income

and other property gains, which is projected to total $677 million. This represents growth of 13.8% over the

$595 million earned in 2003 on current properties owned, a substantial portion of which is due to the addition of

the 300 Madison Avenue property in late 2003.

Commercial property operations, prior to lease termination income and property gains, contributed $621 million

of operating cash flow in 2003, compared with $622 million in 2002 and $642 million in 2001. Operating income

from current properties increased by approximately 4% during each year.

Components of Operating Cash Flow

The components of commercial property operating cash flow were as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Operating income from current properties

Operating income from properties sold

2003

$ 595

$ 621

2002

$ 573

$ 622

2001

$ 550

$ 642

The components of the change in commercial property operating cash flow from year to year are contractual

increases in rental rates, lease rollovers, lease-up of vacancies and acquisitions net of dispositions, as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Prior year’s net operating income

2001 – 2003

2003

2002

2001

before lease termination income and property gains

$ 620

$ 622

$ 642

$ 620

Changes due to:

(i) Contractual increases on in-place leases

(ii) Rental increases achieved on in-place rents on re-leasing

(iii) Lease-up of vacancies

(iv) Acquisitions and dispositions, net

Current year’s net operating income

(i) Contractual increases on in-place leases

(102)

$ 621

(30)

$ 621

(49)

(23)

$ 622

$ 642

During 2003, contractual increases in leases added $16 million to net operating income compared with $16 million

in 2002 and $13 million in 2001. Our leases typically have clauses which provide for the collection of rental

revenues in amounts that increase every five years. Given the high credit quality of tenants in our buildings, there

is generally low-risk of not achieving these increases. It has been our policy to record rental revenues in accordance

with the actual payments received under the terms of our leases, which typically increase over time. However,

industry standards and accounting practices are moving to straight-line rent recognition commencing in 2004.

(ii) Rental increases achieved on in-place rents on re-leasing

During 2003, higher rental rates on the re-leasing of space in the portfolio contributed $10 million of increased

cash flow and $8 million in 2002. At December 31, 2003, average in-place net rent throughout the portfolio was

$22 per square foot, up slightly from December 31, 2002, despite challenging leasing environments across North

America. The company achieved this increase largely as a result of re-leasing initiatives which were completed at

18 BRASCAN CORPORATION 2003 ANNUAL REPORT

an average rental uplift of $3 per square foot on space leased in 2002 and significant re-leasing initiatives in 2003

at equivalent rental rates. Average market rents remained unchanged overall during 2003 as decreases in New York

and Boston were offset by increases in other markets. However, given the low expiry rate of leases in the next two

years, any changes in market rents will not have a substantial impact on net operating income in the short-term.

(iii) Lease-up of vacancies

A total of approximately 6.5 million square feet of vacant space was leased in 2003 and 2002, contributing

$3 million to net operating income during 2003 and $5 million in 2002. The larger increase in 2001 of $15 mil-

lion, as well as rental increases of $17 million during that year (see Note (ii) above) was due to the more buoyant leas-

ing environment in that year and major re-leasing completed in New York and Boston.

Our total portfolio occupancy rate at December 31, 2003 declined from 96% to 94%, primarily due to vacancy

increases in Denver and Minneapolis. The leasing profiles for 2003 and 2002 are shown in the following table:

A S AT D E C E M B E R 3 1

T H O U S A N D S O F S Q U A R E F E E T

New York, New York

Toronto, Ontario

Calgary, Alberta

Boston, Massachusetts

Denver, Colorado

Minneapolis, Minnesota

Other North America

Brazil

Total 1

1 Excludes development sites

2003

Percentage
Leased

98%

96%

98%

83%

74%

91%

93%

94%

Leasable
Area

11,262

6,884

7,454

2,163

3,017

3,008

1,851

2,216

37,855

2002

Percentage
Leased

98%

96%

97%

90%

85%

97%

92%

96%

Leasable
Area

10,113

6,883

7,570

2,163

3,017

3,008

1,515

2,216

36,485

(iv) Acquisitions and dispositions, net

The sale of properties reduced operating cash flow by $30 million in 2003, $49 million in 2002 and $23 million
in 2001. We continued our practice of actively managing our portfolio and selling partial interests in mature, well

leased properties with the sale of a 49% interest in 245 Park Avenue during 2003, as well as a smaller property in

Calgary. We completed the development of 300 Madison Avenue during the last quarter of 2003. This 1.2 million

square foot property located in midtown Manhattan is fully leased for 30 years to CIBC World Markets and

PricewaterhouseCoopers with a CIBC covenant on 100% of the property, and will begin contributing to rental

revenue in 2004. In 2002, we sold partial interests in properties located in Toronto and Calgary, and acquired

1.2 million vacant square feet located in Tower Three of our World Financial Center complex in New York City, which

is included as an asset under development pending re-leasing of the property and tenant buildout of premises.

Tenant Relationships and Lease Maturities

An important characteristic of our commercial property portfolio is the strong credit quality of our tenants. Special

attention is directed at our tenants’ credit quality in order to ensure the long-term sustainability of rental revenues

through economic cycles. The tenant profile on average represents an “A” credit rating. Major tenants with over

BRASCAN CORPORATION 2003 ANNUAL REPORT

400,000 square feet of space in the portfolio include Merrill Lynch, RBC Financial Group, CIBC, Petro-Canada,

Imperial Oil and J.P. Morgan Chase.

Our strategy is to sign long-term leases with our tenants in order to mitigate risk and reduce overall re-tenanting

costs in the portfolio. We typically commence discussions with our tenants regarding their space requirements well

in advance of their contractual expiration, and while each market is different, the majority of our leases, when

signed, have terms ranging from 10 to 20 years. As a result, the average amount of leasable area in the total port-

folio maturing annually is approximately 5%. In New York, leases expiring prior to 2005 were aggressively re-leased

in 2000 and 2001. As a result, scheduled maturities during the next two years combined represent less than 4%

of our space in this major market.

Residential Properties

Our residential property activities consist primarily of single family home building across North America with a well

established niche presence in the mid to upper-end of the home building industry. We are one of the 20 largest

home builders in the United States, with a significant base of operations throughout California. We also build

residential condominiums in Brazil, and have done so successfully for over 20 years. The composition of our

residential property portfolio at December 31, 2003 and 2002, together with associated operating cash flows was

as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

California

Virginia/Ontario/Florida

Alberta/Colorado

Brazil

Total

Underlying value estimate

1 As a percentage of average book value

2 Revenue less cost of sales

Return on Assets 1

Book Value

Operating Cash Flow 2

2003

16.0%

33.1%

27.1%

18.9%

2003

2002

2003

2002

2001

$ 361

$ 351

$ 57

$ 50

$ 45

227

174

$ 738

$ 650

$ 131

$ 105

$ 91

$ 1,200

The underlying value of our residential operations of $1.2 billion is based on an eight times multiple applied to

normalized operating cash flow of $150 million. The book value of assets employed in our residential property

business increased 14% to $738 million in 2003 due to the development of existing land to take advantage of

increased market activity.

Operating Cash Flow

Operating cash flow from our residential operations increased to $131 million in 2003, up from $105 million

in 2002. This substantial increase reflected both increased selling prices and improved margins. Home sales totalled
2,731 for the year compared with 2,892 in 2002. Lot sales in 2003, excluding the bulk sale of development lots

to other builders, totalled 4,355 compared with 5,003 in 2002, as we continue our strategy of monetizing excess

lots in this very positive housing environment.

20 BRASCAN CORPORATION 2003 ANNUAL REPORT

Details of the home and lot sales by regional market excluding bulk sales of 4,700 lots are as follows:

Y E A R S E N D E D D E C E M B E R 3 1

Home Sales

Lot Sales

U N I T S

California

Virginia

Colorado

Ontario

Alberta

Brazil

Florida

Total

2003

1,023

505

—

318

479

406

—

2002

1,093

461

—

374

382

535

2,731

2,892

2003

1,044

745

448

—

1,712

406

—

4,355

2002

1,420

791

277

1,839

535

5,003

Our home building operations generated an average home price in 2003 of $370,000 per unit, an increase

of 7% over 2002 levels. The increase in the average home price was due to a higher-end mix of houses sold, and

increased pricing on housing sales across virtually all markets in North America.

The following is a breakdown of average prices realized on home sales in the last two years:

Y E A R S E N D E D D E C E M B E R 3 1

California

Virginia

Ontario

Alberta

Brazil

Florida

Total

2003

Sales

Average
Price

2002

Sales

Average
Price

( M I L L I O N S )

( T H O U S A N D S )

( M I L L I O N S )

( T H O U S A N D S )

$ 588

230

—

$ 575

456

198 1

116 1

183 1

—

$ 624

193

$ 544

411

136

121

596

$1,011

$ 370

$ 999

$ 345

1 Increases reflect higher value of the domestic currency compared to the U.S. dollar

The backlog of orders for delivery in 2004, as at the date of this report, represents in excess of 50% of expected

2004 closings, higher levels than ever experienced in our operations to date.

Income Producing Land

Income producing land consists of timberlands and agricultural lands, which generate current income as well

as having the potential for capital appreciation.

BRASCAN CORPORATION 2003 ANNUAL REPORT

The composition of our income producing land at December 31, 2003 and 2002 was as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2003

2002

2003

2002

2001

Underlying
Value

Return on
Assets 1

Book Value

Operating Cash Flow

Timberlands

# O F A C R E S

Owned (direct)

440,000

$ 125

6.2%

$ 89

$ 40

Owned (indirect)

Managed

Agricultural lands

Total

1,003,000 2

1,312,000 2

135,000

$ 205

5.1%

5.8%

$ 129

$ 78

1 As a percentage of average book value
2 The book value for our 43% share is included as a component of our investment in 43%-owned Nexfor Inc.

The underlying value of our income producing land is based on comparable transactions in the markets where our

assets are located.

Timberlands

We own 440,000 acres of timberlands located in Maine, U.S., and in the State of Paraná in Brazil. We also own,

through our investment in Nexfor Inc., an indirect 43% interest in timberlands in Maine and New Brunswick,

Canada, of which one million acres are owned outright and a further 1.3 million acres are managed under license.

We believe that this business has attractive characteristics in that it generates sustainable long-term cash flows

and requires little sustaining capital expenditures. Accordingly, we have recently hired executives with forestry

experience to work specifically on acquiring and managing additional timberlands for ourselves and institutional

partners.

Agricultural Lands

We own 135,000 acres of prime agricultural land in the States of São Paulo and Minas Gerais in Brazil. These prop-

erties have, until recently, been utilized primarily for beef production, but are also suitable to grow sugar cane from

which alcohol is produced. The Kyoto protocol has led to a substantial increase in the amount of alcohol to be

contained in gasoline in certain countries, resulting in a significant increase in the value of these lands which has

been reflected in recent sales of similar properties. Accordingly, we are arranging long-term leases to operators

of sugar cane production facilities. These 15 to 20 year leases are expected to generate sustainable and growing

annual cash flows, while retaining for ourselves the value of the land once the leases expire.

Development Properties

Development properties consist predominantly of commercial development land and density rights, and residential

land owned and under option, pending future development into housing lots. These assets are owned for capital

appreciation or for conversion into cash flow generating real estate.

22 BRASCAN CORPORATION 2003 ANNUAL REPORT

The composition of our development properties at December 31, 2003 was as follows:

Book Value

Operating Cash Flow

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Potential Development

2003

Commercial development properties

19.6 million sq. ft.

$ 509

34,714 lots

10,601 lots

246

2002

826

345

2003

2002

2001

$ —

65 1

—

$ 774

$ 1,195

$ 65

$ —

$ 1,019

Residential lots – owned

– optioned

Total

Underlying value estimate

1 Realized gain on sale of lots

The underlying value of our development properties is assumed for these purposes to be equal to either book value
or an estimate of sale value under reasonable circumstances at their current stage of development. These assets
do not generate current cash flows and as a result are not valued within the parameters of a normal cash flow
multiple analysis for the company.

Commercial Development Properties
Commercial development properties at December 31, 2003 and 2002, included the following projects:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Commercial Office Projects

Manhattan

Projected Office Density
# of sq. ft. 1

% owned

Book Value

Operating Cash Flow

2003

2002

2003

2002

2001

$ —

Three World Financial Center

100%

1,200,000

$ 212

300 Madison Avenue

Penn Station development

Toronto

São Paulo

Condominium Projects

São Paulo

Rio de Janeiro

—

100%

2,500,000

25% to 65%

3,692,000

100%

7,500,000

14,892,000

884,000

3,855,000

4,739,000

100%

—

116

382

127

170

437

736

—

Total

19,631,000

$ 509

826

$ —

Underlying value estimate

1 Effective interest excluding partner

$ 609

Manhattan
We completed the development of a 1.2 million square foot office tower at 300 Madison Avenue, located at
42nd Street and Madison Avenue in Manhattan in midtown New York, in the fourth quarter of 2003, on time and
under budget. Accordingly, the book value was transferred to commercial properties at that time.

Currently our largest development property is a 50% interest in Three World Financial Center, the 2.1 million
square foot third tower of our flagship World Financial Center complex in downtown Manhattan. We acquired the
property in 2002 at a substantial discount to replacement value and are currently in the process of securing tenants
for the portion owned by us, which is currently vacant.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Our proposed Penn Station development at West 31st Street and 9th Avenue in midtown New York, which is

currently in the permitting process, is expected to eventually encompass 2.5 million square feet of office and

related space.

Toronto

We own a 50% interest in the Bay-Adelaide Centre development property, located in Toronto’s downtown

financial district, which includes full in-ground infrastructure for 1.8 million square feet of office and residential

space and a fully operational revenue-generating parking facility.

We also own expansion rights for a third office tower at BCE Place, our flagship Toronto office complex, which

entails approximately 800,000 square feet of density.

Brazil

In São Paulo, Brazil, we own the Green Valley Office Park, which currently encompasses 300,000 square feet of

built office space. We also own density to build commercial office space of up to a further 7.5 million square feet,

and condominium density of a further 884,000 square feet, to be developed over the next fifteen years. In Rio de Janeiro,

we own 3.9 million square feet of condominium density in Barra da Tijucca which will be built over the next

10 years.

Residential Development Properties

Residential development properties include land, both owned and optioned, which is in the process of being

converted to residential lots, but not expected to enter the home building process for three years.

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

# of Lots

2003

2002

2003

2002

2001

Residential lots – owned

$ 246

$ 345

$ 65

$ —

Book Value

Operating Cash Flow

California

Northern Virginia

Denver, Colorado

Alberta

Ontario

Residential lots – optioned

California

Northern Virginia

Total

Underlying value estimate

3,841

225

3,266

24,847

2,535

34,714

8,490

2,111

10,601

45,315

—

$ 265

$ 410

$ 369

$ 65

$ —

24 BRASCAN CORPORATION 2003 ANNUAL REPORT

Our residential lands are acquired and developed for future use in our home building operations or for sale to other

builders. We own substantial land holdings across North America, most purchased in the mid-1990’s, and as

a result have an embedded cost advantage over many companies which are acquiring land today at much higher

prices.

Over the past year, with strong markets we have chosen to sell lots to other home builders, rather than continue

to hold these lots for capital appreciation or for future conversion into homes for sale. We recorded gains of

$65 million during 2003 on sales of this nature. We have optioned lots for future years in our most active markets to

ensure that we have low-risk access to lots to support our future home building activities. To that end, we hold

options on over 10,000 lots in our U.S. markets in return for option payments and the provision of our entitlement

and planning expertise.

Real Estate Services

We operate a broad array of real estate services which leverage our real estate presence across North America. These

services include commercial brokerage and investment banking services, residential property services and the

management of 140 million square feet, including our own assets. Our scale provides us with the platform to deliver

superior services offered to our tenants and clients. The composition of the real estate services operations

at December 31, 2003 and 2002 was as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Royal LePage Commercial Brokerage Services

Centract Residential Property Services

Brookfield LePage Facilities Management

Brookfield Residential Management Services

Total

Underlying value estimate

1 As a percentage of average book value

2 Revenue less operating cost

Return on Assets 1

Book Value

Operating Cash Flow 2

2003

53.3%

54.1%

37.5%

22.2%

46.8%

2003

2002

2003

2002

2001

$ 48

$ 216

$ 29

$ 18

$ 14

The underlying value of our real estate services operations for these purposes is based on a 12 times multiple of net

fee income, a conservative valuation when comparing to U.S. trading multiples for similar operations.

Royal LePage Commercial Brokerage Services

Royal LePage Commercial provides commercial leasing, sales, appraisal and brokerage services across Canada.

This operation has the largest share of many major markets across Canada and we continue to look at consolidation

opportunities. Our advisory services group leverages our commercial brokerage, bridge lending and asset management

operations to earn fees and also assists in developing opportunities for our other operations. We invested significant
time and effort in expanding this business during 2003 and hired a number of key people to build this operation

further.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Centract Residential Property Services

Through Centract, we provide a wide array of services to homeowners, corporations and institutions, such as mortgage

settlement, home appraisal, relocation and move-in services. We also provide services to the Royal LePage real

estate franchise network, a residential property brokerage organization with 8,000 agents across Canada. Royal

LePage completed 21% of all home sales in Canada in 2003. We successfully established a public royalty trust

during the year to surface the value and finance the ownership of the franchise contracts associated with this business.

This enabled us to reduce our capital committed to the business by C$121 million and establish a valuable

platform for future growth.

Brookfield LePage Facilities Management

We own 40% of the largest facilities management operation in Canada in partnership with Johnson Controls,

the largest facilities management operator in the world. Our joint venture manages close to 100 million square feet

of premises for major corporations and governments, and continues to benefit from the outsourcing of facilities

worldwide. During 2003, new contracts included the management of 20 million square feet of premises for British

Columbia Buildings Corporation.

Brookfield Residential Management Services

We own 100% of one of the premier condominium and apartment management operations in Toronto, Canada,

providing upscale management services to approximately 35,000 residential units.

Lease Termination Income and Property Gains

Property gains during 2003 of $100 million relate to the sale of a 49% interest in 245 Park Avenue as described

above. During 2002, we generated $60 million of gains on the sale of partial interests in office properties for proceeds

of $290 million. There were no significant lease termination payments during either 2003 or 2002. While these

events are opportunistic and difficult to predict, the dynamic tenant base which is typical of our buildings should

produce similar opportunities in the future.

POWER GENERATING OPERATIONS
Our power generating operations are predominantly hydroelectric facilities located on river systems mainly in

North America, most of which contain reservoirs that enable us to generate increased revenues through the sale

of power during periods of high demand. These operations are predominantly 100% owned by the company,

although we do share ownership of some operations with retail partners in an income trust, and we anticipate

sharing the ownership of additional assets with institutional partners once we have achieved sufficient scale in this

business, similar to our strategy for our commercial property portfolio. The composition of our power generating

operations at December 31, 2003 and 2002 and the associated operating cash flows were as follows:

26 BRASCAN CORPORATION 2003 ANNUAL REPORT

Capacity (MW) 1

2003

2002

957

266

174

304

939

266

157

274

—

Return on
Assets 2

2003

11.7%

10.9%

7.6%

7.7%

—

1,761

1,636

10.2%

135

—

Book Value

Operating Cash Flow

2003

2002

2003

2002

2001

$ 977

328

228

299

1,882

770

272

192

246

—

1,480

107

$ 102

$ 83

$ 54

—

172

—

153

—

1,786

1,771

9.8%

$ 1,927

$ 1,587

$ 172

$ 153

$ 92

$ 2,990

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Ontario, Canada

Quebec, Canada

Northeast United States

Other North America

Brazil

Under development

Total

Underlying value estimate

1 Megawatts (“MW”)

2 As a percentage of average book value

The book value of our power generating assets increased principally due to the acquisition during the year of

additional operations, the completion of projects under construction, including the recent completion of three

plants in Brazil, and the increased carrying value of our Canadian operations due to currency appreciation.

The underlying value of our power generating operations is based on a 12 times multiple of normalized net

operating cash flows, assuming long-term average precipitation levels and an average selling price of 4.34 cents per

kilowatt hour (“KWh”).

Power generating operations contributed $172 million to operating cash flow in 2003, compared with

$153 million in 2002. The increase reflected capacity added during 2003 and 2002, which was offset in part

by low precipitation levels.

Power Generating Facilities

We own operating interests in 45 power generating stations with a combined generating capacity of 1,761 megawatts.

Of these stations, 41 are hydroelectric facilities located on river systems in six geographic regions within North
America, specifically Ontario, Quebec, British Columbia, Maine, New Hampshire and Louisiana. We also own

three hydroelectric stations in southern Brazil, and a 110 megawatt natural gas-fired combined-cycle cogeneration

facility located in northern Ontario. These facilities are capable of producing approximately 7,000 gigawatt hours

of electricity annually.

Our power operations are strategically located with transmission interconnections between Ontario and Quebec.

These interconnections allow us to sell surplus power into the highest-priced regions as opportunities arise.

Our power generating operations in North America are located on 15 river systems in nine different watersheds

which provides important diversification of water flows to minimize the overall impact of fluctuating hydrology.

Our storage reservoirs contain sufficient water to produce 25% of our total annual generation and provide

additional protection against short-term changes in water supply. The reservoirs also enable us to optimize selling

prices by generating and selling power during higher-priced peak periods.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Our total power generation capacity is summarized in the following table:

Ownership

Generating
Stations

Generating
Units

Installed
Capacity
(MW)

Long-term Average
Generation (GWh)
2003

Ontario, Canada

Great Lakes Power Limited

Mississagi Power

Valerie Falls Power

Lake Superior – Cogeneration Plant

Quebec, Canada

Lièvre River Power
Pontiac Power

Northeast United States

Maine Power
New Hampshire Power

Other North American

Louisiana HydroElectric Power

Powell River Energy

Pingston Power

Brazil

Total

100%

100%
100%

75%

50%

68%

3
2

7
8

10
7

32
25

133

349

488

110

957

238
28

266

129
45

174

192

304

1,761

1,610

750

850

3,262

1,428
210

1,638

747
263

1,010

677

261

1,016

143

7,069

We completed the construction of five hydroelectric power generating plants during 2003, adding 135 megawatts

of capacity. Three of these plants were in Brazil, one in British Columbia and one in Ontario. We are also examining

a number of opportunities to acquire additional hydroelectric power plants in North America with the objective

of continuing to expand our generating base.

Operating Margins

Our power generating operations are among the lowest cost producers of electricity in North America, with cash

operating costs of approximately one cent per kilowatt hour. This compares extremely favourably with other forms

of power generation. Our low cost structure results from the high quality of our assets, the continued application

of new technology and the recent re-turbining of many of our facilities. Our power plants are also environmentally

preferable to most other forms of electricity generation and produce virtually no harmful emissions.

28 BRASCAN CORPORATION 2003 ANNUAL REPORT

The revenue, costs and operating margins of our power generating operations are as follows:

A S AT D E C E M B E R 3 1 , 2 0 0 3

C E N T S P E R K W H

Ontario, Canada

Quebec, Canada

Northeast United States

Other North America

Brazil

Weighted Average

Cash Flow Growth

Revenue

4.8

4.4

4.6

2.7

4.0

4.3

Cash
Costs

1.3

0.8

1.5

0.6

0.8

1.1

Operating
Margins

3.5

3.6

3.1

2.1

3.2

Operating cash flow from our power generating business increased in 2003 to $172 million, up from $153 million

in 2002. The following table illustrates the change in operating cash flows from the company’s power generating

business during the past three years:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2001 – 2003

Prior year’s net operating income

(i) Hydrology variations within existing capacity

(ii) Variation in prices and operational improvements

(iii) Acquisitions

—

2003

$ 153

(10)

(8)

2002

2001

(5)

Current year operating cash flow

$ 172

$ 153

(i) Hydrology variations within existing capacity

Generation from existing capacity decreased to 4,231 gigawatt hours during the year, down from 4,356 gigawatt

hours in 2002, due to unusually dry conditions in northern Ontario and western Quebec during the first half

of 2003. This reduced cash flow from our power generating operations by $10 million in 2003 compared to

an increase of $15 million in 2002.

The impact of regional dry conditions was offset by improved hydrology results in Louisiana. The continued expan-

sion of our operating base into different watersheds and river systems should reduce the relative significance of

hydrology variances in the future.

Water levels improved significantly towards the end of 2003 and results in the fourth quarter exceeded long-term

averages. The favourable conditions have continued into 2004 and all facilities are currently operating at above

average generation levels.

BRASCAN CORPORATION 2003 ANNUAL REPORT

(ii) Variation in prices and operational improvements

We experienced lower prices during 2003, relative to the higher price environment experienced during the weather

extremes in 2002. As a result, we did not benefit as much from our ability to use our reservoirs to capture peak

pricing as in the prior years. We increased our base level of revenue pricing due to our power sales contracts which

have clauses to provide for price increases every year, primarily linked to inflation. We expect to improve our per-

formance with respect to capturing peak pricing during 2004.

(iii) Acquisitions

The acquisition of 19 hydroelectric stations in Ontario, Maine and New Hampshire totalling 662 megawatts

during the past three years contributed an incremental 2,016 gigawatt hours of production and an additional
$37 million of operating cash flow during 2003. This new capacity, much of which was acquired in the first half of

2002, contributed $33 million in that year and $3 million in 2001. The additional facilities also further diversify

our watersheds, thereby reducing hydrology risk, and position us as a leading generator in Ontario and an important

participant in the New England electricity markets.

Contract Profile

We endeavour to maximize the stability and predictability of power generating revenues through the use of fixed-

price contracts to minimize the impact of price fluctuations, and the diversification of watersheds and the use

of water storage reservoirs to minimize fluctuation in total generation levels.

Approximately 82% of our projected 2004 revenue is subject to long-term bilateral and fixed-price power sales

contracts or regulated rate-base arrangements. The remaining revenue is generated through the sale of power on

a wholesale basis. Due to the low variable cost of hydroelectric power and the ability to concentrate generation

during peak pricing periods, we are able to generate attractive margins on uncommitted capacity. Our long-term

sales contracts have an average term of 13 years and counterparties are almost exclusively customers with long-

standing credit history or investment grade ratings. Our policy is to use financial contracts which typically have

a term of between one and three years to lock in the future price of uncommitted power generation such that

between 15% and 20% of total revenues is based on spot pricing. This approach provides an appropriate level of

revenue stability, without exposing the company to undue risk of contractual shortfalls and provides the flexibility

to enhance profitability through the production of power during peak price periods.

The following table illustrates our expected revenue profile over the next five years:

Y E A R S E N D E D D E C E M B E R 3 1

Long-term bilateral contracts

Financial contracts 1

Total fixed-price power sales contracts

Regulated transmission and distribution revenue

Uncommitted wholesale generation

2004

2005

2006

2007

2008

54%

18%

72%

10%

82%

18%

54%

20%

74%

10%

84%

16%

55%

20%

75%

10%

85%

15%

55%

20%

75%

10%

85%

15%

55%

20%

75%

10%

85%

15%

Total

100%

1 Largely expire prior to 2006, however, our policy is to forward-sell sufficient wholesale production to maintain a locked-in position on 80% to 85% of expected revenues

30 BRASCAN CORPORATION 2003 ANNUAL REPORT

FUNDS MANAGEMENT
We manage dedicated investment funds for ourselves and on behalf of institutional and other investors. These funds

are currently concentrated in five areas of activity: Bridge Lending, Mezzanine Finance, Restructuring, Opportunistic

Investments and Structured Product activities. Our current industry focus is in real estate, power generation

and resources.

We believe that the combination of our strong operating experience and presence in a variety of industries, together

with our financial expertise, enables us to earn superior risk-adjusted returns in our selected areas. This performance,

combined with our willingness and ability to invest significant capital alongside our co-investors, makes us an attractive

investment partner.

We typically commit a significant amount of our own capital to the funds that we manage. Accordingly, the $5 billion

which we manage in this business includes $1.2 billion of our own capital. We expect that the amounts managed

on behalf of partners will grow substantially over time. This should result in increased returns on our capital as

we will not only earn our proportionate share of the investment returns for each fund, but we will also be entitled

to earn management and performance based incentive fees.

In addition, we continue to own certain financial assets directly, which we acquired prior to establishing our invest-

ment funds or because they do not fit the specific mandate of any one of our current funds. As many of these funds

have only recently been launched, performance fees earned to date have been modest, although we expect these to

grow over time.

The following table shows the composition of the book values and funds under management at December 31,

2003 and 2002, together with the associated operating cash flows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Bridge Lending Fund

Real Estate Finance Fund

Restructuring Fund

Real Estate Opportunity Fund

Structured Products and Capital Markets

Traditional assets under management

Other

Total

Underlying value estimate

1 Includes committed capital

Assets Under
Management 1

2003

675

600

353

190

1,850

1,215

115

Book Value

Operating Cash Flow

2003

2002

2003

2002

2001

$ 318

538

$ 21

$ 37

$ 61

157

—

561

—

115

—

441

—

$ 4,998

$ 1,215

$ 1,138

$ 166

$ 140

$ 135

$ 1,623

The underlying value of our funds management operations is based on the book value of the assets together with

a value attributed to the associated fee streams on a 12-times multiple.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Bridge Lending Fund
The Brascan Bridge Lending Fund is a C$500 million fund dedicated to providing bridge loans, primarily in
Canada. Established in 2003, the Fund leverages our 20-year history of bridge lending, offering tailored lending
solutions to companies in need of access to short-term financing. We have committed C$225 million of capital and
four institutional partners, including Sun Life of Canada and a major government financial institution, have com-
mitted the balance of C$275 million of capital. For larger transactions, we may invest directly and have granted
co-investment rights to our partners to allow them to participate.

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Brascan Bridge Lending Fund

Directly held bridge and corporate loans

Total

Assets Under
Management

2003

$ 385

290

$ 675

Book Value

Operating Cash Flow

2003

$ 28

290

$ 318

2002

$ —

538

$ 538

2003

2002

2001

$ —

$ 21

$ 37

$ 61

Loans advanced during the year include a C$30 million loan to a commercial real estate investor on a mezzanine
basis to acquire a C$200 million real estate portfolio, a C$80 million working capital facility to a Canadian manu-
facturing company and C$35 million of debtor-in-possession financing to a manufacturing company. We also hold
$290 million of bridge and corporate loans which were advanced prior to the establishment of the Fund, although
we expect that most of our future bridge lending activity will be conducted through this Fund.

Real Estate Finance Fund
The Brascan Real Estate Finance Fund (“BREF”) is a $600 million fund which finances the ownership of real estate
properties on a basis which is senior to traditional equity, but subordinate to traditional first mortgages or invest-
ment grade debt. Established in 2002, the Fund combines our own 35-year established track record in real estate
and finance with one of the more experienced New York-based management teams in the business. We provided
$200 million of initial capital and are in the process of raising $400 million from institutional investors.

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Real Estate Finance Fund

Office property loans

Retail property loans

CMBS REIT

Total

Assets Under
Management

2003

$ 600

Book Value

Operating Cash Flow

2003

$ 157

2002

2003

2002

2001

$ —

—

$ 600

$ 157

$ —

BREF is focused on three main areas of real estate finance: mezzanine financing for property owners; real estate
related corporate finance transactions; and real estate structured finance products.

During 2003, we acquired a $50 million mezzanine loan on the 900,000 square foot Woolworth office property
in downtown Manhattan; a $10 million junior first mortgage on the 1,250,000 square foot Colonie Center Mall
in Albany, New York; and a $20 million cross-collateralized loan on four shopping centres in the northeast U.S.
We also acquired a $30 million subordinated debenture and 10% of the common equity interest in CRIIMI MAE,
a public CMBS REIT.

32 BRASCAN CORPORATION 2003 ANNUAL REPORT

Restructuring Fund

The Tricap Restructuring Fund is a C$415 million restructuring fund, which invests long-term capital in companies

facing financial or operational difficulties in industries where we have expertise. Established in 2002 with a dedicated

management team, the Fund benefits from our 20 years of experience in restructuring companies. We have

committed C$200 million of the capital and institutional investors, including Canada Pension Plan Investment

Board and others, have provided the other C$215 million.

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Tricap Restructuring Fund

Doman Industries

Other

Assets Under
Management

2003

$ 320

Book Value

Operating Cash Flow

2003

2002

2003

2002

2001

$ 31

—

Directly held restructuring assets

Total

$ 353

$ 64

$ 89

During the year we continued to work on the restructuring of Doman Industries, a western Canadian forest products

company with a total fund investment of $62 million; and in late 2002 advanced C$55 million to a manufacturing

company, which was repaid after six months following the sale of a division.

Directly held restructuring assets relate to initiatives commenced prior to the establishment of the Fund. Similar to

our bridge lending business, we expect that most of our future restructuring assignments will be conducted

through Tricap.

During the year, we disposed of our investment in Northgate Exploration for a $57 million gain, included in

Investments on page 35, completing the restructuring which was commenced in 1998. The Northgate restructuring

involved successfully completing a major gold/copper mine in British Columbia and bringing it into production.

Real Estate Opportunity Fund

The Brascan Real Estate Opportunity Fund is a C$250 million real estate fund established late in 2003 to invest

in underperforming commercial real estate, other than premier office properties which will continue to be pursued

through our direct real estate operations. The Fund leverages our 35 years of real estate experience, our other real

estate platforms and has a dedicated management team which had previously been pursuing these types of activities

within our commercial property operations for over ten years. We provided the initial capital and will begin raising

funds from other investors in late 2004 after the completion of a number of initial investments.

Our objective is to acquire underperforming real estate which, through our management, leasing and capital investment

expertise, can be enhanced to provide a superior return on capital.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Structured Products and Capital Market Investments

We have developed a number of structured products directed towards both retail and institutional investors.

In addition we maintain portfolios of public securities such as high yield bonds, preferred shares and common equities.

The capital invested in these activities at year end was $561 million, with a total of nearly $1.9 billion under man-

agement.

Assets Under
Management

Book Value

Operating Cash Flow

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2003

2002

2003

2002

2001

Imagine Reinsurance

$ 1,200

$ 288

$ 191

$ 23

$ 10

Brascan SoundVest Diversified Income Fund

Titanium Asset Backed Trust

Securities portfolios

High yield bonds

Equity securities

Total

100

500

—

187

—

107

143

—

$ 1,850

$ 561

$ 441

$ 95

$ 84

$ 48

During the year, wholly-owned Imagine Reinsurance continued to expand its reinsurance operations and reported

increases in operating cash flow. We also launched a retail product offering under the name of Brascan SoundVest

Diversified Income Fund, a fund of income funds. Investment advisory and portfolio management services are

provided by SoundVest Capital Management Ltd. SoundVest Capital is 50%-owned by Brascan and 50% by its

successful investment management team. Lastly, we launched Titanium Trust, an asset backed trust which finances

receivables and other assets purchased from our own operations as well as others. This trust issues short-term asset

backed commercial paper and medium-term notes and will over time assist us to lower our overall cost of capital.

We continued to actively invest in high yield bonds and other publicly traded securities. These activities, which

utilize the knowledge and experience gained from our operating activities, rely on careful due diligence and a value

based investment philosophy. The dramatic strengthening of the high yield markets provided us with exceptional

returns over the past two years.

From time to time, in our areas of industry expertise, we also take positions in securities which we believe to

be undervalued. During 2003, we acquired a 9.2% interest of Canary Wharf Group, plc at a cost of approximately

$153 million. This investment has evolved into a potential major corporate initiative, and accordingly, is included

in Investments. We also took a position in Rayonier, a company that owns timberlands, and sold our investment

following the company’s announcement of its conversion into a Timber REIT.

Traditional Assets Under Management

While we have focused principally on alternative assets under management, we have also established joint ventures

and have invested small amounts of capital with a number of expanding traditional managers of equity and fixed

income. Our infrastructure and position in the capital markets assists our partners to expand their businesses with

confidence and these relationships provide us with additional perspective on the financial markets.

34 BRASCAN CORPORATION 2003 ANNUAL REPORT

M A N A G E R

Highstreet Investment Management

Mavrix Investment Management

SoundVest Capital Management

Total

Growth Opportunities

Investment Type

Equities/Fixed Income

Mutual Funds

Equities/Fixed Income

Assets Under
Management

2003

$ 550

265

400

$ 1,215

Having established a number of new funds over the past two years, we plan to concentrate on integrating each

of these funds into our operating platform and investing additional capital within these operations. Accordingly we

do not expect to introduce additional funds in 2004, although we plan to expand the number of funds offered over

time.

We have recently established a partnership with Tri Continental Capital Ltd., an experienced lender of equity capital

to the residential home building industry. Our 20 years of experience in the residential home building area combined

with the Tri Continental team’s 13 year record of success should enable this partnership to provide superior risk adjusted

returns. As co-general partner of a new $275 million fund, we will commit up to $75 million of capital and work with

management to complete their fund raising and begin to invest the capital in 2004.

INVESTMENTS
Investments consist of assets which do not currently form part of our operations, but which may be integrated into

our operations in the future, or alternatively may be disposed of, on an opportunistic basis.

Y E A R S E N D E D D E C E M B E R 3 1

( M I L L I O N S )

Real Estate

# of

Underlying
Value

Book Value

Operating Cash Flow

Location

Interest

2003

2002

2003

2002

2001

Canary Wharf Group, plc London, UK

52.8

257 1

153

—

$ —

Worldwide

122.6

N. America/UK 63.8

42%

43%

1,938 1

532 1

1,212

356

877

309

Resources

Noranda Inc.

Nexfor Inc.

Northgate
Exploration Limited
Katahdin Paper
Company, LLC

Business Services

British Columbia —

—

Maine

—

100%

Hotel/Ticket Services

Brazil

— 23%/40%

NBS/MediSolution

Canada

38.1/95.1 91%/61%

Banco Brascan, S.A.

Rio de Janeiro

Other

Total

—

40%

—

1 Based on December 31, 2003 quoted market prices

2 Based on available benchmarks

—

76 2

100 2

72 2

45 2

65 2

—

(2)

—

(1)

—

$ 3,085

$ 2,003

$ 1,464

$134

$ 84

$ 80

BRASCAN CORPORATION 2003 ANNUAL REPORT

Real Estate

Canary Wharf Group, plc

We owned approximately 53 million shares of Canary Wharf Group, plc with a market value of $257 million

at year end based on a market price of 270 pence. The Canary Wharf estate consists of approximately

13.1 million square feet of office and retail space, located in close proximity to the City of London. Canary Wharf

Group, plc owns 8.8 million square feet of properties on the estate along with an additional one million square feet

of office space currently under construction and additional land with potential for further development of approx-

imately 5.7 million square feet of office space. The shares were purchased in 2003 following a significant decline

in their trading value. Along with several institutional partners, we have formed an investment group, with Brascan

as the operating partner and asset manager, and have made an offer to the existing shareholders of Canary Wharf

Group, plc to acquire a larger equity interest and operational control of the company.

Resources

Noranda Inc.

We own approximately 123 million shares, or 42% of Noranda Inc. (“Noranda”). Our investment increased from

96.6 million shares, or 40% at the end of 2002 as we subscribed for $197 million in common shares as part of an

equity financing by Noranda, in addition to participation in Noranda’s dividend reinvestment plan.

Noranda is a base metals company with $8 billion of assets. The major commodities produced are nickel, copper,

zinc and aluminum. During the past two years, Noranda completed the development of a number of world-class

mining and processing assets, shut down inefficient production capacity, implemented productivity improvements

and completed a financial restructuring.

Metal prices increased significantly in the latter half of 2003, and continue to increase through early 2004. The

increased prices, together with productivity improvements, had a positive impact on cash flow from operations

through the third and fourth quarters of 2003. Notwithstanding these improvements, the full benefits have not yet

been realized because current price increases will not be reflected until the 2004 results are reported. The following

table shows Noranda’s segmented cash flow from operations and net income:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Cash flow from operations

Copper

Nickel

Aluminum

Zinc

Discontinued operations and unallocated costs

Cash flow from operations

Restructuring charges

Depreciation and other non-cash items

Net income (loss)

2003

2002

$ 313

$ 206

323

(122)

577

(24)

(519)

154

(5)

(95)

326

(498)

(275)

$ (447)

Noranda is traded on both the New York and Toronto stock exchanges. Further information on Noranda is
available through its web site at www.noranda.com.

36 BRASCAN CORPORATION 2003 ANNUAL REPORT

Nexfor Inc.
We own approximately 64 million shares, or 43% of Nexfor Inc. (“Nexfor”). Our investment increased from
62 million shares at the end of 2002 as we acquired 2 million shares during the year through Nexfor’s dividend
reinvestment plan.

During 2003, Nexfor reported net income of $126 million compared with $13 million in 2002. This strong
performance was driven by an increase in panelboard prices, in particular oriented strandboard (“OSB”) prices,
which increased dramatically during the year. OSB prices increased from $130 per thousand square feet at the start
of the year to a high of $465 per thousand square feet. Unfortunately, Nexfor’s paper operations suffered a loss
during the year due to low product prices and restructuring charges.

Nexfor benefited from the expansion of its building products operations in 2002 with the acquisition of three
oriented strandboard mills located in the south-central United States and the successful start-up of a fourth facility
in Alabama. As Nexfor’s performance is highly leveraged to OSB, it is expected that the first quarter of 2004 will
generate exceptionally strong results based on the prices received for sales contracted to date.

The following table shows Nexfor’s segmented cash flow from operations and net income:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Cash flow from operations

Building products

Specialty papers

Unallocated costs

Cash flow from operations

Restructuring charges

Depreciation and other non-cash items

Net income

2003

2002

$ 376

$ 125

(43)

(24)

309

(17)

(166)

(37)

112

—

(99)

$ 126

Nexfor is traded on the Toronto Stock Exchange. Further information on Nexfor is available through its web site
at www.nexfor.com.

Northgate Exploration Limited
We sold our 42% interest in Northgate Exploration Limited (“Northgate”) in November 2003. Northgate is a publicly
traded mid-tier gold producer. This investment resulted from the successful restructuring of the Kemess gold mine
in British Columbia. After an operational restructuring, we transferred the mine to Northgate, and refinanced our
capital investment with two equity issues. On completion of the financial and operational restructuring, we sold
our interest in Northgate through a broad public distribution in the capital markets.

Katahdin Paper Company, LLC
We own a 280,000 ton directory paper plant in East Millinocket, Maine and a 185,000 ton supercalender fine
paper plant in Millinocket, Maine, which operates under the name Katahdin Paper. The operations were acquired
out of bankruptcy in April 2003. The directory plant has been restarted and is currently generating positive
cash flows. Nexfor is managing these operations for us, and in return we have granted them an option to acquire
the operations at a predetermined price based on our investment and cost of capital employed. Once restructured,
these assets will either be integrated into Nexfor’s paper operations or sold by us to another industry participant.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Business Services

Hotel and Ticket Services

We own, in partnership with the Accor Group of France, an effective 23% interest in a joint venture which owns

and manages the Accor Group hotel brands in Brazil. The brands include Novotel, Sofitel, Ibis and Formula One.

We also own a 40% interest in a Ticket Services business in partnership with Accor. Ticket Services has been in

operation as a voucher services business in Brazil and Argentina since the early 1980s. The company provides paper

and electronic vouchers to corporations who utilize them in their compensation programs for employees and for

other cash free uses such as fuel vouchers.

NBS Technologies Inc. and MediSolution Ltd.

We own approximately 38 million shares, or 91% of NBS Technologies Inc. (“NBS”, formerly Mist Inc.). NBS provides

secure identification solutions, financial transaction services and operates a commerce gateway that facilitates

electronic payment processing. We increased our interest in NBS to 91% from 55% in 2003 with the purchase of
our former partners’ interest. Further information on NBS is available through its web site at www.nbstech.com.
We also own approximately 95 million shares or 61% of MediSolution Ltd., which develops and manages medical

human resources management software and systems to the hospital industry, primarily in Canada. The company’s

common shares are publicly traded on the Toronto Stock Exchange. Our interest increased to 61% from 41% at

the end of 2002 upon conversion into equity of a debenture we owned. These balances reflect the carrying values

of the operating assets of these businesses, excluding working capital and indebtedness. Further information on
MediSolution is available through its web site at www.medisolution.com.

Banco Brascan, S.A.

We own 40% of Banco Brascan, which is a South American investment bank based in Rio de Janeiro and São Paulo,

Brazil. The balance of the company is owned 40% by Mellon Financial Group and 20% by management. Banco

Brascan advises, lends to and provides asset management services to domestic and foreign companies in Brazil.

CAPITAL RESOURCES AND LIQUIDITY
Brascan is committed to maintaining high levels of liquidity and access to a broad range of low cost capital

resources. This enables us to provide financial stability and a low cost of capital for our operations, and ensures that

we can react quickly to potential investment opportunities. Our liquidity consists of cash and financial assets, as well

as committed lines of credit. Furthermore, we generate high levels of free cash flow within our businesses and have

minimal sustaining capital expenditure requirements. Free cash flow in 2003 was $733 million.

38 BRASCAN CORPORATION 2003 ANNUAL REPORT

Our capital resources include corporate debt and other borrowings which do not have recourse to Brascan, as well

as preferred and common equity issued by Brascan and certain of our operating business units. Shareholder interests

also includes the equity interests of others in our assets, which consist principally of common shares of our North

American commercial office property operations.

During the year, we raised $1.6 billion through the issuance of preferred equity, income trust units and long-term

debt, enabling us to remain in a very solid financial position.

CASH AND FINANCIAL ASSETS
Although we generate substantial amounts of cash flow within our operations, we generally carry modest cash

balances and instead utilize excess cash to repay revolving credit lines and invest in shorter term financial assets

which generate better returns while still providing a source of liquidity to fund investment initiatives. Cash balances

at December 31, 2003 totalled $382 million.

Financial assets represent securities that are not actively deployed within our financial operations, and which can,

with varying degrees of timing, be liquidated and utilized to fund strategic acquisitions. The market value of our

financial assets approximates their realizable value. The following table shows the composition of these assets and

associated cash flow:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Cash

Government bonds

Corporate bonds

Preferred shares

Common shares

Other

Financial assets

Total

Underlying value estimate

1 Investment income

Book Value

Operating Cash Flow 1

2003

2002

2003

2002

2001

$ 382

332

$ 35

$ 26

$ 29

387

342

—

854

230

397

—

718

$ 1,236

$ 1,050

$ 89

$ 96

$ 111

$ 1,236

CAPITALIZATION
The strength and diversification of the income streams generated by our various operations reduce financing costs

below that of many peers who operate in only one of our selected areas of business. Through the continuous

monitoring of the balance between debt and equity financing, and maintaining access to a broad range of financing

sources, we are able to reduce our weighted average cost of capital on a risk averse basis and thereby improve common

shareholder equity returns.

Our overall weighted average cost of capital, using a 20% return objective for our common equity, is 9.5%

compared with 9.6% in 2002. This reflects the low cost of non-participating preferred equity issued over many

years, principally in the form of perpetual preferred shares, as well as the low cost of non-recourse investment grade

financings achievable due to the high quality of our commercial properties and power generating plants.

BRASCAN CORPORATION 2003 ANNUAL REPORT

The following schedule details the capitalization of the consolidated liabilities and shareholders’ interests at the end

of 2003 and 2002 and the related cash costs:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2003

2002

2003

2002

2001

Underlying

Cost of

Value 1 Capital 2

Book Value

Operating Cash Costs

Liabilities

Non-recourse borrowings

Property specific mortgages

Other debt of subsidiaries

Corporate borrowings

Accounts and other payables

Shareholders’ interests

Minority interests of others in assets

Preferred equity

Common equity

$ 4,881

2,075

1,213

1,745

3,223

1,861

7,348

12,432

20%

18%

16%

$ 4,881

$ 4,992

$ 300

$ 297

$ 303

2,075

1,213

1,745

1,516

1,861

3,024

6,401

1,867

1,035

1,262

1,456

1,185

2,625

5,266

105

294

566

943

106

262

425

756

128

252

361

681

$22,346

9.5%

$16,315

$ 14,422

$1,502

$ 1,278

$ 1,224

1 Underlying value of liabilities represents the cost to retire on maturity
2 As a percentage of average book value

We have benefited recently from unprecedented low interest rates, particularly short-term rates, although as rates

appear poised to increase we are locking in longer term fixed rates. This may result in a modest increase in our cost

of capital during 2004, but should protect our returns over the longer term.

LIABILITIES

Property Specific Mortgages

Where appropriate, we finance our operating assets with long-term, non-recourse borrowings such as property

specific mortgage bonds which do not have recourse to Brascan or our operating entities.

The composition of the company’s borrowings which have recourse only to specific assets is as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Commercial properties

Power generation

Total

1 Interest expense
2 As a percentage of average book value

Average

Term

Cost of
Capital

2003 2

Book Value

Operating Cash Costs 1

2003

2002

2003

2002

2001

$ 4,149

$ 4,413

$ 255

$ 258

$ 278

732

579

$ 4,881

$ 4,992

$ 300

$ 297

$ 303

These borrowings leverage common shareholders’ equity with long-term lower risk financing, which is largely fixed

rate, with an average maturity of 13 years.

Commercial property borrowings represent mortgage debt on real estate properties. Our commercial property

operations have very little general corporate indebtedness since we finance this business primarily with mortgages

40 BRASCAN CORPORATION 2003 ANNUAL REPORT

with recourse only to specific properties. At the end of 2003, these mortgages had an average term of 12 years and

a weighted average interest rate of 7%.

Power generation borrowings consist of financings secured by specific power facilities with an average fixed

interest rate of 7%. We completed two “A(low)” rated asset backed financings in 2003. The first was a 20-year

C$384 million financing on our Great Lakes Power generation system in northern Ontario, and the second was

a 17-year C$175 million financing on the Mississagi Power generation assets, also in northern Ontario. The

coupons were 6.6% and 6.9%, respectively and provide long-term, low-risk, non-recourse financing to leverage

the returns from these assets.

Principal repayments on property specific mortgages due over the next five years and thereafter are as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2004

2005

2006

2007

2008

Beyond

Total

Commercial properties

Power generation

$ 281

$ 454

$ 163

$ 612

$ 252

$ 2,387

$ 4,149

670

732

Total

$ 288

$ 499

$ 167

$ 615

$ 255

$ 3,057

$ 4,881

Percentage of total

10%

13%

63%

100%

Other Debt of Subsidiaries

The composition of the borrowings which have recourse only to assets owned by the company’s subsidiaries is

as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Power generation

Funds management

Real estate

International operations and other

Total

1 Interest expense
2 As a percentage of average book value

Average

Term

Cost of
Capital

2003 2

Book Value

Operating Cash Costs 1

2003

375

647

576

477

2002

2003

2002

2001

375

587

429

476

$ 2,075

$ 1,867

$ 105

$ 106

$ 128

These borrowings are largely corporate debt, issued by way of corporate bonds, bank credit facilities and other types

of debt and financial obligations borrowed by subsidiaries. Power generating debt consists largely of U.S. public

notes which are rated BBB by S&P, Baa3 by Moody’s and BBB(high) by DBRS and which mature in 2004 and

2005.

The corporate bonds issued by our funds management operations are rated A(low) by DBRS and BBB+ by S&P.

At December 31, 2003, our funds management operations had $386 million undrawn committed credit facilities,
which are largely utilized as back-up facilities for the issuance of commercial paper.

Residential property debt consists primarily of construction financing which is repaid from the proceeds from sales

of building lots, single family houses and condominiums and is generally renewed on a rolling basis as new

construction commences.

BRASCAN CORPORATION 2003 ANNUAL REPORT

A portion of the outstanding debt of our international operations is denominated in local currencies and is utilized

to hedge our operating assets against local currency fluctuations, the most significant of which is the Brazilian real.

Brascan does not guarantee any debt of subsidiaries with the exception of $327 million included in debt of inter-

national operations that is supported by financial assets within these operations.

Principal repayments on other debt of subsidiaries due over the next five years and thereafter are as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2004

2005

2006

2007

2008

Beyond

Total

$ 175

$ 200

$ —

$ 375

Power generation

Funds management

Real estate

International operations and other

386

107

183

Total

$ 710

$ 458

$ 163

$ 204

Percentage of total

34%

22%

10%

—

207

—

327

647

576

477

$ 534

$ 2,075

26%

100%

Corporate Borrowings

Corporate borrowings consist of long-term and short-term obligations of Brascan. Long-term corporate borrow-

ings are in the form of bonds and debentures issued into the Canadian and U.S. capital markets both on a public

and private basis. Short-term financing needs are typically met by issuing commercial paper that is backed by long-

term fully committed lines of credit from a wide range of international banks.

The following table summarizes Brascan’s corporate credit facilities:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Commercial paper and bank debt

Publicly traded term debt

Privately held term debt

Total

1 Interest expense
2 As a percentage of average book value

Cost of
Capital

2003 2

Book Value

Operating Cash Costs 1

2003

2002

2003

2002

2001

—

1,100

113

850

112

$ 1,213

$ 1,035

At December 31, 2003, Brascan had $522 million of committed corporate credit facilities which are utilized

principally as back-up credit lines to support commercial paper issuance. Brascan had no commercial paper

borrowings at year end.

Principal repayments on corporate borrowings due over the next five years and thereafter are as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Publicly traded term debt

Privately held term debt

Total

Percentage of total

2004

$ —

101

$ 101

2005

2006

2007

2008

Beyond

Total

$ —

—

$ 300

—

$ 300

25%

$ 800

$ 1,100

—

113

$ 800

$ 1,213

66%

100%

42 BRASCAN CORPORATION 2003 ANNUAL REPORT

SHAREHOLDERS’ INTERESTS
Shareholders’ interests are comprised of three components: participating interests of other shareholders in

our operating assets; non-participating preferred equity issued by the company and its subsidiaries; and common

equity of Brascan.

Shareholders’ interests at December 31, 2003 and 2002 were as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

2003

2002

2003

2002

2001

Number of
Shares

Underlying
Value

Book Value

Operating Cash Flow 1

Participating interests of others in assets

Real estate

Commercial

Residential 2

Power generation

Other

78.2

15.6

24.1

Non-participating preferred equity

Corporate

Subsidiaries

Common equity

180.8 3

$ 2,376

$ 998

$ 1,092

$ 220

$ 217

$ 204

398

305

144

190

184

144

—

165

199

(5)

3,223

1,516

1,456

294

852

1,009

1,861

7,348

852

1,009

1,861

3,024

735

450

1,185

2,625

566

—

262

425

—

252

361

$12,432

$ 6,401

$ 5,266

$ 943

$ 756

$ 681

1 Represents share of operating cash flows attributable to the interests of the respective shareholders and includes cash distributions
2 Residential real estate interests included in commercial real estate prior to 2003
3 Includes convertible instruments on an “as converted” basis

Participating Interests of Others in Assets

The majority of our commercial and residential real estate operations are conducted through Brookfield Properties

Corporation and Brookfield Homes Corporation, respectively, in which shareholders other than Brascan own an

approximate 50% common share interest. Power generating interests represent the 50% interest of unit holders
in the Great Lakes Hydro Income Fund, through which we own certain of our power generating operations.

Distributions to other shareholders in the form of cash dividends totalled $62 million in 2003 compared with

$55 million in 2002. The undistributed cash flows attributable to minority shareholders are retained in the respective

operating businesses and are available to expand their operations, reduce indebtedness or repurchase equity.

Preferred Equity

The company has $1,861 million of non-participating preferred equity outstanding: $852 million issued by Brascan

and $1,009 million issued by consolidated subsidiaries of the company. The preferred equity enables us to expand

our equity base at low-risk without dilution to common shareholders. The average cost of this capital to the

common shareholder was 6% at year end.

During 2003, we issued $117 million of new preferred equity in the form of C$175 million of 15-year non-cumu-

lative 5.4% preferred shares. Our commercial real estate subsidiary also issued C$200 million of preferred shares

BRASCAN CORPORATION 2003 ANNUAL REPORT

yielding 5.75%, C$200 million of preferred shares yielding 5.20%, and $110 million of preferred shares yielding

5.25%, for total proceeds of $415 million. All of the securities issued may be redeemed on maturity for cash or in

common shares based on current market prices at the company’s option.

Common Equity

On a diluted basis, Brascan had 180.8 million common shares outstanding at year end, a decrease from

183.9 million at December 31, 2002. During 2003, we repurchased 4.6 million common shares under a normal

course issuer bid at an average price of $22.24 per share. During 2002, 7.1 million common shares and equiva-

lents were repurchased in a similar manner at a price of $20.12 per share.

Brascan has two classes of common shares outstanding: Class A and Class B. Each class of shares elects one-half

of the company’s Board of Directors. The Class B shares are held by Partners Limited, a private company owned

by 37 individuals, including a number of the executive officers of Brascan.

FINANCIAL POLICIES

Capital Allocation

We consider effective capital allocation to be critical to our success. As a result, we apply a rigorous approach

towards the allocation of capital among our operating businesses. Capital is invested only when the expected

returns exceed predetermined thresholds, taking into consideration both the degree and magnitude of the relative

downside risks and upside potential and, if appropriate, strategic considerations such as the establishment of new

business activities. We conduct post-investment reviews of all capital allocation decisions to ensure that anticipated

returns are achieved and, if not, to determine what lessons can be learned to avoid the same mistakes in the future.

Liquidity

We strive to maintain sufficient financial liquidity at all times in order to participate in attractive investment oppor-

tunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

As at year end, Brascan and its consolidated subsidiaries had $1.0 billion of undrawn committed credit facilities

with 12 international financial institutions, largely maintained as back-up facilities for the issuance of commercial

paper. We also maintain cash and a portfolio of non-strategic financial assets that can be liquidated to fund invest-

ments as required.

During 2003, we generated $624 million of operating cash flow and we expect this amount to increase by approx-

imately 12% to 15% over the long term. The free cash flow from operations, which includes undistributed cash flow

attributable to minority interests in subsidiaries, totalled $733 million during 2003 and is expected to increase

in line with our operating cash flow. Free cash flow is available to pay common share dividends, expand our operating

base, reduce debt or repurchase common shares as appropriate.

Brascan and its investment partners have recently mailed a tender offer for Canary Wharf Group, plc, which values

the company at £1.6 billion. Should we be successful in acquiring 100% of the company with our partners, our

incremental cash investment will be approximately $350 million. Should we be successful in acquiring less than 75%

of Canary Wharf and not be in a position to privatize the company, our incremental cash investment, prior

44 BRASCAN CORPORATION 2003 ANNUAL REPORT

to further syndication of equity interests in Canary Wharf, could increase to approximately $1.4 billion. While we

believe that this latter scenario is remote, the company has arranged special facilities to fund this amount and has

the financial resources available to support this purchase.

Credit Profile

We endeavour to arrange our affairs to maintain high investment grade ratings and to improve them further over

time. The credit ratings for the company at December 31, 2003 and at the time of the printing of this report were

as follows:

Commercial paper

Term debt

Preferred shares

DBRS

S&P

Moody’s

R-1(low)

A(low)

Pfd-2(low)

A-1(low)

A–

P2(mid)

—

Baa3

—

We also endeavour to ensure that our operating businesses maintain investment grade ratings in order to provide

continuous access to a wide range of financings and to enhance borrowing flexibility, a low cost of capital and access

to various forms of financing unavailable to non-investment grade borrowers.

Use of Derivatives

We utilize a number of financial instruments to manage our foreign currency, commodity and interest rate

positions. As a general policy, we endeavour to maintain a balanced position in terms of foreign currency, although

unmatched positions may be taken from time to time within predetermined limits. Brascan and its subsidiaries

typically maintain a net floating rate liability position because we believe that this results in lower financing costs

over the long term given the company’s substantial annual operating cash flows. As at December 31, 2003, our net

floating rate liability was $1.2 billion. As a result, a 100 basis point increase in interest rates would adversely impact

operating cash flow by $12 million.

Although interest rates remain at historically low levels, we have commenced a program to reduce our floating rate

exposure in anticipation of increasing rates over the next few years. In addition, Brascan’s intent is to maintain

a hedged position with respect to the carrying value of net assets denominated in currencies other than the
U.S. dollar. Accordingly, fluctuation in the value of the U.S. dollar relative to other currencies has a negligible

impact on the company’s net financial position. The company receives certain cash flows, principally from its financial

and power generating operations, that are denominated in Canadian dollars. The estimated impact of a C$0.10

change in the Canada/U.S. exchange rates is a corresponding change in operating cash flow of $10 million per

annum.

The company’s risk management and derivative financial instruments are more fully described in Note 14 to

the Consolidated Financial Statements.

Corporate Guarantees, Commitments and Contingent Obligations

We conduct our operations through entities that are fully or proportionately consolidated in our financial

statements other than equity accounted investments. Noranda and Nexfor, which are owned 42% and 43%, respec-

tively, by Brascan are accounted for on the equity basis.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Brascan provides guarantees and indemnities when required from time to time in respect of fund management,

power marketing and financial activities. The company does not typically guarantee obligations of its subsidiaries

or affiliates. However, Brascan has guaranteed $327 million of subsidiary debt as noted under Other Debt of

Subsidiaries on page 42, and $146 million of contingent obligations included in accounts and other payables which

relates to the company’s financial operations and has guaranteed obligations under power purchase agreements

which amounted to $17 million at year end. These obligations are subject to credit rating provisions and are

supported by financial assets of the principal obligor.

The company may be contingently liable with respect to litigation and claims that arise in the normal course of

business. In addition, the company may execute agreements that provide for indemnifications and guarantees to

third parties. Disclosure of commitments, guarantees and contingencies can be found in the Notes to the

Consolidated Financial Statements.

WORKING CAPITAL AND OTHER BALANCES
The composition of our working capital and other balances is as follows:

A S AT D E C E M B E R 3 1 ( M I L L I O N S )

Working capital balances

Real estate

Power generation

Funds management

International and other

Accounts
Receivable

2003

Accounts
Payable

Net

Accounts
Receivable

2002

Accounts
Payable

Net

$ 375

$ (144)

$ 399

$ 359

231

131

449

242

419

280

(38)

(110)

(74)

(12)

133

197

807

411

464

101

156

316

932

—

330

(23)

(119)

(125)

134

Other items

Future income tax assets

Prepaid expenses and other assets,

deferred credits, provisions and other liabilities

1,053

1,163

508

570

—

582

Net working capital and other

$ 1,623

$ 1,745

$ (122)

$ 1,271

$ 1,262

Working capital balances include the trade accounts receivable and payable held in the normal course of each of

our operating businesses. We endeavour to minimize the amount of capital required in our businesses and in this

regard we have established Titanium Trust, described on page 34, to effectively finance working capital balances

with asset backed commercial paper and medium-term notes.

Other balances include future income tax assets, as well as other accrued asset balances and provisions.

46 BRASCAN CORPORATION 2003 ANNUAL REPORT

OPERATING RESULTS

OPERATING CASH FLOW
A summary of the sources of our operating cash flows is as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S )

2003

2002

2001

Operating income

Real estate

Power generation

Funds management

Property gains

Investment income and other

Expenses

Interest expense

Minority share of income before non-cash items

Other operating costs and taxes

Dividends from Noranda and Nexfor

Cash flow from operations and gains

per common share

$ 841

$ 745

$ 752

172

166

100

156

153

140

116

135

129

1,435

1,214

1,162

471

319

557

466

287

405

492

293

326

$ 624

$ 469

$ 388

$ 3.21

$ 2.38

$ 2.06

Cash flow per share from operations and gains for the year ended December 31, 2003, including dividends from

Noranda and Nexfor, totalled $3.21 after deducting all financing charges, operating costs and the portion of oper-

ating cash flow that is attributable to other investors with interests in our businesses, whether retained or distributed.

This represents a 35% increase from the $2.38 per share generated in 2002, which in turn represented a 16%

increase over 2001. Each of our operating businesses is managed so as to generate sustainable and increasing cash

flow streams, which should result in the value of these operations appreciating over time. The cash flow from oper-

ations shown in the table above includes virtually no return on the $819 million of real estate and power generation

development assets, and includes only the dividends received from our investments in Noranda and Nexfor.

Real estate operations increased their contribution to operating cash flow to $841 million from $745 million in

2002 and $752 million in 2001. The 2003 results reflect outstanding performance from the residential property

operations, which contributed $91 million of additional income compared with 2002. Net operating income from

currently owned commercial properties increased steadily over the past two years, although the aggregate level

declined as expected with the sale of partial interests in major properties.

The contribution from power generation increased by 12% due to capacity additions over the past two years. While

the 2003 results were below expectations due to poor hydrology during much of the year, water levels returned

to normal conditions during the fourth quarter and are exceeding expectations thus far in 2004.

Funds management continued to report increased contributions over the past two years as we continue to expand

our fund offerings and assets under management, while at the same time the level of capital deployed in this sec-

tor has remained relatively constant.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Investment income increased significantly in 2003 with the $57 million net gain recognized on the sale of our

investment in Northgate Exploration.

Property gains include gains on the disposition of commercial properties, as well as lease termination gains. We

recorded a $100 million gain on the sale of a 49% interest in our 245 Park Avenue commercial property.

Minority interest share of cash flow increased, reflecting the interest of those shareholdings with improved

performance, principally in the real estate operations. Operating costs and taxes increased in line with the expansion

in operating activities as well as to reflect cash tax payments by our U.S. home building business. These operations

have been exceedingly profitable, and we expect to make continued cash payments in the future.

NET INCOME
Net income is reconciled to operating cash flow, prior to dividends from Noranda and Nexfor, to reflect non-cash

items as set forth below:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Cash flow from operations and gains

Less: dividends from Noranda and Nexfor

Depreciation and amortization

Taxes and other provisions

Minority share of non-cash items

Total non-cash items

Net income prior to Noranda and Nexfor

Equity accounted income (loss) from Noranda and Nexfor

Excluding restructuring charges and gains

Restructuring charges and gains

Net income

Net income per share

Prior to Noranda and Nexfor

Including Noranda and Nexfor

2003

$ 624

(67)

557

149

165

(100)

214

343

(7)

$ 408

$ 1.61

$ 1.98

2002

$ 469

(64)

405

121

104

(84)

141

264

(36)

(145)

$ 1.23

$ 0.21

2001

$ 388

(62)

326

101

(79)

101

225

(24)

—

$ 201

$ 1.12

$ 0.98

Net income increased significantly in 2003. This was due to the increase in cash flow from operations discussed

above, as well as meaningful improvements in the results of both Noranda and Nexfor due to improved product

prices and cost efficiencies. 2002 results included a net charge of $145 million representing our share of Noranda’s

restructuring charges.

Depreciation and amortization increased in each of 2003 and 2002 due primarily to the acquisition or development

of additional commercial properties and power generation facilities. Proposed changes in accounting guidelines will
require commercial property operations, including ours, to adopt the straight-line method for depreciation which

will result in increased depreciation charges in future years.

Taxes and other provisions, which consist primarily of the non-cash tax provision, increased during 2003 due in

large measure to the increased profitability of Brascan’s operations, particularly in the home building sector, and as

48 BRASCAN CORPORATION 2003 ANNUAL REPORT

a result of increased property gains. Brascan operates with significant tax losses, and expenses the carrying value of

tax losses utilized during the period.

Minority share of non-cash items reflects the extent to which the foregoing charges are attributable to the share-

holders of operating subsidiaries, primarily Brookfield Properties and Brookfield Homes.

Equity accounted income from Noranda and Nexfor contributed $65 million during 2003. The contribution is set

out as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Noranda

Operations
Restructuring charges and gains

Nexfor

Operations

Restructuring charges and gains

Net income (loss)

2003

2002

2001

$ 16

(5)

(2)

$ (41)
(145)

—

$ (28)
—

—

$ 65

$ (181)

$ (24)

Cash Flow Growth and Return on Equity

We have established two principal long-term performance objectives: 12% to 15% annualized growth in operating

cash flow per share over the longer term; and a 20% cash return on equity. Although we exceeded our cash flow

growth target by a significant margin in 2003 and made good progress towards our return on equity objectives,

we recognize that these are aggressive targets and will become increasingly difficult to achieve as our business

grows. Nonetheless we are confident in our ability to achieve these goals over the next few years given the earnings

visibility in a number of our businesses, our stable and growing cash flows, and our ability to redeploy capital that

is currently underperforming.

Y E A R S E N D E D D E C E M B E R 3 1

Cash flow from operations per share

Including property gains
Annual growth

Excluding property gains

Annual growth

Cash return on equity

Book value per common share

Annual return

Long-Term
Target

12% to 15%

15%

20%

2003

2002

2001

$ 3.21

35%

$ 2.93

33%

$17.54

18%

$ 2.38
16%

$ 2.21

19%

$14.85

16%

$ 2.06
25%

$ 1.85

11%

$15.52

13%

FREE CASH FLOW
Our free cash flow represents the operating cash flow retained in the business after dividend payments to
shareholders of subsidiaries, preferred equity distributions to preferred shareholders and sustaining capital expen-

ditures, which totals approximately $45 million for Brascan common shareholders on a levelized basis. Free cash

flow is typically used to pay common share dividends, invest in the business for future growth, reduce borrowings

or repurchase equity.

BRASCAN CORPORATION 2003 ANNUAL REPORT

A summary of Brascan’s free cash flow is as follows:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Receipts

Net operating income

Dividends from Noranda and Nexfor

Disbursements

Interest expense on borrowings

Other operating costs and taxes

Sustaining capital investments

Brascan
Minority interests

Distributions

Minority interests

Preferred equity

Free cash flow

Utilization of Cash Resources

2003

2002

2001

$1,435

1,502

$ 1,214

1,278

$ 1,162

1,224

471

466

30
20

492

30
20

769

$ 733

696

582

714

510

The following table illustrates the utilization of free cash flow generated by our operations and financing initiatives

as well as the reallocation of capital between our operating businesses and the repurchase of common equity and

other shareholder interests:

Y E A R S E N D E D D E C E M B E R 3 1 ( M I L L I O N S )

Free cash flow
Less: Property gains 1

Financing

Borrowings, net of repayments

Net issuance of preferred equity
Net repurchase of common shares

Brascan
Subsidiaries

Investing

Real estate 2
Power generation 2
Funds management and financial assets

Investments

Common share dividends

Net generation (utilization) of cash

Net change in non-cash working capital balances

Total

$1,825

(214)

1,611

215

870

(298)
(507)

280

(11)

(804)

(350)

(509)

(1,674)

(352)

(135)

2003

$ 733

(100)

633

(125)

525

(91)
(125)

184

(121)

(139)

(134)

(415)

(809)

(126)

(118)

168

2002

$ 582

2001

510

(60)

522

568

253

(143)
(243)

435

(71)

(529)

(140)

(40)

(780)

(112)

(115)

(54)

456

(228)

(64)
(139)

(339)

181

(136)

(76)

(54)

(85)

(114)

(82)

Increased (decrease) in cash

$ (60)

$ 50

$ (50)

(60)

1 Included as proceeds under Investing
2 Excludes sustaining capital expenditures which are included in the determination of free cash flow

50 BRASCAN CORPORATION 2003 ANNUAL REPORT

QUARTERLY RESULTS
The 2003 and 2002 results by quarter are as follows:

M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S

2003

2002

2003

2002

2003

2002

2003

2002

Total revenue and gains

$ 667

$ 705

$ 728

$ 727

$ 835

$ 689

$1,140

$ 943

Net operating income

Real estate

Power generation

Funds management

Property gains

Investment income and other

Expenses

Interest expense

Minority share of income
before non-cash items

Other operating costs and taxes

Income before non-cash items

Depreciation and amortization

Taxes and other non-cash items

Minority share of non-cash items

Income before investments

Equity accounted income (loss)
from investments

193

179

191

190

222

185

316

114

(23)

—

307

116

114

(23)

(18)

—

306

291

331

108

115

(22)

118

121

(19)

(27)

317

121

112

(22)

235

100

491

191

—

290

126

113

119

207

(28)

129

101

(20)

Net income

Net income per common share

(1)

(8)

(19)

(176)

$ 100

$ 189

$ (110)

Diluted

Basic

$ 0.23

$ 0.24

$ 0.32

$ 0.33

$ 0.27

$ 0.35

$ 0.48

$ 0.49

$ 0.25

$ 0.26

$ 1.00

$ (0.71)

$ 1.03

$ (0.73)

2003 and 2002 cash flow from operations are as follows:

M I L L I O N S

2003

2002

2003

2002

2003

2002

2003

2002

Income before non-cash items

$ 114

Dividends from Noranda Inc.

Dividends from Nexfor Inc.

$ 115

$ 121

$ 112

$ 207

$ 101

Cash flow from operations and gains

$ 130

$ 114

$ 132

$ 110

$ 138

$ 128

$ 224

$ 117

For the three months ended December 31, 2003, cash flow from operations and gains increased to $224 million
($1.20 per share) compared with $117 million ($0.57 per share) in 2002. The 2003 cash flow results include the

$100 million property gain from the sale of a partial interest in our 245 Park Avenue commercial property during

the fourth quarter, of which $50 million accrues to Brascan after deducting minority interests. The fourth quarter

results also reflect a significant gain on the sale of our investment in Northgate Exploration, included in Investment

Income and Other, as well as improved power generation results due to increased water flows.

BRASCAN CORPORATION 2003 ANNUAL REPORT

On a net income basis, results improved significantly in the fourth quarter reflecting the growth in operating cash

flow and property gains, as well as increased contributions from investments in the resource sector. The 2002

results reflected a one-time charge in the fourth quarter relating to Noranda.

BUSINESS ENVIRONMENT AND RISKS
Our financial results are impacted by the performance of each of our operations and various external factors influ-

encing the specific sectors and geographic locations in which we operate, as well as by macro-economic factors such

as economic growth and changes in currency, inflation and interest rates.

Our strategy is to invest in high quality assets which generate sustainable streams of cash flow. While high quality

assets may initially generate lower returns on capital, we believe that the sustainability and future growth of their

cash flows is more assured over the long term, and as a result, warrant higher valuation levels. We also believe that

the high quality of our asset base protects the company against future uncertainty and positions us to invest with

confidence when new investment opportunities arise.

The following is a brief review of the potential impact these different factors may have on the company’s business

operations. A discussion of the business environment and risks is also contained in our annual information form

which is posted on our web site.

Commercial Properties

Our strategy is to invest in high-quality commercial properties defined by the physical characteristics of the assets,

but more importantly, the certainty of receiving rental payments from the high quality tenants which these properties

attract.

Real estate investments are generally subject to varying degrees of risk depending on the nature of the property.

These risks include changes in general economic conditions (such as the availability and cost of mortgage funds),

local conditions (such as an oversupply of space or a reduction in demand for real estate in an area), the attrac-

tiveness of the properties to tenants and competition from other landlords with competitive space.

Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs

and related charges, must be made regardless of whether or not a property is producing sufficient income to

service these expenses. Our commercial properties are subject to mortgages, which require substantial debt service

payments. If our real estate operations became unable or unwilling to meet mortgage payments on any property,

losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale.

Real estate is relatively illiquid. Such illiquidity will tend to limit our ability to promptly change the nature of the

portfolio in response to changing economic or investment conditions. Also, financial difficulties of other property

owners resulting in distress sales may depress real estate values in the markets in which we operate in times of
illiquidity.

52 BRASCAN CORPORATION 2003 ANNUAL REPORT

Our commercial properties generate a relatively stable source of income from contractual tenant rent payments.

Continued growth of rental income is dependent on strong leasing markets to ensure expiring leases are renewed

and new tenants are found promptly to fill vacancies.

While the outlook for commercial office rents is positive in the longer term, 2004 may not provide the same level

of increases in rental rates on renewal as compared to 2003. We are, however, substantially protected against these

short-term market conditions, since most of our leases are long term in nature with an average term of 10 years.

A protracted disruption in the economy, such as the onset of a severe recession, could place downward pressure on

overall industry occupancy levels and, as a result, the net effective rents achievable by ourselves.

Our commercial property operations have insurance covering certain acts of terrorism for up to $500 million
of damage and business interruption costs. We continue to seek additional coverage equal to the full replacement

cost of our assets; however, until this type of coverage becomes commercially available on a reasonable economic

basis, any damage or business interruption costs as a result of uninsured acts of terrorism could result in a material

cost to the company.

Residential Properties

In the residential land development and home building businesses, markets have been favourable over the past five

years with strong demand for well located building lots, particularly in the United States.

The value of land and housing assets is affected by consumer confidence, job stability and interest rates due to their

impact on home buyers’ decisions. These conditions can affect consumers’ outlooks and, in particular, the price

and volume of home purchases.

While recent economic conditions would normally have reduced the level of home sales, low interest rates have

kept home sales near record levels over the past 18 months. A sustained drop in consumer confidence or increased

interest rates would negatively affect these operations.

Power Generating Operations

Operating income from hydroelectric power generation fluctuates in relation to the availability of water and our
ability to generate and deliver power to markets with the highest power rates. While changes in the level

of precipitation impact the amount of power generated by individual units, the diversified locations of our hydro-

electric power stations across several different watersheds in Canada and the United States help to reduce

the financial impact of these fluctuations. Pricing risk is mitigated through fixed-price contracts, forward sales of

electricity, and the regulated revenues we earn from our transmission and distribution business. Furthermore, the

majority of our contracts are structured to ensure that we are only obligated to deliver power that we actually

produce to minimize the risk of unmatched contractual obligations.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Funds Management Operations

Our funds management operations are cash flow generating businesses which, managed carefully, should produce

stable cash flows. Unfavourable economic conditions generally create a higher volume of investment and merchant

banking opportunities. In addition, economic conditions which lead to higher interest rate spreads between funds

borrowed and funds loaned out, also have a favourable impact on cash flows. The stability of the cash flows will

increase as we expand the scope of our funds management activities. Severe economic conditions can, however,

have a major impact on profitability. Since we operate largely within our areas of expertise, we are prepared to

assume ownership of and operate most assets which we finance. As a result, should it be necessary to acquire

financed assets, we are generally able to do so at a lower cost than if these assets were purchased through the capital

markets.

Investments

Investments consist largely of equity interests in Noranda and Nexfor, which are owned 42% and 43% respectively,

by Brascan. Both of these investments are cyclical in nature. Their products are primarily sold in the United States,

Europe and Asia. As a result, fluctuations in the level of economic activity in these markets influence the demand

for and prices of the resource products produced by Noranda and Nexfor.

With the increase in commodity prices over the past year, our share of the earnings of these investments improved

substantially during 2003 and are expected to increase dramatically in 2004.

Execution of Strategy

Our strategy for building long-term shareholder value is to develop or acquire high quality assets which generate

sustainable and increasing cash flows, with the objective of achieving higher returns on capital invested over the

long term.

As part of our growth strategy, we endeavour to maintain a high level of liquidity in order to invest on a value basis

when attractive opportunities arise. This entails adding assets to our existing businesses when the competition for

assets is lowest, either due to depressed economic conditions or when concerns exist relating to a particular industry.

However, there is no certainty that we will be able to continue to acquire or develop additional high quality assets
at attractive prices to supplement growth from our existing assets.

The successful execution of a value investment strategy requires careful timing and business judgment, as well

as the resources to complete asset purchases and restructure them as required, notwithstanding difficulties being

experienced in the particular industry. Our diversified business base and the sustainability of our cash flows provide

an important element of strength in executing this strategy.

The conduct of our business and the execution of our growth strategy rely heavily on teamwork. We believe that

cooperation between our operations, as well as our team-oriented management structure, enable us to respond
promptly to opportunities and problems when they arise.

54 BRASCAN CORPORATION 2003 ANNUAL REPORT

Management stability is achieved by encouraging senior executives to hold substantial share ownership in the

company. However, declining share prices may on occasion encourage executives with shorter term objectives

to leave. This can lead to a loss of business momentum unless management changes are quickly and effectively

implemented. There is no certainty that management changes will always be successfully implemented.

OUTLOOK
We are optimistic as we review the outlook for our operations in 2004. The global economic environment has

strengthened, although there are also conditions that warrant continued caution.

We believe that each of our operations is well positioned for growth. In the real estate sector, the leasing markets

relevant to us are improving slowly, although we are planning our affairs with the expectation that a sustained

recovery in rental rates does not commence until 2005. Fortunately, our strong tenant lease profile and low vacancies

give us a high level of confidence that we will achieve our growth targets in 2004. Furthermore, we will benefit

from the completion of our 300 Madison Avenue office project in late 2003 and the acquisition of the 1625 Eye Street

property in Washington, D.C. in late 2003.

Residential markets remain exceptionally strong in our areas of operation. As we go to print, we have in hand over

50% of our planned home closings for all of 2004. Accordingly, we expect another strong year in this business. Real

estate services continue to benefit from the buoyant commercial and residential markets. We expended considerable

effort to strengthen these operations during 2003 and finished the year with strong momentum. We see this

carrying into 2004 and, accordingly, look for continued increases in the contribution from these operations.

Our power operations have benefited from greatly improved water flows since September of 2003. We expect cash

flows to increase due to the acquisitions made during the past three years. A return to long-term average water

conditions will significantly improve the results from these operations compared to 2003.

We have been steadily building our funds management operating platform by increasing the resources devoted to

these operations and establishing new funds. During 2004, we will be concentrating on investing the new capital

committed by us and by our partners. We expect to achieve this over the course of the year, based on the deal flow

we are currently experiencing. This should positively impact our results in 2004.

We have discussed elsewhere in this report our activities with respect to Canary Wharf Group, plc and Noranda

Inc. An acquisition of Canary Wharf on the basis that is currently contemplated will provide us with a major interest

in an outstanding group of assets for a relatively modest capital outlay. We would expect this investment to have

little impact on cash flows in the near term, while providing the potential for significant returns over the longer

term.

BRASCAN CORPORATION 2003 ANNUAL REPORT

With respect to Noranda, the dramatic improvement in metal prices following completion of its operational and

financial restructuring should result in strong earnings being recorded from this investment in 2004. Similarly,

Noranda’s improved position increases the liquidity of our investment position and the potential for enhancing our

returns on capital.

Nexfor is continuing to experience extremely strong OSB prices, which are likely to result in significant operating

margins for the first part of 2004 in relation to the comparable period in 2003.

Our cost of capital is expected to remain substantially unchanged in 2004. We intend to reduce our floating rate

interest profile in anticipation of rising interest rates. Although this may result in higher borrowing costs, we believe

this will prove to be beneficial over the longer term. We expect to achieve this by continuing to issue long-term,
fixed-rate capital where possible, and by adjusting the interest rate profile of our existing debt and financial assets.

Needless to say, there are many other factors that will impact our performance in 2004, both positively and

negatively. We have described the principal risks earlier in this report, and we will continue to manage our business

in order to withstand market fluctuations, for example, through the use of long-term revenue contracts and long-

term financings. It is this measured approach to business that gives us the confidence that we will meet our 2004

performance objectives with respect to cash flow growth and value creation.

February 11, 2004

56 BRASCAN CORPORATION 2003 ANNUAL REPORT

CONSOLIDATED FINANCIAL STATEMENTS

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The accompanying financial statements and other financial

to express to the shareholders their opinion on the consolidated

information have been prepared by the company’s management

financial statements. Their report is set out below.

which is responsible for their integrity and objectivity. To fulfill

this responsibility, the company maintains policies, procedures

and systems of internal control to ensure that its reporting practices

and accounting and administrative procedures are appropriate.

These policies and procedures are designed to provide a high

degree of assurance that relevant and reliable financial informa-

tion is produced.

The consolidated financial statements have been further exam-

ined by the Board of Directors and by its Audit Committee,

which meets with the auditors and management to review the

activities of each and reports to the Board of Directors. The

auditors have direct and full access to the Audit Committee and

meet with the committee both with and without management

present. The Board of Directors, directly and through its Audit

These financial statements have been prepared in conformity

Committee, oversees management’s financial reporting respon-

with accounting principles generally accepted in Canada, and

sibilities and is responsible for reviewing and approving the

where appropriate, reflect estimates based on management’s

financial statements.

judgment. The financial information presented throughout this

Annual Report is generally consistent with the information con-

tained in the accompanying consolidated financial statements.

Deloitte & Touche, LLP, the independent auditors appointed

by the shareholders, have examined the consolidated financial

statements set out on pages 58 through 95 in accordance with

Toronto, Canada

Bryan K. Davis

auditing standards generally accepted in Canada to enable them

February 11, 2004

Senior Vice-President, Finance

AUDITORS’ REPORT

To the Shareholders of Brascan Corporation:

We have audited the consolidated balance sheets of Brascan

An audit also includes assessing the accounting principles used

Corporation as at December 31, 2003 and 2002 and the

and significant estimates made by management, as well as eval-

consolidated statements of income, retained earnings and cash

uating the overall financial statement presentation.

flows for the years then ended. These financial statements are

the responsibility of the company’s management. Our respon-

sibility is to express an opinion on these financial statements

based on our audits.

In our opinion, these consolidated financial statements

present fairly, in all material respects, the financial position of the

company as at December 31, 2003 and 2002 and the results of its

operations and its cash flows for the years then ended in accor-

We conducted our audits in accordance with Canadian general-

dance with Canadian generally accepted accounting principles.

ly accepted auditing standards. Those standards require that we

plan and perform an audit to obtain reasonable assurance

whether the financial statements are free of material misstate-

ment. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements.

Toronto, Canada

February 11, 2004

Deloitte & Touche, LLP

Chartered Accountants

Consolidated Balance Sheet

Consolidated Statement of Income

Consolidated Statement of Retained Earnings

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

BRASCAN CORPORATION 2003 ANNUAL REPORT

CONSOLIDATED BALANCE SHEET

A S A T D E C E M B E R 3 1
M I L L I O N S

Assets

Operating assets
Real estate
Power generation
Funds management

Investments
Cash and cash equivalents
Financial assets
Accounts receivable and other

Liabilities

Non-recourse borrowings

Property specific mortgages
Other debt of subsidiaries

Corporate borrowings
Accounts and other payables

Shareholders’ interests

Minority interests of others in assets
Preferred equity
Corporate
Subsidiaries
Common equity

On behalf of the Board:

Note

2003

2002

2
3
4

6
7

8
8
9
10

12
12
13

$ 8,311
1,927
1,215
11,453
2,003
382
854
1,623

$ 16,315

$ 4,881
2,075
1,213
1,745

1,516

852
1,009
3,024

7,912
1,587
1,138
10,637
1,464
332
718
1,271

$ 14,422

4,992
1,867
1,035
1,262

1,456

735
450
2,625

$ 16,315

$ 14,422

Robert J. Harding, FCA, Director

Jack M. Mintz, Director

58 BRASCAN CORPORATION 2003 ANNUAL REPORT

CONSOLIDATED STATEMENT OF INCOME

Y E A R S E N D E D D E C E M B E R 3 1
M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S

Total revenues and gains

Net operating income

Real estate
Power generation
Funds management
Property gains
Investment income and other

Expenses

Interest expense
Minority share of income before non-cash items
Other operating costs and taxes
Income before non-cash items

Depreciation and amortization
Taxes and other non-cash items
Minority share of non-cash items

Income before investments

Equity accounted income (loss) from investments

Net income

Net income per common share

Diluted
Basic

Note

17
16

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

2003

$ 3,370

2002

3,064

841
172
166
100
156
1,435

471
319
88
557

149
165
(100)
343
65

408

1.98
2.03

$
$

745
153
140
60
116
1,214

466
287
56
405

121
104
(84)
264
(181)

0.21
0.21

2002

1,596
83
(5)
(44)
(112)

(27)

$
$

Y E A R S E N D E D D E C E M B E R 3 1
M I L L I O N S

Retained earnings, beginning of year
Net income
Preferred equity issue costs
Shareholder distributions – Preferred equity
– Common equity

Amount paid in excess of the book value

of common shares purchased for cancellation

Retained earnings, end of year

Note

22
22

2003

$ 1,491
408
(4)
(58)
(126)

(26)

$ 1,685

1,491

BRASCAN CORPORATION 2003 ANNUAL REPORT

CONSOLIDATED STATEMENT OF CASH FLOWS

Y E A R S E N D E D D E C E M B E R 3 1
M I L L I O N S

Cash flow from operations and gains

Income before non-cash items
Dividends from Noranda Inc.
Dividends from Nexfor Inc.

Operating activities

Commercial property gains, net of minority share
Net change in non-cash working capital balances and other

Financing activities

Corporate borrowings, net of repayments
Property specific mortgages, net of repayments
Other debt of subsidiaries, net of repayments
Corporate preferred equity issued
Preferred equity of subsidiaries issued
Common shares and equivalents repurchased
Common shares of consolidated subsidiaries issued
Common shares of consolidated subsidiaries repurchased
Undistributed minority share of cash flow
Shareholder distributions

Investing activities

Investment in or sale of operating assets, net

Real estate
Power generation
Funds management
Financial assets

Investments

Cash and cash equivalents

Increase (decrease)
Balance, beginning of year

Balance, end of year

Note

2003

557
49
18
624

(50)
168

742

177
(384)
82
117
408
(91)
8
(133)
182
(184)

182

(161)
(164)
(89)
(45)
(415)

(874)

50
332

382

21
21
21

21
21

2002

405
48
16
469

(29)
(115)

325

209
483
(124)
126
127
(143)
65
(308)
178
(156)

457

(113)
(539)
(282)
142
(40)

(832)

(50)
382

332

60 BRASCAN CORPORATION 2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF ACCOUNTING POLICIES

These consolidated financial statements are prepared in accordance with generally accepted accounting principles

(“GAAP”) as prescribed by the Canadian Institute of Chartered Accountants (“CICA”). The company’s account-

ing policies and its financial disclosure in respect of its real estate operations are substantially in accordance with

the recommendations of the Canadian Institute of Public and Private Real Estate Companies (“CIPPREC”).

(a) Basis of Presentation

All currency amounts are in United States dollars (“U.S. dollars”) unless otherwise stated. The consolidated finan-

cial statements include the accounts of Brascan Corporation (“the company”) and the entities over which it has

control.

The company accounts for its investments in Noranda Inc. (“Noranda”), Nexfor Inc. (“Nexfor”) and other invest-

ments over which it has significant influence, on the equity basis. Interests in jointly controlled partnerships and

corporate joint ventures are proportionately consolidated.

(b) Acquisitions

The cost of acquiring a company is allocated to its identifiable net assets on the basis of the estimated fair values at

the date of purchase. The excess of acquisition costs over the underlying net book values of assets acquired is allo-

cated to the underlying tangible and intangible assets with the balance being goodwill. The allocated amounts are

amortized over the estimated useful lives of the assets. The company periodically evaluates the carrying values of

these amounts based on reviews of estimated future operating income and cash flows on an undiscounted basis,

and any impairment is charged against income at that time. Goodwill arising on acquisitions is allocated to report-

ing units and tested annually for impairment.

(i) Commercial properties

Commercial properties held for investment are carried at cost less accumulated depreciation. For operating prop-

erties and properties held for long-term investment, a write-down to estimated net realizable value is recognized

when a property’s estimated undiscounted future cash flow is less than its carried value. The projections of the

future cash flow take into account the specific business plan for each property and management’s best estimate of

the most probable set of economic conditions anticipated to prevail in the market.

Depreciation on buildings is provided on the sinking-fund basis over the useful lives of the properties to a maximum

of 60 years. The sinking-fund method provides for a depreciation charge of an annual amount increasing on a com-

pounded basis of 5% per annum. Depreciation is determined with reference to the carried value, remaining esti-

mated useful life and residual value of each rental property. Tenant improvements and re-leasing costs are deferred

and amortized over the lives of the leases to which they relate.

Development properties consist of properties for which a major repositioning program is being conducted and

properties which are under construction. These properties are recorded at cost, including pre-development expen-

ditures, unless an impairment is identified requiring a write-down to net realizable value.

BRASCAN CORPORATION 2003 ANNUAL REPORT

(ii) Residential properties

Homes and other properties held for sale, which include properties subject to sale agreements, are recorded at the

lower of cost and net realizable value. Income received relating to homes and other properties held for sale is applied

against the carried value of these properties.

Development land and infrastructure is recorded at cost unless impairment is identified requiring a write-down to

net realizable value. Costs are allocated to the saleable acreage of each project or subdivision in proportion to the

anticipated revenue.

(d) Power Generation

Power generating facilities are recorded at cost, less accumulated depreciation. Facilities are tested for impairment

based on an assessment of net recoverable amounts in the event of any adverse developments. A write-down to

estimated net realizable value is recognized if a facility’s estimated undiscounted future cash flow is less than its

carried value. The projections of the future cash flow take into account the operating plan for each facility and man-

agement’s best estimate of the most probable set of economic conditions anticipated to prevail in the market.

Depreciation on power generating facilities and equipment is provided at various rates on a straight-line basis over

the estimated service lives of the assets, which are up to 60 years for hydroelectric generation assets and up to

40 years for transmission, distribution and other assets.

Power generating facilities and infrastructure under development consist of power generating facilities under

construction. These assets are recorded at cost, including pre-development expenditures, unless impairment is iden-

tified requiring a write-down to net realizable value.

(e)

Funds Management and Financial Assets

Funds management operations include activities where the company manages investment funds for itself and

on behalf of other institutional investors. Financial assets represent securities that are not actively deployed within

financial operations, and which can, with varying degrees of timing, be liquidated and utilized to fund strategic

acquisitions.

Portfolio securities are carried at the lower of cost and their estimated net realizable value with any valuation adjust-

ments charged to income. This policy considers the company’s intent to hold an investment through periods where

quoted market values may not fully reflect the underlying value of that investment. Accordingly, there are periods

where the “fair value” or the “quoted market value” may be less than cost. In these circumstances, the company

reviews the relevant security to determine if it will recover its carrying value within a reasonable period of time

and will reduce the carrying value, if necessary. The company also considers the degree to which estimation is

incorporated into valuations and any potential impairment relative to the magnitude of the related portfolio. Securities

held within the company’s trading portfolio, which are designated as trading securities at the time of acquisition,

are recorded at fair value and any valuation adjustments recorded as income.

In determining fair values, quoted market prices are generally used where available and, where not available, man-

agement estimates the amounts which could be recovered over time or through a transaction with knowledgeable

and willing third parties under no compulsion to act.

62 BRASCAN CORPORATION 2003 ANNUAL REPORT

Loans and notes receivable are carried at the lower of cost and estimated net realizable value calculated based on

expected future cash flows, discounted at market rates for assets with similar terms and investment risks.

(f) Revenue and Expense Recognition

(i) Commercial property operations

Recognition of revenue from a commercial property commences when construction is complete and the property

is available for its intended use. Prior to this, the property is categorized as a development property, and revenue

related to such property is applied to reduce development costs.

The company has retained substantially all of the risks and benefits of ownership of its commercial properties and

therefore accounts for leases with its tenants as operating leases. Rental revenue includes participating rents and

recoveries of operating expenses, including property, capital and large corporation taxes.

(ii) Residential property operations

Revenue from the sale of residential land is recorded when the collection of the sale proceeds is reasonably assured

and all other significant conditions are met. Properties which have been sold, but for which these criteria have not

been satisfied, are included in development property or residential inventory assets.

(iii) Power generation

Revenue from the sale of electricity is recorded at the time power is provided based upon output delivered and

capacity provided at rates as specified under contract terms or prevailing market rates.

(iv) Funds management and financial assets

Revenue from loans and securities, less a provision for uncollectible amounts, is recorded on the accrual basis.

Provisions are established in instances where, in the opinion of management, there is reasonable doubt concerning

the repayment of loans or the realization of the carrying values of portfolio securities or portfolio investments.

Gains on the exchange of assets which do not represent a culmination of the earnings process are deferred until

realized by sale. Gains resulting from the exercise of options and other participation rights are recognized when the

securities acquired are sold.

The net proceeds recorded under reinsurance contracts are accounted for as deposits when a reasonable possibility

that the company may realize a significant loss from the insurance risk does not exist.

(v) Real estate services

Commissions from property brokerage are recognized at the time of the closing of the related real estate

transaction.

(g) Capitalized Costs

Capitalized costs on assets under development and redevelopment include all expenditures incurred in connection

with the acquisition, development and construction until the asset is available for its intended use. These expendi-

tures consist of costs and interest on debt that is related to these assets. Ancillary income relating specifically

to such assets during the development period is treated as a reduction of costs.

BRASCAN CORPORATION 2003 ANNUAL REPORT

(h) Pension Benefits and Employee Future Benefits
The costs of retirement benefits for defined benefit plans and post-employment benefits are recognized as the ben-
efits are earned by employees. The company uses the accrued benefit method pro-rated on the length of service
and management’s best estimate assumptions to value its pension and other retirement benefits. Assets are valued
at fair value for purposes of calculating the expected return on plan assets. For defined contribution plans, the
company expenses amounts as paid.

(i) Derivative Financial Instruments
The company and its subsidiaries utilize derivative financial instruments primarily to manage financial risks, including
interest rate, commodity and foreign exchange risks. Hedge accounting is applied when the derivative is designated
as a hedge of a specific exposure and there is reasonable assurance that it will continue to be effective as a hedge
based on an expectation of offsetting cash flows. Realized and unrealized gains and losses on foreign exchange
forward contracts and currency swaps designated as hedges of currency risks are included in the cumulative trans-
lation adjustment account when the currency risk relates to a net investment in a self-sustaining subsidiary and are
otherwise included in income in the same period as when the underlying asset, liability or anticipated transaction
affects income. The periodic exchanges of payments on interest rate swaps designated as hedges of debt are recorded
on an accrual basis as an adjustment to interest expense. The periodic exchanges of payments on power generation
commodity swaps designated as hedges are recorded on a settlement basis as an adjustment to power generation
income. Premiums paid on options are initially recorded as assets and are amortized into earnings over the term
of the option contract. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as
a hedge or the hedging relationship is terminated. The fair value of the derivative that was deferred by the application
of hedge accounting is recognized in income over the term of the original hedging relationship.

Derivative financial instruments that are not designated as hedges are carried at estimated fair values and gains and
losses arising from changes in fair values are recognized in income in the period the changes occur. The use of non-
hedging derivative contracts is governed by documented risk management policies and approved limits. Derivative
financial instruments of a financing nature are recorded at fair value determined on a credit adjusted basis.

Income Taxes

(j)
The company uses the asset and liability method whereby future income tax assets and liabilities are determined
based on differences between the carrying amounts and tax bases of assets and liabilities, and measured using the
tax rates and laws that will be in effect when the differences are expected to reverse.

(k) Reporting Currency and Foreign Currency Translation
During the first quarter of 2003, the U.S. dollar became the functional currency of the company’s head office operations
and the company adopted the U.S. dollar as its reporting currency.

Prior to the change in reporting currency, the accounts of subsidiaries having a functional currency other than the
Canadian dollar were translated using the current rate method under which assets and liabilities were translated
at the exchange rate prevailing at the period-end and revenues and expenses at average rates during the period.
Gains or losses on translation were deferred and included in the cumulative translation adjustment account. Gains or
losses on foreign currency denominated balances and transactions that were designated as hedges of net investments
in these subsidiaries were reported in the same manner.

64 BRASCAN CORPORATION 2003 ANNUAL REPORT

Subsequent to the change in reporting currency, the accounts of subsidiaries having a functional currency other

than the U.S. dollar are translated using the current rate method. Gains or losses on translation are deferred

and included in the cumulative translation adjustment account. Gains or losses on foreign currency denominated

balances and transactions that are designated as hedges of net investments in these subsidiaries are reported in the

same manner.

Foreign currency denominated monetary assets and liabilities of the company and subsidiaries where the functional

currency is the U.S. dollar are translated at the rate of exchange prevailing at period-end and revenues and expenses

at average rates during the period. Gains or losses on translation of these items are included in the consolidated

statement of income. Gains or losses on transactions which hedge these items are also included in the consolidated

statement of income.

(l)

Stock-Based Compensation

The company and its consolidated subsidiaries account for stock options using the fair value method. Under the

fair value method, compensation expense for stock options is determined based on the fair value at the grant date

using an option pricing model and charged to income over the vesting period.

(m) Business Combinations, Goodwill and Other Intangible Assets

The company accounts for business combinations using the purchase method of accounting which establishes

specific criteria for the recognition of intangible assets separately from goodwill. Goodwill is not amortized, but is

subjected to impairment tests on at least an annual basis.

(n) Carrying Value of Assets

The company assesses the carrying values of long-lived assets initially based on the net recoverable amounts deter-

mined on an undiscounted cash flow basis. If the carrying value of an asset exceeds its net recoverable amount,

an impairment loss is recognized to the extent that the fair value is below the asset’s carrying value. Fair value is

determined based on quoted market prices when available, otherwise on the discounted cash flows over the life

of the asset.

(o) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires manage-

ment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period. Actual results could differ from those estimates. Significant estimates

are required in the determination of cash flows and probabilities in assessing net recoverable amounts and net realizable

values; tax and other provisions; hedge effectiveness; and fair values for disclosure purposes.

(p) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and all highly liquid short-term investments with

original maturity less than 90 days.

BRASCAN CORPORATION 2003 ANNUAL REPORT

(q) Changes in Accounting Policies

Functional currency

(i)
During the first quarter of 2003, the U.S. dollar became the functional currency of the company’s head office
operations as a result of the increase in U.S. dollar-denominated activity of those operations as compared to prior
years. Concurrent with this change in functional currency, the company adopted the U.S. dollar as its reporting
currency. The prior year’s financial statements have been translated into U.S. dollars using the current rate method.

(ii) Guarantees
Effective January 1, 2003 the company adopted the requirements of the CICA Accounting Guideline 14,
“Disclosure of Guarantees” (AcG 14), which requires additional disclosure about a guarantor’s obligations under
certain guarantees in the financial statements. AcG 14 defines a guarantee as a contract that contingently requires
the guarantor to make payments to a guaranteed party based on: (a) changes in the underlying economic charac-
teristic that is related to an asset, liability or an equity security of the guaranteed party; (b) failure of another party
to perform under an obligating agreement; or (c) failure of a third party to pay its indebtedness when due.

Future Accounting Policy Changes

(r)
The following future accounting policy changes may have an impact on the company, although the impact, if any,
has not been determined at this time. In July 2003, the CICA issued handbook section 1100, “Generally Accepted
Accounting Principles”. The section establishes standards for financial reporting in accordance with GAAP, and provides
guidance on sources to consult when selecting accounting policies and determining appropriate disclosures when
a matter is not dealt with explicitly in the primary sources of GAAP. The company will implement the new section
prospectively beginning on January 1, 2004. Due to the prospective nature of this change, there is no impact
on the company’s consolidated financial statements as of the implementation date; however, as a result of the new
standard the company will commence recording income arising from tenant leases and depreciation on buildings
on a straight-line basis.

In March 2003, the CICA issued Section 3110, “Asset Retirement Obligations”, effective for financial statements
issued for fiscal years beginning on or after January 1, 2004. Section 3110 addresses the recognition and re-meas-
urement of obligations associated with the retirement of a tangible long-lived asset. This standard provides that
obligations associated with the retirement of tangible long-lived assets be recorded as liabilities when those obliga-
tions are incurred, with the amount of the liability initially measured at fair value. These obligations are capitalized
to the book value of the related long-lived assets and are depreciated over the useful life of the related asset. Section 3110
is not expected to have a material impact on the consolidated financial statements of the company.

In June 2003, the CICA issued Accounting Guideline 15, “Consolidation of Variable Interest Entities” (AcG 15).
AcG 15 provides guidance for applying the principles in Section 1590, “Subsidiaries”, to those entities (defined as
Variable Interest Entities (VIEs)), in which either the equity at risk is not sufficient to permit that entity to finance
its activities without additional subordinated financial support from other parties, or equity investors lack voting
control, an obligation to absorb expected losses, or the right to share expected residual returns. AcG 15 requires
consolidation of VIEs by the Primary Beneficiary, which is defined as the party which has exposure to the majority
of a VIEs expected losses and/or expected residual returns. The company is in the process of assessing the impact
of the amended standard on the consolidated financial statements.

66 BRASCAN CORPORATION 2003 ANNUAL REPORT

In November 2003, the Accounting Standards Board (AcSB) approved a revision to CICA Section 3860, Finan-

cial Instruments: Disclosure and Presentation, to require certain obligations that must or could be settled with

a variable number of the issuer’s own equity instruments to be presented as a liability. It is expected that this will

require the reclassification to liabilities of certain of the company’s preferred shares and securities that are currently

included in equity. Similar reclassifications are expected for the preferred equity securities issued by the company’s

subsidiaries.

Effective January 1, 2004, the company will adopt Accounting Guideline 13, “Hedging Relationships” (AcG 13),

the new accounting guideline issued by the CICA which increases the documentation, designation and effective-

ness criteria to achieve hedge accounting. The guideline requires the discontinuance of hedge accounting for

hedging relationships previously established that do not meet the criteria at the date it is first applied. AcG 13 does

not change the method of accounting for derivatives in hedging relationships, but EIC 128, “Accounting for

Trading, Speculative or Non-Hedging Derivative Financial Instruments”, effective when AcG 13 is adopted,

requires fair value accounting for derivatives that do not qualify for hedge accounting.

(s) Comparative Figures

Certain of the prior year’s figures have been reclassified to conform with the 2003 presentation.

REAL ESTATE

M I L L I O N S

Commercial properties

Residential properties

Income producing land

Development properties

Real estate services

Total

Commercial Properties

M I L L I O N S

Commercial properties
Less: accumulated depreciation

Total

2003

$ 6,622

738

129

774

2002

5,960

650

1,195

$ 8,311

7,912

2003

$ 7,137
515

$ 6,622

2002

$ 6,385
425

$ 5,960

(a) Commercial properties carried at a net book value of approximately $2,380 million (2002 – $2,362 million)

are situated on land held under leases or other agreements largely expiring after the year 2069. Minimum rental

payments on land leases are approximately $22 million (2002 – $22 million) annually for the next five years and

$996 million (2002 – $1,015 million) in total on an undiscounted basis.

During the year, the company disposed of whole and partial interests in properties for proceeds totalling $469 million.

In addition, the company reclassified $558 million from development properties to commercial properties in respect

of a commercial property for which the development period was substantially completed on December 31, 2003.

The company also acquired a property in Washington, D.C. for $157.5 million.

BRASCAN CORPORATION 2003 ANNUAL REPORT

(b) Construction costs of $7 million (2002 – $9 million) were capitalized to the commercial property portfolio for

properties undergoing redevelopment in 2003.

Residential Properties

Residential properties include infrastructure, land and construction in progress for single family homes and

condominiums.

The company, through its subsidiaries, is contingently liable for obligations of its associates in its residential

development land joint ventures. In each case, all of the assets of the joint venture are available first for the purpose

of satisfying these obligations, with the balance shared among the participants in accordance with predetermined

joint venture arrangements.

Income Producing Land

M I L L I O N S

Timberlands

– owned

Agricultural lands

Total

2003

129

2002

Income producing lands generate current income, which is included in income from real estate operations.

Development Properties

M I L L I O N S

Commercial development properties

Residential lots – owned

– optioned

Total

2003

509

246

774

2002

826

345

$ 1,195

Development properties include commercial development land and density rights, and residential land owned and

under option.

During 2003, the company capitalized construction and related costs of $123 million (2002 – $189 million) and
interest costs of $44 million (2002 – $28 million) to its commercial development sites, and interest costs of $28 million

(2002 – $17 million) to its residential land operations.

Real Estate Services

M I L L I O N S

Centract Residential Property Services

Brookfield LePage Facilities Management

Brookfield Residential Management Services

Royal LePage Commercial Brokerage Services

Total

68 BRASCAN CORPORATION 2003 ANNUAL REPORT

2003

2002

Real estate services assets include the fixed and $20 million (2002 – $17 million) of goodwill and other intangible

assets associated with the company’s real estate services businesses. These services include residential and commercial

brokerage, move management, facilities and condominium management and other services associated with commercial

and residential real estate. Property management of the approximate 50 million square feet represented by the

company’s commercial property portfolio is included within these operations.

POWER GENERATION

M I L L I O N S

Property, plant and equipment

Generation

Transmission
Distribution and other

Less:

Accumulated depreciation

Investment in Louisiana HydroElectric Power

Generating facilities under development

Total

2003

2002

$ 1,762
130
60

1,952

298

1,654

228

$ 1,336

99
44

1,479

209

1,270

210

107

$ 1,927

$ 1,587

Generation includes the cost of the company’s 44 hydroelectric generating stations (2002 – 37) in Ontario, Quebec,

Maine, New Hampshire, British Columbia and Brazil, and the Lake Superior Power gas-fired cogeneration plant.

Transmission and distribution is comprised of the cost of regulated transmission and distribution facilities located

in northern Ontario.

The company’s hydroelectric power facilities operate under various agreements for water rights which extend to or

are renewable over terms through the years 2009 to 2044. The company’s transmission and distribution network

operates under a regulated rate base arrangement which is applied to its invested capital.

During 2003, the company completed the development of, through a 50%-owned joint venture, a 30 megawatt

(MW) hydroelectric generating station in British Columbia for $51 million, and a 100%-owned 45 MW hydro-

electric generation station in Ontario for a cost of $57 million. In addition, during 2003 the company acquired

three hydroelectric generating stations located in New England, with a combined generating capacity of 17 MW for

an aggregate cash purchase price of $28 million. In December 2003, the company’s three hydroelectric generating

stations in Brazil commenced operations with a total installed capacity of 60 MW.

During 2002, the company acquired 16 hydroelectric generating stations located in northern Ontario, Maine

and New Hampshire with a combined generating capacity of 645 MW for an aggregate cash purchase price of

$411 million. The operations were acquired in three separate transactions and include interconnections with the
Ontario and New England power grids.

BRASCAN CORPORATION 2003 ANNUAL REPORT

The company accounts for its 75% residual interest in the equity of Louisiana HydroElectric Power under the equity

method as it does not have voting control over the investee. The financial statements of Louisiana HydroElectric

Power for 2003 and 2002 are summarized as follows:

M I L L I O N S

Assets

Debt

Other liabilities

Operating revenues

Operating expenses

Net income

FUNDS MANAGEMENT

M I L L I O N S

Portfolio securities

Loans and notes receivable

Other

Total

(a) Portfolio Securities

M I L L I O N S

Debentures

Preferred shares

Common shares

Total

Note

(a)

(b)

2003

$ 1,044

812

100

138

2003

704

409

102

2002

$ 1,015

806

133

2002

287

751

100

$ 1,215

$ 1,138

2003

553

150

704

2002

164

104

287

Portfolio securities include $54 million (2002 – nil) of securities held within the company’s trading portfolio which

are recorded at fair market value. The balance of securities are carried at the lower of cost and their net realizable

value. The fair value of securities at December 31, 2003 was $720 million (2002 – $268 million).

The portfolio consists of 31% (2002 – 18%) floating rate securities and 69% (2002 – 82%) fixed rate securities with
an average yield of 6.8% (2002 – 8.0%) and an average maturity of approximately five years.

Portfolio securities include $5 million (2002 – $27 million) of investments in affiliates, principally equity accounted

investees owned as part of funds management operations. Revenue earned on these securities during the year

amounted to $1 million (2002 – $1 million).

(b) Loans and Notes Receivable

Loans and notes receivable include corporate loans, merchant banking loans and other loans, either underwritten

on a primary basis or acquired in the secondary market.

The fair value of the company’s loans and notes receivable at December 31, 2003 and 2002 approximated their

carrying value based on expected future cash flows, discounted at market rates for assets with similar terms and

investment risks.

70 BRASCAN CORPORATION 2003 ANNUAL REPORT

Loans and notes receivable include $222 million (2002 – $416 million) denominated in Canadian dollars carried

at a book value of C$288 million (2002 – C$658 million), as well as $24 million (2002 – $95 million) due from

affiliates, which are principally equity accounted investees. Interest earned during the year on loans due from equity

accounted investees amounted to $3 million (2002 – $6 million).

The loan portfolio matures between one year and three years, with an average maturity of approximately one year

and consists of 90% floating rate loans (2002 – 82%) and 10% fixed rate loans (2002 – 18%) with an average yield

of 6.6% (2002 – 9.1%).

Included in Other is $90 million (2002 – $86 million) of goodwill principally arising from the privatization of

Brascan Financial Corporation during 2002.

INVESTMENTS

M I L L I O N S

Real Estate

Category

# of Shares

2003

% Interest

2002

% Interest

Canary Wharf Group, plc

United Kingdom

(a)

52.8

$ 153

$ —

—

Resources

Noranda Inc.

Nexfor Inc.

Northgate Exploration Ltd.

Canada

Katahdin Papers, LLC

United States

Business Services

Hotel and Ticket Services

NBS/MediSolution

Banco Brascan, S.A.

Brazil

Canada

Brazil

Other

Total

(b)

(c)

(b)

(c)

(b)
(c)

122.6

63.8

1,212

356

—

38.1/95.1

—
—

—

45
65

42%

43%

—

100%

23%/40%

91%/61%

40%
—

877

309

—

37
82

40%

43%

42%

—

23%/40%

55%/41%

40%
—

$2,003

$ 1,464

Included in the carrying value of the company’s long-term investments in Noranda and Nexfor is a net amount

of $273 million which represents the excess of acquisition costs over the company’s share of the net book value of

these investments. The carrying values of each of Noranda and Nexfor are subject to periodic reviews to assess
whether any impairments are other than temporary.

These assets are categorized for accounting treatment as follows:

M I L L I O N S

Portfolio investment

Equity accounted investments

Fixed and other assets

(a)

(b)

(c)

Total

2003

153

1,637

213

$ 2,003

2002

—

1,307

157

$ 1,464

Fixed and other assets includes $75 million (2002 – $54 million) of goodwill and other intangibles associated with

Brascan’s business services activities including contracts and intellectual property.

BRASCAN CORPORATION 2003 ANNUAL REPORT

FINANCIAL ASSETS

M I L L I O N S

Government bonds

Corporate bonds

Preferred shares

Common shares

Total

2003

387

342

854

2002

230

397

718

Financial assets are comprised of securities that are not an active component of the company’s funds management

operations (see Note 4).

The fair value of financial assets as at December 31, 2003 was $852 million (2002 – $708 million). The portfolio

consists of 20% (2002 – 46%) floating rate securities and 80% (2002 – 54%) fixed rate securities with an average

yield of 4.2% (2002 – 5.9%).

Financial assets include $356 million (2002 – $302 million) of securities of affiliates, principally equity accounted

investees. Revenue earned on these securities during the year amounted to $24 million (2002 – $24 million).

ACCOUNTS RECEIVABLE AND OTHER

M I L L I O N S

Accounts receivable

Prepaid expenses and other assets

Future income tax assets

Total

(a) Accounts Receivable

M I L L I O N S

Real estate

Power generation

Funds management
Other

Total

Note

(a)

(b)

(c)

2003

$ 1,053

508

2002

807

411

$ 1,623

$ 1,271

2003

231

131

449

242

$ 1,053

2002

399

133
197

807

Included in accounts receivable are Executive Share Ownership Plan loans receivable by the corporation from its

executives of $12 million (2002 – $12 million) and similar loans receivable by consolidated subsidiaries from their

executives of $18 million (2002 – $25 million). No loans have been made since July 2002.

(b) Prepaid Expenses and Other Assets

M I L L I O N S

Real estate
Funds management
Other

Total

72 BRASCAN CORPORATION 2003 ANNUAL REPORT

2003

475

—
33

508

2002

291
46
74

411

(c)

Future Income Tax Assets

M I L L I O N S

Tax assets related to operating and capital losses

Tax liabilities related to differences in tax and book base

Future income tax assets

2003

744

(682)

2002

504

(451)

The future income tax assets relate primarily to non-capital losses available to reduce taxable income which

may arise in the future. The company and its Canadian subsidiaries have future income tax assets of $482 million

(2002 – $247 million) that relate to non-capital losses which expire over the next seven years, and $68 million

(2002 – $56 million) that relate to capital losses which have no expiry. The company’s U.S. subsidiaries have future

income tax assets of $194 million (2002 – $201 million) that relate to net operating losses which expire over the next

17 years. The amount of non-capital losses and deductible temporary differences for which no future income tax

assets have been recognized is approximately $645 million (2002 – $722 million).

8. NON-RECOURSE BORROWINGS

(a) Property Specific Mortgages

M I L L I O N S

Commercial properties

Power generation

Total

2003

$ 4,149

732

$ 4,881

2002

$ 4,413

579

$ 4,992

Property specific mortgages include $1,632 million (2002 – $1,094 million) repayable in Canadian dollars equivalent

to C$2,122 million (2002 – C$1,728 million) and $43 million (2002 – $48 million) in Brazilian reais equivalent

to R$124 million (2002 – R$170 million). The weighted average interest rate at December 31, 2003 was 6.6%

(2002 – 6.9%).

Principal repayments on property specific mortgages due over the next five years and thereafter are as follows:

M I L L I O N S

2004

2005

2006

2007

2008
Thereafter

Total

(b) Other Debt of Subsidiaries

M I L L I O N S

Funds management

Power generation

Real estate

International operations and other

Total

Annual Repayments

288

499

167

615

255
3,057

$ 4,881

2002

587

375

429

476

2003

647

375

576

477

$ 2,075

$ 1,867

BRASCAN CORPORATION 2003 ANNUAL REPORT

Other debt of subsidiaries include $539 million (2002 – $619 million) repayable in Canadian dollars equivalent

to C$701 million (2002 – C$978 million) and $15 million (2002 – $57 million) in Brazilian reais equivalent to

R$43 million (2002 – R$202 million). The weighted average interest rate at December 31, 2003 was 6.6% (2002 – 7.1%).

Real estate debt represents $576 million (2002 – $429 million) drawn under construction financing facilities which

are typically established on a project by project basis. Amounts drawn are repaid from the proceeds on the sale of

building lots, single family houses and condominiums and redrawn to finance the construction of new homes.

Other debt of subsidiaries include obligations pursuant to financial instruments which are recorded as liabilities.

These amounts include $327 million (2002 – $272 million) of obligations relating to the company’s international

operations subject to credit rating provisions, which are supported directly and indirectly by corporate guarantees.

Principal repayments on other debt of subsidiaries over the next five years and thereafter are as follows:

M I L L I O N S

2004

2005

2006

2007

2008

Thereafter

Total

Funds
Management

Power
Generation

Residential
Properties

International
and Other

183

207

647

175

200

—

386

107

—

375

576

327

477

Total

710

458

163

204

534

$ 2,075

The fair value of property specific mortgages and other debt of subsidiaries exceeds the book value by $198 million

(2002 – $182 million), determined by way of discounted cash flows using market rates adjusted for credit spreads

applicable to the debt.

CORPORATE BORROWINGS

M I L L I O N S

Publicly traded term debt
Privately held term debt
Commercial paper and bank borrowings

Total

2003

$ 1,100

113
—

2002

850
112
73

$ 1,213

$ 1,035

Commercial paper and bank borrowings are incurred under the company’s bank credit facilities, which are in the

form of 364-day revolving facilities totalling $522 million as at December 31, 2003, convertible at the company’s

option into three-year amortizing term facilities on each anniversary. These facilities are at floating rates and have

a weighted average interest rate of 2.7% (2002 – 2.5%).

74 BRASCAN CORPORATION 2003 ANNUAL REPORT

Term debt borrowings, which have maturity dates up to 2033, have a weighted average interest rate of 5.4%

(2002 – 5.2%), and include $13 million (2002 – $12 million) repayable in Canadian dollars equivalent to C$17 million

(2002 – C$19 million).

During 2003, the company issued $200 million of 5.75% publicly traded term debt due March 2010 and

$250 million of 7.375% publicly traded term debt due March 2033. During 2002, the company issued $350 million

of 7.125% publicly traded term debt due June 2012.

Principal repayments on corporate borrowings due over the next five years and thereafter are as follows:

M I L L I O N S

2004
2005

2006

2007

2008

Thereafter

Total

Annual Repayments

101
9

300

800

$ 1,213

The fair value of corporate borrowings at December 31, 2003 exceeds the book value by $140 million (2002 – $79 million),

determined by way of discounted cash flows using market rates adjusted for the company’s credit spreads.

10. ACCOUNTS AND OTHER PAYABLES

M I L L I O N S

Accounts payable

Other liabilities

Total

(a) Accounts Payable

M I L L I O N S

Real estate

Power generation

Funds management

Other

Total

(b) Other Liabilities

Note

(a)

(b)

2003

$ 1,163

582

$ 1,745

2003

375
89

419

280

$ 1,163

2002

932

330

$ 1,262

2002

359

101

156

316

932

Other liabilities include provisions for tax, currency and other financial obligations, as well as the fair value of

the company’s obligations to deliver securities it did not own at the time of sale and those pursuant to financial

instruments recorded as liabilities.

BRASCAN CORPORATION 2003 ANNUAL REPORT

11. MINORITY INTERESTS OF OTHERS IN ASSETS

Minority interests of others in assets represent the common equity in consolidated subsidiaries that is owned by

other shareholders. The balances are as follows:

M I L L I O N S

Real estate operations

Power generation

Other

Total

2003

$ 1,295

184

$ 1,516

2002

$ 1,236

164

$ 1,456

During the year ended December 31, 2002, the company completed the privatization of its financial operations

conducted through Brascan Financial Corporation (“Brascan Financial”) for consideration of $227 million in cash,

11.4 million common shares, and 1.1 million Class A, Series 11 preferred shares. In addition, 3.0 million Brascan

Corporation options were issued in exchange for Brascan Financial options pursuant to the tender offer. The fair

value of the consideration paid amounted to $489 million with the purchase price being allocated to the estimated

fair values of tangible and intangible assets. Goodwill on the transaction amounted to $73 million and was

allocated to the underlying reporting business units.

12. PREFERRED EQUITY – CORPORATE AND SUBSIDIARIES

Corporate Preferred Equity

Corporate preferred equity outstanding:

M I L L I O N S

Corporate

Preferred shares

Preferred securities

Total

Note

(a)

(b)

2003

693

159

852

2002

576

159

735

(a) Corporate – Preferred Shares

The company has issued the following preferred shares:

M I L L I O N S

Class A Preferred Shares

Series 1

Series 2

Series 3

Series 4 + 7

Series 8

Series 9

Series 10

Series 11
Series 12

Rate

65% P

70% P
B.A. + 40 b.p. 2
70% P/8.5%

Variable up to P

5.63%

5.75%

5.50%
5.40%

Total

1 Included in accounts and other payables

2 Rate determined in a monthly auction

P – Prime Rate B.A. – Banker’s Acceptance Rate b.p. – Basis Points

76 BRASCAN CORPORATION 2003 ANNUAL REPORT

Term

2003

2002

Retractable

Perpetual

Perpetual
Perpetual

— 1

169

— 1

169

159

117

693

159

65
—

576

The company is authorized to issue an unlimited number of Class A preferred shares and an unlimited number

of Class AA preferred shares, issuable in series. No Class AA preferred shares have been issued.

The following Class A preferred shares are issued and outstanding:

N U M B E R O F S H A R E S

Class A Preferred Shares

Series 1

Series 2

Series 3

Series 4 + 7

Series 8

Series 9

Series 10

Series 11
Series 12

2003

2002

18,891

10,465,100

1,171

2,800,000

1,049,792
2,950,208

10,000,000

4,032,401
7,000,000

18,891

10,465,100

1,171

2,800,000

1,049,792

2,950,208

10,000,000

4,032,401
—

The Class A preferred shares have preference over the Class AA preferred shares, which in turn are entitled to pref-

erence over the Class A and Class B common shares on the declaration of dividends and other distributions to

shareholders. All series of the outstanding preferred shares have a par value of C$25 per share, except the Class A,

Series 3 preferred shares which have a par value of C$100,000 per share.

The Series 10, 11 and 12 shares, unless redeemed by the company, are convertible into Class A shares at a price

equal to the greater of 95% of the market price at the time of conversion and C$2.00, at the option of both the

company and the holder, at any time after the following dates:

Series 10

Series 11

Series 12

Redemption Date

Company’s
Option

September 30, 2008

June 30, 2009

March 31, 2014

June 30, 2009

March 31, 2014

Holder’s
Option

March 31, 2012

December 31, 2013

March 31, 2018

During 2003, the company issued 7,000,000 Series 12 5.4% preferred shares for cash proceeds of C$175 million

by way of a public offering.

During 2002, the company issued 2,940,000 Series 11 5.5% preferred shares for cash proceeds of C$73.5 million

by way of a public offering and 1,092,401 Series 11 preferred shares valued at C$27 million in connection with

the privatization of the financial operations. The company also eliminated C$83 million Series 3 preferred shares

and C$100 million Series 9 preferred shares acquired by subsidiaries.

(b) Corporate – Preferred Securities

The company has the following preferred securities outstanding:

M I L L I O N S

8.35% due 2050

8.30% due 2051

Total

2003

159

2002

159

BRASCAN CORPORATION 2003 ANNUAL REPORT

During 2002, the company issued C$125 million 8.30% preferred securities due 2051. The preferred securities are

subordinated and unsecured. The company may redeem the preferred securities in whole or in part five years after

the date of issue at a redemption price equal to 100% of the principal amount of the preferred securities plus accrued

and unpaid distributions thereon to the date of such redemption. The company may elect to defer interest payments

on the preferred securities for periods of up to five years and may settle deferred interest and principal payments by

way of cash, preferred shares or common shares of the company.

Subsidiary Preferred Shares

Subsidiaries of the corporation have issued the following perpetual preferred shares:

M I L L I O N S

Commercial real estate

Funds management

Total

2003

722

287

$ 1,009

2002

263

187

450

During 2003, the company’s real estate operations issued 4,400,000 Class AAA, Series G preferred shares,

8,000,000 Class AAA, Series H preferred shares, and 8,000,000 Class AAA, Series I preferred shares for proceeds

of $415 million.

13. COMMON EQUITY

The company is authorized to issue an unlimited number of Class A Limited Voting Shares (“Class A common

shares”) and 85,120 Class B Limited Voting Shares (“Class B common shares”), together referred to as common

shares.

The company’s common shareholders’ equity is comprised of the following:

M I L L I O N S

Convertible Notes

Series I

Series II

Rate

B.A. + 40 b.p. 1
4.0% 2

Maturity

2085

2088

Class A and B common shares

Retained earnings
Cumulative translation adjustment

Common equity

N U M B E R S O F S H A R E S

Class A common shares

Class B common shares

Unexercised options

Reserved for conversion of subordinated notes

Total diluted common shares

1 Rate determined in a semi-annual auction, maximum 10%

2 Rate determined as 120% of the current common share dividend

B.A. – Banker’s Acceptance Rate b.p. – Basis Points

78 BRASCAN CORPORATION 2003 ANNUAL REPORT

2003

1,188

1,685
99

2002

1,237

1,491
(167)

$ 3,024

$ 2,625

170,661,953

85,120

170,747,073

7,575,518

2,528,137

174,052,617

85,120

174,137,737

6,701,708

3,105,202

180,850,728

183,944,647

(a) Convertible Notes

The Convertible Notes are subordinate to the company’s senior debt and the company may, at its option, pay

principal and interest due on the notes in Class A common shares of the company.

The Series I and II Convertible Notes are convertible at the option of the holder at any time into a total of

2,528,137 (2002 – 3,105,202) Class A common shares at conversion prices of C$32.00 and C$31.00 per share,

respectively, and are redeemable at any time at the company’s option.

(b) Class A and Class B Common Shares

The company’s Class A common shares and its Class B common shares are each, as a separate class, entitled to elect

one-half of the company’s Board of Directors. Shareholder approvals for matters other than for the election of Directors,

must be received from the holders of the company’s Class A common shares as well as the Class B common shares,

each voting as a separate class.

During 2003 and 2002 the number of issued and outstanding common shares changed as follows:

N U M B E R O F S H A R E S

Outstanding at beginning of year

Issued (repurchased):

Dividend reinvestment plan

Management share option plan

Conversion of debentures and minority interests

In exchange for shares of Brascan Financial

Normal course issuer bid

Outstanding at end of year

2003

2002

174,137,737

169,781,433

38,834

390,800

749,538

8,164

(4,578,000)

14,912

80,000

2,293

11,379,399

(7,120,300)

170,747,073

174,137,737

In 2003, under a normal course issuer bid, the company repurchased 4,578,000 (2002 – 7,120,300) Class A

common shares at a cost of $102 million (2002 – $143 million). During 2002, 11,379,399 Class A common shares

were issued on the privatization of Brascan Financial at a price of C$34.00 per share for total consideration

of C$387 million. Proceeds from the issuance of common shares pursuant to the company’s dividend reinvestment

plan and management share option plan (“MSOP”), totalled $7 million (2002 – $1 million).

The components of basic and diluted earnings per share are summarized in the following table:

M I L L I O N S

Net income

Convertible note interest

Preferred security distributions

Preferred share dividends

Net income available for common shareholders

Weighted average outstanding common shares

Dilutive effect of the conversion of notes and options

Common shares and common share equivalents

2003

408

(2)

(15)

(43)

348

172

182

2002

(2)

(11)

(33)

172

182

BRASCAN CORPORATION 2003 ANNUAL REPORT

(d) Stock-Based Compensation

Options issued under the company’s MSOP vest proportionately over five years and expire 10 years after the grant

date. The exercise price is equal to the market price at the grant date. During 2003, the company granted 1,325,000

options with an exercise price of C$29.97 per share. The cost of the options was determined using the Black-Scholes

model of valuation, assuming a 7.5 year term, 20% volatility, a weighted average expected dividend yield of 3.44%

annually and an interest rate of 4.11%. The cost of $4 million is charged to employee compensation expense over

the five-year vesting period of the options granted.

The changes in the number of options during 2003 and 2002 were as follows:

2003

2002

Outstanding at beginning of year

Granted

Exercised

Converted

Cancelled

Outstanding at end of year

Exercisable at end of year

Number of
Options

( 0 0 0 ’ S )

6,702

1,325

(392)

—

(59)

7,576

3,882

Weighted
Average
Exercise
Price

C$ 24.25

29.97

20.38

—

28.18

C$ 25.41

Number of
Options

( 0 0 0 ’ S )

3,475

500

(221)

3,004

(56)

6,702

3,321

Weighted
Average
Exercise
Price

C$ 24.01

28.72

19.15

23.31

22.70

C$ 24.25

During 2002, three million options were issued to officers of Brascan Financial in exchange for options held by

them in that company.

At December 31, 2003, the following options to purchase Class A common shares were outstanding:

N U M B E R

O U T S T A N D I N G

( 0 0 0 ’ S )

1,509

1,496
4,571

7,576

Exercise Price

C$13.20 – C$19.20

C$19.30 – C$22.70
C$24.95 – C$33.22

Weighted
Average
Remaining
Life

5.8 yrs.

5.4 yrs.
7.0 yrs.

Number
Exercisable
(000’s)

905

1,007
1,970

3,882

A Restricted Share Unit Plan is offered to executive officers and non-employee directors of the company. Under

this plan, each officer and director may choose to receive all or a percentage of his or her annual incentive bonus

or directors fees in the form of Deferred Share Units (“DSUs”) and Restricted Share Appreciation Units

(“RSAUs”). The DSUs and RSAUs vest over a five-year period, and DSUs accumulate additional DSUs at the same

rate as dividends on common shares. Officers and directors are not allowed to convert DSUs and RSAUs into cash
until retirement or cessation of employment. The value of the DSUs, when converted to cash, will be equivalent

to the market value of the common shares at the time the conversion takes place. The value of the RSAUs when

converted into cash will be equivalent to the difference between the market price of equivalent numbers of common

shares at the time the conversion takes place, less the market price on the date the RSAUs are granted. The value

of the vested and unvested DSUs and RSAUs as at December 31, 2003 was $43 million (2002 – $6 million).

80 BRASCAN CORPORATION 2003 ANNUAL REPORT

Employee compensation expense for these plans is charged against income over the vesting period of the DSUs and
RSAUs. Changes in the amount payable by the company in respect of vested DSUs and RSAUs as a result of dividends
and share price movements are recorded as employee compensation expense in the period of the change.

Employee compensation expense related to these plans for the year ended December 31, 2003 including those of
operating subsidiaries was $15 million (2002 – $6 million).

(e) Other
Loans receivable from officers of the company of $1 million (2002 – $5 million) owing under the company’s
Management Share Purchase Plan are secured by fully paid Class A common shares of the company and are
deducted from shareholders’ equity. All loans were fully repaid in January 2004.

14. RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS

(a) Derivative Financial Instruments
The company and its subsidiaries use derivative financial instruments including interest rate swaps, cross currency
interest rate swaps, commodity swaps, commodity options and foreign exchange forward contracts to manage risk.

Management evaluates and monitors the credit risk of its derivative financial instruments and endeavours to mini-
mize credit risk through offset arrangements, collateral, and other credit risk mitigation techniques. The credit risk
of derivative financial instruments is limited to the replacement value of the instrument, and takes into account any
replacement cost and future credit exposure. The replacement value or cost of interest rate swap contracts which
form part of financing arrangements is calculated by way of discounted cash flows using market rates adjusted
for credit spreads.

The company endeavours to maintain a matched book of currencies and interest rates. However, unmatched
positions are carried, on occasion, within predetermined exposure limits. These limits are reviewed on a regular
basis and the company believes the exposures are manageable and not material in relation to its overall business
operations.

At December 31, 2003, the company held foreign exchange contracts with a notional amount of $2,669 million
at an average exchange rate of 1.317 and a replacement value in excess of that recorded in the company’s accounts
of $4 million to manage its Canadian dollar exposure. At December 31, 2002, the company held foreign exchange
contracts with a notional amount of $1,652 million at an average exchange rate of 1.565 and a replacement value
in excess of that recorded in the company’s accounts of $6 million to manage its U.S. dollar exposure. All of the
foreign exchange contracts at December 31, 2003 had a maturity of less than one year. The company also held
interest rate swap contracts having a notional amount of $1,125 million (2002 – $882 million) with a replacement
value in excess of that recorded in the company’s accounts of $2 million (2002 – $33 million). These contracts
expire over a 9-year period.

At December 31, 2003, the company’s Canadian dollar functional subsidiaries held U.S. dollar foreign exchange
contracts with a notional amount of $989 million (2002 – $702 million) at an average exchange rate of 1.338
(2002 – 1.536) and a replacement value in excess of that recorded in the company’s accounts of $3 million (2002 – nil),
and contracts with a replacement cost in excess of that recorded in the company’s accounts of $1 million (2002 – nil).
These contracts expire over the next four years.

BRASCAN CORPORATION 2003 ANNUAL REPORT

The company’s subsidiaries also held interest rate swap contracts as at December 31, 2003 with a total notional

amount of $1,068 million (2002 – $1,583 million). These interest rate swap contracts were comprised of contracts

with a replacement cost in excess of that recorded in the company’s accounts of $12 million (2002 – $1 million), and

contracts with a replacement value in excess of that recorded in the company’s accounts of $18 million (2002 – $28 million).

The interest rate swap transactions have maturities varying from one to 20 years.

Included in 2003 income are net gains on foreign currency amounting to $55 million and included in the

cumulative translation adjustment account are losses net of taxes in respect of foreign currency contracts entered

into for hedging purposes amounting to $263 million, which have been more than offset by translation gains on

the underlying net assets.

(b) Derivative Commodity Instruments

The company has entered into energy derivative contracts primarily to hedge the sale of generated power. The

company endeavours to link forward electricity sale derivatives to specific periods in which it anticipates generating

electricity for sale. The company also formally assesses, both at the hedge’s inception and on an ongoing

basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the

fair values or cash flows of the hedged items. As at December 31, 2003, the energy derivative contracts were

comprised of contracts with a replacement cost in excess of that recorded in the company’s accounts of $28 million

(2002 – $45 million), as well as contracts with a replacement value in excess of that recorded in the company’s

accounts of $23 million (2002 – $24 million).

The company has entered into forward gold sale contracts to hedge its exposure to fluctuations in the price of gold.

As at December 31, 2003 the company held no forward sale gold contracts. As at December 31, 2002 the company

held forward contracts for the sale of 500,000 ounces of gold for delivery in 2003 at an average price of $327 per

ounce. The unrealized loss on these contracts was approximately $10 million as at December 31, 2002. In

addition, the company deferred $3 million of realized gains on gold forwards in accounts and other payables as

at December 31, 2002. These deferred amounts were recognized in 2003.

The company and its subsidiaries are contingently liable with respect to litigation and claims that arise in the normal

course of business.

In the normal course of business, the company and its subsidiaries enter into financing commitments. At the end

of 2003, the company and its subsidiaries had $467 million (2002 – $265 million) in such commitments out-

standing. The company’s subsidiaries maintain credit facilities and other financial assets to fund these commitments.

As at September 11, 2001, the company owned eight million square feet of space in four office towers surround-

ing the World Trade Center site. To date, approximately $202 million has been received for property and business
interruption claims relating to these properties. The company’s insurance claim adjustment process is ongoing. Due

to the complexity of the issues involved, this process will take additional time to conclude. Based upon the

company’s review of its insurance policies and consultation with outside legal experts, the company anticipates a

substantial recovery of its losses in rental revenue and costs associated with the repairs of its properties.

82 BRASCAN CORPORATION 2003 ANNUAL REPORT

All buildings in downtown Manhattan were reopened and available for re-occupancy by the first quarter of 2002.

No material lease cancellations in the New York portfolio occurred as a result of the events of September 11.

The company has acquired $500 million of insurance for damage and business interruption costs sustained as

a result of an act of terrorism. However, a terrorist act could have a material effect on the company’s assets to the

extent damages exceed the coverage. The company has reviewed its loan agreements and believes it is in compliance,

in all material respects, with the contractual obligations therein.

In the normal course of operations, the company and its consolidated subsidiaries execute agreements that provide

for indemnification and guarantees to third parties in transactions such as business dispositions, business acquisitions,

sales of assets, sales of services, securitization agreements, and underwriting and agency agreements. The company
has also agreed to indemnify its directors and certain of its officers and employees. The nature of substantially all

of the indemnification undertakings prevents us from making a reasonable estimate of the maximum potential

amount we could be required to pay third parties as the agreements do not specify a maximum amount and the

amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot

be determined at this time. Historically, neither the company nor its consolidated subsidiaries have made significant

payments nor do they expect to make any significant payments under such indemnification agreements.

Reinsurance

The company conducts finite risk reinsurance operations as part of its funds management activities and accounts

for the assets and liabilities associated with such contracts as deposits. As at December 31, 2003, the company held

reinsurance assets of $822 million (2002 – $621 million) which were offset in each year by an equal amount

of reserves and other liabilities. Net fee income earned on reinsurance operations was $15 million (2002 – $14 million)

representing $506 million (2002 – $177 million) of premium and other revenues offset by $491 million (2002 – $163 million)

of reserves and other expenses.

15. NET OPERATING INCOME

Net operating income for each business segment is equal to revenue less all attributable expenses except interest,

depreciation and amortization, minority share of income and tax expenses. The details are as follows:

(a) Real Estate

M I L L I O N S

Revenue, including property gains

Expenses

Net

2003

$ 2,567

1,626

941

2002

$ 2,441

1,636

805

BRASCAN CORPORATION 2003 ANNUAL REPORT

(b) Power Generation

M I L L I O N S

Revenue

Expenses

Net

(c)

Funds Management

M I L L I O N S

Revenue

Expenses

Net

(d) Other Operations

M I L L I O N S

Revenue

Expenses

Net

2003

320

148

172

2003

260

166

2003

223

156

2002

208

153

2002

214

140

2002

201

116

16. MINORITY INTERESTS OF OTHERS

Minority interests of others is segregated into their share of income before non-cash items and their share of non-

cash items. The minority share of income before non-cash items represents the portion of income before non-cash

items attributable to the minority’s interest, whether remitted or unremitted. The minority share of non-cash items

represents the portion of depreciation and amortization and taxes and other provisions attributable to minority’s

interest. The details of minority interest expense are as follows:

M I L L I O N S

Distributed as dividends

Preferred

Common

Undistributed

Minority interest expense

Minority share of income before non-cash items

Minority share of non-cash items

Minority interest expense

2003

132

219

319

(100)

219

2002

123

203

287

(84)

203

84 BRASCAN CORPORATION 2003 ANNUAL REPORT

17.

INCOME TAXES

The difference between the statutory income tax rate of 37% (2002 – 39%) and the effective income tax rate of

24% (2002 – 33%) is attributable principally to dividends subject to tax prior to receipt by the company of -4%

(2002 – -26%), equity accounted earnings that have already been tax effected by the investees of -5% (2002 – 28%),

changes in Canadian tax rates of -1% (2002 – nil) and other of -3% (2002 – -8%).

18. EQUITY ACCOUNTED INCOME (LOSS) FROM INVESTMENTS

The company’s equity accounted income (loss) from investments consists of the following:

M I L L I O N S

Noranda
Nexfor

Total

2003

2002

(186)
5

(181)

19.

JOINT VENTURES

The following amounts represent the company’s proportionate interest in incorporated and unincorporated joint

ventures reflected in the company’s accounts.

M I L L I O N S

Assets

Liabilities

Operating revenues

Operating expenses

Net income

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

2003

$ 2,369

1,421

406

192

149

(18)

2002

$ 1,851

1,087

334

165

—

(34)

20. POST-EMPLOYMENT BENEFITS

The company offers a number of pension and other post employment benefit plans to its employees. The company’s
obligations under its defined benefit pension plans are determined periodically through the preparation of actuarial

valuations. As of December 31, 2003, assets of the plans totalled $38 million (2002 – $28 million), accrued benefit

obligations totalled $49 million (2002 – $37 million) and unamortized transitional obligations and net actuarial

losses totalled $10 million (2002 – $8 million), for a net accrued benefit liability of $1 million (2002 – $1 million).

Included in the accrued benefit obligations is $6 million ($2002 – $5 million) related to other post employment

benefits. The benefit plan expense for 2003 was $2 million (2002 – $0.3 million). The discount rate used was 6%

(2002 – 7%) with an increase in the rate of compensation of 4% (2002 – 4%) and an investment rate of 7% (2002 – 7%).

BRASCAN CORPORATION 2003 ANNUAL REPORT

21. SUPPLEMENTAL CASH FLOW INFORMATION

M I L L I O N S

Corporate borrowings

Issuances

Repayments

Net

Property specific mortgages

Issuances
Repayments

Net

Other debt of subsidiaries

Issuances

Repayments

Net

Real estate

Dispositions

Investments

Net

Funds management

Securities sold

Securities purchased

Loans collected
Loans advanced

Net

Financial assets

Securities sold

Securities purchased

Net

2003

450

(273)

177

725
(1,109)

(384)

174

(92)

610

(771)

(161)

306

(698)

1,262
(959)

(89)

500

(545)

(45)

2002

413

(204)

209

795
(312)

483

(185)

(124)

295

(408)

(113)

(297)

899
(904)

(282)

315

(173)

142

Cash taxes paid were $42 million (2002 – $16 million) and are included in other operating costs and taxes. Cash

interest paid totalled $490 million (2002 – $463 million).

22. SHAREHOLDER DISTRIBUTIONS

M I L L I O N S

Common equity

Common share dividends

Convertible note interest

Total

Preferred equity

Preferred share dividends

Preferred security distributions

Total

86 BRASCAN CORPORATION 2003 ANNUAL REPORT

2003

124

126

2002

110

112

23. DIFFERENCE FROM UNITED STATES GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES

Canadian generally accepted accounting principles (“Canadian GAAP”) differ in some respects from the principles

that the company would follow if its consolidated financial statements were prepared in accordance with account-

ing principles generally accepted in the United States (“US GAAP”).

The effects of the significant accounting differences between Canadian GAAP and US GAAP on the company’s

balance sheets and the statements of income, retained earnings and cash flow for the years then ended are quantified

and described in this note.

(a)

Income Statement Differences

The significant differences in accounting principles between the company’s income statements and those prepared

under US GAAP are summarized in the following table:

Note

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

M I L L I O N S

Net income as reported under Canadian GAAP

Adjustments

Increase (reduction) of equity accounted income

Change in deferred income taxes

Convertible note and preferred security distributions

Conversion of convertible notes and preferred securities

Stock options

Market value adjustments

Increased commercial property income

Increased commercial property depreciation

Minority shareholders’ interests and other

Net income under US GAAP

Per share amounts under US GAAP

Net income

Basic

Diluted

(i) Equity accounted income

2003

408

2002

(28)

(17)

(45)

—

(60)

—

(13)

—

(14)

(17)

(64)

(15)

339

1.72

1.69

0.03

0.02

Under US GAAP, the company’s equity accounted income has been adjusted for differences in the accounting

treatment by the underlying company as follows:

Canadian GAAP

US GAAP

Accounting Treatment

For 2003 and 2002

Start-up costs

Pension accounting

Derivative instruments and hedging activities

See Note 1 and Note 14

Asset retirement obligations

expense as incurred

defer and amortize

valuation allowance

expense as incurred

no valuation allowance/

additional minimum liability

See Note 23(a)(vi)

accrue retroactively

Canadian GAAP requires recognition of a pension valuation allowance for any excess of the prepaid benefit expense

over the expected future benefit. Changes in the pension valuation allowance are recognized in the Consolidated

BRASCAN CORPORATION 2003 ANNUAL REPORT

Statement of Income. US GAAP does not specifically address pension valuation allowances. In 2002, US regulators

determined that such allowances would not be permitted under US GAAP. In light of these developments, Noranda

eliminates the effects of recognizing pension valuation allowances.

As a result of differences in the original carrying value of Noranda’s Magnesium project under Canadian GAAP

and US GAAP, there is a reduction in the amount of the asset impairment charge in 2002 under US GAAP.

(ii) Deferred income taxes

The change in deferred income taxes includes the tax effect of the income statement adjustments under US GAAP.

Also, under Canadian GAAP the tax rates applied to temporary differences and losses carried forward are those

which are substantively enacted. Under US GAAP, tax rates are applied to temporary differences and losses carried

forward only when they are enacted. In 2003, there was no difference between the substantively enacted rates used

under Canadian GAAP and the enacted rates used under US GAAP.

(iii) Convertible note and preferred security distributions

Under Canadian GAAP, the company’s subordinated convertible notes and preferred securities are treated as equity

with interest paid thereon recorded as a distribution from retained earnings. This results from the company’s ability

to repay these notes and meet interest obligations by delivering its common shares to the holders. Under US GAAP,

the subordinated convertible notes and preferred securities would be recorded as indebtedness with the corre-

sponding interest paid recorded as a charge to income. There is no effect on basic or diluted net income per share.

(iv) Conversion of convertible note and preferred securities

Under Canadian GAAP, the company’s subordinated convertible notes and preferred securities are treated as equity

and converted into the company’s functional currency at historic rates. Under US GAAP, the subordinated

convertible notes and preferred securities would be recorded as indebtedness and converted into the company’s

functional currency at current rates with the corresponding foreign exchange recorded as a charge to income.

(v)

Stock options

Fair value accounting for stock-based compensation was adopted by the company under Canadian GAAP effective

January 1, 2002, which substantially harmonized Canadian GAAP with US GAAP. The amount recorded as an

adjustment in 2002 reflects the difference in accounting for a plan amendment between US GAAP and the transition

rules under Canadian GAAP.

(vi) Market value adjustments

Under Canadian GAAP, the company generally records short-term investments at the lower of cost and net realizable

value, with any unrealized losses in value included in the determination of net income. However, the company

has identified certain distinct portfolios of securities which it has designated to be carried at fair value under

Canadian GAAP. Under US GAAP, all trading securities are carried at market, with unrealized gains and losses
included in the determination of net income. The adjustment for the year ended December 31, 2003 to record

unrealized gains and losses not already recognized under Canadian GAAP was $2 million (2002 – -$18 million).

Under US GAAP, all derivative financial instruments are recognized in the financial statements and measured at fair

value. Changes in the fair value of derivative financial instruments are recognized periodically in either income

88 BRASCAN CORPORATION 2003 ANNUAL REPORT

or shareholders’ equity (as a component of other comprehensive income), depending on whether the derivative

is being used to hedge changes in fair value or cash flows. For derivatives designated as cash flow hedges,

the effective portions of changes in fair value of the derivative are reported in other comprehensive income and are

subsequently reclassified into net income when the hedged item affects net income. Changes in the fair value

of derivative financial instruments that are not designated in a hedging relationship and ineffective portions

of hedges are recognized in income. The unrealized adjustment for the year ended December 31, 2003 was

$24 million (2002 – $1 million).

The effects of accounting for derivatives in accordance with US GAAP for the year ended December 31, 2003 resulted

in an increase in assets of $107 million (2002 – $95 million), an increase in liabilities of $28 million (2002 – $105 million),

an increase in other comprehensive income of $75 million (2002 – a decrease of $11 million) and an increase in

net income of $14 million (2002 – $6 million) within the company’s consolidated financial statements. During the

year ended December 31, 2003, $7 million (2002 – $1 million) of net derivative gains were reclassified from other

comprehensive income to income. Over the next 12 months, principally on the settlement of certain contracts in

Noranda, the company expects to reclassify $23 million, representing its share of net gains on these contracts from

other comprehensive income to income.

(vii) Increased commercial property income

Under Canadian GAAP, rental revenue is recognized over the term of the lease as it becomes due where increases

in rent are intended to offset the estimated effects of inflation. Under US GAAP, rental revenue is recognized on

a straight-line basis over the term of the lease.

(viii)Increased commercial property depreciation

Under Canadian GAAP, commercial properties have been depreciated using the sinking-fund method. Under US GAAP,

commercial properties are depreciated on a straight-line basis.

(ix) Minority shareholders’ interests and other

Minority shareholders’ interests and other has been adjusted for the differences between Canadian GAAP and

US GAAP and includes $20 million (2002 – $4 million) of start-up costs which are deferred and amortized under
Canadian GAAP and expensed under US GAAP.

(b) Comprehensive Income

US GAAP requires a statement of comprehensive income which incorporates net income and certain changes in

equity. Comprehensive income (loss) is as follows:

M I L L I O N S

Net income under US GAAP

Market value adjustments

Minimum pension liability adjustment
Foreign currency translation adjustments

Taxes on other comprehensive income

Comprehensive income (loss)

Note

(i)

(ii)
(iii)

2003

339

243

269

(45)

2002

(101)
(112)

829

(122)

BRASCAN CORPORATION 2003 ANNUAL REPORT

(i) Market value adjustments

Under Canadian GAAP, the company records investments other than specifically designated portfolios of securities

at cost and writes them down when other than temporary impairment occurs. Under US GAAP, these investments

generally meet the definition of available for sale securities, which includes securities for which the company has no

immediate plans to sell but which may be sold in the future, and are carried at fair value based on quoted market

prices. Changes in unrealized gains and losses and related income tax effects are recorded as other comprehensive

income. Realized gains and losses, net of tax and declines in value judged to be other than temporary, are included

in the determination of income. During 2003, the company recorded $141 million (2002 – $17 million) of net

unrealized gains in securities and $27 million (2002 – nil) of net unrealized gains in accounts receivable and other.

Under Canadian GAAP, changes in the fair value of derivatives that are designated as cash flow hedges are not

recognized in income. Under US GAAP, changes in the fair value of the effective portions of such derivatives are

reported in other comprehensive income whereas the offsetting changes in value of the cash flows being hedged

are not. The amounts recorded in other comprehensive income are subsequently reclassified into net income at the

same time as the cash flows being hedged are recorded in net income. The company’s share of the amounts recorded

by Noranda and Nexfor for derivatives that qualify as hedges under US GAAP is $51 million (2002 – $8 million)

which is included in comprehensive income. During 2003, the company also recorded in other comprehensive

income a $24 million increase (2002 – decrease of $19 million) in the fair value of contracts for the forward sale

of production from the company’s power generating operations.

(ii) Minimum pension liability adjustment

US GAAP requires the excess of any unfunded accumulated benefit obligation (with certain other adjustments)

to be reflected as an additional minimum pension liability in the consolidated balance sheet with an offsetting

adjustment to intangible assets to the extent of unrecognized prior service costs, with the remainder recorded

in other comprehensive income. The company has reflected the adjustment including its proportionate share

of adjustments recorded by Noranda and Nexfor.

(iii) Foreign currency translation adjustments

Canadian GAAP provides that the carrying values of assets and liabilities denominated in foreign currencies that
are held by self-sustaining operations are revalued at current exchange rates. US GAAP requires that the change

in the cumulative translation adjustment account be recorded in other comprehensive income. The amount recorded

by the company represents the change in the cumulative translation adjustment account. The resulting changes

in the carrying values of assets which arise from foreign currency conversion are not necessarily reflective of changes

in underlying value.

90 BRASCAN CORPORATION 2003 ANNUAL REPORT

The incorporation of the significant differences in accounting principles under Canadian GAAP and US GAAP

results in the following adjustment of the company’s balance sheet:

M I L L I O N S

Assets

Cash and cash equivalents

Accounts receivable and other

Securities

Loans and notes receivables

Property, plant and equipment

Real estate
Power generation

Equity accounted investments

Total assets under US GAAP

Liabilities and shareholders’ equity

Accounts and other payables

Corporate borrowings

Non-recourse borrowings

Property specific mortgages

Other debt of subsidiaries

Convertible and subordinated notes

Minority shareholders’ interests

Preferred equity

Corporate

Subsidiaries

Common equity

Note

(i)

(ii)

(iii)
(iii)

(iv)

(v)

2003

2002

382

2,132

1,845

511

7,865

1,924

1,491

332

1,663

996

851

7,518
1,587

1,168

$ 16,150

$ 14,115

$ 1,736

1,213

$ 1,297

1,035

4,881

2,100

254

1,419

685

1,009

2,853

4,992

1,903

221

1,378

576

450

2,263

Total liabilities and equity under US GAAP

$ 16,150

$ 14,115

The significant difference in each category between Canadian GAAP and US GAAP are as follows:

(i) Deferred income taxes

The deferred income tax asset under US GAAP is included in accounts receivable and other and is calculated as

follows:

M I L L I O N S

Tax assets related to operating and capital losses

Tax liabilities related to differences in tax and book basis

Valuation allowance

2003

980

(491)

(236)

2002

788

(220)

(284)

Deferred income tax asset under US GAAP

253

284

(ii) Securities

Under Canadian GAAP, the company recorded its short-term investments at the lower of cost and net realizable

value except for certain distinct portfolios of securities which it has designated to be carried at fair value and for

which unrealized gains and losses in value are included in the determination of income. Under US GAAP, trading

securities, which include all of the company’s short-term investments, are carried at market, with unrealized gains

and losses included in income.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Available for sale securities are accounted for as described in this note under (b)(i).

M I L L I O N S

Securities under Canadian GAAP

Reclassification from investments

Net unrealized gains (losses) for trading securities

Net unrealized gains on available for sale securities

Securities under US GAAP

(iii) Joint ventures

2003

$ 1,558

153

(16)

150

2002

$ 1,005

—

(18)

$ 1,845

996

Under US GAAP, proportionate consolidation of investments in joint ventures is generally not permitted. Under

certain rules for foreign private issuers promulgated by the United States Securities and Exchange Commission

(“SEC”), the company has continued to follow the proportionate consolidation method. See also Note 19.

(iv) Equity accounted investments

The company’s investments include investments in Noranda, Nexfor, and other real estate and business services.

For US GAAP, the company’s investments have been adjusted to reflect the cumulative impact of calculating

earnings of its equity accounted affiliates under US GAAP and to reclassify non-equity accounted investment balances.

M I L L I O N S

Investments under Canadian GAAP

Reclassification to securities and accounts receivable and other

Accumulated other comprehensive income (loss)

Retained earnings adjustment

Equity accounted investments under US GAAP

(v) Common equity

M I L L I O N S

Common equity under Canadian GAAP

Reversal of Canadian GAAP cumulative translation adjustment

Paid in capital

Reclassification of convertible notes

Cumulative adjustments to retained earnings under US GAAP
Accumulated other comprehensive income (loss)

2003

$ 2,003

(367)

(80)

(65)

2002

$ 1,464

(158)

(104)

(34)

$ 1,491

$ 1,168

2003

$ 3,024

(99)

31
(52)

(180)
129

2002

$ 2,625

167

(64)

(128)
(361)

Common equity under US GAAP

$ 2,853

$ 2,263

As a result of the above adjustments, the components of common equity under US GAAP are as follows:

M I L L I O N S

Common shares

Paid in capital

Accumulated other comprehensive income (loss)
Retained earnings

Common equity under US GAAP

92 BRASCAN CORPORATION 2003 ANNUAL REPORT

2003

$ 1,183

129

1,510

2002

$ 1,232

(361)
1,368

$ 2,853

$ 2,263

(d) Cash Flow Statement Differences
Under Canadian GAAP, interest on convertible notes is classified as a shareholder distribution. Under US GAAP,
interest on these notes is classified as an operating activity. The summarized cash flow statement under US GAAP
is as follows:

M I L L I O N S

Cash flows provided from (used for) the following activities:

Operating under Canadian GAAP
Convertible note interest
Preferred security distributions

Operating under US GAAP
Financing
Investing

2003

742
(2)
(15)

725
199
(874)

2002

325
(2)
(11)

312
470
(832)

Net increase (decrease) in cash and cash equivalents under US GAAP

(50)

(e) Changes in Accounting Policies
In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections”. First, SFAS 145 rescinds SFAS 4, “Reporting Gains and Losses
from Extinguishment of Debt”, and an amendment of that statement, SFAS 64, “Extinguishment of Debt Made
to Satisfy Sinking-Fund Requirements”. Because of the rescission of SFAS 4 and SFAS 64, the gains and losses from
the extinguishment of debt are no longer required to be classified as extraordinary items. Second, SFAS 145 rescinds
SFAS 44, “Accounting for Intangible Assets of Motor Carriers”. Third, SFAS 145 amends SFAS 13, “Accounting
for Leases”, to require sale-leaseback accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. Lastly, SFAS 145 makes various technical corrections to existing pronounce-
ments that are not substantive in nature.

In June 2002, FASB issued SFAS 146 “Accounting for Costs Associated with Exit or Disposal Activities”. This
statement requires a liability to be recognized for costs associated with exit or disposal activities when they are
incurred rather than at the date upon which a company commits to an exit plan.

In November 2002, FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, which elaborates on the disclosure to
be made by a guarantor about its obligations under certain guarantees issued. There is also a new requirement that
a guarantor must recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken
in issuing the guarantee. The interpretation does identify several situations where the recognition of a liability at
inception for a guarantor’s obligation is not required.

In April 2003, FASB issued SFAS No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging
Activities” (“SFAS 149”). SFAS 149 amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities” (“SFAS 133”). In particular, it clarifies under what circum-
stances a contract with an initial net investment meets the characteristic of derivative, clarifies when a derivative
contains a financing component, amends the definition of an underlying, and amends certain other existing
pronouncements.

BRASCAN CORPORATION 2003 ANNUAL REPORT

Future Accounting Policy Changes

(f)
In May 2003, FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity” (“SFAS 150”). SFAS 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify
a certain financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those
instruments may have been previously classified as equity. Some of the provisions of this statement are consistent
with the current definition of liabilities in FASB Concepts Statement No. 6, “Elements of Financial Statements”.
The remaining provisions of this statement are consistent with the proposal to revise that definition to encompass
certain obligations that a reporting entity can or must settle by issuing its own equity shares, depending on the
nature of the relationships established between the holder and the issuer. The company is assessing the impact, if any.

In January 2003, the FASB issued Interpretation 46 “Consolidation of Variable Interest Entities” (“FIN 46”).
FIN 46 requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into
the financial statements of the entity that has the primary financial interest. FIN 46 also provides the framework
for determining whether a variable interest entity should be consolidated based on voting interest or significant
financial support provided to it. In December 2003, the FASB issued FIN 46(R), amending the guidance in FIN 46
as well as the transition guidance. Based on the company’s interpretation of the revised transition guidance, the company
will be required to adopt the guidance in FIN 46(R) for the year beginning January 1, 2004. However,
the company has adopted this standard for material variable interest entities created after January 31, 2003. The
company is in the process of assessing the remaining impact of the amended standard.

24. SUBSEQUENT EVENT
(a) Subsequent to December 31, 2003, the company sold its interest in Gulf Canada Square in Calgary based
on a property valuation of C$222 million.

(b) On February 5, 2004 the company, together with a group of investment partners, announced a committed
offer, subject to a minimum acceptance of 50.1% and certain other conditions, to acquire all of the outstanding
shares of Canary Wharf Group, plc, a U.K. publicly listed property company which owns approximately 8.8 million
square feet of office and retail properties located on the Canary Wharf estate in London, England. The company
currently holds a 9.2% common share interest in Canary Wharf Group, plc. The total cash cost of the offer and
related expenses is expected to range between £1.5 billion and £1.7 billion and is expected to be funded as to
£800 million with non-recourse acquisition debt and £430 million with equity from the investment partners.
The balance, which is to be provided by the company, is expected to be between £150 million and £350 million
(net of its existing equity investment which, based on the offer price, would be valued at approximately £150 million).
The acquisition debt is not available to the investment group if less than 75% of Canary Wharf shares are tendered
to the offer. In these circumstances, the company’s net cash commitment could increase to a maximum of £755 million.

25. SEGMENTED INFORMATION
The company’s presentation of reportable segments is based on how management has organized the business
in making operating and capital allocation decisions and assessing performance. The company has four reportable
segments:

(a)

real estate operations, which are principally office properties, residential development and home building
operations, located primarily in major North American cities;

94 BRASCAN CORPORATION 2003 ANNUAL REPORT

(b)

power generation operations, which are predominantly hydroelectric power generating facilities on North

American river systems;

(c)

funds management, which include activities where funds are managed for the company and for institutional

investors;

(d)

investments, which are comprised of assets that have been purchased, and which may be combined with operations

in the future.

Non-operating assets and related revenue, cash flow and income are presented as financial assets and other.

Revenue, cash flow from operations and gains, income and assets by reportable segments are as follows:

M I L L I O N S

Real estate

Commercial properties

Residential properties

Income producing land

Development properties

Real estate services

Power generation

Funds management

Investments

Financial assets and other

2003

Cash Flow
From
Operations
Revenue and Gains

Income

Assets

2002

Cash Flow
From
Operations
Revenue and Gains

Income

Assets

$ 1,120

$ 721

$ 721 $ 6,622

$ 1,044

$ 682

1,262

131

105

320

260

111

172

166

134

172

166

132

738

129

774

1,927

1,215

2,003

1,290

—

208

214

105

—

153

140

3,258

112

1,413

1,411

13,456

2,859

2,944

120

1,182

682

105

—

153

140

(161)

937

$ 5,960

650

1,195

1,587

1,138

1,464

12,101

2,321

$ 3,370

1,502

1,500 $16,315

$ 3,064

1,278

1,033

$14,422

Cash interest and other cash expenses

Depreciation, taxes and other non-cash items

878

—

878

214

Cash flow/income from continuing operations

$ 624

$ 408

809

—

809

141

$ 469

Revenue and assets by geographic segments are as follows:

M I L L I O N S

United States

Canada

International

Revenue/Assets

2003

2002

Revenue

$ 1,973

990

407

$ 3,370

Assets

$ 7,812

5,141

3,362

$ 16,315

Revenue

$ 1,804

899

361

$ 3,064

Assets

$ 6,991

5,288

2,143

$14,422

BRASCAN CORPORATION 2003 ANNUAL REPORT

MANAGEMENT TEAM

Chairmen
Robert J. Harding, FCA
Chairman of the Board

Gordon E. Arnell
International

Jack Delmar
International

Jack L. Cockwell
Group Chairman

David W. Kerr
Resources

Edward C. Kress
Power Generation

Managing Partners
J. Bruce Flatt
President and CEO

Jeffrey M. Blidner
Business Development

Richard B. Clark
Commercial Real Estate

Ian G. Cockwell
Residential Real Estate

George E. Myhal
Chief Operating Officer

Steven J. Douglas
Resources

Dominic Gammiero
Building Products

Harry A. Goldgut
Power Generation

Senior Operating Executives
David D. Arthur
Real Estate Opportunity Fund

Dennis H. Friedrich
Commercial Real Estate

Thomas F. Farley
Commercial Real Estate

J. Peter Gordon
Restructuring Fund

Brad S. Huntington
Reinsurance

Brian G. Kenning
Business Development

Trevor D. Kerr
Capital Markets

Paul G. Kerrigan
Residential Real Estate

Brian W. Kingston
Corporate Development

Colum P. Bastable
Commercial Property Services

Barry Blattman
Real Estate Finance Fund

G. Mark Brown
Business Development

Reid Carter
Timber Operations

Gail Cecil
Corporate Development

Colin L. Clark
Power Generation

Simon P. Dean
Residential Services

Corporate Officers
Stephen A. Adams
Technology

Jennifer J. Auyeung
Accounting and Control

Lisa W. Chu
Business Systems

Bryan K. Davis
Finance

96 BRASCAN CORPORATION 2003 ANNUAL REPORT

Timothy R. Price
Funds Management

John E. Zuccotti
Real Estate

Brian D. Lawson
Chief Financial Officer

Richard Legault
Power Generation

Marcelo J.S. Marinho
International

Derek Pannell
Resources

Peter Kukielski
Resources

Craig J. Laurie
Commercial Real Estate

Cyrus Madon
Bridge Lending Fund

Andrew I. Maleckyj
Capital Markets

Kelly J. Marshall
Corporate Finance

Alan Norris
Residential Real Estate

Jim Reid
Business Development

Martin Schady
Resources

Sam J.B. Pollock
Corporate Development

Aaron W. Regent
Resources

Bruce K. Robertson
Funds Management

J. Barrie Shineton
Building Products

A. Paulo Sodré
International

Stephen B. Tiller
Commercial Property Services

John C. Tremayne
Building Products

Donald Tremblay
Power Generation

Benjamin M. Vaughan
Corporate Development

Karen Wharton
Corporate Development

Alan V. Dean
Corporate Affairs and Secretary

Lori A. Pearson
Human Resources

Joseph S. Freedman
General Counsel

Linda T. Northwood
Investor Relations

Aleks Novakovic
Taxation

Lenis W. Quan
Finance and Operations

Rui M. Senos
Internal Audit

Sachin G. Shah
Finance and Treasury

Jack S. Sidhu
Treasury

Ian C. Turnbull
Information Systems

Katherine C. Vyse
Investor Relations, Communications

BRASCAN’S BOARD OF DIRECTORS

The Hon. James J. Blanchard
Partner, Piper Rudnick

Julia E. Foster
Chair, Ontario Arts Council

Jack L. Cockwell
Group Chairman of the Corporation

James K. Gray, O.C.
Corporate Director

The Hon. J. Trevor Eyton, O.C.
Member of the Senate of Canada

Lynda C. Hamilton
President, Edper Investments Limited

J. Bruce Flatt
President and CEO
of the Corporation

Robert J. Harding, FCA
Chairman of the Corporation

David W. Kerr
Chairman of Noranda Inc.

Philip B. Lind, O.C.
Vice-Chairman,
Rogers Communications Inc.

Dr. Jack Mintz
President and CEO
CD Howe Institute

George E. Myhal
COO of the Corporation

The Hon. Roy MacLaren, P.C.
Corporate Director

Saul Shulman, Q.C.
Senior Partner, Goodman & Carr

G. Wallace F. McCain, O.C., O.N.B.
Chairman, Maple Leaf Foods Inc.

George S. Taylor
Corporate Director

* Details on the Directors are provided on Brascan’s web site and in the Management Information Circular

INDEPENDENT MEMBERS OF AFFILIATE AND ADVISORY BOARDS

Real Estate

William T. Cahill
Managing Director
Citicorp Real Estate, Inc.

The Hon. W. Davis, P.C., Q.C.
Counsel, Torys

Robert A. Ferchat
Corporate Director

Bruce T. Lehman
Principal, Armada LLC

Lance Liebman
Professor of Law
Columbia University

John R. McCaig, C.M., LLD
Chairman, Trimac Corporation

Paul D. McFarlane
Corporate Director

Robert J. McGavin
Corporate Director

Michael F.B. Nesbitt
Chairman
Montrose Mortgage Corporation Ltd.

Allan S. Olson
President and CEO
First Industries Corporation

David M. Sherman
President, D. Sherman & Co., Inc.

Robert L. Stelzl
Principal, Colony Capital LLC

Michael D. Young
Principal
Quadrant Capital Partners, Inc.

William Wheaton, PH.D.
Professor of Economics and Director
MIT Center for Real Estate

Power Generation

Funds Management

Investments

André Bureau, O.C.
Chairman, Astral Media Inc.

Dian Cohen, C.M.
President, DC Productions Ltd.

Ronald J. Daniels
Dean, Faculty of Law
University of Toronto

Richard M. Drouin, O.C., Q.C.
Corporate Director

Pierre Dupuis
COO, Dorel Industries Inc.

Kenneth W. Harrigan, O.C.
Corporate Director

Allan O. Kupcis
Chairman, Canadian Nuclear Assoc.

James Bacon
Corporate Director

Lorraine D. Bell
Corporate Director

A. Gordon Craig
Corporate Director

Susan E. Crocker
Corporate Director

William A. Dimma
Chairman, Home Capital Group Inc.

Dr. Sy Eber
President, Eber & Associates Inc.

Karen Kain
President
Dancer Transition Resource Centre

André Bérard
Chairman, National Bank of Canada

John W. (Bud) Bird, O.C.
President, Bird Holdings Ltd.

V. Maureen Kempston Darkes
Group Vice-President
General Motors Corporation

A.L. (Al) Flood, C.M.
Corporate Director

Gordon E. Forward
Corporate Director

Norman R. Gish
Corporate Director

G. Edmund King
Corporate Director

Sidney A. Lindsay
Corporate Director

Allen Karp, O.C.
Chairman, Cineplex Odeon Corp.

Neville W. Kirchmann
President, Kirchman Holdings Ltd.

Gail Kilgour
Senior Vice-President
Canadian Imperial Bank of Commerce

John Lacey
Chairman, Alderwoods Group Inc.

Aldéa Landry
President, Landal Inc.

James W. McCutcheon, Q.C.
Counsel
McCarthy Tétrault, LLP

John MacIntyre
Independent Financial Advisor
TD Capital Group Limited

Frank Potter
Chairman
Emerging Markets Advisors, Inc.

Peter Tanaka
Independent Financial Advisor

The Hon. Frank J. McKenna, P.C.
Counsel
McInnes Cooper

Mary A. Mogford
Corporate Director

Margot Northey
Corporate Director

David H. Race
Corporate Director

James D. Wallace
President, Pioneer Construction Inc.

Don S. Wells
Company Director and Consultant
McGill University

BRASCAN CORPORATION 2003 ANNUAL REPORT

FIVE YEAR FINANCIAL REVIEW

A S A T A N D F O R T H E Y E A R S E N D E D D E C E M B E R 3 1

M I L L I O N S , E X C E P T P E R S H A R E A M O U N T S ( U N A U D I T E D )

2003

2002

2001

2000

1999

$17.54

$14.85

$15.52

$16.27

$15.08

Per Common Share (fully diluted)

Book value

Cash flow from operations

Cash return on book equity

Net income (basic)

Net income

Net income prior to resource investments and gains

3.21

18%

2.03

1.98

1.61

2.38

16%

0.21

1.23

Market trading price – NYSE

Market trading price – TSX

$30.54

$20.50

C$39.73

C$31.75

C$1.02

2.6%

C$1.00

3.1%

2.06

13%

0.99

0.98

1.12

$18.06

C$28.75

C$1.00

3.5%

1.71

11%

2.33

2.29

0.75

1.34

1.46

1.44

0.52

$14.56

$13.50

C$21.95

C$19.10

C$0.99

C$0.98

4.5%

5.1%

Dividends

Paid

Yield

Total (millions)

Assets

Non-recourse borrowings

Property specific mortgages

Other debt of subsidiaries

Corporate borrowings

Common equity

Revenues

Operating income

Cash flow from operations

Net income

Net income prior to resource investments and gains

$16,315

$14,422

$13,792

$14,407

$14,010

4,881

2,075

1,213

3,024

3,370

1,435

624

408

343

4,992

1,867

1,035

2,625

3,064

1,214

469

264

4,503

1,988

826

2,668

3,042

1,163

388

201

225

4,709

2,085

913

2,805

2,844

1,074

332

435

161

4,252

1,973

1,193

2,704

2,399

934

267

284

121

Number of common shares outstanding

170.7

174.1

169.8

169.4

173.8

Note: Financial results reflect Brookfield Properties on a consolidated basis in all years

98 BRASCAN CORPORATION 2003 ANNUAL REPORT

SHAREHOLDER INFORMATION

Shareholder Enquiries
Shareholder enquiries are welcomed and should be directed to
Katherine Vyse, Senior Vice-President, Investor Relations and
Communications at 416-363-9491 or kvyse@brascancorp.com.
Alternatively shareholders may contact the company at its adminis-
trative head office:

Brascan Corporation
Suite 300, BCE Place, Box 762, 181 Bay Street
Toronto, Ontario M5J 2T3
Telephone: 416-363-9491
416-363-2856
Facsimile:
www.brascancorp.com
Web Site:
enquiries@brascancorp.com
E-Mail:

Shareholder enquiries relating to dividends, address changes and
share certificates should be directed to the company’s Transfer
Agent:

CIBC Mellon Trust Company
P.O. Box 7010, Adelaide Street Postal Station
Toronto, Ontario M5C 2W9
Telephone: 416-643-5500 or

Facsimile:
Web Site:

1-800-387-0825 (Toll free throughout North America)
416-643-5501
www.cibcmellon.com

Investor Relations and Communications
We are committed to informing our shareholders of our progress
through a comprehensive communications program which
includes publication of materials such as our annual report,
quarterly interim reports, supplementary information packages and
press releases for material information. We also maintain a web site
that provides ready access to these materials, as well as statutory
filings, stock and dividend information and web archived events.

Meeting with shareholders is an integral part of our communica-
tions program. Directors and management meet with Brascan’s
shareholders at our annual meeting and are available to respond to
questions at any time. Management also meets on a regular basis
with investment analysts, financial advisors and media to ensure
that accurate information is available to investors. All materials
distributed at any of these meetings are posted on the company’s
web site.

The text of the Brascan 2003 Annual Report is available in French
on request from the company and is filed with and available through
SEDAR at www.sedar.com.

Annual Meeting of Shareholders
The company’s 2004 Annual Meeting of Shareholders will be held
at 10:30 a.m. on Friday, April 30, 2004 at The Design Exchange,
234 Bay Street, Toronto, Ontario and will be webcast on Brascan’s
web site at www.brascancorp.com.

Stock Exchange Listings

Class A Common Shares
Class A Preference Shares

Series 1
Series 2
Series 3
Series 4
Series 8
Series 9
Series 10
Series 11
Series 12

Preferred Securities

8.35%
8.30%

Symbol

BNN.A

BNN.PR.A
BNN.PR.B
BNN.PR.F
BNN.PR.C
BNN.PR.E
BNN.PR.G
BNN.PR.H
BNN.PR.I
BNN.PR.J

BNN.PR.S
BNN.PR.T

Dividend Record and Payment Dates

Stock Exchange

New York, Toronto

Toronto
Toronto
Toronto Venture
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto

Toronto
Toronto

Class A Common Shares 1
Class A Preference Shares 1

Record Date

Payment Date

First day of February, May, August and November

Last day of February, May, August and November

Series 1, 2, 4, 10, 11 and 12
Series 3
Series 8
Series 9

15th day of March, June, September and December Last day of March, June, September and December
Thursday following second Wednesday of each month
Second Wednesday of each month
12th day of following month
Last day of each month
First day of February, May, August and November
15th day of January, April, July and October

Preferred Securities 2
8.35% and 8.30%

15th day of March, June, September and December Last day of March, June, September and December

All dividend payments are subject to declaration by the Board of Directors

Interest payments

Dividend Reinvestment Plan
Registered holders of Class A Common Shares who are resident in
Canada may elect to receive their dividends in the form of newly
issued Class A Common Shares at a price equal to the weighted
average price at which the shares traded on the Toronto Stock
Exchange during the five trading days immediately preceding the
payment date of such dividends.

The utilization of the Plan allows current shareholders to acquire
additional shares in the company without payment of commissions.
Further details on the Plan and a Participation Form can be
obtained from our administrative head office, our transfer agent or
from our web site.

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For more information on Brascan, visit our web site at:
www.brascancorp.com

Our web site contains the latest news releases on Brascan,
as well as quarterly reports and financial statements.

The Brascan web site is the best way of keeping up to date
with our activities year-round.

Brascan Corporation
BCE Place, 181 Bay Street, Suite 300
Toronto, Ontario M5J 2T3
Tel: 416-363-9491 Fax: 416-363-2856

One Liberty Plaza, 165 Broadway, 6th Floor
New York, New York 10006
Tel: 212-417-7000 Fax: 212-417-7014