Welcome to the Brookfield Asset Management 2015 Second Quarter Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Andrew Willis, Senior Vice President, Communications, for Brookfield Asset Management. Please go ahead.

Thank you, Operator, and good afternoon. Welcome to Brookfield second quarter webcast and conference call. On the call today are Bruce Flatt, our Chief Executive Officer; and Brian Lawson, our Chief Financial Officer. Brian will start this morning, discussing the highlights of our financial and operating results. Bruce will then discuss our views on the market environment and our investment strategy. At the end of our formal comments, we will turn the call over to the operator and open the call up for questions. In order to accommodate all those who want to ask questions, we ask that you refrain from asking multiple questions at one time in order to provide an opportunity for others in the queue. We will be happy to respond to additional questions later in the call, as time permits. At this time, I would remind you that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information for investors, I would encourage you to review our annual information form and our annual report, both of which are available on our website. Thank you. And I'll now turn the call over to Brian.

Thanks Andy, and good morning. We had a solid quarter highlighted by strong growth in our asset management business. Our clients continue to commit capital to our private and public funds, and we had net capital inflows of $9 billion in the quarter. And that brings fee-bearing capital to nearly $100 billion representing an 18% increase over the past year and giving rise to 44% increase in fee-related earnings. We deployed $4 billion of capital under new initiatives and advanced a number of key development projects which Bruce will speak to in his remarks. Our funds from operations or FFO in the second quarter was $520 million. In addition to the pickup in fee-related earnings, we also had improved operating results at most of our businesses including increased volumes, operational improvements, and the contribution from recently completed acquisitions and development projects. On the other hand we experienced below average generation in our renewable energy business due to weak hydrology, and a lower contribution from our residential property business. Net income in the quarter was $1.2 billion and this compares to $1.6 billion of net income a year ago. As I mentioned, our fee-bearing assets are now at the $100 billion mark and increased by $15 billion over the last 12 months. There are several components of this growth, and if I just breakdown the expansion of the three major elements within this business to illustrate our ability to access different forms of the capital. So first of all we added more than $7 billion to our private funds over the past 12 months, and are currently raising an additional $5 billion and expect to be in a position to launch an addition of $10 billion to $15 billion of fund raising later this year. We now have a well established…

Thanks Brian, and good morning, everyone. I would like to take a few minutes to speak about four items. First, the overall market environment, second interest rates, third, some of our investment activity and fourth, a few comments on our listed entity. First, on the economic environment. I guess our view is that none of the business events in the first half has given us any pause about the continued recovery of the U.S. economy. We see no indication in our businesses of a retracement. Despite this though, we have been net sellers of assets in U.S. nearly given the robust amount of capital available to our investors. Oil and commodity prices have hurt economies like Australia and Canada. Although we are still seeing very good employment levels across those regions, we continue to pursue value investments in around these markets. Brazil is undergoing extreme pressure but the country has a strong democracy with an emerging middle-class. As a result we are investing large sums of capital there, and believe we are acquiring some credible assets that will be great value investment over the longer term. In India, government reform continues, and we’re pleased with the investment we’ve made over the last few years. Capital is starting to migrate back to the country and India is still recovering in many sectors. We hope to selectively put more money to work in opportunities and property power and possibly infrastructure. With eurozone interest rates near zero -- and looking to stay that way versus United States, our investments are focused on operating businesses where we can achieve some growing cash flow, but we’re locking in extremely attractive borrowing cost. Our telecom tower business in France is a good example of that. Second, we often get asked about interest rates. Our view continues…

[Operator Instructions] The first question is from Cherilyn Radbourne of TD Securities. Please go ahead.

Thanks very much and good morning. So fundraising was clearly a highlight of the quarter, so I thought I'd ask a couple questions around that side of the business. And the first one is your sheer number of clients has expanded quite a bit, and the average commitment is now $80 million versus $100 million a couple of years ago, which would say to me that you're starting to penetrate smaller and midsize institutions. So I wondered if you could just talk a little bit about the evolution of your client base?

Sure, it's Brian, Cherilyn. Thanks. And that is exact your observation is bang-on, and that's been an objective of ours, it has been really important for us to have strong relationships with all of the very large global institutional investors. And we feel good that we have those. They're valuable in a lot of ways. But it’s also really important for us to broaden out that investor base into the smaller mid-size pension funds there. They’re great solid clients with a strong tendency towards continuing in future funds and the economics and margins are good as well. It's a key part of our strategy.

And then just as it relates to carry, you've rebuilt the unrealized carry nicely since the big realization on general growth. I was just wondering if you could offer some thoughts on how long it will be before carry starts to become a more regular contributor to your quarterly results?

Yes, so that’s it’s a hard one to predict exactly having said that that $600 million relates to funds that will be harvested. Our target will be harvested over the next three years so you should see that coming along with any additional carry that get generated in those funds over the next few years, which is - really as they come to maturity, which is the typical pattern.

All right that’s my two. Thank you.

Okay. Thanks Cherilyn.

The next question is from Mario Saric of Scotiabank. Please go ahead.

Hi, thank you, and good morning. Maybe sticking to the theme of the evolution of your asset management business, I've also noted that the percentage of investors that invest in multiple funds has really gone up in the last 12 months. Even the past quarter, it's up 6% to 40%. As that extra $10 trillion of incremental capital becomes available for the sector that you highlight in your letter to shareholders, is there a specific target that we can think about in terms of how high you can go, in terms of the participation in the multiple funds by your clients?

I'd start off maybe just a more broad comment on that and I think what the factor that's at work, you're seeing and maybe will try to come up with a specific figure for you, but the factor at work is really that as you know for investment managers its hard work to that -- people that allocate money, it's hard to work to that managers. And if you have both strong number of funds that you can offer institutions, and you have a global franchise to be able to put behind it, it's a lot easier for managers or allocators of capital to vet a manager and then continue to, A, invest in follow-on funds, but, B, it's even better if they can broaden out and do other things with those institutions. So, what we've seen is a something - what's happening is that more money as opposed if somebody watching with one fund and it's just a specific fund in a specific country, that may or may not receive from an institution, large institution, but it's a lot harder than if you have very broad relationships with institutions and you can offer them multiple products, and it's kind of just human nature that if you trust somebody and if they can do the work for you, you're going to go with that party. So, we continue to see that at work and I think you will increasingly see that at work over the next decade as the industry consolidates and the number of allocations and accounts continues to come down.

Okay.

So, I guess specifically to your -- to the actual quantum. I think if you look around the industry with some of the larger managers, they're up at north of 75% in terms of clients with multiple funds and obviously there is no reason why we shouldn't be in the same category.

Okay. That's great and then maybe an associated question. It's probably not a coincidence that you're also seeing some pretty strong margin expansion within the business, both quarter-over-quarter and year-over-year. It's gravitating toward some of the target margins that you've talked about in the past. Is there anything specific within the quarter that led to the roughly 300 basis point increase quarter-over-quarter or should we use 55% of the previous base going forward?

I think we've definitely built the margin up nicely. Part of it as you know we put a lot into building up this business, I'll say, in anticipation of the growth in the fee bearing capital and therefore the revenues. And there will always be a little bit of evolution on that front, but meaning that it's not always going to track completely in line, having said that, I think that's a big part of it -- is that, and then the other part is on the incented distributions as well, because that's a good margin for us as well in that front.

Okay. Thank you.

The next question is from Brendan Maiorana of Wells Fargo. Please go ahead.

Thanks. Brian, if I could just ask a quick follow-up related to that question about the margins? On your incentive or the carried interest, it looks like the generated versus fees, so it's about $100 million generated, $103 million of generated in the quarter, and associated fees was $34 million. It's about the same relationship from the last 12 months. Is this kind of 65% margin on carried interest a fair target over the longer term?

Overall, yes.

Okay, great. And then just a question for Bruce, so I completely get everything you're saying about institutions moving towards real assets, and you guys have highlighted that for a number of years and certainly have been proven correct in terms of where fund allocation is going. Do you feel like there's any risk that either evaluations that are being paid today, not necessarily by Brookfield, but maybe by other asset managers that are in the field, make the risk that returns that have been delivered in the past or maybe that are promised in the future, may not be realized for real assets overall? And is that a risk that institutions could sour on real assets if returns don't come out as expected?

Maybe I'll try two comments. First I'd say, the returns are so far in excess of their fixed income allocations that they'd be taking this from the -- unless people make large mistakes, it's tough to come near 2% return. So, I think if they thought they were going to get 15% returns and they only get 9%, that's possible that that occurs, but when they look back and say, well, compared to our, we were going to be in fixed income maybe it wasn't a bad decision, if that's what occurs. So, I think it's possible that there is some assets – there is some likelihood of that occurring with some assets being purchase. Secondly, I would say that really are two types of real-estate and infrastructure and we try to take to purchase or require assets in the first category. And the first category is, transactions which are acquired where it takes it corporate in nature, it often has an operating angle to it, and its large and therefore we have competitive advantages to earn a higher returns out of it. On the opposite side, if you buy a 100%, let office building for the next 30 years, or a fully let transmission system on a fixed coupon for the next 20 years, those are assets, which are closer to fixed income instruments than what we generally buy and those could get harmed with increases in interest rates. And therefore some of the returns out of infrastructure may not be as good as what people thought that’s not say I think that that will ever disrupt the marketplace for real estate in that infrastructure investing I think that our view is that the trend continues and it will continue other than in one circumstance which is if you think the interest rates going to 8% in the United States on the back on the long end Treasury, then probably that’s going to disrupt the number of things including real asset investing.

Okay, great. Thanks.

[Operator Instructions] The next question is from Andrew Kuske of Credit Suisse. Please go ahead.

Thank you, good morning. Bruce, I appreciate the comments on supporting the underlying LPs. But could you give us some perspective on just ownership levels, and how you think about that over a period of time? Right now, you got 29% ownership of BIP, and this is aside from the GP interest, just on an LP basis. And then you're in the 60% on BRP and BPY. So how do you think about a stabilized level, and what's the appropriate range around ownership for really a duration. How low would you go, and how high would you go?

On the low I’d say we probably we’ve always thought that we wanted to own 20% of these entities at the lowest level, because it enabled us to earn to feel like we were up true up true owner of the business along with everybody that’s there. And I’m not sure that we’re going to go below 20% other than in some extreme circumstance, but that is in our plans. On the high side I would just say that or we don’t really have expectation or what we should own in these companies. The companies are set up to grow and build their asset portfolio and we’ll be as supportive as we can to let them complete transactions, which grow their business if it make sense for all of the unit holders and add the value to the company. And if that means if those transactions that means that we should support them our percentage will increase and if those transactions which require them to issue shares and there is no opportunity for us to put capital up then we maybe diluted. Really we’ll just work with the management teams to support the companies and it’s not really dependent on how much like the percentage of ours isn’t that important it’s just about creating value for the unit holders.

Okay, that's helpful. And then I guess somewhat related question, because a lot of the deals with the underlying LPs do is really in conjunction with your private funds business. So there was some discussion earlier on about effectively tapping into a broader variety of funds, and really the middle market clients. But what’s the ability to really tap the really large checks from some of the larger clients around the world? Did you clearly had longer-term relationships with very big funds around the world, the sovereign wealth funds, but has that ability been effectively enhanced for the $500 million commitments and above?

Yeah the number goes down the size maybe I’ll say is that the size of the check on average goes down, but that actually doesn’t mean that these large investors are less than the funds. What’s happening is our funds are getting larger and therefore we still have very large commitments from big funds. But in addition we’re bringing in a lot of other institutions in smaller numbers. Therefore the average goes down. Maybe more important than that those institutions that are good clients of ours that are in our funds also are here, because of what we can bring them as investments, but size of the funds that we have. So when we complete transactions and when we’re doing large transactions we have very significant amounts of capital that we can choose to bring in an amount and sometimes it’s x and it could be x times three. And so we have those and many of them are putting significant amounts of capital into transactions. So we have that available to us when we’re working on large transactions.

Yeah, that’s very helpful. Thank you.

This concludes the question and answer session. I'll now hand the call back over to Mr. Willis for any closing remarks.

Thank you, Operator. Please feel free to follow-up with us directly, and we look forward to updating you in our next quarter.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.