Financial Review

CONTENTS
Management’s Discussion and Analysis of Financial Results
Performance Overview	9
Operations Review	15
Property	15
Power Generating	22
Funds Management	27
Investment in Noranda	34
Capital Resources and Liquidity	36
Financial Policies	43
Business Environment and Risks	45
Supplemental Information	48
Outlook	51
Auditors’ Report	53
Consolidated Financial Statements	54

INTRODUCTION

This section of our annual report includes management’s discussion and analysis of our financial results (“MD&A”), our consolidated financial statements for the most recent year and the report of the Corporation’s auditors. The MD&A is intended to provide you with an assessment of our performance over the past three years as well as our financial position, performance objectives and future prospects. The basis of presentation in the MD&A is the same as that used for our consolidated financial statements with two principal exceptions: much of the discussion of performance is based on operating cash flow, which is how we benchmark performance and assess value; and certain of our operations are grouped according to how we manage the business, which differs in certain ways from the grouping prescribed by generally accepted accounting principles. We also provide a full reconciliation to our consolidated financial statements, including net income, and an assessment of our performance on that basis as well.

The information in this section should be read in conjunction with our audited consolidated financial statements, which are included on pages 53 through 87 of this report. Additional information, including the company’s Annual Information Form, is available on the company’s web site at www.brascancorp.com and 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 90 of this report. Unless the context indicates otherwise, references in this section of the annual report to the “Corporation” refer to Brascan Corporation, and references to “Brascan” or “the company” refer to the Corporation and its direct and indirect subsidiaries.

8 Brascan Corporation | 2004 Annual Report

Management’s Discussion & Analysis of Financial Results

PERFORMANCE OVERVIEW

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

YEARS ENDED DECEMBER 31, (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2004		2003		2002
Operating cash flow	$	670	$	624	$	469
Per share		2.34		2.14		1.58
Excluding property and disposition gains	$	577	$	517	$	439
Per share		1.98		1.74		1.48
Net income	$	688	$	403	$	83
Per share		2.38		1.31		0.14

We achieved record operating cash flow of $670 million ($2.34 per share) during 2004. On a comparable basis, excluding property and disposition gains, annual growth was 14% on a per share basis. This growth came on top of a particularly strong year in 2003.

Nearly all of our businesses contributed to the improved results in 2004. Power generation and residential property operations recorded substantial increases in net operating income. Our power operations benefitted from acquisitions and a return to normal water levels following unusually poor conditions in 2003, and our home building operations experienced continued strength in our core residential markets of California, Virginia and Alberta.

Our commercial property operations continue to produce steady increases in cash flows, and we successfully expanded our portfolio with the acquisition of three properties in the Washington D.C. market, the completion of our 300 Madison Avenue property in midtown Manhattan and the addition of assets in London, U.K. Our funds management business made significant progress in increasing both funds under management and capital deployed, which will produce cash flow growth in future years.

Net income increased to $688 million ($2.38 per share), also a record result for the company. We benefitted from a substantial increase in the net earnings of Noranda and Norbord, each of which generated record results during the year due to strong product prices. Our operating cash flow only includes cash dividends received from these companies, whereas net income includes our proportionate share of their earnings.

We measure our financial performance with two principal metrics: operating cash flow per share and cash return on equity. The following table shows our performance compared to our objectives over the past three years:

				Three Year			Annual Results
YEARS ENDED DECEMBER 31	Objective			Average			2004			2003			2002
Operating cash flow and gains per share
Annual growth	12% to 15%				20	%		10	%		35	%		16	%
Excluding property and disposition gains	12% to 15%				17	%		14	%		17	%		19	%
Cash return on equity		20	%		18	%		19	%		18	%		16	%

Over the past three years our cash flows have grown at an annualized rate of 20% (17% excluding property and disposition gains), exceeding our target of 12% to 15%, and the cash return on equity in 2004 of 19% is nearly at our target of 20%. Cash flow growth during 2004 of 10% was below that of the prior year; however it is important to note that this was in comparison to 2003 which was a particularly strong year in terms of growth and gains realized on dispositions. As we stated in our report last year, we recognize that we will not hit our targets every year, but believe we can achieve our growth and return objectives on a relatively consistent basis over the long term.

Brascan Corporation | 2004 Annual Report 9

Operating Cash Flow

We focus on cash flow in assessing our performance because we believe that the intrinsic value of Brascan is determined by the magnitude and quality of operating cash flow generated on a per share basis, as well as our ability to increase these cash flows on a sustainable basis over time. Accordingly, our two key performance measurements are annual growth in operating cash flow and cash return on equity, both determined on a per share basis. We define operating cash flow as net income excluding non-cash charges relating to depreciation and amortization, future taxes and, in the case of our major investments and cyclical resource investments, undistributed earnings.

Cash flow is tangible and underpins the value of our assets and is utilized by financial analysts as a key measure in each of our operating sectors. In particular, cash flow excludes depreciation and amortization expense recorded in respect of our commercial real estate properties and hydroelectric power generating assets. Depreciation expense implies that these assets decline in value on a pre-determined basis over time, whereas we believe that the value of these assets will typically increase over time, and will vary based on a number of market and other conditions that cannot be determined in advance.

We do recognize, however, that net income is also an important measure for many readers and that operating cash flow is a non-GAAP measure. Accordingly, we also provide a specific discussion of net income and a reconciliation of the two measures, under Summary of Operating Results – Net Income.

In our opinion, the quality of operating cash flow is measured largely by the degree of stability and growth over an extended period of time, which is in turn determined by the nature of contractual arrangements governing the payment of the cash flows, the credit worthiness of the counterparties, and the competitive profile and cost profile of the operations which generate the cash flows.

For example, our commercial office property lease portfolio has an average length of ten years with a high quality tenant roster. Similarly, over 70% of our power generating revenues are based on contractual arrangements with an average length of 13 years, again with a high quality group of customers. Our funds management business will, over time, generate a growing stream of relatively predictable management fees with a large component related to structured debt securities and loans receivable, which have contractual cash flow entitlements.

We believe that strong, growing cash flows will be rewarded with a premium valuation multiple, leading to a higher equity valuation than would be derived from the ownership of higher yielding assets of lower quality. High quality cash flows also enable us to finance assets on a long-term, low-cost basis without recourse to the Corporation, thereby increasing common equity returns on a reduced risk basis.

Operating Profile

Brascan is an asset management company, with a particular focus on property, power generation and other long-life infrastructure assets. We concentrate on businesses that generate sustainable, low-risk, growing streams of cash flow, such as high quality commercial properties, hydroelectric power generation plants and other infrastructure assets with similar characteristics.

Our direct investments include 70 premier office properties and 120 power generating plants. Relatively low capital investment is required to maintain these operations and the values of the assets owned within these businesses typically appreciate as the associated cash flow streams grow, rather than depreciate over time, as is common with many other types of operating assets. In addition to our direct investments, we have $7 billion of additional assets and capital committed under management and plan to expand these assets significantly in future years.

10 Brascan Corporation | 2004 Annual Report

Brascan’s common share market capitalization exceeds $9 billion and our common shares are inter-listed on both the New York and Toronto stock exchanges.

We own and manage our operations directly as well as through partially owned companies, joint venture partnerships and investment funds that are co-owned with institutional and other partners. We finance our operations with diversified sources of capital. Attractive low-risk financial leverage for our common shares is obtained through the use of property specific mortgages that have no recourse to the Corporation and the issuance of low-rate non-participating securities such as preferred shares. At year end, total shareholders’ interests, including interests of others in our consolidated operations, totalled $7 billion at book value and had an aggregate market capitalization of $15 billion.

Our core operations are concentrated in three areas: our property operations include commercial properties, residential home building, associated development activities and property services; our power generation business is concentrated almost exclusively on hydroelectric power generation, although we also operate three gas fired generating facilities and a small transmission and distribution business; and our funds management business develops, invests and manages funds and investments on behalf of a select group of institutional investors that co-invest in the same types of assets which we own.

Summary Of Operating Results

Operating Cash Flow

The following is a summarized statement of operating cash flows over the past three years:

AS AT AND FOR THE YEARS ENDED DECEMBER 31	Book Value		Operating Cash Flow						Annualized Return 1
MILLIONS, EXCEPT PER SHARE AMOUNTS	2004		2004		2003		2002		2004			2003			2002
Net operating income
Core operations
Property	$	9,289	$	1,019	$	837	$	743		12	%		10	%		10	%
Power generation		3,048		283		172		153		11	%		10	%		11	%
Funds management		3,375		219		198		178		8	%		13	%		11	%
		15,712		1,521		1,207		1,074		11	%		11	%		10	%
Investment in Noranda		1,374		45		49		48		4	%		5	%		5	%
Cash and financial assets		1,400		79		89		96		6	%		8	%		8	%
Receivables and other assets		1,524		—		—		—		—			—			—
Property and disposition gains		—		123		157		60		—			—			—
	$	20,010	$	1,768	$	1,502	$	1,278		10	%		10	%		10	%
Interest expense
Property specific mortgages	$	6,045	$	321	$	300	$	297		6	%		6	%		6	%
Other debt of subsidiaries		2,373		122		105		106		5	%		5	%		5	%
Corporate borrowings		1,675		87		66		63		6	%		6	%		7	%
Cash taxes and other operating costs		2,719		169		88		56		7	%		6	%		5	%
Minority interests of others in assets 2		2,628		399		319		287		15	%		15	%		15	%
Operating cash flow and gains		4,570		670		624		469		16	%		17	%		14	%
Corporate preferred equity		1,089		62		58		44		6	%		6	%		6	%
Operating cash flow for common shares	$	3,481	$	608	$	566	$	425		19	%		18	%		16	%
Per common share	$	13.51	$	2.34	$	2.14	$	1.58		19	%		18	%		16	%

1	Operating cash flow as a percentage of average book value
2	Includes preferred equity issued by subsidiaries and associated distributions

Brascan Corporation | 2004 Annual Report 11

Cash flow from operations and gains for the year ended December 31, 2004, including dividends from Noranda and Norbord, totalled $670 million ($2.34 per share) after deducting financing charges, operating costs and the portion of operating cash flow that is attributable to other investors with interests in our businesses, whether retained or distributed. This represents a 9% increase from the $2.14 per share generated in 2003, which in turn represented a 35% increase over 2002.

We operate our businesses with the objective of generating sustainable and increasing cash flow streams, which should result in the value of these operations appreciating over time. It is worth noting that the cash flow from operations shown above includes virtually no return on $1 billion of real estate and power generation development properties, a low return from undeployed cash and financial assets, and includes only the dividends received from our investment in Noranda, which has a current market value of more than $2 billion.

Property operations increased their contribution to operating cash flow to $1,019 million from $837 million in 2003 and $743 million in 2002. The 2004 results reflect outstanding performance from our residential property operations, due primarily to exceptionally strong demand for new homes in our core markets. Net operating income from currently owned commercial properties also increased during 2004 due to the addition of new properties after remaining relatively unchanged between 2003 and 2002, as growth from existing properties in that year was offset by the impact of the sale of partial interests in more mature properties.

Power generating operations increased their contribution by 65% over 2003 due to a return to normal water flows as well as capacity additions over the past two years. Corresponding growth between 2003 and 2002 was lower than expected as the impact of capacity additions was offset by lower water levels in several key regions.

Contribution from funds management increased by 11% from 2003. We continue to expand our fund offerings and assets under management and the level of capital deployed in this sector increased significantly in the last half of 2004, which together should lead to improved results in 2005. In addition, the 2003 results included a high level of realized gains, particularly from high yield investments, that contributed to significant growth over 2002 but were not replicated in 2004.

We recorded property and disposition gains in each of the past three years. The 2004 results include $60 million of income arising from the termination of a major office lease, and a $63 million gain on the partial monetization of our investment in Norbord. The 2003 results include property disposition gains of $100 million on the sale of a partial interest in one of our New York office properties and a $57 million gain on the sale of a copper/gold mine which we had restructured. The 2002 results include gains of $60 million on the sale of partial interests in properties located in Toronto and Calgary.

Interest expense increased during 2004 and 2003 due to additional non-recourse property specific mortgages arranged to finance our commercial property and hydroelectric generating assets. Interest incurred on corporate and non-recourse debt of subsidiaries also increased due to long-term debt issued to capitalize on low interest rates and the market demand for longer maturities. We also decided to shift our interest rate profile to predominantly fixed rate payments, which results in higher interest payments but a reduced exposure to rising rates.

Minority interest share of cash flow increased, reflecting the interest of those shareholders in the improved performance of the operations in which they participate. The majority of these interests are in our property operations, which recorded particularly strong results in 2004. The increase in cash taxes and other operating costs largely reflects income taxes payable by our U.S. home building operations.

The operating results are discussed in more detail for each business segment under Operations Review.

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Net Income

Net income increased significantly in 2004. This was due to the increase in cash flow from operations previously discussed, as well as meaningful improvements in the equity accounted results of Noranda and Norbord as a result of improved product prices and cost efficiencies. The 2002 results included a net charge of $145 million representing our share of Noranda’s restructuring charges.

Net income is reconciled to operating cash flow as set forth below:

YEARS ENDED DECEMBER 31 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2004			2003			2002
Operating cash flow and gains	$	670		$	624		$	469
Less: dividends from Noranda and Norbord		(64	)		(67	)		(64	)
		606			557			405
Non-cash items
Depreciation and amortization		(251	)		(149	)		(121	)
Future income taxes and other provisions		(153	)		(165	)		(104	)
Minority share of non-cash items		141			100			84
Equity accounted income (loss) from Noranda, Norbord and Fraser Papers		345			60			(181	)
Net income	$	688		$	403		$	83
Net income per share	$	2.38		$	1.31		$	0.14

Depreciation and amortization increased significantly in 2004 as a result of recent changes in accounting requirements which required commercial property operations, including ours, to adopt the straight-line method for depreciation during 2004. This resulted in a $58 million increase in depreciation charges during the year. The remaining increases of $44 million in 2004 and $28 million in 2003 are due to the acquisition and development of additional commercial properties and power generating facilities.

Future income taxes and other provisions were largely unchanged compared to 2003. Brascan has access to significant tax shields as a result of the nature of our asset base, and we do not expect to incur any meaningful cash tax liability in the near future other than in our home building operations. Nonetheless, we record non-cash tax provisions as required under GAAP, which includes expensing the carrying value of tax losses utilized during the period, and tax provisions in respect of the non-cash equity earnings recorded on our investments in Noranda and Norbord.

Minority share of non-cash items reflects the extent to which the foregoing charges are attributable to the minority shareholders of operating subsidiaries, primarily Brookfield Properties and Brookfield Homes.

Equity accounted income from Noranda, Norbord and Fraser Papers contributed $345 million during 2004 compared to $60 million in 2003. The negative contribution in 2002 was due to restructuring charges recorded by Noranda. The contribution is summarized as follows:

YEARS ENDED DECEMBER 31 (MILLIONS)	2004			2003		2002
Noranda	$	218		$	6	$	(186	)
Norbord 1		135			54		5
Fraser Papers 1		(8	)		—		—
Net income (loss)	$	345		$	60	$	(181	)

1 In 2004, Nexfor Inc. distributed its paper operations to its shareholders as Fraser Papers Inc. and changed its name to Norbord Inc.

Brascan Corporation | 2004 Annual Report 13

Financial Profile

Total assets at book value increased to $20.0 billion as at December 31, 2004 from $16.3 billion at the end of the preceding year and $14.4 billion at the end of 2002. The increase was due to a higher level of invested assets, as well as the impact of the higher Canadian dollar on the assets which we own and operate in Canada.

The following is a summarized statement of our financial position and employment of capital over the past three years:

AS AT DECEMBER 31	Book Value
MILLIONS, EXCEPT PER SHARE AMOUNTS	2004		2003		2002
Assets
Property	$	9,289	$	8,222	$	7,872
Power generation		3,048		1,927		1,587
Funds management		3,375		2,095		1,765
		15,712		12,244		11,224
Investment		1,374		1,196		877
Cash and securities		1,400		1,236		1,050
Accounts receivable and other		1,524		1,623		1,271
	$	20,010	$	16,299	$	14,422
Liabilities
Non-recourse borrowings
Property specific mortgages	$	6,045	$	4,881	$	4,992
Other debt of subsidiaries		2,373		2,075		1,867
Corporate borrowings		1,675		1,213		1,035
Accounts payable and other liabilities		2,719		1,745		1,262
Shareholders’ interests
Minority interests of others in assets		1,569		1,516		1,456
Preferred equity – corporate and subsidiaries		2,148		1,861		1,185
Common equity		3,481		3,008		2,625
Total shareholders’ interests		7,198		6,385		5,266
	$	20,010	$	16,299	$	14,422
Per common share	$	13.51	$	11.63	$	9.90

Our property, power and funds management operations each increased assets deployed by over $1 billion in 2004. Property specific mortgages increased as a result of financing arranged in connection with the acquisition of the commercial property and power generating assets referred to above.

Corporate borrowings increased by $462 million due in part to the inclusion of corporate debt issued by our funds management operations, which was assumed by Brascan as part of an amalgamation at year end, as well as net new debt issuances.

Shareholders’ interests increased as a result of $490 million of undistributed earnings and the issuance of $268 million of additional preferred equity through our commercial real estate operations.

14 Brascan Corporation | 2004 Annual Report

OPERATIONS REVIEW

Property

Our property operations consist of commercial office properties, residential properties, development properties and property services activities. In total, we manage approximately 170 million square feet of real estate properties. This includes our own commercial properties, properties managed for institutional investors and third party managed properties. These operations are located predominantly in North America, but also include operations in the United Kingdom and Brazil.

Operating cash flows generated by each area of our real estate operations for the past three years, together with the assets deployed, were as follows:

AS AT AND FOR THE YEARS ENDED DECEMBER 31				Book Value				Operating Cash Flow
MILLIONS	Return on Assets 1			2004		2003		2004		2003		2002
Commercial properties		10	%	$	7,470	$	6,622	$	697		$621		$622
Residential properties		39	%		818		738		305		131		105
Development properties		—			950		814		1		67		2
Property services		32	%		51		48		16		18		14
		12	%	$	9,289	$	8,222	$	1,019		$837		$743

1 As a percentage of average book value

Commercial Properties

Commercial properties generated $697 million of operating cash flows, an increase of 12% over 2003 which in turn was unchanged from 2002. The composition of the commercial property portfolio owned by the company at the end of 2004 and 2003 was as follows:

	Leasable		Return on			Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2004	Area 1		Assets 2			2004		2003		2004		2003		2002
	(000 SQ. FT.)					(MILLIONS)				(MILLIONS)
New York, New York		9,506		11.3	%	$	3,576	$	3,552		$404		$315		$307
Boston, Massachusetts		1,103		10.3	%		328		333		34		33		32
Toronto, Ontario		4,777		8.5	%		1,068		928		85		75		63
Calgary, Alberta		3,166		11.8	%		448		450		53		46		37
Washington, D.C.		1,557		7.5	%		439		150		22		—		—
Denver, Colorado		2,811		8.6	%		370		372		32		32		36
Minneapolis, Minnesota		3,008		4.9	%		414		400		20		22		28
Other North America		927		22.0	%		84		134		24		44		45
Rio de Janeiro, São Paulo, Brazil		2,292		7.7	%		293		303		23		28		25
London, United Kingdom		1,617		—			450		—		—		—		—
Income from properties sold		—		—			—		—		—		26		49
Total 3		30,764		9.9	%	$	7,470	$	6,622		$697		$621		$622

1	Effective interest
2	As a percentage of average book value
3	Excludes development sites

Approximately 86% of commercial property net income is generated from our five core North American markets: New York, Boston, Toronto, Calgary and Washington. We intend to continue our strategy of concentrating our operations within a select number of supply constrained markets with attractive tenant bases in order to maintain a meaningful presence and build on the strength of our tenant relationships within these markets.

The book value of our commercial property portfolio increased during the year with the acquisition of two properties in Washington and a net effective 17% interest in 17 properties within the Canary Wharf estate in London, U.K., as well as the impact of the higher Canadian dollar on our Canadian assets. During 2003 we completed the development of

Brascan Corporation | 2004 Annual Report 15

300 Madison Avenue in New York and sold a 49% interest in our 245 Park Avenue property, also in New York, as well as a smaller Calgary property. The consolidated carrying value of our North American properties is approximately $250 per square foot, significantly less than the estimated replacement cost of these assets. Our core properties are on average 1.4 million square feet in size.

The commercial properties currently owned are expected to generate approximately $750 million of annual operating cash flows. The application of a capitalization rate to this cash flow yields the following values for our portfolio:

	Operating		Book Value		Capitalization Value
MILLIONS	Cash Flow 1		2004		5.00%		5.75%		6.50%		7.25%
Commercial properties	$	750	$	7,470	$	15,000	$	13,000	$	11,500	$	10,350

1 Expected annualized operating cash flow based on year end portfolio

Components of Operating Cash Flow

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:

YEARS ENDED DECEMBER 31 (MILLIONS)	2002 – 2004			2004		2003			2002
Previous net operating income before lease termination income and property gains	$	642		$	621	$	622		$	642
Changes due to:
(i) Contractual increases on in-place leases		36			4		16			16
– Straight-line rental income		22			22		—			—
(ii) Rental increases achieved on in-place rents when re-leased		20			2		10			8
(iii) Lease-up of vacancies		9			1		3			5
(iv) Acquisitions and dispositions, net		(32	)		47		(30	)		(49	)
Current year’s net operating income	$	697		$	697	$	621		$	622

(i) Contractual increases on in-place leases

During 2004, contractual increases in leases added $4 million to net operating income compared with $16 million in each of 2003 and 2002. Our leases generally have clauses which provide for the collection of rental revenues in amounts that increase every five years, with these increases negotiated at the signing of the leases. Given the high credit quality of tenants in our buildings, there is generally low risk of not achieving these increases. Prior to 2004 our policy was to record most of our rental revenues in accordance with the actual payments received under the terms of our leases, which typically increase over time. However, we adopted straight-line rent recognition during 2004 in accordance with revised industry standards and accounting requirements, resulting in a $22 million increase during the year.

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

During 2004, higher rental rates on the re-leasing of space in the portfolio contributed $2 million of increased cash flow over 2003, compared with a corresponding increase of $10 million during the prior year and $8 million in 2002. At December 31, 2004, average in-place net rents throughout the portfolio were $23 per square foot, up from $22 per square foot in December 31, 2003 and $21 per square foot at December 31, 2002, as leasing environments across North America improved. The average market net rent was $25 per square foot in 2004, an increase of $1 over $24 per square foot in 2003. Decreases in New York and Boston were offset by increases in other markets.

(iii) Lease-up of vacancies

Contribution to net operating income from lease-up of vacancies was $1 million in 2004 compared with $3 million in 2003 and $5 million in 2002. Contributions from vacancy lease-up was greater in 2003 due to vacancies leased in properties acquired in prior years. The contribution to operating cash flow from vacancy lease-up is expected to increase in the future as properties acquired or developed in 2004 with vacancies are leased up.

16 Brascan Corporation | 2004 Annual Report

During 2004 we leased close to four million square feet of space, approximately four times the amount of space contractually expiring. This includes two million square feet of new leases and 1.6 million square feet of renewals.

Our total portfolio occupancy rate at December 31, 2004 was 97% in our core North American markets, and 95% overall, as shown in the following table:

	2004					2003					2002
AS AT DECEMBER 31	Leasable		Percentage			Leasable		Percentage			Leasable		Percentage
THOUSANDS OF SQUARE FEET	Area		Leased			Area		Leased			Area		Leased
New York, New York		11,221		98	%		11,262		98	%		10,113		98	%
Boston, Massachusetts		2,163		97	%		2,163		98	%		2,163		97	%
Toronto, Ontario		6,790		95	%		6,884		96	%		6,883		96	%
Calgary, Alberta		6,331		98	%		7,454		98	%		7,570		97	%
Washington, D.C.		1,557		93	%		570		53	%		—		—
Core North America		28,062		97	%		28,333		97	%		26,729		97	%
Denver, Colorado		3,017		85	%		3,017		83	%		3,017		90	%
Minneapolis, Minnesota		3,008		86	%		3,008		74	%		3,008		85	%
Other North America		927		89	%		1,281		91	%		1,515		97	%
Total North America		35,014		95	%		35,639		94	%		34,269		96	%
Brazil		2,292		92	%		2,216		93	%		2,216		92	%
London, United Kingdom		1,617		86	%		—		—			—		—
Total 1		38,923		95	%		37,855		94	%		36,485		96	%

1 Excludes development sites

(iv) Acquisitions and dispositions, net

The value created in our mature commercial properties provides us with the opportunity to generate additional gains and capital in order to reinvest in other opportunities at higher returns. We continued our practice of actively managing our portfolio with the acquisition of two properties in Washington D.C., aggregating 1.6 million square feet, and completed the first full year of operations of our 300 Madison Avenue property in midtown Manhattan, New York. This 1.2 million square foot building was completed in late 2003 and is fully leased to CIBC World Markets and PricewaterhouseCoopers for 30 years with a CIBC covenant on 100% of the property.

We sold 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. 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. The net acquisition of properties, together with associated leasing fees, increased operating cash flow by $47 million in 2004, and the sale of properties reduced operating cash flow by $30 million in 2003 and $49 million in 2002.

Tenant Relationships and Lease Maturities

An important characteristic of our commercial property portfolio is the strong credit quality of our tenants. Special attention is given to 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 400,000 square feet of space in the portfolio include Merrill Lynch, CIBC, RBC Financial Group, Petro-Canada, Imperial Oil and JPMorgan Chase, among others.

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, extend between 10 and 20 years. As a result, the average amount of leasable area in the total portfolio maturing annually is approximately 5%.

Brascan Corporation | 2004 Annual Report 17

Residential Properties

Our residential property business consists primarily of single family home building across North America with our established niche being 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 in California and Virginia. We also build residential condominiums in Brazil and build homes and develop lots in Toronto and Calgary, and have done so successfully for over 20 years. The capital deployed and the cash flows generated by these operations over the past three years were as follows:

AS AT AND FOR THE YEARS ENDED DECEMBER 31				Book Value				Operating Cash Flow 1
MILLIONS	Return on Assets 2			2004		2003		2004		2003		2002
United States
California		48	%	$	414	$	361	$	184	$	57	$	50
Virginia		35	%		196		110		53		27		21
Colorado		43	%		22		25		10		3		(9	)
Florida		—			4		91		—		—		(3	)
Canada
Ontario		38	%		16		26		8		5		3
Alberta		30	%		90		68		24		23		33
Brazil		39	%		76		57		26		16		10
		39	%	$	818	$	738	$	305	$	131	$	105

1	Revenue less cost of sales
2	As a percentage of average book value

Operating cash flow from our residential operations increased to $305 million in 2004, up from $131 million in 2003 and $105 million in 2002. This substantial increase reflected both higher selling prices and improved margins, as well as an increase in the number of homes and lot sales closed during the year. All of our major markets continued to experience strong demand due to favourable economic fundamentals and demographic trends. We own approximately 50% of the equity capital in our U.S. and Canadian operations and, accordingly, a corresponding proportion of the improved returns accrued to other investors which is reflected as minority interests of others in assets.

Home sales totalled 3,321 units for the year compared with 2,731 in 2003. Lot sales in 2004, including the bulk sale of lots to other builders, totalled 6,125 compared with 5,152 in 2003.

The book value of the assets employed in our residential business has increased in each of the past two years due to an increased level of activity, development of land and higher level of work in process.

Details of the home and lot sales by regional market, are as follows:

	Home Sales						Lot Sales 1
YEARS ENDED DECEMBER 31 (UNITS)	2004		2003		2002		2004		2003		2002
United States
California		1,357		1,023		1,093		1,415		1,044		1,420
Virginia		523		505		461		864		745		791
Colorado		—		—		—		468		448		277
Florida		—		—		47		—		—		47
Canada
Ontario		339		318		374		339		318		468
Alberta		496		479		382		2,433		2,191		2,221
Brazil		606		406		535		606		406		535
Total		3,321		2,731		2,892		6,125		5,152		5,759

1 Including lots associated with home sales

18 Brascan Corporation | 2004 Annual Report

The average home sales price in 2004 for our home building operations was $416,000 per unit, an increase of 12% over 2003 levels. The increase in the average home price was due to a larger proportion of higher priced houses sold, and increased pricing on housing sales across virtually all markets in North America.

The backlog of orders for delivery in 2005, as at the date of this report was approximately 40% of expected 2005 closings.

Development Properties

Development properties consist predominantly of commercial property development sites, density rights and related infrastructure, and land owned and under option, held pending future development into income producing assets or for sale to other users or our own home building operations. These assets are owned to add value through obtaining building entitlements or for conversion into cash flow generating real estate. Development properties also include rural development properties in Brazil.

The composition of our development properties at December 31, 2004 and 2003 was as follows:

AS AT AND FOR THE YEARS ENDED DECEMBER 31		Book Value				Operating Cash Flow
MILLIONS	Potential Development	2004		2003		2004		2003			2002
Commercial development properties	22.1 million sq. ft.	$	603	$	509	$	—	$	—		$	—
Residential lots – owned	35,658 lots		263		246		—		65	1		—
– optioned	14,919 lots		45		19		—		—			—
Rural development properties	135,000 acres		39		40		1		2			2
Total		$	950	$	814	$	1	$	67		$	2

1 Realized gain on sale of lots

Commercial Development Properties

We maintain an in-house development capability to undertake commercial developments when the risk-adjusted returns are adequate and significant pre-leasing has been achieved. Commercial development properties at December 31, 2004 and 2003, included the following projects:

	Projected Office Density					Book Value
AS AT DECEMBER 31 (MILLIONS)	% owned			# of sq. ft. 1		2004		2003
Commercial Office Projects
New York		100	%		3,700,000
Toronto	25% to 65%				3,692,000
Calgary		100	%		500,000
Denver		100	%		400,000
São Paulo		100	%		7,500,000
London, United Kingdom 2		17	%		735,000
					16,527,000	$	449	$	382
Residential Projects
São Paulo		100	%		1,558,000
Rio de Janeiro		100	%		4,030,000
					5,588,000		154		127
Total					22,115,000	$	603	$	509

1	Effective interest excluding partners
2	Proportionate share held indirectly through Canary Wharf Group plc

Currently our largest commercial office development property is a 1.2 million square foot divided 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 vacant property in 2002 at a substantial discount to replacement value and are in the process

Brascan Corporation | 2004 Annual Report 19

of securing tenants for the portion owned by us, which is expected to be 70% leased by the end of 2005. Also in New York is our Penn Station development in midtown New York which recently received increased permitting for 2.5 million square feet of office density.

We own a 50% interest in the Bay-Adelaide Centre development property, located in Toronto’s downtown financial district. This project includes below-grade infrastructure for 1.8 million square feet of office and residential space and a fully operational underground revenue-generating parking facility. We also own expansion rights for a third office tower at BCE Place, our flagship Toronto office complex, which would add approximately 800,000 square feet of density. We have similar rights to develop 500,000 square feet of office space at Bankers Hall in Calgary and 400,000 square feet for Republic Plaza in Denver.

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 residential condominium density of a further 1.5 million square feet, to be developed over the next fifteen years. In Rio de Janeiro, we own 4.0 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 more than three years.

			Book Value
AS AT DECEMBER 31 (MILLIONS)	# of Lots		2004		2003
Residential lots – owned
United States		7,970	$	110	$	144
Canada		27,688		153		102
		35,658		263		246
Residential lots – optioned
United States		14,919		45		19
Total		50,577	$	308	$	265

Over the past two years, with strong markets we have chosen to sell additional development lots to other home builders, rather than continue to hold these lots for future conversion into homes for sale at a later date. We recorded gains of $65 million during 2003 on sales of this nature and, although we did not complete any significant transaction of a similar nature in 2004, we continue to pursue such opportunities.

We have elected to increase our use of options to control lots for future years in our most active markets in order to reduce risk. To that end, we have acquired options on nearly 15,000 lots in our U.S. markets in return for us providing our planning and development expertise to obtain the required entitlements.

Rural Development Properties

We own 135,000 acres of prime rural development land in the States of São Paulo and Minas Gerais in Brazil. These properties have, until recently, been utilized primarily for beef production, but are also suitable for the growing of soy beans and sugar cane for the production of ethanol. A substantial increase in the world-wide consumption of ethanol to add to or use as a substitute for gasoline has resulted in a significant increase in the value of lands which are suitable for sugar cane

20 Brascan Corporation | 2004 Annual Report

growing. Accordingly, we are in the process of entering into long-term land leases with operators of large sugar cane processing facilities. During 2004 we set aside approximately 30,000 acres to lease for 20-year terms to earn growing annual cash flows significantly in excess of those previously received. We will continue to retain ownership in the land, which we expect to appreciate further in value.

Property Services

We operate a broad array of property services which leverage our industry presence. These services include commercial property brokerage and investment banking services, and residential and commercial property services. The composition of our property services operations at December 31, 2004 and 2003 was as follows:

AS AT AND FOR THE YEARS ENDED DECEMBER 31				Book Value				Operating Cash Flow 1
MILLIONS	Return on Assets 2			2004		2003		2004		2003		2002
Commercial Brokerage and Advisory Services				$	8	$	8	$	10	$	4	$	2
Brookfield LePage Facilities Management					10		9		4		3		2
Brookfield Residential Management Services					3		4		1		1		1
Centract Residential Property Services					30		27		1		10		9
Total		32	%	$	51	$	48	$	16	$	18	$	14

1	Revenue less operating cost
2	As a percentage of average book value

Although the aggregate operating cash flow from property services is relatively small in comparison to that generated by our other property operations, the return on capital employed is significant. In addition to benefitting our clients, these operations complement our other property operations and broaden our market knowledge.

Commercial brokerage and advisory services are provided through Royal LePage Commercial. These include commercial leasing, sales, appraisal and brokerage services across Canada. This operation has the largest share of many major markets across Canada. 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. The Brascan Financial Real Estate Group provides financing, advisory and investment banking and brokerage services throughout North America.

Brookfield LePage Facilities Management, one of the largest facilities management operations in Canada, is owned 40% by Brascan 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 trend towards outsourcing of facilities management worldwide.

Brookfield Residential Management Services manages premier condominium and apartments in Canada, providing management services to approximately 35,000 upscale residential units.

Centract Residential Property Services provides 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 property franchise network, a residential property brokerage organization with 10,000 agents across Canada. Royal LePage brokered one in five of all homes sold in Canada in 2004. A public royalty trust was established during 2003 to finance the ownership of franchise contracts associated with this business. This enabled us to reduce the capital committed to the business by approximately $100 million.

Brascan Corporation | 2004 Annual Report 21

Power Generating Operations

Our power generating operations are predominantly hydroelectric facilities located on river systems in North America, many 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 facilities with co-investors, including operations which are held through a publicly listed income trust. 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 capital deployed and operating cash flows produced by our power generating operations are as follows:

AS AT AND THE YEARS ENDED FOR DECEMBER 31	Installed		Return on			Book Value				Operating Cash Flow
MILLIONS	Capacity (MW)		Assets 1			2004		2003		2004		2003		2002
Ontario		957		13	%	$	1,122	$	977	$	140	$	102	$	83
Quebec		266		17	%		359		328		57		33		40
British Columbia		127		13	%		80		71		10		7		5
New England		199		14	%		262		228		34		16		15
New York		779		8	%		839		—		17		—		—
Other		294		7	%		386		323		25		14		10
Total		2,622		11	%	$	3,048	$	1,927	$	283	$	172	$	153

1 As a percentage of average book value

As at December 31, 2004, we owned operating interests in 120 power generating stations with a combined generating capacity of 2,622 megawatts. Since year end, we have acquired 2 additional stations with a combined generating capacity of 23 megawatts and have entered into agreements to acquire interests in nine other hydroelectric generating stations with a combined generating capacity of 772 megawatts. Of our existing stations, all but three are hydroelectric facilities located on river systems in seven geographic regions, specifically Ontario, Quebec, British Columbia, New York, New England, Louisiana and southern Brazil. This distribution provides important diversification of water flows to minimize the overall impact of fluctuating hydrology. Our storage reservoirs contain sufficient water to produce approximately 20% of our total annual generation and provide partial 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. Our facilities produce approximately 10,500 gigawatt hours of electricity annually based on average water flows, more than double our annual generation capacity of five years ago.

Operating cash flow from our power generating business increased 65% in 2004 to $283 million from $172 million in 2003 and $153 million in 2002. Operating assets in this business, at book value, increased from $1.6 billion at the end of 2002 to $3.0 billion at the end of 2004 as a result of acquisitions and the development of new facilities, as well as the increased carrying value of our Canadian operations due to currency appreciation.

We expect the operations owned at year end to contribute approximately $360 million of operating cash flow based on current pricing and average hydrology. The application of a capitalization rate to this cash flow yields the following values for our portfolio:

	Operating		Book Value			Capitalization Value
MILLIONS	Cash Flow 1		2004		5.0%		6.0%		7.0%		8.0 %
Power generating facilities	$	360	$	3,048	$	7,200	$	6,000	$	5,150	$	4,500

1 Expected annualized operating cash flow based on year end capacity, current in-place pricing and average hydrology

The book value is lower than the intrinsic value because the assets have either been held for many years and therefore depreciated for accounting purposes which, in our view, is inconsistent with the nature of hydroelectric generating assets; or because we have been successful in acquiring, developing and upgrading many of our facilities on an attractive basis.

22 Brascan Corporation | 2004 Annual Report

The high end of the value range reflects our belief that hydroelectric generating facilities will over time become increasingly attractive to investors due to the quality of their cash flows.

Components of Operating Cash Flow

The following table illustrates the components of the change in operating cash flows from the company’s power generating business during the past three years:

YEARS ENDED DECEMBER 31 (MILLIONS)	2002 – 2004		2004		2003			2002
Prior year’s net operating income	$	92	$	172	$	153		$	92
(i) Hydrology variations within existing capacity		32		27		(10	)		15
(ii) Variation in prices and operational improvements		55		50		(8	)		13
(iii) Capacity additions		104		34		37			33
Current year operating cash flow	$	283	$	283	$	172		$	153

(i) Hydrology variations within existing capacity

Generation from existing capacity increased to 6,818 gigawatt hours during the year, a significant increase from the 4,231 gigawatt hours generated in 2003. The increase was due to a return to normal water conditions following unusually dry conditions in northern Ontario and western Quebec during the first half of 2003. The variance in water conditions increased cash flow from our power generating operations by $27 million in 2004 compared to a decrease of $10 million in 2003. The continued expansion of our operating base into different watersheds and river systems should reduce the relative significance of hydrology variances in any one region in the future. Water levels in the fourth quarter were slightly below long-term averages. However all facilities are currently operating at or above average generation levels.

(ii) Variation in prices and operational improvements

During 2004 we successfully restructured a number of our power sales arrangements to increase the base level of revenue pricing, many of which have clauses to provide for price increases every year, primarily linked to inflation. The total increase was $50 million. Our reservoirs enable us to capture peak pricing by storing water for utilization during periods of high demand. We experienced lower prices during 2003, relative to the higher price environment which occurred during the weather extremes in 2002.

(iii) Capacity additions

We have increased our generating capacity significantly over the past three years through acquisitions and selective development. Most of the capacity additions in 2004 occurred at the end of the third quarter, and accordingly, were not fully reflected in the current year’s results. Nonetheless, additional capacity contributed $34 million in 2004, compared with $37 million in 2003 and $33 million in 2002. The additional facilities also further the diversification of our watersheds, thereby reducing hydrology risk, and position us as a leading generator in Ontario and an important participant in the New York and New England electricity markets.

Operating Margins

Our power generating operations are among the lowest cost producers of electricity in North America, with cash operating costs averaging 1.6 cents per kilowatt hour. This compares 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.

Based on average hydrology and current power prices, our operations are capable of generating $360 million of annual operating cash flows:

Brascan Corporation | 2004 Annual Report 23

AS AT DECEMBER 31, 2004	Per Kilowatt Hour			Total 1
	(CENTS)			(MILLIONS)
Revenue		4.8		$	504
Expenses		(1.6	) 2		(166	)
Operating cash flow		3.2			338
Transmission and distribution					22
				$	360

1	Based on in-place capacity of 2,622 MW and average generation of 10,482 GWh
2	Includes fuel for gas plants

Contract Profile

We endeavour to maximize the stability and predictability of our power generating revenues through the use of contracts to minimize the impact of price fluctuations, by diversifying watersheds, and by utilizing water storage reservoirs to minimize fluctuations in annual generation levels.

Approximately 70% of our projected 2005 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. The level of contracted revenue is lower than our target of 80% to 85% because power generated by the recently acquired New York operations was not contracted at the time of acquisition. Approximately 50% of this output was subsequently contracted on a short-term basis with the objective of establishing longer term contracts in the future.

Our long-term sales contracts have an average term of 13 years and the counterparties are almost exclusively customers with long-standing favourable credit histories or have 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. All power that is produced and not otherwise sold under a contract is sold in wholesale electricity markets, and 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 non-contracted power. This approach provides an appropriate level of revenue stability, without exposing the company to undue risk of contractual shortfalls and also provides the flexibility to enhance profitability through the production of power during peak price periods.

A brief description of our power operations in each of our major markets follows.

Ontario

Our power operations in northern Ontario include 17 hydroelectric generating stations on six river systems in northern Ontario, with a combined generating capacity of 847 megawatts, and one 110 megawatt natural-gas fired cogeneration plant located in Sault Ste. Marie. Our transmission and distribution operations in northern Ontario consist of approximately 726 km of 44 kilovolt (“kV”) to 230 kV transmission lines and 11 distribution sub-stations that serve approximately 11,500 customers. In November 2004, we were selected by the Ontario Government to develop two wind power projects with almost 150 megawatts of capacity. Construction on these projects is expected during 2005 and 2006.

					Long-term
					Average
	Installed		Generating		Generation		Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Lake Superior Power		110		1		850	$	105	$	105
Mississagi Power 1		488		4		750		274		258
Sault Power		203		5		906		492		409
Wawa Power		156		8		756		251		205
		957		18		3,262	$	1,122	$	977	$	140	$	102	$	83

1 Held Through 50% Owned Great Lakes Hydro Income Fund

24 Brascan Corporation | 2004 Annual Report

Operating cash flow increased substantially during 2004 due to a 4% increase in generation as well as improvements in pricing achieved as a result of re-marketing contracts and increasing the proportion of power dispatched during peak demand periods.

Quebec

Our operations in western Quebec consist of five hydroelectric generation stations on three tributaries of the Ottawa River, with a combined generating capacity of 266 megawatts. These operations have four key interconnections with the Quebec power grid and two with the Ontario power grid.

					Long-term
					Average
	Installed		Generating		Generation		Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Lièvre River Power 1		238		3		1,418	$	271	$	248
Pontiac Power		28		2		210		88		80
		266		5		1,628	$	359	$	328	$	57	$	33	$	40

1 Held through 50% owned Great Lakes Hydro Income Fund

Operating cash flow improved during 2004 due to a 14% increase in generation as well as improved margins arising from re-contracting and by utilizing our interconnections to facilitate sales into higher priced markets.

British Columbia

Our operations in British Columbia include three hydroelectric power generating stations with a combined generating capacity of 127 megawatts. During 2004, we added a third generating unit to the recently constructed Pingston Power station near Revelstoke, B.C., increasing its capacity to 45 megawatts.

					Long-term
					Average
	Installed		Generating		Generation		Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Powell River Energy 1		82		2		261	$	48	$	44
Pingston Power		45		1		95		32		27
		127		3		356	$	80	$	71	$	10	$	7	$	5

1 Held through 50% owned Great Lakes Hydro Income Fund

New England

Our New England operations include seven hydroelectric generating stations in Maine and eight hydroelectric generating stations in New Hampshire, with a combined generating capacity of 174 megawatts. During 2004, we completed construction of the 25 megawatt White Mountain cogeneration facility in Berlin/Gorham.

					Long-term
					Average
	Installed		Generating		Generation		Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Maine Power 1		129		7		748	$	180	$	177
New Hampshire Power 1		45		8		262		49		51
White Mountain, NH		25		1		184		33		—
		199		16		1,194	$	262	$	228	$	34	$	16	$	15

1 Held through 50% owned Great Lakes Hydro Income Fund

Brascan Corporation | 2004 Annual Report 25

Operating cash flow increased substantially during 2004 reflecting a full year of contribution from operations acquired in November 2003 and early 2004, and a return to normal water conditions following particularly dry conditions in the first half of 2003.

New York

In September 2004, we established our operations in New York State through the acquisition of 72 power stations for approximately $900 million including working capital. These stations have a combined generating capacity of 779 megawatts and long-term average generating capacity of 2,933 GWh. They include 71 hydroelectric power generating stations located on 14 river systems in upstate New York, and one 105 megawatt dual-fired cogeneration station in East Syracuse.

					Long-term
					Average
	Installed		Generating		Generation		Book Value					Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Hudson River Power		237		12		915	$	272	$	—
St. Lawrence River Power		223		30		1,096		313		—
Lake Ontario Power		214		29		892		221		—
East Syracuse		105		1		30		33		—
		779		72		2,933	$	839	$	—	$	17	$	—	$	—

Operating cash flow in 2004 includes the period from September 29, 2004, the date of acquisition. We expect these operations to contribute approximately $90 million of annual net operating income on a normalized basis.

Other Power Operations

Our other power operations include our interest in Louisiana Hydroelectric Power, which operates a 192 megawatt run-of-the-river facility on a diversion of the Mississippi River, and five hydroelectric stations in southern Brazil with 102 megawatts of capacity, two of which we acquired in 2004. Our Brazilian power stations are located in the states of Minas Gerais, Paraná and Rio Grande do Sul, and are operated from our office in Curitiba. In December 2004, we announced an agreement to acquire six additional hydroelectric stations in the State of Minas Gerais with a combined generating capacity of 76 megawatts.

					Long-term
					Average
	Installed		Generating		Generation		Book Value				Operating Cash Flow
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capacity		Stations		2004		2004		2003		2004		2003		2002
	(MW)				(GWh)		(MILLIONS)				(MILLIONS)
Louisiana HydroElectric Power		192		1		677	$	244	$	228
Brazil		102		5		432		90		50
Development properties						—		52		45
		294		6		1,109	$	386	$	323	$	25	$	14	$	10

Operating cash flow increased due to the additional Brazilian operations and higher generation levels at Louisiana HydroElectric Power.

The book value of our investment in Louisiana HydroElectric Power represents our 75% equity interest in the project, which we do not consolidate as we do not have voting control at this time. We expect to consolidate this entity in our accounts beginning in 2005 under new accounting requirements for variable interest entities. The book value of Louisiana HydroElectric Power’s assets at year end was $1.0 billion, financed by $0.8 billion of project specific debt.

26 Brascan Corporation | 2004 Annual Report

Funds Management

We manage dedicated investment funds for ourselves and on behalf of institutional and other investors. Our current industry focus is on property and long-life infrastructure assets.

In addition, we hold a proprietary portfolio of private equity investments consisting of interests in businesses that we believe are undervalued and are being held until such time as they may be sold for a higher value or combined with our core operations. In the meantime we actively manage these investments and pursue alternatives to restructure or optimize these businesses to enhance their value.

The following table shows the assets under management at December 31, 2004 and 2003, together with the associated operating cash flows:

	Return on			Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Assets 1			Management 2		Book Value				Operating Cash Flow
MILLIONS	2004			2004		2004		2003		2004		2003		2002
Bridge Lending Fund		10	%	$	1,148	$	698	$	265	$	40	$	21	$	37
Real Estate Finance Fund		12	%		627		103		157		15		8		—
Restructuring Fund		24	%		366		95		64		19		8		9
Real Estate Opportunity Fund		—			210		80		—		—		—		—
Timber Management Fund		11	%		87		87		89		10		4		2
Private Equity Fund		5	%		750		750		844		40		32		41
Structured Products and Capital Markets		9	%		1,775		1,420		561		85		95		84
Traditional assets under management		—			3,208		2		—		1		—		—
Office properties under management3		—			2,200		—		—		—		—		—
Other		—			140		140		115		9		30		5
Total		8	%	$	10,511	$	3,375	$	2,095	$	219	$	198	$	178

1	As a percentage of average book value
2	Represents capital committed or pledged by Brascan and co-investors, including the book value of our invested capital
3	Management fees included in property income

We believe that the combination of our operating experience and knowledge of a number of industries, together with our financial capabilities, enables us to earn superior risk-adjusted returns in our selected areas of investment. This, combined with our willingness and ability to invest significant capital alongside our co-investors, makes us an attractive investment partner.

Of the $10.5 billion which we manage in this business, $3.4 billion represents 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 earn management and performance based incentive fees. 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.

We continue to own financial assets directly which we acquired prior to establishing our investment funds or because they do not fit the specific mandate of any one of our current funds.

Brascan Corporation | 2004 Annual Report 27

The following table shows operating cash flows generated by our funds management operations:

YEARS ENDED DECEMBER 31 (MILLIONS)	2004		2003		2002
Investment income
Interest	$	70	$	58	$	43
Dividends		24		34		30
Capital gains		39		40		31
Net fee income		46		34		33
		179		166		137
Private equity investment income		40		32		41
	$	219	$	198	$	178

Operating cash flows increased to $219 million in 2004, an increase of 11% over 2003 which in turn was higher than 2002. Net fee income increased to $46 million in 2004 as a result of a higher level of activity and more assets under management. Higher interest income reflects higher levels of interest bearing securities and loans held during the year.

The value of our funds management business is determined by the value of our invested capital together with the value of the associated net fee stream, which in 2004 totalled $46 million. We are in the early stage of building these cash flows and, accordingly, are incurring a proportionately higher level of start-up costs. Based on net fee incomes that we expect will increase significantly, the incremental value of this business is currently between $500 million and $1 billion, using multiples of 10 to 20 times. This is in addition to the appreciation in value the of assets we own in our various Funds.

Bridge Lending Fund

The Bridge Lending Fund is a C$1 billion fund dedicated to providing bridge loans, primarily in Canada. The Fund leverages our 20-year history of offering tailored lending solutions to companies in need of access to short-term financing. We have committed 45% of the Fund’s capital and our institutional partners have committed the balance. For larger transactions, we may invest directly and have granted co-investment rights to our partners to allow them to participate in a similar manner.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management 1		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Bridge Lending Fund	$	833	$	383	$	28	$	14	$	2	$	—
Directly held bridge and corporate loans		315		315		237		26		19		37
Total	$	1,148	$	698	$	265	$	40	$	21	$	37

1 Represents capital committed by Brascan and co-investors, including invested capital

Loans advanced during the year by the Fund include a $200 million loan to Atlas Cold Storage, an industrial storage company, and a $200 million loan to Unibord, a manufacturer of wood panel products. The Fund’s management team reviewed over $4 billion of financing opportunities and issued funding commitments totalling $800 million. A total of $575 million was advanced during the year to 11 clients. We also hold $315 million of bridge and corporate loans, which represent co-investments or were originated prior to the establishment of the Fund.

28 Brascan Corporation | 2004 Annual Report

Real Estate Finance Fund

The Real Estate Finance Fund was launched in 2002 as a $600 million fund to finance the ownership of real estate properties on a basis which is senior to traditional equity, but subordinate to traditional first mortgages or investment grade debt. The Fund combines our own 35-year track record in real estate and finance with an experienced New York-based management team. We have agreed to provide $200 million of capital and institutional investors will provide the balance of $400 million.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management 1		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Real Estate Finance Fund	$	600					$	15	$	8	$	—
Office property loans			$	43	$	56
Retail property loans				8		56
CMBS REIT				15		45
Collateralized debt obligation notes				10		—
		600		76		157		15		8		—
Directly held		27		27		—		—		—		—
Total	$	627	$	103	$	157	$	15	$	8	$	—

1 Represents capital committed by Brascan and co-investors, including invested capital

During 2004, the Fund acquired 35 loan positions with an aggregate investment of $436 million. Significant transactions included the acquisition of a $70 million junior mortgage on the Bank of America Center in San Francisco, and $65 million in mezzanine financing on a diversified portfolio of long-term health care centers in the U.S.

The Fund also established a $350 million collateralized debt obligation facility with a group of institutional lenders who have committed low cost funding for a seven-year term to finance the acquisition of mortgage loan securities. This financing provides a stable source of funding that will enable the Fund to achieve higher returns for its investors, including Brascan.

In 2005, we plan to expand our operations to the U.K. with the increase of the Fund’s mandate to include European opportunities.

Restructuring Fund

The Tricap Restructuring Fund was launched in 2002 as a C$415 million restructuring fund, to invest long-term capital in companies facing financial or operational difficulties in industries where we have expertise. The Fund benefits from our 20 year record of restructuring companies experiencing financial and operational difficulties. We have committed C$200 million of the capital and institutional investors have provided the balance.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management 1		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Tricap Restructuring Fund	$	347					$	13	$	6	$	4
Western Forest Products			$	15	$	31
Concert Industries				37		—
Other				24		—
		347		76		31		13		6		4
Directly held restructuring assets		19		19		33		6		2		5
Total	$	366	$	95	$	64	$	19	$	8	$	9

1 Represents capital committed by Brascan and co-investors, including invested capital

During the year, we completed the restructuring of Western Forest Products (formerly Doman Industries), a western Canadian forest products company. We recovered the full amount of our initial fund investment of $62 million on the reorganization, with the Fund continuing to hold an 18% interest in Western Forest, received through the restructuring. The 18% interest has a current investment value of $30 million.

Brascan Corporation | 2004 Annual Report 29

We recently advanced $75 million to acquire the senior secured debt of Concert Industries, a leading manufacturer of air woven consumer tissue products. Tricap sponsored the restructuring of this company, and in return received a 100% common equity interest in Concert which will be operationally restructured over the next few years.

Directly held restructuring assets relate to co-investment positions and assets owned prior to the establishment of the Fund.

Real Estate Opportunity Fund

Our Real Estate Opportunity Fund was launched in 2003 as a C$250 million property fund to invest in underperforming commercial properties. Premier office properties will continue to be pursued through our direct property operations or a planned core property fund. The Fund has a dedicated management team which had previously been pursuing similar types of activities within our commercial property operations for many years. We provided the initial capital and will raise funds from other investors after the origination of a number of initial investments.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management 1		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Real Estate Opportunity Fund	$	210	$	80	$	—	$	—	$	—	$	—

1 Represents capital committed by Brascan and co-investors, including invested capital

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. We completed several investments since inception including the acquisition of a $69 million office property portfolio in Indianapolis and an $11 million redevelopment asset in Toronto. We are currently examining a number of attractive investment opportunities and expect to significantly increase invested assets during 2005.

Timber Management Fund

We currently own 440,000 acres of timberlands located in Maine and in the State of Paraná in Brazil. These lands generated net operating cash flow of $10 million in 2004 and have a book value of $87 million. We also own, through our investment in Fraser Papers, an indirect 42% interest in timberlands in Maine and New Brunswick, which include one million acres owned outright and a further 1.3 million acres managed under license.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Timber Management Fund
Directly held		440,000	$	87	$	89	$	10	$	4	$	2
Indirect holdings 1		2,300,000		—		—		—		—		—
Total		2,740,000	$	87	$	89	$	10	$	4	$	2

1 Held indirectly through our 42% ownership interest in Fraser Papers

In 2003, we assembled a team of forest management professionals to expand our timber management operations and to ultimately establish a Timber Management Fund. We have formed relationships with institutional investors who wish to acquire timber assets and we are currently jointly examining a number of promising opportunities.

30 Brascan Corporation | 2004 Annual Report

Private Equity Fund

We own a number of private equity investments which will either be sold once value has been maximized or integrated into our core operations. Within our areas of expertise, we continue to seek new investments of this nature and dispose of more mature assets. The following table sets out the investments in our proprietary private equity fund, together with associated cash flows and gains:

AS AT AND FOR THE YEARS ENDED DECEMBER 31		# of		%			Book Value				Operating Cash Flow
MILLIONS	Location	Shares		Interest			2004		2003		2004			2003			2002
Forest products
Norbord Inc.	North America/UK		53.8		36	%	$	177	$	356	$	19		$	18		$	16
Fraser Papers Inc.	North America		12.8		42	%		204		—		—			—			—
Katahdin Paper Company, LLC	Maine		—		100	%		85		76		(1	)		(2	)		—
Business Services
Banco Brascan, S.A.	Rio de Janeiro		—		40	%		59		45		4			3			13
Privately held	Various		—		—			81		89		11			9			7
Publicly listed	Canada		—		—			86		72		3			—			(1	)
Mining and metals
Coal lands	Alberta		—		100	%		58		53		4			4			5
Northgate Exploration Limited	British Columbia		—		—			—		—		—			—			1
Real Estate
Canary Wharf Group, plc	London, UK		—		—			—		153		—			—			—
Total							$	750	$	844	$	40		$	32		$	41

Norbord Inc.

We own approximately 54 million shares, representing a 36% interest in Norbord Inc. (“Norbord”). The book value of this investment was $177 million at year end. We issued debentures during 2004 that are exchangeable into 20 million of these shares and which are reflected as a liability at year end of $195 million. Accordingly, our net interest in Norbord is approximately 34 million shares, or 23%, and had a quoted market value at year end of approximately $349 million.

Norbord is an international producer of wood panels with operations in the United States, Canada and Europe. The company’s principal product is oriented strandboard (“OSB”). Norbord contributed $19 million of dividends to our cash flow together with a $63 million gain as described below.

During 2004, Norbord distributed its paper operations to shareholders as a newly formed public company, Fraser Papers Inc. and concurrently changed its name from Nexfor Inc. At the same time, Norbord paid a special dividend of C$1.00 per share.

We also monetized approximately half of our investment in Norbord during the year through the sale of 10 million Norbord common shares and the issuance of debentures exchangeable into a further 20 million Norbord common shares, all at a price of C$12.75 per share. Including the special dividend, we generated proceeds from this investment of approximately $300 million and a realized pre-tax gain of $63 million.

Norbord reported net income of $326 million ($2.21 per share) during 2004, which represents a substantial increase from the $126 million ($1.12 per share) earned during 2003 on a comparable basis. This increase was driven largely by a very strong pricing environment for panel products, particularly OSB, in addition to expanded capacity and operating efficiencies.

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

Brascan Corporation | 2004 Annual Report 31

Fraser Papers Inc.

We own approximately 13 million common shares of Fraser Papers, which we received on the distribution of this business from Norbord during the year. These shares represent a 42% equity interest in Fraser and have a book value of $204 million.

Fraser Papers produces a wide range of specialty paper products from its operations which are located principally in Maine and New Brunswick. The company also owns one million acres of timberlands and operates a further 1.3 million acres under provincial license.

Fraser Papers reported a net loss of $43 million during 2004, which represents a substantial improvement from the loss of $92 million incurred during 2003. The improved results were driven largely by the stabilization of the paper markets and the impact of cost reductions. Fraser Papers will continue to explore opportunities to improve its operating base. Although prices for the products produced by Fraser have been weak in recent months, the business is cyclical in nature and over the long term we expect substantially improved operating results.

Fraser Papers is traded on the Toronto Stock Exchange. Further information on Fraser Papers is available through its web site at www.fraserpapers.com.

Katahdin Paper Company, LLC

We own a 280,000 ton per year directory paper producer in East Millinocket, Maine and a 185,000 ton per year supercalender fine paper producer in Millinocket, Maine, which together operate under the name Katahdin Paper. These operations were acquired out of a third party bankruptcy in April 2003. The directory plant was restarted in 2003 and is currently generating positive cash flows. The supercalender plant was restarted in June 2004 and is expected to reach full production in the near future.

Banco Brascan, S.A.

We own 40% of Banco Brascan, which is a Brazilian 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.

Privately Held

Privately held business service investments include a joint venture with the Accor Group of France which owns and manages the Accor Group hotel brands in Brazil, including Novotel, Sofitel, Ibis and Formula One, and a voucher services business in Brazil, which provides paper and electronic vouchers to corporations which utilize them in their compensation programs for employees and for the purchase of motor fuel and other purposes.

Publicly Listed

Publicly listed business service investments include controlling interests in NBS Technologies Inc. and MediSolution Ltd. NBS provides secure identification solutions, financial transaction services and operates a commerce gateway that facilitates electronic payment processing. MediSolution Ltd. develops and manages medical human resources management software and systems to the hospital industry, primarily in Canada.

Coal Lands

Brascan owns the coal rights under approximately 475,000 acres of freehold lands in central Alberta. These lands supply approximately 11% of Alberta’s coal-fired power generation through the production of approximately 12 million tonnes of coal annually. Royalties from this production generate $4 million of operating cash flow and provide a stable source of income as they are free of crown royalties and require no holdings costs. In addition, we own a 3.5% net profit interest in 75 million tonnes of proven reserves, and 25 million tonnes of potential reserves of high quality metallurgical coal in British Columbia.

32 Brascan Corporation | 2004 Annual Report

Northgate Exploration Limited

We held a 42% interest in Northgate Exploration Limited until its sale 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. On completion of the financial and operational restructuring, we sold our interest in Northgate through a broad public distribution in the capital markets, recognizing a gain of $57 million which is included in Property and Disposition Gains.

Canary Wharf Group, plc

At the beginning of 2004, we owned approximately 96 million shares of Canary Wharf Group, plc which owns high quality commercial property interests in London, United Kingdom. Our initial shareholdings were purchased in 2003 following a precipitous decline in their trading value. Along with several institutional partners, we formed an investment group that made an offer to the existing shareholders of Canary Wharf Group, plc in 2004 to acquire a larger equity interest and operational control of the company. Although unsuccessful in our offer, we were able to increase our interest through subsequent purchases to 17% and, together with investment partners, a combined 34%. Following the conclusion of the takeover offer process, we transferred this investment to our real estate operations in accordance with our long term intentions with respect to these assets and their correlation with our core commercial real estate operations.

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 $1.4 billion, with nearly $1.8 billion under management.

	Assets Under
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Management 1		Book Value				Operating Cash Flow
MILLIONS	2004		2004		2003		2004		2003		2002
Reinsurance portfolio	$	991	$	991	$	288	$	32	$	23	$	23
Brascan SoundVest Funds		188
Titanium Asset Backed Trust		167
Securities portfolios		429						53		72		61
High yield bonds				122		86
Equity securities				307		187
Total	$	1,775	$	1,420	$	561	$	85	$	95	$	84

1 Represents capital committed by Brascan and co-investors, including invested capital

Our reinsurance operations raised $100 million from institutional investors during 2004, reducing our ownership interest from 100% to 80%. The assets deployed in this business consist largely of fixed income securities, which increased during the year with the continued expansion of this business. We also launched two retail product offerings under the names of Brascan SoundVest Diversified Income Fund, a fund of income trusts, and Brascan SoundVest Total Return Fund, a diversified fund of income trusts, common shares and other equity securities. Investment advisory and portfolio management services are provided by SoundVest Capital Management Ltd., which is 50%-owned by Brascan. In 2003 we launched Titanium Trust, an asset backed trust which finances receivables and other assets acquired from our own operations, as well as from others. This trust issues short-term asset backed commercial paper and medium-term notes, and will over time assist in lowering 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 during the previous two years.

From time to time, in our areas of industry expertise, we also take positions in securities which we believe to be undervalued which are included in our equity security portfolios.

Brascan Corporation | 2004 Annual Report 33

Traditional Assets Under Management

While we have focussed principally on alternative assets under management, we have also established joint ventures and have invested relatively small amounts of capital with a number of 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. In 2004, we formed Brascan Strategic Asset Management, a New York based investment manager specializing in fixed income products, which has grown rapidly.

					Assets Under
					Management
Manager	% Ownership			Investment Type	2004
					(MILLIONS)
Brascan Strategic Asset Management		100	%	Equities/Fixed Income	$	1,500
Highstreet Asset Management		35	%	Equities/Fixed Income		833
Mavrix Fund Management		10	%	Mutual Funds		417
SoundVest Capital Management		50	%	Equities/Fixed Income		458
Total					$	3,208

Office Properties Under Management

We currently manage $2.2 billion of commercial properties held by institutional investors that represent co-ownership interests in our core commercial property portfolio. The fees earned on these activities are included in property income. We are currently developing a core office property fund that will expand our real estate assets under management and associated fees and will enhance our return from future office property acquisitions.

Investment In Noranda

We own approximately 123 million shares, or 42% of Noranda Inc. Our investment had a book value of $1.4 billion and a stock market value of $2.2 billion at December 31, 2004.

AS AT AND FOR THE YEARS ENDED DECEMBER 31			Book Value				Dividends Received
MILLIONS	# of Shares		2004		2003		2004		2003		2002
Noranda common shares		122.6	$	1,374	$	1,196	$	45	$	49	$	48

Noranda is a base metals company with over $9 billion of assets. The major commodities produced are nickel, copper, zinc and aluminum, which experienced significant increases in demand and prices over the past year, and into 2005. As a result, Noranda continues to benefit from increased profit margins for most of its products and, accordingly, we expect the company to report strong operating earnings and cash flows during 2005.

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

YEARS ENDED DECEMBER 31 (MILLIONS)	2004			2003
Cash flow from operations
Copper	$	894		$	313
Nickel		680			323
Aluminum		119			59
Zinc		72			4
Unallocated costs		(412	)		(122	)
Cash flow from operations		1,353			577
Restructuring charges		33			(24	)
Depreciation and other non-cash items		(835	)		(530	)
Net income	$	551		$	23

34 Brascan Corporation | 2004 Annual Report

In response to improved metal prices and increases in the value of its businesses, Noranda’s board of directors initiated a process whereby a special committee of its board was formed to review expressions of interest to purchase Noranda. Brascan has supported this process fully, while also considering other alternatives to maximize the value and liquidity of its 42% interest in Noranda.

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.

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 contractual revolving credit lines and invest in shorter term financial assets which generate higher returns while still providing a source of liquidity to fund investment initiatives.

Financial assets represent securities that are not actively deployed within our funds management operations, pending deployment into our core operations. The market value of our financial assets approximates their realizable value. The following table shows the composition of these assets and associated cash flow:

AS AT AND FOR THE YEARS ENDED DECEMBER 31	Book Value				Operating Cash Flow
MILLIONS	2004		2003		2004		2003		2002
Financial assets
Government bonds	$	42	$	49	$	3	$	4	$	5
Corporate bonds		463		387		17		12		14
Preferred shares		351		342		22		27		28
Common shares		140		76		3		2		4
Other		—		—		34		44		45
Total financial assets		996		854		79		89		96
Cash		404		382		—		—		—
Total	$	1,400	$	1,236	$	79	$	89	$	96

Property and Disposition Gains

The following table sets out property and disposition gains over the past three years.

YEARS ENDED DECEMBER 31 (MILLIONS)	2004			2003			2002
Disposition gains	$	63		$	57		$	—
Lease termination income		60	1		—			—
Property gains		—			100	1		60	1
	$	123		$	157		$	60

1 50% of these items were shared with the other shareholders of our commercial property operations

During 2004 we earned a $63 million gain on the partial monetization of our investment in Norbord. During 2003 we earned a $57 million gain on the sale of our investment in Northgate. These investments are discussed further under Funds Management — Private Equity.

Also during 2004 we earned lease termination income of $60 million from the cancellation of an existing lease and replacement with a new 20-year 460,000 square foot lease at One World Financial Center. Property gains during 2003 of $100 million related to the sale of a 49% interest in 245 Park Avenue. During 2002, we generated $60 million of gains on the sale of partial interests in office properties located in Toronto and Calgary. There were no significant lease termination payments during either 2003 or 2002. The lease termination income and property gains noted above were shared as to 50% with other investors in these operations.

Brascan Corporation | 2004 Annual Report 35

While these events are opportunistic and difficult to predict, the dynamic nature of our asset base should produce similar opportunities in the future.

CAPITAL RESOURCES AND LIQUIDITY

We are committed to maintaining high levels of liquidity and access to a broad range of low cost capital. This enables us to provide financial stability and a low cost of capital to 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 exceeded $800 million during 2004.

Our capitalization, which is summarized in the following table, includes corporate debt and other borrowings that do not have recourse to the Corporation, preferred equity issued by the company and certain of our operating business units, as well as Brascan’s common equity capital. Other shareholder interests represent the equity they have invested in our assets, which consist principally of common shares of our North American commercial office property operations.

During the year, we raised $2.3 billion of capital through the issuance of long-term debt and preferred equity, enabling us to remain in a very solid financial position.

Capitalization

The strength and diversification of the income streams generated by our various operations permit us to have financing costs below that of many peers who operate in only one of our selected areas of business. By continuously monitoring the balance between debt and equity financing, and maintaining access to a broad range of financing sources, we endeavour to reduce our weighted average cost of capital on a risk adverse basis and thereby improve common shareholder returns.

Our overall weighted average cash cost of capital, using a 20% return objective for our common equity, is 9.5%, unchanged from 2003. This reflects the low cost of non-participating preferred equity issued over a number of 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.

The following table details our consolidated liabilities and shareholders’ interests at the end of 2004 and 2003 and the related cash costs:

AS AT AND FOR THE YEARS ENDED DECEMBER 31	Cost of Capital 1						Book Value				Operating Cash Flow 2
MILLIONS	2004			2003			2004		2003		2004		2003		2002
Liabilities
Non-recourse borrowings
Property specific mortgages		6	%		6	%	$	6,045	$	4,881	$	321	$	300	$	297
Other debt of subsidiaries		5	%		5	%		2,373		2,075		122		105		106
Corporate borrowings		6	%		6	%		1,675		1,213		87		66		63
Accounts payable and other liabilities		7	%		6	%		2,719		1,745		169		88		56
Shareholders’ interests
Minority interests of others in operations		22	%		20	%		1,569		1,516		345		294		262
Preferred equity		6	%		6	%		2,148		1,861		116		83		69
Common equity		19	%		18	%		3,481		3,008		608		566		425
		16	%		16	%		7,198		6,385		1,069		943		756
		9.5	%		9.5	%	$	20,010	$	16,299	$	1,768	$	1,502	$	1,278

1	Based on operating cash flows as a percentage of average book value
2	Interest expense in the case of borrowings. Attributable operating cash flows in the case of shareholders’ interests, including cash distributions, and current taxes and operating expenses in the case of accounts payable and other liabilities

36 Brascan Corporation | 2004 Annual Report

Brascan makes judicious use of debt and preferred equity at the corporate and subsidiary level to enhance returns to common shareholders as well as those who hold participating interests in our consolidated subsidiaries. While corporate and subsidiary debt is typically investment grade, we take care to minimize any liquidity or refinancing risk to the company.

We have benefitted recently from low interest rates, particularly short-term rates, and since rates appear poised to increase we are locking in longer term fixed rates and closing out floating rate swap positions. This resulted 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 mortgages which do not have recourse to the Corporation or our operating entities.

The composition of Brascan’s borrowings which have recourse limited to specific assets is as follows:

			Cost of
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Average		Capital 1			Book Value				Operating Cash Flow 2
MILLIONS	Term		2004			2004		2003		2004		2003		2002
Commercial properties		12		6	%	$	4,534	$	4,149	$	261	$	255	$	258
Power generation		10		6	%		1,511		732		60		45		39
Total		11		6	%	$	6,045	$	4,881	$	321	$	300	$	297

1	As a percentage of average book value of debt
2	Interest expense

These borrowings leverage common shareholders’ equity with long-term lower risk financing, which is largely fixed rate, with an average maturity of 11 years.

Commercial property borrowings represent mortgage debt on properties. Our commercial property operations have a relatively low level of general corporate indebtedness since we finance this business primarily with mortgages with recourse only to specific properties. At the end of 2004, these mortgages had an average term of 12 years and a weighted average interest rate of 6%. Commercial borrowings increased as a result of mortgage financings secured by our newly acquired Washington, D.C. properties.

Power generation borrowings consist of financings secured by specific power facilities with an average interest rate of 6%. We raised $500 million of two-year secured debt to finance the acquisition of our New York power operations in September 2004. This debt will be refinanced in 2006 with long-term debt once we have secured appropriate power contracts, consistent with our other financings. The Corporation has guaranteed repayment of $75 million of this debt under certain circumstances, but we expect to negotiate fully non-recourse financing when the long-term debt is put into place. The balance of the increase in power generation debt is due to the impact of foreign currency translation on Canadian dollar denominated financings.

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

YEARS ENDED DECEMBER 31 (MILLIONS)	2005			2006			2007			2008			2009			Beyond			Total
Commercial properties	$	311		$	210		$	642		$	285		$	193		$	2,893		$	4,534
Power generation		89			524			22			22			59			795			1,511
Total	$	400		$	734		$	664		$	307		$	252		$	3,688		$	6,045
Percentage of total		7	%		12	%		11	%		5	%		4	%		61	%		100	%

Brascan Corporation | 2004 Annual Report 37

Other Debt of Subsidiaries

These borrowings are largely corporate debt, issued by way of corporate bonds, bank credit facilities and other types of debt and financial obligations of subsidiaries. The composition of these borrowings is as follows:

			Cost of
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Average		Capital 1			Book Value				Operating Cash Flow 2
MILLIONS	Term		2004			2004		2003		2004		2003		2002
Property		2		5	%	$	660	$	576	$	32	$	19	$	12
Power generation		3		6	%		617		375		23		22		23
Funds management		13		5	%		530		647		38		34		29
International operations and other		7		6	%		566		477		29		30		42
Total		4		5	%	$	2,373	$	2,075	$	122	$	105	$	106

1	As a percentage of average book value of debt
2	Interest expense

Property debt includes residential property debt, which 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.

Power generation debt consists of $200 million 8.3% U.S. public notes which mature in 2005, C$400 million 4.6% public notes which mature in 2009 and C$100 million floating rate public notes which mature in 2006. The notes are rated BBB by S&P and BBB(high) by DBRS.

Funds management debt includes C$325 million of retractable preferred shares that will be repaid in 2007 and 2011 and pay dividends at an average rate of 6.4%. Funds management debt also includes a C$255 million debenture issued during 2004 by a subsidiary of Brascan, that is exchangeable at the option of either the company or the holder into 20 million common shares of Norbord held by the subsidiary at C$12.75 per share. The carrying value of these debentures, which at year end was $195 million, is required under current accounting principles to be adjusted to reflect the market value of the underlying shares with any changes in value recorded in the company’s income statement during the period. The 2003 balance includes $313 million (C$375 million) of public debt assumed by the Corporation with effect from December 31, 2004 upon amalgamating the funds management operations into the Corporation, and accordingly is no longer reflected as debt of subsidiaries.

A portion of the outstanding debt of our international operations is denominated in their domestic currencies and is utilized to hedge their operating assets against local currency fluctuations, the most significant of which is the Brazilian real. The Corporation does not typically guarantee the debts of subsidiaries with the exception of $393 million included in debt of international operations that is supported by financial assets held within those operations.

38 Brascan Corporation | 2004 Annual Report

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

YEARS ENDED DECEMBER 31 (MILLIONS)	2005			2006			2007			2008			2009			Beyond			Total
Property	$	407		$	214		$	32		$	7		$	—		$	—		$	660
Power generation		200			84			—			—			333			—			617
Funds management		5			—			114			11			7			393			530
International operations and other		120			46			2			1			3			394			566
Total	$	732		$	344		$	148		$	19		$	343		$	787		$	2,373
Percentage of total		31	%		15	%		6	%		1	%		14	%		33	%		100	%

Corporate Borrowings

Corporate borrowings represent long-term and short-term obligations of the company. Long-term corporate borrowings are in the form of bonds and debentures issued in 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 group of international banks.

The following table summarizes Brascan’s corporate credit facilities:

	Cost of
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Capital 1			Book Value				Operating Cash Flow 2
MILLIONS	2004			2004		2003		2004		2003		2002
Commercial paper and bank debt		3	%	$	249	$	—	$	5	$	3	$	7
Publicly traded term debt		5	%		1,413		1,100		74		54		48
Privately held term debt		8	%		13		113		8		9		8
Total		6	%	$	1,675	$	1,213	$	87	$	66	$	63

1	As a percentage of average book value of debt
2	Interest expense

The company assumed $313 million (C$375 million) of public term debt originally issued by our funds management business as of December 31, 2004. The notes mature evenly over 2005, 2006 and 2007. The company redeemed $100 million of privately held term debt that matured during the year.

At December 31, 2004, the company had approximately $1 billion of committed corporate credit facilities which are utilized principally as back-up credit lines to support commercial paper issuance. The unutilized portion of these lines totalled $765 million at year end.

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

YEARS ENDED DECEMBER 31 (MILLIONS)	2005			2006			2007			2008			2009			Beyond			Total
Commercial paper and bank debt	$	249		$	—		$	—		$	—		$	—		$	—		$	249
Publicly traded term debt		104			104			105			300			—			800			1,413
Privately held term debt		10			2			1			—			—			—			13
Total	$	363		$	106		$	106		$	300		$	—		$	800		$	1,675
Percentage of total		22	%		6	%		6	%		18	%		—	%		48	%		100	%

Brascan Corporation | 2004 Annual Report 39

Shareholders’ Interests

Shareholders’ interests are comprised of three components: participating interests of other shareholders in our operating assets and subsidiary companies; non-participating preferred equity issued by the company and its subsidiaries; and common equity of the company.

Shareholders’ interests at December 31, 2004 and 2003 were as follows:

	Number of
AS AT AND FOR THE YEARS ENDED DECEMBER 31	Shares			Book Value				Operating Cash Flow 1
MILLIONS	2004			2004		2003		2004		2003			2002
Participating interests of others in assets
Property
Commercial		77.5		$	1,063	$	998	$	238	$	220		$	217
Residential 2		15.3			122		190		84		64			—
Power generation		24.1			194		184		21		15			11
Other					190		144		2		(5	)		34
					1,569		1,516		345		294			262
Non-participating preferred equity
Corporate					1,089		852		62		58			44
Subsidiaries					1,059		1,009		54		25			25
					2,148		1,861		116		83			69
Common equity		271.7	3		3,481		3,008		608		566			425
				$	7,198	$	6,385	$	1,069	$	943		$	756

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 debentures and options on an “as converted” basis

Participating Interests of Others in Assets

The majority of our commercial and residential property 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 some of our power generating operations. Other interests include holdings of others in certain funds management businesses.

The book values of these interests typically increase each year, representing the excess of income over cash distributions. During 2004, our U.S. residential operations distributed $142 million of surplus cash generated within the business, resulting in a decrease in the book value of these interests, and we raised additional capital in certain of our funds management businesses. Distributions to other minority shareholders in the form of cash dividends totalled $73 million in 2004 compared with $62 million in 2003. 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 $2,148 million of non-participating preferred equity outstanding: $1,089 million issued by the Corporation and $1,059 million issued by consolidated subsidiaries. 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.

40 Brascan Corporation | 2004 Annual Report

During 2004, we issued $237 million of corporate preferred equity in exchange for preferred shares previously issued by our Funds Management operations. Our commercial property subsidiary also issued C$200 million of preferred shares yielding 5.00%, and C$150 million of preferred shares yielding 5.20%, for total proceeds of C$350 million.

As a result of new accounting requirements, we will reclassify as financial obligations preferred equity securities that are convertible into common shares at the option of the holders at market prices, notwithstanding the company’s right to redeem the securities for cash prior to conversion. This change, which will be implemented January 1, 2005, will include $500 million of corporate preferred equity and $809 million of preferred equity issued by our commercial property operations.

Common Equity

On a diluted basis, Brascan had 271.7 million common shares outstanding at year end, an increase of 0.4 million shares from December 31, 2003. During 2004, we repurchased 0.8 million common shares under a normal course issuer bid at an average price of $23.35 per share and issued 1.5 million options at an average price of $25.06 per share. During 2003, 6.9 million common shares and equivalents were repurchased in a similar manner at a price of $14.83 per share. We split our common shares on a three-for-two basis on June 1, 2004 in order to increase their liquidity. All share amounts have been adjusted to reflect the split on a retroactive basis.

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 35 individuals, including a number of the senior executive officers of Brascan.

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 expenditures. Free cash flow is typically used to pay common share dividends, invest in the business for future growth, reduce borrowings or repurchase equity.

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

YEARS ENDED DECEMBER 31 (MILLIONS)	2004		2003		2002
Receipts
Net operating income	$	1,704	$	1,435	$	1,214
Dividends from Noranda and Norbord		64		67		64
		1,768		1,502		1,278
Disbursements
Interest expense on borrowings		530		471		466
Other operating costs and taxes		169		88		56
Sustaining capital investments
Brascan		55		45		30
Minority interests		20		20		20
Distributions
Minority interests		73		62		55
Preferred equity		116		83		69
		963		769		696
Free cash flow	$	805	$	733	$	582

Brascan Corporation | 2004 Annual Report 41

The following table provides an overview of how our free cash flow and financing proceeds have been utilized over the past three years:

YEARS ENDED DECEMBER 31 (MILLIONS)	Total			2004			2003			2002
Free cash flow	$	2,120		$	805		$	733		$	582
Financing
Borrowings, net of repayments		2,020			1,577			(125	)		568
Net issuance of preferred equity		1,042			264			525			253
Minority interest distributions		(140	)		(140	)		—			—
		2,922			1,701			400			821
Investing
Property 1		(701	)		(349	)		(221	)		(131	)
Power generation 1		(1,738	)		(1,070	)		(139	)		(529	)
Funds management and securities		(1,816	)		(1,087	)		(549	)		(180	)
Net repurchase of common shares
Brascan		(253	)		(19	)		(91	)		(143	)
Subsidiaries		(401	)		(33	)		(125	)		(243	)
		(4,909	)		(2,558	)		(1,125	)		(1,226	)
Common share dividends		(374	)		(136	)		(126	)		(112	)
Net generation (utilization) of cash		(241	)		(188	)		(118	)		65
Net change in non-cash working capital balances		263			210			168			(115	)
Increase (decrease) in cash	$	22		$	22		$	50		$	(50	)

1 Excludes the levelized amount of sustaining capital expenditures which are included in the determination of free cash flow

Working Capital and Other Balances

The composition of our working capital and other balances is as follows:

	2004							2003
	Accounts		Accounts					Accounts		Accounts
AS AT DECEMBER 31 (MILLIONS)	Receivable		Payable		Net			Receivable		Payable		Net
Working capital balances
Property operations	$	482	$	524	$	(42	)	$	231	$	375	$	(144	)
Power generation		169		100		69			131		89		42
Funds management		204		1,298		(1,094	)		449		419		30
International and other		332		160		172			242		280		(38	)
		1,187		2,082		(895	)		1,053		1,163		(110	)
Other items
Future income tax assets		56		—		56			62		—		62
Prepaid expenses and other assets, deferred credits, provisions and other liabilities		281		637		(356	)		508		582		(74	)
		337		637		(300	)		570		582		(12	)
Net working capital and other	$	1,524	$	2,719	$	(1,195	)	$	1,623	$	1,745	$	(122	)

Working capital balances include the trade accounts receivable and payables 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 Asset Backed Trust to effectively finance working capital balances with asset backed commercial paper and medium-term notes.

The increase in net liabilities of our funds management business is due principally to a higher level of insurance deposit liabilities. Other balances include future income tax assets, as well as other accrued asset balances and provisions.

42 Brascan Corporation | 2004 Annual Report

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 operations. Capital is invested only when the expected returns exceed pre-determined thresholds, taking into consideration both the degree and magnitude of the relative risks and upside potential and, if appropriate, strategic considerations in the establishment of new business activities. We conduct post-investment reviews on capital allocation decisions to assess the results against anticipated returns.

Liquidity

We strive to maintain sufficient financial liquidity at all times in order to participate in attractive investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

As at year end, Brascan and its consolidated subsidiaries had $0.9 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 substantial cash and financial assets that can be liquidated to fund investments as required.

During 2004, we generated $670 million of operating cash flow and we aim to increase this by approximately 12% to 15% per annum over the long term. The free cash flow from operations, which includes undistributed cash flow attributable to minority interests in subsidiaries, totalled $805 million during 2004 and is expected to increase generally in line with our operating cash flow. Free cash flow is available to expand our operating base, pay common share dividends, reduce debt or repurchase common shares as appropriate.

Credit Profile

We endeavour to arrange our affairs to maintain investment grade ratings and to improve them further over time. The credit ratings for the company at December 31, 2004, and at the time of the printing of this report were as follows:

	DBRS	S&P	Moody’s
Commercial paper	R-1(low)	A-1(low)		—
Term debt	A(low)	A–	Baa3
Preferred shares	Pfd-2(low)	P2(mid)		—

We also endeavour to ensure that our principal operations 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.

The following outlines our targeted debt to capitalization levels:

	Objective	2004			2003			2002
Debt to capitalization
Excluding property specific mortgages	30% to 40%		29	%		29	%		31	%
Corporate borrowings	20% to 30%		22	%		20	%		20	%

Use Of Derivatives

We utilize a number of financial instruments to manage our foreign currency, commodity and interest rate exposures. As a general policy, we endeavour to maintain balanced positions, although unmatched positions may be taken from time to time within predetermined limits. The company’s risk management and derivative financial instruments are more fully described in the notes to our Consolidated Financial Statements.

Brascan Corporation | 2004 Annual Report 43

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 that are denominated in Canadian dollars that are not hedged. The estimated impact of a C$0.05 change in the Canada/U.S. exchange rate is a corresponding change in operating cash flow of approximately $0.04 per share.

We typically finance our assets that generate predictable long-term cash flows with long term fixed rate debt in order to provide stability in cash flows and protect returns in the event of changes in interest rates. We also make use of fixed rate preferred equity financing as well as financial contracts to provide additional hedges in this regard. Nonetheless, the company and our subsidiaries typically maintain a net floating rate liability position because we believe that this results in lower financing costs over the long term and can do this given the company’s substantial annual operating cash flows. For several years we had swapped a significant amount of fixed rate debt to floating rate to take advantage of declining interest rates, which resulted in a meaningful reduction in our cost of capital and benefitted our operating results. Although interest rates remain at low levels, we continue to reduce our floating rate exposure with the expectation that rates will increase over the next few years.

Accounting principles require that the impact of fluctuating interest rates on the values of most of our assets and financial obligations are not recorded as income. However changes in values of certain of our fixed-rate financial instruments are recorded as income, even though they represent an economic hedge against changes in value of the corresponding assets. Accordingly, although such changes may be offset by variances in the value of the related asset, movements in long-term interest rates may have an increased impact on our reported financial results.

As at December 31, 2004, 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 $0.05 per share. Our fixed-rate obligations at year end include a notional amount of $1.6 billion (2003 – $0.3 billion) which is required to be recorded at market value and any changes in value recorded as current income, with the result that a 10 basis point increase in long term interest rates will result in a corresponding increase in income of $0.05 per share and vice versa, based on our year end positions. It is important for shareholders to keep in mind that these interest rate related revaluation gains or losses are offset by corresponding changes in values of the assets and cash flow streams that they relate to, which are not reflected in current income.

Corporate Guarantees, Commitments and Contingent Obligations

Brascan’s policy is to not guarantee obligations of subsidiaries or affiliates. We do, however, provide limited guarantees and indemnities when required from time-to-time to further the growth of our power marketing and fund management businesses. The Corporation has guaranteed $75 million of project specific debt raised during 2004 to finance the acquisition of power generating assets, as well as $393 million of subsidiary debt previously guaranteed by a company with which we amalgamated. The Corporation has also guaranteed obligations under power purchase agreements which amounted to $19 million at year end. Certain of these obligations, together with $172 million of obligations included in accounts payable and other liabilities, 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 regulatory proceedings, litigation and claims that arise in the normal course of business. The company does not believe it has any material exposure in this regard and has provided for any expected claims in its accounts. In addition, the company may execute agreements that provide indemnifications and guarantees to third parties. Disclosure of commitments, guarantees and contingencies can be found in the Notes to the Consolidated Financial Statements.

44 Brascan Corporation | 2004 Annual Report

Off Balance Sheet Arrangements

We conduct our operations through entities that are fully or proportionately consolidated in our financial statements other than equity accounted investments. Brascan’s interests in Noranda, Norbord, Fraser Papers and Louisiana HydroElectric Power are each accounted for on the equity basis.

Brascan holds non-controlling interests in a small number of investment entities through loans receivable or equity investments acquired through restructurings and other asset management initiatives. These entities will be consolidated into our financial statements commencing January 1, 2005 in accordance with new accounting requirements, because we are considered to be the principal beneficiary, based on the relative amount of equity at risk. We do not believe that we hold any such interests that would give rise to a material impact on our financial statements if they were to be consolidated as of December 31, 2004. We will also commence consolidating our investment in Louisiana HydroElectric Power beginning January 1, 2005, as further described under Power Generating operations.

BUSINESS ENVIRONMENT AND RISKS

Our financial results are impacted by the performance of each of our operations and various external factors influencing the specific sectors and geographic locations in which we operate; by macro-economic factors such as economic growth, changes in currency, inflation and interest rates; by regulatory requirements and initiatives; and by litigation and claims that arise in the normal course of business.

Our strategy is to invest in high quality long-life 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 enables us to invest with confidence when 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 as defined by the physical characteristics of the assets and, more importantly, the certainty of receiving rental payments from large corporate tenants which these properties attract. Nonetheless, Brascan remains exposed to certain risks inherent in the commercial property business.

Commercial property 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 the markets in which we operate), the attractiveness of the properties to tenants, competition from other landlords with competitive space and our ability to provide adequate maintenance at an economical cost.

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 property 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.

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.

Brascan Corporation | 2004 Annual Report 45

While we believe the outlook for commercial office rents is positive in the longer term, 2005 may not provide the same level of increases in rental rates or renewals as compared to 2004. The company is, 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 occupancy levels and net effective rents.

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 reasonably 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 our residential land development and home building operations, markets have been favourable over the past five years with strong demand for well located building lots, particularly in the United States. Our operations are concentrated in high growth areas which we believe have positive demographic and economic conditions.

Nonetheless, the residential home building and land development industry is cyclical and may be significantly affected by changes in general and local economic conditions such as consumer confidence, job stability, availability of financing for home buyers and higher interest rates due to their impact on home buyers’ decisions. These conditions can affect the outlook of consumers and, in particular, the price and volume of home purchases. Furthermore, we are subject to risks related to the availability and cost of materials and labour, supply and cost of building lots, and adverse weather conditions that can cause delays in construction schedules and cost overruns.

POWER GENERATING OPERATIONS

Our strategy is to own primarily hydroelectric generating facilities, which have operating costs significantly below that of most competing forms of generation. As a result, there is a high level of assurance that we will be able to deliver power on a profitable basis. In addition, we sell most of our generation pursuant to long term contracts that protect us from variations in future prices. Nonetheless, we are subject to certain risks, the most significant of which are hydrology and price.

The revenues generated by our power facilities are proportional to the amount of electricity generated, which is dependent upon available water flows. Although annual deviations from long term average water flows can be significant, we strive to mitigate this risk by increasing the geographic diversification of our facilities which assists in balancing the impact of generation fluctuations in any one geographic region.

Demand for electricity varies with economic activity. Accordingly, an economic slow down could have an adverse impact on prices. In addition, oversupply in our markets may result from excess generating capacity. Pricing risk is mitigated through fixed-price contracts, forward sales of electricity, and the regulated revenues we earn from our transmission and distribution business. Continued growth in pricing is dependent on favourable economic and supply conditions and the renewal of contracts on favourable terms.

Our power operations are typically financed with long term debt. A prolonged decline in operating income due to unusually poor hydrology or extremely low pricing could impact our ability to meet our obligations to mortgagees and could result in losses as a result of the mortgagee’s right of foreclosure or sale.

The operation of hydroelectric generating facilities and associated sales of electricity are regulated to varying degrees in most regions. Changes in regulation can affect the quantity of generation and the manner in which we produce it, which could impact revenues.

46 Brascan Corporation | 2004 Annual Report

FUNDS MANAGEMENT OPERATIONS

Our funds management operations are focussed on the ownership and management of investments, the majority of which are debt and similar obligations that are supported by underlying tangible assets and cash flows. The principal risks in this business are potential loss of invested capital as well as insufficient investment or fee income to cover operating expenses and cost of capital.

Unfavourable economic conditions could have a significant impact on our investees, which could negatively impact their ability to satisfy their obligations to us on a timely basis. This could reduce the value and liquidity of our investments and the level of investment income. Since most of our investments are in our areas of expertise and given that we strive to maintain adequate supplemental liquidity at all times, we are well positioned to assume ownership of and operate most of the assets and businesses that we finance. Furthermore, if this situation does arise, we typically acquire the assets at a discount to the underwritten value, which protects us from loss.

Conversely, overly favourable economic conditions may limit the number of attractive investment opportunities and thereby restrict our ability to increase assets under management and the related income streams. We mitigate this risk by exercising patience and by maintaining a relatively low level of administrative overhead.

We finance many of our funds management investments with debt capital, typically on a matched basis reflecting maturity and interest rate profiles. Nonetheless, a contraction of available credit could result in an increase in financing costs which would impact our profitability or cause us to dispose of assets sooner than otherwise planned and thereby reduce returns or result in a loss of capital. This risk is mitigated through the structuring of our financing arrangements and by maintaining adequate liquidity to refinance obligations if necessary.

Our ability to successfully expand our funds management business is dependent on our reputation with our current and potential investment partners. We believe that our track record and recent investments, as well as adherence to operating policies that emphasize a constructive management culture, will enable us to continue to develop productive relationships with institutional investors.

INVESTMENT IN NORANDA

Our investment in Noranda, a global mining and metals business, is cyclical in nature. Its 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.

With the increase in commodity prices over the past eighteen months, our share of the earnings of this investment improved substantially during 2004 and we expect continued strong performance in 2005 based on current prices.

EXECUTION OF STRATEGY

Our strategy for building shareholder value is to develop or acquire high quality assets and businesses that generate sustainable and increasing cash flows, with the objective of achieving higher returns on capital invested over the long term.

We endeavour to maintain an appropriate level of liquidity in order to invest on a value basis when attractive opportunities arise. Our approach to business 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 acquire or develop additional high quality assets at attractive prices to supplement our growth.

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 a particular industry. Our diversified business base, liquidity and the sustainability of our cash flows provide important elements of strength in executing this strategy.

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The conduct of our business and the execution of our growth strategy rely heavily on teamwork. We believe that co-operation among our operations and our team-oriented management structure are essential to responding promptly to opportunities and challenges as they arise. There is, however, also no certainty that the appointment of new senior executives will always be successfully executed.

SUPPLEMENTAL INFORMATION

Segmented Financial Information

The following is a summarized statement that shows the net investment in each of our operating businesses along with associated operating cash flows and the return on our net investment:

YEARS ENDED DECEMBER 31	Book Value				Operating Cash Flow				Annualized Return 1
MILLIONS, EXCEPT PER SHARE AMOUNTS	2004		2003 2		2004		2003 2		2004			2003  2
Assets
Property
Direct 3	$	921	$	616	$	53	$	60		7	%		10	%
Brookfield Properties		1,114		1,038		231		218		21	%		21	%
Brookfield Homes		122		195		85		64		54	%		33	%
		2,157		1,849		369		342		18	%		18	%
Power generation		1,216		749		180		112		18	%		15	%
Funds management		2,286		1,913		224		209		11	%		11	%
Investment in Noranda		1,374		1,196		45		49		4	%		4	%
Cash and financial assets		288		879		32		68		5	%		8	%
Accounts receivable and other assets		122		141		—		—		—			—
	$	7,443	$	6,727	$	850	$	780		12	%		12	%
Liabilities
Other debt of subsidiaries	$	393	$	327	$	46	$	43		13	%		13	%
Corporate borrowings		1,675		1,576		103		100		6	%		6	%
Accounts other payables		730		658		27		8		4	%		1	%
Shareholders’ interests
Preferred equity – corporate and subsidiaries		1,164		1,158		66		63		6	%		5	%
Common equity		3,481		3,008		608		566		19	%		18	%
—
		4,645		4,166		674		629		15	%		15	%
	$	7,443	$	6,727	$	850	$	780		12	%		12	%
Per share	$	13.65	$	11.63	$	2.38	$	2.14

1	Operating cash flow as a percentage of average book value
2	Restated to reflect amalgamation of Brascan Financial Corporation
3	Includes $450 million (2003 – $153 million) of book value relating to our investment in Canary Wharf Group plc that does not generate any current investment income

48 Brascan Corporation | 2004 Annual Report

QUARTERLY RESULTS

     The 2004 and 2003 results by quarter are as follows:

	Q1						Q2						Q3						Q4
MILLIONS, EXCEPT PER SHARE AMOUNTS	2004			2003			2004			2003			2004			2003			2004			2003
Total revenue and gains	$	768		$	667		$	898		$	728		$	1,062		$	835		$	1,299		$	1,140
Net operating income
Property		214			192			222			191			241			221			342			233
Power generation		74			36			71			44			68			35			70			57
Funds management		54			52			65			50			46			45			35			33
Investment income and other		25			27			17			21			26			30			11			11
Property and disposition gains		—			—			60			—			63			—			—			157
		367			307			435			306			444			331			458			491
Expenses
Interest expense		129			116			135			108			134			121			132			126
Current income taxes		8			—			16			—			16			2			46			20
Other operating costs		18			14			13			19			22			14			30			19
Minority share of net income before the following		82			63			109			64			84			73			124			119
Net income before the following		130			114			162			115			188			121			126			207
Depreciation and amortization		(56	)		(35	)		(56	)		(36	)		(60	)		(38	)		(79	)		(40	)
Future taxes and other provisions		(54	)		(28	)		(53	)		(30	)		(56	)		(41	)		10			(66	)
Minority share of the foregoing items		31			23			41			22			34			27			35			28
Equity accounted income (loss) from investments		96			(18	)		95			(8	)		86			31			68			55
Net income	$	147		$	56		$	189		$	63		$	192		$	100		$	160		$	184
Net income per common share
Diluted	$	0.50		$	0.15		$	0.67		$	0.18		$	0.68		$	0.32		$	0.53		$	0.66
Basic	$	0.51		$	0.16		$	0.68		$	0.18		$	0.68		$	0.33		$	0.56		$	0.66

2004 and 2003 cash flow from operations by quarter are as follows:

	Q1				Q2				Q3				Q4
MILLIONS, EXCEPT PER SHARE AMOUNTS	2004		2003		2004		2003		2004		2003		2004		2003
Income before non-cash items	$	130	$	114	$	162	$	115	$	188	$	121	$	126	$	207
Dividends from Noranda		11		12		11		13		11		12		12		12
Dividends from Norbord		5		4		5		4		4		5		5		5
Cash flow from operations and gains	$	146	$	130	$	178	$	132	$	203	$	138	$	143	$	224
Per common share	$	0.49	$	0.44	$	0.64	$	0.44	$	0.72	$	0.46	$	0.49	$	0.80

For the three months ended December 31, 2004, cash flow from operations and gains totalled $143 million ($0.49 per share) compared with $224 million ($0.80 per share) in 2003. 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 accrued to Brascan after deducting minority interests. The fourth quarter results of 2003 also reflected a $57 million gain on the sale of our investment in Northgate Exploration, included in Property and Disposition Gains.

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The following sections contain additional information required by applicable continuous disclosure guidelines.

CONTRACTUAL OBLIGATIONS

The following table presents the contractual obligations of the company by payment periods:

					Payments Due by Period
			Less than		1- 3		4 - 5		After 5
MILLIONS	Total		One Year		Years		Years		Years
Long-term debt
Property specific mortgages	$	6,045	$	400	$	1,705	$	494	$	3,446
Other debt of subsidiaries		2,373		732		511		343		787
Corporate borrowings		1,675		363		512		200		600
Commitments		445		445		—		—		—

Contractual obligations include $445 million of commitments by the company and its subsidiaries provided in the normal course of business, including commitments to provide bridge financing, and letters of credit and guarantees provided in respect of power sales contracts and reinsurance obligations, of which $81 million is included in the consolidated balance sheet.

CORPORATE SECURITIES AND DIVIDENDS

The dividends paid by Brascan during the past three years are as follows:

	Dividends per Share
YEARS ENDED DECEMBER 31	2004		2003		2002
Class A Common Shares	$	0.55	$	0.49	$	0.43
Class A Preferred Shares
Series 1 1		0.30		0.54		0.43
Series 2		0.54		0.59		0.46
Series 3		1,774.04		2,112.47		1,579.32
Series 4 + 7		0.54		0.59		0.46
Series 8		0.56		0.81		0.65
Series 9		1.08		1.01		0.90
Series 10		1.11		1.03		0.92
Series 11		1.06		0.98		0.54
Series 12		1.04		0.83		—
Preferred Securities
Due 2050		1.61		1.49		1.37
Due 2051		1.60		1.48		0.92

1   Redeemed July 30, 2004

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management 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. In particular, estimates required in the normal course of preparing Brascan’s financial statements include the determination of: future cash flows utilized in assessing net recoverable amounts and net realizable values; depreciation and amortization; value of goodwill and intangible assets; ability to utilize tax losses; effectiveness of financial hedges for accounting purposes; and fair values for disclosure purposes. These estimates have been applied in a manner consistent with that in the prior year. The estimates are impacted by, among other things, movements in interest rates and other factors as described in the analysis of business environment and risks, beginning on page 46. The interrelated nature of these factors prevents us from quantifying the overall impact of these movements on the company’s financial statements in a meaningful way.

50 Brascan Corporation | 2004 Annual Report

RELATED PARTY TRANSACTIONS

In the normal course of operations the company enters into various transactions on market terms with related parties which have been measured at exchange value and are recognized in the consolidated financial statements. None of the transactions individually or in aggregate are material to the overall operations.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2004 the company adopted the following new accounting policies, none of which individually or collectively had a material impact on the consolidated financial statements of the company, unless otherwise noted. These changes were the result of changes to the Canadian Institute of Chartered Accountants (“CICA”) Handbook, Accounting Guidelines (“AcG”) and Emerging Issues Committee Abstracts (“EIC”).

Generally Accepted Accounting Principles, CICA Handbook Section 1100

Section 1100 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 provision of section 1100 have been applied on a prospective basis to balances outstanding as at January 1, 2004, and transactions after that date. The adoption of the new standard resulted in recognition of additional straight-line rental revenues of $22 million and additional depreciation of $58 million before any tax effects for the year ended December 31, 2004.

Asset Retirement Obligations, CICA Handbook Section 3110

Section 3110 addresses the recognition and re-measurement 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 obligations are incurred, with the amount of the liabilities 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.

Hedging Relationship, AcG 13

AcG 13 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.

Impairment of Long-Lived Assets, CICA Handbook Section 3063

Section 3063 provides that an impairment loss be recognized when the carrying value of an asset exceeds the total undiscounted cash flows expected from its use and eventual disposition. The impairment recognized is measured as the amount by which the carrying value exceeds its fair value.

Accounting for Operating Leases Acquired in Either an Asset Acquisition of Business Combination, EIC 140

EIC 140 requires that when a company acquires real estate in either an asset acquisition or business combination, a portion of the purchase price should be allocated to the in-place leases to reflect the intangible amounts of leasing costs, above or below market leases and tenant relationship values, if any. These intangible costs are amortized over their respective lease terms.

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OUTLOOK

We are optimistic as we review the outlook for our operations in 2005 and believe we are well positioned for growth.

In the commercial property sector, the leasing markets in which we operate are improving on a measured basis, although we are planning our affairs with the expectation that a sustained recovery in rental rates does not commence until 2006. Fortunately, our strong tenant lease profile and low vacancies give us a high level of confidence that we expect to achieve our targets in 2005.

Residential markets remain exceptionally strong in our core markets. Accordingly, we expect another strong year in these operations. Real estate services continue to benefit from the buoyant commercial and residential markets.

Our power operations benefitted from a return to normal water flows during 2004 and current storage levels are consistent with long-term averages. We expect cash flows to increase compared to 2004 due to the acquisitions made during the past three years and current pricing levels.

We continue to build our funds management business by committing additional resources and launching new funds. During 2005, we will continue to concentrate on investing the capital committed by us and by our partners. We expect to achieve this over the course of the year, based on the level of activity and higher profile of our fund activities. This should positively impact our results in 2005.

Our largest private equity investments comprise ownership interests in Norbord and Fraser Papers. Norbord is continuing to benefit from strong panelboard prices, which are likely to result in healthy operating margins at least for the first part of 2005. Fraser Papers, however, continues to face pricing pressures for a number of its products.

Noranda has benefitted from significant increases in prices for most of its products, and despite higher operating costs including currency and energy prices, achieved record earnings and cash flows. The outlook for metal prices remains favourable which will result in Noranda reporting strong results while these conditions exist. Brascan and Noranda are undertaking a process which could result in the restructuring or sale of all or part of Brascan’s interests in Noranda. In the meantime, we remain supportive of Noranda and its management team as they continue to build value for their shareholders.

Our cost of capital is expected to remain substantially unchanged in 2005. We intend to continue to reduce our floating rate interest profile in anticipation of rising interest rates. Although this may result in higher current borrowing costs, we believe this will prove to be beneficial over the longer term. We expect to achieve this by issuing long-term, fixed-rate capital where appropriate, and by adjusting the interest rate profile of our existing debt and financial assets.

Needless to say, there are many factors that could impact our performance in 2005, both positively and negatively. We have described the principal risks earlier in this report, and we will continue to manage our business with the objective of reducing the impact of market fluctuations, for example, through the use of long-term revenue contracts and long-term financings. It is this measured approach to business that provides us with confidence that we will meet our 2005 performance objectives with respect to cash flow growth and value creation.

Brian D. Lawson
Chief Financial Officer
February 10, 2005

52 Brascan Corporation | 2004 Annual Report