Brookfield Asset Management, Inc. (USA) (BAM)

Extremely complex. Very hard to understand and value properly.

I also think BAM's focus on building cash flow instead of book value will cause the company to make decisions not in the best interest of building value for the shareholders.

For instance it spun off BIP and kept 40% of the shares. BIP will pay a dividend. (do you think BAM will book that as cash flow?) If BIP had stayed inside of BAM this money could have been used to fund internal growth. Instead 60% of this dividend stream will be paid to the new outside owners of BIP and a chunk of that will be lost to taxes. BAM is also charging BIP a management fee. From BIP's prospectus under the category Our Master Services Agreement first paragraph "on a quarterly basis, we will pay a base management fee to the Manager equal to 0.3125% (1.25% annually) of the market value of our partnership." If this fee didn't exist as an internal charge I feel it is now an unneeded cost (like a fund of funds mutual fund). If it was an internal charge pre spinoff it seems to me to now be a fee that increases cash flow (an expense has now become an income stream). Also if BIP's international board is independent, why does it need to pay a fee to BAM? Aren't 40% of the dividends enough of a fee?

BIP is a Bermuda based partnership. Read ENFORCEMENT OF CERTAIN CIVIL LIABILITIES on page iii of BIP's prospectus. I got the impression BIP is pretty much immune from Canadian and US civil judgments.

The ownership and organizational chart of BIP is baffling. Is the rest of BAM and its subs like this? I really don't know and do not want to invest 50 to 100 hours or more to figure out.

I felt very uneasy about BAM after reading the first few page's of BIP's prospectus, so in real life I sold my BAM and swapped into CNQ.

I'm not accusing BAM of any wrongdoing. I just think it's extremely complex and I just don't feel comfortable owning a stock I have lots of questions on and I readily admit I do not understand.