Brookfield/Trisura Group -- summary under Subsidiary distribution

Overview

Brookfield Asset Management is proposing to transfer subsidiaries, carrying on a Canadian, U.S. and international insurance business, to a newly-incorporated Ontario subsidiary (Trisura Group), and then distribute its shares of Trisura Group to the Brookfield shareholders as a taxable dividend. For non-Canadian beneficial shareholders, the Part XIII tax withholding tax obligations “will be satisfied in the ordinary course through arrangements with their broker or other intermediary.” The dividend is expected to occur as a tax-free distribution for Code purposes.

Trisura Group

Trisura Group, was incorporated on January 27, 2017 and issued 40 Common Shares to Brookfield Asset Management for $1,000. Through the subsidiaries, described below, to be acquired by it, it will operate as an international specialty insurance provider in the surety, risk solutions, corporate insurance and reinsurance niche segments of the market.

TGI/TG Holdco

Trisura Guarantee Insurance Company (“TGI” or “Trisura Guarantee”) is a Canadian niche P&C insurance company with a primary focus on the Canadian surety, professional and executive liability and warranty markets, which currently is wholly-owned by 6436978 Canada Limited (“TG Holdco”). TG Holdco is a Canadian federal company which is owned 60% by an indirect wholly-owned subsidiary of Brookfield Asset Management and 40% by TG Management Group, whose shareholders include the founding shareholders of TGI.

Trisura US

Trisura US, a new Oklahoma subsidiary that will focus on the risk solutions segment, is expected to be incorporated.

Trisura International Insurance

Trisura International Insurance is a Barbados-regulated entity which focuses on the reinsurance segment of the international market, and is held through Imagine Group Holding Limited (“Trisura International Holdco”), also a Bermuda company.

Brookfield Asset Management

A global alternative asset manager listed on the NYSE and TSX.

Proposed transactions

1. Brookfield Asset Management will subscribe for approximately 5,799,960 Common Shares of Trisura Group in exchange for approximately $144.9 million;
2. Brookfield Asset Management will exchange its interest in Trisura International Holdco for approximately $51.8 million with Trisura Group;
3. After approval by the federal Minister of Finance, Brookfield Asset Management will exchange its 60.0% interest in TG Holdco for approximately $51.8 million with Trisura Group. Trisura Group’s share capital following these transactions will total approximately $144.9 million or approximately $25.00 per Common Share representing its approximate fair value as of that date.
4. Brookfield Asset Management will make a special dividend to holders of its Class A Shares and Class B Shares of all of the Common Shares of Trisura Group. As a result of the special dividend, holders of Class A Shares and Class B Shares will be entitled to receive one Common Share for every 188 Class A Shares or Class B Shares held as of the Record Date for the special dividend, provided that the special dividend will be subject to any applicable withholding tax and no holder will be entitled to receive any fractional interests in the Common Shares. Holders who would otherwise be entitled to a fractional Common Share will receive a cash payment.

Payment of Canadian withholding tax

To satisfy the withholding tax liabilities of non-Canadian registered shareholders, Brookfield Asset Management will withhold a portion of the Common Shares, and a portion of any cash distribution in lieu of fractional Common Shares, otherwise distributable. Brookfield Asset Management will purchase these withheld Common Shares and the proceeds of this sale, together with the amount of any cash withheld from any cash distribution in lieu of fractional Common Shares, will be remitted to the Canadian federal government in satisfaction of Canadian withholding tax liabilities. For non-Canadian beneficial shareholders, these withholding tax obligations will be satisfied in the ordinary course through arrangements with their broker or other intermediary.

Canadian tax consequences

Resident Holders who receive Common Shares pursuant to the spin-off will be considered to have received a taxable dividend equal to the aggregate fair market value of the Common Shares so received plus the amount of any cash received in lieu of fractional Common Shares. The adjusted cost base to a Resident Holder of the Common Shares received pursuant to the spin-off will be equal to the fair market value of the Common Shares so received.

U.S. tax consequences

For U.S. federal income tax purposes, Trisura Group and Brookfield Asset Management intend to treat the distribution as a tax-free distribution to U.S. Holders. If, contrary to expectation, the distribution is determined not to qualify as a tax-free distribution, then each U.S. Holder who receives Common Shares in the distribution generally is expected to be treated as receiving a taxable dividend.