SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 40-F (Check one) [ ] Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934 or [X] Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 Commission file number 11097 ------ GREAT LAKES POWER INC. (Exact name of Registrant as Specified in its Charter) ONTARIO (Province or Other Jurisdiction of Incorporation or Organization) 4939 (Primary Standard Industrial Classification Code Number) NOT APPLICABLE (IRS Employer Identification Number) BCE PLACE 181 BAY STREET SUITE 4400 TORONTO, ONTARIO CANADA M5J 2T3 (416) 359-8600 (Address and Telephone Number of Registrant's Principal Executive Offices) CENTURY POWER, L.L.C. 3900 PARK AVENUE, SUITE 102 EDISON, N.J. 08820 (732) 494-9455 ATTENTION: JACK R. SAUER (Name, Address and Telephone Number of Agent for Service in the United States) Securities registered or to be registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------- ----------------------------------------- None None Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Debt Securities (to be offered on a delayed or continuous basis) For annual reports, indicate by check mark the information filed with this Form: [ ] Annual Information Form [X] Audited annual financial statement Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. N/A --------------------- Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to the registrant in connection with such rule. Yes No X --- --- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- UNDERTAKING AND CONSENT TO SERVICE OF PROCESS A. Undertaking Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form 40-F: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities. B. Consent to Service of Process The Registrant has filed with the Securities and Exchange Commission a written irrevocable consent and power of attorney on Form F-X. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Form 40-F constitute forward-looking statements, which are based on the Registrant's current expectations and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, among others, general business and economic conditions and competitive actions. -2- SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized. GREAT LAKES POWER INC. By: /s/ Alan V. Dean --------------------------------- Name: Alan V. Dean Title: SVP & Corporate Secretary Date: March 26, 2002 -3- EXHIBIT INDEX Exhibits Description - -------- ----------- 1 2001 Annual Report containing the audited consolidated financial statements of Great Lakes Power Inc. for the year ended December 31, 2001 (p. 9-17) and management's discussion and analysis of the company's financial condition and results of operations (p. 3-8). 2 Annual Filing of Reporting Issuer (Form 28) dated February 28, 2002 3 Consent of Deloitte & Touche EXHIBIT 1 GREAT LAKES POWER INC. - ------------------------------------ 2001 ANNUAL REPORT GREAT LAKES POWER INC. is an independent power company with operations in Canada and the United States. Its production base includes 27 hydroelectric generating stations and one natural gas-fired cogeneration plant, having a combined generating capacity of 1,117 megawatts. Great Lakes has been supplying power for over 85 years through its integrated hydroelectric power generation, transmission and distribution system in northern Ontario. The company also has other power operations in Ontario, Quebec, British Columbia, Louisiana and Maine. Great Lakes is a wholly owned subsidiary of Brascan Corporation (TSE: BNN.A, NYSE: BNN). HEAD OFFICE CONTENTS Great Lakes Power Inc. 2001 Highlights 1 Suite 4400, P.O. Box 762 Corporate Profile 2 BCE Place, 181 Bay Street Management's Discussion and Analysis 3 Toronto, Ontario M5J 2T3 Consolidated Financial Statements 9 Telephone: 416-363-9491 Power Station Statistics 18 Facsimile: 416-363-2856 Ten Year Review 20 Directors and Officers 21 2001 HIGHLIGHTS FINANCIAL HIGHLIGHTS 2001 2000 - -------------------------------------------------------------------------------- millions, except per share amounts Income Gross revenues $ 374 $ 361 Power revenues 270 246 Net income 131 116 Financial Position Total assets(1) 2,930 2,642 Shareholders' equity(1) 1,299 1,249 - -------------------------------------------------------------------------------- Per Common Share Net income(2) $ 1.04 $ 0.92 Dividends 0.64 0.64 ================================================================================ (1) At December 31 (2) Fully diluted OPERATING HIGHLIGHTS 2001 2000 - -------------------------------------------------------------------------------- Total installed capacity (megawatts)(1) 1,117 905 Electricity generation (gigawatt hours) 4,768 4,581 Electricity sales (gigawatt hours)(2) 5,729 5,519 ================================================================================ (1) Capacity includes Great Northern Energy, acquired February 1, 2002 (2) Sales include power purchased externally to supply customer demand in Great Lakes Power Limited's service area PRODUCTION BASE Owner- Generating Generating Installed ship Stations Units Capacity - -------------------------------------------------------------------------------------------- megawatts Great Lakes Power Limited, Ontario(1) 100% 12 22 331 Great Lakes Hydro Income Fund (50%) Maclaren Power, Quebec(1) 100% 3 10 238 Powell River Energy, British Columbia(2) 50% 2 7 82 Great Northern Energy, Maine(1)(5) 100% 6 31 126 Other Power Operations Lake Superior Power, Ontario(3) 50% 1 3 110 Valerie Falls Power, Ontario(2) 65% 1 2 10 Pontiac Power, Quebec(2) 100% 2 7 28 Louisiana HydroElectric Power, Louisiana(2) 75%(4) 1 8 192 - -------------------------------------------------------------------------------------------- Total 28 90 1,117 ============================================================================================ (1) Integrated hydroelectric power generating and transmission systems (2) Other hydroelectric stations (3) Natural gas-fired cogeneration plant (4) Residual interest (5) Acquisition closed February 1, 2002 1 CORPORATE PROFILE Great Lakes Power Inc. ("Great Lakes" or the "company") is an independent electric power company with operations in Canada and the United States. The company operates and has ownership interests in eight power operations with a combined generating capacity of 1,117 megawatts ("MW"). Great Lakes is also involved in power transmission and distribution, and energy marketing. Great Lakes is a wholly owned subsidiary of Brascan Corporation ("Brascan"), a company operating in the real estate, financial and power generation sectors, with investments in the resource sector. Brascan's common shares are listed on the Toronto, New York and Brussels stock exchanges. Great Lakes conducts its business through four operating groups: GREAT LAKES POWER LIMITED ("GLPL"), a wholly owned subsidiary which operates an integrated hydro-electric power generation, transmission and distribution system based in Sault Ste. Marie, Ontario. This system has supplied electricity to the Algoma district of northern Ontario for over 85 years and is the largest independent producer and distributor of electricity in the province. The system operates 12 hydroelectric generating stations with a combined generating capacity of 331 MW, together with related transmission and distribution facilities. > GREAT LAKES HYDRO INCOME FUND (the "Fund"), an unincorporated open-ended trust, in which Great Lakes owns 50% of the trust units. The Fund has interests in three power operations: o a 100% interest in the Maclaren Power hydroelectric generating and transmission system in western Quebec, including three hydroelectric stations with a combined generating capacity of 238 MW and transmission interconnections with both the Hydro-Quebec and Ontario power grids. o a 50% interest in the Powell River Energy hydroelectric generating and transmission facilities in southwestern British Columbia, including two hydroelectric stations with a combined generating capacity of 82 MW. The acquisition of Powell River Energy closed on February 2, 2001. o a 100% interest in Great Northern Energy, which owns six hydroelectric stations and related trans- mission facilities in Northern Maine, with a combined generating capacity of 126 MW and a transmission interconnection with the New England power grid. The acquisition of Great Northern Energy closed on February 1, 2002. > OTHER POWER OPERATIONS, which include the following wholly and partly owned power operations: o a 50% interest in Lake Superior Power, which owns and operates a 110 MW natural gas-fired cogeneration plant in Sault Ste. Marie, Canada. o a 65% interest in Valerie Falls Power , which owns a 10 MW hydroelectric station in northwestern Ontario. o wholly owned Pontiac Power, which owns two hydroelectric stations in western Quebec, with a combined generating capacity of 28 MW and a transmission interconnection with the Ontario power grid. o a 75% residual interest in Louisiana HydroElectric Power, which owns and operates a 192 MW hydroelectric station and sediment control facility in Louisiana on the Mississippi River. > BRASCAN ENERGY MARKETING, a wholly owned subsidiary which conducts the company's wholesale energy marketing business in Canada and the United States. These operations also provide valuable market intelligence regarding pricing dynamics, regulatory systems and market participants, which serves to support the company's growth strategy by targeting the most attractive energy markets. Great Lakes is also participating in the development of hydroelectric stations in Brazil, including four stations now under development which will have a combined generating capacity of 86 MW. In addition, Great Lakes holds a portfolio of financial investments which generate a stable level of cash flow for investment in the company's power operations and distributions to shareholders. Great Lakes is committed to growing its power generation business by expanding its production base through developing greenfield sites and acquiring existing hydroelectric assets; by enhancing its capacity to access interconnected energy markets in Canada and the United States; and by implementing technology changes to improve the efficiency and capacity of its operations. 2 GREAT LAKES POWER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATIONS REVIEW Summary Production statistics for the company's power generating operations for 2001 and 2000 are shown below: - --------------------------------------------- gigawatt hours 2001 2000 - --------------------------------------------- Generation Great Lakes Power Limited 1,300 1,369 Great Lakes Hydro Income Fund Maclaren Power 1,224 1,554 Powell River Energy(1) 363 -- Other Power Operations Lake Superior Power(2) 881 852 Valerie Falls Power 51 51 Pontiac Power 194 217 Louisiana HydroElectric Power 755 538 - --------------------------------------------- 4,768 4,581 ============================================= (1) Results for 2001 include 11 months since acquisition in February 2001 (2) Including electricity equivalents of contracted gas sales The company's power operations generated 4,768 gigawatt hours ("GWh") of electricity during 2001, up from 4,581 GWh in 2000. The return to more normal water flows on the lower Mississippi River and the impact of the Powell River Energy acquisition in early 2001 were partly offset by drier conditions in northern Ontario and western Quebec. Higher precipitation levels in the late fall of 2001 in eastern Canada have returned the company's reservoirs closer to their long-term averages. Total power sales in 2001 increased to 5,729 GWh from 5,519 GWh in 2000. Power sales include the additional power acquired by Great Lakes Power Limited to serve customers in its franchise area. Great Lakes Power Limited GLPL's operating performance in 2001 compared to 2000 is shown below: - ----------------------------------------------- 2001 2000 - ----------------------------------------------- Installed capacity (MW) 331 327 Electricity generation (GWh) 1,300 1,369 Electricity sales (GWh)(1) 2,277 2,309 External power purchases (GWh) 1,079 1,054 Internal power generation (%)(2) 55 57 =============================================== (1) Including power purchased externally to supply customer demand in GLPL service area (2) Measured as a percentage of electricity available for sale before distribution and line loss In 2001, GLPL generated 1,300 GWh of power from its own stations, down 5% from 2000 due to drier than normal weather conditions in northern Ontario. GLPL's electricity sales in 2001 were 2,277 GWh, slightly lower than in 2000, mainly due to lower demand from the system's industrial customers. GLPL purchases additional power from Ontario Power Generation Inc. ("OPG") to meet the needs of customers in its franchise area which exceed its own internal power generation. Power purchases in 2001 increased 2% to 1,079 GWh. Power sales to GLPL's customers for 2001 and 2000 are shown below: - ---------------------------------------- gigawatt hours 2001 2000 - ---------------------------------------- City of Sault Ste. Marie 719 722 Algoma Steel 805 821 St. Marys Paper 385 396 Other customers 368 370 - ---------------------------------------- 2,277 2,309 ======================================== In 2001, GLPL supplied electric power to a total of 43,766 customers, of which 11,566 were supplied directly and 32,200 via the City of Sault Ste. Marie Public Utilities Commission, which distributes power within the city of Sault Ste. Marie. GLPL is completing a program of returbining its existing power generating units to improve their operating efficiency and add capacity at significantly lower costs than new development. During 2001, 4 MW of capacity were added through returbining two units at the McPhail power station. In total, 32 MW of capacity have been added to GLPL's generating capacity since the returbining program started in 1996. Maclaren Power The Maclaren Power system's operating performance for 2001 and 2000 is shown below: - -------------------------------------------- 2001 2000 - -------------------------------------------- Installed capacity (MW) 238 238 Electricity generation (GWh) 1,224 1,554 Electricity sales (GWh) 1,233 1,573 ============================================ Power generation in 2001 decreased 21% as a result of lower precipitation levels in western Quebec. Maclaren Power sells its electrical power to two main industrial companies with operations in the area: Papier Masson Ltee, which operates a newsprint mill; and Nexfor Inc., which operates a pulp mill. Powell River Energy In February 2001, the Great Lakes Hydro Income Fund acquired from Pacifica Papers Inc. a 50% interest in two hydroelectric stations in the City of Powell River Energy in southwestern British Columbia for $56.5 million. These facilities have a total installed capacity of 82 MW and are capable of generating over 500 GWh of electricity annually, for sale to an industrial company on a take-or-pay contract. MANAGEMENT'S DISCUSSION AND ANALYSIS 3 Powell River Energy's operating performance for the eleven months of 2001 since its acquisition in February 2001 is shown below: - --------------------------------------------------- 2001 - --------------------------------------------------- Installed capacity (MW) 82 Electricity generation and sales (GWh) 363 =================================================== Power generation in 2001 was below normal due to dry conditions during much of the year in western British Columbia. Great Northern Energy In February 2002, the Great Lakes Hydro Income Fund acquired from Great Northern Paper Inc. a hydroelectric generating and transmission system in northern Maine for US$156.5 million. This system includes six power stations located on the Penobscot River with a combined generating capacity of 126 MW, 11 water storage dams with 300,000 MW hours of storage capacity and a 20 MW transmission interconnection with the New England Power Pool ("NEPOOL"). Operating results for Great Northern Energy will be included in Great Lakes' total results commencing February 2002. Lake Superior Power Lake Superior Power's operating performance for 2001 and 2000 is shown below: - ---------------------------------------------- 2001 2000 - ---------------------------------------------- Installed capacity (MW) 110 110 Electricity generation and sales (GWh)(1) 881 852 Gas consumption/sales (MMcf)(2) 9,268 8,162 ============================================== 1 Including power equivalent of natural gas sales 2 MMcf - million cubic feet Sales increased during 2001 as a result of the decision to sell contracted gas purchases to take advantage of the significant increase during the year in natural gas prices. Valerie Falls Power Valerie Falls Power's operating performance for 2001 and 2000 is shown below: - ------------------------------------------------------ 2001 2000 - ------------------------------------------------------ Installed capacity (MW) 10 10 Electricity generation and sales (GWh) 51 51 ====================================================== Power generation and sales for 2001 were unchanged from 2000. Pontiac Power Pontiac Power's operating performance for 2001 and 2000 is shown below: - -------------------------------------------------- 2000 2000 - -------------------------------------------------- Installed capacity (MW) 28 28 Electricity generation (GWh) 194 217 Electricity sales (GWh) 192 214 ================================================== Power generation declined by 11% with lower precipitation levels in western Quebec. Louisiana HydroElectric Power Louisiana HydroElectric Power's operating performance for 2001 and 2000 is shown below: - ---------------------------------------------------- 2001 2000 - ---------------------------------------------------- Installed capacity (MW) 192 192 Electricity generation (GWh) 755 538 Electricity sales (GWh) 732 520 ==================================================== Power generation increased by 40% in 2001, as water flows on the lower Mississippi River started to return to normal following abnormally dry conditions in the US Midwest throughout most of 2000. Brascan Energy Marketing The company's energy marketing operations sell the portion of the electricity generated by the Maclaren Power system but not sold pursuant to long-term contracts, as well as power purchased wholesale, into the short-term contract and spot electricity markets. Operating results for Brascan Energy Marketing for 2001 and 2000 are shown below: - ----------------------------------------------------- gigawatt hours 2001 2000 - ----------------------------------------------------- Electricity sales 870 695 Purchases from Maclaren Power 296 270 Wholesale electricity purchases 618 460 ===================================================== INCOME ANALYSIS Great Lakes' net income for 2001 increased to $130.9 million or $1.04 per fully diluted common share, from $115.5 million or $0.92 per share in 2000. Financial results for the year ended December 31, 2001 compared to 2000 are shown below: - ---------------------------------------------------------- millions, except per share amounts 2001 2000 - ---------------------------------------------------------- Power revenues Great Lakes Power Limited $128.9 $123.7 Great Lakes Hydro Income Fund 52.7 54.3 Lake Superior Power 38.1 30.4 Louisiana HydroElectric Power 12.4 6.0 Pontiac Power 12.3 13.3 Valerie Falls Power 3.5 3.5 Brascan Energy Marketing 22.0 15.2 --------------------- 269.9 246.4 Other income Long-term investments 45.6 48.0 Investment and other 58.9 66.2 - ---------------------------------------------------------- 374.4 360.6 - ---------------------------------------------------------- Expenses Interest 82.1 83.1 Power and fuel costs 75.6 70.2 Operating 37.2 32.3 Depreciation 27.4 24.8 Minority interests 11.7 15.1 Income and other taxes 9.5 19.6 - ---------------------------------------------------------- 243.5 245.1 - ---------------------------------------------------------- Net income $130.9 $115.5 ========================================================== Per fully diluted common share $1.04 $0.92 - ---------------------------------------------------------- 4 GREAT LAKES POWER INC. Power Revenues Power revenues increased from $246.4 million in 2000 to $269.9 million in 2001, due mainly to higher contributions from Lake Superior Power, Louisiana HydroElectric Power and Brascan Energy Marketing. The company's share of the revenue of Lake Superior Power increased 25% in 2001 to $38.1 million due to the resale of contracted gas purchases to take advantage of higher natural gas prices. The company's share of income from Louisiana HydroElectric Power doubled in 2001 to $12.4 million with the return to more normal water flows on the lower Mississippi River, following abnormally dry conditions in the US Midwest during 2000. The expansion of the company's energy marketing business, which was started in 2000, led to a 45% increase in this source of revenue during 2001 to $22.0 million. Power revenue from Great Lakes Power Limited for 2001 reflects an electricity price increase effective June 1, 200x1. Other Income Income from long-term investments consists of dividends from the company's investments. This income decreased to $45.6 million in 2001 as a result of lower average interest rates. The composition of these long-term investments and the changes during 2001 are described in the Balance Sheet Analysis section of this report. Investment and other income consists of dividends earned on the company's securities portfolio, interest on loans receivable and other fee income. This income decreased to $58.9 million in 2001 due to lower average interest rates during the year. Expenses Expenses decreased from $245.1 million in 2000 to $243.5 million in 2001. Power and fuel costs increased 8% to $75.6 million. These include the cost of power purchased by Great Lakes Power Limited from OPG and the company's share of the cost of natural gas fuel purchased for the Lake Superior Power cogeneration plant. The cost of power purchased by GLPL increased by $6.4 million, mainly because of an OPG price increase effective June 1, 2001 and higher external power purchases relative to 2000. The cost of power purchases was partly reduced by $7.0 million of previously set aside hydrological reserves in 2001, compared to $5.1 million in 2000. Operating expenses include the cost of maintaining operating facilities. These expenses increased by 15% to $37.2 million, mainly due to the Powell River Energy acquisition in February 2001. Income and other taxes decreased by 51% to $9.5 million in 2001 due to lower federal and municipal tax rates. Quarterly Earnings The following table summarizes the quarterly fully diluted earnings per share for 2001 compared to 2000: - ---------------------------------------------------------- 2001 2000 - ---------------------------------------------------------- Net income per fully diluted share 1st Quarter $0.24 $0.25 2nd Quarter 0.30 0.26 3rd Quarter 0.30 0.22 4th Quarter 0.20 0.19 - ---------------------------------------------------------- Total for the year $1.04 $0.92 ========================================================== BALANCE SHEET ANALYSIS The company's total assets increased during 2001 to $2,930.0 million, due mainly to investments in additional generating capacity. Assets and liabilities at December 31, 2001 and 2000 are summarized in the following table: - --------------------------------------------------------- millions 2001 2000 - --------------------------------------------------------- Financial assets Securities $ 715.6 $ 667.3 Loans and other receivables 425.0 325.5 Long-term investments 521.8 536.2 Property, plant and equipment 1,267.6 1,113.4 - --------------------------------------------------------- $ 2,930.0 $ 2,642.4 ========================================================= Liabilities Accounts payable and other $ 91.9 $ 82.7 Mortgage bonds 555.6 443.5 Term debentures 596.2 558.8 Future income taxes 116.4 104.4 Minority interests 271.3 204.0 Shareholders' equity 1,298.6 1,249.0 - --------------------------------------------------------- $ 2,930.0 $ 2,642.4 ========================================================= Financial Assets Great Lakes maintains a portfolio of securities and long-term investments, many of which represent the residual gains realized from previous investment banking activities of predecessor companies. The company's securities portfolio, which is comprised primarily of preferred shares of affiliated Canadian companies, increased from $667.3 million to $715.6 million. The composition of the company's securities portfolio by business sector at December 31, 2001 and 2000 is summarized below: - ----------------------------------------------------------- millions 2001 2000 - ----------------------------------------------------------- Property $269.4 $220.5 Natural resources 151.5 147.7 Financial services 15.0 21.0 Diversified 199.4 189.4 Short-term deposits and other 80.3 88.7 - ----------------------------------------------------------- $715.6 $667.3 =========================================================== The company's loans and other receivables increased to $425.0 million in 2001 due principally to cash placed in interest bearing deposits with affiliates pending investment in the company's power generating operations. MANAGEMENT'S DISCUSSION AND ANALYSIS 5 Long-term Investments The book values of the company's long-term investments and the underlying securities at December 31, 2001 and 2000 are shown below: - --------------------------------------------------------- millions 2001 2000 - --------------------------------------------------------- Trilon Financial Corporation $195.3 $195.3 Noranda Inc. 145.8 150.0 Brascan Corporation 112.0 112.0 Other investments 68.7 78.9 - --------------------------------------------------------- $521.8 $536.2 ========================================================= Great Lakes holds a senior preferred share investment in Trilon Holdings Inc. which, together with Brascan, owns 71% of the common shares of Trilon Financial Corporation ("Trilon"), a publicly listed Canadian-based financial services company. This interest was increased from 65% on January 16, 2001 following Trilon's repurchase of 14.5 million of its common shares. Trilon's financial results for the two years ended December 31, 2001 are shown below: - --------------------------------------------------------- millions 2001 2000 - --------------------------------------------------------- Total assets $3,585 $3,541 Shareholders' equity 2,660 2,707 Revenues 444 414 Net income 251 236 ========================================================= Great Lakes also holds a senior preferred share investment in Noranda Equities Inc. which, together with Brascan, owns 40% of the common shares of Noranda Inc. ("Noranda"). Noranda, a publicly listed company, is a major producer of mined and refined base metals. Noranda's financial results for the two years ended December 31, 2001 are shown below: - ---------------------------------------------------------- millions 2001 2000 - ---------------------------------------------------------- Total assets $12,032 $11,778 Shareholders' equity 3,797 4,094 Sales 6,152 6,957 Net income (loss) (92) 293 ========================================================== Great Lakes owns a $112 million senior preferred share investment issued by a wholly owned subsidiary of Brascan. Brascan's financial results for the two years ended December 31, 2001 are shown below: - --------------------------------------------------------- millions 2001 2000 - --------------------------------------------------------- Total assets $21,929 $11,480 Common equity 4,261 4,181 Revenues 1,229 1,216 Net income 311 648 ========================================================= Brascan's results in 2000 included income and gain on sale of discontinued operations of $260 million. Other investments include primarily the company's shares of First Toronto Investments Limited ("First Toronto"), a Brascan subsidiary which participates in the secondary market for equity securities of Canadian corporations, primarily companies affiliated with Brascan. Great Lakes' investment in First Toronto provided a pre-tax equivalent yield of 7.3% in 2001. Property, Plant and Equipment The depreciated cost of the company's property, plant and equipment increased during 2001 to $1,267.6 million, largely due to the acquisition of Powell River Energy and capital improvements at Great Lakes Power Limited. LIQUIDITY AND CREDIT FACILITIES Great Lakes finances itself through mortgage bonds, corporate debentures, bank credit facilities and bridge and loan facilities provided by Brascan and its affiliates. At December 31, 2001, the company's total debt was $1,151.8 million, as detailed in the following table: - ------------------------------------------------------------------ Average Average Interest Interest millions 2001 Rate 2000 Rate - ------------------------------------------------------------------ First Mortgage Bonds GLPL $ 317.0 5.6% $251.4 6.6% Great Lakes Hydro Income Fund 100.0 7.5% 100.0 7.5% Project loans 138.6 8.2% 92.1 9.9% --------------------------------------- 555.6 443.5 Term debentures 596.2 7.4% 558.8 8.6% - ------------------------------------------------------------------ $1,151.8 $1,002.3 ================================================================== In December 2001, GLPL issued $150 million of First Mortgage Bonds Series 5 at a rate of 4.58% to replace the $95 million 6.69% Series 3 Bonds which came due on December 31, 2001. In addition to the above debt, the company has a commercial paper program with an authorized amount of $100 million. The company's commercial paper is currently rated R-1(low) by Dominion Bond Rating Service and A-2 by Standard & Poor's. The company's commercial paper program, distributed in the money market by a group of investment dealers, normally provides the company with its most cost-effective source of short-term funds. CAPITAL BASE AND FINANCIAL POSITION On February 28, 2001, the shareholders of Great Lakes Power Inc. approved a going private transaction, under which Brascan acquired the outstanding publicly held shares of the company. The company's capital base at December 31, 2001 of $1,298.6 million was comprised of 101.4 million common shares with a book value of $1,050.9 million or $10.37 per share and $247.7 million of subordinated debentures convertible into 24.8 million common shares at $10.00 per share. 6 GREAT LAKES POWER INC. The convertible debentures mature September 2013 and interest and principal may be paid by the company in the form of its common shares. The debentures are therefore included as part of the company's capital base. On a fully diluted basis, there would be 126.1 million common shares outstanding. The composition of the company's capital base at December 31, 2001 and 2000 is summarized in the following table: - -------------------------------------------------------------------- millions, except number of shares 2001 2000 - -------------------------------------------------------------------- Subordinated convertible debentures $ 247.7 $ 247.7 Common shares 1,050.9 1,001.3 - -------------------------------------------------------------------- $1,298.6 $ 1,249.0 ==================================================================== Number of common shares Currently issued 101,383,135 101,393,934 Convertible debentures 24,766,754 24,769,030 - -------------------------------------------------------------------- Fully diluted 126,149,889 126,162,964 ==================================================================== Regular dividends paid on the company's common shares in both 2001 and 2000 amounted to $64.9 million, representing an earnings payout ratio of 50%. The regular quarterly dividend per common share paid in both 2001 and 2000 was $0.16. The company's policy is to distribute surplus operating cash flows not required for investment in power generating facilities to its common shareholders in the form of regular quarterly and special dividend payments. NEW DEVELOPMENTS In November 2000, Great Lakes announced a $500 million capital investment program with the stated objective of doubling the operating earnings from its power business over the next five years. The company has already made two acquisitions under this program through the Great Lakes Hydro Income Fund: a 50% interest in the 82 MW Powell River Energy hydroelectric facilities in British Columbia in February 2001, and the 126 MW Great Northern Energy hydroelectric system in Maine in February 2002. These operations are described on page 4 of this report. The company also has a number of new developments under way which will add a further 134 MW to its generating capacity and enhance its ability to sell its power generation in interconnected energy markets. The following is a summary of these projects. High Falls, Ontario In May 2001, construction started on the 45 MW High Falls generating facility on the Michipicoten River near Wawa, Ontario. This will replace the existing 27 MW plant with a larger, more efficient station with increased peak-period generating capability. This project has an expected cost of $75 million and is expected to be in service by December 2002. Sault Ste. Marie, Ontario/Michigan Permitting and preliminary engineering are under way for the construction of a high voltage transmission interconnection to link the company's Ontario power system at Sault Ste. Marie, Ontario, with the neighbouring power grid at Sault Ste. Marie, Michigan. This interconnection will have a capacity of up to 300 MW at 230 Kilovolts and is expected to enhance the company's ability to access US energy markets to maximize the value of its power generation. Pingston Creek, British Columbia During 2000, the company entered into a 50/50 joint venture with Canadian Hydro Developers Inc. to proceed with the development of the 30 MW Pingston Creek hydroelectric power station near Revelstoke in central British Columbia. Construction started on this project in March 2001 and completion is now expected in late 2002 at a total cost of approximately $47 million. Brascan Energetica, Southern Brazil Through Brascan Energetica S.A. ("BESA"), a wholly owned subsidiary of Brascan, the company is developing a number of smaller hydroelectric stations in Brazil. Four hydroelectric generating projects with a total of 86 MW of capacity have already been approved by the Brazilian regulatory agency, ANEEL. Two of these are currently under construction: Passo do Maio, a 30 MW station in the State of Rio Grande do Sul; and Pedrinho, a 16 MW station in the State of Parana. Site development has begun at Salto Natal, a 15 MW station also in Parana, and will commence during the second quarter at Sitio Grande, a 25 MW station in the State of Bahia. In addition to these four approved projects, BESA has submitted six further projects containing 148 MW to ANEEL for authorization, and is studying another five projects for possible submission to ANEEL. BUSINESS ENVIRONMENT AND RISKS Operating income from hydroelectric power generation fluctuates mainly in relation to the availability of water in the company's river systems. In the case of Great Lakes Power Limited, lower than average water inflows can reduce stored water levels. This can reduce the level of internal power generation, which increases the need for more expensive external power purchases, resulting in lower earnings. The largest industrial customer of GLPL accounts for approximately 12% of the company's revenues. Should demand from this customer be temporarily interrupted, the immediate effect on the company's revenues would be largely offset by a reduction in purchases of higher-priced power and the sale of any surplus power to the Ontario, Quebec and neighbouring power grids at market prices for electricity at any given time. In the event of a lengthy shutdown of the company's largest customers, any surplus power could be sold on a basis MANAGEMENT'S DISCUSSION AND ANALYSIS 7 which recognized the higher value of firm power, since this power could be scheduled and integrated into an overall generation plan. While changes in the level of precipitation impact the power generation of the company's individual operations, the fact that it has hydroelectric stations in several different watershed areas in Canada and the United States helps it balance the financial impact of these fluctuations. Risk is also reduced through the existence of long-term power sale contracts with major utility customers. Investment income from a portion of the company's preferred shareholdings varies only with the amount invested, as the rate of return is generally fixed. Other investment income is sensitive to interest rate changes; however, a similar offsetting sensitivity exists with a portion of the company's debt. OPERATING STRATEGY The company's primary goals are to increase earnings and cash flow and to distribute surplus operating cash flow, not otherwise required for investment, to shareholders as dividends. The company is committed to expanding its power generating business by enhancing and expanding its power production base. To achieve this objective, the company has four strategic priorities: (1) continued access to interconnected electricity markets in the United States through the company's existing transmission interconnections between Ontario and Quebec, and other planned and proposed inter-connections with adjacent markets in the United States; (2) expansion of its production base through the acquisition of existing generating assets and development of greenfield sites; (3) application of the expertise and market intelligence provided by its energy marketing operations to support its growth strategy and increase returns on capital; and (4) continued implementation of technology improvements to increase the efficiency and capacity of its generating facilities. Regulatory changes now under way in the electricity industry in both North and South America are expected to provide new opportunities for the company's services. Continued economic growth should also, over time, help expand the market for the company's power and provide opportunities for investment in new power generating facilities. FORWARD-LOOKING STATEMENTS The company's financial analysis and review contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include general economic conditions, weather conditions, interest rates, availability of equity and debt financing and other risks. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 8 GREAT LAKES POWER INC. CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT RESPONSIBILITY To the Shareholders The attached financial statements and other financial information have been prepared by the company's management which is responsible for their integrity and objectivity. To fulfill this responsibility, the company maintains systems of internal control and policies and procedures to ensure that its reporting practices and accounting and administrative procedures are of high quality, consistent with reasonable costs. These policies and procedures are designed to provide relevant and reliable financial information. These statements have been prepared in conformity with Canadian generally accepted accounting principles and, where appropriate, reflect estimates based on judgments of management. Financial information presented elsewhere in this Annual Report is consistent with that shown in the accompanying consolidated financial statements. Deloitte & Touche LLP, the independent auditors appointed by the shareholders, have examined the financial statements of the company in accordance with Canadian generally accepted auditing standards to enable them to express to the shareholders their opinion on the financial statements. Their report as auditors is set out below. These statements have been further examined by the Board of Directors and by its Audit Committee, which meets with the auditors and management to review the activities of each and reports to the Board of Directors. The auditors have full access to the Audit Committee and meet with the committee both with and without the presence of management. The Board of Directors, through its Audit Committee, oversees management's financial reporting responsibilities and is responsible for reviewing and approving the financial statements. [SIGNATURE] Craig J. Laurie Vice-President and Chief Financial Officer February 1, 2002 AUDITORS' REPORT To the Shareholders of Great Lakes Power Inc. We have audited the consolidated balance sheets of Great Lakes Power Inc. as at December 31, 2001 and 2000 and the consolidated statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2001 and 2000 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. [SIGNATURE] Deloitte & Touche LLP Toronto, Canada February 1, 2002 CONSOLIDATED FINANCIAL STATEMENTS 9 CONSOLIDATED BALANCE SHEET December 31 - ------------------------------------------------------------------------------ millions note 2001 2000 - ------------------------------------------------------------------------------ Assets Securities $ 715.6 $ 667.3 Loans and other receivables 3 425.0 325.5 Long-term investments 4 521.8 536.2 Property, plant and equipment 5 1,267.6 1,113.4 - ------------------------------------------------------------------------------ $ 2,930.0 $ 2,642.4 ============================================================================= Liabilities Accounts payable and other $ 91.9 $ 82.7 Mortgage bonds 7 555.6 443.5 Term debentures 8 596.2 558.8 Future income tax liability 9 116.4 104.4 Minority interests 10 271.3 204.0 Shareholders' equity 11 1,298.6 1,249.0 - ------------------------------------------------------------------------------ $ 2,930.0 $ 2,642.4 ============================================================================== Approved by the Board: [SIGNATURE] [SIGNATURE] Sidney A. Lindsay Edward C. Kress Director Director 10 GREAT LAKES POWER INC. CONSOLIDATED STATEMENT OF INCOME Years ended December 31 - ------------------------------------------------------------------------------------------ millions, except per share amounts note 2001 2000 - ------------------------------------------------------------------------------------------ Revenue Power operations $ 269.9 $246.4 Long-term investments 45.6 48.0 Investment and other income 12 58.9 66.2 - ------------------------------------------------------------------------------------------ 374.4 360.6 - ------------------------------------------------------------------------------------------ Expenses Interest 82.1 83.1 Power and fuel purchases 75.6 70.2 Operating costs 37.2 32.3 Depreciation 27.4 24.8 Minority interests 11.7 15.1 Income and other taxes 9 9.5 19.6 - ------------------------------------------------------------------------------------------ 243.5 245.1 - ------------------------------------------------------------------------------------------ Net income $ 130.9 $115.5 ========================================================================================== Fully diluted net income per common share 12 $ 1.04 $0.92 ========================================================================================== CONSOLIDATED STATEMENT OF RETAINED EARNINGS Years ended December 31 - ----------------------------------------------------------------------- millions 2001 2000 - ----------------------------------------------------------------------- Retained earnings Balance, beginning of year $397.8 $364.8 Net income 130.9 115.5 Convertible debenture interest (16.1) (17.6) Common share dividends (64.9) (64.9) - ----------------------------------------------------------------------- Balance, end of year $447.7 $397.8 ======================================================================= CONSOLIDATED FINANCIAL STATEMENTS 11 CONSOLIDATED STATEMENT OF CASH FLOWS Years ended December 31 - ------------------------------------------------------------------------ millions note 2001 2000 - ------------------------------------------------------------------------ Cash provided from operations 12 $ 136.3 $ 129.6 Net change in non-cash working capital (1.6) 21.4 - ------------------------------------------------------------------------ Cash provided by operating activities 134.7 151.0 - ------------------------------------------------------------------------ Financing and shareholder distributions Borrowings 165.3 -- Debt repayments (110.3) (6.9) Convertible debenture interest (16.1) (17.6) Common share dividends (64.9) (64.9) - ------------------------------------------------------------------------ (26.0) (89.4) - ------------------------------------------------------------------------ Investing Securities purchases (76.3) (50.0) Securities sales 36.0 41.3 Loans and other receivables (35.5) 11.4 Property, plant and equipment (41.3) (51.8) - ------------------------------------------------------------------------ (117.1) (49.1) - ------------------------------------------------------------------------ Cash and cash equivalents Increase (decrease) (8.4) 12.5 Balance, beginning of year 18.7 6.2 - ------------------------------------------------------------------------ Balance, end of year $ 10.3 $ 18.7 ======================================================================== 12 GREAT LAKES POWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES Business Operations The company is incorporated under the laws of Ontario and develops, owns and operates hydroelectric and other power generating facilities principally in Canada. The company also conducts investment activities, which include the receipt of interest and dividends on the company's financial assets as well as gains realized on investment transactions. Principles of Consolidation The consolidated financial statements include: (i) the accounts of all subsidiaries and other controlled entities of Great Lakes Power Inc. (the "company") including Great Lakes Power Limited, Great Lakes Hydro Income Fund, Valerie Falls Power, Pontiac Power and Highvale Power; and (ii) the accounts of incorporated and unincorporated joint ventures and partnerships to the extent of the company's proportionate interest in their respective assets, liabilities, revenue and expenses, including the company's investment in Lake Superior Power and Powell River Energy. The company owns a 75% (2000 - 75%) residual interest in Louisiana HydroElectric Power, which is equity accounted. Investments Partly owned businesses, where the company is able to exercise significant influence, are carried on the equity method. Interests in jointly controlled entities are proportionately consolidated. Other long-term investments are carried at the lower of cost and net realizable value. The excess of acquisition costs over net book values of the company's investments is amortized over their estimated useful lives. The company evaluates the carrying value of this excess for potential impairment on an ongoing basis. Management assesses the recoverability of this excess based on a review of the expected future operating income and cash flows of these investments on an undiscounted basis. Revenue and Expense Recognition Revenue from the sale of electricity and steam is recorded based upon output delivered and capacity provided at rates as specified under contract terms or prevailing market rates. Electricity sales revenue is recognized when power is provided. Investment income is recorded on the accrual basis, less a provision for uncollectible interest, fees, commissions or other amounts. The company is rate regulated and maintains hydrological provisions and insurance which adjust for the effect of variations in streamflow when measured against long-term averages. Securities Securities are carried at the lower of cost and estimated realizable value with any adjustment required charged against investment income. Loans Receivable Loans receivable are carried at the lower of cost and estimated realizable value with any provision for estimated losses, legal and other collection costs charged against investment income. Financing Costs Expenses related to the issuance of debt are amortized over the term of the debt. Expenses related to the issuance of the company's shares are charged to retained earnings. Interest on funds used in construction and on development projects is capitalized. Statement of Cash Flows Cash and cash equivalents are included in the securities line on the balance sheet. Interest and income and other tax expense recorded under the accrual method of accounting approximate the cash amounts paid. Income Taxes The company uses the liability method in accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and measured using the enacted, or substantively enacted, tax rates and laws that will be in effect when the differences are expected to reverse, taking into account prudent tax strategies. Foreign Exchange Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the weighted average rate for the year. CONSOLIDATED FINANCIAL STATEMENTS 13 Derivative Financial Instruments The company, principally through wholly owned Brascan Energy Marketing Inc., uses derivative financial instruments, where appropriate, to manage commodity price risk associated with the company's production, operating and risk management activities. Gains and losses resulting from these instruments are included in income on the same basis as the asset, liability or contract being hedged. Non-hedging activity is subject to policy limits with any gains or losses recorded in investment and other income on a fair value basis. Use of 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. Actual results could differ from those estimates. Comparative Figures Certain of the prior year's figures have been reclassified to conform with the 2001 presentation. These comparatives reflect the consolidation of the Great Lakes Hydro Income Fund. 2. ACQUISITIONS Powell River Energy In February 2001, the Great Lakes Hydro Income Fund (the "Fund") acquired a 50% indirect interest in the Powell River Energy hydroelectric power generation and transmission facilities in southwestern British Columbia ("Powell River Energy"). These acquisitions were accounted for under the purchase method of accounting. The net assets acquired as a result of the acquisition and the consideration given are as follows: - ------------------------------------------------ millions 2001 - ------------------------------------------------ Assets acquired Property, plant and equipment $ 74.7 Liabilities assumed Future income tax liability 18.2 - ------------------------------------------------ Net assets acquired $ 56.5 ================================================ Consideration paid $ 56.5 ================================================ 3. LOANS AND OTHER RECEIVABLES - -------------------------------------------------- millions 2001 2000 - -------------------------------------------------- Demand deposits $ 189.6 $ 124.5 Project financing receivables 89.4 83.8 Coal royalty receivables 69.5 66.9 Trade receivables 29.0 33.8 Prepaid interest and other 47.5 16.5 - -------------------------------------------------- $ 425.0 $ 325.5 ================================================== 4. LONG-TERM INVESTMENTS Long-term investments include the company's direct and indirect interests in Trilon Financial Corporation ("Trilon"), Noranda Inc. ("Noranda"), Brascan Corporation ("Brascan") and First Toronto Investments Limited ("First Toronto"). The book values of the company's long-term investments and the underlying securities at December 31, 2001 compared to 2000 are as follows: - -------------------------------------------------------- millions 2001 2000 - -------------------------------------------------------- Trilon Financial Corporation $ 195.3 $ 195.3 Noranda Inc. 145.8 150.0 Brascan Corporation 112.0 112.0 Other investments 68.7 78.9 - -------------------------------------------------------- $ 521.8 $ 536.2 ======================================================== Great Lakes holds a senior preferred share investment in Trilon Holdings Inc. which, together with Brascan, owned 65% of the common shares of Trilon at December 31, 2000. This interest increased to 71% on January 16, 2001 following Trilon's repurchase of 14.5 million of its common shares. Great Lakes holds a senior preferred share investment in Noranda Equities Inc. which, together with Brascan, owns 40% of the common shares of Noranda. Great Lakes owns a $112.0 million senior preferred share investment issued by a wholly owned subsidiary of Brascan. Other investments include primarily the company's shares of First Toronto, a Brascan subsidiary which participates in the secondary market for equity securities of Canadian corporations, primarily companies affiliated with Brascan. 14 GREAT LAKES POWER INC. 5. PROPERTY, PLANT AND EQUIPMENT - -------------------------------------------------------- millions 2001 2000 - -------------------------------------------------------- Generation $ 1,160.6 $ 1,048.5 Transmission 207.1 201.4 Distribution 64.5 49.1 Other 98.9 47.7 - -------------------------------------------------------- 1,531.1 1,346.7 Accumulated depreciation and amortization 263.5 233.3 - -------------------------------------------------------- $ 1,267.6 $ 1,113.4 ======================================================== Property, plant and equipment includes the cost of the company's 12 hydroelectric generating stations in northern Ontario and two Pontiac Power hydroelectric generating stations in Quebec; the cost of the three Maclaren Power hydroelectric generating stations and the 50% share of the two Powell River Energy hydroelectric generating stations, owned through the Great Lakes Hydro Income Fund; the cost of the Valerie Falls Power hydroelectric generating station; the company's 75% residual interest in Louisiana HydroElectric Power's hydroelectric generating station and sediment control works; the company's 50% share of the cost of the Lake Superior Power cogeneration plant; and the cost of the company's Highvale Power coal assets. Depreciation is based on the service lives of the assets which are 60 years for hydroelectric generation, 20 years for cogeneration and 40 years for transmission, distribution and other. The company's hydroelectric power facilities operate under various agreements for water rights which extend to or are renewable over terms through the year 2022 for Great Lakes Power Limited, 2044 for Valerie Falls Power, 2019 and 2020 for Pontiac Power, 2019 for Maclaren Power and 2031 for Louisiana HydroElectric Power. Substantially all of the water rights for Powell River Energy are perpetual. 6. JOINT VENTURES The following amounts represent the company's proportionate interest in incorporated and unincorporated joint ventures reflected in the company's accounts: - ---------------------------------------------------------- millions 2001 2000 - ---------------------------------------------------------- Assets $ 125 $ 49 Liabilities 84 23 Operating revenues 46 31 Operating expenses 31 19 Net income 10 7 Cash flows from operating activities 16 9 Cash flows from investing activities (60) (2) Cash flows from financing activities 37 (9) ========================================================== 7. MORTGAGE BONDS - ----------------------------------------------------- millions 2001 2000 - ----------------------------------------------------- Great Lakes Power Limited First Mortgage Bonds Series 4 (US $105.0) $ 167.0 $ 156.4 Series 5 (2000 - Series 3) 150.0 95.0 - ----------------------------------------------------- 317.0 251.4 Great Lakes Power Trust Credit Agreements 15.3 -- First Mortgage Bonds Series 1 50.0 50.0 Series 2 25.0 25.0 Series 3 25.0 25.0 - ----------------------------------------------------- 115.3 100.0 Other Power Operations Project mortgages Pontiac Power 63.3 64.5 Valerie Falls Power -- 9.9 Powell River Energy 46.5 -- Lake Superior Power 13.5 17.7 - ----------------------------------------------------- $ 555.6 $ 443.5 ===================================================== The US$105 million First Mortgage Bonds Series 4 bear interest at the rate of 6.57%, are due on June 16, 2003 and are secured by a charge on the company's wholly owned power generating assets in northern Ontario. The $150 million First Mortgage Bonds Series 5 bear interest at the rate of 4.58%, are due on June 16, 2003 and are secured by a charge on the company's wholly owned power generating assets in northern Ontario. Through the use of an interest rate swap, the company pays interest at a rate which varies with the Banker's Acceptance ("B.A.") rate. These bonds replaced the $95 million First Mortgage Bonds Series 3 bearing interest at a rate of 6.69%, which matured December 31, 2001. The Great Lakes Hydro Income Fund First Mortgage Bonds Series 1, 2 and 3 bear interest at 7.33%, 7.55% and 7.78%, respectively; and are due April 24, 2005, April 24, 2010 and April 24, 2015, respectively. These Mortgage Bonds are secured by charges on all present and future real and personal property of Great Lakes Power Trust, which is wholly owned by the Fund. The Pontiac Power project mortgages bear interest at a blended rate of 10.52%, amortize monthly to December 1, 2020 and are secured by charges on the respective Pontiac Power generating assets. The company's proportionate share of the Powell River Energy project mortgages of $35.0 million and $11.5 million bear interest at B.A. + 1.25% and B.A. + 3.5% respectively, are due May 2002 and are CONSOLIDATED FINANCIAL STATEMENTS 15 secured by a charge on the respective Powell River Energy operating assets. The Lake Superior Power project mortgage bears interest at 9.41%, amortizes annually to December 29, 2006 and is secured by a charge on the company's Lake Superior Power cogeneration assets. The company has established a US$100 million loan facility with Brascan, its principal shareholder, which can be drawn down at any time, bearing interest at the prime rate and secured by the company's residual interest in Louisiana HydroElectric Power. At either party's option, the facility may be drawn down and converted into a fixed-rate financing at 9.75% repayable in 2015. Principal repayments on the company's outstanding mortgage bonds due over the next five years and thereafter are as follows: - --------------------------------------------- millions Annual Repayments - --------------------------------------------- 2002 $ 67.6 2003 322.3 2004 5.0 2005 54.6 2006 3.8 Thereafter 102.3 - --------------------------------------------- $555.6 ============================================= 8. TERM DEBENTURES - --------------------------------------------------------- millions 2001 2000 - --------------------------------------------------------- Corporate debentures Series 1 (US$175.0) $ 278.2 $260.8 Series 3 (US$200.0) 318.0 298.0 - --------------------------------------------------------- $ 596.2 $558.8 ========================================================= The Series 1 debentures bear interest at the rate of 9.0% and are due in August 2004. The Series 3 debentures bear interest at 8.3% and are due March 2005. Through the use of an interest rate swap, the company pays interest at a rate which varies with the LIBOR rate. 9. FUTURE INCOME TAX LIABILITY The difference between the statutory rate and the effective rate of tax is attributable to the company's dividend income and equity earnings being taxed prior to receipt by the company. The company's future income tax liability of $116.4 million (2000 - $104.4 million) is comprised principally of temporary differences relating to property, plant and equipment. This amount is net of a future tax asset of $21 million (2000 - $25 million) relating to unused non-capital losses. 10. MINORITY INTERESTS Minority interests include preferred shares, limited partnership interests and trust units owned by minority shareholders in the company's consolidated subsidiaries, as follows: - --------------------------------------------------- millions 2001 2000 - --------------------------------------------------- Preferred shares issued by consolidated subsidiaries $ 90.1 $ 90.1 Limited partnership interests of consolidated subsidiaries 4.2 3.5 Trust units issued by consolidated subsidiaries 177.0 110.4 - --------------------------------------------------- $271.3 $204.0 =================================================== 11. SHAREHOLDERS' EQUITY The company is authorized to issue an unlimited amount of common shares, of which the following were issued and outstanding: - -------------------------------------------------------------- millions 2001 2000 - -------------------------------------------------------------- 101,383,135 (2000 - 101,393,934) Common shares $ 603.2 $ 603.5 Retained earnings 447.7 397.8 - -------------------------------------------------------------- 1,050.9 1,001.3 Subordinated convertible debentures 247.7 247.7 - -------------------------------------------------------------- $ 1,298.6 $ 1,249.0 ============================================================== The subordinated convertible debentures mature September 30, 2013, bear interest at the prime rate subject to a minimum of 6% and a maximum of 8%, and are convertible at $10.00 per common share into 24.8 million common shares. Principal and interest are payable at the company's option with cash. The company is authorized to issue an unlimited amount of preferred shares, none of which are currently outstanding. 12. OTHER INFORMATION - ----------------------------------------------------------------- millions, except per share amounts 2001 2000 - ----------------------------------------------------------------- Average fully diluted common shares outstanding 126.2 126.2 Basic earnings per share $ 1.13 $ 0.97 - ----------------------------------------------------------------- Cash provided from operations Net income $ 130.9 $ 115.5 Add non-cash items Depreciation 27.4 24.8 Hydrological provisions (17.1) (31.1) Unremitted equity (income) loss and other (4.9) 20.4 - ----------------------------------------------------------------- $ 136.3 $ 129.6 ================================================================= 16 GREAT LAKES POWER INC. The fair value of the company's securities and loans and other receivables approximates their carrying values at December 31, 2001 and 2000 based on expected future cash flows from these assets, discounted at market rates for assets with similar terms and investment risks. The fair value of the company's mortgage bonds and term debentures is $1,165.5 million (2000 - $1,013.7 million) based on current market prices for debt with similar terms and risks. All financial and investment transactions with affiliated companies are at normal market terms. Affiliated companies include Brascan and its subsidiaries and equity accounted investees. At December 31, 2001, the carrying value of securities and deposits with affiliated companies amounted to $660.3 million and $189.6 million, respectively (2000 - $603.6 million and $124.5 million). In 2001, income from securities and loans with affiliated companies amounted to $47.5 million (2000 - $56.7 million). The company's two largest customers accounted for 12% and 10%, respectively, of total revenues in 2001 (2000 - 12% and 11%, respectively). During 2001, $7.0 million of hydrological provisions (2000 - $5.1 million) were applied against power purchase costs and $10.1 million (2000 - $26.0 million) were included in revenue from power operations. At December 31, 2001, hydrological provisions totalled $3.0 million (2000 - $20.1 million). The company endeavours to maintain a matched book of currencies and interest-sensitive assets and liabilities. However, unmatched positions are carried, on occasion, within pre-determined exposure limits based on expectations for interest rates and currencies. These limits are reviewed on a regular basis and the company believes the exposures are manageable and not material in relation to its overall business operations. 13. COMMITMENTS AND CONTINGENCIES The company has entered into a power agency and guarantee agreement with the Great Lakes Power Trust (the "Trust"), in which the company has a 50% indirect interest, for a term of 20 years. This agreement requires the company to fund any deficiency amount between a guaranteed price for energy and the actual energy revenues earned by the Trust. The company is entitled to receive any revenues in excess of the guaranteed amount. The cumulative net surplus (deficiency) amount in 2001 was $0.2 million (2000 - ($0.3) million). In addition, the company agreed to provide to the Trust a hydrology credit facility in the amount of $15 million for a period of 15 years, which is not to be drawn in excess of $5 million per year. The facility bears interest at market rates. 14. DERIVATIVE FINANCIAL INSTRUMENTS The company has entered into energy derivative contracts primarily to hedge its production and ultimate sale of generated power. - -------------------------------------------------------------------------- Effective Effective Range of Notional Rates Notional Rates Maturity Buy Range Sell Range - -------------------------------------------------------------------------- Electricity 1 month 528 $39-$43 895 $26-$83 - 4 years GWh GWh - -------------------------------------------------------------------------- As at December 31, 2001, the contracts had a fair value determined based on quoted market rates of $29.6 million. The fair value of contracts with a positive mark-to-market was $31.1 million, which represents counterparty credit risks. The company manages credit risks by entering into contracts with highly rated counterparties. The company also maintained interest rate swap contracts having a total notional amount of $468 million (2000 - $298 million). These interest rate swap contracts were comprised of contracts with a favourable replacement value of $26 million (2000 - $9 million). The interest rate swap transactions include both fixed and variable rate instruments, the net effect of which does not materially affect the interest rate profile of the company. These contracts have maturities varying from one to four years. 15. SUBSEQUENT EVENT On February 1, 2002, the Great Lakes Hydro Income Fund completed the acquisition of Great Northern Energy, comprising six hydroelectric generating stations and related transmission facilities in the State of Maine for cash consideration of US$156.5 million. CONSOLIDATED FINANCIAL STATEMENTS 17 POWER STATION STATISTICS - -------------------------------------------------------------------------------------------------------------------- POWER GENERATING STATIONS Ownership ----------------------------------------------------------------- Operation Interest Location Name Type - -------------------------------------------------------------------------------------------------------------------- GREAT LAKES POWER LIMITED 100% St. Mary's River, Francis H. Clergue Hydroelectric Ontario Michipicoten River, Scott Falls Hydroelectric Ontario High Falls Hydroelectric McPhail Hydroelectric Hollingsworth Hydroelectric Montreal River, Andrews Hydroelectric Ontario Hogg Hydroelectric Gartshore Hydroelectric MacKay Hydroelectric Magpie River, Ontario Mission Falls Hydroelectric Harris Hydroelectric Steephill Falls Hydroelectric MACLAREN POWER 100%(1) Lievre River, Quebec Masson Hydroelectric Dufferin Hydroelectric High Falls Hydroelectric POWELL RIVER ENERGY 50%(1) Powell River, British Powell River Hydroelectric Columbia Lois Lake Hydroelectric GREAT NORTHERN ENERGY(2) 100%(1) Penobscot River, Maine Weldon Hydroelectric West Branch, East Millinocket Hydroelectric Penobscot River, Maine Dolby Hydroelectric Millinocket Hydroelectric North Twin Hydroelectric McKay Hydroelectric LAKE SUPERIOR POWER 50% Sault Ste. Marie, Lake Superior Power Natural gas-fired Ontario cogeneration VALERIE FALLS POWER 65% Seine River, Ontario Valerie Falls Hydroelectric PONTIAC POWER 100% Coulonge River, Quebec Coulonge Hydroelectric Noire River, Quebec Waltham Hydroelectric LOUISIANA HYDROELECTRIC 75%(3) Mississippi River and Sidney A. Murray, Jr. Hydroelectric POWER Red River, Louisiana and sediment control - -------------------------------------------------------------------------------------------------------------------- (1) Held through the 50% owned Great Lakes Hydro Income Fund (2) Acquisition closed February 1, 2002 (3) Residual ownership interest G L O S S A R Y Average Annual Energy: the total energy generated annually by a power station, averaged over its years of full operation up to a maximum of ten years, measured in gigawatt hours ("GWh"). Average Inflow: the average water flow available for power generation, measured in cubic feet per second ("cfs"). Bulb Turbine: a hydraulic turbine normally of a Kaplan type, with a shaft mounted horizontally in the water passage driving a generator located in a bulb surrounded by water. Typically used for high inflow, low head applications. Capacity Factor: the average utilization of a power station's current installed capacity over an average year since full operation up to a maximum of ten years, expressed as a percentage. Cogeneration: the ability to generate at the same time electricity and thermal energy heat, usually in the form of steam. Francis Turbine: a vertically mounted hydraulic turbine with fixed blades. Typically used in medium to high head applications where water levels do not fluctuate significantly. Gigawatt Hour: one gigawatt hour equals one million kilowatt hours. A kilowatt hour is equivalent to the energy consumed by a 100 watt light bulb burning for 10 hours. 18 GREAT LAKES POWER INC. - ----------------------------------------------------------------------------------------------------------------------- OPERATING STATISTICS ------------------------------------------------------------------------------------ Installed Average Operating Capacity Average Operation Capacity Storage Inflow Head Factor Annual Energy (MW) (cfs days) (cfs) (ft.) (%) (GWh) - ----------------------------------------------------------------------------------------------------------------------- GREAT LAKES POWER LIMITED 52.2 - 35,926 19 83 378 22.5 1,130 2,436 75 48 95 27.0 559 2,402 148 70 166 12.8 5,705 2,363 47 49 55 23.2 220,083 1,966 114 50 102 46.9 500 1,487 185 37 154 18.5 3,145 1,477 77 38 62 23.0 12,670 1,472 114 46 92 62.0 174,597 1,461 249 33 178 15.0 35 1,058 117 45 59 12.5 212 1,055 97 44 48 15.5 70,807 906 136 41 56 MACLAREN POWER 105.0 - 5,779 184 70 633 38.0 - 5,754 59 60 195 95.0 544,811 5,445 180 68 565 46.0 292,450 3,321 285 79 318 POWELL RIVER ENERGY 36.0 139,903 920 440 70 222 18.1 - 6,386 39 68 101 GREAT NORTHERN ENERGY(2) 6.9 - 4,149 25 59 34 20.9 - 4,149 49 53 101 36.1 - 3,668 110 62 190 7.0 196,000 3,668 28 77 49 37.5 451,000 2,793 182 70 230 110.0 NA NA NA 87 844 LAKE SUPERIOR POWER 10.0 127,132 1,400 67 60 44 VALERIE FALLS POWER 17.0 97,000 2,590 145 87 118 PONTIAC POWER 11.0 92,300 1,305 136 82 71 LOUISIANA HYDROELECTRIC 192.0 - 102,000 6 to 20 56 932 POWER - ----------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------ PLANT EQUIPMENT DATA ------------------------------------------------------ Number Unit Operation of Units Capacity Unit Type Speed (MW) (rpm) - -------------------------------------------------------------------------------------------- GREAT LAKES POWER LIMITED 3 17.4 Bulb 64 1 10.8 Kaplan 225 1 11.7 Mixed-flow 225 2 8.5 Francis 240 1 10.0 Francis 240 2 5.9/6.9 Kaplan 200 1 23.2 Kaplan 200 2 9.2 Francis 257 1 28.5 Francis 257 1 18.5 Kaplan 200 1 23.0 Kaplan 240 2 14.2 Francis 277 1 33.6 Francis 240 1 15.0 Kaplan 257 1 12.5 Kaplan 257 1 15.5 Kaplan 257 MACLAREN POWER 4 26.0 Francis 164 2 19.0 Kaplan 164 1 26.0 Francis 180 3 23.0 Francis 180 5 23.0/26.0 Francis 180 POWELL RIVER ENERGY 2 18.0 Francis 333/400 4 4.4/4.7 Kaplan 171 GREAT NORTHERN ENERGY(2) 6 1.15 Francis 240 7 1.3-5.3 Francis/Incline 171-267 8 3.9/5.1/5.2 Francis 240 3 2.3/2.4 Kaplan 240 3 12.2/13.2 Francis 257 2 42.0 Gas turbine NA LAKE SUPERIOR POWER 1 26.0 Steam turbine NA 2 5.0 Kaplan 300 VALERIE FALLS POWER 2 8.5 Francis 400 PONTIAC POWER 3 1.5-2.9 Francis 360-514 2 2.5 Francis 400 LOUISIANA HYDROELECTRIC 8 24.0 Bulb 600 POWER - -------------------------------------------------------------------------------------------- * Includes storage on upstream lakes and reservoirs Installed Capacity: the measure of a power station's electric generating capacity at full production, measured in megawatts ("MW"). Kaplan Turbine: a vertically or horizontally mounted hydraulic turbine which utilizes movable blades to optimize electricity generation. Typically used in variable, medium to low head applications. Megawatt: one megawatt equals one thousand kilowatts. A kilowatt is the electrical energy required to turn on ten 100 watt light bulbs and is equivalent to 1.34 horsepower. Mixed-flow Turbine: A fixed-blade turbine that combines the characteristics of a Francis turbine and a propellor turbine, to give high power output over a relatively narrow range of flow. Operating Head: the vertical distance that water drops to the tailrace to generate hydroelectric power, measured in feet. Power Generation: the power generated by a station after deducting station usage, expressed in gigawatt hours. Storage: the temporary holding capacity available to store water for later use in electricity generation, measured in cubic feet per second days ("cfs days"). POWER STATION STATISTICS 19 TEN YEAR REVIEW 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------- FINANCIAL RESULTS* - ----------------------------------------------------------------------------------------- millions, except per share amounts Gross revenues $ 374.4 $ 360.6 $ 286.3 $ 292.0 $ 291.7 Power revenues 269.9 246.4 187.7 190.9 186.8 Net income 130.9 115.5 113.1 104.5 122.1 Common share dividends 64.9 64.9 64.9 64.9 64.9 Assets 2,930.0 2,642.4 2,405.2 2,255.5 2,236.1 Capital base 1,298.6 1,249.0 1,216.0 1,183.7 1,160.6 - ----------------------------------------------------------------------------------------- Per Common Share(1) Book value - Basic $ 10.37 $ 9.87 $ 9.55 $ 9.23 $ 9.00 Net income - Fully diluted 1.04 0.92 0.90 0.83 0.97 Dividends 0.64 0.64 0.64 0.64 0.64 - ----------------------------------------------------------------------------------------- OPERATING RESULTS - ----------------------------------------------------------------------------------------- Total Company Installed capacity (MW) 1,117(2) 905 899 653 642 Electricity generation (GWh) 4,768 4,581 3,604 3,045 3,608 Electricity sales (GWh) 5,729 5,519 4,410 4,411 4,391 - ----------------------------------------------------------------------------------------- Great Lakes Power Limited Installed capacity (MW) 331 327 321 313 302 Electricity generation (GWh) 1,300 1,369 1,503 969 1,484 Electricity sales (GWh) 2,277 2,309 2,341 2,378 2,313 Internal power generation (%) 54.7 56.5 61.8 39.6 61.4 - ----------------------------------------------------------------------------------------- Maclaren Power(3) Installed capacity (MW) 238 238 238 -- -- Electricity generation (GWh) 1,224 1,554 1,452 -- -- Electricity sales (GWh) 1,233 1,573 1,492 -- -- - ----------------------------------------------------------------------------------------- Powell River Energy(4) Installed capacity (MW) 82 -- -- -- -- Electricity generation & sales (GWh) 363 -- -- -- -- - ----------------------------------------------------------------------------------------- Lake Superior Power Installed capacity (MW) 110 110 110 110 110 Electricity generation & sales 881 852 843 820 840 (GWh)(5) - ----------------------------------------------------------------------------------------- Valerie Falls Power Installed capacity (MW) 10 10 10 10 10 Electricity generation & sales 51 51 51 16 45 (GWh) - ----------------------------------------------------------------------------------------- Pontiac Power(6) Installed capacity (MW) 28 28 28 28 28 Electricity generation (GWh) 194 217 205 166 193 Electricity sales (GWh) 192 214 202 164 189 - ----------------------------------------------------------------------------------------- Louisiana HydroElectric Power Installed capacity (MW) 192 192 192 192 192 Electricity generation (GWh) 755 538 810 1,074 1,046 Electricity sales (GWh) 732 520 780 1,033 1,004 - ------------------------------------------------------------------------------------------ 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------ FINANCIAL RESULTS* - ------------------------------------------------------------------------------------------ millions, except per share amounts Gross revenues $ 268.0 $ 256.7 $ 261.1 $ 235.6 $ 226.4 Power revenues 167.7 149.7 143.0 119.3 108.5 Net income 112.3 107.7 105.4 98.8 93.9 Common share dividends 61.2 60.2 56.4 295.0 43.7 Assets 2,347.3 2,109.9 2,001.1 1,918.6 2,100.1 Capital base 1,111.9 1,055.7 1,016.8 977.1 918.0 - ------------------------------------------------------------------------------------------ Per Common Share(1) Book value - Basic $ 8.52 $ 8.08 $ 7.69 $ 7.29 $ 9.18 Net income - Fully diluted 0.89 0.86 0.84 0.79 0.94 Dividends 0.61 0.60 0.57 2.96 0.44 - ------------------------------------------------------------------------------------------ OPERATING RESULTS - ------------------------------------------------------------------------------------------ Total Company Installed capacity (MW) 640 610 601 491 491 Electricity generation (GWh) 3,682 3,229 3,166 3,007 2,185 Electricity sales (GWh) 4,115 3,936 3,839 3,272 2,685 - ------------------------------------------------------------------------------------------ Great Lakes Power Limited Installed capacity (MW) 300 299 299 299 299 Electricity generation (GWh) 1,801 1,381 1,352 1,733 1,522 Electricity sales (GWh) 2,270 2,125 2,064 2,044 2,045 Internal power generation (%) 74.8 62.4 62.9 79.8 70.8 - ------------------------------------------------------------------------------------------ Maclaren Power(3) Installed capacity (MW) -- -- -- -- -- Electricity generation (GWh) -- -- -- -- -- Electricity sales (GWh) -- -- -- -- -- - ------------------------------------------------------------------------------------------ Powell River Energy(4) Installed capacity (MW) -- -- -- -- -- Electricity generation & sales -- -- -- -- -- (GWh) - ------------------------------------------------------------------------------------------ Lake Superior Power Installed capacity (MW) 110 110 110 -- -- Electricity generation & sales 849 847 819 30(7) -- (GWh)(5) - ------------------------------------------------------------------------------------------ Valerie Falls Power Installed capacity (MW) 10 9 -- -- -- Electricity generation & sales 58 39 13(7) -- -- (GWh) - ------------------------------------------------------------------------------------------ Pontiac Power(6) Installed capacity (MW) 28 -- -- -- -- Electricity generation (GWh) 197 -- -- -- -- Electricity sales (GWh) 197 -- -- -- -- - ------------------------------------------------------------------------------------------ Louisiana HydroElectric Power Installed capacity (MW) 192 192 192 192 192 Electricity generation (GWh) 974 962 982 1,244 663(7) Electricity sales (GWh) 938 925 943 1,198 640(7) - ------------------------------------------------------------------------------------------ * Certain financial results for 2000 have been restated to conform with the 2001 presentation. (1) All share and per share amounts prior to 1998 reflect the two-for-one stock split in March 1998. (2) Including 126 MW of capacity in Great Northern Energy acquired February 1, 2002. (3) Acquired November 1999. Only Maclaren Power's electricity generation and sales for last 43 days of 1999 are included in company totals for 1999. (4) Acquired February 2, 2001. Results for 2001 include 11 months since acquisition. (5) Includes electricity equivalents of contracted gas sales. (6) Acquired December 1996. Pontiac Power's electricity generation and sales in December 1996 are not included in company totals for that year. (7) Electricity generation and sales during part-year start-up periods. 20 GREAT LAKES POWER INC. DIRECTORS AND OFFICERS BOARD OF DIRECTORS John E. Bahen Robert A. Dunford Allen T. Lambert, O.C. Corporate Director Group Chairman Energy Group Chairman Operations Financial Services Brascan Corporation Brascan Corporation Alex G. Balogh Harry A. Goldgut Sidney A. Lindsay(1) Chairman Vice-Chairman and Chief President Falconbridge Limited Executive Officer of the Lindsay Consultants Corporation Jack L. Cockwella Edward C. Kress(1) George S. Taylor(1) Co-Chairman Chairman of the Corporate Director Brascan Corporation Corporation Ronald J. Daniels Dean, Faculty of Law University of Toronto (1) Member of Audit Committee CORPORATE OFFICERS Edward C. Kress Colin L. Clark Craig J. Laurie Chairman Senior Vice-President, Vice-President and Chief Generation Financial Officer Harry A. Goldgut Laurent Cusson Trevor D. Kerr Vice-Chairman and Senior Vice-President, Vice-President and Chief Executive Officer Marketing Treasurer Richard Legault Alan V. Dean Lisa W. F. Chu President and Vice-President and Controller Chief Operating Officer Secretary DIRECTORS AND OFFICERS 21 [GREAT LAKES POWER LOGO] Printed in Canada EXHIBIT 2 ----------------------------------------------------- [GREAT LAKES POWER LOGO] ANNUAL FILING OF REPORTING ISSUER (Form 28) ----------------------------------------------------- ANNUAL FILING OF REPORTING ISSUER (FORM 28) NAME OF REPORTING ISSUER Great Lakes Power Inc. (the "Corporation"). JURISDICTION UNDER WHICH INCORPORATED, ORGANIZED OR CONTINUED The Corporation was formed under the laws of Ontario by Articles of Amalgamation dated March 2, 2001 through the amalgamation of Great Lakes Power Inc., a public company continued in Ontario (the "Predecessor Company") and 1458103 Ontario Limited, a private subsidiary of Brascan Corporation ("Brascan"). FINANCIAL YEAR END December 31. VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES As of February 28, 2002, the Corporation had outstanding 101,383,135 fully paid and non-assessable Common Shares. Each holder of Common Shares, at a meeting of the Shareholders, is entitled to one vote for each Share. To the knowledge of the directors and officers of the Corporation, the only persons who or corporations which beneficially own, directly or indirectly, or exercise control or direction over Common Shares carrying more than 10% of the voting rights attached to shares of the Corporation, the approximate number of the shares so owned, controlled or directed by each, and the percentages of voting shares of the Corporation represented by such shares are: Approximate Percentage Name Number of Common Shares of Common Shares - ---- ----------------------- ---------------------- Brascan Corporation ("Brascan") 84,383,135 83.2% (including private subsidiaries) Toronto, Ontario GLP NT Corporation ("GLP NT") 17,000,000 16.8% (including private subsidiaries) Toronto, Ontario ANNUAL REPORTING ISSUER FORM 1 Brascan is a public company, which operates in the property, energy and financial services sectors, with other investments in the natural resource sector. Brascan's Class A Limited Voting Shares are listed on the Toronto, New York and Brussels stock exchanges. GLP NT is an investment holding company whose major asset is its indirect shareholding in the Corporation. Its Class A non-voting retractable shares are listed on The Toronto Stock Exchange. The Corporation is advised that Brascan and its affiliates own 74.5% of the Class A non-voting retractable shares of GLP NT. DIRECTORS The following table sets out the names of the directors of the Corporation as at February 28, 2002, along with all major positions and offices in the Corporation or its major affiliates held by each of them, their principal occupation or employment and the year in which they were first elected as a director of the Corporation or the Predecessor Company. As of February 28, 2002, none of the directors listed below owned, directly or indirectly, any of the Common Shares of the Corporation. Name, Municipality of Residence, Year Became Office and Principal Occupation Director(b) - -------------------------------- ----------- JOHN E. BAHEN, Surrey, England 1997 Corporate Director ALEX G. BALOGH, Toronto, Ontario 1998 Chairman of the Board of Falconbridge Limited, a natural resources company JACK L. COCKWELL, Toronto, Ontario 1980 Co-Chairman and director of Brascan, a property, energy and financial services company RONALD J. DANIELS, Toronto, Ontario 2000 Dean, Faculty of Law, University of Toronto ROBERT A. DUNFORD, Aurora, Ontario 1980 Group Chairman, Energy Operations of Brascan HARRY A. GOLDGUT, Thornhill, Ontario 1997 Vice-Chairman and Chief Executive Officer of the Corporation; and Executive Vice-President of Brascan EDWARD C. KRESS(a), Toronto, Ontario 1991 Chairman of the Corporation; and Executive Vice-President of Brascan ALLEN T. LAMBERT, O.C., Toronto, Ontario 1988 Group Chairman, Brascan Financial Services and a director of Brascan SIDNEY A. LINDSAY(a), Toronto, Ontario 1991 President of Lindsay Consultants, a financial consulting firm GEORGE S. TAYLOR(a), St. Mary's, Ontario 1984 Corporate Director and a director of Brascan (a) Member of the Audit Committee (b) Indicates year first elected as a director of the Corporation or its predecessors 2 GREAT LAKES POWER INC. All of the persons named in the above table were appointed members of the board of directors of the Corporation on March 2, 2001. Each director holds office until the next annual meeting of shareholders of the Corporation or until a successor is appointed. EXECUTIVE COMPENSATION Compensation of Named Executive Officers The senior management of the Corporation, as at February 28, 2002, consists of four executive officers: Edward C. Kress, Chairman; Harry A. Goldgut, Vice-Chairman and Chief Executive Officer; Richard Legault, President and Chief Operating Officer; and Colin L. Clark, Senior Vice-President, Generation (collectively, the "Named Executive Officers"). Messrs. Kress and Goldgut are also employees of Brascan and are remunerated by that company. Mr. Legault is employed by a subsidiary of the Corporation, Maclaren Energy Inc. ("Maclaren"), and receives his remuneration from Maclaren. Mr. Clark is employed by a subsidiary of the Corporation, Great Lakes Power Limited ("GLPL") as its Chief Executive Officer and receives his remuneration from GLPL. The following table sets forth all compensation received by the Named Executive Officers from the Corporation, its predecessors and its affiliates over the past three years. Summary Compensation Table For the Years Ended December 31, 2001, 2000 and 1999 ANNUAL COMPENSATION --------------------------------------- Name and Principal Position Year Salary ($) Bonus ($) - --------------------------- ---- ---------- --------- EDWARD C. KRESS 2001 290,000 80,000 Chairman 2000 285,000 80,000 1999 275,000 75,000 HARRY A. GOLDGUT 2001 255,000 90,000 Vice-Chairman and Chief Executive Officer 2000 245,000 80,000 1999 235,000 75,000 RICHARD LEGAULT(1) 2001 235,000 90,000 President and Chief Operating Officer 2000 175,000 80,000 1999 -- -- COLIN LARK 2001 150,000 50,000 Senior Vice-President, Generation 2000 125,000 32,500 1999 106,307 22,500 (1) Mr. Legault joined the Predecessor Company on January 1, 2000. ANNUAL REPORTING ISSUER FORM 3 GLPL Executive Compensation As no remuneration is paid directly by the Corporation to its officers, the Corporation does not have a compensation committee. The Chairman of the Corporation, who is also the Chairman of GLPL, in conjunction with the Chief Executive Officer of GLPL, has primary responsibility for making recommendations for approval by the board of directors of GLPL with respect to the appointment of executive officers of that company. The Chairman, in conjunction with other board members of GLPL, also has primary responsibility for determining the review, design and competitiveness of GLPL's compensation plans. The key components of GLPL's executive officer compensation are base salary, short-term incentive plans and retirement security. The short-term incentives are designed to provide an amount of variable compensation which is linked to individual performance. Base Salaries GLPL's policy is that base salaries should be based on individual performance, responsibility and experience to ensure that they reflect the contribution of each officer. Short-Term Incentives GLPL's short-term incentive program consists of the allocation of a bonus pool from time to time to recognize exceptional performance. For executive officers, including the Corporation's Named Executive Officers who are paid compensation by GLPL, incentive bonuses may be up to 25% of base salary. Retirement Security GLPL has registered defined benefit and defined contribution plans, which provide its employees, upon their normal retirement age of 65 years, with a lifetime pension and a survivor pension of 60% of the employee's pension. Pensions under the defined benefit plan are equal to the product of 2% of the employee's highest five-year average annual eligible earnings less 0.7% of the average of the prior three years of earnings not in excess of the Year's Maximum Pensionable Earnings, multiplied by his or her years of credited service. The pension benefit is subject to the Canada Customs and Revenue Agency maximum which is currently $1,722.22 times years of credited service. None of the Named Executive Officers participates in GLPL's defined benefit plan. The Named Executive Officer who participates in GLPL's defined contribution plan is Mr. Clark. DIRECTORS' COMPENSATION Directors of the Corporation who are not employees of the Corporation, its subsidiaries or Brascan receive an annual fee of $10,000 plus $800 for each directors' meeting and each committee meeting attended in person or $350 if attended by telephone. Committee chairs receive an annual fee of $1,000, plus $800 for each committee meeting attended in person or $350 if attended by telephone. Payments are made quarterly. During 2001, the Corporation paid $80,000 to five directors in their capacities as directors of the Corporation. In addition, directors are also reimbursed for travel and other out-of-pocket expenses incurred in attending directors' or committee meetings. 4 GREAT LAKES POWER INC. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE The Corporation carries insurance coverage with an annual policy limit of $10,000,000 subject to a corporate deductible of $500,000 per loss. Under this insurance coverage, the Corporation and certain of its associated companies (collectively, the "Organization") are reimbursed for payments made to directors or officers of the Organization required or permitted by law or under provisions of the by-laws of the companies within the Organization as indemnity for loss, including legal costs, arising from acts, errors or omissions done or committed by officers and directors in the course of their duties as such. This policy also provides coverage to individual directors and officers if they are not indemnified by the Organization and is subject to a deductible of $5,000 per person or a maximum deductible of $25,000 per loss. The insurance coverage for directors and officers has certain exclusions including, but not limited to, exclusions for those acts which result in personal profit or advantage to which the insureds were not legally entitled and for libel and slander, some of which exclusions are covered under other insurance policies. The aggregate premiums paid in 2001 in respect of this policy were $24,000. INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS As at February 28, 2002, no officer, director or employee or former officer, director or employee of the Corporation or its subsidiaries is or has been indebted to the Corporation or the Predecessor Corporation or its subsidiaries (other than "routine indebtedness" under applicable Canadian securities laws) at any time since January 1, 2001. INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS No director or senior officer of the Corporation and, to the knowledge of the directors and senior officers of the Corporation, after reasonable inquiry, none of their respective associates nor any person who beneficially owns or exercises control or discretion over more than 10% of the outstanding Shares, has any interest in any material contract to which the Corporation is a party. AUDITOR OF THE REPORTING ISSUER The auditor for the Corporation is Deloitte & Touche LLP, Chartered Accountants, Toronto, Canada. ANNUAL REPORTING ISSUER FORM 5 EXHIBIT 3 Deloitte & Touche LLP BCE Place 181 Bay Street, Suite 1400 Toronto, ON M5J 2V1 Canada Tel: (416) 601 6150 Fax: (416) 601 6151 www.deloitte.ca [Deloitte & Touche LOGO] INDEPENDENT AUDITORS' CONSENT We consent to the use of our report dated February 1, 2002, appearing in this Annual Report on Form 40-F of Great Lakes Power Inc. for the year ended December 31, 2001. [DELOITTE & TOUCHE LLP SIGNATURE] DELOITTE & TOUCHE LLP Toronto, Ontario March 25, 2002 - -------- Deloitte Touche Tohmatsu LOGO - --------