Management’s
Discussion and Analysis of Financial Results

March 3, 2014



PART I – OBJECTIVES AND FINANCIAL
HIGHLIGHTS



BASIS OF PRESENTATION

Financial data included in this Management’s
Discussion and Analysis (“MD&A”) for the year ended December 31, 2013, includes material information up to March
3, 2014. Financial data provided has been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (“IFRS”). All dollar references, unless otherwise stated, are in millions
of Canadian dollars except per unit amounts. Amounts in U.S. dollars are identified as “US$.”



Brookfield Canada Office Properties (“BOX,”
the “Trust,” “we”, “our” or “us” ) was formed in connection with the reorganization
of BPO Properties Ltd. (“BPP”), a wholly-owned subsidiary of Brookfield Office Properties Inc. (“BPO”
or “Brookfield Office Properties”), on May 1, 2010, in which BPP’s directly owned office assets were transferred
to the Trust. In connection with the reorganization, the Trust also acquired BPO’s interest in Brookfield Place Toronto,
which includes Bay Wellington Tower and partial interests in the retail concourse and parking operations.



On December 1, 2011, we acquired from
BPO, a 25% interest in nine office assets from its Canadian Office Fund portfolio totaling 6.5 million square feet in Toronto
and Ottawa and on July 11, 2013, we acquired Bay Adelaide East from BPO totaling 980,000 square feet in Toronto.



The following discussion and analysis
is intended to provide readers with an assessment of the performance of BOX over the past two years as well as our financial position
and future prospects. It should be read in conjunction with the consolidated financial statements and appended notes, which begin
on page 35 of this report. In Part II – Financial Statement Analysis, we review our operating performance and financial
position as presented in our financial statements prepared in accordance with IFRS.



We included our discussion of operating
performance on an IFRS basis beginning on page 16 of the MD&A followed by a discussion of non-IFRS measures. Included in non-IFRS
measures are commercial property net operating income, funds from operations, and adjusted funds from operations on a total and
per-unit basis. Commercial property net operating income, funds from operations and adjusted funds from operations do not have
any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.
We define commercial property net operating income as income from commercial property operations after direct property operating
expenses, including property administration costs have been deducted but prior to deducting interest expense, general and administrative
expenses, and fair value gains (losses). We define funds from operations as net income prior to transaction costs, fair value
gains (losses), and certain other non-cash items. Adjusted funds from operations is defined by us as funds from operations net
of second-generation leasing commissions and tenant improvements, maintaining value capital expenditures, and straight-line rental
income.



Commercial property net operating income
is an important measure that we use to assess operating performance of our commercial properties, and funds from operations is
a widely used measure in analyzing the performance of real estate. Adjusted funds from operations is a measure used to assess
an entity’s ability to pay distributions. We provide the components of commercial property net operating income, a reconciliation
of net income to commercial property net operating income, a full reconciliation of net income to funds from operations and adjusted
funds from operations, and a reconciliation of cash generated from operating activities to adjusted funds from operations beginning
on page 19.



Additional information, including our
Annual Information Form, is available on our Web site at www.brookfieldcanadareit.com or at www.sedar.com or www.sec.gov.



OVERVIEW OF THE BUSINESS

BOX is a publicly traded, real estate
investment trust listed on the Toronto and New York stock exchanges under the symbol BOX.UN and BOXC, respectively.



The Trust invests, develops and operates
commercial office properties in Toronto, Ottawa, Calgary, and Vancouver.



At December 31, 2013, the carrying value
of BOX’s total assets was $5,608.8 million. During 2013, we generated $164.8 million of net income ($1.77 per unit), $144.7
million of funds from operations ($1.55 per unit), and $110.1 million of adjusted funds from operations ($1.18 per unit).





|4 | 2013 Annual Report
|- | ------------------













FINANCIAL HIGHLIGHTS

BOX’s financial results are as follows:



|(Millions, except per-unit amounts)            |  | 2013 |       |  | 2012 |   |       | 2011 | 
|---------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Results of operations                          |  |      |       |  |      |   |       |      | 
|Commercial property revenue                    |  | $    | 521.9 |  |      | $ | 515.1 |      | 
|Net income                                     |  |      | 164.8 |  |      |   | 527.5 |      | 
|Funds from operations(1)                       |  |      | 144.7 |  |      |   | 139.0 |      | 
|Adjusted funds from operations(1)
    (2)      |  |      | 110.1 |  |      |   | 107.4 |      | 
|Distributions                                  |  |      | 109.1 |  |      |   | 103.4 |      | 
|Per unit amounts – attributable to unitholders |  |      |       |  |      |   |       |      | 
|Net income                                     |  |      | 1.77  |  |      |   | 5.66  |      | 
|Funds from operations(1)                       |  |      | 1.55  |  |      |   | 1.49  |      | 
|Adjusted funds from operations(1)
    (2)      |  |      | 1.18  |  |      |   | 1.15  |      | 
|Distributions                                  |  |      | 1.17  |  |      |   | 1.11  |      | 



|(Millions, except per-unit amounts)    |  | Dec. 31, 2013 |         |  | Dec. 31, 2012 |   |         | Dec. 31, 2011 | 
|-------------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | ------------- | 
|Balance sheet data                     |  |               |         |  |               |   |         |               | 
|Total assets                           |  | $             | 5,608.8 |  |               | $ | 5,163.6 |               | 
|Investment properties                  |  |               | 5,390.2 |  |               |   | 5,090.2 |               | 
|Investment property and corporate debt |  |               | 2,354.9 |  |               |   | 2,013.0 |               | 
|Total equity                           |  |               | 3,092.3 |  |               |   | 3,035.6 |               | 
|Total equity per unit                  |  |               | 33.18   |  |               |   | 32.57   |               | 

| | (1) | Non-IFRS measure.
                                         Refer to description of non-IFRS measures and reference to reconciliation to comparable
                                         IFRS measures beginning on page 18.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(2)Current period amounts were adjusted to reflect actual leasing commissions, tenant improvements and maintaining value capital
expenditures incurred. Prior period amounts were calculated based on historical spend levels as well as projected spend levels
over the next 10 years as described on page 21.



COMMERCIAL PROPERTY OPERATIONS

Our strategy to own premier properties
in high-growth, and in many instances supply-constrained markets with high barriers to entry, has created one of Canada’s
most distinguished portfolios of office properties. Our commercial-property portfolio consists of interests in 28 properties totaling
20.8 million square feet, including 4.1 million square feet of parking and other. Our development portfolio consists of the Bay
Adelaide East development site totaling 980,000 square feet. Our markets are the financial, government and energy sectors in the
cities of Toronto, Ottawa, Calgary, and Vancouver. Our strategy is concentrating operations within a select number of Canadian
gateway cities with attractive tenant bases in order to maintain a meaningful presence and build on the strength of our tenant
relationships within these markets.







We remain focused on the following strategic
priorities:



| | · | Realizing
                                         value from our investment properties through proactive leasing initiatives;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | · | Prudent
                                         capital management, including the refinancing of mature investment properties; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| | · | Acquiring
                                         high-quality investment properties in our primary markets for value when opportunities
                                         arise.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Brookfield Canada Office Properties | 5
|----------------------------------- | -















The following table summarizes our commercial
property portfolio by region as at December 31, 2013:



|Region                |  | Number of Properties |    |  | Total Area (000’s Sq. Ft.) |  |        | BOX’s Owned Interest (000’s Sq. Ft.) |  |  | Fair Value (Millions) |  |  | Fair Value Per Sq. Ft. |         |  | Debt(1)(Millions) |   |     | Net BookEquity(2)(Millions) | 
|--------------------- |  | -------------------- | -- |  | -------------------------- |  | ------ | ------------------------------------ |  |  | --------------------- |  |  | ---------------------- | ------- |  | ----------------- | - | --- | --------------------------- | 
|Commercial properties |  |                      |    |  |                            |  |        |                                      |  |  |                       |  |  |                        |         |  |                   |   |     |                             | 
|Eastern region        |  |                      | 19 |  |                            |  | 13,152 |                                      |  |  | 7,541                 |  |  | $                      | 3,207.5 |  |                   | $ | 425 |                             | 
|Western region        |  |                      | 9  |  |                            |  | 7,669  |                                      |  |  | 4,255                 |  |  |                        | 1,950.7 |  |                   |   | 458 |                             | 
|Total                 |  |                      | 28 |  |                            |  | 20,821 |                                      |  |  | 11,796                |  |  | $                      | 5,158.2 |  |                   | $ | 437 |                             | 

(1)Excludes debt associated with our development property and corporate debt.

(2)Represents fair value less debt and excludes working capital and is a non-IFRS measure.



An important characteristic of our portfolio
is the strong credit quality of our tenants. We direct special attention to credit quality, particularly in the current economic
environment, in order to ensure the long-term sustainability of rental revenues through economic cycles. Major tenants with over
500,000 square feet of space in the portfolio include government and related agencies, Suncor Energy Inc., Bank of Montreal, Imperial
Oil and Talisman Energy. A detailed list of major tenants is included in Part III (“Risks and Uncertainties”) of this
MD&A, beginning on page 23.



Our strategy is to sign long-term leases
in order to mitigate risk and reduce our overall re-tenanting costs. We typically commence discussions with tenants regarding
their space requirements well in advance of the contractual expiration, and although each market is different, the majority of
our leases, when signed, extend between five and 10-year terms. As a result of this strategy, approximately 6.5% of our leases,
on average, mature annually up to 2018.



Our average lease term is eight years.
The following is a breakdown of lease maturities by region with associated in-place rental rates on our commercial properties:





|Total
    Portfolio                |  |             | Toronto,
    Ontario |  |   | Ottawa,
    Ontario |      
|---------------------------------- |  | ----------- | -------------------- |  | - | ------------------- | -----
|                                   |  |             |                      |  |   |                     |      
|                                   |  | 000's       |                      |  |   |                     |      
|Year of Expiry                     |  | Sq.
    Ft. |                      |  | % |                     |      
|Currently available                |  |             | 665                  |  |   |                     | 4.0  
|2014                               |  |             | 1,428                |  |   |                     | 8.5  
|2015                               |  |             | 1,294                |  |   |                     | 7.7  
|2016                               |  |             | 1,345                |  |   |                     | 8.0  
|2017                               |  |             | 629                  |  |   |                     | 3.8  
|2018                               |  |             | 761                  |  |   |                     | 4.6  
|2019                               |  |             | 789                  |  |   |                     | 4.7  
|2020                               |  |             | 1,271                |  |   |                     | 7.6  
|2021 & beyond                      |  |             | 8,532                |  |   |                     | 51.1 
|Parking and other                  |  |             | 4,107                |  |   |                     | 3⁄4    
|Total                              |  |             | 20,821               |  |   |                     | 100.0
|Average market net rent(2)
    (3) |  |             |                      |  |   |                     |      









|Calgary, Alberta |                            |  | Vancouver, B.C. |  |       | Other | 
|---------------- | -------------------------- |  | --------------- |  | ----- | ----- | 
|                 |                            |  |                 |  |       |       | 
|                 |                            |  | 000's           |  |       |       | 
|Year of Expiry   |                            |  | Sq. Ft.         |  |       | %     | 
|                 | Currently available        |  |                 |  | 24    |       | 
|                 | 2014                       |  |                 |  | 49    |       | 
|                 | 2015                       |  |                 |  | 215   |       | 
|                 | 2016                       |  |                 |  | 468   |       | 
|                 | 2017                       |  |                 |  | 65    |       | 
|                 | 2018                       |  |                 |  | 227   |       | 
|                 | 2019                       |  |                 |  | 100   |       | 
|                 | 2020                       |  |                 |  | 242   |       | 
|                 | 2021 & beyond              |  |                 |  | 4,245 |       | 
|                 | Parking and other          |  |                 |  | 1,194 |       | 
|                 | Total                      |  |                 |  | 6,829 |       | 
|                 | Average market net rent(2) |  |                 |  |       |       | 

(1)
Net rent at expiration of lease.

(2)Average market net rent represents management’s estimate of average rent per square foot for buildings of similar
quality to our portfolio. However, it may not necessarily be representative of the specific space that is rolling in any specific
year. Included on page 18 is the average leasing net rent achieved on our year-to-date leasing as compared to the average expiring
net rent.

(3)Average market net rent for Toronto reflects higher market rents for Brookfield Place Toronto and Bay Adelaide West, which
comprise 30% of BOX’s exposure in Toronto.





|6 | 2013 Annual Report
|- | ------------------











Commercial
Development



The following table summarizes our Bay
Adelaide East development project at December 31, 2013:



|                       |  |         |  |                         |  | Number of |   |  | Owned    |  |     |               | 
|---------------------- |  | ------- |  | ----------------------- |  | --------- | - |  | -------- |  | --- | ------------- | 
|(Square feet in 000’s) |  | Region  |  | Location                |  | Sites     |   |  | Interest |  |     | Leasable Area | 
|Bay Adelaide East      |  | Toronto |  | Bay and Adelaide Street |  |           | 1 |  |          |  | 100 | %             | 



Bay Adelaide East is 60% pre-leased to
anchor tenants Deloitte LLP and Borden Ladner Gervais and is targeted to be completed in late 2015.



PERFORMANCE
MEASUREMENT

The key indicators by which we measure
our performance are:



| | · | Net
                                         income per unit;
| | - | -------------------------------------------------------------

| | · | Commercial
                                         property net operating income;
| | - | ----------------------------------------------------------------------------------

| | · | Funds
                                         from operations per unit;
| | - | ------------------------------------------------------------------------

| | · | Adjusted
                                         funds from operations per unit;
| | - | ---------------------------------------------------------------------------------

| | · | Total
                                         equity per unit;
| | - | ---------------------------------------------------------------

| | · | Overall
                                         indebtedness level;
| | - | --------------------------------------------------------------------

| | · | Weighted-average
                                         cost of debt; and
| | - | ---------------------------------------------------------------------------

| | · | Occupancy
                                         levels.
| | - | ----------------------------------------------------------



Although we monitor and analyze our financial
performance using a number of indicators, our primary business objective of generating reliable and growing cash flow is monitored
and analyzed using net income, commercial property net operating income, funds from operations, and adjusted funds from operations.
Although net income is calculated in accordance with IFRS, IFRS does not prescribe standardized meanings for commercial property
net operating income, funds from operations, and adjusted funds from operations; therefore, they are unlikely to be comparable
to similar measures presented by other entities. We provide the components of commercial property net operating income, a reconciliation
of net income to commercial property net operating income and a full reconciliation of net income to funds from operations and
adjusted funds from operations beginning on page 19 of this MD&A.



Net Income

Net income is calculated in accordance
with IFRS. Net income is used as a key indicator in assessing the profitability of the Trust.



KEY PERFORMANCE DRIVERS



In addition to monitoring and analyzing
performance in terms of net income, we consider the following items to be important drivers of our current and anticipated financial
performance:



| | · | Increases
                                         in occupancies by leasing vacant space;
| | - | ------------------------------------------------------------------------------------------

| | · | Increases
                                         in rental rates through maintaining or enhancing the quality of our assets and as market
                                         conditions permit; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Reduction
                                         in operating costs through achieving economies of scale and diligently managing contracts.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



We also believe that the key external
performance drivers include the availability of:



| | · | Debt
                                         capital at a cost and on terms conducive to our goals;
| | - | ----------------------------------------------------------------------------------------------------

| | · | Equity
                                         capital at a reasonable cost;
| | - | -----------------------------------------------------------------------------

| | · | New
                                         property acquisitions that fit into our strategic plan; and
| | - | --------------------------------------------------------------------------------------------------------

| | · | Investors
                                         for dispositions of peak value or non-core assets.
| | - | -----------------------------------------------------------------------------------------------------





|Brookfield Canada Office Properties | 7
|----------------------------------- | -













PART II – FINANCIAL STATEMENT
ANALYSIS



ASSET PROFILE

Our total asset carrying value was $5,608.8
million at December 31, 2013 (compared to $5,163.6 million at December 31, 2012). The following is a summary of our assets:



|(Millions)                   |  | Dec. 31, 2013 |         |  | Dec. 31, 2012 |  
|---------------------------- |  | ------------- | ------- |  | ------------- | -
|Non-current assets           |  |               |         |  |               |  
|Investment properties        |  |               |         |  |               |  
|Commercial properties        |  | $             | 5,158.2 |  |               | $
|Commercial developments      |  |               | 232.0   |  |               |  
|                             |  |               | 5,390.2 |  |               |  
|Current assets               |  |               |         |  |               |  
|Tenant and other receivables |  |               | 17.5    |  |               |  
|Other assets                 |  |               | 6.3     |  |               |  
|Cash and cash equivalents    |  |               | 194.8   |  |               |  
|                             |  |               | 218.6   |  |               |  
|Total                        |  | $             | 5,608.8 |  |               | $



COMMERCIAL PROPERTIES

Commercial properties comprise of our
direct interests in wholly owned commercial properties and our proportionate share of the related assets, liabilities, revenue
and expenses in our jointly controlled commercial properties.



The fair value of our commercial properties
was $5,158.2 million as at December 31, 2013 (compared to $5,090.2 million at December 31, 2012). The increase in value of commercial
properties is attributable to capital expenditures, leasing costs and the recognition of fair value gains as a result of improvements
to tenant profiles and valuation parameters.



A breakdown of our commercial properties
is as follows:





|                            |            |                 | BOX’s           | Fair Value    | Fair Value   
|--------------------------- | ---------- | --------------- | --------------- | ------------- | -------------
|                            | Number of  | Total Area      | Owned Interest  | Dec. 31, 2013 | Dec. 31, 2012
|                            | Properties | (000's Sq. Ft.) | (000's Sq. Ft.) | (Millions)    | (Millions)   
|Eastern region              | 19         | 13,152          | 7,541           | $             | 3,207.5      
|Western region              | 9          | 7,669           | 4,255           |               | 1,950.7      
|Total commercial properties | 28         | 20,821          | 11,796          | $             | 5,158.2      
|Fair value per Sq. Ft.      |            |                 |                 | $             | 437          







The key valuation metrics for our commercial
properties are as follows:





|                  | December 31, 2013 | December 31, 2012
|----------------- | ----------------- | -----------------
|                  |                   |                  
|Eastern region    |                   |                  
|Discount rate     |                   |                  
|Terminal cap rate |                   |                  
|Hold period (yrs) |                   |                  
|                  |                   |                  
|Western region    |                   |                  
|Discount rate     |                   |                  
|Terminal cap rate |                   |                  
|Hold period (yrs) |                   |                  







Fair values are most sensitive to changes
in discount rates and timing or variability of cash flows. A 25 basis-point decrease in the discount and terminal capitalization
rates will impact the fair value of commercial properties by $130.6 million and $167.7 million, or 2.5% and 3.3%, respectively,
at December 31, 2013.





|8 | 2013 Annual Report
|- | ------------------













Upon the signing of the majority of our leases,
we provide a capital allowance for tenant improvements or tenant inducements for leased space in order to accommodate the specific
space requirements of the tenant. In addition to these allowances, leasing commissions are paid to third-party brokers and Brookfield
Office Properties Management LP (“BOPM LP”) (formerly Brookfield Properties Management Corporation prior to October
1, 2013), a subsidiary of BPO. We may experience a delay between lease commencement and the payment of leasing costs due to timing
of the tenant installation and the required inspections and certifications. For the year ended December 31, 2013, such expenditures
totaled $22.1 million (compared to $27.0 million in 2012). The decrease is primarily related to higher tenant installation costs
incurred on the lease-up of space at Suncor Energy Centre, Bay Adelaide West, HSBC Building and Brookfield Place Toronto in 2012.



We also invest in ongoing maintenance
and capital improvement projects to sustain the high quality of the infrastructure and tenant service amenities in our properties.
Capital expenditures for the year ended December 31, 2013 totaled $20.7 million (compared to $28.8 million in 2012). These expenditures
exclude repairs and maintenance costs. Fluctuations in our capital expenditures vary period over period based on required and
planned expenditures on our commercial properties.



Capital expenditures include maintaining
value expenditures, which are those required in order to maintain the properties in their current operating state. Capital expenditures
also include projects which represent improvements to an asset or reconfiguration of space that adds productive capacity in order
to increase rentable area or increase current rental rates. For the year ended December 31, 2013, maintaining value capital expenditures
totaled $9.4 million (compared with $3.2 million in 2012), while the remaining capital expenditures of $11.3 million (compared
with $25.6 million in 2012) primarily consist of the washroom upgrades at Brookfield Place, Fifth Avenue Place, Royal Centre and
First Canadian Place, a floor conversion project at First Canadian Place and external plaza membrane upgrades at Fifth Avenue
Place. Capital expenditures are recoverable in some cases through contractual tenant cost-recovery payments. During the year ended
December 31, 2013, $12.6 million of our total capital expenditures were recoverable (compared with $15.4 million in 2012).



The following table summarizes the second-generation
leasing commissions and tenant improvements, and maintaining value capital expenditures recorded on our commercial properties
during the year ended December 31, 2013. “Second-generation” leasing commissions and tenant improvements includes
both new and renewal tenants for all of our properties with the exception of Bay Adelaide West that is considered “first-generation”
since it was a new development completed in 2009 and associated leasing costs may not be representative of our normal spend. Second-generation
leasing commissions and tenant improvements vary with the timing of renewals, vacancies, and tenant mix. These costs historically
have been lower for renewals of existing tenants compared to new tenants.



For the year ended December 31, 2013,
second-generation leasing commissions and tenant improvements consisted primarily of leasing commissions incurred at Fifth Avenue
Place, Place de Ville I, Place de Ville II, Bankers Hall and First Canadian Place, tenant improvements at Bankers Hall, Hudson’s
Bay Centre, Fifth Avenue Place, First Canadian Place and tenant build-outs at Royal Centre.





|(Millions)                                                    |  |  |  | 2013 |   | 2012
|------------------------------------------------------------- |  |  |  | ---- | - | ----
|Second-generation leasing commissions and tenant improvements |  |  |  |      | $ | 20.1
|Maintaining value capital expenditures                        |  |  |  |      |   | 9.4 
|Total                                                         |  |  |  |      | $ | 29.5







The following table summarizes the changes
in value of our commercial properties during the year ended December 31, 2013:





|(Millions)                                   |  |  |  | Dec. 31, 2013
|-------------------------------------------- |  |  |  | -------------
|Beginning of year                            |  |  |  | $            
|Additions:                                   |  |  |  |              
|Capital expenditures and tenant improvements |  |  |  |              
|Leasing commissions                          |  |  |  |              
|Tenant inducements                           |  |  |  |              
|Fair value gains                             |  |  |  |              
|Other changes                                |  |  |  |              
|End of year                                  |  |  |  | $            







COMMERCIAL DEVELOPMENT

Commercial development consists of the
Bay Adelaide East development site, acquired from our parent company, BPO, for an aggregate total investment of $601.9 million.
The building was purchased on an “as-if-completed-and-stabilized basis,” and as such, BPO retains the development
obligations including construction, lease-up and financing. Once completed, the building will add 980,000 square feet of high-quality,
centrally located leasable space to our portfolio. At closing, we paid BPO $169.9 million representing the amount invested and
value created to date in the project at close, net of working capital associated with the development. We have committed to fund
an additional $26.0 million of up-front equity and an additional $350.0 million funded from a first mortgage construction loan.
Additionally, we will make a final payment to BPO of $56.0 million on stabilization, subject to achieving stabilized net operating
income and targeted permanent financing, which is expected to occur in 2017. Bay Adelaide East is currently 60% pre-leased and
is on target to be completed in late 2015.





|Brookfield Canada Office Properties | 9
|----------------------------------- | -













Commercial development under active development
is measured using a discounted cash flow model, net of costs to complete, as of the balance sheet date. The total fair value of
development land and infrastructure was $232.0 million at December 31, 2013.







The details of development expenditures
during the year ended December 31, 2013 are as follows:



|(Millions)                             |  |  |  | 2013 |   | 2012
|-------------------------------------- |  |  |  | ---- | - | ----
|Construction costs                     |  |  |  |      | $ | 54.4
|Property taxes and other related costs |  |  |  |      |   | 3.3 
|Capitalized borrowing costs            |  |  |  |      |   | 4.4 
|Total                                  |  |  |  |      | $ | 62.1
|                                       |  |  |  |      |   |     



The following table summarizes the changes
in value of our commercial development during the year ended December 31, 2013:



|(Millions)               |  |  |  | Dec. 31, 2013
|------------------------ |  |  |  | -------------
|Beginning of year        |  |  |  | $            
|Additions:               |  |  |  |              
|Acquisition              |  |  |  |              
|Development expenditures |  |  |  |              
|End of year              |  |  |  | $            



TENANT AND OTHER RECEIVABLES

Tenant and other receivables decreased
to $17.5 million at December 31, 2013, from $25.4 million at December 31, 2012.



OTHER ASSETS

The components of other assets are as
follows:





|(Millions)                        | Dec. 31, 2013 | Dec. 31, 2012
|--------------------------------- | ------------- | -------------
|Prepaid expenses and other assets | $             | 6.3          
|Restricted cash                   |               | 3⁄4            
|Total                             | $             | 6.3          







CASH AND CASH EQUIVALENTS

We endeavor to maintain high levels of
liquidity to ensure that we can meet distribution requirements and react quickly to potential investment opportunities. At December
31, 2013, cash balances were $194.8 million, compared to $41.0 million at December 31, 2012.



LIABILITIES AND EQUITY

Our asset base of $5,608.8 million is
financed with a combination of debt and equity. The components of our liabilities and equity are as follows:





|(Millions)                             | Dec. 31, 2013 | Dec. 31, 2012
|-------------------------------------- | ------------- | -------------
|Liabilities                            |               |              
|Non-current liabilities                |               |              
|Investment property and corporate debt | $             | 2,229.1      
|                                       |               |              
|Current liabilities                    |               |              
|Investment property and corporate debt |               | 125.8        
|Accounts payable and other liabilities |               | 161.6        
|                                       |               | 287.4        
|                                       |               |              
|Equity                                 |               |              
|Unitholders’ equity                    |               | 854.7        
|Non-controlling interest               |               | 2,237.6      
|                                       |               | 3,092.3      
|Total liabilities and equity           | $             | 5,608.8      









|10 | 2013 Annual Report
|-- | ------------------













INVESTMENT PROPERTY AND CORPORATE DEBT

Investment property and corporate debt
(current and non-current) totaled $2,354.9 million at December 31, 2013 (compared to $2,013.0 million at December 31, 2012). The
increase is primarily attributable to refinancings related to Brookfield Place Toronto and 105 Adelaide in Toronto, and Suncor
Energy Centre and Bankers Hall in Calgary, offset by a repayment of our revolving corporate credit facility, and principal amortization
payments. Investment property and corporate debt at December 31, 2013 had a weighted-average interest rate of 4.22%. Debt on our
investment properties are mainly non-recourse, thereby reducing overall financial risk to the Trust.



We attempt to match the maturity of our
investment property debt portfolio with the average lease term of our properties. As a result of our refinancings, at December
31, 2013, the average term to maturity of our investment property debt increased to eight years, compared to our average lease
term of eight years.



The details of investment property and
corporate debt at December 31, 2013, are as follows:



|                             |  |           |  | Interest |      |  | Maturity |               | BOX’s Share |   |         |                 
|---------------------------- |  | --------- |  | -------- | ---- |  | -------- | ------------- | ----------- | - | ------- | ----------------
|                             |  | Location  |  | Rate %   |      |  | Date     |               | (Millions)  |   |         | Mortgage Details
|Commercial property          |  |           |  |          |      |  |          |               |             |   |         |                 
|Jean Edmonds Towers          |  | Ottawa    |  |          | 5.55 |  |          | January 2014  |             | $ | 0.1     |                 
|151 Yonge St.                |  | Toronto   |  |          | 2.92 |  |          | July 2014     |             |   | 9.2     |                 
|First Canadian Place         |  | Toronto   |  |          | 5.37 |  |          | December 2014 |             |   | 71.1    |                 
|Hudson's
    Bay Centre(1)   |  | Toronto   |  |          | 2.99 |  |          | May 2015      |             |   | 101.4   |                 
|Royal Centre                 |  | Vancouver |  |          | 3.33 |  |          | June 2015     |             |   | 144.1   |                 
|2 Queen St. East             |  | Toronto   |  |          | 5.64 |  |          | December 2017 |             |   | 28.6    |                 
|Brookfield Place Toronto     |  | Toronto   |  |          | 3.24 |  |          | January 2020  |             |   | 519.8   |                 
|22 Front St. West            |  | Toronto   |  |          | 6.24 |  |          | October 2020  |             |   | 17.9    |                 
|Bankers Court                |  | Calgary   |  |          | 4.96 |  |          | November 2020 |             |   | 44.7    |                 
|Queen's Quay Terminal        |  | Toronto   |  |          | 5.40 |  |          | April 2021    |             |   | 85.1    |                 
|Fifth Avenue Place           |  | Calgary   |  |          | 4.71 |  |          | August 2021   |             |   | 167.2   |                 
|Bay Adelaide West            |  | Toronto   |  |          | 4.43 |  |          | December 2021 |             |   | 391.3   |                 
|Exchange Tower               |  | Toronto   |  |          | 4.03 |  |          | April 2022    |             |   | 115.2   |                 
|HSBC Building                |  | Toronto   |  |          | 4.06 |  |          | January 2023  |             |   | 43.5    |                 
|105 Adelaide St. West        |  | Toronto   |  |          | 3.87 |  |          | May 2023      |             |   | 37.0    |                 
|Bankers Hall                 |  | Calgary   |  |          | 4.38 |  |          | November 2023 |             |   | 300.0   |                 
|Jean Edmonds Towers          |  | Ottawa    |  |          | 6.79 |  |          | January 2024  |             |   | 15.6    |                 
|Suncor Energy Centre         |  | Calgary   |  |          | 5.19 |  |          | August 2033   |             |   | 275.0   |                 
|                             |  |           |  |          |      |  |          |               |             |   |         |                 
|Development                  |  |           |  |          |      |  |          |               |             |   |         |                 
|Bay Adelaide East(2)         |  | Toronto   |  |          | 3.15 |  |          | December 2016 |             |   | 5.0     |                 
|                             |  |           |  |          |      |  |          |               |             |   |         |                 
|Corporate                    |  |           |  |          |      |  |          |               |             |   |         |                 
|$200M Corporate Revolver     |  | 3⁄4         |  |          | 3⁄4    |  |          | August 2017   |             |   | 3⁄4       |                 
|                             |  |           |  |          | 4.22 |  |          |               |             |   | 2,371.8 |                 
|Premium on assumed mortgages |  |           |  |          |      |  |          |               |             |   | 1.2     |                 
|Deferred financing costs     |  |           |  |          |      |  |          |               |             |   | (18.1   | )               
|Total                        |  |           |  |          | 4.22 |  |          |               |             | $ | 2,354.9 |                 

(1)This loan has limited recourse to the Trust’s parent, BPP, for up to $15.0 million.

(2)This loan has a three year term from the date of the initial advance, and has limited recourse to the Trust’s parent,
BPP, for up to $75.0 million. Two one-year extension options are available provided certain leasing thresholds have been met and
no material defaults have occurred.



The details of the financing transactions
completed during the year ended December 31, 2013, are as follows:



|(Millions)               |  |    |  |             |  | NewProceeds (1) |       |  | Net ProceedsGenerated(1) |   |       | Interest Rate (%) |  |  | Mortgage Detail |   | Maturity
|------------------------ |  | -- |  | ----------- |  | --------------- | ----- |  | ------------------------ | - | ----- | ----------------- |  |  | --------------- | - | --------
|Brookfield Place Toronto |  | Q1 |  | Refinancing |  | $               | 525.0 |  |                          | $ | 213.0 |                   |  |  | 3.244           | % |         
|105 Adelaide St. West    |  | Q2 |  | Refinancing |  |                 | 37.5  |  |                          |   | 16.8  |                   |  |  | 3.870           | % |         
|Hudson’s Bay Centre      |  | Q2 |  | Extension   |  |                 | 3⁄4     |  |                          |   | 3⁄4     |                   |  |  | 2.999           | % |         
|Suncor Energy Centre     |  | Q3 |  | Refinancing |  |                 | 275.0 |  |                          |   | 61.8  |                   |  |  | 5.188           | % |         
|$200M Corporate Revolver |  | Q3 |  | Extension   |  |                 | 3⁄4     |  |                          |   | 3⁄4     |                   |  |  | BA + 1.75%      |   |         
|Bankers Hall             |  | Q4 |  | Refinancing |  |                 | 300.0 |  |                          |   | 146.0 |                   |  |  | 4.377           | % |         

(1)Excludes
financing costs.





|Brookfield Canada Office Properties | 11
|----------------------------------- | --













During the first quarter of 2013, we repaid
the amount drawn on our revolving corporate credit facility of $68.0 million.



During the fourth quarter of 2013, an
advance of $5.0 million was drawn from the Bay Adelaide East construction facility at an average interest rate of 3.15%.



Investment property and corporate debt
maturities for the next five years and thereafter are as follows:





|                                 |  |                 |       |  |            |   |         |          |  |   | Weighted-Average     | 
|-------------------------------- |  | --------------- | ----- |  | ---------- | - | ------- | -------- |  | - | -------------------- | 
|                                 |  | Scheduled       |       |  |            |   |         |          |  |   | Interest Rate (%) at | 
|(Millions, except interest data) |  | Amortization(1) |       |  | Maturities |   |         | Total(1) |  |   | Dec. 31, 2013        | 
|2014                             |  | $               | 47.2  |  |            | $ | 78.6    |          |  | $ | 125.8                | 
|2015                             |  |                 | 44.1  |  |            |   | 235.1   |          |  |   | 279.2                | 
|2016                             |  |                 | 42.9  |  |            |   | 5.0     |          |  |   | 47.9                 | 
|2017                             |  |                 | 45.3  |  |            |   | 28.6    |          |  |   | 73.9                 | 
|2018                             |  |                 | 47.4  |  |            |   | 3⁄4       |          |  |   | 47.4                 | 
|2019 and thereafter              |  |                 | 270.8 |  |            |   | 1,509.9 |          |  |   | 1,780.7              | 
|Total                            |  | $               | 497.7 |  |            | $ | 1,857.2 |          |  | $ | 2,354.9              | 









(1) Net of transaction costs.



CONTRACTUAL OBLIGATIONS

The following table presents our contractual
obligations over the next five years and beyond:



|                                                                 |  | Payments Due By Period |        
|---------------------------------------------------------------- |  | ---------------------- | -------
|(Millions)                                                       |  | Total                  |        
|Investment property and corporate
    debt(1)                    |  | $                      | 2,354.9
|Interest expense – investment property
    and corporate debt(2) |  |                        | 752.7  
|Minimum rental payments
    - ground leases(3)                   |  |                        | 490.9  
|                                                                 |  | $                      | 3,598.5

(1) Net of transaction costs.

(2)Represents aggregate
interest expense expected to be paid over the term of the debt, on an undiscounted basis, based at current interest rates.

(3) Represents minimum rental
payments, on an undiscounted basis, on land leases or other agreements.



CREDIT RATINGS

Our access to financing depends on, among
other things, suitable market conditions and the maintenance of suitable long-term credit ratings. Our credit ratings may be adversely
affected by various factors, including increased debt levels, decreased earnings, declines in tenant demand, increased competition,
a further deterioration in general economic and business conditions and adverse publicity. Any downgrades in our credit ratings
may impede our access to capital markets or raise our borrowing rates.



We are currently rated by Dominion Bond
Rating Service Inc. (“DBRS”) and Standard & Poor’s (“S&P”). Our credit ratings at December
31, 2013, and at the date of this report were:



|              |  | DBRS         |  | S&P                 |    
|------------- |  | ------------ |  | ------------------- | ---
|Issuer Rating |  | BBB (stable) |  | BBB- (Credit Watch) | (1)

(1)Rating
was given in conjunction with BPO’s rating as S&P views these two related companies as one rated entity.



We are committed to arranging our affairs
to maintain these ratings and improve them further over time.



Credit ratings are intended to provide
investors with an independent measure of the credit quality of an issue of securities. The credit ratings presented are not a
recommendation to purchase, hold or sell our Trust Units, as such ratings do not comment as to market price or suitability for
a particular investor. There is no assurance that any rating will remain in effect for any given period or that any rating will
not be revised or withdrawn entirely by the rating agency in the future if, in its judgment, circumstances so warrant.



CORPORATE GUARANTEES AND CONTINGENT
OBLIGATIONS

We and our operating subsidiaries may
be contingently liable with respect to litigation and claims that arise from time to time in the normal course of business or
otherwise. A specific litigation, with a judgment amount of $59.7 million ($63.0 million Australian dollars), is being pursued
against one of our subsidiaries related to security on a defaulted loan. Management has determined that the most probable cash
outflow related to the litigation being pursued against us is $15.2 million ($16.0 million Australian dollars), which has been
fully provided for in the Trust’s financial statements. We anticipate that this specific litigation will be settled in 2014.



In addition, we may execute agreements
that provide for indemnifications and guarantees to third parties. Disclosure of commitments, guarantees, and contingencies can
be found in Note 15 of the consolidated financial statements.





|12 | 2013 Annual Report
|-- | ------------------













INCOME TAXES

The Trust is a “mutual fund trust”
pursuant to the Income Tax Act (Canada). The Trust distributes or designates all taxable earnings to unitholders, and as
such, under current legislation, the obligation to pay tax rests with each unitholder. No current and deferred tax provisions
are required on the Trust’s income.



ACCOUNTS PAYABLE AND OTHER LIABILITIES

Accounts payable and other liabilities
totaled $161.6 million at December 31, 2013 (compared to $115.0 million at December 31, 2012). The increase is primarily related
to timing of accrued liabilities, timing of interest payments and the litigation accrual as discussed in the “Corporate
Guarantees and Contingent Obligations” section of the MD&A.



A summary of the components of accounts
payable and other liabilities is as follows:





A summary of the components of accounts
payable and other liabilities is as follows:



|(Millions)                               | Dec. 31, 2013 | Dec. 31, 2012
|---------------------------------------- | ------------- | -------------
|Accounts payable and accrued liabilities | $             | 141.0        
|Accrued interest                         |               | 20.6         
|Total                                    | $             | 161.6        



EQUITY

The components of equity are as follows:



|(Millions)               | Dec. 31, 2013 | Dec. 31, 2012
|------------------------ | ------------- | -------------
|Trust Units              | $             | 552.1        
|Contributed surplus      |               | 3.1          
|Retained earnings        |               | 299.5        
|Unitholders’ equity      |               | 854.7        
|Non-controlling interest |               | 2,237.6      
|Total                    | $             | 3,092.3      



The following tables summarize the changes
in the units outstanding during the year ended December 31, 2013 and December 31, 2012:



|                                                        |  | 2013
|------------------------------------------------------- |  | ----
|                                                        |  |     
|Units issued and outstanding at beginning of year       |  |     
|Units issued pursuant to Distribution Reinvestment Plan |  |     
|Total units outstanding at December 31, 2013            |  |     



|                                                        |  | 2012
|------------------------------------------------------- |  | ----
|                                                        |  |     
|Units issued and outstanding at beginning of year       |  |     
|Units issued pursuant to Distribution Reinvestment Plan |  |     
|Total units outstanding at December 31, 2012            |  |     



At December 31, 2013, the weighted average
number of Trust Units outstanding was 26,150,847 (compared to 26,121,860 at December 31, 2012).



In November 2013, we renewed our normal
course issuer bid for our Trust Units for a further one-year period. During the twelve-month period commencing November 7, 2013,
and ending November 6, 2014, we may purchase on the Toronto Stock Exchange (“TSX”), the New York Stock Exchange, and/or
other exchanges or alternative trading systems if eligible, or by such other means as may be permitted by the TSX, up to 1,308,057
Trust Units, representing approximately 5% of its issued and outstanding Trust Units. No Trust Units were repurchased by the Trust
under its normal course issuer bid for the year ended December 31, 2013. A copy of the Notice of Intention relating to our normal
course issuer bid may be requested without charge.



Trust Units

Each Trust Unit is transferable and represents
an equal, undivided, beneficial interest in BOX and in any distributions, whether of net income, net realized capital gains, or
other amounts, and in the event of the termination or winding-up of the Trust, in the Trust’s net assets remaining after
satisfaction of all liabilities. All Trust Units rank among themselves equally and ratably without discrimination, preference,
or priority. Each Trust Unit entitles the holder thereof to one vote at all meetings of unitholders or with respect to any written
resolution of unitholders. The Trust Units have no conversion, retraction, or redemption rights.





|Brookfield Canada Office Properties | 13
|----------------------------------- | --













Special Voting Units

Special Voting Units are only issued in
tandem with Class B limited partnership units (“Class B LP Units”) of Brookfield Office Properties Canada LP
(“BOPC LP”) and are not transferable separately from the Class B LP Units to which they relate and upon
any transfer of Class B LP Units, such Special Voting Units will automatically be transferred to the transferee of the
Class B LP Units. As Class B LP Units are exchanged for Trust Units or purchased for cancellation, the corresponding
Special Voting Units will be cancelled for no consideration.



Each Special Voting Unit entitles the holder
thereof to one vote at all meetings of unitholders or with respect to any resolution in writing of unitholders. Except for the
right to attend and vote at meetings of the unitholders or with respect to written resolutions of the unitholders, Special Voting
Units do not confer upon the holders thereof any other rights. A Special Voting Unit does not entitle its holder to any economic
interest in BOX, or to any interest or share in BOX, or to any interest in any distributions (whether of net income, net realized
capital gains, or other amounts), or to any interest in any net assets in the event of termination or winding-up.



Non-Controlling interest

We classify the outstanding Class B LP
Units as non-controlling interest for financial statement purposes in accordance with IFRS. The Class B LP Units are exchangeable
on a one-for-one basis (subject to customary anti-dilution provisions) for Trust Units at the option of the holder. Each Class
B LP Unit is accompanied by a Special Voting Unit that entitles the holder thereof to receive notice of, to attend, and to vote
at all meetings of unitholders of BOX. The holders of Class B LP Units are entitled to receive distributions when declared by
BOPC LP equal to the per-unit amount of distributions payable to each holder of Trust Units. However, the Class B LP Units have
limited voting rights over BOPC LP.







The following tables present distributions
declared to Trust unitholders and non-controlling interest for the year ended December 31, 2013 and December 31, 2012.



|                                    |  | 2013
|----------------------------------- |  | ----
|(Millions, except per unit amounts) |  |     
|Paid in cash or DRIP                |  |     
|Payable as of December 31, 2013     |  |     
|Total                               |  |     
|Per unit                            |  |     





|                                    |  | 2012
|----------------------------------- |  | ----
|(Millions, except per unit amounts) |  |     
|Paid in cash or DRIP                |  |     
|Payable as of December 31, 2012     |  |     
|Total                               |  |     
|Per unit                            |  |     



We determine annual distributions to unitholders
by looking at forward-looking cash flow information, including forecasts and budgets and the future business prospects of the
Trust. We do not consider periodic cash flow fluctuations resulting from items such as the timing of property operating costs,
property tax installments, or semi-annual debenture and mortgage payable interest payments in determining the level of distributions
to unitholders. To determine the level of cash distributions made to unitholders, we consider the impact of, among other items,
the future growth in the income-producing portfolio, future acquisitions, and leasing related to the income-producing portfolio.
Annual distributions to unitholders are expected to continue to be funded by cash flows generated from our portfolio.



CAPITAL RESOURCES AND LIQUIDITY

We employ a broad range of financing strategies
to facilitate growth and manage financial risk, with particular emphasis on the overall reduction of the weighted-average cost
of capital, in order to enhance returns for unitholders. Our principal liquidity needs for the next twelve months are to:



| | • | fund recurring expenses;
| | - | ------------------------

| | • | meet debt service requirements;
| | - | -------------------------------

| | • | make distributions;
| | - | -------------------

| | • | fund those capital expenditures
                                         deemed mandatory, including tenant improvements
| | - | ------------------------------------------------------------------------------------------------------------------------

| | • | fund current development costs
                                         not covered by construction loans; and
| | - | --------------------------------------------------------------------------------------------------------------

| | • | fund investing activities,
                                         which could include:
| | - | ----------------------------------------------------------------------------------------

| | § | discretionary
                                         capital expenditures;
| | - | ----------------------------------------------------------------------------

| | § | property
                                         acquisitions; and
| | - | -------------------------------------------------------------------

| | § | repurchase
                                         of our units.
| | - | -----------------------------------------------------------------





|14 | 2013 Annual Report
|-- | ------------------













We believe that our liquidity needs will
be satisfied using cash on hand and cash flows generated from operating and financing activities. Rental revenue, recoveries from
tenants, interest and other income, available cash balances, draws on our credit facilities and refinancings (including upward
refinancings) of maturing indebtedness are our principal sources of capital used to pay operating expenses, distributions, debt
service, capital expenditures, and leasing costs in our commercial-property portfolio. We seek to increase income from our existing
properties by controlling operating expenses and by maintaining quality standards for our properties that promote high occupancy
rates and support increases in rental rates while reducing tenant turnover. We believe our revenue, along with proceeds from financing
activities, will continue to provide the necessary funds for our short-term liquidity needs and to fund anticipated ongoing distributions.
However, material changes in these factors may adversely affect our net cash flows.



Our principal liquidity needs for periods
beyond the next year are for scheduled debt maturities, unit distributions, development costs and capital expenditures. We plan
to meet these needs with one or more of the following:



| | • | cash flow from operating activities;
                                         and
| | - | ---------------------------------------------------------------------------------

| | • | credit facilities and refinancing
                                         opportunities; and
| | - | ---------------------------------------------------------------------------------------------

| | • | construction loans
| | - | ------------------



Our investment property and corporate
debt is primarily fixed-rate and non-recourse to the Trust. These investment-grade financings are typically structured on a loan-to-appraised-value
basis of between 50% and 65% as market conditions permit. In addition, in certain circumstances where a building is leased almost
exclusively to a high-credit-quality tenant, a higher loan-to-value financing, based on the tenant’s credit quality, is
put in place at rates commensurate with the cost of funds for the tenant. This reduces our equity requirements to finance investment
property and enhances equity returns.



Most of our borrowings are in the form
of long-term property-specific financings with recourse only to the specific assets. Limiting recourse to specific assets ensures
that poor performance within one area does not compromise our ability to finance the balance of our operations. Our maturity schedule
is fairly diversified so that financing requirements in any given year are manageable.



Our focus on structuring financings with
investment-grade characteristics ensures that debt levels on any particular asset can typically be maintained throughout a business
cycle. This enables us to limit covenants and other performance requirements, thereby reducing the risk of early payment requirements
or restrictions on the distribution of cash from the assets being financed.



To help ensure we are able to react to
investment opportunities quickly and on a value basis, we attempt to maintain a high level of liquidity. Our primary sources of
liquidity consists of cash and undrawn committed credit facilities. In addition, we structure our affairs to facilitate monetization
of longer-duration assets through financings, co-investor participations, or refinancings.



At December 31, 2013, our available liquidity
consists of $194.8 million of cash on hand, and $196.4 million of undrawn capacity on our corporate credit facility.



Cost of Capital

We continually strive to reduce our weighted-average
cost of capital and improve unitholders’ equity returns through value-enhancement initiatives and the consistent monitoring
of the balance between debt and equity financing.



As of December 31, 2013, our weighted-average
cost of capital, assuming a long-term 9.0% return on equity, was 6.7%. Our cost of capital is lower than many of our peers because
of the greater amount of investment-grade financing that can be placed on our assets, which is a function of the high-quality
nature of both the assets and the tenant base that composes our portfolio. In determining the long-term 9.0% return on equity,
management considers various factors including a review of various financial models such as dividend growth model and capital
asset pricing model, as well as examination of market returns. Based on the calculations of the financial models, market returns
and historic returns achieved by the Trust, management believes that the long-term 9.0% return is an appropriate benchmark.





|Brookfield Canada Office Properties | 15
|----------------------------------- | --













The following schedule details the capitalization
of the Trust and the related costs thereof:



|                                        |  | Cost of Capital(1) |     |   | Underlying Value(2) | 
|--------------------------------------- |  | ------------------ | --- | - | ------------------- | 
|(Millions, except cost of capital data) |  | Dec. 31, 2013      |     |   | Dec. 31, 2012       | 
|Liabilities                             |  |                    |     |   |                     | 
|Investment property and corporate debt  |  |                    | 4.2 | % |                     | 
|Unitholders’ equity                     |  |                    |     |   |                     | 
|Trust Units(3)                          |  |                    | 9.0 | % |                     | 
|Other equity                            |  |                    |     |   |                     | 
|Non-controlling interest(3)             |  |                    | 9.0 | % |                     | 
|Total                                   |  |                    | 6.7 | % |                     | 

(1)	Total
weighted-average cost of capital is calculated on the weighted average of underlying value.

| | (2) | Underlying value
                                         of liabilities presents the cost to retire debt on maturity. Underlying value of unitholders’
                                         equity and other equity is based on the closing unit price of BOX on the Toronto Stock
                                         Exchange (“TSX”).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(3)Assumes a long-term
9.0% return on equity for December 31, 2013 and December 31, 2012.



OPERATING RESULTS

Included on the following pages is a discussion
of the various components of our operating results in accordance with IFRS followed by a discussion of non-IFRS measures and corresponding
reconciliations to comparable IFRS measures.



|(Millions, except per unit amounts)                  |  | 2013 |       |  | 2012 |  
|---------------------------------------------------- |  | ---- | ----- |  | ---- | -
|Commercial property revenue                          |  | $    | 521.9 |  |      | $
|Direct commercial property expense                   |  |      | 250.0 |  |      |  
|                                                     |  |      | 271.9 |  |      |  
|Investment and other income                          |  |      | 0.9   |  |      |  
|Interest expense                                     |  |      | 105.2 |  |      |  
|General and administrative expense                   |  |      | 25.4  |  |      |  
|Income beforefair value gains                        |  |      | 142.2 |  |      |  
|Fair value gains                                     |  |      | 22.6  |  |      |  
|Net income and comprehensive income                  |  | $    | 164.8 |  |      | $
|Net income and comprehensive income attributable to: |  |      |       |  |      |  
|Unitholders                                          |  | $    | 46.1  |  |      | $
|Non-controlling interest                             |  |      | 118.7 |  |      |  
|                                                     |  | $    | 164.8 |  |      | $
|Net income per Trust unit                            |  | $    | 1.77  |  |      | $



COMMERCIAL PROPERTY REVENUE

Revenue from commercial properties includes
rental revenues earned from tenant leases, straight-line rent, percentage rent, and additional rent from the recovery of operating
costs and property taxes. Revenue from investment properties totaled $521.9 million for the year ended December 31, 2013 (compared
to $515.1 million in 2012). The increase is primarily due to increases in occupancy at Brookfield Place Toronto, Bay Adelaide
West and Hudson’s Bay Centre in Toronto, Suncor Energy Centre, Bankers Hall and Fifth Avenue Place in Calgary and continued
growth in same property revenues offset by expiries at First Canadian Place, Exchange Tower and Royal Centre.



The components of revenue are as follows:



|(Millions)                         |  | 2013 |       |  | 2012 |  
|---------------------------------- |  | ---- | ----- |  | ---- | -
|Rental revenue                     |  | $    | 518.5 |  |      | $
|Non-cash rental revenue            |  |      | 2.6   |  |      |  
|Lease termination and other income |  |      | 0.8   |  |      |  
|Commercial property revenue        |  | $    | 521.9 |  |      | $



Our strategy of owning premier properties
in high-growth, and in many instances supply-constrained markets with high barriers to entry, along with our focus on executing
long-term leases with strong credit-rated tenants, has created one of Canada’s most distinguished portfolios of office properties.
In the past, this strategy has reduced our exposure to the cyclical nature of the real estate business. In the fourth quarter
of 2013, we continued to reduce our lease expiry profile. We feel confident with our current rollover exposure, which is the percentage
of our total managed space currently scheduled to expire, and are focused on working toward renewals on expiries in the upcoming
months, as well as continuing to manage our rollover exposure in the future years.





|16 | 2013 Annual Report
|-- | ------------------













Our leases generally have clauses that
provide for the collection of rental revenues in amounts that increase every few years, with these increases negotiated at the
signing of the lease. Approximately 35% of our leases completed in 2013 have rent escalation clauses that will increase rent by
an average of $0.18 per square foot on an annual basis over the term of the lease. The large number of high-credit-quality tenants
in our portfolio lowers the risk of not realizing these increases. IFRS requires that these increases be recorded on a straight-line
basis over the life of the lease. For the year ended December 31, 2013, we recognized $2.6 million of non-cash rental revenue
(compared to $8.0 million in 2012). The decrease over the prior year is primarily due to the expiry of free rent periods at Bay
Adelaide West and First Canadian Place in Toronto. Direct commercial property expenses, which include real estate taxes, utilities,
insurance, repairs and maintenance, cleaning, and other property-related expenses, were $250.0 million for the year ended December
31, 2013 (compared to $245.9 million in 2012).



Substantially all of our leases are net
leases, in which the lessee is required to pay its proportionate share of the property’s operating expenses such as utilities,
repairs, insurance, and taxes. Consequently, leasing activity is the principal contributor to the change in same-property net
operating income. Our total portfolio occupancy rate ended the quarter at 96.0%. At December 31, 2013, average in-place net rent
throughout the portfolio was $27 per square foot, compared with an average market net rent of $33 per square foot. The Trust’s
average in-place net rent is lower than the market net rent which is reflective of the fact that a portion of our leases were
executed at a point in time wherein market rents were lower. In a market of increasing rents, this below-market gap provides a
growth opportunity for the Trust as we replace lower in-place net rents with higher market rents. Accordingly, we anticipate steady
growth in our net operating income as the two rates converge over time.



The following table shows the average
lease term, in-place rents, and estimated current market rents for similar space in each of our markets as of December 31, 2013:



|                 |  |                 |        |  | Avg.       |  |      | Avg. In-Place(1) |  |  | Avg. Market(2)  | 
|---------------- |  | --------------- | ------ |  | ---------- |  | ---- | ---------------- |  |  | --------------- | 
|                 |  | Leasable Area   |        |  | Lease Term |  |      | Net Rent         |  |  | Net Rent        | 
|Region           |  | (000's Sq. Ft.) |        |  | (Years)    |  |      | ($ per Sq. Ft.)  |  |  | ($ per Sq. Ft.) | 
|Toronto, Ontario |  |                 | 8,750  |  |            |  | 7.0  |                  |  |  | 28              | 
|Ottawa, Ontario  |  |                 | 1,744  |  |            |  | 0.5  |                  |  |  | 20              | 
|Calgary, Alberta |  |                 | 5,635  |  |            |  | 11.3 |                  |  |  | 29              | 
|Vancouver, B.C.  |  |                 | 582    |  |            |  | 9.4  |                  |  |  | 22              | 
|Other            |  |                 | 3      |  |            |  | 3⁄4    |                  |  |  | 3⁄4               | 
|Total            |  |                 | 16,714 |  |            |  | 7.9  |                  |  |  | 27              | 

(1)Average in-place net rent represents the annualized cash amount on a per square foot basis collected from tenants plus tenant
expense reimbursements less the operating expenses being incurred for that space, excluding the impact of straight-lining rent
escalations or amortizing free rent periods provided on in-place leases.

(2)Average market net rent represents management’s estimate of average rent per square foot for buildings of similar
quality to our portfolio. However, it may not necessarily be representative of the specific space that is rolling in any specific
year.



A summary of current and historical occupancy
levels at December 31 for the past two years is as follows:





|                                      |  | Dec. 31, 2013 |        |  | Dec. 31, 2012 | 
|------------------------------------- |  | ------------- | ------ |  | ------------- | 
|                                      |  | Leasable      |        |  | %             | 
|(000’s Sq. Ft., except % leased data) |  | Area          |        |  | Leased        | 
|Toronto, Ontario                      |  |               | 8,750  |  |               | 
|Ottawa, Ontario                       |  |               | 1,744  |  |               | 
|Calgary, Alberta                      |  |               | 5,635  |  |               | 
|Vancouver, B.C.                       |  |               | 582    |  |               | 
|Other                                 |  |               | 3      |  |               | 
|Total                                 |  |               | 16,714 |  |               | 





During 2013, we leased 2,209,000 square
feet of space, which included 882,000 square feet of new leasing and 1,327,000 square feet of renewals, compared to expiries of
1,775,000 square feet and accelerated expiries of 572,000 square feet. The average leasing net rent was $29 per square foot, which
is an increase of 32% over the average expiring net rent of $22 per square foot. At December 31, 2013, the average leasing net
rent related to new and renewed leases was $33 per square foot and $26 per square foot, respectively.



Leasing highlights from the fourth quarter
include:

| | · | 1,039,000
                                         square feet in Ottawa
| | - | ------------------------------------------------------------------------

| | - | A short term renewal for 1,036,000 square
                                         feet, and obtained approval from the Treasury Board of Canada Secretariat to an average
                                         9-year, 1,036,000-square-foot renewal, with Public Works and Government Services Canada
                                         at Place de Ville I & II
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 299,000
                                         square feet in Calgary
| | - | -----------------------------------------------------------------------

| | - | A 10-year, 290,000-square-foot new lease
                                         with TransCanada PipeLines Limited at Fifth Avenue Place
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | 49,000
                                         square feet in Toronto
| | - | ----------------------------------------------------------------------

| | - | A three-year, 16,000-square-foot new lease with the Bank
of Nova Scotia at Exchange Tower
| | - | -----------------------------------------------------------------------------------------





|Brookfield Canada Office Properties | 17
|----------------------------------- | --













The details of our leasing activity for
the year ended December 31, 2013, are as follows:



|                 |  | Dec. 31, 2012 |        |  | Activities during the year ended Dec. 31, 2013 |  |        | Dec. 31, 2013 | 
|---------------- |  | ------------- | ------ |  | ---------------------------------------------- |  | ------ | ------------- | 
|                 |  | Total         |        |  |                                                |  |        |               | 
|                 |  | Leasable      |        |  |                                                |  |        |               | 
|(000's Sq. Ft.)  |  | Area          |        |  | Leased                                         |  |        | Expiries      | 
|Toronto, Ontario |  |               | 8,750  |  |                                                |  | 8,262  |               | 
|Ottawa, Ontario  |  |               | 1,744  |  |                                                |  | 1,739  |               | 
|Calgary, Alberta |  |               | 5,635  |  |                                                |  | 5,609  |               | 
|Vancouver, B.C.  |  |               | 582    |  |                                                |  | 574    |               | 
|Other            |  |               | 3      |  |                                                |  | 3      |               | 
|Total Leasing    |  |               | 16,714 |  |                                                |  | 16,187 |               | 

(1)
Represents net rent in the final year.

(2)Year one leasing net rent is the rent at the commencement of the lease term on a per square foot basis including tenant
expense reimbursements, less operating expenses being incurred for that space, but excluding the impact of straight-lining rent
escalations or amortization of free rent periods.

(3)Average leasing net rent is the average rent over the lease term on a per square foot basis including tenant expense reimbursements,
less operating expenses being incurred for that space, but including the impact of straight-ling rent escalations or amortization
of free rent periods.



Additionally, during the year ended December
31, 2013, tenant improvements and leasing costs related to leasing activity that occurred averaged $10.86 per square foot, of
which $25.73 per square foot and $0.96 per square foot related to new and renewed leases, respectively, compared to $10.11 per
square foot during the same prior year period.



INVESTMENT AND OTHER INCOME

Investment and other income totaled $0.9
million in 2013 (compared to $nil in 2012). The amounts primarily include interest earned on cash balances and other income.



INTEREST EXPENSE

Interest expense totaled $105.2 million
in 2013, respectively (compared to $109.3 million in 2012). The decrease is due to the lower average costs of borrowing of 4.22%,
compared to 5.21% in 2012, primarily related to refinancings at lower interest rates, coupled with lower interest incurred as
a result of the repayment of the outstanding balance on the revolving corporate credit facility and capitalized interest earned
on Bay Adelaide East, offset by break fees incurred for early refinancing at Suncor Energy Centre in Calgary during the third
quarter of 2013 and higher debt balances compared to the prior year.



GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were
$25.4 million in 2013, respectively (compared to $20.9 million in 2012). The increase is primarily due a non-recurring legal charge
incurred during the year.



INCOME TAX EXPENSE

The Trust is a “mutual fund trust”
pursuant to the Income Tax Act (Canada). The Trust distributes or designates all taxable earnings to unitholders, and as
such, under current legislation, the obligation to pay tax rests with each unitholder. No current and deferred tax provisions
are required on the Trust’s income.



FAIR VALUE GAINS

During the year ended December 31, 2013,
the Trust recognized fair value gains of $22.6 (compared to $388.5 million in 2012). Fair value adjustments are determined based
on the movement of various parameters on a quarterly basis, including changes in projected cash flows as a result of leasing and
timing, discount rates, and terminal capitalization rates. Our investment property values increased from December 31, 2012 supported
by changes in the terminal capitalization rates resulting from improved tenant profiles and lower expiry rollover risk. Specifically
during 2013, we completed significant new leasing and renewals such as PricewaterhouseCoopers and TransCanada PipeLines Limited
in Calgary and Public Works and Government Services Canada in Ottawa as well as continued capital spends in the rest of our portfolio.



NON-IFRS MEASURES

Although we monitor and analyze our financial
performance using a number of indicators, our primary business objective of generating reliable and growing cash flow is monitored
and analyzed using net income, commercial property net operating income, funds from operations, and adjusted funds from operations.
Although net income is calculated in accordance with IFRS, IFRS does not prescribe standardized meanings for commercial property
net operating income, funds from operations, and adjusted funds from operations; therefore, they are unlikely to be comparable
to similar measures presented by other entities.





|18 | 2013 Annual Report
|-- | ------------------













Commercial property net operating income

Commercial property net operating income
is defined by us as income from commercial property operations after direct property operating expenses, including property administration
costs have been deducted but prior to deducting interest expense, general and administrative expenses, and fair value gains (losses).
Commercial property net operating income is used as a key indicator of performance, as it represents a measure over which management
of our commercial property operations has control.



Funds from Operations

Our definition of funds from operations
or “FFO” includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts
(“NAREIT”) definition of FFO including the exclusion of gains (or losses) from the sale of real estate property and
the add back of any depreciation and amortization related to real estate assets. In addition to the adjustments prescribed by
NAREIT, we also make adjustments to exclude any unrealized fair value gains (or losses) that arise as a result of reporting under
IFRS. These additional adjustments result in an FFO measure that would be similar to that which would result if the Trust determined
net income in accordance with U.S. GAAP and is also consistent with the Real Property Association of Canada (“REALPAC”)
white paper on funds from operations for IFRS issued November 2012. Our FFO measure will differ from other organizations applying
the NAREIT definition to the extent of certain differences between the IFRS and U.S. GAAP reporting frameworks, principally related
to the recognition of lease termination income and fair value gains (or losses), which does not have a significant impact on the
FFO measure reported.



Adjusted Funds from Operations

Adjusted funds from operations or “AFFO”
is defined by us as FFO net of actual second-generation leasing commissions and tenant improvements, actual maintaining value
capital expenditures, and straight-line rental income. AFFO is a widely used measure used to assess an entity’s ability
to pay distributions.



Total equity per unit

Total equity per unit represents the book
value of our total equity divided by total units outstanding. We believe that total equity per unit is the best indicator of our
current financial position because it reflects our total equity adjusted for all inflows and outflows, including FFO and changes
in the value of our investment properties.



We believe that FFO, AFFO, commercial
property net operating income, total equity per unit and net income are measures comparable to organizations in our industry that
are organized as REITs.



COMMERCIAL PROPERTY NET OPERATING INCOME







Commercial property net operating income
includes commercial property revenue less direct commercial property expense and is a key indicator of performance as it represents
a measure over which management of the commercial property operations has control. One of the ways in which we evaluate performance
is by comparing the performance of the commercial property portfolio on a same property basis. Same property commercial property
net operating income is defined as properties included in our consolidated results that we own and operate throughout both the
current and prior period. Accordingly, same property results would exclude properties acquired or sold during each period, as
well as significant lease termination and other income (charges) amounts that are non-recurring.



Our commercial property net operating
income for the year ended December 31, 2013, was $271.9 million (compared to $269.2 million in 2012). The increase is primarily
due to increases in occupancy at Brookfield Place Toronto and Bay Adelaide West in Toronto, continued growth in same property
revenues across the Calgary portfolio, offset by expiries at First Canadian Place, Exchange Tower and Royal Centre.



The components of commercial property
net operating income are as follows:



|(Millions)                         |  | 2013 |       |  | 2012 |  
|---------------------------------- |  | ---- | ----- |  | ---- | -
|Commercial property revenue        |  | $    | 521.9 |  |      | $
|Direct commercial property expense |  |      | 250.0 |  |      |  
|Total                              |  | $    | 271.9 |  |      | $





|Brookfield Canada Office Properties | 19
|----------------------------------- | --















Same commercial property operation highlights
are as follows:



|(Millions)                                               |  | 2013 |       |   | 2012 |  
|-------------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Commercial property net operating income – same property |  | $    | 272.9 |   |      | $
|Lease termination and other income (charges)             |  |      | (1.0  | ) |      |  
|Total                                                    |  | $    | 271.9 |   |      | $



|                                        |  | Dec. 31, 2013 |      |   | Dec. 31, 2012 |  
|--------------------------------------- |  | ------------- | ---- | - | ------------- | -
|Same property average in-place net rent |  | $             | 27   |   |               | $
|Same property occupancy                 |  |               | 96.0 | % |               |  



RECONCILIATION OF COMMERCIAL PROPERTY
NET OPERATING INCOME TO NET INCOME



|(Millions, except per unit amounts)      |  | 2013 |        |   | 2012 |  
|---------------------------------------- |  | ---- | ------ | - | ---- | -
|Commercial property net operating income |  | $    | 271.9  |   |      | $
|Add (deduct):                            |  |      |        |   |      |  
|Fair value gains                         |  |      | 22.6   |   |      |  
|General and administrative expense       |  |      | (25.4  | ) |      |  
|Interest expense                         |  |      | (105.2 | ) |      |  
|Investment and other income              |  |      | 0.9    |   |      |  
|Net income                               |  | $    | 164.8  |   |      | $



RECONCILIATION OF NET INCOME TO FUNDS
FROM OPERATIONS

Funds from operations was $1.55 per unit
during the year ended December 31, 2013 (compared to $1.49 per unit in 2012).



|(Millions, except per unit amounts)                            |  | 2013 |       |   | 2012 |  
|-------------------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Net income                                                     |  | $    | 164.8 |   |      | $
|Add (deduct):                                                  |  |      |       |   |      |  
|Fair value gains                                               |  |      | (22.6 | ) |      |  
|Amortization of lease incentives                               |  |      | 2.5   |   |      |  
|Funds from operations                                          |  | $    | 144.7 |   |      | $
|Funds from operations attributable to unitholders              |  |      | 40.5  |   |      |  
|Funds from operations attributable to non-controlling interest |  |      | 104.2 |   |      |  
|                                                               |  | $    | 144.7 |   |      | $
|Weighted average Trust Units outstanding                       |  |      | 26.1  |   |      |  
|Funds from operations per Trust unit                           |  | $    | 1.55  |   |      | $



RECONCILIATION OF FUNDS FROM OPERATIONS
TO ADJUSTED FUNDS FROM OPERATIONS

Adjusted funds from operations totaled
$1.18 per unit during the year ended December 31, 2013 (compared to $1.15 per unit in 2012).



|(Millions, except per unit amounts)                                     |  | 2013 |       |   | 2012 |  
|----------------------------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Funds from operations                                                   |  | $    | 144.7 |   |      | $
|Deduct:                                                                 |  |      |       |   |      |  
|Straight-line rental income                                             |  |      | (5.1  | ) |      |  
|Second-generation leasing commissions and tenant improvements (1)       |  |      | (20.1 | ) |      |  
|Maintaining value capital expenditures (1)                              |  |      | (9.4  | ) |      |  
|Adjusted funds from operations                                          |  | $    | 110.1 |   |      | $
|Adjusted funds from operations attributable to unitholders              |  |      | 30.8  |   |      |  
|Adjusted funds from operations attributable to non-controlling interest |  |      | 79.3  |   |      |  
|                                                                        |  | $    | 110.1 |   |      | $
|Weighted average Trust Units outstanding                                |  |      | 26.1  |   |      |  
|Adjusted funds from operations per Trust unit                           |  | $    | 1.18  |   |      | $
|Trust unit distributions declared                                       |  | $    | 1.17  |   |      | $
|Distribution ratio                                                      |  |      | 98    | % |      |  

(1)Current period amounts were adjusted to reflect actual leasing commissions, tenant improvements and maintaining value capital
expenditures incurred. Prior period amounts were calculated based on historical spend levels as well as projected spend levels
over the next 10 years as described on page 21.





|20 | 2013 Annual Report
|-- | ------------------













AFFO is calculated by adjusting FFO for
straight-line rental income, actual second-generation leasing commissions and tenant improvements, and actual maintaining value
capital expenditures for maintaining the infrastructure and current rental revenues of our properties. Actual expenditures will
vary from period to period and at times could be materially different depending on the timing of leasing activities and capital
plans. As a result, AFFO will experience volatility when comparing period-over-period results. Due to the volatile nature of AFFO,
we believe that it is important to compare the actual results with historic and projected averages of leasing costs and maintaining
value capital expenditures in order to determine the effects of a full office leasing cycle. Our 5-year historic average reflects
the actual leasing activities completed, while the 10-year average projections reflect our leasing expiry profile. We also believe
that these averages will provide insight to determining the normalized distribution payout ratio and growth in adjusted funds
from operations.



The historic and projected averages are
as follows:



|                                       |  |   | Annual amount            |  |  |   |                      | 
|-------------------------------------- |  | - | ------------------------ |  |  | - | -------------------- | 
|(Millions)                             |  |   | 5-year historic coverage |  |  |   | 10-year average plan | 
|Second generation                      |  |   |                          |  |  |   |                      | 
|Leasing commissions                    |  | $ | 7.5                      |  |  | $ | 6.4                  | 
|Tenant improvements                    |  |   | 13.2                     |  |  |   | 13.8                 | 
|Maintaining value capital expenditures |  |   | 3.3                      |  |  |   | 6.3                  | 



There is no standard industry defined
measure of AFFO; therefore, our methodology of calculating AFFO will differ from other entities and may not be comparable to similar
measures presented by other entities.



RECONCILIATION OF CASH FROM OPERATING
ACTIVITIES TO ADJUSTED FUNDS FROM OPERATIONS



|(Millions)                                                        |  | 2013 |       |   | 2012 |  
|----------------------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Cash generated from operating activities                          |  | $    | 174.4 |   |      | $
|Add (deduct):                                                     |  |      |       |   |      |  
|Working capital and other                                         |  |      | (37.1 | ) |      |  
|Leasing commissions and tenant inducements                        |  |      | 5.7   |   |      |  
|Amortization of deferred financing costs                          |  |      | (3.4  | ) |      |  
|Second-generation leasing commissions and tenant improvements (1) |  |      | (20.1 | ) |      |  
|Maintaining value capital expenditures (1)                        |  |      | (9.4  | ) |      |  
|Adjusted funds from operations                                    |  | $    | 110.1 |   |      | $

(1)Current period amounts were adjusted to reflect actual expenditures incurred. Prior period amounts were calculated based
on historical spend levels as well as projected spend levels over the next 10 years as described above.





|Brookfield Canada Office Properties | 21
|----------------------------------- | --













QUARTERLY RESULTS



The results by quarter are as follows:



|                                         |  | 2013 |       |  | 2012 |  
|---------------------------------------- |  | ---- | ----- |  | ---- | -
|(Millions, except per unit amounts)      |  | Q4   |       |  | Q3   |  
|Revenue                                  |  | $    | 132.7 |  |      | $
|Commercial property net operating income |  |      | 67.2  |  |      |  
|Interest expense                         |  |      | 23.3  |  |      |  
|Funds from operations                    |  |      | 37.8  |  |      |  
|Adjusted funds from operations (1)       |  |      | 22.4  |  |      |  
|Net income                               |  |      | 50.5  |  |      |  
|Net income per Trust unit                |  | $    | 0.54  |  |      | $

(1)2013 amounts were adjusted to reflect actual leasing commissions, tenant improvements and maintaining value capital expenditures
incurred. 2012 amounts were calculated based on historical spend levels as well as projected spend levels over the next 10 years
as described on page 21.



In the fourth quarter of 2013, revenues increased
as a result of new leases and renewals at market rents. Net income increased in the fourth quarter of 2013, when compared with
the third quarter, mainly due to higher fair value gains on investment properties and lower interest expense.





|22 | 2013 Annual Report
|-- | ------------------













PART III – RISKS AND UNCERTAINTIES



BOX’s financial results are affected
by the performance of our operations and various external factors influencing the specific sectors and geographic locations in
which we operate, as well as macroeconomic factors such as economic growth, inflation, interest rates, regulatory requirements
and initiatives, and litigation and claims that arise in the normal course of business.



Our strategy is to invest in premier assets
that generate sustainable streams of cash flow. Although high-quality assets may initially generate lower returns on capital,
we believe that the sustainability and future growth of their cash flows is more assured over the long term and, as a result,
warrant higher valuation levels. We also believe that the high quality of our asset base protects the Trust against future uncertainty
and enables us to invest with confidence when opportunities arise.



The following is a review of the material
factors and the potential impact these factors may have on our business operations. A more detailed description of our business
environment and risks is contained in our Annual Information Form, which is posted on our web site at www.brookfieldcanadareit.com
or at www.sedar.com or www.sec.gov.



PROPERTY-RELATED RISKS

Our strategy is to invest in high-quality
office properties as defined by the physical characteristics of the asset and, more important, the certainty of receiving rental
payments from large corporate tenants (with investment-grade credit ratings – see “Credit Risk” on page 24)
that these properties attract. Nonetheless, we remain exposed to certain risks inherent in the core office-property business.



Commercial property investments are generally
subject to varying degrees of risk depending on the nature of the property. These risks include changes in general economic conditions
(such as the availability and costs of mortgage funds), local conditions (such as an oversupply of space or a reduction in demand
for real estate in the markets in which we operate), the attractiveness of the properties to tenants, competition from other landlords
with competitive space, and our ability to provide adequate maintenance at an economical cost.



Certain significant expenditures, including
property taxes, maintenance costs, mortgage payments, insurance costs, and related charges, must be made regardless of whether
a property is producing sufficient income to service these expenses. Our office properties are subject to mortgages that require
substantial debt service payments. If we become unable or unwilling to meet mortgage payments on any property, losses could be
sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale. We believe the stability and
long-term nature of our contractual revenues effectively mitigates these risks.



As owners of premier office properties,
lease rollovers also present a risk, as continued growth of rental income is dependent on strong leasing markets to ensure expiring
leases are renewed and new tenants are found promptly to fill vacancies. Refer to “Lease Rollover Risk” on page 24
of this MD&A for further details.



INTEREST RATE AND FINANCING RISK

We attempt to stagger the maturities of
our mortgage portfolio evenly over a 10-year time horizon. We believe that this strategy will most effectively manage interest
rate risk.



As outlined under “Capital Resources
and Liquidity,” beginning on page 14 of this MD&A, we have an ongoing need to access debt markets to refinance maturing
debt as it comes due. There is a risk that lenders will not refinance such maturing debt on terms and conditions acceptable to
us or on any terms at all. Our strategy to stagger the maturities of our mortgage portfolio attempts to mitigate our exposure
to excessive amounts of debt maturing in any one year.



Approximately 0.5% of our outstanding
investment property and corporate debt at December 31, 2013 is floating-rate debt (December 31, 2012 – 3.8%) and subject
to fluctuations in interest rates. The effect of a 100-basis point increase in interest rates on interest expense relating to
our floating-rate debt, all else being equal, is an increase in interest expense of $0.1 million on an annual basis or $nil per
unit. In addition, there is interest rate risk associated with the Trust’s fixed rate debt due to the expected requirement
to refinance such debt in the year of maturity. The effect of a 100 basis-point increase in interest rates on interest expense
relating to fixed rate debt maturing within one year, all else being equal, is an increase in interest expense of $0.7 million
on an annual basis or approximately $0.01 per unit.



The analysis does not reflect the impact
a changing interest rate environment could have on our overall performance and, as a result, it does not reflect the actions management
may take in such an environment.



We currently have a level of indebtedness
for the Trust of 45.7% of the fair market value of our commercial properties. This level of indebtedness is considered by the
Trust to be conservative and, based on this, the Trust believes that all debts will be financed or refinanced as they come due
in the foreseeable future.





|Brookfield Canada Office Properties | 23
|----------------------------------- | --













CREDIT RISK

Credit risk arises from the possibility
that tenants may be unable to fulfill their lease commitments. We mitigate this risk by ensuring that our tenant mix is diversified
and by limiting our exposure to any one tenant. We also maintain a portfolio that is diversified by industry type so that exposure
to a business sector is lessened. Currently, no single tenant represents more than 11.2% of total leasable area and 6.7% of commercial
property revenue.



We attempt to mitigate our credit risk
by signing long-term leases with tenants who have investment-grade credit ratings. The Trust directs special attention to the
credit quality of our tenants in order to ensure the long-term sustainability of rental revenues through economic cycles. Once
a lease has been signed, the Trust proactively monitors the financial performance of significant tenants on a regular basis and
reviews the status of arrears. The Trust regularly monitors indicators of increased risk within its tenant portfolio and maintains
a formalized tenant credit report to identify natural changes in credit quality.



The following list shows our top 20 largest
tenants by leasable area in our commercial properties portfolio and their respective lease commitments:





|   |  |                                  |  |                             |  |                 |  | 000’s Sq. Ft.(2) |       |   |      |  |      |      |  |  |       |  
|-- |  | -------------------------------- |  | --------------------------- |  | --------------- |  | ---------------- | ----- | - | ---- |  | ---- | ---- |  |  | ----- | -
|   |  | Tenant                           |  | Primary Location            |  | CreditRating(1) |  | 2014             |       |   | 2015 |  |      | 2016 |  |  | 2017  |  
|1  |  | Government and related agencies  |  | Toronto, Ottawa             |  | AAA             |  |                  | 1,088 |   |      |  | 587  |      |  |  | 204   |  
|2  |  | Suncor Energy Inc.               |  | Calgary                     |  | BBB+            |  |                  |       |   |      |  |      |      |  |  |       |  
|3  |  | Bank of Montreal                 |  | Toronto, Calgary            |  | A+              |  |                  | 22    |   |      |  |      |      |  |  | 17    |  
|4  |  | Imperial Oil                     |  | Calgary                     |  | AAA             |  |                  |       |   |      |  |      |      |  |  | 718   |  
|5  |  | Talisman Energy                  |  | Calgary                     |  | BBB             |  |                  |       |   |      |  |      |      |  |  |       |  
|6  |  | Royal Bank                       |  | Toronto, Calgary, Vancouver |  | AA-             |  |                  |       |   |      |  | 12   |      |  |  | 16    |  
|7  |  | Enbridge Inc.                    |  | Calgary                     |  | A-              |  |                  |       |   |      |  |      |      |  |  |       |  
|8  |  | Deloitte LLP                     |  | Toronto, Calgary            |  | Not Rated       |  |                  |       |   |      |  | 98   |      |  |  | 49    |  
|9  |  | Bennett Jones                    |  | Toronto, Calgary            |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|10 |  | KPMG Management Services LP      |  | Toronto                     |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|11 |  | Canadian Natural Resources       |  | Calgary                     |  | BBB+            |  |                  |       |   |      |  |      |      |  |  |       |  
|12 |  | CIBC                             |  | Toronto, Calgary            |  | A+              |  |                  |       |   |      |  |      |      |  |  |       |  
|13 |  | Osler, Hoskin & Harcourt         |  | Toronto                     |  | Not Rated       |  |                  | 61    |   |      |  | 28   |      |  |  |       |  
|14 |  | EnCana Corporation               |  | Calgary                     |  | BBB             |  |                  |       |   |      |  | 241  |      |  |  |       |  
|15 |  | McMillan LLP                     |  | Toronto, Vancouver          |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|16 |  | Toronto Stock Exchange           |  | Toronto                     |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|17 |  | Goodmans LLP                     |  | Toronto                     |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|18 |  | The Bay                          |  | Toronto                     |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|19 |  | Gowlings Canada Inc.             |  | Toronto                     |  | Not Rated       |  |                  |       |   |      |  |      |      |  |  |       |  
|20 |  | The Manufacturers Life Insurance |  | Toronto                     |  | AA-             |  |                  |       |   |      |  |      |      |  |  |       |  
|   |  | Total                            |  |                             |  |                 |  |                  | 1,171 |   |      |  | 966  |      |  |  | 1,004 |  
|   |  | Total %                          |  |                             |  |                 |  |                  | 12.4  | % |      |  | 10.2 | %    |  |  | 10.6  | %



(1)From Standard &
Poor’s.

(2) Percentage of total
leasable area of commercial properties, prior to considering partnership interests in partially owned properties; excludes parking.

(3) Reflects the year of
maturity related to lease(s) included in the ‘Beyond’ column.



LEASE ROLLOVER RISK

Lease roll-over risk arises from the possibility
that we may experience difficulty renewing leases as they expire or in re-leasing space vacated by tenants upon early lease expiry.
We attempt to stagger our lease-expiry profile so that we are not faced with disproportionate amounts of space expiring in any
one year. Approximately 6.5% of our leases mature annually up to 2018. Our portfolio has a weighted-average lease life of eight
years. We further mitigate this risk by maintaining a diversified portfolio mix by geographic location and by proactively leasing
space in advance of its contractual expiry.



The following table sets out lease expiries,
by square footage, for our portfolio at December 31, 2013.



|                 |  | Currently |     |   |      |  |       |      |  |  |       |   |  |      |       |   |      |  |     |      |  |  |      |   |  | 2021     |     |   |          |  |       |         |  |  |       |  
|---------------- |  | --------- | --- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - | ---- |  | --- | ---- |  |  | ---- | - |  | -------- | --- | - | -------- |  | ----- | ------- |  |  | ----- | -
|(000’s Sq. Ft.)  |  | Available |     |   | 2014 |  |       | 2015 |  |  | 2016  |   |  | 2017 |       |   | 2018 |  |     | 2019 |  |  | 2020 |   |  | & Beyond |     |   | Leasable |  |       | Parking |  |  | Total |  
|Toronto, Ontario |  |           | 506 |   |      |  | 272   |      |  |  | 501   |   |  |      | 792   |   |      |  | 539 |      |  |  | 504  |   |  |          | 653 |   |          |  | 971   |         |  |  | 4,012 |  
|Ottawa, Ontario  |  |           | 64  |   |      |  | 1,099 |      |  |  | 543   |   |  |      | 8     |   |      |  | 5   |      |  |  | 3    |   |  |          | 3⁄4   |   |          |  | 9     |         |  |  | 13    |  
|Calgary, Alberta |  |           | 24  |   |      |  | 49    |      |  |  | 215   |   |  |      | 468   |   |      |  | 65  |      |  |  | 227  |   |  |          | 100 |   |          |  | 242   |         |  |  | 4,245 |  
|Vancouver, B.C.  |  |           | 71  |   |      |  | 8     |      |  |  | 35    |   |  |      | 77    |   |      |  | 20  |      |  |  | 27   |   |  |          | 35  |   |          |  | 49    |         |  |  | 260   |  
|Other            |  |           | 3⁄4   |   |      |  | 3⁄4     |      |  |  | 3⁄4     |   |  |      | 3⁄4     |   |      |  | 3⁄4   |      |  |  | 3⁄4    |   |  |          | 1   |   |          |  | 3⁄4     |         |  |  | 2     |  
|Total            |  |           | 665 |   |      |  | 1,428 |      |  |  | 1,294 |   |  |      | 1,345 |   |      |  | 629 |      |  |  | 761  |   |  |          | 789 |   |          |  | 1,271 |         |  |  | 8,532 |  
|% of total       |  |           | 4.0 | % |      |  | 8.5   | %    |  |  | 7.7   | % |  |      | 8.0   | % |      |  | 3.8 | %    |  |  | 4.6  | % |  |          | 4.7 | % |          |  | 7.6   | %       |  |  | 51.1  | %





|24 | 2013 Annual Report
|-- | ------------------













ENVIRONMENTAL RISKS

As an owner of real property, we are subject
to various laws relating to environmental matters. These laws could hold us liable for the costs of removal and remediation of
certain hazardous substances or waste present in our buildings, released or deposited on or in our properties or disposed of at
other locations. These costs could be significant and would reduce cash available for our business. The failure to remove or remediate
such substances could adversely affect our ability to sell or our ability to borrow using such real estate as collateral and could
potentially result in claims against us. We are not aware of any material non-compliance with environmental laws at any of our
properties nor are we aware of any pending or threatened investigations or actions by environmental regulatory authorities in
connection with any of our properties or any pending or threatened claims relating to environmental conditions at our properties.



We will continue to make the necessary
capital and operating expenditures to ensure that we are compliant with environmental laws and regulations. Although there can
be no assurances, we do not believe that costs relating to environmental matters will have a material effect on our business,
financial condition or results of operations. However, environmental laws and regulations can change rapidly and we may become
subject to more stringent environmental laws and regulations in the future. Compliance with more stringent environmental laws
and regulations could have an adverse effect on our business, financial condition, or results of operations.



OTHER RISKS AND UNCERTAINTIES

Real estate is relatively illiquid. Such
illiquidity may limit our ability to vary our portfolio promptly in response to changing economic or investment conditions. Also,
financial difficulties of other property owners resulting in distressed sales could depress real estate values in the markets
in which we operate.



Our investment properties generate a relatively
stable source of income from contractual tenant rent payments. Continued growth of rental income is dependent on strong leasing
markets to ensure expiring leases are renewed and new tenants are found promptly to fill vacancies at attractive rental rates.
With leasing markets performance being impacted by the strength of the economies in which we operate, it is possible we could
see downward pressure on overall occupancy levels and net effective rents if economic recovery slows or stalls. We are, however,
substantially protected against short-term market conditions, as most of our leases are long-term in nature with an average term
of eight years.



INSURANCE RISKS

We maintain insurance on our commercial
properties in amounts and with deductibles that we believe are in line with what owners of similar properties carry. We maintain
all risk property insurance and rental value coverage (including coverage for the perils of flood, earthquake and windstorm).
Our all risk policy limit is $1.5 billion per occurrence. Our earthquake limit is $500 million per occurrence and in the annual
aggregate. This coverage is subject to a $100,000 (dollars) deductible for all locations except for British Columbia where the
deductible is 3% of the values for all locations where the physical loss, damage or destruction occurred. The flood limit is $500
million per occurrence and in the annual aggregate, and is subject to a deductible of $25,000 (dollars) for all losses arising
from the same occurrence, with the exception of our Calgary properties where 25% of the loss is subject to a $500,000 deductible.



With respect to our commercial properties,
we purchase an insurance policy that covers acts of terrorism for limits up to $1.2 billion.





|Brookfield Canada Office Properties | 25
|----------------------------------- | --













PART IV – CRITICAL ACCOUNTING
POLICIES AND ESTIMATES



Adoption
of Accounting Standards

The Trust adopted IFRS 10, “Consolidated
Financial Statements”, IFRS 11, “Joint Arrangements” and IFRS 12, “Disclosure of Interests in Other Entities”,
effective January 1, 2013.

| | i. | IFRS 10 defines the principle of
                                         control and establishes control as the basis for determining which entities are consolidated
                                         in the financial statements of the reporting entity. In accordance with the transitional
                                         provisions of IFRS 10, the Trust reassessed the control conclusion for its investees
                                         at January 1, 2013 and concluded that no change to our current treatment was required.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ii. | As a result of the adoption of
                                         IFRS 11, the Trust has changed its accounting policy with respect to its interests in
                                         joint arrangements. Under IFRS 11, the Trust classifies its interests in joint arrangements
                                         as either joint operations or joint ventures depending on the Trust’s rights to
                                         the assets and obligation for the liabilities of the arrangements. When making this assessment,
                                         the Trust considers the structure of the arrangements, the legal form of any separate
                                         vehicles, the contractual terms of the arrangements and other facts and circumstances.
                                         Previously, the structure of the arrangement was the primary focus of classification.
                                         The Trust has re-evaluated its involvement in its joint arrangements and concluded that
                                         no change to the previous accounting treatment was required.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii. | IFRS 12 requires the Trust to
                                         disclose information that helps users to evaluate the nature, risks and financial effects
                                         associated with the Trust’s interests in subsidiaries, associates, joint arrangements
                                         and unconsolidated structured entities. The new disclosures have been reflected in the
                                         Trust’s annual consolidated financial statements.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Trust adopted IFRS 13, “Fair
Value Measurement”, effective January 1, 2013. IFRS 13 establishes a single source for fair value measurements and disclosures
about fair value measurements. IFRS 13 defines fair value, establishes a framework for measuring fair value, and requires disclosures
about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial
instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements,
except in specified circumstances. The Trust has assessed its fair value measurement framework and concluded that no change to
the current treatment was required. Additional disclosure has been included in the consolidated financial statements to be in
accordance with the standard.



The Trust adopted Amendments to IAS 1,
“Presentation of Items of Other Comprehensive Income”, effective January 1, 2013. Amendments to IAS 1 require the
Trust to present the items of other comprehensive income (“OCI”) that may be reclassified to profit or loss in the
future if certain conditions are met, separately from those that would never be reclassified to profit or loss. At this time,
the Trust is not required to present any items in OCI.



Future accounting
policy changes

Financial instruments

IFRS 9, “Financial Instruments”
is a multi-phase project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces
new requirements for classifying and measuring financial assets. In October 2010, the International Accounting Standards Board
(“IASB”) reissued IFRS 9, incorporating new requirements on accounting for financial liabilities and carrying over
from IAS 39 the requirements for de-recognition of financial assets and financial liabilities. The mandatory effective date of
IFRS 9 has not been finalized. The IASB intends to expand IFRS 9 to add new requirements for impairment of financial assets measured
at amortized cost and hedge accounting. On completion of these various phases, IFRS 9 will be a complete replacement of IAS 39.



Levies

IFRIC 21, “Levies” clarifies
that a liability for a levy, such as property taxes, is recognized when the activity that triggers payment, as identified by the
relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that
no liability should be recorded before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning
on or after January 1, 2014. The Trust is currently evaluating the impact to the consolidated financial statements.





|26 | 2013 Annual Report
|-- | ------------------













critical
accounting policies

Our critical accounting policies are those
that we believe are the most important in portraying our financial condition and results of operations, and require the most subjective
judgment and estimates on the part of management.



Investment Properties

Investment
properties include commercial properties held to earn rental income and properties that are being constructed or developed for
future use as investment properties. Commercial properties and commercial developments are recorded at fair value, determined
based on available market evidence, at the balance sheet date. We determine the fair value of each investment property based upon,
among other things, rental income from current leases and assumptions about rental income from future leases reflecting market
conditions at the balance sheet date, less future cash flows in respect of such leases. Fair values are primarily determined by
discounting the expected future cash flows, generally over a term of 11 years including a terminal value based on the application
of a capitalization rate to estimated year 12 cash flows. Commercial developments under active development are measured using
a discounted cash flow model, net of costs to complete, as of the balance sheet date. Valuations of investment properties are
most sensitive to changes in the discount rate and timing or variability of cash flows.



The
cost of commercial developments includes direct development costs, realty taxes and borrowing costs directly attributable to the
development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of
borrowing costs capitalized is determined first by reference to borrowings specific to the project, where relevant, and otherwise
by applying a weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other
specific developments. Where borrowings are associated with specific developments, the amount capitalized is the gross cost incurred
on those borrowings less any investment income arising on their temporary investment. Borrowing costs are capitalized from the
commencement of the development until the date of practical completion. The capitalization of borrowing costs is suspended if
there are prolonged periods when development activity is interrupted. We consider practical completion to have occurred when the
property is capable of operating in the manner intended by management. Generally this occurs upon completion of construction and
receipt of all necessary occupancy and other material permits. Where we have pre-leased space as of or prior to the start of the
development and the lease requires us to construct tenant improvements which enhance the value of the property, practical completion
is considered to occur on completion of such improvements.



Initial direct leasing costs we incur
in negotiating and arranging tenant leases are added to the carrying amount of investment properties.



Tax

The Trust is a “mutual fund trust”
pursuant to the Income Tax Act (Canada). The Trust distributes or designates all taxable earnings to unitholders, and as
such, under current legislation, the obligation to pay tax rests with each unitholder. Deferred income taxes are not recognized
in the Trust’s financial statements on the basis that the Trust can deduct distributions paid such that its liability for
income taxes is substantially reduced or eliminated for the year, and the Trust intends to continue to distribute its taxable
income and continue to qualify as a real estate investment trust for the foreseeable future.



Revenue Recognition

We account for our leases with tenants
as operating leases as we have retained substantially all of the risks and benefits of ownership of our investment properties.
Revenue recognition under a lease commences when the tenant has a right to use the leased asset. Generally, this occurs on the
lease commencement date or, where we are required to make additions to the property in the form of tenant improvements that enhance
the value of the property, upon substantial completion of those improvements. The total amount of contractual rent to be received
from operating leases is recognized on a straight-line basis over the term of the lease; a straight-line rent or free-rent receivable,
which is included in the carrying amount of investment property, is recorded for the difference between the rental revenue recorded
and the contractual amount received.



An allowance for doubtful accounts is
recorded, if necessary, for estimated losses resulting from the inability of tenants to make required rent payments. The computation
of this allowance is based on the tenants’ payment history and current credit status as well as certain industry-specific
or geography-specific credit considerations. We also make judgments with respect to whether tenant improvements provided in connection
with a lease enhance the value of the leased property, which determines whether such amounts are treated as additions to investment
property as well as the point in time at which revenue recognition under the lease commences. In addition, where a lease allows
a tenant to elect to take all or a portion of any unused tenant improvement allowance as a rent abatement, we must exercise judgment
in determining the extent to which the allowance represents an inducement that is amortized as a reduction of lease revenue over
the term of the lease.



Rental revenue also includes percentage
participating rents and recoveries of operating expenses, including property taxes. Percentage participating rents are recognized
when tenants’ specified sales targets have been met. Operating expense recoveries are recognized in the period that recoverable
costs are chargeable to tenants.





|Brookfield Canada Office Properties | 27
|----------------------------------- | --













Critical judgments in applying accounting
policies

The following are the critical judgments
that have been made in applying our accounting policies and that have the most significant effect on the amounts in the consolidated
financial statements:

| | i. | Investment property
| | -- | -------------------

The Trust’s accounting
policies relating to investment property are described in Note 2(f) in the consolidated financial statements. In applying this
policy, judgment is applied in determining whether certain costs are additions to the carrying amount of the property and, for
properties under development, identifying the point at which practical completion of the property occurs and identifying the directly
attributable borrowing costs to be included in the carrying value of the development property.



| | ii. | Common Control Transactions
| | --- | ---------------------------

IFRS does not include specific
measurement guidance for transfers of businesses, subsidiaries or assets between entities under common control. Accordingly, the
Trust has developed a policy to account for such transactions taking into consideration other guidance in the IFRS framework and
pronouncements of other standard-setting bodies. The Trust’s policy is to record assets and liabilities recognized as a
result of transfers of businesses or subsidiaries between entities under common control at the carrying value on the transferor’s
financial statements. Differences between the carrying amount of the consideration paid or received, where the Trust is the transferor,
and the carrying amount of the assets and liabilities transferred are recorded directly in equity.



USE OF ESTIMATES

The preparation of our consolidated financial
statements requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts
of revenues and expenses during the reporting period. Our estimates are based on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. The result of our ongoing evaluation of these estimates forms the
basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions.



RELATED-PARTY TRANSACTIONS

In the normal course of operations, the
Trust enters into various transactions on market terms with related parties that have been measured at exchange value and are
recognized in the consolidated financial statements.



The Trust has entered into two service-support
agreements with BOPM LP, dated May 1, 2010, for the provision of property management, leasing, construction, and asset management
services. The purpose of the agreements is to provide the services of certain personnel and consultants as are necessary to help
the Trust operate and manage its assets and tenant base; it also includes a cost-recovery for administrative and regulatory compliance
services provided. The fees paid to BOPM LP are calculated in accordance with the terms of the agreements. Included in direct
commercial property expense during the year ended December 31, 2013, are amounts paid to BOPM LP for property management services
of $14.2 million (compared to $13.8 million in 2012). Included in investment properties during the year ended December 31, 2013,
are amounts paid to BOPM LP for leasing and construction services of $4.1 million (compared to $3.1 million in 2012). Included
in general and administrative expenses during the year ended December 31, 2013, are amounts paid to BOPM LP for asset management
and administrative and regulatory compliance services of $17.5 million (compared to $16.2 million in 2012).



Included in rental revenues during the
year ended December 31, 2013, are amounts received from Brookfield Asset Management Inc., the ultimate parent of BPO, and its
affiliates of $6.3 million (compared to $5.9 million in 2012).



On July 11, 2013, the Trust acquired Bay
Adelaide East from BPO for an aggregate total investment of $601.9 million. The Trust purchased the building on an “as-if-completed-and-stabilized
basis,” and paid BPO $169.9 million representing the amount invested and value created to date in the project at close.
The Trust has committed to fund an additional $26.0 million of up-front equity and an additional $350.0 million that will be funded
from a first mortgage construction loan. Additionally, the Trust will make a final payment to BPO of $56.0 million on stabilization,
subject to achieving stabilized net operating income and targeted permanent financing. As part of the acquisition of Bay Adelaide
East, we formed an independent committee and engaged third-party advisors to evaluate the fairness of the transaction.





|28 | 2013 Annual Report
|-- | ------------------













PART V – BUSINESS ENVIRONMENT AND
OUTLOOK



OPERATING
ENVIRONMENT AND OUTLOOK

2013
was a successful year for BOX as we made great progress on all fronts, including significant leasing volume and capital initiatives,
solid growth in net operating income and funds from operations, as well as the acquisition of Bay Adelaide East. Our performance
over the past year reiterates our belief that BOX offers institutional investors and individual shareholders alike the best option
to invest in the most prestigious office properties in Canada. On the leasing front, BOX achieved a full-year leasing total of
2.2 million square feet and our portfolio occupancy rate finished the year at 96.0%, which compares favourably with the Canadian
national average of 91.9%. We also improved our 5-year rollover exposure up to 2018 by 5%. With respect to financing initiatives,
through the completion of several re-financings and extensions that generated gross proceeds of more than $1.7 billion, we lowered
the average cost of debt from 5.2% to 4.2%, extended the average debt term-to-maturity from five to eight years, and repatriated
$438 million of capital at ownership. Bay Adelaide East is 60% pre-leased and is on target to be completed in late 2015. It is
being developed to the highest level of efficiency and sustainability and will achieve LEED Platinum certification upon completion
and along with Bay Adelaide West, it forms the newest, best-in class office precinct in Toronto’s financial core.



Our
priorities for 2014 include focusing on leasing objectives, as we continue our strategy of being proactive and maintaining an
above-market occupancy rate. At the end of 2013, we experienced a slowdown in leasing velocity in the market that we operating
in. However, the fundamentals remain stable in the Class “A” and “AA” sectors, with vacancy rates between
5% to 7%. We are focused on renewing the Government’s lease at Jean Edmonds Tower in Ottawa, and devising re-leasing plans
to fill existing voids and minimize rollover exposure in the near to mid-term in Toronto and Vancouver. We also continue to focus
on gaining access to the debt markets for opportunities to further reduce our cost of capital and interest rate exposure. And
lastly, we will advance and actively monitor the development and lease-up of the Bay Adelaide East Tower and to ensure construction
milestones are achieved and completion is on target and on budget.



We
ended 2013 with $3.1 billion in net assets at a value per unit of $33.18, a 2.0% increase over the course of the year. In addition,
we ended the year with a significant cash position and we will continue to look for opportunities to deploy this cash at attractive
returns to unitholders.



With
a strong balance sheet offering financial flexibility, a well-leased portfolio with below-market net rents, and solid fundamentals
in our markets, BOX is well positioned to deliver on its commitment to unitholders in 2014.



disclosure
controls and procedures

Management, including the Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
the applicable Canadian and U.S. securities law) as of December 31, 2013. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of December 31, 2013.



Internal
Controls over Financial Reporting

There
was no change in the Trust’s internal control over financial reporting that occurred during 2013 that has materially affected,
or is reasonably likely to materially affect, the Trust’s internal control over financial reporting. Management has also
evaluated the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2013, and based
on that assessment concluded that the Trust’s internal control over financial reporting was effective. Refer to Management’s
Report on Internal Control over Financial Reporting on page 33 of this annual report.







Bryan K. Davis

Chief Financial Officer

March 3, 2014





|Brookfield Canada Office Properties | 29
|----------------------------------- | --













DISTRIBUTIONS

Trust distributions declared for the year
ended December 31, 2013 and December 31, 2012 are as follows:



|(Millions, except per unit amounts) |  | 2013 |      |  | 2012 |  
|----------------------------------- |  | ---- | ---- |  | ---- | -
|Paid in cash or DRIP                |  | $    | 27.9 |  |      | $
|Payable at December 31              |  |      | 2.6  |  |      |  
|Total                               |  |      | 30.5 |  |      |  
|Per unit                            |  | $    | 1.17 |  |      | $





|30 | 2013 Annual Report
|-- | ------------------













Management’s Responsibility for
the Financial Statements



The consolidated financial statements
and management’s financial analysis and review contained in this annual report are the responsibility of the management
of the Trust. To fulfill this responsibility, the Trust maintains a system of internal controls to ensure that its reporting practices
and accounting and administrative procedures are appropriate and provide assurance that relevant and reliable financial information
is produced. The consolidated financial statements have been prepared in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board and, where appropriate, reflect estimates based on management’s
best judgment in the circumstances. The financial information presented throughout this annual report is consistent with the information
contained in the consolidated financial statements.



Deloitte LLP, the independent auditors
appointed by the unitholders, have audited the consolidated financial statements in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States) to enable them to express
to the Board of Trustees and unitholders their opinion on the consolidated financial statements. Their report as Independent Registered
Public Accounting Firm is set out on the following page.



The consolidated financial statements
have been further examined by the Board of Trustees and by its Audit Committee, which meets with the auditors and management to
review the activities of each and reports to the Board of Trustees. The auditors have direct and full access to the Audit Committee
and meet with the committee both with and without management present. The Board of Trustees, directly and through its Audit Committee,
oversees management’s responsibilities and is responsible for reviewing and approving the consolidated financial statements.



|                                          |                            
|----------------------------------------- | ---------------------------
|                                          |                            
|Jan Sucharda                              | Bryan K. Davis             
|President and Chief Executive
    Officer | Chief Financial
    Officer
|March 3, 2014                             |                            





|Brookfield Canada Office Properties | 31
|----------------------------------- | --













Report of Independent Registered Public
Accounting Firm



To the Board of Trustees and Unitholders of Brookfield Canada
Office Properties



We have audited the accompanying consolidated
financial statements of Brookfield Canada Office Properties and subsidiaries (the “Trust”), which comprise the consolidated
balance sheets as at December 31, 2013 and December 31, 2012, and the consolidated statements of income and comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and the notes
to the consolidated financial statements.



Management's Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.



Auditor's Responsibility

Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion

In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Trust and subsidiaries as at December 31, 2013
and December 31, 2012 and their financial performance and their cash flows for the years then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.



Other Matter

We have also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the Trust’s internal control over financial
reporting as of December 31, 2013, based on the criteria established in Internal Control — Integrated Framework (1992)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2014 expressed an
unqualified opinion on the Trust’s internal control over financial reporting.







Chartered Professional Accountants, Chartered Accountants

Licensed Public Accountants



March 3, 2014

Toronto, Canada





|32 | 2013 Annual Report
|-- | ------------------













Management’s Report on Internal
Control over Financial Reporting



Management
of Brookfield Canada Office Properties is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive
Officer and the Chief Financial Officer and effected by the Board of Trustees, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.



Due
to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis.
Also, projections of any evaluation to the effectiveness of internal control over the financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.



Management
assessed the effectiveness of Brookfield Canada Office Properties’ internal control over financial reporting as of December
31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management concluded that, as at December 31, 2013, Brookfield
Canada Office Properties’ internal control over financial reporting is effective. There are no material weaknesses that
have been identified by Management.



Brookfield
Canada Office Properties' internal control over financial reporting as of December 31, 2013 has been audited by Deloitte LLP,
Independent Registered Public Accounting Firm, who also audited Brookfield Canada Office Properties’ consolidated financial
statements for the year ended December 31, 2013, and as stated in the Report of Independent Registered Public Accounting Firm,
Deloitte LLP, expressed an unqualified opinion on the effectiveness of Brookfield Canada Office Properties' internal control over
financial reporting.



|                                          |                        
|----------------------------------------- | -----------------------
|                                          |                        
|Jan Sucharda                              | Bryan K. Davis         
|President and Chief Executive
    Officer | Chief Financial Officer
|March 3, 2014                             |                        





|Brookfield Canada Office Properties | 33
|----------------------------------- | --













Report of Independent Registered Public
Accounting Firm



To the Board of Trustees and Unitholders of Brookfield Canada
Office Properties

We have audited the internal control over
financial reporting of Brookfield Canada Office Properties and subsidiaries (the “Trust”)as of December 31,
2013, based onthe criteria established in Internal Control—Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Trust's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Trust's internal control over financial reporting based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.



A company's internal control over financial
reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers,
or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect
on the financial statements.



Because of the inherent limitations of
internal control over financial reporting, including the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation
of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, the Trust maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the criteria established
in Internal Control — Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway
Commission.



We have also audited, in accordance with
Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements as of and for the year ended December 31, 2013 of the Trust and our report dated March 3,
2014 expressed an unqualified opinion on those financial statements.





Chartered Professional Accountants, Chartered Accountants

Licensed Public Accountants



March 3, 2014

Toronto, Canada





|34 | 2013 Annual Report
|-- | ------------------













Consolidated Balance Sheets



|(Millions) (CDN$)                      |  | Note |    |  | Dec. 31, 2013 |   |         | Dec. 31, 2012 | 
|-------------------------------------- |  | ---- | -- |  | ------------- | - | ------- | ------------- | 
|Assets                                 |  |      |    |  |               |   |         |               | 
|Non-current assets                     |  |      |    |  |               |   |         |               | 
|Investment properties                  |  |      |    |  |               |   |         |               | 
|Commercial properties                  |  |      | 5  |  |               | $ | 5,158.2 |               | 
|Commercial development                 |  |      | 5  |  |               |   | 232.0   |               | 
|                                       |  |      |    |  |               |   | 5,390.2 |               | 
|                                       |  |      |    |  |               |   |         |               | 
|Current assets                         |  |      |    |  |               |   |         |               | 
|Tenant and other receivables           |  |      | 7  |  |               |   | 17.5    |               | 
|Other assets                           |  |      | 8  |  |               |   | 6.3     |               | 
|Cash and cash equivalents              |  |      | 9  |  |               |   | 194.8   |               | 
|                                       |  |      |    |  |               |   | 218.6   |               | 
|Total assets                           |  |      |    |  |               | $ | 5,608.8 |               | 
|                                       |  |      |    |  |               |   |         |               | 
|Liabilities                            |  |      |    |  |               |   |         |               | 
|Non-current liabilities                |  |      |    |  |               |   |         |               | 
|Investment property and corporate debt |  |      | 10 |  |               | $ | 2,229.1 |               | 
|                                       |  |      |    |  |               |   |         |               | 
|Current liabilities                    |  |      |    |  |               |   |         |               | 
|Investment property and corporate debt |  |      | 10 |  |               |   | 125.8   |               | 
|Accounts payable and other liabilities |  |      | 11 |  |               |   | 161.6   |               | 
|                                       |  |      |    |  |               |   | 287.4   |               | 
|Total liabilities                      |  |      |    |  |               |   | 2,516.5 |               | 
|                                       |  |      |    |  |               |   |         |               | 
|Equity                                 |  |      | 13 |  |               |   |         |               | 
|Unitholders’ equity                    |  |      |    |  |               |   | 854.7   |               | 
|Non-controlling interest               |  |      |    |  |               |   | 2,237.6 |               | 
|Total equity                           |  |      |    |  |               |   | 3,092.3 |               | 
|Total liabilities and equity           |  |      |    |  |               | $ | 5,608.8 |               | 



See accompanying notes to the consolidated
financial statements.



On behalf of the Trust,



|                 |                                      
|---------------- | -------------------------------------
|                 |                                      
|Thomas F. Farley | Jan Sucharda                         
|Chairman         | President and Chief Executive Officer





|Brookfield Canada Office Properties | 35
|----------------------------------- | --













Consolidated Statements of Income and
Comprehensive Income



|Years ended December 31                              |  |      |        |  |      |   |       |      | 
|---------------------------------------------------- |  | ---- | ------ |  | ---- | - | ----- | ---- | 
|(Millions, except per unit amounts) (CDN$)           |  | Note |        |  | 2013 |   |       | 2012 | 
|Commercial property revenue                          |  |      | 14     |  |      | $ | 521.9 |      | 
|Direct commercial property expense                   |  |      | 14     |  |      |   | 250.0 |      | 
|Investment and other income                          |  |      | 14     |  |      |   | 0.9   |      | 
|Interest expense                                     |  |      | 10     |  |      |   | 105.2 |      | 
|General and administrative expense                   |  |      | 14, 17 |  |      |   | 25.4  |      | 
|Income before fair value gains                       |  |      |        |  |      |   | 142.2 |      | 
|Fair value  gains                                    |  |      | 5      |  |      |   | 22.6  |      | 
|Net income and comprehensive income                  |  |      |        |  |      | $ | 164.8 |      | 
|                                                     |  |      |        |  |      |   |       |      | 
|Net income and comprehensive income attributable to: |  |      |        |  |      |   |       |      | 
|Unitholders                                          |  |      |        |  |      | $ | 46.1  |      | 
|Non-controlling interest                             |  |      |        |  |      |   | 118.7 |      | 
|                                                     |  |      |        |  |      | $ | 164.8 |      | 
|Net income per Trust unit – basic and diluted        |  |      |        |  |      | $ | 1.77  |      | 



See accompanying notes to the consolidated
financial statements.





|36 | 2013 Annual Report
|-- | ------------------















Consolidated
Statements of Changes in Equity



|Years ended December 31 (Millions) (CDN$)                             |  | Note |    |  | 2013 |   |         | 2012 | 
|--------------------------------------------------------------------- |  | ---- | -- |  | ---- | - | ------- | ---- | 
|Trust Units                                                           |  |      |    |  |      |   |         |      | 
|Balance at beginning of year                                          |  |      |    |  |      | $ | 551.1   |      | 
|Issuance of Trust Units under Distribution Reinvestment Plan (“DRIP”) |  |      | 12 |  |      |   | 1.0     |      | 
|Balance at end of year                                                |  |      |    |  |      |   | 552.1   |      | 
|Contributed surplus                                                   |  |      |    |  |      |   |         |      | 
|Balance at beginning and end of year                                  |  |      |    |  |      |   | 3.1     |      | 
|Retained earnings                                                     |  |      |    |  |      |   |         |      | 
|Balance at beginning of year                                          |  |      |    |  |      |   | 283.9   |      | 
|Net income                                                            |  |      |    |  |      |   | 46.1    |      | 
|Distributions                                                         |  |      | 12 |  |      |   | (30.5   | )    | 
|Balance at end of year                                                |  |      |    |  |      |   | 299.5   |      | 
|Total unitholders’ equity                                             |  |      |    |  |      | $ | 854.7   |      | 
|                                                                      |  |      |    |  |      |   |         |      | 
|Non-controlling interest                                              |  |      |    |  |      |   |         |      | 
|Balance at beginning of year                                          |  |      |    |  |      | $ | 2,197.5 |      | 
|Net income                                                            |  |      |    |  |      |   | 118.7   |      | 
|Distributions                                                         |  |      | 12 |  |      |   | (78.6   | )    | 
|Balance at end of year                                                |  |      |    |  |      |   | 2,237.6 |      | 
|Total equity                                                          |  |      |    |  |      | $ | 3,092.3 |      | 



See accompanying notes to the consolidated
financial statements.





|Brookfield Canada Office Properties | 37
|----------------------------------- | --











Consolidated Statements of Cash Flows



|Years ended December 31 (Millions) (CDN$)             |  | Note |    |  | 2013 |   |         | 2012 | 
|----------------------------------------------------- |  | ---- | -- |  | ---- | - | ------- | ---- | 
|Operating activities                                  |  |      |    |  |      |   |         |      | 
|Net income                                            |  |      |    |  |      | $ | 164.8   |      | 
|Add (deduct):                                         |  |      |    |  |      |   |         |      | 
|Non-cash rental revenue                               |  |      | 14 |  |      |   | (2.6    | )    | 
|Amortization of deferred financing costs              |  |      |    |  |      |   | 3.4     |      | 
|Leasing commissions and tenant inducements            |  |      |    |  |      |   | (5.7    | )    | 
|Fair value gains                                      |  |      |    |  |      |   | (22.6   | )    | 
|Interest expense                                      |  |      |    |  |      |   | 105.2   |      | 
|Interest paid                                         |  |      |    |  |      |   | (98.2   | )    | 
|Other working capital                                 |  |      |    |  |      |   | 30.1    |      | 
|Cash flows provided by operating activities           |  |      |    |  |      |   | 174.4   |      | 
|                                                      |  |      |    |  |      |   |         |      | 
|Investing activities                                  |  |      |    |  |      |   |         |      | 
|Acquisition of commercial developments                |  |      | 5  |  |      |   | (169.9  | )    | 
|Restricted cash and deposits                          |  |      |    |  |      |   | 0.8     |      | 
|Capital expenditures – commercial properties          |  |      |    |  |      |   | (36.5   | )    | 
|Capital expenditures – commercial development         |  |      |    |  |      |   | (47.0   | )    | 
|Cash flows used in investing activities               |  |      |    |  |      |   | (252.6  | )    | 
|                                                      |  |      |    |  |      |   |         |      | 
|Financing activities                                  |  |      |    |  |      |   |         |      | 
|Investment property debt arranged                     |  |      |    |  |      |   | 1,132.5 |      | 
|Investment property debt repayments                   |  |      |    |  |      |   | (684.8  | )    | 
|Investment property debt amortization                 |  |      |    |  |      |   | (39.6   | )    | 
|Corporate debt arranged                               |  |      |    |  |      |   | 175.0   |      | 
|Corporate debt repayments                             |  |      |    |  |      |   | (243.0  | )    | 
|Trust unit distributions paid                         |  |      | 19 |  |      |   | (29.5   | )    | 
|Class B LP unit distributions paid                    |  |      | 19 |  |      |   | (78.6   | )    | 
|Cash flows provided by (used in) financing activities |  |      |    |  |      |   | 232.0   |      | 
|Increase in cash and cash equivalents                 |  |      |    |  |      |   | 153.8   |      | 
|Cash and cash equivalents, beginning of year          |  |      |    |  |      |   | 41.0    |      | 
|Cash and cash equivalents, end of year                |  |      |    |  |      | $ | 194.8   |      | 



See accompanying notes to the consolidated
financial statements.





|38 | 2013 Annual Report
|-- | ------------------













Notes to the Consolidated Financial
Statements



NOTE 1: NATURE AND DESCRIPTION OF THE
TRUST

Brookfield Canada Office Properties (the
“Trust” or “BOX”) is an unincorporated, closed-end real estate investment trust (“REIT”) established
under and governed by the laws of the Province of Ontario, Canada and created pursuant to a declaration of trust dated March 19,
2010 and amended and restated February 24, 2012. Although it is intended that BOX qualifies as a “mutual fund trust”
pursuant to the Income Tax Act (Canada), BOX is not a mutual fund under applicable securities laws.



The Trust is a subsidiary of Brookfield
Office Properties Inc. (“BPO”), which owns an aggregate equity interest in the Trust of 83.3% as of December 31, 2013
consisting of 40.5% of the issued and outstanding units of BOX (“Trust Units”) and 100% of the issued and outstanding
Class B limited partnership units (“Class B LP Units”) of Brookfield Office Properties Canada LP (“BOPC LP”),
a subsidiary of BOX that owns direct interests in the Trust’s investment properties. BOX primarily invests in and operates
commercial office properties in Toronto, Ottawa, Calgary, and Vancouver. The registered and operating office of the Trust is Brookfield
Place Toronto, 181 Bay Street, Suite 330, Toronto, Ontario, M5J 2T3.



NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

| | (a) | Statement of compliance
| | --- | -----------------------

The consolidated financial statements
have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board (“IFRS”).



| | (b) | Basis of presentation
| | --- | ---------------------

The financial statements have been prepared
on a going concern basis and have been presented in Canadian dollars rounded to the nearest million. The accounting policies set
out below have been applied consistently in all material respects with exception to the standards adopted in the current year
as described in Note 3. New standards and guidelines not effective for the current accounting year are described in Note 4.



| | (c) | Basis of consolidation
| | --- | ----------------------

The consolidated financial statements
include the accounts of the Trust and its consolidated subsidiaries consisting of BOPC GP Inc. and BOPC LP, which are the entities
over which the Trust has control. Control is achieved when the Trust has power over an entity; is exposed, or has rights, to variable
returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Trust holds all
of the Class A Limited Partnership Units of BOPC LP (“Class A LP Units”). The holders of the Class A LP Units are
entitled to vote at all meetings of the partners of BOPC LP. In addition, BOX is the sole shareholder of BOPC GP Inc., the general
partner of BOPC LP, which has full power and exclusive authority to administer, manage, control and operate the business and affairs
of BOPC LP. The Trust reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control.



Non-controlling interests in the equity
and results of the Trust are shown separately in equity on the consolidated balance sheets.



All intercompany assets, liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Trust are eliminated in full on consolidation.



| | (d) | Interests in joint operations
| | --- | -----------------------------

A joint operation is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous consent of the parties sharing control. This usually results through
a direct interest rather than through the establishment of a separate entity. The Trust has determined that its joint arrangements
are all joint operations.



Where the Trust undertakes its activities
under joint operations, the Trust recognizes its proportionate share of jointly controlled assets, liabilities, revenues and expenses
in the consolidated financial statements which are classified according to their nature.



| | (e) | Fair value measurement
| | --- | ----------------------

The Trust measures its non-financial assets
such as investment properties, at fair value at each balance sheet date. Fair values of financial instruments measured at amortized
cost are described in Note 2(j).



Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the
fair value of an asset or liability, the Trust takes into account the characteristics of the asset or liability and available
market evidence at the measurement date.





|Brookfield Canada Office Properties | 39
|----------------------------------- | --













In addition, for financial reporting purposes,
fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements
are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:



| | · | Level
                                         1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
                                         that the Trust can access at the measurement date;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level
                                         2 inputs are inputs, other than quoted prices included within Level 1, that are observable
                                         for the asset or liability, either directly or indirectly; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level
                                         3 inputs are unobservable inputs for the asset or liability.
| | - | -----------------------------------------------------------------------------------------------------------



| | (f) | Investment properties
| | --- | ---------------------

Investment
properties include commercial properties held to earn rental income and properties that are being constructed or developed for
future use as investment properties. Commercial properties and commercial developments are recorded at fair value, determined
based on available market evidence, at the balance sheet date. We determine the fair value of each investment property based upon,
among other things, rental income from current leases and assumptions about rental income from future leases reflecting market
conditions at the balance sheet date, less future cash flows in respect of such leases. Fair values are primarily determined by
discounting the expected future cash flows, generally over a weighted-average term of 11 years, including a terminal value based
on the application of a capitalization rate to estimated year 12 cash flows. Commercial developments under active development
are measured using a discounted cash flow model, net of costs to complete, as of the balance sheet date. Valuations of investment
properties are most sensitive to changes in the discount rate and timing or variability of cash flows.



The
cost of commercial development includes direct development costs, realty taxes and borrowing costs directly attributable to the
development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of
borrowing costs capitalized is determined first by reference to borrowings specific to the project, where relevant, and otherwise
by applying a weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other
specific developments. Where borrowings are associated with specific developments, the amount capitalized is the gross cost incurred
on those borrowings less any investment income arising on their temporary investment. Borrowing costs are capitalized from the
commencement of the development until the date of practical completion. The capitalization of borrowing costs is suspended if
there are prolonged periods when development activity is interrupted. We consider practical completion to have occurred when the
property is capable of operating in the manner intended by management. Generally this occurs upon completion of construction and
receipt of all necessary occupancy and other material permits. Where we have pre-leased space as of or prior to the start of the
development and the lease requires us to construct tenant improvements which enhance the value of the property, practical completion
is considered to occur on completion of such improvements.



Initial direct leasing costs we incur
in negotiating and arranging tenant leases are added to the carrying amount of investment properties.



| | (g) | Assets held for sale
| | --- | --------------------

Non-current assets and
groups of assets and liabilities that comprise disposal groups are categorized as assets held for sale where the asset or disposal
group is available for sale in its present condition and the sale is highly probable. For this purpose, a sale is highly probable
if management is committed to a plan to achieve the sale, there is an active program to find a buyer, the non-current asset or
disposal group is being actively marketed at a reasonable price, the sale is anticipated to be completed within one year from
the date of classification, and it is unlikely there will be changes to the plan. Where an asset or disposal group is acquired
with a view to resale, it is classified as a non-current asset held for sale if the disposal is expected to take place within
one year of the acquisition and it is highly likely that the other conditions referred to above will be met within a short period
following the acquisition. Non-current assets held for sale and disposal groups are carried at the lesser of carrying amount and
fair value less costs to sell. The profit or loss arising on re-classification or sale of a disposal group is recognized as discontinued
operations.



| | (h) | Provisions
| | --- | ----------

A provision is a liability
of uncertain timing or amount. Provisions are recognized when the Trust has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably
estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a discount rate that reflects current market assessments of the time value
of money and the risks specific to the obligation. Provisions are remeasured at each balance sheet date using the current discount
rate. The increase in the provision due to the passage of time is recognized as interest expense.



| | (i) | Revenue recognition
| | --- | -------------------

The Trust has retained substantially all
of the risks and benefits of ownership of its investment properties and therefore accounts for leases with its tenants as operating
leases. Revenue recognition under a lease commences when the tenant has a right to use the leased asset. Generally, this occurs
on the lease inception date or, where the Trust is required to make additions to the property in the form of tenant improvements
that enhance the value of the property, upon substantial completion of those improvements. The total amount of contractual rent
to be received from operating leases is recognized on a straight-line basis over the term of the lease; a straight-line rent receivable,
which is included in the carrying amount of investment property, is recorded for the difference between the rental revenue recorded
and the contractual amount received.





|40 | 2013 Annual Report
|-- | ------------------













Rental revenue also includes percentage
participating rents and recoveries of operating expenses, including property and capital taxes. Percentage participating rents
are recognized when tenants’ specified sales targets have been met. Operating expense recoveries are recognized in the period
that recoverable costs are chargeable to tenants.



| | (j) | Financial instruments and
                                         derivatives
| | --- | ------------------------------------------------------------------------------

Derivative instruments are recorded on
the consolidated balance sheets at fair value, including those derivatives that are embedded in financial or non-financial contracts
and that are not closely related to the host contract, and gains and losses arising from changes in fair value of derivative instruments
are recognized in net income in the period the changes occur.



The following summarizes the Trust’s
classification and measurement of financial instruments:



|Financial assets and liabilities       |  | Classification        |  | Measurement   
|-------------------------------------- |  | --------------------- |  | --------------
|Cash and cash equivalents              |  | Loans and receivables |  | Amortized cost
|Tenant receivables                     |  | Loans and receivables |  | Amortized cost
|Investment property and corporate debt |  | Other liabilities     |  | Amortized cost
|Accounts payable and other liabilities |  | Other liabilities     |  | Amortized cost



With the exception of Investment property
and corporate debt, the carrying amounts of these financial assets and liabilities approximate fair value. The fair value of investment
property and corporate debt is determined by discounting contractual principal and interest payments at estimated current market
interest rates for the instrument. Current market interest rates are determined with reference to current benchmark rates for
a similar term and current credit spreads for debt with similar terms and risks.



| | (k) | Cash and cash equivalents
| | --- | -------------------------

Cash and cash equivalents include cash
and short-term investments with original maturities of three months or less.



| | (l) | Non-controlling interest
| | --- | ------------------------

Class B LP Units are classified as non-controlling
interest and are presented as a component of equity as they represent equity interests in BOPC LP not attributable, directly or
indirectly, to the Trust.



| | (m) | Income taxes
| | --- | ------------

The Trust is a “mutual fund trust”
pursuant to the Income Tax Act (Canada). The Trust intends to distribute or designates all taxable earnings to unitholders
and, under current legislation, the obligation to pay tax rests with each unitholder. No current or deferred tax provision is
recognized in the Trust’s financial statements on the Trust’s income.



| | (n) | Critical judgments in applying
                                         accounting policies
| | --- | -------------------------------------------------------------------------------------------

The following are the critical judgments
that have been made in applying the Trust’s accounting policies and that have the most significant effect on the amounts
in the consolidated financial statements:



(i)   	Leases

| |  | The Trust’s policy for revenue
                                         recognition on investment properties is described in Note 2(i). In applying this policy,
                                         the Trust makes judgments with respect to whether tenant improvements provided in connection
                                         with a lease enhance the value of the leased property, which determines whether such
                                         amounts are treated as additions to investment property as well as the point in time
                                         at which revenue recognition under the lease commences. In addition, where a lease allows
                                         a tenant to elect to take all or a portion of any unused tenant improvement allowance
                                         as a rent abatement, the Trust must exercise judgment in determining the extent to which
                                         the allowance represents an inducement that is amortized as a reduction of lease revenue
                                         over the term of the lease.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Trust also makes judgments in
                                         determining whether certain leases, in particular those tenant leases with long contractual
                                         terms where the lessee is the sole tenant in a property and long-term ground leases where
                                         the Trust is lessor, are operating or finance leases. The Trust has determined that all
                                         of its leases are operating leases.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(ii) 	 Investment
property

The Trust’s accounting policies
relating to investment property are described in Note 2(f). In applying this policy, judgment is applied in determining whether
certain costs are additions to the carrying amount of the property and, for properties under development, identifying the point
at which practical completion of the property occurs and identifying the directly attributable borrowing costs to be included
in the carrying value of the development property.





|Brookfield Canada Office Properties | 41
|----------------------------------- | --















(iii) 	Income
taxes

Deferred income taxes are not
recognized in the Trust’s financial statements on the basis that the Trust can deduct distributions paid such that its liability
for income taxes is substantially reduced or eliminated for the year, and the Trust intends to continue to distribute its taxable
income and continue to qualify as a real estate investment trust for the foreseeable future.



(iv) 	Common control
transactions

IFRS does not include specific
measurement guidance for transfers of businesses or subsidiaries between entities under common control. Accordingly, the Trust
has developed a policy to account for such transactions taking into consideration other guidance in the IFRS framework and pronouncements
of other standard-setting bodies. The Trust’s policy is to record assets and liabilities recognized as a result of
transfers of businesses or subsidiaries between entities under common control at the carrying value on the transferor’s
financial statements. Differences between the carrying amount of the consideration paid or received, where the Trust is the
transferor, and the carrying amount of the assets and liabilities transferred are recorded directly in equity.



(v)   Consolidated
financial statements

The Trust’s accounting policies
relating to consolidation are described in Note 2(c). In applying this policy, judgment is applied in determining whether the
Trust has control over the entity and if facts or circumstances indicate that there are changes to one or more of the elements
of control.



| | (o) | Critical Accounting Estimates
                                         and Assumptions
| | --- | --------------------------------------------------------------------------------------

The Trust makes estimates and assumptions
that affect the carrying amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported
amount of earnings for the period. Actual results could differ from estimates. The estimates and assumptions that are critical
to the determination of the amounts reported in the consolidated financial statements relate to the following:



Investment property

The critical estimates and assumptions
underlying the valuation of investment properties are set out in Note 5.



NOTE 3: ADOPTION OF ACCOUNTING STANDARDS

The Trust adopted IFRS 10, “Consolidated
Financial Statements”, IFRS 11, “Joint Arrangements” and IFRS 12, “Disclosure of Interests in Other Entities”,
effective January 1, 2013.

| | i. | IFRS 10 defines the principle of
                                         control and establishes control as the basis for determining which entities are consolidated
                                         in the financial statements of the reporting entity. In accordance with the transitional
                                         provisions of IFRS 10, the Trust reassessed the control conclusion for its investees
                                         at January 1, 2013 and concluded that no change to its current treatment was required.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ii. | As a result of the adoption of
                                         IFRS 11, the Trust has changed its accounting policy with respect to its interests in
                                         joint arrangements. Under IFRS 11, the Trust classifies its interests in joint arrangements
                                         as either joint operations or joint ventures depending on the Trust’s rights to
                                         the assets and obligation for the liabilities of the arrangements. When making this assessment,
                                         the Trust considers the structure of the arrangements, the legal form of any separate
                                         vehicles, the contractual terms of the arrangements and other facts and circumstances.
                                         Previously, the structure of the arrangement was the primary focus of classification.
                                         The Trust has re-evaluated its involvement in its joint arrangements and concluded that
                                         no change to the previous accounting treatment was required.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii. | IFRS 12 requires the Trust to
                                         disclose information that helps users to evaluate the nature, risks and financial effects
                                         associated with the Trust’s interests in subsidiaries, associates, joint arrangements
                                         and unconsolidated structured entities. Disclosures have been reflected in these consolidated
                                         financial statements.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Trust adopted IFRS 13, “Fair
Value Measurement”, effective January 1, 2013. IFRS 13 establishes a single source for fair value measurements and disclosures
about fair value measurements. IFRS 13 defines fair value, establishes a framework for measuring fair value, and requires disclosures
about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial
instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements,
except in specified circumstances. The Trust has assessed its fair value measurement framework and concluded that no change to
the current treatment was required. Additional disclosure has been included in these financial statements to be in accordance
with the new standard.



The Trust adopted Amendments to IAS 1,
“Presentation of Items of Other Comprehensive Income” (“Amendments to IAS 1”), effective January 1, 2013.
Amendments to IAS 1 require the Trust to present the items of other comprehensive income (“OCI”) that may be reclassified
to profit or loss in the future if certain conditions are met, separately from those that would never be reclassified to profit
or loss. At this time, the Trust is not required to present any items in OCI.





|42 | 2013 Annual Report
|-- | ------------------













NOTE 4: FUTURE ACCOUNTING
POLICY CHANGES

| | (a) | Financial instruments
| | --- | ---------------------

IFRS 9, “Financial Instruments”
is a multi-phase project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces
new requirements for classifying and measuring financial assets. In October 2010, the International Accounting Standards Board
(“IASB”) reissued IFRS 9, incorporating new requirements on accounting for financial liabilities and carrying over
from IAS 39 the requirements for de-recognition of financial assets and financial liabilities. The mandatory effective date of
IFRS 9 has not been finalized. The IASB intends to expand IFRS 9 to add new requirements for impairment of financial assets measured
at amortized cost and hedge accounting. On completion of these various phases, IFRS 9 will be a complete replacement of IAS 39.



| | (b) | Levies
| | --- | ------

IFRIC 21, “Levies” clarifies
that a liability for a levy, such as property taxes, is recognized when the activity that triggers payment, as identified by the
relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that
no liability should be recorded before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning
on or after January 1, 2014. The Trust is currently evaluating the impact to the consolidated financial statements.



NOTE 5:
Investment properties



|                                             |  | Dec. 31, 2013         |         |  | Dec. 31, 2012          |  
|-------------------------------------------- |  | --------------------- | ------- |  | ---------------------- | -
|(Millions)                                   |  | Commercial properties |         |  | Commercial development |  
|Balance at beginning of year                 |  | $                     | 5,090.2 |  |                        |  
|Additions:                                   |  |                       |         |  |                        |  
|Acquisition                                  |  |                       | 3⁄4       |  |                        |  
|Capital expenditures and tenant improvements |  |                       | 35.0    |  |                        |  
|Leasing commissions                          |  |                       | 7.0     |  |                        |  
|Tenant inducements                           |  |                       | 0.8     |  |                        |  
|Fair value gains                             |  |                       | 22.6    |  |                        |  
|Other changes                                |  |                       | 2.6     |  |                        |  
|Balance at end of year                       |  | $                     | 5,158.2 |  |                        | $



During the third quarter of 2013, the
Trust acquired Bay Adelaide East from its parent company, BPO, for an aggregate total investment of $601.9 million. The building
was purchased on an “as-if-completed-and-stabilized basis,” and as such, BPO retains the development obligations including
construction, lease-up and financing. The Trust paid BPO $169.9 million representing the amount invested and value created to
date in the project at close, net of working capital associated with the development. The Trust has committed to fund an additional
$26.0 million of up-front equity and an additional $350.0 million that will be funded from a first mortgage construction loan.
Additionally, the Trust will make a final payment to BPO of $56.0 million on stabilization, subject to achieving stabilized net
operating income and targeted permanent financing, which is expected to occur in 2017. As part of the acquisition of Bay Adelaide
East, the Trust formed an independent committee and engaged third-party advisors to evaluate the fairness of the transaction.
The assets, liabilities and earnings from Bay Adelaide East have been included in the consolidated financial statements commencing
from July 11, 2013.



Other changes represent net straight-line
rent recognized in accordance with IAS 17, “Leases” that is implied within the fair value of investment properties.



The Trust determined the fair value of
each investment property based upon, among other things, rental income from current leases and assumptions about rental income
from future leases reflecting market conditions at the applicable balance sheet dates, less future cash outflows with respect
to such leases. Fair values were primarily determined by discounting the expected future cash flows, generally over a weighted-average
term of 11 years, including a terminal value based on the application of a capitalization rate to estimated year 12 cash flows.
Commercial developments under active development are measured using a discounted cash flow model, net of costs to complete, as
of the balance sheet date. In accordance with its policy, the Trust measures its investment properties using valuations prepared
by management. The Trust does not measure its investment properties based on valuations prepared by external valuation professionals.





|Brookfield Canada Office Properties | 43
|----------------------------------- | --













The key valuation metrics for the Trust’s
investment properties are set out in the following tables:



|                  |  | December 31, 2013 |      |   |         | December 31, 2012 |     
|----------------- |  | ----------------- | ---- | - | ------- | ----------------- | ----
|                  |  | Maximum           |      |   | Minimum |                   |     
|Eastern region    |  |                   |      |   |         |                   |     
|Discount
    rate |  |                   | 8.00 | % |         |                   | 6.00
|Terminal cap rate |  |                   | 7.00 | % |         |                   | 5.25
|Hold period (yrs) |  |                   | 13   |   |         |                   | 10  
|                  |  |                   |      |   |         |                   |     
|Western region    |  |                   |      |   |         |                   |     
|Discount rate     |  |                   | 6.75 | % |         |                   | 6.00
|Terminal cap rate |  |                   | 6.00 | % |         |                   | 5.50
|Hold period (yrs) |  |                   | 11   |   |         |                   | 10  



A 25 basis-point decrease in the discount
and terminal capitalization rates will impact the fair value of commercial properties by $130.6 million and $167.7 million or
2.5% and 3.3%, respectively at December 31, 2013.



During the year ended December 31, 2013,
the Trust capitalized a total of $60.6 million (compared to $nil during the year ended December 31, 2012) of costs related to
commercial developments. Included in this amount is $3.3 million (compared to $nil during the year ended December 31, 2012) of
property taxes and other related costs and $4.4 million (compared to $nil during the year ended December 31, 2012) of capitalized
borrowing costs. The weighted average capitalization rate used for capitalization of borrowing costs on commercial developments
was 4.9%. Included in construction and related costs for the year ended December 31, 2013, is $49.0 million paid to a subsidiary
of Brookfield Asset Management Inc. (“BAM”), the ultimate parent of BPO, pursuant to contracts to construct investment
properties.



Investment properties with a fair value
of approximately $929.0 million (compared to $924.4 million at December 31, 2012) are situated on land held under leases or other
agreements largely expiring after the year 2023. Investment properties do not include any properties held under operating leases.



Investment properties with a fair value
of $4,738.7 million (compared to $4,681.0 million at December 31, 2012) are pledged as security for investment property and corporate
debt.



NOTE 6: INVESTMENT IN JOINTLY CONTROLLED
OPERATIONS

The Trust undertakes its activities under
jointly controlled operations through direct interests in assets, rather than through the establishment of a separate entity.
The Trust’s interests in the following properties are classified as joint operations and, accordingly, the Trust has recognized
its share of the related assets, liabilities, revenues and expenses for the following properties:



|                          |  |                            |  | Principal place of                  |  | Ownership Interest and voting rights |   
|------------------------- |  | -------------------------- |  | ----------------------------------- |  | ------------------------------------ | --
|Jointly controlled assets |  | Nature                     |  | business/incorporation              |  | Dec. 31, 2013                        |   
|Exchange Tower            |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 50
|Fifth Avenue Place        |  | Commercial office property |  | Calgary, Alberta                    |  |                                      | 50
|Bankers Hall              |  | Commercial office property |  | Calgary, Alberta                    |  |                                      | 50
|Bankers Court             |  | Commercial office property |  | Calgary, Alberta / Toronto, Ontario |  |                                      | 50
|Suncor Energy Centre      |  | Commercial office property |  | Calgary, Alberta                    |  |                                      | 50
|Brookfield Place Retail   |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 50
|Brookfield Place Parking  |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 56
|First Canadian Place (1)  |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25
|2 Queen St. E.            |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25
|151 Yonge St.             |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25
|Place de Ville I          |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25
|Place de Ville II         |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25
|Jean Edmonds Towers       |  | Commercial office property |  | Toronto, Ontario                    |  |                                      | 25

(1)First Canadian Place is subject to a land lease with respect to 50% of the land on which the property is situated. The land
lease will expire on December 1, 2023 subject to an extension under certain circumstances. At the expiry of the land lease, the
other land owner will have the option to acquire, for a nominal amount, an undivided 50% beneficial interest in the office tower.





|44 | 2013 Annual Report
|-- | ------------------













NOTE 7: TENANT AND OTHER RECEIVABLES

As of December 31, 2013, a reserve totaling
$0.1 million has been recorded against uncollectible tenant receivables (compared to $0.2 million at December 31, 2012).



As of December 31, 2013, $0.4 million
of the Trust’s balance of accounts receivables is over 90 days past due (compared to $0.2 million at December 31, 2012).



The Trust’s maximum exposure to
credit risk associated with tenant and other receivables is equivalent to its carrying value. Credit risk related to tenant receivables
arises from the possibility that tenants may be unable to fulfill their lease commitments. The Trust manages this risk by attempting
to ensure that its tenant mix is diversified and by limiting its exposure to any one tenant. The Trust maintains a portfolio that
is diversified by industry type so that exposure to a business sector is lessened. Currently no one tenant represents more than
6.7% of commercial property revenue. This risk is further managed by signing long-term leases with tenants who have investment
grade credit ratings.



NOTE 8: OTHER ASSETS



|(Millions)                        |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|--------------------------------- |  | ------------- | --- |  | ------------- | -
|Prepaid expenses and other assets |  | $             | 6.3 |  |               | $
|Restricted cash                   |  |               | 3⁄4   |  |               |  
|Total                             |  | $             | 6.3 |  |               | $



NOTE 9: CASH AND CASH EQUIVALENTS

At December 31, 2013, the Trust had $nil
of cash placed in term deposits, which is consistent with the amount at December 31, 2012. For the year ended December 31, 2013,
interest income of $0.9 million was recorded on cash and cash equivalents, compared to $nil in 2012.



Note10: Investment property and corporate debt



|                                                       |  | Dec. 31, 2013 |      |   | Dec. 31, 2012 |  
|------------------------------------------------------ |  | ------------- | ---- | - | ------------- | -
|                                                       |  | Weighted      |      |   |               |  
|(Millions)                                             |  | Average Rate  |      |   | Debt Balance  |  
|Investment property debt – fixed rate                  |  |               | 4.22 | % |               | $
|Investment property and corporate debt – floating rate |  |               | 3.00 | % |               |  
|Total investment property and corporate debt           |  |               | 4.22 | % |               | $
|                                                       |  |               |      |   |               |  
|Current                                                |  |               |      |   |               | $
|Non-current                                            |  |               |      |   |               |  
|Total debt                                             |  |               |      |   |               | $



The Trust’s secured investment property
and corporate debt is non-recourse to the Trust with the exception of $104.8 million (compared to $103.9 million at December 31,
2012) which has limited recourse to the Trust’s parent, BPP and $nil (compared to $67.7 million at December 31, 2012) which
has recourse to the Trust.



Investment property and corporate debt
maturities for the next five years and thereafter are as follows:



|                                 |  |              |       |  |            |   |         |       |  |   | Weighted-Average     | 
|-------------------------------- |  | ------------ | ----- |  | ---------- | - | ------- | ----- |  | - | -------------------- | 
|                                 |  | Scheduled    |       |  |            |   |         |       |  |   | Interest Rate (%) at | 
|(Millions, except interest data) |  | Amortization |       |  | Maturities |   |         | Total |  |   | Dec. 31, 2013        | 
|2014                             |  | $            | 47.2  |  |            | $ | 78.6    |       |  | $ | 125.8                | 
|2015                             |  |              | 44.1  |  |            |   | 235.1   |       |  |   | 279.2                | 
|2016                             |  |              | 42.9  |  |            |   | 5.0     |       |  |   | 47.9                 | 
|2017                             |  |              | 45.3  |  |            |   | 28.6    |       |  |   | 73.9                 | 
|2018                             |  |              | 47.4  |  |            |   | 3⁄4       |       |  |   | 47.4                 | 
|2019 and thereafter              |  |              | 270.8 |  |            |   | 1,509.9 |       |  |   | 1,780.7              | 
|Total                            |  | $            | 497.7 |  |            | $ | 1,857.2 |       |  | $ | 2,354.9              | 
|                                 |  |              |       |  |            |   |         |       |  |   |                      | 



For the year ended December 31, 2013,
interest of $105.2 million (compared to $109.3 million in 2012) was recorded on investment property and corporate debt.



Approximately 0.5% of the Trust’s
outstanding commercial property and corporate debt at December 31, 2013, is floating rate debt (compared to 3.8% at December 31,
2012). The effect of a 100 basis-point increase in interest rates on interest expense relating to floating rate debt, all else
being equal, is an increase in interest expense of $0.1 million on an annual basis. In addition, there is interest rate risk associated
with the Trust’s fixed rate debt due to the expected requirement to refinance such debts in the year of maturity. The effect
of a 100 basis-point increase in interest rates on interest expense relating to fixed rate debt maturing within one year, all
else being equal, is an increase in interest expense of $0.7 million on an annual basis.





|Brookfield Canada Office Properties | 45
|----------------------------------- | --













The fair value of investment property
and corporate debt (categorized as level 3 in the fair value hierarchy) is determined by discounting contractual principal and
interest payments at estimated current market interest rates for the instrument. Current market interest rates are determined
with reference to current benchmark rates for a similar term and current credit spreads for debt with similar terms and risks.
As of December 31, 2013, the fair value of investment property and corporate debt exceeds the principal loan value of these obligations
by $8.3 million (compared to an excess of $71.3 million at December 31, 2012).



Interest rate risk arises when the fair
value or future cash flows of commercial property and corporate debt fluctuate because of changes in market interest rates. Financing
risk arises when lenders will not refinance maturing debt on terms and conditions acceptable to the Trust, or on any terms at
all. The Trust attempts to stagger the maturities of its borrowings, as well as obtain fixed-rate debt as the means of managing
interest rate risk. The Trust has an ongoing need to access debt markets to refinance maturing debt as it comes due. The Trust’s
strategy to stagger its borrowing maturities attempts to mitigate the Trust’s exposure to excessive amounts of debt maturing
in any one year. The Trust has debt totaling $78.6 million maturing in 2014, representing 3.3% of the Trust’s total debt
outstanding at December 31, 2013, of which $9.2 million and $69.4 million matures in the third and fourth quarters of 2014, respectively.



The details of the financing transactions
completed in 2013 are as follows:



|(Millions)               |  |    |  |             |  | New Proceeds (1) |       |  | Net Proceeds
    Generated(1) |   |       | Interest
    Rate (%) |  |  | Mortgage Detail                                    |   | Maturity
|------------------------ |  | -- |  | ----------- |  | ---------------- | ----- |  | ----------------------------- | - | ----- | --------------------- |  |  | -------------------------------------------------- | - | --------
|Brookfield Place Toronto |  | Q1 |  | Refinancing |  | $                | 525.0 |  |                               | $ | 213.0 |                       |  |  | 3.244                                              | % |         
|105 Adelaide St. West    |  | Q2 |  | Refinancing |  |                  | 37.5  |  |                               |   | 16.8  |                       |  |  | 3.870                                              | % |         
|Hudson’s Bay Centre      |  | Q2 |  | Extension   |  |                  | 3⁄4     |  |                               |   | 3⁄4     |                       |  |  | 2.999                                              | % |         
|Suncor Energy Centre     |  | Q3 |  | Refinancing |  |                  | 275.0 |  |                               |   | 61.8  |                       |  |  | 5.188                                              | % |         
|$200M Corporate Revolver |  | Q3 |  | Extension   |  |                  | 3⁄4     |  |                               |   | 3⁄4     |                       |  |  | BA
                                         + 1.75 | % |         
|Bankers Hall             |  | Q4 |  | Refinancing |  |                  | 300.0 |  |                               |   | 146.0 |                       |  |  | 4.377                                              | % |         

(1)Excludes
financing costs.



During the first quarter of 2013, the
Trust repaid the amount drawn on the revolving corporate credit facility of $68.0 million.



During the fourth quarter of 2013, an
advance of $5.0 million was drawn from the Bay Adelaide East construction facility at an average interest rate of 3.15%.



NOTE 11: ACCOUNTS PAYABLE AND OTHER LIABILITIES

The components of the Trust’s accounts
payable and other liabilities are as follows:



|(Millions)                               |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|---------------------------------------- |  | ------------- | ----- |  | ------------- | -
|Accounts payable and accrued liabilities |  | $             | 141.0 |  |               | $
|Accrued interest                         |  |               | 20.6  |  |               |  
|Total                                    |  | $             | 161.6 |  |               | $



NOTE 12: DISTRIBUTIONS

The following tables present distributions
declared for the year ended December 31, 2013 and December 31, 2012:



|                                    |  | 2013        |     
|----------------------------------- |  | ----------- | ----
|(Millions, except per unit amounts) |  | Trust Units |     
|Paid in cash or DRIP                |  | $           | 27.9
|Payable as at December 31, 2013     |  |             | 2.6 
|Total                               |  | $           | 30.5
|Per unit                            |  | $           | 1.17



|                                    |  | 2012        |     
|----------------------------------- |  | ----------- | ----
|(Millions, except per unit amounts) |  | Trust Units |     
|Paid in cash or DRIP                |  | $           | 26.4
|Payable as at December 31, 2012     |  |             | 2.6 
|Total                               |  | $           | 29.0
|Per unit                            |  | $           | 1.11





|46 | 2013 Annual Report
|-- | ------------------













The Trust has implemented a distribution
reinvestment plan (“DRIP”), which allows certain Canadian resident unitholders to elect to have their distributions
reinvested in additional Trust Units. No brokerage commissions or service charges are payable in connection with the purchase
of Trust Units under the DRIP and the Trust will pay all administrative costs. The automatic reinvestment of distributions under
the DRIP does not relieve holders of Trust Units of any income tax applicable to such distributions. For the year ended December
31, 2013, $952,973 (dollars) or 34,953 Trust Units were issued through the DRIP, compared to $610,349 (dollars), or 22,322 Trust
Units in 2012.



NOTE 13: EQUITY

The components of equity are as follows:



|(Millions)               |  | Dec. 31, 2013 |         |  | Dec. 31, 2012 |  
|------------------------ |  | ------------- | ------- |  | ------------- | -
|Trust Units              |  | $             | 552.1   |  |               | $
|Contributed surplus      |  |               | 3.1     |  |               |  
|Retained earnings        |  |               | 299.5   |  |               |  
|Unitholders’ equity      |  |               | 854.7   |  |               |  
|Non-controlling interest |  |               | 2,237.6 |  |               |  
|Total                    |  | $             | 3,092.3 |  |               | $



Authorized Capital and Outstanding
Securities

The Trust is authorized to issue an unlimited
number of two classes of units: Trust Units and Special Voting Units. Special Voting Units are only issued in tandem with
the issuance of Class B LP Units.



The following tables summarize the changes
in the units outstanding during the year ended December 31, 2013 and December 31, 2012:



|                                                  |  | 2013 |            
|------------------------------------------------- |  | ---- | -----------
|                                                  |  |      | Trust Units
|Units issued and outstanding at beginning of year |  |      | 26,132,882 
|Units issued pursuant to DRIP                     |  |      | 34,953     
|Total units outstanding at December 31, 2013      |  |      | 26,167,835 



|                                                  |  | 2012 |            
|------------------------------------------------- |  | ---- | -----------
|                                                  |  |      | Trust Units
|Units issued and outstanding at beginning of year |  |      | 26,110,560 
|Units issued pursuant to DRIP                     |  |      | 22,322     
|Total units outstanding at December 31, 2012      |  |      | 26,132,882 



At December 31, 2013, the weighted average
number of Trust Units outstanding was 26,150,847 (compared to 26,121,860 at December 31, 2012).



In November 2013, the Trust renewed its
normal course issuer bid for its Trust Units for a further one-year period. During the twelve-month period commencing November
7, 2013, and ending November 6, 2014, the Trust may purchase on the Toronto Stock Exchange (“TSX”), the New York Stock
Exchange, and/or other exchanges or alternative trading systems if eligible, or by such other means as may be permitted by the
TSX, up to 1,308,057 Trust Units, representing approximately 5% of its issued and outstanding Trust Units. No Trust Units were
repurchased by the Trust under its normal course issuer bid for the year ended December 31, 2013. A copy of the Notice of Intention
relating to the Trust’s normal course issuer bid may be requested without charge from the Trust.



Trust Units

Each Trust Unit is transferable and represents
an equal, undivided, beneficial interest in BOX and any distributions, whether of net income, net realized capital gains, or other
amounts, and in the event of the termination or winding-up of the Trust, in the Trust’s net assets remaining after satisfaction
of all liabilities. All Trust Units rank among themselves equally and ratably without discrimination, preference, or priority.
Each Trust Unit entitles the holder thereof to one vote at all meetings of unitholders or with respect to any written resolution
of unitholders. The Trust Units have no conversion, retraction, or redemption rights.



Special Voting Units

Special Voting Units are only issued in
tandem with Class B LP Units of BOPC LP and are not transferable separately from the Class B LP Units to which
they relate. Upon any transfer of Class B LP Units, such Special Voting Units will automatically be transferred to the
transferee of the Class B LP Units. As Class B LP Units are exchanged for Trust Units or purchased for cancellation,
the corresponding Special Voting Units will be cancelled for no consideration.





|Brookfield Canada Office Properties | 47
|----------------------------------- | --













Each Special Voting Unit entitles the
holder thereof to one vote at all meetings of unitholders or with respect to any resolution in writing of unitholders. Except
for the right to attend and vote at meetings of the unitholders or with respect to written resolutions of the unitholders, Special
Voting Units do not confer upon the holders thereof any other rights. A Special Voting Unit does not entitle its holder to any
economic interest in BOX, or to any interest or share in BOX, or to any interest in any distributions (whether of net income,
net realized capital gains, or other amounts), or to any interest in any net assets in the event of termination or winding-up.



Non-Controlling interest

The Trust classifies the outstanding Class
B LP Units as non-controlling interest for financial statement purposes in accordance with IFRS. The Class B LP Units are exchangeable
on a one-for-one basis (subject to customary anti-dilution provisions) for Trust Units at the option of the holder. Each Class
B LP Unit is accompanied by a Special Voting Unit that entitles the holder thereof to receive notice of, to attend, and to vote
at all meetings of unitholders of BOX. The holders of Class B LP Units are entitled to receive distributions when declared by
BOPC LP equal to the per unit amount of distributions payable to each holder of Trust Units. However, the Class B LP Units have
limited voting rights over BOPC LP.



BOPC LP is a subsidiary of BOX, which
owns 100% of the issued and outstanding Class A LP Units of BOPC LP. Summarized financial information for BOPC LP has not been
disclosed as all the investment properties are held in BOPC LP and as such BOPC LP is substantially the same as BOX.



NOTE 14: REVENUE AND
Expenses

(a) Commercial property revenue

The components of revenue are as follows:



|(Millions)                         |  | 2013 |       |  | 2012 |  
|---------------------------------- |  | ---- | ----- |  | ---- | -
|Rental revenue                     |  | $    | 518.5 |  |      | $
|Non-cash rental revenue            |  |      | 2.6   |  |      |  
|Lease termination and other income |  |      | 0.8   |  |      |  
|Commercial property revenue        |  | $    | 521.9 |  |      | $



The Trust generally leases investment
properties under operating leases with lease terms between five and 10 years, with options to extend up to five additional years.



Future minimum rental commitments on non-cancellable
tenant operating leases are as follows:



|(Millions)                                    |  | 2013 |         |  | 2012 |  
|--------------------------------------------- |  | ---- | ------- |  | ---- | -
|Not later than 1 year                         |  | $    | 250.7   |  |      | $
|Later than 1 year and not longer than 5 years |  |      | 886.8   |  |      |  
|Later than 5 years                            |  |      | 1,134.8 |  |      |  
|                                              |  | $    | 2,272.3 |  |      | $



(b)   Expenses

The following represents an analysis of
the nature of the expense included in direct commercial property expense, interest expense, and administrative expense:



|(Millions)                      |  | 2013 |       |  | 2012 |  
|------------------------------- |  | ---- | ----- |  | ---- | -
|Employee benefits               |  | $    | 18.5  |  |      | $
|Interest expense                |  |      | 105.2 |  |      |  
|Property maintenance            |  |      | 117.5 |  |      |  
|Real estate taxes               |  |      | 108.2 |  |      |  
|Ground rents                    |  |      | 7.0   |  |      |  
|Asset management fees and other |  |      | 24.2  |  |      |  
|Total expenses                  |  | $    | 380.6 |  |      | $



Operating expenses include ground rent
expenses for the year ended December 31, 2013, of $7.0 million (compared to $7.2 million in 2012) representing rent expense associated
with operating leases for land on which certain of the Trust’s investment properties are situated. These leases have remaining
terms of between 10 and 101 years. The Trust does not have an option to purchase the leased land at the expiry of the lease periods.





|48 | 2013 Annual Report
|-- | ------------------















Future minimum lease payments under these
arrangements are as follows:



|(Millions)                                    |  | 2013 |       |  | 2012 |  
|--------------------------------------------- |  | ---- | ----- |  | ---- | -
|Not later than 1 year                         |  | $    | 6.9   |  |      | $
|Later than 1 year and not longer than 5 years |  |      | 27.6  |  |      |  
|Later than 5 years                            |  |      | 456.4 |  |      |  
|                                              |  | $    | 490.9 |  |      | $



(c)    Investment and
other income

Investment and other income was $0.9 million
for the year ended December 31, 2013 (compared to $nil in 2012). The amounts primarily include interest earned on cash balances
and other income.



NOTE 15: GUARANTEES, CONTINGENCIES,
AND OTHER

(a) In the normal course of operations,
the Trust and its consolidated subsidiaries execute agreements that provide for indemnification and guarantees to third parties
in transactions such as business dispositions, business acquisitions, lease-up of development properties, sales of assets, and
sales of services.



(b) The Trust and its operating subsidiaries
may be contingently liable with respect to litigation and claims that arise from time to time in the normal course of business
or otherwise. A specific litigation, with a judgment amount of $59.7 million ($63.0 million Australian dollars), is being pursued
against one of the Trust’s subsidiaries related to security on a defaulted loan. Management has determined that the most
probable cash outflow related to the litigation being pursued against the Trust is $15.2 million ($16.0 million Australian dollars),
which has been fully provided for in the Trust’s financial statements. The Trust anticipates that this specific litigation
will be settled in 2014.



(c) As of December 31, 2013, the Trust
had commitments totaling $177.5 million for the development costs of Bay Adelaide East in Toronto, of which $157.5 were owed to
third parties.



(d) The Trust has currently guaranteed
up to $200.0 million related to its revolving corporate credit facility. As of December 31, 2013 the Trust has issued letters
of credit of $3.6 million related to its revolving corporate credit facility.



(e) The Trust maintains insurance on its
commercial properties in amounts and with deductibles that the Trust believes are in line with what owners of similar properties
carry. The Trust maintains all risk property insurance and rental value coverage (including coverage for the perils of flood,
earthquake and windstorm). The Trust’s all risk policy limit is $1.5 billion per occurrence. The Trust’s earthquake
limit is $500 million per occurrence and in the annual aggregate. This coverage is subject to a $100,000 (dollars) deductible
for all locations except for British Columbia where the deductible is 3% of the values for all locations where the physical loss,
damage or destruction occurred. The flood limit is $500 million per occurrence and in the annual aggregate, and is subject to
a deductible of $25,000 (dollars) for all losses arising from the same occurrence, with the exception of our Calgary properties
where 25% of the loss is subject to a $500,000 deductible. With respect to its commercial properties, the Trust purchases an insurance
policy that covers acts of terrorism for limits up to $1.2 billion.



NOTE 16: SEGMENTED INFORMATION

The Trust has only one business segment:
the ownership and operation of investment properties in Canada.



NOTE 17: RELATED-PARTY TRANSACTIONS

In the normal course of operations, the
Trust enters into various transactions on market terms with related parties that have been measured at exchange value and are
recognized in the consolidated financial statements.



The Trust has entered into two service-support
agreements with Brookfield Office Properties Management LP (“BOPM LP”) (formerly Brookfield Properties Management
Corporation prior to October 1, 2013), a subsidiary of BPO, for the provision of property management, leasing, construction, and
asset management services. The purpose of the agreements is to provide the services of certain personnel and consultants as are
necessary to help the Trust operate and manage its assets and tenant base; it also includes a cost-recovery for administrative
and regulatory compliance services provided. The fees paid to BOPM LP are calculated in accordance with the terms of the agreements.
Included in direct commercial property expense during the year ended December 31, 2013, are amounts paid to BOPM LP for property
management services of $14.2 million (compared to $13.8 million in 2012). Included in investment properties during the year ended
December 31, 2013, are amounts paid to BOPM LP for leasing and construction services of $4.1 million (compared to $3.1 million
in 2012). Included in general and administrative expenses during the year ended December 31, 2013, are amounts paid to BOPM LP
for asset management and administrative and regulatory compliance services of $17.5 million (compared to $16.2 million in 2012).



Included in rental revenues during the
year ended December 31, 2013, are amounts received from BAM and its affiliates of $6.3 million (compared to $5.9 million in 2012).





|Brookfield Canada Office Properties | 49
|----------------------------------- | --













Refer to Note 5, Investment Properties, for
information on the acquisition of Bay Adelaide East development from BPO as well as details of construction and related costs
paid to a subsidiary of BAM pursuant to contracts to construct investment properties.



Compensation of Independent Trustees

The remuneration of independent trustees
during the year ended December 31, 2013 and 2012 was as follows:



|(Millions)            |   | 2013 |   | 2012
|--------------------- | - | ---- | - | ----
|Cash compensation     | $ | 0.2  | $ | 0.2 
|Unit-based
    awards |   | 0.2  |   | 0.2 
|                      | $ | 0.4  | $ | 0.4 



The remuneration of independent trustees
is determined by the Trust’s Governance and Nominating Committee having regard to the complexity of the Trust’s operations,
the risks and responsibilities involved in being a trustee of the Trust, the requirement to participate in scheduled and special
board meetings, expected participation on the board’s standing committees and compensation paid to trustees of comparable
entities.



NOTE 18: CAPITAL MANAGEMENT AND LIQUIDITY

The Trust employs a broad range of financing
strategies to facilitate growth and manage financial risk.



The Trust continually strives to reduce
its weighted-average cost of capital and improve unitholders’ equity returns through value-enhancement initiatives and the
consistent monitoring of the balance between debt and equity financing. As of December 31, 2013, the weighted-average cost of
capital, assuming a long-term 9.0% return on equity, was 6.7% (compared to 7.4% in 2012)



The following schedule details the capitalization
of the Trust and the related costs thereof:



|                                        |  | Cost of Capital(1) |     |   | Underlying Value(2) | 
|--------------------------------------- |  | ------------------ | --- | - | ------------------- | 
|(Millions, except cost of capital data) |  | Dec. 31, 2013      |     |   | Dec. 31, 2012       | 
|Liabilities                             |  |                    |     |   |                     | 
|Investment property and corporate debt  |  |                    | 4.2 | % |                     | 
|Unitholders’ equity                     |  |                    |     |   |                     | 
|Trust Units(3)                          |  |                    | 9.0 | % |                     | 
|Other equity                            |  |                    |     |   |                     | 
|Non-controlling interest(3)             |  |                    | 9.0 | % |                     | 
|Total                                   |  |                    | 6.7 | % |                     | 

(1)	Total
weighted-average cost of capital is calculated on the weighted average of underlying value.

| | (2) | Underlying value
                                         of liabilities presents the cost to retire debt on maturity. Underlying value of unitholders’
                                         equity and other equity is based on the closing unit price of BOX on the TSX.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(3)Assumes a long-term 9.0%
return on equity for December 31, 2013 and December 31, 2012.



Investment property and corporate debt

The Trust’s investment property
and corporate debt is primarily fixed-rate and non-recourse to the Trust, thereby reducing the overall financial risk to the Trust.
These financings are typically structured on a loan-to-appraised value basis of between 50% and 65% when the market permits. In
addition, in certain circumstances where a building is leased almost exclusively to a high-credit quality tenant, a higher loan-to-value
financing, based on the tenant’s credit quality, is put in place at rates commensurate with the cost of funds for the tenant.
This reduces equity requirements to finance investment property and enhances equity returns.



The Trust is subject to certain covenants
on its borrowings, including debt service coverage and loan-to-value thresholds. As of December 31, 2013, the Trust was in compliance
with all of its covenants.



The Trust’s strategy is to satisfy
its liquidity needs using cash on hand, cash flows generated from operating activities, and cash provided by financing activities.
Rental revenue, recoveries from tenants, interest and other income, available cash balances, draws on credit facilities, and refinancings,
including upward refinancings, of maturing indebtedness are the Trust’s principal sources of capital used to pay operating
expenses, distributions, debt service, and recurring capital and leasing costs in its investment property portfolio.



The principal liquidity needs for periods
beyond the next year are for unit distributions, scheduled debt maturities, recurring and non-recurring capital expenditures,
and development costs. The Trust’s strategy is to meet these needs with one or more of the following:



| | • | cash flow from operations;
| | - | --------------------------

| | • | construction loans; and
| | - | -----------------------

| | • | credit facilities and refinancing
                                         opportunities.
| | - | -----------------------------------------------------------------------------------------





|50 | 2013 Annual Report
|-- | ------------------













The Trust attempts to match the maturity
of its commercial property and corporate debt portfolio with the average lease terms of its properties. At December 31, 2013,
the average term to maturity of the Trust’s investment property and corporate debt portfolio was eight years and the Trust’s
average lease term of its properties was approximately eight years. The Trust will continue to make efforts to match the maturity
of the investment property and corporate debt portfolio with the average lease term of its properties.



The
following table presents the contractual maturities of the Trust’s financial liabilities:



|                                          |  |       |         |  | Payments Due By Period |  
|----------------------------------------- |  | ----- | ------- |  | ---------------------- | -
|(Millions)                                |  | Total |         |  | 1 year                 |  
|Investment property and corporate debt(1) |  | $     | 3,107.6 |  |                        | $
|Accounts payable and other liabilities    |  |       | 161.6   |  |                        |  

(1) Includes repayment of principal
and interest.



NOTE 19: OTHER INFORMATION

Supplemental cash flow information:



|                                                        |  | 2013        |      |   | 2012             |  
|------------------------------------------------------- |  | ----------- | ---- | - | ---------------- | -
|(Millions)                                              |  | Trust Units |      |   | Class B LP Units |  
|Distributions declared to unitholders                   |  | $           | 30.5 |   |                  | $
|Add:	Distributions payable at the beginning of the year |  |             | 2.6  |   |                  |  
|Less:	Distributions payable at the end of the year      |  |             | (2.6 | ) |                  |  
|Less:	Distributions to participants in DRIP             |  |             | (1.0 | ) |                  |  
|Cash distributions paid                                 |  | $           | 29.5 |   |                  | $



Note 20:
APPROVAL OF ANNUAL FINANCIAL STATEMENTS

The annual financial statements were approved
by the Trust’s Board of Trustees and authorized for issue on January 27, 2014.





|Brookfield Canada Office Properties | 51
|----------------------------------- | --













Unitholder Information



DISTRIBUTION PAYMENT DATES



|             |  |  | 2014        |        |  | 2013             |   |        | 2012        | 
|------------ |  |  | ----------- | ------ |  | ---------------- | - | ------ | ----------- | 
|(Dollars)    |  |  | Trust Units |        |  | Class B LP Units |   |        | Trust Units | 
|January 15   |  |  | $           | 0.0975 |  |                  | $ | 0.0975 |             | 
|February 15  |  |  |             | 0.0975 |  |                  |   | 0.0975 |             | 
|March 15     |  |  |             | 0.0975 |  |                  |   | 0.0975 |             | 
|April 15     |  |  |             |        |  |                  |   |        |             | 
|May 15       |  |  |             |        |  |                  |   |        |             | 
|June 15      |  |  |             |        |  |                  |   |        |             | 
|July 15      |  |  |             |        |  |                  |   |        |             | 
|August 15    |  |  |             |        |  |                  |   |        |             | 
|September 15 |  |  |             |        |  |                  |   |        |             | 
|October 15   |  |  |             |        |  |                  |   |        |             | 
|November 15  |  |  |             |        |  |                  |   |        |             | 
|December 15  |  |  |             |        |  |                  |   |        |             | 





|52 | 2013 Annual Report
|-- | ------------------













Selected Financial and Operational Information



|December 31 (Millions, except per-unit and operating information) |  | 2013 |            |  | 2012 |   |            | 2011 | 
|----------------------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | ---- | 
|Financial results                                                 |  |      |            |  |      |   |            |      | 
|Commercial property net operating income                          |  | $    | 271.9      |  |      | $ | 269.2      |      | 
|Funds from operations                                             |  |      | 144.7      |  |      |   | 139.0      |      | 
|Adjusted funds from operations (1)                                |  |      | 110.1      |  |      |   | 107.4      |      | 
|Distributions                                                     |  |      | 109.1      |  |      |   | 103.4      |      | 
|Net income                                                        |  |      | 164.8      |  |      |   | 527.5      |      | 
|Total assets                                                      |  |      | 5,608.8    |  |      |   | 5,163.6    |      | 
|Unitholders’ equity                                               |  |      | 854.7      |  |      |   | 838.1      |      | 
|                                                                  |  |      |            |  |      |   |            |      | 
|Per Trust unit                                                    |  |      |            |  |      |   |            |      | 
|Trust Units outstanding                                           |  |      | 26,167,835 |  |      |   | 26,132,882 |      | 
|Class B LP Units outstanding                                      |  |      | 67,088,022 |  |      |   | 67,088,022 |      | 
|Funds from operations                                             |  |      | 1.55       |  |      |   | 1.49       |      | 
|Adjusted funds from operations (1)                                |  |      | 1.18       |  |      |   | 1.15       |      | 
|Distributions                                                     |  |      | 1.17       |  |      |   | 1.11       |      | 
|Unitholders value                                                 |  |      | 33.18      |  |      |   | 32.57      |      | 
|                                                                  |  |      |            |  |      |   |            |      | 
|Operating data                                                    |  |      |            |  |      |   |            |      | 
|Number of commercial properties                                   |  |      | 28         |  |      |   | 28         |      | 
|Total area (000’s of sq. ft.)                                     |  |      | 20,821     |  |      |   | 20,716     |      | 
|Owned interest (000’s of sq. ft.)                                 |  |      | 11,796     |  |      |   | 11,685     |      | 
|Average occupancy (%)                                             |  |      | 96.0       |  |      |   | 96.9       |      | 

(1)Current period amounts were adjusted to reflect actual leasing commissions, tenant improvements and maintaining value capital
expenditures incurred. Prior period amounts were calculated based on historical spend levels as well as projected spend levels
over the next 10 years as described on page 21 of the MD&A.





|Brookfield Canada Office Properties | 53
|----------------------------------- | --















|Board of Trustees                            | Officers                                             
|-------------------------------------------- | -----------------------------------------------------
|                                             |                                                      
|Thomas F. Farley                             | T. Jan Sucharda                                      
|Chairman of the Board                        | President and Chief Executive Officer                
|President and Global Chief Operating Officer |                                                      
|Brookfield Office Properties Inc.            | Bryan K. Davis                                       
|                                             | Chief Financial Officer                              
|                                             |                                                      
|T. Jan Sucharda                              | Stefan Dembinski                                     
|President and Chief Executive Officer        | Senior Vice President, Asset Management, Eastern and 
|Brookfield Canada Office Properties          | Chief Sustainability Officer                         
|                                             |                                                      
|                                             | Ian Parker                                           
|Dennis H. Friedrich                          | Senior Vice President, Asset Management, Western     
|Chief Executive Officer                      |                                                      
|Brookfield Office Properties Inc.            | Deborah R. Rogers                                    
|                                             | Senior Vice President, Legal Counsel, Secretary      
|Paul D. McFarlane                            |                                                      
|Corporate Director                           | Ryk Stryland                                         
|                                             | Senior Vice President, Development                   
|Colum Bastable                               |                                                      
|Chairman, Cushman & Wakefield Ltd.           | T. Nga Trinh                                         
|                                             | Senior Vice President, Investments                   
|Roderick D. Fraser, Ph.D., O.C.              |                                                      
|Officer, Order of Canada                     | D. Cameron Black                                     
|                                             | Vice President, Legal Counsel, Western               
|Susan Riddell Rose                           |                                                      
|President, Perpetual Energy Inc.             | Matthew Cherry                                       
|                                             | Vice President, Investor Relations and Communications
|                                             |                                                      
|                                             | Elliott S. Feintuch                                  
|                                             | Vice President, Legal Counsel, Eastern               
|                                             |                                                      
|                                             | Michael Yam                                          
|                                             | Vice President & Controller                          
|                                             |                                                      
|                                             | Michelle L. Campbell                                 
|                                             | Assistant Secretary                                  







|54 | 2013 Annual Report
|-- | ------------------













Information



PROFILE

Brookfield Canada Office Properties is
a Canadian real estate investment trust, focusing on the ownership and value enhancement of premier office properties. The current
property portfolio is comprised of interests in 28 premier office properties totaling 20.8 million square feet and one development
property totaling 980,000 square feet. Landmark properties include Brookfield Place Toronto and First Canadian Place in Toronto
and Bankers Hall in Calgary.



BROOKFIELD CANADA OFFICE PROPERTIES

Brookfield Place, Bay Wellington Tower

181 Bay Street, Suite 330

Toronto, Ontario M5J 2T3

Tel: 416.359.8555

Fax: 416.359.8596

www.brookfieldcanadareit.com



UNITHOLDER INQUIRIES

Brookfield Canada Office Properties welcomes
inquiries from unitholders, analysts, media representatives and other interested parties. Questions relating to investor relations
or media inquiries can be directed to Matthew Cherry, Vice President, Investor Relations and Communications at 416.359.8593 or
via e-mail at matthew.cherry@brookfield.com. Inquiries regarding financial results should be directed to Bryan Davis, Chief Financial
Officer at 416.359.8612 or via e-mail at bryan.davis@brookfield.com.



Unitholder questions relating to distributions,
address changes and unit certificates should be directed to the Trust’s Transfer Agent:



CST TRUST COMPANY

P.O. Box 700

Station B

Montreal, Quebec H3B 3K3

Tel: 416.682.3860 / 800.387.0825

Fax: 888.249.6189

Website: www.canstockta.com

E-mail: inquiries@canstockta.com



COMMUNICATIONS

We strive to keep our unitholders updated
on our progress through a comprehensive annual report, quarterly interim reports, periodic press releases and quarterly conference
calls.



Brookfield Canada Office Properties maintains
a Web site, www.brookfieldcanadareit.com, which provides access to our published reports, press releases, statutory filings, supplementary
information and trust and distribution information as well as summary information on the Trust.





|Brookfield Canada Office Properties | 55
|----------------------------------- | --