##### 



Exhibit 99.3




---



##### 



Managements Responsibility for the Financial Statements
    -s- Richard B. Clark
    
    -s- Bryan K. DavisRichard B. Clark
    
    Bryan K. DavisPresident and Chief Executive Officer
    
    Senior Vice President and Chief Financial OfficerMarch 7, 2008
 Report of Independent Registered Chartered Accountants
 To the Board of Directors and Shareholders of Brookfield Properties Corporation
     (DELOITTE & TOUCHE LLP)Toronto, Canada
    
    Independent Registered Chartered
AccountantsMarch 7, 2008
    
    Licensed Public Accountants
 61




---



##### 



Comments by Independent Registered Chartered Accountants on Canada  United States of America
Reporting Differences
  (DELOITTE & TOUCHE LLP)Toronto, Canada
    
    Independent Registered Chartered
AccountantsMarch 7, 2008
    
    Licensed Public Accountants
 Managements Report on Internal Control over Financial Reporting
     -s- Richard B. Clark
    
    -s- Bryan K. DavisRichard B. Clark
    
    Bryan K. DavisPresident and Chief Executive Officer
    
    Senior Vice President and Chief Financial OfficerMarch 7, 2008
 62




---



##### 



Report of Independent Registered Chartered Accountants
 To the Board of Directors and Shareholders of Brookfield Properties Corporation
 Internal ControlIntegrated Framework
    Internal Control
 Integrated Framework
  (DELOITTE & TOUCHE LLP)Toronto, Canada
    
    Independent Registered Chartered
AccountantsMarch 7, 2008
    
    Licensed Public Accountants
 63




---



##### 



Consolidated Balance Sheets
 December 31 (US Millions)
    
    Note
    
    
    2007
    
    
    2006AssetsCommercial properties
    
    
    5
    
    
    $
    15,889
    
    
    $
    15,287Commercial developments
    
    
    6
    
    
    
    1,172
    
    
    
    735Residential developments
    
    
    7
    
    
    
    1,228
    
    
    
    706Receivables and other
    
    
    8
    
    
    
    1,056
    
    
    
    974Intangible assets
    
    
    9
    
    
    
    759
    
    
    
    853Restricted cash and deposits
    
    
    10
    
    
    
    151
    
    
    
    507Cash and cash equivalents
    
    
    27
    
    
    
    214
    
    
    
    188Assets related to discontinued operations
    
    
    11
    
    
    
    4
    
    
    
    64$
    20,473
    
    
    $
    19,314LiabilitiesCommercial property debt
    
    
    12
    
    
    $
    12,125
    
    
    $
    11,185Accounts payable and other liabilities
    
    
    13
    
    
    
    1,357
    
    
    
    923Intangible liabilities
    
    
    14
    
    
    
    834
    
    
    
    919Future income tax liabilities
    
    
    15
    
    
    
    600
    
    
    
    584Liabilities related to discontinued operations
    
    
    11
    
    
    
    3
    
    
    
    36Capital securities  corporate
    
    
    16
    
    
    
    1,053
    
    
    
    1,093Capital securities  fund subsidiaries
    
    
    17
    
    
    
    762
    
    
    
    810Non-controlling interests  fund subsidiaries
    
    
    17
    
    
    
    193
    
    
    
    259Non-controlling interests  other subsidiaries
    
    
    19
    
    
    
    86
    
    
    
    67Preferred equity  subsidiaries
    
    
    20
    
    
    
    382
    
    
    
    326Shareholders equityPreferred equity  corporate
    
    
    21
    
    
    
    45
    
    
    
    45Common equity
    
    
    22
    
    
    
    3,033
    
    
    
    3,067$
    20,473
    
    
    $
    19,314
 See accompanying notes to the consolidated financial statements
 On behalf of the Board,-s- Gordon E. Arnell
    
    -s- Richard B. ClarkGordon E. Arnell
    
    Richard B. ClarkChairman
    
    President and Chief Executive Officer
 64




---



##### 



Consolidated Statements of Income
 December 31 (US Millions, except per share amounts)
    
    Note
    
    
    2007
    
    
    2006Total revenue
    
    
    24
    
    
    $
    2,912
    
    
    $
    1,911Net operating incomeCommercial property operations
    
    
    24
    
    
    $
    1,302
    
    
    $
    836Residential development operations
    
    
    24
    
    
    
    237
    
    
    
    144Interest and other
    
    
    
    
    
    
    44
    
    
    
    441,583
    
    
    
    1,024ExpensesInterestCommercial property debt
    
    
    
    
    
    
    697
    
    
    
    422Capital securities  corporate
    
    
    16
    
    
    
    61
    
    
    
    59Capital securities  fund subsidiaries
    
    
    17
    
    
    
    (27
    )
    
    
    (12
    )General and administrative
    
    
    
    
    
    
    103
    
    
    
    67Transaction costsDebt defeasance
    
    
    12
    
    
    
    27
    
    
    
    Other
    
    
    18
    
    
    
    17
    
    
    
    15Non-controlling interestsFund subsidiaries
    
    
    17
    
    
    
    (75
    )
    
    
    (21
    )Other subsidiaries
    
    
    
    
    
    
    23
    
    
    
    19Depreciation and amortization
    
    
    
    
    
    
    530
    
    
    
    276Future income taxes
    
    
    15
    
    
    
    70
    
    
    
    92Net income from continuing operations
    
    
    
    
    
    
    157
    
    
    
    107Discontinued operations, net of non-controlling interests
    
    
    11
    
    
    
    83
    
    
    
    28Net income
    
    
    
    
    
    $
    240
    
    
    $
    135Net income from continuing operations per common share
    
    
    22Basic
    
    
    
    
    
    $
    0.39
    
    
    $
    0.30Diluted
    
    
    
    
    
    $
    0.38
    
    
    $
    0.29Net income per common share
    
    
    22Basic
    
    
    
    
    
    $
    0.60
    
    
    $
    0.38Diluted
    
    
    
    
    
    $
    0.59
    
    
    $
    0.37
 See accompanying notes to the consolidated financial statements
 65




---



##### 



Consolidated Statements of Changes in Common Equity
 December 31 (US Millions)
    
    Note
    
    
    2007
    
    
    2006Common sharesBalance, beginning of year
    
    
    
    
    
    $
    2,303
    
    
    $
    1,066Shares repurchased
    
    
    
    
    
    
    (26
    )
    
    
    Proceeds from shares issued on exercise of options
    
    
    
    
    
    
    5
    
    
    
    4Proceeds from equity offering of 49,500,000 common shares, net of issue costs
    
    
    
    
    
    
    
    
    
    
    1,233Balance, end of year
    
    
    22
    
    
    
    2,282
    
    
    
    2,303Contributed surplusBalance, beginning of year
    
    
    
    
    
    
    2
    
    
    
    Shares repurchased
    
    
    
    
    
    
    (8
    )
    
    
    Stock-based compensation awards
    
    
    23
    
    
    
    6
    
    
    
    2Balance, end of year
    
    
    
    
    
    
    
    
    
    
    2Retained earningsBalance, beginning of year
    
    
    
    
    
    
    706
    
    
    
    747Net income
    
    
    
    
    
    
    240
    
    
    
    135Shareholder distributionsPreferred share dividends  corporate
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Common share dividends
    
    
    
    
    
    
    (216
    )
    
    
    (173
    )Amount paid in excess of the book value of common shares purchased for cancellation
    
    
    
    
    
    
    (69
    )
    
    
    Cumulative impact of changes in accounting policies, net of taxes of $1 million
    
    
    2
    
    
    
    1
    
    
    
    Balance, end of year
    
    
    
    
    
    
    659
    
    
    
    706Accumulated other comprehensive incomeBalance, beginning of year
    
    
    
    
    
    
    56
    
    
    
    85Transition adjustment on adoption of financial instruments standards
    
    
    2
    
    
    
    (4
    )
    
    
    Other comprehensive income (loss) for the year
    
    
    
    
    
    
    40
    
    
    
    (29
    )Balance, end of year
    
    
    
    
    
    
    92
    
    
    
    56Total retained earnings and accumulated other comprehensive income
    
    
    
    
    
    
    751
    
    
    
    762Total common equity
    
    
    
    
    
    $
    3,033
    
    
    $
    3,067
 See accompanying notes to the consolidated financial statements
 Consolidated Statements of Comprehensive Income
 December 31 (US Millions)
    
    Note
    
    
    2007
    
    
    2006Net income
    
    
    
    
    
    $
    240
    
    
    $
    135Other comprehensive incomeChange in foreign currency translation gains (losses) on investments in subsidiaries
    
    
    2
    
    
    
    181
    
    
    
    (10
    )Losses arising from hedges of net investments in subsidiaries, net of taxes of $39
million (2006 -
$3 million)
    
    
    
    
    
    
    (122
    )
    
    
    (19
    )Net losses on derivatives designated as cash flow hedges, net of taxes of $7 million
(2006  nil)
    
    
    
    
    
    
    (20
    )
    
    
    Reclassification to earnings of losses, net of taxes of $1 million (2006  nil)
    
    
    
    
    
    
    1
    
    
    
    Total other comprehensive income (loss)
    
    
    
    
    
    
    40
    
    
    
    (29
    )Comprehensive income
    
    
    
    
    
    $
    280
    
    
    $
    106
 See accompanying notes to the consolidated financial statements
 66




---



##### 



Consolidated Statements of Cashflow
 December 31 (US Millions)
    
    Note
    
    
    2007
    
    
    2006Operating activitiesNet income
    
    
    
    
    
    $
    240
    
    
    $
    135Depreciation and amortization
    
    
    
    
    
    
    533
    
    
    
    284Future income taxes
    
    
    
    
    
    
    104
    
    
    
    107Debt defeasance cost
    
    
    
    
    
    
    27
    
    
    
    Property disposition gains
    
    
    
    
    
    
    (144
    )
    
    
    (44
    )Amortization of value of acquired operating leases to rental revenue, net
    
    
    
    
    
    
    (137
    )
    
    
    (44
    )Straight-line rent, net
    
    
    
    
    
    
    (47
    )
    
    
    (17
    )Stock option and deferred share unit grant expense
    
    
    
    
    
    
    3
    
    
    
    9Non-controlling interests  fund and other subsidiaries
    
    
    
    
    
    
    (19
    )
    
    
    Non-cash component of capital securities  fund subsidiaries
    
    
    
    
    
    
    (82
    )
    
    
    (23
    )Income from equity-accounting investments
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Distributions received from equity-accounted investments
    
    
    
    
    
    
    3
    
    
    
    9Deferred leasing costs
    
    
    
    
    
    
    (41
    )
    
    
    (27
    )Increase in land and housing inventory and related working capital
    
    
    
    
    
    
    (355
    )
    
    
    (258
    )Working capital and other
    
    
    
    
    
    
    (94
    )
    
    
    (61
    )(13
    )
    
    
    66Financing activities and capital distributionsCommercial property debt arranged
    
    
    
    
    
    
    1,776
    
    
    
    518Commercial property debt repaid
    
    
    
    
    
    
    (1,513
    )
    
    
    (248
    )Corporate credit facilities arranged
    
    
    
    
    
    
    837
    
    
    
    1,086Corporate credit facilities repaid
    
    
    
    
    
    
    (734
    )
    
    
    (1,110
    )Capital securities arranged  fund subsidiaries
    
    
    
    
    
    
    
    
    
    
    764Non-controlling interest contributions arranged  fund subsidiaries
    
    
    
    
    
    
    9
    
    
    
    278Acquisition financing arranged
    
    
    
    
    
    
    130
    
    
    
    3,702Land development debt arranged
    
    
    
    
    
    
    271
    
    
    
    96Land development debt repaid
    
    
    
    
    
    
    (52
    )
    
    
    (18
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (19
    )
    
    
    (12
    )Common shares issued
    
    
    
    
    
    
    5
    
    
    
    1,233Common shares repurchased
    
    
    
    
    
    
    (105
    )
    
    
    Preferred share dividends
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Common share dividends
    
    
    
    
    
    
    (216
    )
    
    
    (173
    )386
    
    
    
    6,113Investing activitiesMarketable securities
    
    
    
    
    
    
    
    
    
    
    58Loans receivable
    
    
    
    
    
    
    40
    
    
    
    (24
    )Loans receivable  affiliate
    
    
    27
    
    
    
    (200
    )
    
    
    Acquisition of Trizec, net of cash and cash equivalents acquired
    
    
    4, 27
    
    
    
    
    
    
    
    (5,341
    )Acquisitions of commercial properties, net
    
    
    27
    
    
    
    (307
    )
    
    
    (569
    )Proceeds from sale of commercial properties, net
    
    
    27
    
    
    
    224
    
    
    
    82Restricted cash and deposits
    
    
    
    
    
    
    365
    
    
    
    (102
    )Commercial development and redevelopment investments
    
    
    
    
    
    
    (313
    )
    
    
    (79
    )Commercial property tenant improvements
    
    
    
    
    
    
    (107
    )
    
    
    (55
    )Capital expenditures
    
    
    
    
    
    
    (49
    )
    
    
    (25
    )(347
    )
    
    
    (6,055
    )Increase in cash resources
    
    
    
    
    
    
    26
    
    
    
    124Opening cash and cash equivalents
    
    
    
    
    
    
    188
    
    
    
    64Closing cash and cash equivalents
    
    
    
    
    
    $
    214
    
    
    $
    188
 See accompanying notes to the consolidated financial statements
 67




---



##### 



Notes to the Consolidated Financial Statements
 NOTE 1:
SUMMARY OF ACCOUNTING POLICIES
 (a) General
  (b) Principles of consolidation
  (i)
    
    the accounts of all wholly-owned subsidiaries of the company and the accounts
of all such wholly-owned subsidiaries incorporated and unincorporated joint ventures
to the extent of their proportionate interest in the respective assets, liabilities,
revenue and expenses of such ventures;(ii)
    
    the accounts of BPO Properties Ltd. (BPO Properties) and Brookfield
Financial Properties, L.P. (Brookfield Financial Properties) and the accounts of BPO
Properties and Brookfield Financial Properties incorporated and unincorporated joint
ventures to the extent of their proportionate interest in the respective assets,
liabilities, revenue and expenses of such ventures; and(iii)
    
    the accounts of Brookfield Properties Office Partners, Inc., TRZ Holdings
LLC, BPOP Holdings (US) LLC and BPOP (Canada) Inc. (collectively, the US Office
Fund) and the accounts of the US Office Funds incorporated and unincorporated joint
ventures to the extent of its proportionate interest in the respective assets,
liabilities, revenue and expenses of such ventures.
  (i)
    
    Brookfield Financial Properties: The company owns a 99.4% limited partnership
interest and a 100% managing general partnership interest in Brookfield Financial
Properties.(ii)
    
    BPO Properties: The company owns 89% on an equity basis and 54.3% on a voting
basis of the common shares of BPO Properties.(iii)
    
    US Office Fund: The company owns an indirect 45% economic interest in the US
Office Fund through its 100% equity interest in BPOP (Canada) Inc., which in turn
holds 38% of the common equity in TRZ Holdings II (formerly Trizec Properties Inc.),
and its 6% equity interest in Brookfield Properties Office Partners, Inc., which holds
a 35% interest in the legal equity of TRZ Holdings LLC.
 (c) Properties
 (i)
    
    Commercial propertiesCommercial properties held for investment are carried at cost less accumulated
depreciation. Upon acquisition, the company allocates the purchase price to the
components of the commercial properties acquired: the amount allocated to land is
based on its appraised value; buildings and existing tenant improvements are recorded
at depreciated replacement cost; above- and below-market in-place operating leases are
determined based on the present value of the difference between the rents payable
under the contractual terms of the leases and estimated market rents; lease
origination costs for in-place operating leases are determined based on the estimated
costs that would be incurred to put the existing leases in place under the same terms
and conditions; and tenant relationships are measured based on the present value of
the estimated avoided net costs if a tenant were to renew its lease at expiry,
discounted by the probability of such renewal.Depreciation on buildings is provided on a straight-line basis over the useful lives
of the properties to a maximum of 60 years. Depreciation is determined with reference
to each rental propertys carried value, remaining estimated useful life and residual
value. Acquired tenant improvements, above- and below-market in-place operating leases
and lease origination costs are amortized on a straight-line basis over the remaining
terms of the leases. The value associated with acquired tenant relationships is
amortized on a straight-line basis over the expected term of the relationships.
Depreciation on buildings and tenant improvements is recorded in depreciation and
amortization expense. All other amounts are amortized to revenue.The unamortized balance of above- and below- market leases, lease origination costs
and tenant relationships is included in intangible assets or intangible liabilities as
appropriate.Properties are reviewed for impairment whenever events or changes in circumstances
indicate the carrying value may not be recoverable. For commercial properties, an
impairment loss is recognized when a propertys carrying value exceeds its
 68




---



##### 



undiscounted future net cashflow. The impairment is measured as the amount by which the
carrying value exceeds the estimated fair value. Projections of future cashflow take
into account the specific business plan for each property and managements best
estimate of the most probable set of economic conditions anticipated to prevail in the
market.Leasing costs, which include third-party brokerage fees and legal costs incurred in the
successful negotiation of leases, have been deferred and are being amortized on a
straight-line basis over the terms of the respective leases. The unamortized balance is
included in commercial properties.(ii)
    
    Commercial developmentsCommercial properties under development consist of properties for which a major
repositioning program is being conducted and properties which are under construction.
These properties are recorded at cost, including pre-development expenditures. For
development properties, an impairment loss is recognized when a propertys carrying
value exceeds its undiscounted future net cashflow. Properties are reviewed for
impairment whenever events or changes in circumstances indicate the carrying value may
not be recoverable. The impairment is measured as the amount by which the carrying
value exceeds the estimated fair value. Projections of future cashflow take into
account the specific business plan for each property and managements best estimate of
the most probable set of economic conditions anticipated to prevail in the market.(iii)
    
    Residential developmentsDevelopment land is held for residential development and is recorded at the lower of
cost and estimated net realizable value. Costs are allocated to the saleable acreage
of each project or subdivision in proportion to the anticipated revenue.(iv)
    
    Discontinued operationsProperties that qualify as held for sale pursuant to the criteria of CICA Handbook
Section 3475, Disposal of long-lived assets and discontinued operations, are
classified as discontinued operations. Such properties are recorded at the lower of
carrying amount or fair value less estimated cost to sell and are not depreciated
while classified as held for sale. The results of operations and balance sheet items
related to any property that has been identified as a discontinued operation are
reported separately if the company will not have any significant continuing
involvement in the operations of the property after the disposal transaction.
Comparative amounts are also reclassified.
 (d) Capitalized costs
  (e) Tenant improvements
  (f) Stock-based compensation
  (g) Revenue recognition
 (i)
    
    Commercial propertiesThe company has retained substantially all of the risks and benefits of
ownership of its rental properties and therefore accounts for leases with its
tenants as operating leases. Revenue recognition under a lease begins when the
tenant takes possession of, or controls, the physical use of the property subject
to the lease. Generally, this occurs on the lease commencement date or, where the
company is required to make additions to the property in the form of tenant
 69




---



##### 



improvements, 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 or free rent receivable, as
applicable, is recorded for the difference between the rental revenue recorded and the
contractual amount received. 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.Revenue and expenses related to commercial developments are recognized in income when
the development is substantially complete. This is also the point at which the property
is reclassified from commercial developments to commercial properties. The company
considers a commercial development to be substantially complete upon the earlier of
attaining an occupancy that results in break even income after debt servicing or the
expiration of a reasonable maximum period of time, but no later than one year after
completion of major construction. Prior to substantial completion, revenues and
expenses related to commercial developments are capitalized to the property.(ii)
    
    Residential propertiesLand sales are recognized at the time that the risks and rewards of ownership have been
transferred, possession or title passes to the purchaser, all material conditions of
the sales contract have been met, and a significant cash down payment or appropriate
security is received.Revenue from the sale of homes is recognized when title passes to the purchaser upon
closing and at which time all proceeds are received or collectability is assured.(iii)
    
    Performance and management fee revenueThrough the operations of the U.S. Office Fund and the Canadian Office Fund, the
company is entitled to management fees and performance fees. The company recognizes
performance fees in revenue when the amount receivable from its fund partners is
finalized at the end of a contractually specified term. The company has not recognized
any performance fees to date.
 (h) Income taxes
  (i) Reporting currency and foreign currency translation
    (j) Use of estimates
  (k) Derivative financial instruments
  70




---



##### 



(l) Cash and cash equivalents
  NOTE 2: CHANGES IN ACCOUNTING POLICIES
 Variability in Variable Interest Entities
  Accounting Changes
  Financial Instruments
  (i) Comprehensive Income, CICA Handbook Section 1530
  (ii) Financial Instruments  Recognition and Measurement, CICA Handbook Section 3855
  71




---



##### 



(iii) Hedges, CICA Handbook Section 3865
  (iv) Financial Instruments  Presentation and Disclosure, CICA Handbook Section 3861
  (v) Equity, CICA Handbook Section 3251
  Impact of adopting sections 1530, 3855 and 3865
         72




---



##### 



NOTE 3: FUTURE ACCOUNTING POLICY CHANGES
 Capital Disclosures
  Financial Instruments  Disclosures and Presentation
  Goodwill and Intangible Assets
  NOTE 4: BUSINESS ACQUISITIONS
 Trizec Acquisition
    (Millions)Commercial and development properties
    
    $
    7,541Cash and cash equivalents
    
    
    325Restricted cash
    
    
    88Accounts receivable and other assets
    
    
    62Intangible assets(1)
    
    
    785Accounts payable and other liabilities assumed
    
    
    (214
    )Intangible liabilities(1)
    
    
    (816
    )Future income tax liabilities
    
    
    (182
    )Non-controlling interests assumed
    
    
    (4
    )Preferred shares assumed
    
    
    (65
    )Commercial property debt assumed
    
    
    (1,854
    )Total purchase price
    
    $
    5,666
 
 (1)
    
    All intangibles are subject to amortization  73




---



##### 



(Millions)Investment by Fund partners and joint venture partner
    
    $
    1,042Acquisition financing
    
    
    3,702Brookfield Properties equity investment
    
    
    857Cash on hand utilized
    
    
    167Excess funding for working capital
    
    
    (102
    )Total purchase price
    
    $
    5,666
    Accrued on
    
    
    
    Expensed as incurred(Millions)
    
    acquisition
    
    
    
    2007
    
    
    2006
    
    
    
    TotalSeverance costs
    
    $
    31
    
    
    
    $
    4
    
    
    $
    2
    
    
    
    $
    37Retention costs
    
    
    7
    
    
    
    
    3
    
    
    
    9
    
    
    
    
    19Consulting and integration
    
    
    
    
    
    
    
    6
    
    
    
    4
    
    
    
    
    10Total
    
    $
    38
    
    
    
    $
    13
    
    
    $
    15
    
    
    
    $
    66
   NOTE 5: COMMERCIAL PROPERTIES
  (Millions)
    
    2007
    
    
    2006Commercial propertiesLand
    
    $
    2,828
    
    
    $
    2,769Building and improvements
    
    
    14,253
    
    
    
    13,332Total commercial properties
    
    
    17,081
    
    
    
    16,101Less: Accumulated depreciation
    
    
    (1,192
    )
    
    
    (814
    )Total
    
    $
    15,889
    
    
    $
    15,287
 
 (a)
    
    Commercial properties, carried at a net book value of approximately $3,392 million (2006 -
$3,218 million), are situated on land held under leases or other agreements largely expiring after
the year 2065. Minimum rental payments on land leases are approximately $28 million annually for
the next five years and $3,256 million in total on an undiscounted basis.(b)
    
    Depreciation and amortization on commercial properties for the year ended December 31, 2007 was
$378 million (2006  $107 million). 74




---



##### 



(c)
    
    The following amounts represent the companys proportionate interest in incorporated and
unincorporated joint ventures and partnerships, reflected in the companys commercial and
development properties: (Millions)
    
    2007
    
    
    2006Assets
    
    $
    3,931
    
    
    $
    4,608Liabilities
    
    
    2,038
    
    
    
    2,652Revenues
    
    
    673
    
    
    
    581Expenses
    
    
    378
    
    
    
    351Net income(1)
    
    
    264
    
    
    
    146Cashflow from operating activities
    
    
    276
    
    
    
    175Cashflow used in financing activities
    
    
    (167
    )
    
    
    (92
    )Cashflow used in investing activities
    
    
    109
    
    
    
    (19
    )
 
 (1)
    
    Future income taxes are not reflected here as they are recorded at the corporate level NOTE 6: COMMERCIAL DEVELOPMENTS
  NOTE 7: RESIDENTIAL DEVELOPMENTS
  (Millions)
    
    2007
    
    
    2006Land under development
    
    $
    431
    
    
    $
    249Housing inventory
    
    
    85
    
    
    
    58Land held for development
    
    
    712
    
    
    
    399Total
    
    $
    1,228
    
    
    $
    706
   NOTE 8: RECEIVABLES AND OTHER
  (Millions)
    
    2007
    
    
    2006Accounts receivables
    
    $
    154
    
    
    $
    133Straight-line rent and free rent receivables
    
    
    378
    
    
    
    299Real estate mortgages
    
    
    63
    
    
    
    86Residential receivables and other assets
    
    
    292
    
    
    
    245Prepaid expenses and other assets
    
    
    169
    
    
    
    211Total
    
    $
    1,056
    
    
    $
    974
    75




---



##### 



NOTE 9: INTANGIBLE ASSETS
  (Millions)
    
    2007
    
    
    2006Intangible assetsLease origination costs
    
    $
    377
    
    
    $
    321Tenant relationships
    
    
    501
    
    
    
    515Above-market leases and below-market ground leases
    
    
    82
    
    
    
    79960
    
    
    
    915Less accumulated amortizationLease origination costs
    
    
    (124
    )
    
    
    (45
    )Tenant relationships
    
    
    (62
    )
    
    
    (13
    )Above-market leases and below-market ground leases
    
    
    (15
    )
    
    
    (4
    )Total net
    
    $
    759
    
    
    $
    853
 NOTE 10: RESTRICTED CASH AND DEPOSITS
   NOTE 11: DISCONTINUED OPERATIONS
        76




---



##### 



(Millions)
    
    2007
    
    
    2006Revenue
    
    $
    17
    
    
    $
    31Operating expenses
    
    
    (6
    )
    
    
    (17
    )11
    
    
    
    14Interest expense
    
    
    (2
    )
    
    
    (5
    )Depreciation and amortization
    
    
    (3
    )
    
    
    (8
    )Income from discontinued operations prior to gains, non-controlling interests and taxes
    
    
    6
    
    
    
    1Gain on sale of discontinued operations
    
    
    144
    
    
    
    44Non-controlling interests
    
    
    (33
    )
    
    
    (2
    )Future income taxes
    
    
    (34
    )
    
    
    (15
    )Income and gains from discontinued operations
    
    $
    83
    
    
    $
    28Income and gains from discontinued operations per share  basic and diluted(1)
    
    $
    0.21
    
    
    $
    0.08
 
 (1)
    
    Per share amounts have been restated to reflect the impact of the three-for-two
common stock split effective May 4, 2007 NOTE 12: COMMERCIAL PROPERTY DEBT
          77




---



##### 



Weighted-AverageScheduled
    
    
    
    
    
    
    
    
    
    
    Interest Rate at(Millions)
    
    Amortization
    
    
    Maturities
    
    
    Total
    
    
    Dec. 31, 20072008
    
    $
    154
    
    
    $
    1,078
    
    
    $
    1,232
    
    
    
    6.36
    %2009
    
    
    177
    
    
    
    482
    
    
    
    659
    
    
    
    6.29
    %2010
    
    
    193
    
    
    
    18
    
    
    
    211
    
    
    
    6.55
    %2011(1)
    
    
    199
    
    
    
    4,486
    
    
    
    4,685
    
    
    
    7.01
    %2012
    
    
    207
    
    
    
    212
    
    
    
    419
    
    
    
    6.52
    %2013 and thereafter
    
    
    660
    
    
    
    4,259
    
    
    
    4,919
    
    
    
    6.17
    %Total commercial property debt
    
    $
    1,590
    
    
    $
    10,535
    
    
    $
    12,125
    
    
    
    6.65
    %
 
 (1)
    
    Corporate mezzanine debt of $3,093 million within the U.S. Office Fund matures in 2011 NOTE 13: ACCOUNTS PAYABLE AND OTHER LIABILITIES
  (Millions)
    
    2007
    
    
    2006Accounts payable and accrued liabilities
    
    $
    613
    
    
    $
    503Straight-line rent payable
    
    
    59
    
    
    
    46Residential payables and accrued liabilities
    
    
    184
    
    
    
    138Land development debt
    
    
    501
    
    
    
    236Total
    
    $
    1,357
    
    
    $
    923
    Weighted AverageInterest Rate at
    
    
    Principal Repayments
    
    
    2013
    
    
    2007
    
    
    2006(Millions)
    
    Dec. 31, 2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    & Beyond
    
    
    Total
    
    
    TotalLand development debt
    
    
    6.17
    %
    
    $
    180
    
    
    $
    307
    
    
    $
    5
    
    
    $
    8
    
    
    $
    1
    
    
    $
    
    

    
    $
    501
    
    
    $
    236
  NOTE 14: INTANGIBLE LIABILITIES
  (Millions)
    
    2007
    
    
    2006Intangible liabilitiesBelow-market leases
    
    $
    971
    
    
    $
    902Above-market ground lease obligations
    
    
    58
    
    
    
    701,029
    
    
    
    972Less accumulated amortizationBelow-market leases
    
    
    (189
    )
    
    
    (46
    )Above-market ground lease obligations
    
    
    (6
    )
    
    
    (7
    )Total net
    
    $
    834
    
    
    $
    919
 NOTE 15: FUTURE INCOME TAXES
  (Millions)
    
    2007
    
    
    2006Future income tax liabilities related to difference in tax and book basis, net
    
    $
    (944
    )
    
    $
    (935
    )Future income tax assets related to non-capital losses and capital losses
    
    
    344
    
    
    
    351Total net
    
    $
    (600
    )
    
    $
    (584
    )
 78




---



##### 



(Millions)
    
    Canada
    
    
    United States
    
    
    Total2008
    
    $
    22
    
    
    $
    
    
    
    $
    222009
    
    
    10
    
    
    
    
    
    
    
    102010
    
    
    64
    
    
    
    180
    
    
    
    2442011  2015
    
    
    86
    
    
    
    208
    
    
    
    2942016  2020
    
    
    7
    
    
    
    40
    
    
    
    472021 and beyond
    
    
    350
    
    
    
    3
    
    
    
    353Total
    
    $
    539
    
    
    $
    431
    
    
    $
    970
  (Millions)
    
    2007
    
    
    2006Income tax expense at the Canadian federal and provincial income
tax rate of 35% (2006  35%)
    
    $
    70
    
    
    $
    68Increase (decrease) in income tax expense due to the following:Non-deductible preferred share dividends
    
    
    18
    
    
    
    16Lower income tax rates in other jurisdictions
    
    
    (23
    )
    
    
    (8
    )Change in tax rate applicable to temporary differences
    
    
    (75
    )
    
    
    Non-controlling interests in income tax expense
    
    
    
    
    
    
    (2
    )Foreign exchange gains and losses
    
    
    43
    
    
    
    (12
    )Change in future Canadian tax rates
    
    
    17
    
    
    
    16Other
    
    
    20
    
    
    
    14Total net
    
    $
    70
    
    
    $
    92
  NOTE 16: CAPITAL SECURITIES  CORPORATE
  Shares
    
    
    Shares
    
    
    Cumulative(Millions, except share information)
    
    Authorized
    
    
    Outstanding
    
    
    Dividend Rate
    
    
    2007(2)
    
    
    2006Class AAA Series E(1)
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    70% of bank prime
    
    $
    
    
    
    $
    171Class AAA Series F
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    6.00
    %
    
    
    199
    
    
    
    171Class AAA Series G
    
    
    6,000,000
    
    
    
    4,400,000
    
    
    
    5.25
    %
    
    
    109
    
    
    
    110Class AAA Series H
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.75
    %
    
    
    199
    
    
    
    171Class AAA Series I
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.20
    %
    
    
    199
    
    
    
    171Class AAA Series J
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.00
    %
    
    
    198
    
    
    
    171Class AAA Series K
    
    
    6,000,000
    
    
    
    6,000,000
    
    
    
    5.20
    %
    
    
    149
    
    
    
    128Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,053
    
    
    $
    1,093
 (1)
    
    Balance has been offset with a promissory note  refer to Note 27(d) for further
details(2)
    
    Includes transaction costs of $7 million at December 31, 2007 which are amortized to
interest expense over the life of the securities   79




---



##### 



Redemption Date(1)
    
    Redemption Price(2)
    
    Companys Option(3)
    
    Holders Option(4)Series E
    
    Retractable at par
    
    
    
    
    
    Series F
    
    September 30, 2009
    
    C $25.75
    
    September 30, 2009
    
    March 31, 2013Series G
    
    June 30, 2011
    
    US $26.00
    
    June 30, 2011
    
    September 30, 2015Series H
    
    December 31, 2011
    
    C $26.00
    
    December 31, 2011
    
    December 31, 2015Series I
    
    December 31, 2008
    
    C $25.75
    
    December 31, 2008
    
    December 31, 2010Series J
    
    June 30, 2010
    
    C $26.00
    
    June 30, 2010
    
    December 31, 2014Series K
    
    December 31, 2012
    
    C $26.00
    
    December 31, 2012
    
    December 31, 2016
 (1)
    
    Subject to applicable law and rights of the company, the company may, on or after
the dates specified above, redeem Class AAA preferred shares for cash as follows: the Series F at
a price of C$25.75, if redeemed during the 12 months commencing September 30, 2009 and decreasing
by C$0.25 each 12-month period thereafter to a price per share of C$25.00 if redeemed on or after
September 30, 2012; the Series G at a price of US$26.00, if redeemed during the 12 months
commencing June 30, 2011 and decreasing by US$0.33 each 12-month period thereafter to a price per
share of US$25.00 if redeemed on or after June 30, 2014; the Series H at a price of C$26.00, if
redeemed during the 12 months commencing December 31, 2011 and decreasing by C$0.33 each 12-month
period thereafter to a price per share of C$25.00 if redeemed on or after December 31, 2014; the
Series I at a price of C$25.75, if redeemed during the 12 months commencing December 31, 2008 and
decreasing by C$0.25 each 12-month period thereafter to a price per share of C$25.00 if redeemed
on or after December 31, 2010; the Series J at a price of C$26.00 if redeemed during the 12
months commencing June 30, 2010 and decreasing by C$0.25 each 12-month period thereafter to a
price per share of C$25.00 if redeemed on or after June 30, 2014; the Series K at a price of
C$26.00 if redeemed during the 12-months commencing December 31, 2012 and decreasing by C$0.33
each 12-month period thereafter to a price per share of $C25.00 if redeemed on or after December
31, 2015.(2)
    
    Subject to applicable law and rights of the company, the company may purchase
Class AAA preferred shares for cancellation at the lowest price or prices at which, in the
opinion of the Board of Directors of the company, such shares are obtainable.(3)
    
    Subject to the approval of the Toronto Stock Exchange the company may, on or after
the dates specified above, convert the Class AAA, Series F, G, H, I, J and K into common shares
of the company. The Class AAA, Series F, G, H, I, J and K preferred shares may be converted into
that number of common shares determined by dividing the then-applicable redemption price by the
greater of C$2.00 (Series G  US$2.00) or 95% of the weighted average trading price of common
shares at such time.(4)
    
    Subject to the companys right to redeem or find substitute purchasers, the holder
may, on or after the dates specified above, convert Class AAA, Series F, G, H, I, J and K
preferred shares into that number of common shares determined by dividing the then-applicable
redemption price by the greater of C$2.00 (Series G  US$2.00) or 95% of the weighted average
trading price of common shares at such time.   (Millions)
    
    2007
    
    
    2006Series E(1)
    
    $
    4
    
    
    $
    7Series F through K
    
    
    57
    
    
    
    52Total net
    
    $
    61
    
    
    $
    59
 (1)
    
    Owned by Brookfield Asset Management Inc.  refer to Note 27(d) NOTE 17: U.S. OFFICE FUND
  (Millions)
    
    2007
    
    
    2006Capital securities  fund subsidiariesDebt securities
    
    $
    257
    
    
    $
    257Redeemable equity interests
    
    
    505
    
    
    
    553762
    
    
    
    810Non-controlling interests  fund subsidiaries
    
    
    193
    
    
    
    259Total
    
    $
    955
    
    
    $
    1,069
 80




---



##### 



(Millions)
    
    2007
    
    
    2006Interest on debt securities
    
    $
    26
    
    
    $
    7Interest on redeemable equity interests
    
    
    29
    
    
    
    255
    
    
    
    9Non-cash component(1)
    
    
    (82
    )
    
    
    (21
    )Total interest expense  capital securities  fund subsidiaries
    
    $
    (27
    )
    
    $
    (12
    )
 (1)
    
    Represents co-investors share of non-cash items, such as depreciation and
amortization (Millions)
    
    2007
    
    
    2006Non-controlling interests
    
    $
    60
    
    
    $
    3Non-cash component(1)
    
    
    (109
    )
    
    
    (24
    )Non-controlling interests  fund subsidiaries
    
    $
    (49
    )
    
    $
    (21
    )
 (1)
    
    Represents co-investors share of non-cash items, such as depreciation and
amortization  (Millions)
    
    2007
    
    
    2006Non-controlling interests  fund subsidiaries  continuing operations
    
    $
    (75
    )
    
    $
    (21
    )Non-controlling interests  fund subsidiaries  discontinued operations
    
    
    26
    
    
    
    Total non-controlling interests  fund subsidiaries
    
    $
    (49
    )
    
    $
    (21
    )
 NOTE 18: TRANSACTION COSTS  OTHER
   NOTE 19: NON-CONTROLLING INTERESTS  OTHER SUBSIDIARIES
  (Millions)
    
    Others' Equity Ownership
    
    
    2007
    
    
    2006Common shares of BPO Properties(1)
    
    
    11.0
    %
    
    $
    73
    
    
    $
    55Limited partnership units of Brookfield Financial Properties
    
    
    0.6
    %
    
    
    13
    
    
    
    12Total
    
    
    
    
    
    $
    86
    
    
    $
    67
 (1)
    
    Canadian dollar denominated 81




---



##### 



NOTE 20: PREFERRED EQUITY  SUBSIDIARIES
  Shares
    
    
    Preferred
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Shares Series
    
    Dividend Rate
    
    2007
    
    2006BPO Properties
    
    
    1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    45
    
    
    $
    393,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    96
    
    
    
    82300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    150
    
    
    
    1272,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    71
    
    
    
    61800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    20
    
    
    
    17Total
    
    
    
    
    
    
    
    
    
    $
    382
    
    
    $
    326
      NOTE 21: PREFERRED EQUITY  CORPORATE
  Shares
    
    
    Cumulative(Millions, except share information)
    
    
    Outstanding
    
    
    Dividend Rate
    
    
    2007
    
    
    2006Class A redeemable voting
    
    
    14,202,000
    
    

    7.50%
    
    
    $
    11
    
    
    $
    11Class AA Series E
    
    
    2,000,000
    
    
    70% of bank prime
    
    
    34
    
    
    
    34Total
    
    
    
    
    
    
    
    
    
    $
    45
    
    
    $
    45
    NOTE 22: COMMON EQUITY (a)
Common shares
  2007
    
    
    2006(1)Common shares outstanding, beginning of year
    
    
    396,868,457
    
    
    
    346,814,438Addition of shares as a result of exercise of options
    
    
    450,871
    
    
    
    554,019Addition of shares as a result of equity offering
    
    
    
    
    
    
    49,500,000Deduction of shares repurchased for cancellation
    
    
    (4,513,720
    )
    
    
    Common shares outstanding, end of year
    
    
    392,805,608
    
    
    
    396,868,457
 (1)
    
    Share amounts have been restated to reflect the impact of the three-for-two common
stock split effective May 4, 2007 82




---



##### 



post-split
   (b) Accumulated other comprehensive income
  Balance as at Dec. 31(Millions)
    
    2007
    
    
    2006Unrealized foreign currency translation gains on investments in
subsidiaries, net of related hedging activities, net of taxes
    
    $
    115
    
    
    $
    56Losses on derivatives designated as cash flow hedges(1), net of taxes
    
    
    (23
    )
    
    
    Accumulated other comprehensive income
    
    $
    92
    
    
    $
    56
 
 (1)
    
    Includes losses of $1 million which will be reclassified to interest expense over the
next 12 months (c) Earnings per share
  (Millions, except per share amounts)
    
    2007
    
    

2006 (1)Net income from continuing operations
    
    $
    157
    
    
    $
    107Preferred share dividends
    
    
    (3
    )
    
    
    (3
    )Net income from continuing operations available to common shareholders
    
    $
    154
    
    
    $
    104Net income
    
    $
    240
    
    
    $
    135Preferred share dividends
    
    
    (3
    )
    
    
    (3
    )Net income available to common shareholders
    
    $
    237
    
    
    $
    132Weighted average shares outstanding  basic
    
    
    395.9
    
    
    
    348.6Unexercised dilutive options
    
    
    3.3
    
    
    
    4.4Weighted average shares outstanding  diluted
    
    
    399.2
    
    
    
    353.0
 
 (1)

    
    Share amounts have been restated to reflect the impact of the three-for-two common
stock split effective May 4, 2007 NOTE 23: STOCK-BASED COMPENSATION
   83




---



##### 



WeightedIssue
    
    Expiry
    
    
    Number
    
    
    AverageDate
    
    Date
    
    
    of Shares
    
    
    Exercise Price1998
    
    
    2008
    
    
    
    384,374
    
    
    $
    3.871999
    
    
    2009
    
    
    
    29,300
    
    
    
    3.032000
    
    
    2010
    
    
    
    410,487
    
    
    
    3.332001
    
    
    2011
    
    
    
    756,686
    
    
    
    6.122002
    
    
    2012
    
    
    
    1,068,924
    
    
    
    6.992003
    
    
    2013
    
    
    
    909,678
    
    
    
    7.672004
    
    
    2014
    
    
    
    1,456,944
    
    
    
    12.212005
    
    
    2015
    
    
    
    873,602
    
    
    
    14.582006
    
    
    2016
    
    
    
    818,058
    
    
    
    18.102007
    
    
    2017
    
    
    
    1,513,044
    
    
    
    19.45Total
    
    
    
    
    
    
    8,221,097
    
    
    $
    11.77
  2007
    
    
    2006Number
    
    
    Weighted Average
    
    
    Number
    
    
    Weighted Averageof Options
    
    
    Exercise Price
    
    
    of Options
    
    
    Exercise PriceOutstanding, beginning of year
    
    
    7,179,459
    
    
    $
    11.63
    
    
    
    6,962,943
    
    
    $
    10.47Granted
    
    
    1,528,407
    
    
    
    31.21
    
    
    
    884,836
    
    
    
    20.17Exercised
    
    
    (450,871
    )
    
    
    (11.90
    )
    
    
    (554,019
    )
    
    
    (9.61
    )Cancelled
    
    
    (35,898
    )
    
    
    (17.56
    )
    
    
    (114,301
    )
    
    
    (15.29
    )Outstanding, end of year
    
    
    8,221,097
    
    
    $
    11.77
    
    
    
    7,179,459
    
    
    $
    11.63Exercisable at end of year
    
    
    4,546,631
    
    
    $
    8.02
    
    
    
    4,994,898
    
    
    $
    9.77
    NOTE 24: COMMERCIAL PROPERTY AND RESIDENTIAL DEVELOPMENT OPERATIONS
 (a) Revenue
  (Millions)
    
    2007
    
    
    2006Revenue from commercial property operations
    
    $
    2,168
    
    
    $
    1,407Revenue from residential development operations
    
    
    700
    
    
    
    4602,868
    
    
    
    1,867Interest and other income
    
    
    44
    
    
    
    44Total
    
    $
    2,912
    
    
    $
    1,911
 84




---



##### 



(b) Commercial property operations
  (Millions)
    
    2007
    
    
    2006Revenue
    
    $
    2,168
    
    
    $
    1,407Property operating costs
    
    
    (866
    )
    
    
    (571
    )Commercial property net operating income
    
    $
    1,302
    
    
    $
    836
      (Millions)
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012Rental revenue
    
    $
    1,357
    
    
    $
    1,320
    
    
    $
    1,257
    
    
    $
    1,148
    
    
    $
    1,067
 (c) Residential development operations
  (Millions)
    
    2007
    
    
    2006Revenue
    
    $
    700
    
    
    $
    460Expenses
    
    
    (463
    )
    
    
    (316
    )Residential development net operating income
    
    $
    237
    
    
    $
    144
 85




---



##### 



NOTE 25: DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
  (a) Income statement differences
   (Millions, except per share information)
    
    
    
    
    
    2007
    
    2006Net income as reported under Canadian GAAP
    
    
    
    
    
    $
    240
    
    
    $
    135Adjustments:Decreased commercial property income
    
    
    (i)
    
    
    
    (12
    )
    
    
    (17
    )Decreased commercial property depreciation
    
    (ii)
    
    
    8
    
    
    
    7Increased (decreased) commercial property income, lease termination
income and property disposition gains
    
    (iii)
    
    
    (8
    )
    
    
    3Foreign exchange and dividends on convertible preferred shares
    
    (iv)
    
    
    200
    
    
    
    44Decreased residential development income
    
    
    (v)
    
    
    
    (52
    )
    
    
    (31
    )Decreased (increased) deferred income taxes
    
    (vi)
    
    
    7
    
    
    
    (3
    )Net income under US GAAP
    
    
    
    
    
    $
    383
    
    
    $
    138Preferred share dividends and change in redemption value of redeemable preferred shares
    
    
    
    
    
    
    (97
    )
    
    
    (55
    )Net income available to common shareholders under US GAAP
    
    
    
    
    
    $
    286
    
    
    $
    83Net income per share under US GAAPBasic
    
    
    
    
    
    $
    0.71
    
    
    $
    0.23Diluted
    
    
    
    
    
    $
    0.71
    
    
    $
    0.23
  (i) Decreased commercial property income
  (ii) Decreased commercial property depreciation
  (iii) Increased (decreased) commercial property income, lease termination income and property
disposition gains
  (iv) Foreign exchange and dividends on convertible preferred shares
  86




---



##### 



(v) Decreased residential development income
  (vi) Decreased deferred income taxes
      (b) Comprehensive income
   87




---



##### 



(Millions)
    
    2007
    
    2006Net income under US GAAP
    
    $
    383
    
    
    $
    138Other comprehensive income on change in foreign currency translation
adjustment under US GAAP, net of related hedges
    
    
    24
    
    
    
    (17
    )Other comprehensive income arising from cashflow hedging activities
under US GAAP
    
    
    (19
    )
    
    
    Comprehensive income using US GAAP amounts
    
    $
    388
    
    
    $
    121
 (c) Balance sheet differences
  December 31 (Millions)
    
    
    
    
    
    2007
    
    2006AssetsCommercial properties
    
    
    (i)
    
    
    $
    15,464
    
    
    $
    14,892Commercial developments
    
    
    
    
    
    
    1,172
    
    
    
    735Residential developments
    
        
    (ii)
    
    
    
    1,317
    
    
    
    753Receivables and other
    
    
    (iii), (iv)
    
    
    
    1,053
    
    
    
    914Intangible assets
    
    
    
    
    
    
    759
    
    
    
    853Restricted cash and deposits
    
    
    
    
    
    
    151
    
    
    
    507Marketable securities
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    
    
    
    
    214
    
    
    
    188Assets held for sale
    
    
    
    
    
    
    4
    
    
    
    64Total assets under US GAAP
    
    
    
    
    
    
    20,134
    
    
    
    18,906LiabilitiesCommercial property debt
    
        
    (iv)
    
    
    
    12,168
    
    
    
    11,185Accounts payable and other liabilities
    
    
    (v)
    
    
    
    1,330
    
    
    
    893Intangible liabilities
    
    
    
    
    
    
    834
    
    
    
    919Deferred tax liabilities
    
        
    (vi)
    
    
    
    384
    
    
    
    488Liabilities related to assets held for sale
    
    
    
    
    
    
    3
    
    
    
    36Capital securities  corporate
    
        
    (vii)
    
    
    
    
    
    
    
    Capital securities  fund subsidiaries
    
    
    
    
    
    
    257
    
    
    
    257Minority interests  fund subsidiaries
    
        
    (ix)
    
    
    
    184
    
    
    
    259Minority interests  other subsidiaries
    
    
    (x)
    
    
    
    90
    
    
    
    72Redeemable equity interests
    
        
    (viii)
    
    
    
    705
    
    
    
    724Preferred equity  subsidiaries
    
    
    
    
    
    
    382
    
    
    
    326Shareholders equityPreferred equity  corporate
    
        
    (xi)
    
    
    
    855
    
    
    
    855Common equity
    
        
    (xii)
    
    
    
    2,942
    
    
    
    2,892Total liabilities and shareholders equity under US GAAP
    
    
    
    
    
    $
    20,134
    
    
    $
    18,906
 88




---



##### 



(i) Commercial properties
  (Millions)
    
    2007
    
    2006Commercial properties under Canadian GAAP
    
    $
    15,889
    
    
    $
    15,287Additional accumulated depreciation under US GAAP
    
    
    (425
    )
    
    
    (395
    )Commercial properties under US GAAP
    
    $
    15,464
    
    
    $
    14,892
 (ii) Residential developments
  (Millions)
    
    2007
    
    2006Residential developments under Canadian GAAP
    
    $
    1,228
    
    
    $
    706Residential inventory adjustment
    
    
    89
    
    
    
    47Residential developments under US GAAP
    
    $
    1,317
    
    
    $
    753
 (iii) Receivables and other
  (Millions)
    
    2007
    
    2006Receivables and other under Canadian GAAP
    
    $
    1,056
    
    
    $
    974Straight-line rent receivable adjustment
    
    
    39
    
    
    
    55Deferred financing costs reclassified
    
    
    43
    
    
    
    (10
    )Reclass of related party receivable offset against a financial liability under Canadian GAAP
    
    
    200
    
    
    
    Residential receivable adjustment
    
    
    (285
    )
    
    
    (105
    )Receivables and other under US GAAP
    
    $
    1,053
    
    
    $
    914
 (iv) Commercial property debt
  (v) Accounts payable and other liabilities
  (Millions)
    
    2007
    
    2006Accounts payable and other liabilities under Canadian GAAP
    
    $
    1,357
    
    
    $
    923Tenant inducement
    
    
    (27
    )
    
    
    (30
    )Accounts payable and other liabilities under US GAAP
    
    $
    1,330
    
    
    $
    893
 89




---



##### 



(vi) Deferred tax liabilities
  (Millions)
    
    2007
    
    2006Tax assets related to net operating and capital losses
    
    $
    (463
    )
    
    $
    (459
    )Tax liabilities related to differences in tax and book basis
    
    
    706
    
    
    
    820Valuation allowance
    
    
    141
    
    
    
    127Deferred tax liabilities under US GAAP
    
    $
    384
    
    
    $
    488
 (vii) Capital securities  corporate
  (viii) Redeemable equity interests
  (ix) Minority interests  fund subsidiaries
  (x) Minority interests  other subsidiaries
  (xi) Preferred equity  corporate
  (Millions)
    
    2007
    
    2006Preferred equity  corporate under Canadian GAAP
    
    $
    45
    
    
    $
    45Classification of capital securities as preferred equity, net of issue costs
    
    
    810
    
    
    
    810Preferred equity  corporate under US GAAP
    
    $
    855
    
    
    $
    855
 (xii) Common equity
  (Millions)
    
    2007
    
    2006Common equity under Canadian GAAP
    
    $
    3,033
    
    
    $
    3,067Adjustment to accumulated depreciation under US GAAP
    
    
    (402
    )
    
    
    (403
    )Adjustment to accounts payable and other liabilities under US GAAP
    
    
    28
    
    
    
    30Adjustment to deferred income tax asset under US GAAP
    
    
    188
    
    
    
    101Rental revenue adjustments under US GAAP
    
    
    38
    
    
    
    53Residential revenue adjustment under US GAAP
    
    
    (144
    )
    
    
    (56
    )Foreign currency translation adjustments(1)
    
    
    201
    
    
    
    100Common equity under US GAAP
    
    $
    2,942
    
    
    $
    2,892
 (1)
    
    Includes foreign currency effects related to all other US GAAP adjustments  (Millions)
    
    2007
    
    2006Common shares
    
    $
    2,287
    
    
    $
    2,168Additional paid-in capital
    
    
    174
    
    
    
    242Accumulated other comprehensive income
    
    
    2
    
    
    
    (22
    )Retained earnings
    
    
    479
    
    
    
    504Common equity under US GAAP
    
    $
    2,942
    
    
    $
    2,892
 90




---



##### 



(d) Cashflow statement differences
  (Millions)
    
    2007
    
    2006Cash provided from (used in) the following activitiesOperating
    
    $
    44
    
    
    $
    118Financing
    
    
    329
    
    
    
    6,061Investing
    
    
    (347
    )
    
    
    (6,055
    )Increase (decrease) in cash
    
    $
    26
    
    
    $
    124
 (e) Change in accounting policies
 (i) FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
  (f) Future accounting policy changes
 (i) SFAS No. 157, Fair Value Measurements
  (ii) SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
  (iii) SFAS No. 141(R), Business Combinations and SFAS No. 160, Non-controlling Interests
in Consolidated Financial Statements
  NOTE 26: GUARANTEES, CONTINGENCIES AND OTHER
    91




---



##### 



92




---



##### 



NOTE 27: OTHER INFORMATION
          93




---



##### 



Years ended December 31 (Millions)
    
    2007
    
    2006Acquisition of Trizec(1)
    
    $
    
    
    
    $
    (5,666
    )Cash and cash equivalents acquired
    
    
    
    
    
    
    325Net acquisition of Trizec
    
    $
    
    
    
    $
    (5,341
    )Acquisitions of commercial properties
    
    $
    (622
    )
    
    $
    (667
    )Mortgages and other balances assumed on acquisition
    
    
    315
    
    
    
    98Net acquisitions
    
    $
    (307
    )
    
    $
    (569
    )Dispositions of commercial properties
    
    $
    328
    
    
    $
    169Mortgages assumed by purchasers
    
    
    (104
    )
    
    
    (87
    )Net dispositions
    
    $
    224
    
    
    $
    82Cash taxes paid
    
    $
    35
    
    
    $
    5Cash interest paid (excluding dividends paid on capital securities)
    
    $
    761
    
    
    $
    452
 (1)
    
    Refer to Note 4      94




---



##### 



NOTE 28: SEGMENTED INFORMATION
  Commercial
    
    
    ResidentialUnited States
    
    
    Canada
    
    
    Development
    
    
    Total(Millions)
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006AssetsCommercial properties
    
    $
    13,498
    
    
    $
    13,136
    
    
    
    $
    2,391
    
    
    $
    2,151
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    15,889
    
    
    $
    15,287Development properties
    
    
    676
    
    
    
    433
    
    
    
    
    496
    
    
    
    302
    
    
    
    
    1,228
    
    
    
    706
    
    
    
    
    2,400
    
    
    
    1,441Receivables and other
    
    
    569
    
    
    
    516
    
    
    
    
    195
    
    
    
    213
    
    
    
    
    292
    
    
    
    245
    
    
    
    
    1,056
    
    
    
    974Intangible assets
    
    
    719
    
    
    
    799
    
    
    
    
    40
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    759
    
    
    
    853Restricted cash and deposits
    
    
    146
    
    
    
    497
    
    
    
    
    2
    
    
    
    10
    
    
    
    
    3
    
    
    
    
    
    
    
    
    151
    
    
    
    507Cash and cash equivalents
    
    
    134
    
    
    
    166
    
    
    
    
    74
    
    
    
    21
    
    
    
    
    6
    
    
    
    1
    
    
    
    
    214
    
    
    
    188Assets related to discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    64Total
    
    $
    15,742
    
    
    $
    15,547
    
    
    
    $
    3,202
    
    
    $
    2,815
    
    
    
    $
    1,529
    
    
    $
    952
    
    
    
    $
    20,473
    
    
    $
    19,314
  Commercial
    
    
    ResidentialUnited States
    
    
    Canada
    
    
    Development
    
    
    Total(Millions)
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006Revenues
    
    $
    1,713
    
    
    $
    994
    
    
    
    $
    455
    
    
    $
    413
    
    
    
    $
    700
    
    
    $
    460
    
    
    
    $
    2,868
    
    
    $
    1,867Expenses
    
    
    678
    
    
    
    400
    
    
    
    
    188
    
    
    
    171
    
    
    
    
    463
    
    
    
    316
    
    
    
    
    1,329
    
    
    
    8871,035
    
    
    
    594
    
    
    
    
    267
    
    
    
    242
    
    
    
    
    237
    
    
    
    144
    
    
    
    
    1,539
    
    
    
    980Interest and other income
    
    
    18
    
    
    
    19
    
    
    
    
    14
    
    
    
    16
    
    
    
    
    12
    
    
    
    9
    
    
    
    
    44
    
    
    
    44Net operating income from
continuing operations
    
    
    1,053
    
    
    
    613
    
    
    
    
    281
    
    
    
    258
    
    
    
    
    249
    
    
    
    153
    
    
    
    
    1,583
    
    
    
    1,024Interest expenseCommercial property debt
    
    
    654
    
    
    
    370
    
    
    
    
    43
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    697
    
    
    
    422Capital securities  corporate
    
    
    9
    
    
    
    6
    
    
    
    
    52
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    59Capital securities  fund subsidiaries
    
    
    (27
    )
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (12
    )General and administrative
    
    
    58
    
    
    
    34
    
    
    
    
    45
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    67Transaction costs
    
    
    40
    
    
    
    15
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    15Non-controlling interestsFund subsidiaries
    
    
    (75
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    (21
    )Other subsidiaries
    
    
    1
    
    
    
    1
    
    
    
    
    22
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    19Depreciation and amortization
    
    
    466
    
    
    
    202
    
    
    
    
    64
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    530
    
    
    
    276Income before unallocated costs
    
    
    (73
    )
    
    
    18
    
    
    
    
    51
    
    
    
    28
    
    
    
    
    249
    
    
    
    153
    
    
    
    
    227
    
    
    
    199Future income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    92Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    157
    
    
    $
    107Discontinued operations
    
    
    15
    
    
    
    18
    
    
    
    
    68
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    28Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    240
    
    
    $
    135Acquisition of Trizec, net
    
    $
    
    
    
    $
    5,341
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    5,341Acquisitions of commercial properties, net
    
    
    307
    
    
    
    420
    
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    569Dispositions of commercial properties, net
    
    
    (89
    )
    
    
    (61
    )
    
    
    
    (135
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    (224
    )
    
    
    (82
    )Commercial property tenant
improvements
    
    
    100
    
    
    
    47
    
    
    
    
    7
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    55Development and redevelopment
    
    
    179
    
    
    
    29
    
    
    
    
    134
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    79Capital expenditures
    
    
    32
    
    
    
    12
    
    
    
    
    17
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    25
  95




---



##### 



Selected Financial Information
 December 31 (US Millions, except for share information)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Financial results(1)Commercial property net operating income(2)
    
    $
    1,302
    
    
    $
    836
    
    
    $
    691
    
    
    $
    683
    
    
    $
    586Funds from operations
    
    
    629
    
    
    
    443
    
    
    
    435
    
    
    
    403
    
    
    
    343Net income
    
    
    240
    
    
    
    135
    
    
    
    164
    
    
    
    138
    
    
    
    232Total assets
    
    
    20,473
    
    
    
    19,314
    
    
    
    9,513
    
    
    
    8,800
    
    
    
    8,382Shareholders equity
    
    
    3,078
    
    
    
    3,112
    
    
    
    1,943
    
    
    
    1,992
    
    
    
    1,938Per diluted common share(1)Common shares outstanding
    
    
    392.8
    
    
    
    396.9
    
    
    
    346.8
    
    
    
    350.1
    
    
    
    351.5Fully diluted shares outstanding
    
    
    401.1
    
    
    
    404.0
    
    
    
    353.9
    
    
    
    357.2
    
    
    
    359.1Funds from operations and gains
    
    
    1.81
    
    
    
    1.38
    
    
    
    1.23
    
    
    
    1.30
    
    
    
    1.23Funds from operations excluding lease termination income and gains
    
    
    1.57
    
    
    
    1.25
    
    
    
    1.23
    
    
    
    1.13
    
    
    
    0.95Net income
    
    
    0.59
    
    
    
    0.37
    
    
    
    0.46
    
    
    
    0.39
    
    
    
    0.64Dividends paid
    
    
    0.55
    
    
    
    0.51
    
    
    
    0.43
    
    
    
    0.28
    
    
    
    0.23
    (3)Shareholders equity  book value
    
    
    7.95
    
    
    
    7.51
    
    
    
    5.57
    
    
    
    5.61
    
    
    
    5.41Common share price at year end
    
    
    19.25
    
    
    
    26.22
    
    
    
    19.61
    
    
    
    16.62
    
    
    
    12.75Operating dataCommercial propertiesNumber of commercial properties
    
    
    109
    
    
    
    116
    
    
    
    66
    
    
    
    40
    
    
    
    42Leasable area (millions of sq. ft.)
    
    
    64
    
    
    
    76
    
    
    
    48
    
    
    
    38
    
    
    
    38Effective interest (millions of sq. ft.)
    
    
    59
    
    
    
    58
    
    
    
    29
    
    
    
    30
    
    
    
    30Average occupancy (%)
    
    
    95.6
    
    
    
    95.1
    
    
    
    94.6
    
    
    
    92.7
    
    
    
    94.1
 (1)Excludes the assets, liabilities and results of operations of Brookfield Homes Corporation(2)Includes net operating income from discontinued operations(3)Excludes the distribution of Brookfield Homes Corporation 96




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##### 



Corporate Governance
   
    
    The board has a majority of independent directors
    
    The full board is elected annually; shareholders have cumulative voting rights in
director elections
    
    The company does not have a poison pill in place
    
    The company expenses stock option grants on its income statement
    
    The positions of CEO and Chairman are separated and a lead independent director has been
designated
    
    The company has publicly disclosed board guidelines and the performance of the board is
reviewed annually
    
    Independent directors routinely meet without the CEO or management present
    
    The audit committee and the governance and nominating committee are comprised solely of
independent directors
   Committee Membership
 Audit Committee
    
    Governance & Nominating Committee
    
    Human Resources & Compensation CommitteePaul D. McFarlane, Chair
    
    Allan S. Olson*, Chair
    
    J. Bruce Flatt, ChairWilliam T. Cahill
    
    William T. Cahill
    
    Paul D. McFarlaneAllan S. Olson
    
    Roderick D. Fraser
    
    Linda D. RabbittRobert L. Stelzl
 *
    
    Lead independent director 97