##### 



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 company. To fulfill this
responsibility, the company 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 Canadian generally accepted accounting principles 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 & Touche LLP, the independent auditors appointed by the shareholders, have audited the
consolidated financial statements in accordance with Canadian generally accepted auditing standards
to enable them to express to the shareholders their opinion on the consolidated financial
statements. Their report as auditors is set out below. The consolidated financial statements have been further examined by the Board of Directors and by
its Audit Committee, which meets with the auditors and management to review the activities of each
and reports to the Board of Directors. The auditors have direct and full access to the Audit
Committee and meet with the committee both with and without management present. The Board of
Directors, directly and through its Audit Committee, oversees management responsibilities and is
responsible for reviewing and approving the financial statements. -s- Richard B. Clark
    
    -s- Craig J. LaurieRichard B. Clark
    
    Craig J. LauriePresident and Chief Executive Officer
    
    Senior Vice President and Chief Financial OfficerFebruary 9, 2005
 Auditors Report To the Shareholders, We have audited the consolidated balance sheets of Brookfield Properties Corporation as at December
31, 2004 and 2003 and the consolidated statements of income, retained earnings and cashflow for the
years then ended. These financial statements are the responsibility of the companys management.
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects,
the financial position of the company as at December 31, 2004 and 2003 and the results of its
operations and its cashflows for the years then ended in accordance with Canadian generally
accepted accounting principles. The company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
companys internal control over financial reporting. Accordingly, we express no such opinion. Toronto, CanadaFebruary 9, 2005
    

(DELOITTE & TOUCHE LLP)Chartered Accountants
 37




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##### 



Consolidated Balance Sheet December 31 (US Millions)
    
    Note
    
    
    2004
    
    
    2003AssetsCommercial properties
    
    
    4
    
    
    $
    6,693
    
    
    $
    6,297Development properties
    
    
    5
    
    
    
    716
    
    
    
    684Receivables and other
    
    
    6
    
    
    
    685
    
    
    
    717Marketable securities
    
    
    7
    
    
    
    285
    
    
    
    267Cash and cash equivalents
    
    
    
    
    
    
    112
    
    
    
    132$
    8,491
    
    
    $
    8,097LiabilitiesCommercial property debt
    
    
    8
    
    
    $
    4,550
    
    
    $
    4,537Accounts payable and other liabilities
    
    
    9
    
    
    
    591
    
    
    
    545Future income tax liability
    
    
    10
    
    
    
    96
    
    
    
    18Shareholders interestsMinority interests of others in properties
    
    
    11
    
    
    
    53
    
    
    
    81Preferred sharesSubsidiaries
    
    
    12
    
    
    
    320
    
    
    
    415Corporate
    
    
    12
    
    
    
    854
    
    
    
    586Common shares
    
    
    13
    
    
    
    2,027
    
    
    
    1,915$
    8,491
    
    
    $
    8,097
 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
 38




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##### 



Consolidated Statement of Income December 31 (US Millions, except per share amounts)
    
    Note
    
    
    2004
    
    
    2003Total revenue and gains
    
    
    15
    
    
    $
    1,442
    
    
    $
    1,363Net operating incomeCommercial property operations
    
    
    15Operating income from properties
    
    
    
    
    
    $
    683
    
    
    $
    597Lease termination income and gains
    
    
    
    
    
    
    60
    
    
    
    100Total commercial property operations
    
    
    
    
    
    
    743
    
    
    
    697Development and residential operations
    
    
    15
    
    
    
    42
    
    
    
    31Interest and other
    
    
    
    
    
    
    47
    
    
    
    62832
    
    
    
    790ExpensesInterest
    
    
    
    
    
    
    270
    
    
    
    265Administrative and development
    
    
    
    
    
    
    41
    
    
    
    44Minority interests of others in properties
    
    
    
    
    
    
    20
    
    
    
    21Income before undernoted
    
    
    
    
    
    
    501
    
    
    
    460Depreciation and amortization
    
    
    
    
    
    
    143
    
    
    
    79Taxes and other non-cash items
    
    
    10
    
    
    
    116
    
    
    
    102Net income
    
    
    
    
    
    $
    242
    
    
    $
    279Net income per share
    
    
    13Basic
    
    
    
    
    
    $
    1.29
    
    
    $
    1.64Diluted
    
    
    
    
    
    $
    1.28
    
    
    $
    1.63Net income per share  after giving effect to stock dividend
    
    
    13Basic
    
    
    
    
    
    $
    0.86
    
    
    $
    1.09Diluted
    
    
    
    
    
    $
    0.85
    
    
    $
    1.08
 See accompanying notes to the consolidated financial statements Consolidated Statement of Retained Earnings December 31 (US Millions)
    
    Note
    
    
    2004
    
    
    2003Retained earnings  beginning
of year
    
    
    
    
    
    $
    797
    
    
    $
    630Net income
    
    
    
    
    
    
    242
    
    
    
    279Shareholder distributionsPreferred shares dividends
    
    
    
    
    
    
    (41
    )
    
    
    (20
    )Common share dividends
    
    
    
    
    
    
    (96
    )
    
    
    (79
    )Amount paid in excess of the
book value of common
shares purchased for
cancellation
    
    
    
    
    
    
    (35
    )
    
    
    (13
    )Retained earnings  end of
year
    
    
    13
    
    
    $
    867
    
    
    $
    797
 39




---



##### 



Consolidated Statement of Cashflow December 31 (US Millions)
    
    Note
    
    
    2004
    
    
    2003Operating activitiesNet income
    
    
    
    
    
    $
    242
    
    
    $
    279Depreciation and amortization
    
    
    
    
    
    
    143
    
    
    
    79Taxes and other non-cash items
    
    
    
    
    
    
    116
    
    
    
    102501
    
    
    
    460Property disposition gains
    
    
    
    
    
    
    
    
    
    
    (100
    )Commercial property tenant improvements
    
    
    
    
    
    
    (82
    )
    
    
    (26
    )Other
    
    
    
    
    
    
    58
    
    
    
    Cashflow provided from operating activities
    
    
    
    
    
    
    477
    
    
    
    334Financing activities and capital distributionsCommercial property debt arranged
    
    
    
    
    
    
    452
    
    
    
    735Commercial property debt repayments
    
    
    
    
    
    
    (626
    )
    
    
    (727
    )Subordinated note receivable
    
    
    
    
    
    
    
    
    
    
    98Other advances
    
    
    
    
    
    
    (8
    )
    
    
    (99
    )Common shares issued
    
    
    
    
    
    
    10
    
    
    
    8Common shares of Brookfield repurchased
    
    
    
    
    
    
    (43
    )
    
    
    (106
    )Preferred shares issued, net
    
    
    
    
    
    
    261
    
    
    
    408Preferred shares redeemed
    
    
    
    
    
    
    
    
    
    
    (74
    )Cashflow distributed to other shareholders of subsidiaries
    
    
    
    
    
    
    (163
    )
    
    
    (15
    )Preferred share dividends
    
    
    
    
    
    
    (41
    )
    
    
    (20
    )Common share dividends
    
    
    
    
    
    
    (96
    )
    
    
    (79
    )Cashflow (used in) provided from financing activities and
capital distributions
    
    
    
    
    
    
    (254
    )
    
    
    129Investing activitiesMarketable securities
    
    
    
    
    
    
    (18
    )
    
    
    (267
    )Acquisitions of real estate, net
    
    
    18
    
    
    
    (207
    )
    
    
    (172
    )Dispositions of real estate, net
    
    
    18
    
    
    
    63
    
    
    
    222Development and redevelopment investments
    
    
    
    
    
    
    (55
    )
    
    
    (174
    )Capital expenditures
    
    
    
    
    
    
    (26
    )
    
    
    (16
    )Cashflow used in investing activities
    
    
    
    
    
    
    (243
    )
    
    
    (407
    )(Decrease) increase in cash resources
    
    
    
    
    
    
    (20
    )
    
    
    56Opening cash and cash equivalents
    
    
    
    
    
    
    132
    
    
    
    76Closing cash and cash equivalents
    
    
    
    
    
    $
    112
    
    
    $
    132
 See accompanying notes to the consolidated financial statements 40




---



##### 



Notes to the Consolidated Financial Statements NOTE 1: SIGNIFICANT ACCOUNTING POLICIES  (a)
    General The consolidated financial statements of Brookfield Properties Corporation (the company) are
prepared in accordance with generally accepted accounting principles as prescribed by the Canadian
Institute of Chartered Accountants (CICA).  (b)
    Principles of consolidationThe consolidated financial statements include:  (i)
    the accounts of all subsidiaries of the company including its
wholly-owned operations, as well as BPO Properties Ltd. (BPO Properties) and
Brookfield Financial Properties L.P. (Brookfield Financial Properties); and(ii)
    the accounts of all subsidiaries incorporated and unincorporated
joint ventures and
partnerships to the extent of the companys proportionate interest in their
respective assets, liabilities, revenue and expenses.  The companys ownership interests in operating entities which are not wholly owned are as
follows:  (i)
    Brookfield Financial Properties L.P.: The company owns a 99.4%
limited partnership interest and general partnership interest in Brookfield
Financial Properties L.P.(ii)
    BPO Properties Ltd.: The company owns 89% on an equity basis and
54.3% on a voting basis of the common shares of BPO Properties Ltd.  (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 estimated fair value; buildings and existing tenant improvements are
recorded at depreciated replacement cost; above and below market in-place leases
are determined based on the present value of the difference between the rents
payable under the terms of the respective leases and estimated market rents; lease
origination costs for in-place 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 costs if a tenant were to renew its lease at expiry, discounted
by the probability of such renewal.Depreciation on buildings is provided during the year ended December 31, 2004 on a
straight-line basis and on the sinking fund basis in previous years, in each case
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 leases and lease
origination costs are amortized over the remaining terms of the related in-place
leases. The value associated with tenant relationships is amortized over the
expected term of the relationships. All other tenant improvements and re-leasing
costs are deferred and amortized over the lives of the leases to which they relate.For commercial properties, an impairment loss is recognized when a propertys
carrying value exceeds its undiscounted future net cash flow. 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.(ii)
    Development propertiesCommercial 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.Development 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. 41




---



##### 



(d) Capitalized costs Costs capitalized to commercial and residential properties which are under development and other
properties held for sale include all expenditures incurred in connection with the acquisition,
development, construction and initial predetermined leasing period. These expenditures consist of
all direct costs, interest and certain administrative expenses. Administrative costs are those
directly attributable to development projects and include salaries and benefits of employees
directly associated with the development projects, such as architects, engineers, designers and
development project managers. Ancillary income relating specifically to such properties during the
development period is treated as a reduction of costs. (e) Stock-based compensation The company accounts for stock options using the fair value method. Under this method, compensation
expense for stock options that are direct awards of stock is measured at fair value at the grant
date using the Black-Scholes option pricing model and recognized over the vesting period. (f) Revenue recognition Revenue from a commercial property is recognized upon the earlier of attaining a break-even point
in cashflow after debt servicing, or the expiration of a reasonable period of time following
substantial completion, subject to the time limitation determined when the project is approved.
Prior to this, the property is categorized as a rental property under development, and related
revenue is applied to reduce development costs. The 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. 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 receivable is recorded for the difference between the rental revenue
recorded and the contractual amount received. Rental revenue includes percentage participating
rents and recoveries of operating expenses, including property, capital and Canadian large
corporation 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 from the sale of land and other properties is recorded when the collection of the sale
proceeds is reasonably assured and all other significant conditions are met. Properties which have
been sold, but for which these criteria have not been satisfied, are classified as commercial
properties or included in residential inventory assets, unless they meet the criteria for treatment
as discontinued operations. (g) Income taxes The company accounts for income taxes under the liability method. Under this method, future income
tax assets and liabilities are calculated based on: (i) the temporary differences between the
carrying values and the tax bases of assets and liabilities, and (ii) unused income tax losses,
measured using substantively enacted income tax rates and laws that are expected to apply in the
future as temporary differences reverse and income tax losses are used. (h) Reporting currency and foreign currency translation The consolidated financial statements have been presented in US dollars as the companys principal
investments and cashflow are influenced primarily by the US dollar. Assets and liabilities
denominated in foreign currencies are translated into US dollars at the rate in effect at the
balance sheet date. Revenues and expenses are translated at the weighted average rate in effect for
the period presented. The companys operations in Canada are self-sustaining in nature and as such,
cumulative gains and losses arising from the consolidation of the assets and liabilities of these
operations are recorded as a separate component of shareholders equity. All amounts expressed in the financial statements are in millions of US dollars unless otherwise
noted. (i) Marketable securities Marketable securities are carried at the lower of amortized cost and their estimated net realizable
value. During periods where the fair value or the quoted market value may be less than cost,
the company reviews the relevant security to determine if it will recover its carrying value within
a reasonable period of time and adjusts it, if necessary. This policy considers the companys
intent to hold an investment through periods when quoted market values may not fully reflect the
underlying value of that investment. The company also considers the degree to which estimation is
incorporated into valuations and any potential impairment relative to the magnitude of the related
portfolio. In determining fair values, quoted market prices are generally used when available and, when not
available, management estimates the amounts which could be recovered over time or through a
transaction with knowledgeable and willing third parties under no compulsion to act. (j) Use of estimates The preparation of financial statements, in conformity with Canadian generally accepted accounting
principles, requires estimates and assumptions that affect the carried amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date 42




---



##### 



of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from estimates. Significant estimates are required in
the determination of future cash flows and probabilities in assessing net recoverable amounts and
net realizable value, the allocation of the purchase price to components of commercial properties
acquired, depreciation and amortization, the companys ability to utilize tax losses, hedge
effectiveness, and fair value for disclosure purposes. (k) Derivative financial instruments The company and its subsidiaries utilize derivative financial instruments primarily to manage
financial risks, including interest rate, commodity and foreign exchange risks. Hedge accounting is
applied when the derivative is designated as a hedge of a specific exposure and there is reasonable
assurance that the hedge will be effective. Realized and unrealized gains and losses on forward
exchange contracts designated as hedges of currency risks are included in the cumulative
translation account when the currency risk being hedged relates to a net investment in a
self-sustaining subsidiary. Otherwise, realized and unrealized gains and losses on derivative
financial instruments designated as hedges of financial risks are included in income as an offset
to the hedged item in the period the underlying asset, liability or anticipated transaction affects
income. Financial instruments that are not designated as hedges are carried at estimated fair values, and
gains and losses arising from changes in fair values are recognized in income as a component of
interest and other income in the period the changes occur. The use of non-hedging derivative
contracts is governed by documented risk management policies and approved limits. (l) Comparative figures Certain comparative figures have been reclassified to conform with the current years presentation. NOTE 2: CHANGES IN ACCOUNTING POLICIES Effective January 1, 2004, the company adopted CICA Handbook section 1100, Generally Accepted
Accounting Principles. The section establishes standards for financial reporting in accordance
with
Canadian GAAP, and provides guidance on sources to consult when selecting accounting policies and
determining appropriate disclosures when a matter is not dealt with explicitly in the primary
sources of Canadian GAAP. In particular, this section requires the company to record income arising
from tenant leases and depreciation on buildings on a straight-line basis. Adoption of this section
resulted in recognition of additional straight-line rental revenue of $22 million and additional
depreciation of $58 million before any tax effects for the year ended December 31, 2004.
Previously, the company recorded rental revenue as it was contractually due and payable, and
recorded depreciation on buildings using the sinking fund method. Effective January 1, 2004, the company adopted CICA Handbook section 3063, Impairment of
Long-Lived Assets. The section provides that an impairment loss be recognized when the carrying
value of an asset exceeds the total undiscounted cash flows expected from its use and eventual
disposition. The impairment recognized is measured as the amount by which the carrying value
exceeds its fair value. The adoption of section 3063 did not have a significant impact on the
companys consolidated financial statements. Previously, the impairment was measured as the excess
of the carrying value over the sum of the total undiscounted cash flows. Effective January 1, 2004, the company adopted CICA Handbook section 3110, Asset Retirement
Obligations. The section addresses the recognition and remeasurement of obligations associated
with the retirement of a tangible long-lived asset. This standard provides that obligations
associated with the retirement of tangible long-lived assets be recorded as liabilities when those
obligations are incurred, with the amount of the liability initially measured at fair value. These
obligations are capitalized to the book value of the related long-lived assets and are depreciated
over the useful life of the related asset. The adoption of section 3110 did not have a significant
impact on the companys consolidated financial statements. Effective January 1, 2004, the company adopted Accounting Guideline 13, Hedging Relationships,
(AcG 13), a new accounting guideline issued by the Accounting Standards Board (AcSB) of the CICA
addressing identification, designation, documentation and effectiveness of hedging relationships
for the purposes of applying hedge accounting. Under AcG 13, hedge designation of derivative
financial instruments is only allowed if, both at the inception of the hedge and throughout the
hedge period, the changes in the fair value or cash flows of the derivative instruments are
expected to substantially offset the fair value or cash flows of the underlying asset, liability or
anticipated transaction. Realized and unrealized gains and losses on derivative financial
instruments designated as hedges of financial risks are included in income in the same period as
when the underlying asset, liability or anticipated transaction affects income. The company has adopted CICA Emerging Issue Committee Abstract 140, Accounting for Operating
Leases Acquired in Either an Asset Acquisition or Business Combination, (EIC 140), issued in
September 2003. EIC 140 requires that when a company acquires real estate in either an asset
acquisition or business combination, a portion of the purchase price should be allocated to the
in-place leases to reflect the intangible amounts of leasing costs, above or below market leases
and tenant relationship values, if any. These intangible costs are amortized over their respective
lease terms. The adoption of EIC 140 did not have a significant impact on the companys
consolidated financial statements. 43




---



##### 



NOTE 3: FUTURE ACCOUNTING POLICY CHANGES In June 2003, the CICA issued Accounting Guideline 15, Consolidation of Variable Interest
Entities (AcG 15), which is effective for the companys 2005 fiscal year and provides guidance
for applying the principles in section 1590, Subsidiaries, to those entities defined as Variable
Interest Entities (VIEs) and more commonly referred to as Special Purpose Entities (SPEs), in which
either the equity at risk is not sufficient to permit that entity to finance its activities without
additional subordinated financial support from other parties, or equity investors lack either
voting control, an obligation to absorb expected losses, or the right to relieve expected residual
returns. AcG 15 requires consolidation of VIEs by the Primary Beneficiary. The Primary Beneficiary
is defined as the party who has exposure to the majority of a VIEs
expected losses and/or expected residual returns. The adoption of AcG 15 will not have a material
impact on the consolidated financial statements. In November 2003, CICA Handbook Section 3860, Financial Instruments  Disclosure and
Presentation, effective for the companys 2005 fiscal year, was amended to require that certain
obligations that may be settled at the issuers option in cash or the equivalent value by a
variable number of the issuers own equity instruments be presented as a liability. The amendments
to Section 3860 are effective for fiscal years beginning on or after November 1, 2004, and the
company intends to apply these provisions retroactively, with restatement of prior years presented.
It is expected that this will require the reclassification to liabilities of certain of the
companys preferred shares and securities that are currently included in equity and the recording
of interest expense determined based on the effective financing rate associated with these
instruments. NOTE 4: COMMERCIAL PROPERTIES A breakdown of commercial properties is as follows: (Millions)
    
    2004
    
    
    2003Commercial properties
    
    $
    7,272
    
    
    $
    6,748Less: Accumulated depreciation
    
    
    (579
    )
    
    
    (451
    )Total
    
    $
    6,693
    
    
    $
    6,297
 (a) Commercial properties, carried at a net book value of approximately $2,400 million (2003 
$2,380 million), are situated on land held under leases or other agreements largely expiring after
the year 2069. Minimum rental payments on land leases are approximately $22 million annually for
the next five years and $973 million in total on an undiscounted basis. (b) Construction costs of $15 million (2003  $7 million), interest costs of nil (2003  nil) and
general and administrative expenses of nil (2003  nil) were capitalized to the commercial property
portfolio for properties undergoing redevelopment in 2004. (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)
    
    2004
    
    
    2003Assets
    
    $
    2,173
    
    
    $
    2,164Liabilities
    
    
    1,254
    
    
    
    1,267Operating revenues
    
    
    363
    
    
    
    296Operating expenses
    
    
    141
    
    
    
    120Net income
    
    
    110
    
    
    
    87Cashflow provided from operating activities
    
    
    146
    
    
    
    132Cashflow provided from financing activities
    
    
    
    
    
    
    21Cashflow provided from (used in) investing activities
    
    
    25
    
    
    
    (16
    )
 NOTE 5: DEVELOPMENT PROPERTIES Development properties include commercial developments, primarily for office development and
residential land under and held for
development. A breakdown of development properties is as follows: (Millions)
    
    2004
    
    
    2003Commercial developments
    
    $
    399
    
    
    $
    349Residential developments
    
    
    317
    
    
    
    335Total
    
    $
    716
    
    
    $
    684
 Commercial developments include commercial land, and rights and options which represent
developable land and construction costs. Residential development land includes fully entitled lots
and land in processing. The company capitalizes interest and administrative and development costs
to both commercial and residential development properties. During 2004, the company capitalized construction and
related costs of $26 million (2003  $123 million) and $14 million (2003  $44 million) of interest
to its commercial development sites. 44




---



##### 



The company, through its subsidiaries, is contingently liable for obligations of its
associates in its residential development land joint ventures. In each case, all of the assets of
the joint venture are available first for the purpose of satisfying these obligations with the
balance shared among the participants in accordance with predetermined joint-venture arrangements. NOTE 6: RECEIVABLES AND OTHER The components of receivables and other assets are as follows: (Millions)
    
    2004
    
    
    2003Receivables and real estate mortgages
    
    $
    435
    
    
    $
    499Prepaid expenses and other assets
    
    
    246
    
    
    
    212Non-core real estate assets held for sale
    
    
    4
    
    
    
    6Total
    
    $
    685
    
    
    $
    717
 NOTE 7: MARKETABLE SECURITIES Marketable securities are comprised of a portfolio of fixed-rate corporate bonds with a fair
value approximately equal to its book value and an average yield of 2.6%. The portfolio matures
over the period of 2005 to 2007. NOTE 8: COMMERCIAL PROPERTY DEBT Predominantly all of the commercial property mortgages are secured by individual properties
without recourse to the company. Approximately 90% of the companys commercial property debt is due
after 2006. Weighted AverageInterest Rate at
    
    
    Principal Repayment
    
    
    2010&
    
    
    2004
    
    
    2003(Millions)
    
    Dec. 31, 2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Beyond
    
    
    Total
    
    
    TotalCommercial property debt
    
    
    6.5
    %
    
    $
    277
    
    
    $
    175
    
    
    $
    632
    
    
    $
    278
    
    
    $
    193
    
    
    $
    2,995
    
    
    $
    4,550
    
    
    $
    4,537
 Commercial property debt includes $945 million (2003  $1,104 million) repayable in Canadian
dollars of C$1,134 million (2003 -C$1,435 million). The weighted average interest rate at December
31, 2004 was 6.5% (2003  6.6%). The companys bank credit facility is in the form of a three-year revolving facility totaling $150
million, of which $20 million was drawn at December 31, 2004. This facility has a floating interest
rate of approximately 3.7%. NOTE 9: ACCOUNTS PAYABLE AND OTHER LIABILITIES The components of the companys accounts payable and other liabilities are as follows: (Millions)
    
    2004
    
    
    2003Accounts payable
    
    $
    289
    
    
    $
    241AdvancesRetractable preferred shares
    
    
    167
    
    
    
    154Other
    
    
    135
    
    
    
    150Total
    
    $
    591
    
    
    $
    545
 The Class AAA Series E retractable preferred shares have a cumulative dividend rate of 70% of
bank prime. The company also has a revolving five-year term facility with a shareholder which bears
interest based on the prime rate. This revolving facility is convertible at either partys option
into a fixed-rate financing at 9.75% repayable in 2015. This facility was undrawn at December 31,
2004. Other advances are comprised mainly of debt attributable to the land development business of
$135 million (2003  $150 million) and are primarily recourse in nature to subsidiaries of the
company. The weighted average interest rate on these advances as at December 31, 2004 was 4.2%
(2003  4.4%). Advances totaling $107 million are due by the end of 2005, and the remaining
balances are due prior to 2009. NOTE 10: INCOME TAXES Future income tax assets (liabilities) consist of the following: (Millions)
    
    2004
    
    
    2003Future income tax assets related to non-capital and capital losses
    
    $
    472
    
    
    $
    469Future income tax liabilities related to differences in tax and book
basis, net
    
    
    (568
    )
    
    
    (487
    )Total
    
    $
    (96
    )
    
    $
    (18
    )
 45




---



##### 



The future income tax assets (liabilities) relate primarily to non-capital losses available to
reduce taxable income which may arise in the future. The company and its Canadian subsidiaries have
future income tax assets of $277 million (2003  $235 million) that relate to non-capital losses
which expire over the next ten years, and $45 million (2003  $40 million) that relate to capital
losses which have no expiry. The companys U.S. subsidiaries have future income tax assets of $150
million (2003  $194 million) that relate to net operating losses which expire over the next 16
years. The amount of non-capital losses and deductible temporary differences, for which no future
income tax assets have been recognized, is approximately $400 million (2003  $436 million) which
also expire over the next 10 years. Future income tax expense consists of the following: (Millions)
    
    2004
    
    
    2003Income tax expense at the Canadian federal and provincial
income tax rate of 35% (2003 - 35%)
    
    $
    133
    
    
    $
    141Increase (decrease) in income tax expense due to the following:Higher income taxes in other jurisdictions
    
    
    6
    
    
    
    7Minority shareholders interests in income tax expense
    
    
    (4
    )
    
    
    (2
    )Changes in Canadian tax rates
    
    
    
    
    
    
    (23
    )Tax assets previously not recognized
    
    
    (25
    )
    
    
    (28
    )Non-taxable portion of capital gains
    
    
    (1
    )
    
    
    (1
    )Other
    
    
    7
    
    
    
    8Total
    
    $
    116
    
    
    $
    102
 NOTE 11: MINORITY INTERESTS OF OTHERS IN PROPERTIES Minority interests of others in properties include the amounts of common equity related to
other non-controlling shareholders interests in property ownership entities which are consolidated
in the companys accounts. The balances are as follows: Equity(Millions)
    
    Ownership
    
    2004
    
    
    2003Participation by other
shareholders in properties
through:Common shares of BPO Properties
    
    
    11.0
    %
    
    $
    42
    
    
    $
    72Limited partnership units
of Brookfield Financial
Properties
    
    
    0.6
    %
    
    
    11
    
    
    
    9Total
    
    
    
    
    
    $
    53
    
    
    $
    81
 NOTE 12: PREFERRED SHARES  SUBSIDIARIES AND CORPORATE Subsidiaries and corporate preferred shares outstanding total $1,174 million (2003  $1,001 million) as follows: (a) Subsidiaries The companys subsidiaries have the following preferred shares outstanding: Shared
    
    
    Preferred
    
    Cumulative(Millions except share information)
    
    Outstanding
    
    
    Shares Series
    
    Dividend Rate
    
    2004
    
    
    2003BPO Properties
    
    
    1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    38
    
    
    $
    353,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    80
    
    
    
    74300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    124
    
    
    
    1152,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    59
    
    
    
    55800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    17
    
    
    
    15$
    318
    
    
    $
    294100%-owned subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    121Total
    
    
    
    
    
    
    
    
    
    
    
    $
    320
    
    
    $
    415
 The redemption terms of the preferred shares issued by BPO Properties are as follows: (i) Series G preferred shares are entitled to cumulative dividends at an annual rate equal to 70%
of the average bank prime rate. The company may, at its option, redeem the shares at a price of
C$25 per share plus arrears on any accrued and unpaid dividends. (ii) Series J and M preferred shares are entitled to cumulative dividends at an annual rate equal
to 70% of the average bank prime rate for the previous quarter. The company may, at its option,
redeem the shares at a price of C$25 per share plus arrears on any accrued and unpaid dividends. (iii) Series K preferred shares are entitled to cumulative dividends at the 30 day bankers
acceptance rate plus 0.4%. The company may, at its option, redeem the shares at a price of
C$500,000 per share plus an amount equal to all accrued and unpaid dividends. 46




---



##### 



(iv) Series N preferred shares are entitled to cumulative dividends at the 30 day bankers
acceptance rate plus 0.4%. The company may, at its option, redeem the shares at C$25 per share plus
arrears on any accrued and unpaid dividends. (b) Corporate The company has the following preferred shares authorized and outstanding: (Millions, except share information)
    
    
    
    
    
    
    CumulativeAuthorized
    
    Outstanding
    
    
    Preferred Shares Series
    
    
    Dividend Rate
    
    
    2004
    
    
    20036,312,000
    
    
    6,312,000
    
    
    Class A redeemable voting
    
    
    7.50
    %
    
    $
    11
    
    
    $
    112,000,000
    
    
    2,000,000
    
    
    Class AA Series E
    
    70% of bank prime
    
    
    
    34
    
    
    
    348,000,000
    
    
    8,000,000
    
    
    Class AAA Series F
    
    
    6.00
    %
    
    
    126
    
    
    
    1266,000,000
    
    
    4,400,000
    
    
    Class AAA Series G
    
    
    5.25
    %
    
    
    110
    
    
    
    1108,000,000
    
    
    8,000,000
    
    
    Class AAA Series H
    
    
    5.75
    %
    
    
    151
    
    
    
    1518,000,000
    
    
    8,000,000
    
    
    Class AAA Series I
    
    
    5.20
    %
    
    
    154
    
    
    
    1548,000,000
    
    
    8,000,000
    
    
    Class AAA Series J
    
    
    5.00
    %
    
    
    146
    
    
    
    6,000,000
    
    
    6,000,000
    
    
    Class AAA Series K
    
    
    5.20
    %
    
    
    122
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    854
    
    
    $
    586
 Cumulative preferred dividends are payable quarterly, as and when declared by the Board of
Directors, on the last day of March, June, September and December. The holders of Class A preferred shares are entitled to receive notice of and to attend all
shareholders meetings and for all purposes are entitled to one vote for each Class A preferred
share held, except in respect to the election of directors, where cumulative voting will apply in
the same manner as for the common shares. Upon giving at least 30 days notice prior to the date
set for redemption, the company may redeem all, or from time to time any part, of the outstanding
Class A preferred shares on payment to the holders thereof, for each share to be redeemed of an

amount equal to C$2.50 per share, together with all accrued and unpaid cumulative dividends
thereon. The company may redeem outstanding Class AA preferred shares, at a redemption price for each of the
Class AA preferred shares so redeemed as may have been fixed for that purpose in respect of each
series prior to the sale and allotment of any Class AA preferred shares of that series, plus an
amount equal to unpaid cumulative dividends. During 2004, the company issued 8,000,000 Class AAA, Series J preferred shares and 6,000,000 Class
AAA, Series K preferred shares for total proceeds of C$350 million. During 2003, the company issued 4,400,000 Class AAA, Series G preferred shares, 8,000,000 Class
AAA, Series H preferred shares, and 8,000,000 Class AAA, Series I preferred shares for total
proceeds of $415 million. In June 2003, 4,000,000 Class AAA, Series C and D preferred shares were
redeemed for $74 million. The redemption terms of the Class AAA Preferred Shares are as follows: Redemption Date(1)
    
    Redemption Price(2)
    
    Companys Option(3)
    
    Holders Option(4)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, 2010
    
    December 31, 2016
   (1)
    
    Subject to applicable law and rights of the corporation, 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, 47




---



##### 



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 corporation, 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. NOTE 13: COMMON SHARES The authorized common share capital consists of an unlimited number of common voting shares.
The issued and outstanding common share capital consists of: (Millions)
    
    2004
    
    
    2003Common shares
    
    $
    1,080
    
    
    $
    1,084Retained earnings, and cumulative translation adjustment
    
    
    947
    
    
    
    831Total
    
    $
    2,027
    
    
    $
    1,915
 Retained earnings and cumulative translation adjustment include a foreign currency cumulative
translation adjustment of $80 million (2003  $34 million) and $6 million (2003  $8 million) from
preferred share issue costs. The amount paid in excess of the book value of common shares purchased
for cancellation was $29 million (2003  $13 million). (a) Common shares During the years 2004 and 2003, common shares issued
and outstanding changed as follows: 2004
    
    
    2003Common shares outstanding, beginning of year
    
    
    156,246,701
    
    
    
    160,364,416Addition of shares as a result of exercise of options
    
    
    755,052
    
    
    
    888,985Deduction of shares as a result of repurchases made
    
    
    (1,409,900
    )
    
    
    (5,006,700
    )Common shares outstanding, end of year
    
    
    155,591,853
    
    
    
    156,246,701
 During 2004, the exercise of options issued under the companys share option plan generated
cash proceeds of $10 million (2003 - $ 8 million). During 2004, common shares of the company were
acquired for cancellation pursuant to the normal course issuer bid at an average price of $30.54
per share (2003  $21.10). (b) Earnings per share Net income per share and weighted average common
shares outstanding are calculated as follows: (Millions, except per share information)
    
    2004
    
    
    2003Net income
    
    $
    242
    
    
    $
    279Preferred share dividends
    
    
    (41
    )
    
    
    (20
    )Net income available to common shareholders
    
    $
    201
    
    
    $
    259Weighted average common shares outstanding  basic
    
    
    155.9
    
    
    
    157.4Effect of unexercised options
    
    
    1.2
    
    
    
    1.2Weighted average common shares outstanding  diluted
    
    
    157.1
    
    
    
    158.6
 On February 9, 2005, the Board of Directors approved a three-for-two stock split. The stock
split will be in the form of a stock dividend. Shareholders will receive one Brookfield common
share for each two common shares held. The stock dividend will be payable on March 31, 2005 to
shareholders of record at the close of business on March 15, 2005. The stock split will not change
the economic value of the common shares issued and outstanding. Effectively, the number of common
shares increases by one-half and the earnings per share decreases by one-third. 48




---



##### 



NOTE 14: STOCK-BASED
COMPENSATION Options issued under the companys Share Option Plan vest proportionately over five years and
expire ten years after the grant date. The exercise price is equal to the market price at the grant
date. During the first quarter of 2004, the company granted 975,000 stock options under the Share Option
Plan with an exercise price of $29.42 per share, which was equal to the market price on the grant
date. The compensation expense was calculated using the Black-Scholes model of valuation, assuming
a 7.5-year term, 16.0% volatility, a weighted average dividend yield of 2% and an interest rate of
4.6%. The resulting fair value of $7 million (2003 - $5 million) is charged to expense over the
vesting period of the options granted. The following table sets out
the number of options to purchase common shares which were issued and outstanding at December 31, 2004 under the companys share option plan: Number
    
    
    Weighted AverageIssue Date
    
    Expiry Date
    
    
    of Shares
    
    
    Exercise Price1998
    
    
    2008
    
    
    
    254,500
    
    
    $
    13.661999
    
    
    2009
    
    
    
    29,300
    
    
    
    9.942000
    
    
    2010
    
    
    
    309,925
    
    
    
    12.082001
    
    
    2011
    
    
    
    492,237
    
    
    
    17.652002
    
    
    2012
    
    
    
    608,587
    
    
    
    18.972003
    
    
    2013
    
    
    
    495,439
    
    
    
    19.962004
    
    
    2014
    
    
    
    938,591
    
    
    
    30.02Total
    
    
    
    
    
    
    3,128,579
    
    
    $
    21.04The change in the number of options during 2004
and 2003 is as follows:
 2004
    
    
    2003Number
    
    
    Weighted Average
    
    
    Number
    
    
    Weighted Averageof Options
    
    
    Exercise Price
    
    
    of Options
    
    
    Exercise PriceOutstanding, beginning of year
    
    
    3,242,240
    
    
    $
    16.03
    
    
    
    3,504,791
    
    
    $
    12.99Granted
    
    
    975,000
    
    
    
    29.42
    
    
    
    1,000,000
    
    
    
    18.38Exercised
    
    
    (755,052
    )
    
    
    (13.21
    )
    
    
    (888,985
    )
    
    
    (8.44
    )Cancelled
    
    
    (333,609
    )
    
    
    (19.70
    )
    
    
    (373,566
    )
    
    
    (17.05
    )Outstanding, at end of year
    
    
    3,128,579
    
    
    $
    21.04
    
    
    
    3,242,240
    
    
    $
    16.03Exercisable at end of year
    
    
    1,580,724
    
    
    $
    17.74
    
    
    
    1,136,968
    
    
    $
    13.42
 A Deferred Share Unit Plan is offered to executive officers and non-employee directors of the
company. Under this plan, each officer and director may choose to receive all or a percentage of
his or her annual incentive bonus or directors fees in the form of deferred share units (DSUs).
The DSUs are vested over a five year period and accumulate additional DSUs at the same rate as
dividends on common shares. Officers and directors are not permitted to convert the DSUs into cash
until retirement or cessation of employment. The value of the vested and non-vested DSUs, when
converted to cash, will be equivalent to the market value of the common shares at the time the
conversion takes place. Employee compensation expense for these plans is charged against income
over the vesting period of the DSUs. Changes in the amount payable by the company in respect of
vested DSUs as a result of dividends and share price movements are recorded as employee
compensation expense in the period of the change. Employee compensation expense related to the stock option and the Deferred Share Unit plans for the
year ended December 31, 2004 was $5 million (2003 - $3 million). NOTE 15: COMMERCIAL
PROPERTY AND RESIDENTIAL DEVELOPMENT OPERATIONS (a) Revenue and
gains
The components of revenue and gains are as follows: (Millions)
    
    2004
    
    
    2003Revenue from commercial property operations
    
    $
    1,074
    
    
    $
    976Lease termination income
    
    
    60
    
    
    
    Total commercial property revenue
    
    
    1,134
    
    
    
    976Revenue from development and residential operations
    
    
    261
    
    
    
    225Revenue from commercial property, development and residential operations
    
    
    1,395
    
    
    
    1,201Interest and other
    
    
    47
    
    
    
    62Commercial property gains
    
    
    
    
    
    
    100Total
    
    $
    1,442
    
    
    $
    1,363
 49




---



##### 



(b) Commercial
property operations
The results of the companys commercial property operations are as follows: (Millions)
    
    2004
    
    
    2003Commercial property operations
    
    $
    1,074
    
    
    $
    976Expenses
    
    
    (391
    )
    
    
    (379
    )Lease termination income and gains
    
    
    60
    
    
    
    100Total
    
    $
    743
    
    
    $
    697
 Due to the events of September 11, 2001 and the impact on the companys properties in Lower
Manhattan, commercial property income includes $7 million (2003 - $11 million) of business
interruption insurance claims as a result of loss of revenue. During 2004, rental revenues
from Merrill Lynch accounted for 14% (2003 - 14%) of total revenue
from commercial properties. (c) Development and
residential operations
Development and residential operations results for the year are as follows: (Millions)
    
    2004
    
    
    2003Revenue
    
    $
    261
    
    
    $
    225Expenses
    
    
    (219
    )
    
    
    (194
    )Total
    
    $
    42
    
    
    $
    31
 NOTE 16: DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES Canadian generally accepted accounting principles (Canadian GAAP) differ in some respects
from the principles that the company would follow if its consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the United States (US
GAAP). The effects of significant accounting differences on the companys balance sheet and
statements of income, retained earnings and cashflow are quantified and described in the
accompanying notes. Under both Canadian and US GAAP, non-GAAP measures and discussion are generally
not included in the financial statements and notes thereto. (a) Income statement differences The incorporation of the significant differences in accounting principles in the companys income
statements for the years ended December 31, 2004 and 2003 under US GAAP would result in net income
under US GAAP of $259 million (2003  $254 million). The main differences between Canadian GAAP and
US GAAP are summarized in the following table: (Millions, except per share information)
    
    2004
    
    
    2003Net income as reported under Canadian GAAP
    
    $
    242
    
    
    $
    279Adjustments:(i) (Decreased) increased commercial property income
    
    
    (18
    )
    
    
    9(ii) Decreased (increased) commercial property depreciation
    
    
    5
    
    
    
    (60
    )(iii) Increased commercial property lease termination income and gains
    
    
    42
    
    
    
    9(iv) (Increased) decreased deferred income taxes
    
    
    (12
    )
    
    
    17Net income under US GAAP
    
    $
    259
    
    
    $
    254Net income per shareBasic
    
    $
    1.40
    
    
    $
    1.49Diluted
    
    $
    1.39
    
    
    $
    1.48Net income per share  after giving effect to stock dividendBasic
    
    $
    0.93
    
    
    $
    0.99Diluted
    
    $
    0.92
    
    
    $
    0.98
  Other significant differences are outlined in each category between Canadian GAAP and US GAAP
as follows:(i)
    
    (Decreased) Increased commercial property incomePrior to January 1, 2004, rental revenue was recognized under Canadian GAAP over the term
of the lease as it becomes due where increases in rent are intended to offset the estimated
effects of inflation. Effective January 1, 2004, rental revenue is recognized on a
straight-line basis over the term of the lease. Under US GAAP, rental revenue has always
been recognized on a straight-line basis. The net impact on the current year income of the
company had the straight-line method always been used under Canadian GAAP would be a
decrease in commercial property revenue by $18 million (2003 - increase by $9 million). 50




---



##### 



(ii)
    
    Decreased (increased) commercial property depreciationPrior to January 1, 2004, commercial properties were depreciated under Canadian GAAP using
the sinking-fund method.
Effective January 1, 2004, depreciation of rental properties is recorded using the
straight-line method on a prospective basis.
Under US GAAP, commercial properties have been depreciated on a straight-line basis from
inception. As a result of the higher carrying value under Canadian GAAP at January 1, 2004,
straight-line depreciation is higher under Canadian GAAP by $5 million for 2004. For 2003,
straight-line depreciation under US GAAP was $60 million higher
than sinking - fund
depreciation under Canadian GAAP.(iii)
    
    Increased commercial property lease termination income and gainsUnder US GAAP, the book values of commercial property assets differ from Canadian GAAP as a
result of historical rental revenue recognition and commercial property depreciation
methods, as explained in (i) and (ii). Further, termination of a previously existing lease
at One World Financial Center in New York resulted in additional lease termination income
under US GAAP. The net impact of these amounts would be an increase in commercial property
lease termination income and gains of $42 million (2003 - $9 million).(iv)
    
    (Increased) decreased deferred income taxesIncome taxes are accounted for using the liability method under Canadian and US GAAP. For
the year ended December 31, 2004, an increase of deferred income tax expense of $12 million
(2003 - decrease of $17 million) would be recorded under US GAAP due to the tax effect of
the stated differences between Canadian and US GAAP described
above.
Under current Canadian and US GAAP, the impact of changes in income tax rates to the tax
asset or liability account is reflected in the current years statement of income. Under
Canadian GAAP, the impact of the change is reflected when the legislation affecting the tax
rate change is substantively enacted, whereas the impact under US GAAP is reflected when
legislation is enacted. (b) Comprehensive income Under US GAAP, the Financial Accounting Standards Board (FASB) issued SFAS 130 entitled
Reporting Comprehensive Income requiring the reporting of comprehensive income. Comprehensive
income, which incorporates net income, includes all changes in equity during the year, and
accordingly, the change in the companys cumulative translation adjustment is reflected in the
companys calculation of comprehensive income. Differences arise from the application of the current rate method of currency translation under US
GAAP to all periods presented pursuant to the adoption of the US dollar as the companys reporting
currency, and from other differences between Canadian and US GAAP as described above under Income
statement differences. Comprehensive income using Canadian GAAP amounts is as follows: (Millions)
    
    2004
    
    
    2003Net income under Canadian GAAP
    
    $
    242
    
    
    $
    279Foreign currency translation adjustment under Canadian GAAP
    
    
    46
    
    
    
    70Comprehensive income using Canadian GAAP amounts
    
    $
    288
    
    
    $
    349
 Comprehensive income using US GAAP amounts is as follows: (Millions)
    
    2004
    
    
    2003Net income under US GAAP
    
    $
    259
    
    
    $
    254Foreign currency translation adjustment under US GAAP
    
    
    71
    
    
    
    54Comprehensive income using US GAAP amounts
    
    $
    330
    
    
    $
    308
 51




---



##### 



(c) Balance sheet differences There are differences in the treatment of balance sheet items between Canadian GAAP and US GAAP.
The incorporation of the significant differences in accounting principles in the companys
financial statements as at December 31, 2004 and 2003 would result in the following balance sheet
presentation under US GAAP: (Millions)
    
    2004
    
    
    2003AssetsCommercial properties
    
    $
    6,277
    
    
    $
    5,877Development properties
    
    
    716
    
    
    
    684Receivables and other
    
    
    777
    
    
    
    824Deferred income taxes
    
    
    6
    
    
    
    116Marketable securities
    
    
    285
    
    
    
    267Cash and cash equivalents
    
    
    112
    
    
    
    132Total assets under US GAAP
    
    $
    8,173
    
    
    $
    7,900Liabilities and shareholders equityCommercial property debt
    
    $
    4,550
    
    
    $
    4,537Accounts payable and other liabilities
    
    
    558
    
    
    
    545Minority interests of others in properties
    
    
    58
    
    
    
    86Preferred sharesSubsidiaries
    
    
    320
    
    
    
    415Corporate
    
    
    865
    
    
    
    598Common shares
    
    
    1,822
    
    
    
    1,719Total liabilities and shareholders equity under US GAAP
    
    $
    8,173
    
    
    $
    7,900
 Significant differences between Canadian GAAP and US GAAP are as follows: Commercial properties There are two principal differences between Canadian GAAP and US GAAP affecting the carrying value of commercial properties.
The first difference relates to historical differences in the method of depreciation to be applied to depreciable assets as
described in
Note 16(a)(ii). At December 31, 2004, this would result in a cumulative adjustment of $416 million (2003  $420 million). The second
difference relates to the method of accounting for joint ventures and partnerships. Under Canadian GAAP, the accounts of all
incorporated and unincorporated joint ventures and partnerships are proportionately consolidated according to the companys ownership interest. Under US GAAP, the equity method of accounting is applied. In circumstances where a joint venture is an operating
entity and the significant financial and operating policies are, by contractual arrangement, jointly controlled by all parties
having an
equity interest in the entity, US regulations do not require adjustment to equity account the joint ventures. The presentation of the
companys joint ventures does not require adjustment to the equity method. (Millions)
    
    2004
    
    
    2003Commercial properties under Canadian GAAP
    
    $
    6,693
    
    
    $
    6,297Additional accumulated depreciation under US GAAP
    
    
    (416
    )
    
    
    (420
    )Commercial properties under US GAAP
    
    $
    6,277
    
    
    $
    5,877
 Receivables and other The principal difference in the accounting for receivables and other under US GAAP is the inclusion of a straight-line rent
receivable
of $92 million (2003  $107 million) had the company always straight-lined its revenue. (Millions)
    
    2004
    
    
    2003Receivables and other under Canadian GAAP
    
    $
    685
    
    
    $
    717Straight-line rent receivable
    
    
    92
    
    
    
    107Receivables and other under US GAAP
    
    $
    777
    
    
    $
    824
 Deferred income taxes Under US GAAP, the company has a deferred tax asset of $6 million (2003  $116 million). The
offsetting balance created by this adjustment decreases future income tax liability under Canadian
GAAP by $96 million (2003  $18 million), decreases cumulative translation adjustment by $25
million (2003  $5 million) and increases shareholders equity by $127 million (2003  $139
million). 52




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##### 



The deferred income tax asset under US GAAP is as follows: (Millions)
    
    2004
    
    
    2003Tax assets related to net operating and capital losses
    
    $
    612
    
    
    $
    609Tax liabilities related to differences in tax and book basis
    
    
    (458
    )
    
    
    (333
    )Valuation allowance
    
    
    (148
    )
    
    
    (160
    )Deferred income tax asset under US GAAP
    
    $
    6
    
    
    $
    116
 Accounts payable and other liabilities The principal difference under US GAAP relates to deferred income relating to a lease transaction at One World Financial Center
in New York. The accounts payable and other liabilities under US GAAP is as follows: (Millions)
    
    2004
    
    
    2003Accounts payable and other liabilities under Canadian GAAP
    
    $
    591
    
    
    $
    545Deferred income
    
    
    (33
    )
    
    
    Accounts payable and other liabilities under US GAAP
    
    $
    558
    
    
    $
    545
 Common shareholders equity The cumulative impact of US GAAP adjustments to common
shareholders equity is as follows: (Millions)
    
    2004
    
    
    2003Common shareholders equity under Canadian GAAP
    
    $
    2,027
    
    
    $
    1,915Adjustment to accumulated depreciation under US GAAP
    
    
    (416
    )
    
    
    (420
    )Adjustment to accounts payable and other liabilities under US GAAP
    
    
    33
    
    
    
    Adjustment to deferred income tax asset under US GAAP
    
    
    102
    
    
    
    134Rental revenue adjustments under US GAAP
    
    
    92
    
    
    
    107Foreign currency translation adjustments, net
    
    
    (16
    )
    
    
    (17
    )Common shareholders equity under US GAAP
    
    $
    1,822
    
    
    $
    1,719
 The components of common shareholders equity under US GAAP, after the adjustments in the previous table, are as follows: (Millions)
    
    2004
    
    
    2003Common shares
    
    $
    1,173
    
    
    $
    1,177Additional paid-in capital, net*
    
    
    871
    
    
    
    825Cumulative translation adjustment
    
    
    (29
    )
    
    
    (100
    )Cumulative adjustments to net income and retained earnings
    
    
    (193
    )
    
    
    (183
    )Common shareholders equity under US GAAP
    
    $
    1,822
    
    
    $
    1,719
   *
    Net of retained earnings of $607 million (2003  $526 million) Joint ventures The following amounts represent the companys proportionate interest in incorporated and unincorporated joint
ventures reflected in
the companys balance sheet for US GAAP purposes: (Millions)
    
    2004
    
    
    2003Assets
    
    $
    1,866
    
    
    $
    1,865Liabilities
    
    
    1,254
    
    
    
    1,267Operating revenue
    
    
    306
    
    
    
    258Operating expenses
    
    
    130
    
    
    
    109Net income
    
    
    81
    
    
    
    74Cashflows provided from operating activities
    
    
    116
    
    
    
    116Cashflows provided from investing activities
    
    
    
    
    
    
    21Cashflows provided from (used in) financing activities
    
    
    25
    
    
    
    (16
    )
 (d) Change in
accounting policies In April 2003, FASB issued SFAS 149, Amendment of SFAS 133 on Derivative Instruments and Hedging
Activities (SFAS 149). SFAS 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for hedging activities
under SFAS 133. In particular, it clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative, clarifies when a derivative contains a
financing component, amends the definition 53




---



##### 



of an underlying, and amends certain other existing pronouncements. The adoption of SFAS 149
by the company has not had a material impact on the results of operations or financial condition. In May 2003, FASB issued SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances) whereas many of those instruments were
previously classified as equity. Some of the provisions of this statement are consistent with the
current definition of liabilities in FASB Concepts Statement 6, Elements of Financial Statements.
The remaining provisions of this statement are consistent with the proposal to revise that
definition to encompass certain obligations that a reporting entity can or must settle by issuing
its own equity shares, depending on the nature of the relationship established between the holder
and the issuer. The adoption of SFAS 150 by the company has not had a material impact on the
consolidated financial statements. In December 2003, the FASB issued revised Interpretation 46 (FIN 46R), Consolidation of Variable
Interest Entities (VIEs), an Interpretation of Accounting Research Bulletin 51, Consolidated
Financial Statements, and replaces the previous version of FASB Interpretation 46 issued in
January, 2003 (FIN 46). This interpretation is to be applied immediately to VIEs created after
January 31, 2003. A company that holds a variable interest in a VIE it acquired before February 1,
2003 shall apply the provision of this interpretation no later than the first fiscal year or
interim period ending after March 15, 2004 unless those entities are considered to be special
purpose entities in which the application is to be no later than the end of the first reporting
period that ends after December 15, 2003. This interpretation may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is first applied or by restating previously
issued financial statements for one or more years with a cumulative-effect adjustment as of the
beginning of the first year restated. The decision whether to consolidate a VIE begins with
establishing that a VIE exists. A VIE exists when either the total equity investment at risk is not
sufficient to permit the entity to finance its activities by itself, or the equity investor lacks
one of three characteristics associated with owning a controlling financial interest. Those
characteristics are the direct or indirect ability to make decisions about the entitys activities
through voting rights or similar rights, the obligation to absorb the expected losses of an entity,
and the right to receive the expected residual returns. The entity with the majority of the
expected losses or expected residual return is considered to be primary beneficiary of the entity
and is required to consolidate such entity. FIN 46R was effective for the company on June 30, 2004.
The adoption of FIN 46R has not had a material impact on the companys financial statements. (e) Future accounting policy changes In December 2004, the FASB issued SFAS 123R, Share-Based Payment (SFAS 123R), which establishes
accounting standards for all transactions in which an entity exchanges its equity instruments for
goods and services. SFAS 123R focuses primarily on accounting for transactions with employees, and
carries forward without change prior guidance for share-based payments for transactions with
non-employees. SFAS 123R eliminates the intrinsic value measurement objective in APB Opinion 25 and generally
requires the company to measure the cost of employee services received in exchange for an award of
equity instruments based on the fair value of the award on the date of the grant. The standard
requires grant date fair value to be estimated using either an option-pricing model which is
consistent with the terms of the award or a market observed price, if such a price exists. Such
cost must be recognized over the period during which an employee is required to provide service in
exchange for the award. The standard also requires the company to estimate the number of
instruments that will ultimately be issued, rather than accounting for forfeitures as they occur.
The company is assessing the requirements of the standard and believes that its adoption will not
have a significant impact. In December 2004, the FASB issued SFAS 153, Exchanges of Non-Monetary Assets (SFAS 153), an
amendment of APB 29. This standard amends Opinion 29 to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. The standard specifies that a non-monetary
exchange has commercial substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. This standard is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is
permitted for non-monetary asset exchanges occurring in fiscal periods beginning after the date
this standard is issued. Retroactive application is not permitted. The company is assessing the
requirements of this standard and believes that its adoption will not have a significant impact. On March 21, 2004, the FASB ratified the consensus reached by the EITF on EITF 03-6. This EITF
requires the calculation of earnings per share to be changed to measure the impact of certain
securities or other instruments or contracts that entitle their holders to participate in
undistributed earnings of the reporting entity, provided such entitlement is non-discretionary and
objectively determinable. EITF 03-6 is effective for the first interim or annual reporting period
that begins after March 31, 2004, and requires retroactive adjustment to earnings per share
presented for prior periods. The company is assessing the impact that EITF 03-6 will have on its
2005 consolidated financial statements, if any. 54




---



##### 



NOTE 17: GUARANTEES, CONTINGENCIES AND OTHER (a) In the normal course of operations, the company and its consolidated subsidiaries execute
agreements that provide for indemnification and guarantees to third parties in transactions such as
business dispositions, business acquisitions, sales of assets, sales of services, securitization
agreements and underwriting and agency agreements. In particular, the company provided income
guarantees to the co-owners in connection with the sale of certain properties in prior years. These
guarantees are based on a specified level of contractual occupancy until July 2007 and a specified
rate of return until July 2005. Based on estimated levels of contractual occupancy and rate of
return, the company has provided for potential payments of $2 million at the time of sale. The company has also agreed to indemnify its directors and certain of its officers and employees.
The nature of substantially all of the indemnification undertakings prevent the company from making
a reasonable estimate of the maximum potential amount that could be required to pay third parties
as the agreements do not specify a maximum amount and the amounts are dependent upon the outcome of
future contingent events, the nature and likelihood of which cannot be determined at this time.
Historically, neither the company nor its consolidated subsidiaries have made significant payments
nor do they expect to make any significant payments under such indemnification agreements. Brookfield does not conduct its operations, other than equity-accounted investments, through
entities that are not fully or proportionately consolidated in its consolidated financial
statements, and has not guaranteed or otherwise contractually committed to support any material
financial obligations not reflected in its consolidated financial statements. (b) The company and its operating subsidiaries are contingently liable with respect to litigation
and claims that arise from time to time in the normal course of business. In the opinion of
management, any liability which may arise from such contingencies would not have a material adverse
effect on the consolidated financial statements of the company. (c) On September 11, 2001, Brookfield owned eight million square feet of space in four office
towers surrounding the World Trade Center site - One Liberty Plaza and One, Two and Four World
Financial Center. The physical damage sustained by these properties was mainly cosmetic as a result
of the attack on and subsequent collapse of the World Trade Center and consisted primarily of
replacement of broken windows and some repair to the granite façade on the World Financial Center.
While there was no structural damage to these four office towers, the glass-enclosed Winter Garden
atrium at the center of the World Financial Center suffered more significant damage from falling
debris than other areas of the complex. This component of the World Financial Center was fully
restored and re-opened in September 2002. To date, approximately $230 million has been received for property and business interruption claims
relating to One Liberty Plaza, One World Financial Center, the Winter Garden and common areas of
the World Financial Center. Two and Four World Financial Center are covered by insurance in place
under the triple-net leases with Merrill Lynch. Brookfields insurance claim adjustment process is
on-going due to the complexity of the issues involved. However, Brookfield anticipates recovery of
all material amounts relating to the restoration and business interruption costs of its properties. One Liberty Plaza and Four World Financial Center reopened in October 2001 and One and Two World
Financial Center reopened in the first quarter of 2002. No material lease cancellations in the New
York portfolio occurred as a result of the events of September 11. Brookfield has insurance covering certain acts of terrorism for up to $600 million of damage and
business interruption costs. Brookfield continues to seek additional coverage equal to the full
replacement cost of its assets; however, until this type of coverage becomes commercially available
on an economically reasonable basis, any damage or business interruption costs as a result of
uninsured acts of terrorism could result in a material cost to the company. Brookfield believes it
is in compliance with all of its loan covenants, despite not being able to acquire terrorism
coverage for the full replacement cost of all of the companys properties. NOTE 18: OTHER INFORMATION (a) At December 31, 2004, the company had foreign exchange contracts to sell a notional amount
of C$711 million at a weighted average exchange rate of C$1.00 = US$0.76, maturing in January 2005,
designated as hedges for accounting purposes to manage the companys foreign exchange risk in
respect to its Canadian-denominated net investments. The fair value of these contracts at December
31, 2004 was a loss of $52 million which is reflected in the cumulative translation adjustment
account. The companys self-sustaining subsidiaries also had foreign exchange contracts to sell a
notional amount of US$310 million at a weighted average exchange rate of US$1.00 = C$1.33, maturing
in January 2005, which have not been designated as hedges for financial reporting purposes. The
aggregate fair value of these contracts at December 31, 2004 was a gain of $30 million. (b) As at
December 31, 2004, Brookfield had approximately $216 million (December 31, 2003 - $562
million) of indebtedness outstanding to Brascan Corporation and its affiliates. During the first
quarter of 2004, the company, based on an agreement signed in 1997, purchased the land lease on one
of its Canadian properties for an amount equal to its carrying value of $80 million from Brascan
Corporation. (c) Generally accepted accounting principles require that, where practical, estimates be made with
respect to the fair value of both on and off balance sheet financial instruments. The financial
assets of the company are generally short-term floating rate loans receivable of a trade nature. At
December 31, 2004, the fair value of loans receivable exceeded their book value by $1 million (2003
-$1 million). The fair value of mortgages and loans payable is determined by references to current
market rates for debt with similar 55




---



##### 



terms and risks. As at December 31, 2004, the fair value of advances, commercial property debt
and other loans payable exceeds the book value of these obligations
by $196 million (2003 - $178
million). (d) Supplemental cashflow information Years ended December 31 (Millions)
    
    2004
    
    
    2003Investing activitiesAcquisitions of real estate
    
    $
    (359
    )
    
    $
    (172
    )Mortgages assumed by purchasers
    
    
    152
    
    
    
    $
    (207
    )
    
    $
    (172
    )Dispositions of real estate
    
    $
    99
    
    
    $
    469Mortgages assumed by purchasers
    
    
    (36
    )
    
    
    (247
    )$
    63
    
    
    $
    222
 Cash taxes paid were
$7 million (2003 - $10 million). Cash interest paid totaled $278 million
(2003 - $308 million). (e) The assets and liabilities of certain of the companys subsidiaries are neither available to
pay debts of, nor constitute legal obligations of the parent or other subsidiaries, respectively. NOTE 19: SEGMENTED INFORMATION The company and its subsidiaries operate in the U.S. and Canada within the commercial property
business and the residential land development business. The following summary presents segmented
financial information for the companys principal areas of business by industry and geographic
location: United States

    
    Canada
    
    Total(Millions)
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003AssetsCommercial properties
    
    $
    5,093
    
    
    $
    4,842
    
    
    
    $
    1,600
    
    
    $
    1,455
    
    
    
    $
    6,693
    
    
    $
    6,297Development properties
    
    
    326
    
    
    
    373
    
    
    
    
    390
    
    
    
    311
    
    
    
    
    716
    
    
    
    684Receivables and other
    
    
    355
    
    
    
    334
    
    
    
    
    330
    
    
    
    383
    
    
    
    
    685
    
    
    
    717Marketable securities
    
    
    285
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    285
    
    
    
    267Cash and cash equivalents
    
    
    49
    
    
    
    101
    
    
    
    
    63
    
    
    
    31
    
    
    
    
    112
    
    
    
    132$
    6,108
    
    
    $
    5,917
    
    
    
    $
    2,383
    
    
    $
    2,180
    
    
    
    $
    8,491
    
    
    $
    8,097
 United States
    
    Canada
    
    Total(Millions)
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003Commercial property operationsRental revenues
    
    $
    773
    
    
    $
    678
    
    
    
    $
    301
    
    
    $
    298
    
    
    
    $
    1,074
    
    
    $
    976Lease termination income and gains
    
    
    60
    
    
    
    97
    
    
    
    
    
    
    
    
    3
    
    
    
    
    60
    
    
    
    100Expenses
    
    
    262
    
    
    
    244
    
    
    
    
    129
    
    
    
    135
    
    
    
    
    391
    
    
    
    379571
    
    
    
    531
    
    
    
    
    172
    
    
    
    166
    
    
    
    
    743
    
    
    
    697Land and housingRevenues
    
    
    19
    
    
    
    30
    
    
    
    
    242
    
    
    
    195
    
    
    
    
    261
    
    
    
    225Expenses
    
    
    16
    
    
    
    27
    
    
    
    
    203
    
    
    
    167
    
    
    
    
    219
    
    
    
    1943
    
    
    
    3
    
    
    
    
    39
    
    
    
    28
    
    
    
    
    42
    
    
    
    31Other revenues
    
    
    14
    
    
    
    25
    
    
    
    
    33
    
    
    
    37
    
    
    
    
    47
    
    
    
    62Net operating income
    
    
    588
    
    
    
    559
    
    
    
    
    244
    
    
    
    231
    
    
    
    
    832
    
    
    
    790Interest expense
    
    
    215
    
    
    
    212
    
    
    
    
    55
    
    
    
    53
    
    
    
    
    270
    
    
    
    265Administrative and development
    
    
    20
    
    
    
    20
    
    
    
    
    21
    
    
    
    24
    
    
    
    
    41
    
    
    
    44Minority interests of others in properties
    
    
    4
    
    
    
    2
    
    
    
    
    16
    
    
    
    19
    
    
    
    
    20
    
    
    
    21Income before undernoted
    
    
    349
    
    
    
    325
    
    
    
    
    152
    
    
    
    135
    
    
    
    
    501
    
    
    
    460Depreciation and amortization
    
    
    102
    
    
    
    40
    
    
    
    
    41
    
    
    
    39
    
    
    
    
    143
    
    
    
    79Income before unallocated costs
    
    
    247
    
    
    
    285
    
    
    
    
    111
    
    
    
    96
    
    
    
    
    358
    
    
    
    381Taxes and other non-cash items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    102Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    242
    
    
    $
    279Acquisitions of real estate, net
    
    $
    124
    
    
    $
    172
    
    
    
    $
    83
    
    
    $
    
    
    
    
    $
    207
    
    
    $
    172Dispositions of real estate, net
    
    
    (31
    )
    
    
    (199
    )
    
    
    
    (32
    )
    
    
    (23
    )
    
    
    
    (63
    )
    
    
    (222
    )Commercial property tenant improvements
    
    
    69
    
    
    
    13
    
    
    
    
    13
    
    
    
    13
    
    
    
    
    82
    
    
    
    26Development and redevelopment investments
    
    
    51
    
    
    
    167
    
    
    
    
    4
    
    
    
    7
    
    
    
    
    55
    
    
    
    174Capital expenditures
    
    
    13
    
    
    
    7
    
    
    
    
    13
    
    
    
    9
    
    
    
    
    26
    
    
    
    16
 56




---



##### 



Selected Financial Information December 31 (US Millions, except per share information)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Financial results (1)Commercial property net operating income
    
    $
    743
    
    
    $
    697
    
    
    $
    660
    
    
    $
    672
    
    
    $
    611Funds from
operations and gains - continuing operations
    
    
    501
    
    
    
    460
    
    
    
    374
    
    
    
    334
    
    
    
    268Net income from continuing operations
    
    
    242
    
    
    
    279
    
    
    
    236
    
    
    
    202
    
    
    
    140Total assets
    
    
    8,491
    
    
    
    8,097
    
    
    
    7,450
    
    
    
    7,419
    
    
    
    8,123Capital base
    
    
    3,254
    
    
    
    2,997
    
    
    
    2,433
    
    
    
    2,353
    
    
    
    2,390Per diluted common share(1)Common shares outstanding
    
    
    155.6
    
    
    
    156.2
    
    
    
    160.4
    
    
    
    161.7
    
    
    
    158.7Fully diluted shares outstanding
    
    
    158.7
    
    
    
    159.6
    
    
    
    163.9
    
    
    
    165.1
    
    
    
    167.4Funds from operations and gains
    
    $
    2.93
    
    
    $
    2.78
    
    
    $
    2.18
    
    
    $
    1.92
    
    
    $
    1.56Funds from operations excluding straight line rent,
lease termination income and gains
    
    
    2.41
    
    
    
    2.15
    
    
    
    1.87
    
    
    
    1.63
    
    
    
    1.45Net income
    
    
    1.28
    
    
    
    1.63
    
    
    
    1.34
    
    
    
    1.12
    
    
    
    0.76Dividends paid
    
    
    0.62
    
    
    
    2.50

(2)
    
    
    0.40
    
    
    
    0.33
    
    
    
    0.25Shareholders equity - book value
    
    
    13.19
    
    
    
    12.31
    
    
    
    11.07
    
    
    
    10.27
    
    
    
    10.06Common share price at year end
    
    
    37.40
    
    
    
    28.70
    
    
    
    18.20
    
    
    
    15.45
    
    
    
    16.35Operating
data - Commercial propertiesNumber of properties
    
    
    46
    
    
    
    48
    
    
    
    50
    
    
    
    50
    
    
    
    60Rentable area (millions of sq. ft.)
    
    
    46
    
    
    
    46
    
    
    
    46
    
    
    
    45
    
    
    
    46Effective interest (millions of sq. ft.)
    
    
    35
    
    
    
    36
    
    
    
    35
    
    
    
    37
    
    
    
    41Average occupancy (%)
    
    
    95.2
    
    
    
    94.1
    
    
    
    95.5
    
    
    
    97.3
    
    
    
    97.0Property managementArea managed (sq. ft.)
    
    
    150
    
    
    
    140
    
    
    
    130
    
    
    
    120
    
    
    
    120
   (1)
    
    Excludes the assets, liabilities and results of operations of Brookfield Homes
Corporation(2)
    
    Includes the distribution of Brookfield Homes Corporation valued at $2.00 per common
share 57