EQUITY EQUITY (Tables)

12 Months Ended

Dec. 31, 2017

Non-controlling interests represent the common and preferred equity in consolidated entities that are owned by other shareholders.



AS AT DEC. 31 (MILLIONS)	2017		2016
Common equity	$	47,281	$	39,974
Preferred equity	4,347		3,261
Total	$	51,628	$	43,235

Equity consists of the following:



AS AT DEC. 31 (MILLIONS)	2017		2016
Preferred equity	$	4,192	$	3,954
Non-controlling interests	51,628		43,235
Common equity	24,052		22,499
	$	79,872	$	69,688

At December 31, 2016, the following options to purchase Class A shares were outstanding:



	Weighted-Average Remaining Life	Options Outstanding (000’s)
Exercise Price	Weighted-Average Remaining Life	Vested	Unvested	Total
C$11.77	2.2 years	4,885	—	4,885
C$18.20 – C$23.63	1.1 years	2,159	—	2,159
C$26.02	0.1 years	640	—	640
US$15.45	3.2 years	5,153	—	5,153
US$16.83 – US$23.37	4.8 years	5,626	890	6,516
US$25.21 – US$30.59	7.5 years	4,692	9,143	13,835
US$33.75 – US$36.32	8.1 years	949	5,030	5,979
		24,104	15,063	39,167

The authorized common share capital consists of an unlimited number of shares. Shares issued and outstanding changed as follows:



FOR THE YEARS ENDED DEC. 31	2017		2016
Outstanding, beginning of year¹	958,168,417		961,290,839
Issued (repurchased)
Repurchases	(3,448,665	)	(4,707,132	)
Long-term share ownership plans²	3,826,248		1,312,463
Dividend reinvestment plan and others	227,120		272,247
Outstanding, end of year¹	958,773,120		958,168,417


1.	Net of 30,569,215 (2016 – 27,846,452) Class A shares held by the company in respect of long-term compensation agreements


2.	Includes management share option plan and restricted stock plan

Common Equity

The company’s common equity is comprised of the following:



AS AT DEC. 31 (MILLIONS)	2017		2016
Common shares	$	4,428	$	4,390
Contributed surplus	263		234
Retained earnings	11,864		11,490
Ownership changes	1,459		1,199
Accumulated other comprehensive income	6,038		5,186
Common equity	$	24,052	$	22,499

The number of issued and outstanding common shares and unexercised options are as follows:



AS AT DEC. 31	2017	2016
Class A shares¹	958,688,000	958,083,297
Class B shares	85,120	85,120
Shares outstanding¹	958,773,120	958,168,417
Unexercised options and other share-based plans²	47,474,284	43,798,733
Total diluted shares	1,006,247,404	1,001,967,150


1.	Net of 30,569,215 (2016 – 27,846,452) Class A shares held by the company in respect of long-term compensation agreements


2.	Includes management share option plan and escrowed stock plan



	Average Rate
AS AT DEC. 31 (MILLIONS)	2017		2016		2017		2016
Perpetual preferred shares
Floating rate	2.33	%	1.97	%	$	531	$	532
Fixed rate	4.82	%	4.82	%	749		753
	3.78	%	3.65	%	1,280		1,285
Fixed rate-reset preferred shares	4.21	%	4.42	%	2,912		2,669
	4.08	%	4.17	%	$	4,192	$	3,954

Further details on each series of preferred shares are as follows:



			Issued and Outstanding
AS AT DEC. 31 (MILLIONS, EXCEPT PER SHARE INFORMATION)	Rate		2017	2016	2017		2016
Class A preferred shares
Perpetual preferred shares
Series 2	70% P		10,465,100	10,465,100	$	169	$	169
Series 4	70% P/8.5%		2,800,000	2,800,000	45		45
Series 8	Variable up to P		2,479,585	2,479,585	43		43
Series 13	70% P		9,297,700	9,297,700	195		195
Series 15	B.A. + 40 b.p.¹		2,000,000	2,000,000	42		42
Series 17	4.75	%	7,950,756	8,000,000	173		174
Series 18	4.75	%	7,966,158	8,000,000	180		181
Series 25	T-Bill + 230 b.p.¹		1,533,133	1,533,133	38		38
Series 36	4.85	%	7,949,024	8,000,000	200		201
Series 37	4.90	%	7,949,083	8,000,000	195		197
					1,280		1,285
Rate-reset preferred shares²
Series 9	3.80	%	1,519,115	1,519,115	21		21
Series 24	3.01	%	9,394,250	9,394,250	230		230
Series 26	3.47	%	9,903,348	9,903,348	243		243
Series 28	2.73	%	9,359,387	9,394,373	235		235
Series 30	4.80	%	9,934,050	9,950,452	245		245
Series 32	4.50	%	11,982,568	11,982,568	303		303
Series 34	4.20	%	9,977,889	9,977,889	255		255
Series 38	4.40	%	8,000,000	8,000,000	181		181
Series 40	4.50	%	12,000,000	12,000,000	275		275
Series 42	4.50	%	12,000,000	12,000,000	269		269
Series 44	5.00	%	9,945,189	10,000,000	189		190
Series 46	4.80	%	11,895,790	12,000,000	220		222
Series 48³	4.75	%	12,000,000	—	246		—
					2,912		2,669
Total					$	4,192	$	3,954


1.	Rate determined quarterly

Dividend rates are fixed for five to six years from the quarter end dates after issuance, June 30, 2011, March 31, 2012, June 30, 2012, December 31, 2012, September 30, 2013, March 31, 2014, June 30, 2014, December 31, 2014, December 31, 2015, December 31, 2016 and December 31, 2017, respectively and reset after five to six years to the 5-year Government of Canada bond rate plus between 180 and 417 basis points


3.	Issued on September 13, 2017

P – Prime Rate, B.A. – Bankers’ Acceptance Rate, b.p. – Basis Points

At December 31, 2017, the following options to purchase Class A shares were outstanding:



	Weighted-Average Remaining Life	Options Outstanding (000’s)
Exercise Price	Weighted-Average Remaining Life	Vested	Unvested	Total
C$11.77	1.2 years	2,620	—	2,620
C$21.08	0.1 years	177	—	177
US$15.45	2.2 years	4,772	—	4,772
US$16.83 – US$23.37	3.8 years	5,834	—	5,834
US$25.21 – US$30.59	6.5 years	6,858	5,967	12,825
US$33.75 – US$36.32	7.1 years	2,049	3,191	5,240
US$36.88 – US$37.75	9.1 years	—	6,222	6,222
		22,310	15,380	37,690

Preferred equity includes perpetual preferred shares and rate-reset preferred shares and consists of the following:



	Average Rate
AS AT DEC. 31 (MILLIONS)	2017		2016		2017		2016
Perpetual preferred shares
Floating rate	2.33	%	1.97	%	$	531	$	532
Fixed rate	4.82	%	4.82	%	749		753
	3.78	%	3.65	%	1,280		1,285
Fixed rate-reset preferred shares	4.21	%	4.42	%	2,912		2,669
	4.08	%	4.17	%	$	4,192	$	3,954

Schedule of basic and diluted earnings per share

The components of basic and diluted earnings per share are summarized in the following table:



FOR THE YEARS ENDED DEC. 31 (MILLIONS)	2017			2016
Net income attributable to shareholders	$	1,462		$	1,651
Preferred share dividends	(145		)	(133		)
Net income available to shareholders	$	1,317		$	1,518

Weighted average – common shares	958.8			959.0
Dilutive effect of the conversion of options and escrowed shares using treasury stock method	21.2			17.6
Common shares and common share equivalents	980.0			976.6

Schedule of expense recognized for share-based compensation

The expense recognized for share-based compensation is summarized in the following table:



FOR THE YEARS ENDED DEC. 31 (MILLIONS)	2017			2016
Expense arising from equity-settled share-based payment transactions	$	69		$	64
Expense arising from cash-settled share-based payment transactions	281			32
Total expense arising from share-based payment transactions	350			96
Effect of hedging program	(275		)	(27		)
Total expense included in consolidated income	$	75		$	69

Schedule of number and weighted average exercise prices of share options

The change in the number of DSUs and RSUs during 2017 and 2016 was as follows:



	DSUs		RSUs
	Number of Units (000’s)		Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2017	14,986		10,920	C$	9.09
Granted and reinvested	661		—		—
Exercised and canceled	(703	)	—		—
Outstanding at December 31, 2017	14,944		10,920	C$	9.09



	DSUs		RSUs
	Number of Units (000’s)		Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2016	13,793		10,920	C$	9.09
Granted and reinvested	1,264		—		—
Exercised and canceled	(71	)	—		—
Outstanding at December 31, 2016	14,986		10,920	C$	9.09

The change in the number of options during 2017 and 2016 were as follows:



	Number of Options (000’s)¹		Weighted- Average Exercise Price		Number of Options (000’s)²			Weighted- Average Exercise Price
Outstanding at January 1, 2017	7,684		C$	15.63	$	31,483		US$	25.77
Granted	—			—	6,331				36.92
Exercised	(4,887	)		17.50	(2,149		)		24.36
Canceled	—			—	(772		)		33.28
Outstanding at December 31, 2017	2,797		C$	12.35	34,893			US$	27.71


1.	Options to acquire TSX listed Class A shares


2.	Options to acquire NYSE listed Class A shares



	Number of Options (000’s)¹		Weighted- Average Exercise Price		Number of Options (000’s)²			Weighted- Average Exercise Price
Outstanding at January 1, 2016	9,427		C$	17.07	$	28,488		US$	24.98
Granted	—			—	4,363				30.59
Exercised	(1,743	)		23.44	(970		)		22.00
Canceled	—			—	(398		)		31.25
Outstanding at December 31, 2016	7,684		C$	15.63	31,483			US$	25.77


1.	Options to acquire TSX listed Class A shares


2.	Options to acquire NYSE listed Class A shares

The change in the number of ES shares during 2017 and 2016 was as follows:



	Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2017	24,167		$	27.77
Granted	3,700		36.88
Exercised	(95	)	21.74
Outstanding at December 31, 2017	27,772		$	29.01



	Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2016	20,938		$	27.33
Granted	3,250		30.59
Exercised	(21	)	21.74
Outstanding at December 31, 2016	24,167		$	27.77

Schedule of options granted using black-scholes module

The cost of the escrowed shares granted during the year was determined using the Black-Scholes model of valuation with inputs to the model as follows:



YEARS ENDED DEC. 31	Unit	2017	2016
Weighted-average share price	US$	36.88	30.59
Weighted-average fair value per share	US$	4.92	5.29
Average term to exercise	Years	7.5	7.5
Share price volatility¹	%	18.9	28.0
Liquidity discount	%	25.0	25.0
Weighted-average annual dividend yield	%	2.1	1.6
Risk-free rate	%	2.3	1.6


1.	Share price volatility was determined based on historical share prices over a similar period to the average term to exercise

The fair value of each DSU is equal to the traded price of the company’s common shares.



	Unit	Dec. 31, 2017	Dec. 31, 2016
Share price on date of measurement	C$	54.72	44.30
Share price on date of measurement	US$	43.54	33.01

The fair value of RSUs was determined primarily using the following inputs:



	Unit	Dec. 31, 2017	Dec. 31, 2016
Share price on date of measurement	C$	54.72	44.30
Weighted-average fair value of a unit	C$	45.63	35.21

The cost of the options granted during the year was determined using the Black-Scholes valuation model, with inputs to the model as follows:



YEARS ENDED DEC. 31	Unit	2017	2016
Weighted-average share price	US$	36.92	30.59
Weighted-average fair value per option	US$	4.92	5.29
Average term to exercise	Years	7.5	7.5
Share price volatility¹	%	18.9	28.0
Liquidity discount	%	25.0	25.0
Weighted-average annual dividend yield	%	2.1	1.6
Risk-free rate	%	2.3	1.6


1.	Share price volatility was determined based on historical share prices over a similar period to the average term to exercise