
	EQUITY

Equity consists of the following:



AS AT DEC. 31 (MILLIONS)	Note	2019		2018
Preferred equity	(a)	$	4,145	$	4,168
Non-controlling interests	(b)	81,833		67,335
Common equity	(c)	30,868		25,647
		$	116,846	$	97,150


a)	Preferred Equity

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



	Average Rate
AS AT DEC. 31 (MILLIONS)	2019		2018		2019		2018
Perpetual preferred shares
Floating rate	2.91	%	2.90	%	$	531	$	531
Fixed rate	4.82	%	4.82	%	739		744
	4.02	%	4.02	%	1,270		1,275
Fixed rate-reset preferred shares	4.28	%	4.26	%	2,875		2,893
	4.20	%	4.19	%	$	4,145	$	4,168

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



			Issued and Outstanding
AS AT DEC. 31 (MILLIONS, EXCEPT PER SHARE INFORMATION)	Rate		2019	2018	2019		2018
Class A preferred shares
Perpetual preferred shares
Series 2	70% P		10,457,685	10,457,685	$	169	$	169
Series 4	70% P/8.5%		2,795,910	2,795,910	45		45
Series 8	Variable up to P		2,476,185	2,476,185	42		42
Series 13	70% P		9,290,096	9,290,096	195		195
Series 15	B.A. + 40 b.p.¹		2,000,000	2,000,000	42		42
Series 17	4.75	%	7,840,204	7,901,476	171		172
Series 18	4.75	%	7,866,749	7,921,178	178		179
Series 25	3-Month T-Bill + 230 b.p.		1,529,133	1,529,133	38		38
Series 36	4.85	%	7,842,909	7,900,764	197		199
Series 37	4.90	%	7,830,091	7,888,143	193		194
					1,270		1,275
Rate-reset preferred shares²
Series 9	2.75	%	1,515,981	1,515,981	21		21
Series 24	3.01	%	9,278,894	9,338,572	227		228
Series 26	3.47	%	9,770,928	9,840,588	240		241
Series 28	2.73	%	9,233,927	9,289,397	232		233
Series 30	4.69	%	9,787,090	9,852,258	241		243
Series 32³	5.06	%	11,750,299	11,849,808	297		300
Series 34⁴	4.44	%	9,876,735	9,926,620	253		254
Series 38	4.40	%	7,906,132	7,955,948	179		180
Series 40⁵	4.03	%	11,841,025	11,914,515	271		273
Series 42	4.50	%	11,887,500	11,943,400	266		268
Series 44	5.00	%	9,831,929	9,882,879	187		188
Series 46	4.80	%	11,740,797	11,810,653	217		219
Series 48	4.75	%	11,885,972	11,961,701	244		245
					2,875		2,893
Total					$	4,145	$	4,168


1.	Rate determined quarterly.

Dividend rates are fixed for 5 to 6 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 5 to 6 years to the 5-year Government of Canada bond rate plus between 180 and 417 basis points.


3.	Dividend rate reset commenced September 30, 2018.


4.	Dividend rate reset commenced March 31, 2019.


5.	Dividend rate reset commenced September 30, 2019.

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

The company is authorized to issue an unlimited number of Class A preferred shares and an unlimited number of Class AA preferred shares, issuable in series. No Class AA preferred shares have been issued.

The Class A preferred shares are entitled to preference over the Class A and Class B Limited Voting Shares (“Class A and B shares”) on the declaration of dividends and other distributions to shareholders. All series of the outstanding preferred shares have a par value of C$25.00 per share.


b)	Non-controlling Interests

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



AS AT DEC. 31 (MILLIONS)	2019		2018
Common equity	$	76,557	$	62,109
Preferred equity	5,276		5,226
Total	$	81,833	$	67,335

Further information on non-controlling interests is provided in Note 4 – Subsidiaries.


c)	Common Equity

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



AS AT DEC. 31, 2019 AND 2018 (MILLIONS)	2019		2018
Common shares	$	7,305	$	4,457
Contributed surplus	286		271
Retained earnings	16,026		14,244
Ownership changes	1,010		645
Accumulated other comprehensive income	6,241		6,030
Common equity	$	30,868	$	25,647

The company is authorized to issue an unlimited number of Class A shares and 85,120 Class B shares, together referred to as common shares. The company’s common shares have no stated par value. The holders of Class A shares and Class B shares rank on par with each other with respect to the payment of dividends and the return of capital on the liquidation, dissolution or winding up of the company or any other distribution of the assets of the company among its shareholders for the purpose of winding up its affairs. Holders of the Class A shares are entitled to elect half of the Board of Directors of the company and holders of the Class B shares are entitled to elect the other half of the Board of Directors. With respect to the Class A and Class B shares, there are no dilutive factors, material or otherwise, that would result in different diluted earnings per share between the classes. This relationship holds true irrespective of the number of dilutive instruments issued in either one of the respective classes of common stock, as both classes of shares participate equally, on a pro rata basis, in the dividends, earnings and net assets of the company, whether taken before or after dilutive instruments, regardless of which class of shares is diluted.

The holders of the company’s common shares received cash dividends during 2019 of $0.64 per share (2018 – $0.60 per share).

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



AS AT DEC. 31, 2019 AND 2018	2019	2018
Class A shares¹	1,006,110,641	955,057,721
Class B shares	85,120	85,120
Shares outstanding¹	1,006,195,761	955,142,841
Unexercised options and other share-based plans²	46,678,774	42,086,712
Total diluted shares	1,052,874,535	997,229,553


1.	Net of 42,278,231 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2019 (2018 – 37,538,531).


2.	Includes management share option plan and escrowed stock plan.

The authorized common share capital consists of an unlimited number of Class A shares and 85,120 Class B shares. Shares issued and outstanding changed as follows:



FOR THE YEARS ENDED DEC. 31	2019		2018
Outstanding, beginning of year¹	955,142,841		958,773,120
Issued (repurchased)
Issuances	52,757,437		—
Repurchases	(7,188,534	)	(9,579,740	)
Long-term share ownership plans²	5,346,417		5,752,331
Dividend reinvestment plan and others	137,600		197,130
Outstanding, end of year³	1,006,195,761		955,142,841


1.	Net of 37,538,531 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2018 (2017 – 30,569,215).


2.	Includes management share option plan and restricted stock plan.


3.	Net of 42,278,231 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2019 (2018 – 37,538,531).

In September 2019, the company issued 52.8 million Class A shares in connection with the acquisition of an approximate 61% interest in Oaktree.

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)	2019			2018
Net income attributable to shareholders	$	2,807		$	3,584
Preferred share dividends	(152		)	(151		)
Dilutive effect of conversion of subsidiary preferred shares	(74		)	(105		)
Net income available to shareholders	$	2,581		$	3,328

Weighted average – common shares	968.6			957.6
Dilutive effect of the conversion of options and escrowed shares using treasury stock method	23.7			19.8
Common shares and common share equivalents	992.3			977.4

Share-Based Compensation

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



FOR THE YEARS ENDED DEC. 31 (MILLIONS)	2019			2018
Expense arising from equity-settled share-based payment transactions	$	81		$	73
Expense/(Recovery) arising from cash-settled share-based payment transactions	506			(64		)
Total expense arising from share-based payment transactions	587			9
Effect of hedging program	(500		)	75
Total expense included in consolidated income	$	87		$	84

The share-based payment plans are described below. There were no cancellations of or modifications to any of the plans during 2019 and 2018.

Equity-settled Share-based Awards

Management Share Option Plan

Options issued under the company’s Management Share Option Plan (“MSOP”) vest over a period of up to five years, expire 10 years after the grant date and are settled through issuance of Class A shares. The exercise price is equal to the market price at the grant date. For the year ended December 31, 2019, the total expense incurred with respect to MSOP totaled $31 million (2018 – $28 million).

The changes in the number of options during 2019 and 2018 were as follows:



	TSX				NYSE
	Number of Options (000’s)¹		Weighted- Average Exercise Price		Number of Options (000’s)²		Weighted- Average Exercise Price
Outstanding at January 1, 2019	790		C$	11.77	36,742		US$	29.52
Granted	—			—	5,077			45.63
Exercised	(790	)		11.77	(7,831	)		20.26
Canceled	—			—	(186	)		40.02
Outstanding at December 31, 2019	—		C$	—	33,802		US$	34.03


1.	Options to acquire TSX listed Class A shares.


2.	Options to acquire NYSE listed Class A shares.



	TSX				NYSE
	Number of Options (000’s)¹		Weighted- Average Exercise Price		Number of Options (000’s)²		Weighted- Average Exercise Price
Outstanding at January 1, 2018	2,797		C$	12.35	34,893		US$	27.71
Granted	—			—	4,538			40.42
Exercised	(2,007	)		12.59	(2,492	)		23.58
Canceled	—			—	(197	)		34.81
Outstanding at December 31, 2018	790		C$	11.77	36,742		US$	29.52


1.	Options to acquire TSX listed Class A shares.


2.	Options to acquire NYSE listed Class A shares.

The weighted-average fair value of options granted for the year ended December 31, 2019 was $5.89 (2018 – $5.38), and was determined using the Black-Scholes valuation model, with inputs to the model as follows:



FOR THE YEARS ENDED DEC. 31	Unit	2019	2018
Weighted-average share price	US$	45.63	40.42
Average term to exercise	Years	7.5	7.5
Share price volatility¹	%	16.9	16.3
Liquidity discount	%	25.0	25.0
Weighted-average annual dividend yield	%	2.0	1.9
Risk-free rate	%	2.5	2.8


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

At December 31, 2019, the following options to purchase Class A shares were outstanding:



		Options Outstanding (000’s)
Exercise Price	Weighted-Average Remaining Life	Vested	Unvested	Total
US$15.45 – US$23.02	1.6 years	3,746	—	3,746
US$23.37 – US$30.59	4.7 years	8,348	1,542	9,890
US$33.75 – US$40.39	6.8 years	7,581	7,514	15,095
US$44.24 – US$57.96	9.2 years	409	4,662	5,071
		20,084	13,718	33,802

At December 31, 2018, the following options to purchase Class A shares were outstanding:



		Options Outstanding (000’s)
Exercise Price	Weighted-Average Remaining Life	Vested	Unvested	Total
C$11.77	0.2 years	790	—	790
US$15.45	1.2 years	4,255	—	4,255
US$16.83 – US$23.37	2.8 years	5,160	—	5,160
US$25.21 – US$30.59	5.5 years	8,410	3,293	11,703
US$33.75 – US$36.32	6.1 years	2,873	2,115	4,988
US$36.88 – US$37.75	8.6 years	1,197	9,439	10,636
		22,685	14,847	37,532

Escrowed Stock Plan

The Escrowed Stock Plan (the “ES Plan”) provides executives with indirect ownership of Class A shares. Under the ES Plan, executives are granted common shares (the “ES Shares”) in one or more private companies that own Class A shares. The Class A shares are purchased on the open market with the purchase cost funded by the company. The ES shares generally vest over five years and must be held to the fifth anniversary of the grant date. At a date no more than ten years from the grant date, all outstanding ES shares will be exchanged for Class A shares issued by the company based on the market value of Class A shares at the time of the exchange. The number of Class A shares issued on exchange will be less than the Class A shares purchased under the ES Plan resulting in a net reduction in the number of Class A shares issued by the company.

During 2019, 10.7 million Class A shares were purchased in respect of ES shares granted to executives under the ES Plan (2018 – 5.8 million Class A shares) during the year. For the year ended December 31, 2019, the total expense incurred with respect to the ES Plan totaled $25 million (2018 – $25 million).

The weighted-average fair value of escrowed shares granted for the year ended December 31, 2019 was $6.81 (2018 – $5.38), and was determined using the Black-Scholes model of valuation with inputs to the model as follows:



FOR THE YEARS ENDED DEC. 31	Unit	2019	2018
Weighted-average share price	US$	51.11	40.39
Average term to exercise	Years	8.5	7.5
Share price volatility¹	%	17.3	16.3
Liquidity discount	%	25	25
Weighted-average annual dividend yield	%	1.8	1.9
Risk-free rate	%	2.1	2.8


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

The change in the number of ES shares during 2019 and 2018 was as follows:



	Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2019	27,103		$	33.27
Granted	10,650		51.11
Exercised	(1,075	)	23.66
Canceled	(151	)	39.48
Outstanding at December 31, 2019	36,527		$	38.73



	Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2018	27,772		$	29.01
Granted	5,815		40.39
Exercised	(6,484	)	21.40
Outstanding at December 31, 2018	27,103		$	33.27

Restricted Stock Plan

The Restricted Stock Plan awards executives with Class A shares purchased on the open market (“Restricted Shares”). Under the Restricted Stock Plan, Restricted Shares awarded vest over a period of up to five years, except for Restricted Shares awarded in lieu of a cash bonus, which may vest immediately. Vested and unvested Restricted Shares are subject to a hold period of up to five years. Holders of Restricted Shares are entitled to vote Restricted Shares and to receive associated dividends. Employee compensation expense for the Restricted Stock Plan is charged against income over the vesting period.

During 2019, Brookfield granted 800,493 Class A shares (2018 – 581,051) pursuant to the terms and conditions of the Restricted Stock Plan, resulting in the recognition of $25 million (2018 – $20 million) of compensation expense.

Cash-settled Share-based Awards

Deferred Share Unit Plan and Restricted Share Unit Plan

The Deferred Share Unit Plan and Restricted Share Unit Plan provide for the issuance of DSUs and RSUs, respectively. Under these plans, qualifying employees and directors receive varying percentages of their annual incentive bonus or directors’ fees in the form of DSUs and RSUs. The DSUs and RSUs vest over periods of up to five years, and DSUs accumulate additional DSUs at the same rate as dividends on common shares based on the market value of the common shares at the time of the dividend. Participants are not allowed to convert DSUs and RSUs into cash until retirement or cessation of employment.

The value of the DSUs, when converted to cash, will be equivalent to the market value of the common shares at the time the conversion takes place. The value of the RSUs, when converted into cash, will be equivalent to the difference between the market price of equivalent number of common shares at the time the conversion takes place and the market price on the date the RSUs are granted. The company uses equity derivative contracts to offset its exposure to the change in share prices in respect of vested and unvested DSUs and RSUs. The fair value of the vested DSUs and RSUs as at December 31, 2019 was $1.4 billion (2018 – $894 million).

Employee compensation expense for these plans is charged against income over the vesting period of the DSUs and RSUs. The amount payable by the company in respect of vested DSUs and RSUs changes as a result of dividends and share price movements. All of the amounts attributable to changes in the amounts payable by the company are recorded as employee compensation expense in the period of the change. For the year ended December 31, 2019, employee compensation expense totaled $7 million (2018 – $11 million), net of the impact of hedging arrangements.

The change in the number of DSUs and RSUs during 2019 and 2018 was as follows:



	DSUs		RSUs
	Number of Units (000’s)		Number of Units (000’s)		Weighted- Average Exercise Price
Outstanding at January 1, 2019	14,637		10,540	C$	9.21
Granted and reinvested	532		—		—
Exercised and canceled	(1,034	)	—		—
Outstanding at December 31, 2019	14,135		10,540	C$	9.21



	DSUs		RSUs
	Number of Units (000’s)		Number of Units (000’s)			Weighted- Average Exercise Price
Outstanding at January 1, 2018	14,944		10,920		C$	9.09
Granted and reinvested	466		—			—
Exercised and canceled	(773	)	(380	)		5.89
Outstanding at December 31, 2018	14,637		10,540		C$	9.21

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



	Unit	Dec. 31, 2019	Dec. 31, 2018
Share price on date of measurement	C$	75.03	52.32
Share price on date of measurement	US$	57.80	38.35

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



	Unit	Dec. 31, 2019	Dec. 31, 2018
Share price on date of measurement	C$	75.03	52.32
Weighted-average fair value of a unit	C$	65.82	43.11